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Operator: Good day, and welcome to the MSA Safety Fourth Quarter and Full Year 2024 Earnings Conference Call. All participants will be in a listen-only mode. Please note that this event is being recorded. I would now like to turn the conference over to Larry De Maria, Please go ahead.

Larry De Maria: Thank you. Good morning and welcome to MSA Safety’s fourth quarter and full year 2024 earnings conference call. This is Larry De Maria, Executive Director of Investor Relations. I am joined by Steve Blanco, President and CEO, Lee McChesney, Senior Vice President, CFO, and Stephanie Schulow, President of our America segment. During today’s call, we will discuss MSA Safety Incorporated’s fourth quarter and full year financial results along with our full year 2025 outlook. Before we begin, I would like to remind everyone that the matters discussed during this call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include not limited to, or projections and anticipated levels of future performance.

Forward-looking statements involve a number of risks, uncertainties, and other factors that may cause our actual results to differ materially from those discussed today. These risks, uncertainties, and other factors are detailed in our SEC filings. MSA Safety Incorporated undertakes no duty publically update any forward-looking statements made on this call, except as required by law. We have included certain non-GAAP financial measures as part of our discussion this morning. Non-GAAP reconciliations are available in the appendix of today’s presentation. The presentation and press release are available on our Investor Relations website at investors.msasafety.com. Moving on to today’s agenda, First, Steve will highlight the importance of our mission and provide a business update from the fourth quarter and full year 2024.

We will then review our financial performance 2025 outlook. To conclude, Steve will outline our 2025 strategic priorities before providing closing comments. Then open the call for your questions. With that, I’ll turn the call over to Steve Blanco. Steve?

Steve Blanco: Thanks, Larry, and good morning, everyone. Thank you for your continued interest in MSA Safety Incorporated. 2024 marked MSA Safety’s 110th year as a purpose-driven company. Over that time, we’ve remained dedicated to our mission that men and women may work in safety, and their families and their communities may live in health throughout the world. Today, we are better positioned than ever to help our customers solve their toughest safety challenges. As we move forward into 2025, we remain focused on fulfilling our mission and protecting the more than 40 million workers around the world that place their trust in the MSA brand. I want to personally thank all our associates for their continued commitment to our singular mission of safety.

Before we get into our recent performance, I would like to acknowledge and thank the more than 15,000 first responders, including our customers from the Los Angeles County and Los Angeles City fire departments, who have been heroically fighting to end the devastating fires in Southern California. As we have done with past disasters, MSA is partnering with the American Red Cross to help those directly impacted, and our team continues to monitor the situation for additional opportunities to provide support. Now on slide five, to provide a business update on the quarter and full year. Our team executed well against the backdrop of a dynamic operating environment to conclude 2024. Financial results for the quarter were mixed as we achieved margin expansion through SG&A management, earnings growth, and solid free cash flow generation despite sales growth being lower than expectations.

Sales were impacted by pockets of industrial market weakness, softer US fire service demand, as well as foreign exchange headwinds. That said, overall demand was resilient across our top product categories as evidenced by healthy order pace in the fourth quarter, and we continue to see order momentum so far this quarter. Sequentially, backlog reduction was attributable to seasonal customer deliveries as well as the timing of customer orders. From a commercial perspective, we announced the award of a ten-year $33 million breathing apparatus contract with the US Coast Guard and delivered on the second tranche of the US Air Force order. Additionally, we received our largest ever order for the MSA Plus connected portables, which was a competitive win from a large energy customer.

We remain encouraged by our pipeline for connected devices in 2025 as we continue to meet our customers where they are on their connected journey. Moving now to our product categories, Sales in fire service on a reported basis were up high, single digits year over year, primarily due to double-digit growth in SCBA, which benefited from positive impacts of shipping the final units of the US Air Force order as well as strong performance in international markets. Sales in detection were down low single digits year over year on a contraction in Fixed Gas and Flame Detection, primarily due to a challenging comp partially offset by high single-digit growth in portable gas detection, which continued to perform well across traditional and connected devices.

