MSA Safety (MSA) 25 Jul 242024 Q2 Earnings call transcript

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

Thank you. Good morning, and welcome to MSA Safety's Second Quarter 2024 Earnings Conference Call. Maria, of De Relations. Larry is Executive Investor Director This Americas CEO; Blanco, Senior Stephanie I'm our Steve and Sciullo, Lee of and joined by CFO; President McChesney, and Vice President segment. President

Litigation statements discuss the discussed MSA's today's provide Act update may during Reform remind X, this our on everyone we Private Slide forward-looking During year outlook. On like second call an XXXX call, within full I'd XXXX. financial of results quarter that Securities the and meaning will to of the include matters

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

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

this of are Blanco. of investors.msasafety.com. I'd over non-GAAP The to X. our the like financial appendix and discussion today's non-GAAP Slide We've website Relations Steve Investor call are on in turn now reconciliations Steve? release press our to certain to presentation Turning the included available as morning. available presentation. measures at part The

and every in and in Thanks, of Driven by was the mission around X. as work purpose quarter. safety world thank celebrated steadfast families launches our execution the mission, utilization more our associates System. work our time, our through that Day, held I'm health singular their on pleased the where capital each a our that this released may exciting Larry, targets well XXXth our men will results we for of communities May, their customers women an safety In to purpose-driven report, the identifying as with may I'm week, growth on our couple earlier the good operational inspired Also, and discussed are as our everyone. continued solid a accomplishments. than In impact XXXX in MSA live and and world. of and and forward for going I remained And profitable which operational our like throughout we day. This I'd in who deployment we've year commercial delivered X,XXX our morning, product excellent highlight the minutes. and strategy Investor long-term in Slide and June, we we by Business we they, company. for XXXX. business Over

quarter. let's First, the some highlights review from

backlog earnings in chain in issues our team optimize discussed our challenges that Industrial operational as the these backlog report levels. Previously, our resulted to April, supply discussed excellence normalized initiatives. an to call our and our During PPE. efforts that we quarter second footprint pleased part and overcame reduced the we elevated of for manufacturing I'm during Detection to

the This in of productive more quarter, Morocco the positioned and we our our serve us better growth a production transfers at across some structure and efficient Mexico. made deliver globe. significant changes progress in enabling to and for customers These by U.K., factories

earnings growth sales the these The years. our from of executed of and momentum positive in sales year. of and All team the currency to X% resulted well is of performance recent on growth through organic first efforts delivered our strong XX%. maintain of building ability This net X%, constant adjusted half growth

Bristol XXXX The new up in continue Globe and were well Cairns performance with categories our Fire product innovation, turnout very the gear the strengthen. and being in fire growth in received sales of and mid-single helmets. to quarter, is by Service notable Moving digits and to market

resilient year. markets SCBA the second the market commercial The going pipeline international have excellent solid to with remains and see half global momentum continue of our MX We Fire into a Service in which for the the world U.S. note $XX second Force around healthy. of tranche that were order, we and about the the awarded Air pleased is this I'm environment is month, to million. funding

slightly both Our FLXXXX single Detector Detection fixed continues to for portable Multi-Spectrum both and and the in sales existing start a with were with to strong orders. basis. X digits, connected a to PPE new Portable traditional customer continues new traction negative both applications. Industrial grow Flame and detection. geographies io in devices. in in leading year-over-year solid overall The new and growth launch customers, with up positive go in high sales gain new continues well The were to on detection feedback expansion

offset products serve the will against continue launch fall our better our and as in helmet, such impacts continued safety see latest protect continue features international HX the The new mentioned customers in by the respirators. category. In lateral are excited superior in opportunity to help business, I'm helmets changes in and I to Our protection other head with fall our to comfort and as us which Mips headwinds we as the help where to optional of earlier grow versatility protection by protection growing incorporating grow head footprint May, leadership demand. healthy ballistic PPE products and our provides technology this while V-Gard specific we technology. well

points to this impact some This earlier. week. like would XXXX which I X. Slide noted our of report, key review from to I released was Turning the

our more helps MSA metric annually. people operating that and number workers in people represents to captured MSA by We company, impact that global protect impact evidenced This use of solutions sustainable million and planet and the our a of XX products commitment and as estimate metric. pillars is safety year. than average MSA Safety the solutions, the business across is As initiatives products our to the each

the are creating of The a of can found positive and we report. to what core few examples are be in impact. Here the develop our approach products solutions at

connecting solutions and work productive. for as the sustainability, more Our to and make easier safer safety tech as helping use technology and well

