MSA - Earnings call transcript Q4 2024 | MSA Safety Incorporated

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Operator

Good day, and welcome to the MSA Safety Fourth Quarter and Full Year 2024 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Larry De Maria. Please go ahead.

Lawrence De Maria

Thank you. to Conference Fourth Call. welcome Year and and Earnings XXXX morning, MSA Quarter Safety Full Good This of Investor Larry Relations. is De Maria, Executive Director Senior Americas segment. Steve CEO; and I'm President Sciullo, Vice McChesney, Stephanie our by CFO; President of joined President and Blanco, Lee and

along we'll results, our today's year call, quarter full XXXX MSA discuss During full fourth year Safety's and financial with outlook.

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

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

involve actual uncertainties and results statements discussed other our materially number differ cause those from may Forward-looking of to today. a factors risks, that

this SEC any Safety publicly required non-GAAP risks, duty today's of to statements financial no forward-looking presentation our reconciliations by filings. of certain MSA call, appendix available These other law. in website and are discussion measures Investor uncertainties are part except the update on Relations undertakes on morning. at as factors presentation. made press this are The release investors.msasafety.com. in included non-GAAP our as and The available We've our detailed

today's to on Moving agenda.

importance update the and highlight mission will a our business Steve First, year XXXX. provide from and quarter fourth the of full

We Steve will XXXX will and priorities then conclude, providing review closing comments. our outlook. outline strategic To financial performance before our XXXX

the open your questions. for then call will We

Steve? With that, Blanco. call I'll Steve the to turn over

Steven Blanco

their our we've we their you everyone. world. purpose-driven safety to in their XXth good a challenges. safety men on and in Larry, may better to customers than year continued and and families ever mission Today, dedicated Safety's time, positioned that health solve Thank our X. remained Over morning, your MSA communities throughout help Slide women and that MSA toughest that live work company. they, interest the marked are Thanks, may Starting for in XXXX Safety. as

mission brand. the XXXX, of for and singular than we around safety. personally fulfilling that in all remain to million their protecting want workers world forward focused our the commitment MSA more XX I on of associates continued mission trust move to our we into our As thank the their place

performance, Before heroically than more I'd from Angeles the first fighting County the end the to our and thank recent in our acknowledge responders, into we like to XX,XXX who and Departments City Southern California. Angeles customers been have get including devastating fires Los Fire Los

situation past support. American continues with As done disasters, team to with directly Cross help to we've monitor partnering for Red the those our opportunities is additional to the impacted. And provide MSA

Now the on provide full business and on a Slide year. to X update quarter

growth backdrop cash a earnings lower dynamic than through expectations. Our solid well margin environment SG&A Financial of we management, to sales for that the flow team conclude quarter against executed the generation despite XXXX. expansion were operating achieved mixed as free growth results and was

were across Sales industrial market said, by categories healthy and momentum order see Force far seasonal backlog as delivery. was to the to continue reduction so was our That of as demand exchange as attributable we Air product as service and deliveries order demand U.S. quarter. overall quarter, headwinds. fire well fourth well the anticipated weakness as this softer in pace U.S. impacted Sequentially, resilient foreign evidenced by customer pockets

Coast From the tranche Apparatus Guard Breathing award Air commercial second Force with of delivered $XX the contract a we million the perspective, XX-year a U.S. on of announced order. and U.S. the

customers to are a a as North we We our MSA+ where order customer journey. we devices largest remain win on encouraged which portables, they America. in XXXX for connected from energy the our meet large connected by our competitive ever connected Additionally, continue received for pipeline their was in

a year-over-year, in reported Air detection, down to double-digit the well primarily a Sales contraction challenging fixed primarily the Moving of strong benefited in U.S. in on international which gas single and single digits in by detection, growth across to low units impacts fire comp, order final perform as single-digit SCBA, due Sales in devices. basis gas continued up markets. in shipping digits categories. and due flame year-over-year a Detection to high our partially traditional on were to Force service as offset of portable product from high well now growth which connected were positive performance