Industrial PPE sales were down mid-single digits for the year. We had low single-digit growth in industrial head protection, offset by a low single-digit decline in fall protection, as well as double-digit contraction in other PPE sales. From a full-year perspective, net sales growth finished the year up 1% on a reported basis and 2% on an organic basis, compounding on top of the 17% reported growth we delivered in 2023. While top-line growth was more modest than we originally anticipated, we remain encouraged by the positive long-term trends in industrial safety technology, our innovation pipeline, and the overall resiliency of the business. Strong operating leverage driven by resilient gross margins and SG&A management enabled adjusted operating margin expansion and 10% adjusted earnings growth.

Turning to slide six, at our Investor Day last May, we introduced our strategy, which we refer to as Accelerate, to deliver long-term profitable growth as well as 2028 financial targets. The progress we have made this year on advancing this strategy provides us with a strong foundation to build on in 2025 and beyond and reinforces our confidence and commitment to our 2028 financial targets. I’d like to take a few moments to highlight a few of the key accomplishments in 2024. First, we leveraged our market-leading innovation and new product development process, which includes a high focus on the voice of the customer, to introduce innovative products and solutions across our categories. In fire service, we launched the new Cairns 1836 fire helmet, and we completed work on our next generation G1 SCBA, which we recently submitted to the NFPA for its approval to the 2025 standard.

In detection, we bolstered our fixed gas and flame detection portfolio with the release of the FL5000 multi-spectrum IR flame detector. And in industrial PPE, we released our newest industrial head protection solution, the V-Gard H2 safety harness, maintaining our continued leadership in the premium safety solutions market. We also leaned into the implementation of our targeted growth accelerators. This included accelerating our customer solutions and recurring revenue through our MSA Plus Connected Worker platform. Connected portables were our fastest growing category in 2024, and we expect further growth in 2025 via customer acquisitions, existing conversions of customers, and additional product development. As an organization, we continue to apply the principles of the MSA business system to drive continuous improvement in all we do.

We further deployed our broad operational excellence program with a strong focus on maximizing our customer experience and operating margin enhancement. Our goal remains to deliver productivity and sourcing savings, manage price and inflation, improve quality, and deliver an exceptional customer experience. These initiatives are paying dividends and resonating within the organization, helping us drive continued expansion of gross and operating profit while improving customer satisfaction. Finally, our strong financial profile and balance sheet enabled effective capital allocation through organic growth investments and the return of capital to shareholders in the form of dividends and share buybacks. In addition, we remain highly disciplined in our approach to M&A, and we continue to evaluate inorganic growth opportunities to meet our strategic and financial goals.

With that, I would like to turn the call over to Lee McChesney to walk us through the fourth quarter and full year 2024 financial results in more detail and our 2025 outlook.

Lee McChesney: Thank you, Steve, and good day, everyone. We appreciate you joining the call. Let’s start on slide seven with the quarterly financial highlights. Fourth quarter sales were $500 million, an increase of 1% on a reported basis and 2% organic over the prior year. Healthy growth in the fire service was partially offset by a low single-digit contraction in detection and a mid-single-digit contraction in industrial PPE. We made contributions from volume and pricing in the quarter, and currency translation was a 1% headwind to overall growth. Order pace remained solid in the fourth quarter, up 14% year over year, and second-half orders are up 10% versus the same prior year period. While macro and geopolitical conditions remain dynamic, we continue to see mixed but generally resilient market conditions and retain an active new business pipeline.

Consistent with normal seasonal patterns, our book to bill is slightly below one times, and as we anticipated, we reduced backlog. Backlog conversion was largely in fire service, more specifically related to the G1 SCBA. Now moving on to margins, gross profit in the fourth quarter was resilient at 46.9%, down 120 basis points over the prior year. Gross margin contraction was attributable to inflation and large project mix, which was partially offset by price and productivity programs. GAAP operating margin was 23.5%, with adjusted operating margin of 24.0%, up 70 basis points over the prior year, an incremental operating margin of 113%. The margin increase was largely due to effective SG&A management and lower variable compensation expense, along with our sustained price inflation focus and continued productivity execution.