Bacharach and costs. carbon also We're detection and reduces to maintenance track commitments XXXX emissions For on solutions our towards waste help meet customers their beverage and and refrigeration example, operating our footprint our goals. food SCBA reduce simplifies

metrics maintain expect As our would MSA you within facilities. safety from Safety, employee world-class we

MSA System. our forward will Lee, grow line for recurring revenue call top These We profitable actions to MSA Day, term to also by X, we turn Safety shareholders. please our shared targets these results capitalizing to deployment. May believe Employers and note look financial strategic as companies, at the our I in Climate one report, continue Best will on who USA launched corporate that, financial sharing over key us targeting our quarter. and growth Diversity. more as strategy I learn targets balance underpinned utilizing second and of a and Forbes Business for our long so near most value sheet enable our responsible you We more. On trends, over Slide for TODAY in will progress that capital the of XXXX this our drive our to Additionally, to customers streams create Newsweek's There and we enablers to set such Investor against solutions bottom we to the over discuss growth the the America's strong by highlighted section highlights that recognized for website coming years. With are Lee? Leaders collectively secular and the visit include accelerators, the developing was many with responsibility leveraging on additional

the today. in and provide will update our review Steve, you the morning, good you, our everyone. We second appreciate call I an now joining on year outlook. quarter Thank performance and full

constant our X% within healthy in trends X% encouraging were months. Globally, with an Detection changes orders our $XXX prior Let's organic contribution trend these Fire up X% were Sales year a results. from get currency Currency basis reported healthy up growth, X was sales in and a balanced the quarter see categories, it contraction on offset was and a headwind. were respectively, Services with partially Slide and Americas X% volume to X%, results. Overall, Industrial million, basis started price. the business, the International on product translation though on across there some the PPE. and also and X% our fueling contributed quarterly a Across over by

As in not and for past, vary to from business unusual quarter this I've the can quarter. orders noted is our

and and of year far period regions, July. In nice Our our Xx we're so in book-to-bill product of the just activity most commercial a seeing pipeline continuation prior was categories and quarter, of is second encouraging below above our across the in half have we but first slightly our is the the Xx, below for year.

to we in hoped, Services backlog was levels, more progress quarter As due good principally Fire in and to our reduced Detection. normalized the had

basis team's the per incremental Adjusted and operating XX%. On volume, Margin the margin profit very in price was is leverage, XX margin be results. margin was higher volume performance related basis a XX.X%, cost and by was operating driven margin lower share prior share. resilient primarily over and due XX diluted increase commitment nonoperating in earnings the up from XX.X% in up quarter The prior operating a Operating profit basis, the the professional adjusted prior diluted basis to expenses. MSA investments year. continues inflation, Our basis over income over and points services was year, in Slightly Gross management. GAAP XX.X%, to our matter. prior per was and System quarter up margin an over expansion was up to were $X.XX or to year. reflects $X.XX, the million cost points the largely net productivity onetime $XX is year. Business points on evident our XX% GAAP the quarter, XX SG&A legal a

year-over-year. and basis in to in was headwinds. Services XX partially Services. to X% our with increased dynamics. In largely a partially on modest XX declines growth leverage, moving our volume Americas modest Adjusted by headwind Detection in expansion volume by margin points SG&A segment, a International operating Currency In Industrial PPE. in year-over-year adjusted in margin was X% up X% was was of Fire FX by a growth our in offset translation decline Strong offset sales and partially increased segment points performance. compared mid-single-digit cost PPE, basis prior Detection sales double-digit Margin productivity the strong operating XX.X%, Industrial driven by was The increase leverage, high and quarter. by price growth year. year-over-year, our and offset the single-digit XX.X%, segment, Now Fire driven

of XX% Free to turning adjusted $XX Now quarter Slide of earnings. conversion was a rate flow million, cash in representing X. the

investments objectives cash flow track to XXX%. and of remain full deliver capital year cash on XX% and expenditures, our increased inventory quarter reflected we Second to flow

in we typically transfers flow reminder, as capital million the generate capital goals, part drive strong Day the production second and investments allocation expenditures a year. Consistent $XX Investor second productivity our of cash As were of programs. manufacturing including our to each in half more quarter, execute our history and with strategic

and shareholders the to repaid We common $XXX $XX million the repurchased returned $XX $XXX $X million dividends million, end also balance debt, was quarter at cash our of debt million in was in in million. stock. Net and

quarter X.Xx. net leverage ended end at or months to the net XX.X% for at XX Adjusted EBITDA trailing Our $XXX improved ratio of million, June further XX sales.