in on had contraction digits well single-digit by as for double-digit offset in mid-single growth PPE as perspective, Industrial of the basis, top head low the XXXX. growth year fall PPE sales full X% XX% the in and a basis a delivered net a single-digit sales. finished on We sales we protection, protection industrial growth compounding reported on low X% were other From reported organic in year up down year. decline an

technology, operating more than operating growth by in While the safety was remain we originally the of driven adjusted our and margin resilient modest resiliency overall and pipeline management, business. gross expansion adjusted top and innovation XX% trends SG&A line the growth. industrial anticipated, by positive long-term Strong enabled leverage we encouraged margins earnings

our XXXX year with XXXX this beyond, to well our build to introduced on a The on last and commitment progress strategy targets. and Accelerate as May, in XXXX financial we Turning At as to advancing reinforces it Investor our and deliver us profitable to to we made refer long-term Day strong confidence growth we financial X. strategy, provides Slide this which as have foundation targets. our

to take to of a key XXXX. few like I'd a highlight in accomplishments few moments the

on a and development categories. our to Fire its In introduce across next-generation innovative Cairns our standard. leverage and we process, products completed XXXX which recently we includes high and XXXX GX fire for on the to we work service, the Helmet, new First, solutions to our launched market-leading customer product focus voice approval NFPA of new innovation submitted SCBA, we the which

the release bolstered newest FLXXXX we Multi-Spectrum HX released Safety head the IR V-Guard & Detection, Helmet. industrial the Gas industrial protection Flame solution, our an of In with In Flame detection our Detector. PPE, we Fixed portfolio

the team's and safety premium innovative across solutions to Our market. leadership ability our continued solutions portfolio deliver reinforces in competitive products our and

also leaned growth MSA+ customer acquisitions, our XXXX, our targeted We accelerating product solutions in we conversions additional Worker This further through portables growth existing accelerators. the fastest-growing and implementation category our expect Platform. included XXXX were of customer and of Connected recurring Connected and development. our customers revenue via in into

improvement apply excellence our and operating We on of organization, customer an broad we we system, maximizing program MSA continue strong do. the principles As continuous further all focus drive deployed to operational experience to our a business in with margin enhancement. the

productivity price and quality manage exceptional deliver and inflation, deliver to customer remains sourcing savings, goal improve an Our experience. and

improving initiatives satisfaction. organization, These and drive continued helping and expansion resonating paying dividends are gross profit within while of operating the customer us

buybacks. strong of in our allocation share sheet dividends balance effective and to the financial investments and Finally, capital capital organic through and of form enabled the shareholders profile growth return

outlook. addition, more quarter approach our In fourth the in detail Lee? 'XX over financial goals. and disciplined the With we that, inorganic I'd XXXX highly to financial turn through full to remain opportunities to we and that like and M&A, walk meet in to our and evaluate continue results our us year strategic growth to Lee call

Lee McChesney

the you, call. Thank everyone. you good Steve, appreciate joining and day, We

over the and the Slide X% in the a contraction on partially Let's financial reported . X prior X% mid-single-digit contraction organic year. quarter with Fourth start industrial of $XXX was were basis in in sales a Healthy by fire highlights. million, and low increase growth detection offset quarterly single-digit on service PP&E. an a

fourth was currency pricing from volume orders up the and had pace translation same up quarter, And Order growth. are overall and in year-over-year. the in We the second a XX% solid quarter, period. versus XX% year headwind to contributions X% prior half remained

mix generally an we resilient active market conditions macro to business continue remain While new conditions retain but and see pipeline. geopolitical dynamic, and

reduced the quarter. And anticipated, backlog patterns, is to with Consistent an in service, below the in specifically we largely Xx. Backlog slightly fire normal SCBA. seasonal book-to-bill as following was related third conversion increase GX more our we

down contraction moving to year. large was at the basis Gross and which in mix, productivity price and points attributable by margins. was over programs. inflation fourth profit partially on resilient quarter prior offset to margin Gross was Now the XX.X%, project XXX

was adjusted XXX%. due with year to margin compensation focus and of expense, of effective operating The largely price basis margin lower SG&A management over along XX XX.X%, our margin operating the margin incremental inflation with was prior operating increase execution. points variable productivity up XX.X%, sustained continued GAAP and and

driving on sustainable improvements focus laser Our results. to yield margin continues

ongoing a an per On The in totaled sales per share. tax effective as due profit GAAP $X.XX, earnings share over a expense lower up diluted SG&A million rate. prior effective year. the X% largely adjusted lower interest management, a diluted net higher income and to increase by basis, year-over-year of driven or $XX was deleveraging and growth result operating the $X.XX quarter were