Our laser focus on driving sustainable margin improvements continues to yield results. GAAP net income in the quarter totaled $88 million, or $2.22 per diluted share. On an adjusted basis, diluted earnings per share were $2.25, up 9% over the prior year. The increase was largely due to higher operating profit, driven by sales growth, effective SG&A management, lower interest expense as a result of ongoing deleveraging, and a lower year-over-year effective tax rate. Now I would like to review our segment performance. In our Americas segment, sales increased 1% year over year on a reported basis, as growth in the fire service was partially offset by contractions in detection and industrial PPE. Currency translation was a 2% headwind. Adjusted operating margin was 30.7%, up 90 basis points year over year.

Margin expansion was largely driven by price realization, productivity, and SG&A management. In our international segment, growth was flat year over year on both a reported and organic basis. Double-digit growth in fire service was balanced with mid-single-digit contractions in detection and industrial PPE. Currency translation was relatively neutral in the quarter, and adjusted operating margin was 17.6%, a year-over-year decrease of 60 basis points due to inflationary pressures being partially offset by price. Now moving on to slide eight, where I’ll review our full year 2024 results. Relatively broad-based demand offset some pockets of weakness throughout the year, leading to total net sales of $1.8 billion, up 1% reported and 2% organic compared to last year.

Positive contributions from price were partially offset by modest FX pressure, primarily in Latin America. Both segments contributed low single-digit growth. Gross profit margin was 47.6% in 2024, about flat year over year. Adjusted operating margin was 22.9%, up 70 basis points compared to the prior year. Incremental operating margins were 81%. Adjusted diluted earnings per share were $7.70, up 10% over the prior year. Our continued ability to generate capital-efficient growth was evidenced by our 22.9% adjusted return on capital employed. Now turning to slide nine, free cash flow in the fourth quarter was $93 million, representing a conversion rate of 105%. Free cash flow was driven by higher earnings, backlog conversion, and solid working capital execution, with an improvement of working capital efficiency of 70 basis points year over year.

With that said, we did finish the year slightly below our target levels, tied to the sales shortfall and balance sheet hedging programs. We invested $14 million in CapEx, repaid $43 million in debt, and returned $20 million in dividends to shareholders and repurchased $10 million of shares. For the full year, free cash flow was $242 million, compared to $397 million in the prior year, adjusted for the divestiture of MSA LLC, completed in January of 2023. Full year conversion rate at 80% was below our targeted levels, primarily due to working capital and higher cash compensation and tax payments related to our strong performance in 2023. During 2024, we invested $54 million in CapEx, repaid $94 million of debt, returned $79 million in dividends to shareholders, and repurchased $30 million of shares.

Net debt at the end of the year was $343 million, including cash of $165 million. Adjusted EBITDA for the full year was $469 million, or 26% of sales. We strengthened our financial position in 2024, ending the year with significant liquidity and net leverage of 0.7 times. Our overall financial strength provides us with ample liquidity, enables our balanced capital deployment strategy, and continued investments in growth. Through the continued implementation of the MSA business system, we made great progress in reducing our backlog to normalized levels and lowering back orders. This has had meaningful benefits, including improved delivery times and fill rates, as well as greater productivity measures and reduced working capital. And while we’re still in the early innings of implementing our business system, it has been very rewarding to see these projects come to life across the globe.

I’m now on slide ten. Before turning to our 2025 outlook, I wanted to take a minute to reflect on our financial performance trends. At a high level, our resiliency is reflected in the organic growth, incremental margins, and our improved balance sheet. As I look towards our 2028 goals, we can look at the last three years as a baseline to why we remain optimistic even with a dynamic 2025 upon us. So let’s turn to our 2025 outlook on slide eleven. We’ve taken a balanced approach in our outlook based on the positive long-term dynamics inherent in our industry that underpin demand. The essential nature of our differentiated products and solutions and the stability and diversity of our portfolio and end market. However, the operating environment will be dynamic with continued uncertain macroeconomic and geopolitical climate.