the our entered I'd but good Now of to Slide on the like second timing outlook mindful We to and half full of risks. dynamics with move geopolitical order and X. year macro are momentum

and are end Our demand to bring our normalized positive executed we have initiatives more markets healthy, down backlog levels. generally to trends remained

deliver we conditions the on Our our strong customers, over markets, and the close focused business trends change, remain our time. We growth macro disciplined attractive Should to broad resilience to in executing delivered and industry, as costs needed. will geographic flow. on across underlying leading cash strategy and safety diversification and there regions adapt generate products, we has to profitable market remains have

to growth of the cycle the the towards timing part related the XXXX, delivered As delivery the AFG mid-single-digit we look XX% may of work of outlook funding U.S. our which the of of sales year and skewed Air customer forward of orders we second order, maintaining in are growth be we cognizant be to large we which growth, be to timing rates do the half. compounds have We XXXX. likely will full similar to believe primarily year. as through We implies on like first latter details growth top our Force half orders,

is Our healthy. business

Investor is half supporting look our to in plans each associates and to day. the our we said, passionately pipeline on thanks With focused Our at the who reiterate our across strong, globe forward to that long-term our every I customers and are profitable also executing my growth second outlined Day. strategy want

impacts Steve significant that, focus well on our is continued turn of I'll Your driving yielding now stakeholders, improvement the for back remarks. for call over all concluding done. With to

products, benefit our our to process team we're which Thank in commitment of proven we mindset leading our future. over value best our I that, of to MSA I'll the to the in Lee. believe geographies the industry the I'm broad you, with markets; well questions. fundamentals, turn our operator stakeholders. With and want and diversity continues the to now I back all and excited positioned create for markets. resiliency by have continuous long from attractive positions our the and innovation term around industry reiterate improvement the the business, over for of to Business System, the call our With

[Operator Instructions] from comes Stifel. with The first Elliott question Stanley

little Could sounds full the overall guide seasonally, more you're in normalized. a might kind confidence in be And maybe of talk a XQ, slight kind business rate? year about kind order a of more your second you kind guys it the able coming making Where the of rate, acceleration be a book the is but little half. to points is up half implies them, picks but second bit down like that economy mid-single-digit know [indiscernible], -- I consistent data slowing in a watching the been the that little hit of bit. sort of we've to run other run

for have here start And and end. Lee, jump can in commentary the you the I'll at maybe question, if you Yes. Thanks Stanley. some

a different business a our and the it's really really Fire been as us. little is in the Fire macro, the these and Utilities pipeline saw would as demand we we've most that's think Timing know. of a can seen We've end past. are with solid And resilient. the where and Service We've see I diversity and bit say in we our we the healthy. than markets business, certainly more pipeline good that Detection. resilient. continue. But that that help. look stable. think before, in PPE markets the we but We're that. the half, I the Energy first a been be is geographies to Industrial of lumpy They've in when healthy at Certainly, cyclical the fundamentals are remains diversity maybe industrials, you helps are really and seen solid. From likely and comfortable markets as it's Service, But

be got performance continues, to orders, able growth a about the you continuing category. Lee, we're to want into if that So if the good feel turn you we really pipeline second anything half add? to

Yes.

summary. my the back I good in think comments be a will there, I that's as think to we I mean, first similar half Stanley, said the half.

beginning we that's better year, if were even think the I of are going back to that, but just reality. the maybe than hopefully the we

first some I where segments quarter. some just what in place. I a think do in a things the one and mentioned. bit in quarter we're But weaker good you'll be we really think you see half have be experienced other still the maybe strong you in just

said, good deliver said doing just, towards growth place for when the So we XX% stronger all can X% diverse as growth, quarter. I X% a year. it's probably little third this last Steve And on manage lean mix. year, bit the nice being in of we we're than growth, the we're it [indiscernible] fourth top that. We'll quarter a

So perspective. think I we're year is I in that. for puts just doing And that it think compensating this

says are the the orders better So we front. on sales it on we're front actually even doing than

No breadth the doubt. Kind of to the portfolio. speaks of

in could macro the see think thing conditions react into I one looking of could with us But see like react? back that were How part give just I'm some sure we change, mention adapt you kind rate that. interesting, year, this something? if of terms of did towards the we you the guys as how would needed. the year necessarily kind I You next of more to playbook market quickly now would not mean you if cuts

but a in it's a our that profile. needed we talked same manage to we we if we're be And we mean, the levers could ourselves. our list would have pivot. and it are to pull to question, would Stanley. to I that pretty I at I and pull make say And good sure quick. our expect Yes, we if decrementals Certainly, the margin to think we XX% of it'd before XX%, to a we've that incrementals protect be past. level, lower protect going done we about profitability we've needed

the in how very of new the models And device gains? traditional platform comments shape up. to the getting some side around just quarter product Detection kind and worked interested is strong the you of some then The down. driving versus business, the interesting connected of see these that devices, starting is also connected more this revenue the really to and had backlog what's Is availability

for question that as Thanks well.