Now a and reported and was Americas to expansion by headwind. basis growth in offset performance. largely on In segment, basis increased our contractions X% partially realization, driven year-over-year was XX.X%, Industrial review Service Margin Detection as I'd a by in XX PPE. management. was Adjusted margin like Fire segment year-over-year. operating translation SG&A points Currency was our price X% up productivity sales

decrease on Industrial segment, of margin flat the was basis XX with neutral Fire mid-single-digit inflationary And operating in in points In PPE. to was growth in translation adjusted and Detection price. a was year-over-year XX.X%, Currency International offset basis. Service a pressures, And both Double-digit growth contractions by reported balanced year-over-year was our due relatively organic partially quarter.

price single-digit compared weakness profit I'll total by to contributions up broad-based pressure, XXXX, gross a America. from Slide pockets and XX.X% primarily segments offset FX of demand review leading to our reported Both results. year. in throughout contributed offset sales of Now XXXX was year where Latin about the year, last $X.X flat in organic some moving year-over-year. billion, Relatively to low partially Positive X% X, X% margin modest growth, net on full were

XX% XX compared were prior basis share operating the was were prior year. to year. margins margin the XX%. operating XX.X%, up diluted points Adjusted Adjusted per $X.XX, earnings Incremental over up

on generate efficient by growth evidenced continued XX.X% return was capital ability capital our employed. Our to adjusted

tied Free representing balance with to Now solid basis levels the conversion year a $XX working driven With XX capital our rate said, cash execution is working turning of efficiency target below earnings, to conversion and an programs. capital shortfall backlog year-over-year. million, we finish did flow sheet the flow of in cash fourth the was and that by of hedging sales slightly quarter points improvement Free Slide XXX%. X. higher

million paid $XX We shares. $XX we $XX million debt CapEx, invested returned and $XX dividends repurchased to of million in in and shareholders in million

levels, was For in completed primarily LLC due rate year, January the performance in year, target to of higher $XXX and million strong conversion cash million was tax which capital compared XXXX. adjusted of working for payments of prior the full compensation year MSA our and related to divestiture was below in cash $XXX free flow XX% the our Full XXXX. to

XXXX, CapEx, $XXX Adjusted including million, of we net cash million ending to was repurchased $XX at sales. the in invested of of of We $XX XX% year our XXXX, million in Net $XXX debt Now returned or was repaid million liquidity and $XXX $XX X.Xx. the debt, shareholders position during million the end year million of million. in full EBITDA and the $XX dividends leverage for of financial year strengthened significant shares. with

and lowering as business benefits, rates as with the ample reducing the backlog greater liquidity, delivery normalized orders. made meaningful reduced and measures strength productivity progress capital fill times This balanced investments and MSA Through as enables deployment financial in we're overall system, great and levels of capital. improved well our has to growth. including strategy working back had we provides implementation us our continued Our continued

the XX. innings I'm it And while to to in of to Slide projects on see system, very been across early life now our the we're has these still business rewarding come implementing globe.

wanted Before our to to take incremental our I improved At minute turning resiliency to in sheet. margins the is reflect reflected on trends. our financial a balance and XXXX level, performance our a high outlook, growth, organic

even why to towards years we goals, can our remain X look optimistic at I us. with as upon last a a As look XXXX dynamic we baseline XXXX the

our XXXX and to and and end We've underpin XX. in So our nature on inherent portfolio our outlook that our differentiated in the stability diversity essential the industry and let's long-term our outlook of a products the markets. of based turn taken balanced solutions Slide demand, on approach positive dynamics

environment the continued be operating However, climate. macroeconomic with dynamic uncertain will geopolitical and

the we upcoming conversion in Day, fire have the due Investor XXXX May navigate and confidence to our U.S. of since noted change we've Force we comps Additionally, to North delivery standard our strategy fire challenging in and Overall, service Air for orders incremental have America XXXX. healthy, remains service. the backlog NFPA

backdrop, in throughout our timing ahead resilient we our as Though With well which remain us there the balances nature of optimistic this and dynamics the outlook, the risks see opportunities cautiously some as we year. be of business. could

generate the comparison We sales organic growth in expect be for headwinds if just XXXX, which in to mentioned. not normal mid-single-digit our single-digit low would range, I