Additionally, we’ve noticed since our May outlook that we have challenging comparisons due to the delivery of the US Air Force orders and incremental backlog conversion in 2024. Overall, fire service remains healthy, and we have confidence in our strategy to navigate the upcoming North America NFPA standard change for fire service, though there could be some timing dynamics throughout the year. With this backdrop, we remain cautiously optimistic in our outlook, which balances the opportunities and risks we see ahead of us as well as the resilient nature of our business. We expect to generate low single-digit organic sales growth in 2025, which would be in our normal mid-single-digit range if not for the comparison headwinds I just mentioned.

Finally, I would also note that our sales cadence in 2025 will be in line with historical trends. For modeling purposes, I will also provide some below-the-line drivers that impact the results. We expect our tax rate to be between 24% and 25% in 2025, and based on current rates, interest expense is expected to be approximately $24 million to $27 million. We expect pension and other non-operating income to be $45 million higher than 2024 levels. In addition, while we expect organic sales growth to be up low single digits, current foreign exchange rates imply a further headwind to reported sales. We are not immune to external factors that could impact our top and bottom line, but we will continue to be agile in the event of the operating environment differing meaningfully from our expectations.

For example, while we do not include tariffs in our outlook, we stand ready to navigate any potential impact we see. Finally, I’d like to share my gratitude to our global team for their solid execution and operating performance in 2024. We are well positioned entering 2025, and we will continue to be fully focused on executing our Accelerate strategy, delivering on our financial commitments, and creating sustainable value for our shareholders. Now I’d like to turn the call back to Steve to outline the key areas of focus for 2025.

Steve Blanco: Thanks, Lee, and I’m on slide twelve. As I look ahead into 2025, our team around the world continues to maintain and execute our strategy while controlling what we can control. Our 2025 initiatives strongly emphasize growth and extending our leadership position in safety technology through innovation, implementing the MSA business system, delivering continued improvements in operations, and maintaining our disciplined approach to capital allocation. On slide thirteen, overall, we executed well in what we see as a dynamic environment in 2024, a tribute to the team’s focus on serving that mission and the inherent resiliency of our business. As we turn to 2025, we remain focused on driving profitable growth and building on the foundational work we completed in 2024 for our Accelerate strategy.

I’m confident our focus and determination will help drive long-term value creation for our shareholders and continue to make MSA Safety Incorporated the preferred choice for our customers around the world. With that, I’ll turn the call back over to the operator for Q&A.

Operator: Thank you. We will now begin the question and answer session. Your first question today will come from Ross Sparenblak with William Blair. Please go ahead.

Ross Sparenblak: Hey, good morning, gentlemen.

Steve Blanco: Good morning, Ross.

Ross Sparenblak: Hey, Steve. You called out firming orders in your commentary there. Can you maybe just help us size the cadence as we move through the quarter and into January? And maybe just frame some of the puts and takes when you think about the growth expectations throughout 2025.

Steve Blanco: Yeah. For you mean, the order pace we’ve seen thus far?

Ross Sparenblak: Exactly.

Steve Blanco: Yeah. Yeah. So so if we if we looked at the the overall fourth quarter, we started out we would say, where we hope to be in fourth quarter. December was lighter than we anticipated. A lot of that industrial wise, slower December than we thought. I think it it fit that thesis of that choppiness in industrial which, you know, our distributors kinda shared with as well. So we weren’t, you know, weren’t seeing what we thought maybe in December, but as we looked into year to date, thus far, it’s been a a really solid start. Across the board, especially in in our detection business. Fire service has been good. So as we look at it, overall, I think we look at the twenty five story, the incoming and the pipeline. Really matching up with what we anticipated?

You know, as we talked even back to Investor Day, I think it fits really well But what we initially thought strategically we’d focus on and how we’ve kinda move forward. The detection space and fall protection is is clearly a category as well. So so far, I’d say the the order pace is just Just as as we hoped it would be, and the pipeline is the same.

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

Steve Blanco: Yeah. That’s a good question too. So the you know, this first, the fire service business continues to be resilient, and the pipeline’s good. I would say that the pace of ordering wasn’t to the level we anticipate the Air Force order, which was nice, but we actually expected it to be a little stronger. Now again, we’re not seeing any competitive accounts take those orders from us but a slower pace. As we look into 2025, you know, we are cautious because of the NFPA standards change in, you know, the latter part of the year. The promulgates probably early 2026, but I think we’re really well positioned. You know, our team’s done a nice job really talking to the customer base on who will potentially wait and who won’t. And in our view, we got a pretty good base of business that won’t wait but there were certainly are customers that are gonna consider hey, I wanna wait and see what the new standard is.