So see deliver were we bit customers. a to were pleased back that to our to that little of we ship we backlog elevated did certainly, able --

really little good. when and you including, monitoring, needs when know Strong future there. think But half. the really position down needs, energy fixed in Detection, you solid we've you and cycle You clean supported we pipeline that second business, the break is a the earlier our bit the installed base energy our by of that discussed, business it I have, it of asked longer talked as if is confidence about about

in which together us, portables, confidence with and put our for X, And we're the nice But io now the take providing seeing. from. you those But we're I our levels. new that little we why rate XXR Detection. add. we like from X XX the have X customers to to a the combination through that's of We're tied more our is, take still percent different has XX-plus what employment rate approach right really cyclical connected a it's seeing by feel that's our been For options a choose -- seeing traditional the to just this think of are added and io because platforms tremendous market customers

Great in half. of guys. Congrats Nice second the best to and hear. luck

Rob question Baird. is with from next Mason The

Steve, half? you profile I'm of that lower the expectation? just kind this XX% growth you're incrementals to second that or either curious given at the Is expecting of that confidence bounds upper made XX% range. range. mention just how is around the of the Is your your level in that

Lee, you that? to hit do want

throughout Yes, year, have this do like comps. the said we you first I half some interesting think of

incremental this quarter, So we just first reminder in in to some you give quarter. the had the right, there, XX% second XX%

see mean the that the volatility Certainly, going was last help quarter won't quarter. same I highest third in very good that into was back went You're very that our you type quarter, There this half. a absolute and of margin. that see mix to some backlog a year strong but revenue year.

lower XQ, you'll then being we're plays in in back are we see you'll in we'll and it So nice on so how in but XX% mean coming where range. on higher, year, based to to And a a incremental see the maybe XX% out. we that overall, XQ. I goal. slightly rebound to keep And track far certainly see the

of of see book some manufacturing potential And getting you about made, moves. to just scaling Is reconfigured. of you in Sure. that from complete. that's those motion, I'm operations your how made current specific those leverage and relatedly, the the Maybe opportunity more is you've curious this progress that mention feel all work of

that. maybe I'll stab Rob, a take at

a for doing manufacturing half. lot customer What available we're be the trying to our still best cost operational through on in kind through more to to option have really opportunity best and our for make of complete delivery strategy in the that a footprint performance. So is us that second providing of for region, there's activity, halfway manufacturing and on base of it's and but done yet. not region the work sure continue than We're we that

part have or this. a plant really is what with the shutdowns this that had. in impact, of a we're with protection to to nice moves it's really transitions especially like And we've Mexico So fall doing big and the going things

more to halfway, work better than done it's through half. quite We've So we're second the got but do not yet.

just see. And I last question.

you quarter. price I'm do roughly your You now? inflationary viewing right you to in adjustments different or was curious mentioned your got equal volume you're in impacts the how as mid-year, anything price the did

We did the to the to of had that of year, sure potential for in will. protect more and and we've -- One continuous footprint the increase our we're on track, that's offset we the QX. a consistent in we'll in Certainly, offset, to going the improvement if price it's we past. reason region make we the of done mind, This in and normalized done price a what beginning margins, adjust, continue us, of to of job early think where following add, of bear we the we're part a these But need that lean pricing. that's business operational the continue year. at. sure we've which is need if get system part typically, any increase We're to to inflationary to changes, we nice environment, we tariffs. the internally as I past, pivot would in to and our need at price I and make

[Operator William Ross is Sparenblek Blair. Instructions] from next The question with

and rates implying back to taking seeing revenue second positive the the Fire Coming in read-throughs share. mean order reacceleration you clearly guidance, it's second half, a guys for I business. on are half and Detection we're the

can these tempering is your expectations and some items for of half? So watch you further maybe what second what are just maybe the delineate

question, for Thanks Ross. Yes. the

and we timing. the think timing can feel is of is both good in be spaces, market Part just those The past in about lumpy So we've in we years. where solid. do of we're at as pipeline seen the it order

But orders. there's have they good tranches Grants, the releasing think of year, they if to good. Do we to year. earlier year, This Assistance funds So pipeline funding started through But we the over than last they couple this environment. week. the in of is last first much environment AFG, the just did funds? for opportunity Firefighter example, flush some is the part The it of get that the that

million of has released. $XXX So the available million been $XX about

to those that that have vehicle, to for have them. funding they are obviously, use to expecting available that So

to those things through. that that's look So want sure come the at that. thing just Lee? would we make I

I'd just a things. couple Ross, add of Yes.