Finally, I note line would will XXXX our cadence trends. sales in with historical also that in be

I results. impact also will drivers that the For modeling purposes, some provide below-the-line

our rate expect tax be based rates, approximately and million. XXXX. We XX% XX% to interest $XX to $XX expense current between And expected on million is in to be

pension to $X be $X XXXX income levels. million higher expect and other to We nonoperating than million

current organic sales exchange while digits, addition, be a headwind low reported further sales. single certainly, rates expect foreign imply to In we growth up to

line we could our factors event from the of our continue external to operating will top environment the bottom but expectations. in agile and immune not differing are that meaningfully We be to impact

For navigate impact stand include see. tariffs example, we ready potential in outlook, any not we our do while we to

like to our XXXX. execution my share and I'd in solid Finally, global to for performance gratitude team operating their

are sustainable value XXXX, executing our on our will and on our shareholders. be positioned creating Accelerate financial fully focused and entering for We commitments strategy, continue well delivering to we

back Now I'd the to focus of and like key call to areas can XXXX. for he outline the turn Steve

Steven Blanco

on Thanks, I'm Lee, XX. Slide and

ahead our world into while our and control. the look on I what our controlling As focus maintain team continues executing their XXXX, can around strategy we to mission, serving

innovation, emphasize implementing allocation. disciplined business our MSA operations in technology approach strongly and growth continued system capital maintaining delivering the position improvements Our safety in extending XXXX through leadership our initiatives and to and

tribute focus on overall, resiliency the business. that our in XX, Slide On what dynamic to as we we executed and a in a the well serving see team's XXXX, of mission environment inherent

in profitable will help for foundational to our for growth Accelerate the we drive our work we long-term XXXX I'm creation determination value MSA focus building on on to around our 'XX, completed the confident focused our choice Safety driving customers world. strategy. As shareholders continue and turn remain for and we and make preferred the

that, With operator turn the to for call the back I'll Q&A. over

Operator

And question come with William [Operator Ross Blair. your will Sparenblek from Instructions] first today

Ross Sparenblek

maybe puts the about firming throughout frame you in just size orders us quarter commentary we as takes out called into maybe as you just Steve, some through you help of And move the your the there. Can XXXX. the and and expectations cadence think January? growth

Steven Blanco

Yes.

thus you For far, mean the order we've Ross? seen -- pace

Ross Sparenblek

Exactly. Yes.

Steven Blanco

Yes.

lighter if we A to at choppiness we quarter, that than think of thought. us which with fourth slower industrial of the out And would So a fourth as December distributors kind looked overall that we December lot in well. our thesis be started we we anticipated. shared hope it was say I industrial, fits of where quarter. in than wise, we

looked weren't really maybe been in thus we business. especially what as into in But a our So seeing across far, it's we thought solid we the board, December. start detection year-to-date

good. been has service Fire

at matching look with the the incoming overall, up and look really story, we 'XX the we at it, we anticipated. pipeline as So what I think

talked we and as focus Investor what I to Day, fits back detection And in how category moved forward protection really kind strategically we with clearly of As initially well it even the we'd we've thought space. well. on fall is a think

same. the just pipeline So be, the so would order we'd hoped as pace is it I'd and is the say far,

Ross Sparenblek

the NFPA sense Okay. anticipation mean new deferred I I you mean, that in launches? with any product of change, ordering do standard the coming been the get there's

Steven Blanco

good a too. question, that's Yes,

had fire the but pipeline which of order, the be we a actually pace the would wasn't stronger. -- the the I little year. Air the continues resilient to it We fire as level service is we that say Force to service, we ordering was the So to ended nice, anticipated expected business first, good. and the be

those Now at orders again, we're pace. a us not seeing any take competitive accounts but from slower

view, promulgate the nice is into our cautious year, standard positioned, a As we're the of has part well change are won't. of are and to consider, job business the going wait I done standard what does. want hey, and wait, potentially the 'XX. in really who pretty base are won't will who and really there the got see wait to the we but on team customer we to a look But talking 'XX, of I And because base early certainly that latter NFPA probably think good that our we've new customers in

Ross Sparenblek

Okay. That's one just very helpful. And me. more for

it, a just in marketplace. to was existing this new what or referenced also You I [indiscernible] I was customer? missed [indiscernible] MSA+ order. dynamics if the understand better some like existing large competitive of and a

Steven Blanco

the Yes. Thanks for question.

America, a a large primary great competed competitive we the fantastic you the competitive and in of So customer competitors conversion, all where might team a job. North expect this against was conversion did

Operator

today Saree Your next with Jefferies. will question come from Boroditsky

Saree Boroditsky

margins set a almost you margins, the XXXX? margin think America just year bit little you Maybe potential how the as like XX% on at into focusing heading this exiting does about the up

Lee McChesney

I'd bring will points year is when what I XX going think basis say, about year. That's of XX goal Certainly, that and to we that each if to a we're there. be . to to each combat got something Well, of improvement. something do we you target 'XX, probably back it. is I've of a our bit times, this goes after would harder. number certainly to improvement you've go and wrong said type FX out

more be about our margin as that. predicting year, to than get the a the outlook in still rates margins 'XX. now, at for times SG&A than least to right the the it's has know FX, the game we So but we move at look -- I we're to weeks looking going it's going in the of and for last and few in the certainly point into I'm not if today, But more even area it's think think been up I gross

Saree Boroditsky

helpful. a the variability the trend That's margins do think through switching the year? And through to talk you of you about maybe into similar quarter head we XXXX. into Then in question. should international Can first how remainder international, How then the down as margins step just the sequentially?

Lee McChesney

Yes. Good question.

how think just down and definitely for I step because volume year. it. the also just We comment for simply a there's the a of see international, just about for that's outlook in leverage, XQ but the entire made portfolio, we

anomalies like years, You're going seasonal our sales. to or couple see that. backlog of last things orders some a and normal in more of pattern had large you've The because

time international. and a in there that launching same in play. are dynamics certainly attack the North It doesn't variability NPD, things. But we structural working think There America. is have long-term between we same restructuring base. to markets on we our market on in do international differences -- the I productivity, North one of And We're more working position of the have a over cost America. done it's market it's are But

it be difference. So a will

have But certainly, we're this we globe. across margin it going the after objectives

Saree Boroditsky

And more. that. just one appreciate I then

the You to mentioned how the service, just the Americas I on sales just of about the just in thinking cadence service focus you're normal the seasonality fire given and fire talk But challenging about year. if quarter? kind comp to fourth the

Lee McChesney

Yes. sure. Yes,

of I'll couple a dynamics about. you So give think to

say pattern, quarter, It's about always larger in when that talking step and have there's up is single-digit second first back certainly our lower it's organic target seasonal half. growth low for I little the bit to we're a quarter, a So year. going the a normal --

to in the half the is back first XX% Typically, XX% overall half. the probably year are of the our remainder and sales in about

a we view Air drop that's half give of going when into in first 'XX, to differing because So the 'XX, in you you had Force. a just that

get year, overall, the second think of I'll as PPE, our comps. talked that, as segment. That's half well. the negative be focus had the then default backlog. certainly our the comp a kind still share, about of that growth And those first versus growth will that view Industrial of since just for May, final of focused And also to rundown that our it the we have leading And because into fire are protections a 'XX add harder for positive extra in because well we still to we've year on beyond 'XX. being we certainly, We Detection our in as In half. is as year

Operator

Sinderen question [Operator B. with Instructions] from will Van Riley come And next your today FBR. Jeff