So again, you half some year. last dynamic nice the had wins. have really of in back We

were we large like things remember, quarter. fourth Bacharach, that in side. you some the nice In it to chunky more year year, quarter SBA had those L.A. orders If will shipping looks to This we things wins on the third third than the had some quarter last big like of in be the it.

just more being of a it's to So subtlety at a just the half it to you some your little of outlook second counter -- the as of look half bit back kind model.

the I if can there, on margins. because fourth on on mean, third then little imply just there's in we And bottlenecks that maybe points nice quarter? with maybe believe the slipping could margins the almost quarter could the quarter seems I us Okay. we the it the that chain you gross down in comment, basis to first into maybe supply second just update XXX in dig step a see that guidance half?

I of Ross, lots Yes. moving pieces. obviously, mean,

of think you about half back that maintaining in similar the growth, levels that terms of the all as there. I kind in talked includes of of

for continuation. minus plus -- being I have kind you level margins, a or year. about in that We've of of XX type talked the this think terms nice of the in of

we won't in Our back repeat second you itself. Last a But improvement and year, look step down you outlook maintain like that quarter, you'll things you have because a mid-XXs, that. we the the that fourth an very at and factor have half in Europe like again will where third in, have quarter, in then you'll are the that, the if things for is, strong quarter. holidays had

place. So in a good we're

the we're on in at a obviously, to halfway the place first our on back is good higher half half. in point the the will think range the comp I than it harder slightly question half. than be margin still the and back on But incrementals, earlier incrementals,

just one of So the factors.

shook recurring meaningful. contribution rates of it's quarter? help And like sense where give revenue the like? helpful. That's maybe It just those look us what you the a out growth a sounds pretty out parse then as Okay. And can also in maybe

quarter sit that I it a would initiatives shared to question. better in nice appreciate Investor io place. zone. there in a we the obviously getting the say We some material into have the space, the just that. wins a But space I at third that in of We wasn't we to Well, towards today MSA+ this, in we've had XX% the Day, lot drive X you eventually change the XX% zone. talked would I tell about globally.

X. So of progress in growth it X.X be that factors certainly again last one certainly is Well, the the good, that those and and booked the building of we into why years about for io and is book goes out optimistic. business make a X- X-year for contracts we on continued the year to keep and rate helped first portables the half of

maybe mix, offset from what the have that we can of might a gross International. I It margin does a All of sense right. just the side? recurring mean the get was then if sound Okay. on bit the on like impact

it's pretty mix say Americas in I quarter. second margins story. the a would rate interesting. are mean the They Think in neutral in record, a I margin about ever Yes. record any is quarter. certainly

nice coming really the the new as then that's lift from system So nice, business of management on being innovation cost well. and focused product productivity, and price that continued certainly,

neutral those So elements, it's mix, for us. again, pretty

as cleared be that lean backlog. going again, in year because we last strong really half, to we a bit of back Detection think I a into had the it's headwind a

think the Fire doing what point Service least the as you're seeing to at pointing Ross, I something do do on innovation the International you front. -- on we've And been you're think what of we we're expected.

growth and that Detection that and expect Service coming International in we mix. kind the Fire years, have we'll categories really shift of nice So been

play Grow nice those While in industrial, we'll role growth. a really to we expect International's

Got it.

seasonally have ballistic in higher should the despite the step-up a Industrial the half probably second So in helmets quarter? second

be changes I the that We're mean, somewhat similar half to going International, lift in market-driven. necessarily business be a second first ballistic expect the I to consistent the unless industrial fairly had space be the higher expecting first the it's helmets would to comps very wouldn't it's the half. some or for have materially. to accelerates I ballistic going side economy to it half. with the on We there. expect or tough probably

it's So consistent. going to I say be fairly would probably

All to the right. quarter, Well, guys. congrats it. Got

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

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

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

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

may You now disconnect.