Jeff Van Sinderen

bit of more And you what segment. wonder some You if touched this little can product in comments, in the about demand bit even speak I guess a terms and 'XX little and you're in upgrades could prepared initiatives a 'XX. those doing your create I about innovation replacements for of in Detection into innovation then but

what you're there. seeing about curious Just

Steven Blanco

Yes. Thanks for the question.

spend broadly as the us We in a a with bit of So prepared we voice with gain up lead, come differentiate or marketplace. innovation they really I this to solutions activity lot it in challenges the us of a and time identify. of the we but speaking, and insights know, you we inform where customer is mean, VOC and lot talked comments, who customers, about our to to are the helps

comfort look and detection 'XX, et FDIC. think advantage the monitoring side we've for this and cetera. what's switch look optimizing would with on think the I talk categories in you what at service, us, see 'XX a this a ergonomics, fire if lean GX with I GX specifically at portable next-generation we that's what the to about Detection as And And and functionality, about talked bit see this. space I'll that of at then we because this really in enhance focused then we the X more, 'XX, year's good if fixed showcase taken will little we So of as you

the if connected side business, really are a at you So platform into portable look of lot. this we the leaning

have out and throughout software roll robust products, continue capabilities of plan We updates beyond. also cloud and will we 'XX that have -- a to

Accelerate part coming see and benefits. Certainly, you'll show have May -- should up some So strategy, set in really we some talked strategic our nice that of year. about the to as that's does of this see fruition that of initiative

see latter in it's an revenue that the might strong there. year fixed when the And as half in the the space, we've monitoring progress really but that, of really the you lot as And fixed of that A a business, far diversity because acquisition. to refrigeration [ SMC installed HVAC strong the and adds strong in solution ] including Bacharach, that and Clean, base. of automation, where That we expanded play our the already set including the we came through that base good storage side great and through got portfolio. be energy best space of in, side, that came have,

So really we to a detection, really think I or we filling what when it's think and of with the it's well key fitting into out be driver out expected, future. going growth

Jeff Van Sinderen

Okay. NFPA a new change then on follow year. And little bit just wanted to this the Terrific. up standard I

you that business under out? standard? guess, that of this about see do the the frame for sort tough normalize think that, you know to feel then I is you As to playing of needs but new a I time how what happen And do question,

Steven Blanco

out standards X X usually to Well, come these every years.

So something this not new. is that's

specific buying standard they of and a of have experience you they as the Typically, do is see do in and evaluate the a what's at with wait. the we this. a customers changing evaluate relative So also And they're how in lot that can't have they see lot what needs view customers cycle department. then to where you

would process, But platforms same. have of those to they the submitted approval our platform. they standard, promulgate to doing that certainly, do validate through probably we processes, different the up are then of testing. to have really So think, they 'XX. We've the competitors, all and And the all expect early the 'XX And they we for approval. NFPA timing our get that the is go which when all to through

but be changes changes likely. are would Again, if not minor. standard, exactly, significant fairly at They're you But to we the don't that relative look know in standard typical the it, nature. that timing on

So team customers will wait. of kind our has. be that the that's thoughts certainly There

I I We standard our expect we that -- we are, continued said, customers. that to a look happen. at platform, which in always and did GX view. And in it's fairly launched for as change think but our we to 'XX, There our enhance normalized we've

change on the to next-gen, what -- perfect. we've made we standard and the 'XX the really We've each But the standard. upgrade this enhancement latest So opportunity think of GX each including for done advantage timing taking is that.

perfect come year when years standard GX, to first timing for back XX those this promulgates, it first next So up. units from 'XX be out that XXXX will

good go on So into Force and 'XX we is for the prepared. the feel going Air change, really little the a we're future comp we as well we this. be standard choppy, think but to certainly

Operator

Larry to over This for question-and-answer our session. turn would like the I closing back concludes conference Maria to De any remarks.

Lawrence De Maria

Thank you. Safety. continued for morning the and MSA you We your joining call appreciate this interest in

forward for be quarter. to If our of XX on you progress We available the replay continued will days. today's you next audio available be call, again on later Relations look miss the updating portion an made today our Investor website next will and

Operator

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

may You now disconnect.

MSA Safety (MSA) 13 Feb 252024 Q4 Earnings call transcript