Ross Sparenblak: Okay. Yeah. That’s very helpful. And just one more for me. You know, you also referenced a large MSA plus order. You know, forgive me if I missed it. Was this a new or existing customer? Just like to better understand some of the competitive dynamics and

Chris Hepler: This was new. This was raised.

Ross Sparenblak: Yeah. Thanks for the question. So this was a competitive conversion. The large customer in North America great competitive conversion where we competed against all of the primary competitors you might expect. And the team did a fantastic job.

Ross Sparenblak: That’s great to hear. Alright. I’ll jump back in queue. Thanks, Chris.

Chris Hepler: Thanks, Ross.

Operator: Your next question today will come from Sarim BoraDietzki with Jefferies. Please go ahead.

Sarim BoraDietzki: Hi, good morning. Thanks for taking the questions. Maybe just focusing a little bit on the margins America margins exiting the year at almost thirty-one percent. Like, how does this set you up you think about the margin potential heading into 2025?

Lee McChesney: Yep. So good morning. Well, I probably bring you back to, you know, our goal each year is to target thirty to fifty basis points of improvement. You know, that’s certainly what we’re gonna do each year. I would say when we think about twenty five, that will be a bit harder. You know, certainly, FX is out there. You know, I’ve I’ve showed this a number of times. We we go after that type of improvement, and if something goes wrong, you got something combat it. So, I mean, right now, I’m not gonna get into the game with predicting FX, but we certainly know it’s if I look at the rates today, it’s it’s at least a point and, you know, times even in the last few weeks has been more than that. But I still think, you know, for for the year, we’re looking to to to move the margins up, and it’s gonna be more in the gross margin area than in the SG As you think about our outlook for 2025.

Sarim BoraDietzki: That’s helpful. Then maybe switching to international, a similar question. Can you just talk through the variability in international margins as we head into 2025? How do you think about the step down into the first quarter sequentially? And then how should margins trend through the remainder of the year?

Lee McChesney: Yes. Good question. And I think for international, but also just for the entire portfolio, there’s definitely a step down in one Q just just simply because of volume leverage. You know, and that’s how we see it. We made a comment about just the outlook for the year. You’re gonna see a more normal seasonal pattern in our sales. The last couple of years, you’ve had some anomalies because of large orders or backlog and things like that. But Right. There is a variability in international. It doesn’t have the same you know, market position or market dynamics that we do in North America, We are working on the same things. You know, we’re working on productivity, launching NPD, you know, we certainly have done restructuring over time to attack our cost base.

And I think, you know, it’s more of a long term play. There are structural differences between the international markets in North America, so there’ll be a difference. But certainly, you know, we have these margin objectives, you know, we’re going after it across the globe. Sure.

Sarim BoraDietzki: I appreciate that. And then just one more. You mentioned just the normal seasonality for the year, but if we just kind of focus on Americas and fire service, just talk about how you’re thinking about the cadence to the fire service sales given the challenging comp in the fourth quarter.

Lee McChesney: Yeah. Sure. Yeah. So I’ll give you a couple of dynamics to think about. So we’re talking about low single-digit organic growth is our target for the year. It’s certainly when I say you have a normal seasonal pattern, you know, that’s, you know, it’s always gonna again have that lower first quarter little bit step up for the second quarter, and there’s there’s a a larger back half. You know, typically, our sales overall know, probably about forty-seven to forty-eight percent the first half of the year, and remainder is in the back half. So when you drop that in, into 2025, that’s gonna give you just a a different view because in the first half of 2024, we had Air Force. We also had a, you know, kind of our final rundown of extra backlog.

In fire overall, you know, we’ve as we share, we think for the year, it will be a negative growth year because of those comps. And certainly the harder comp isn’t is in the first half of the year. Versus the second half. I’ll just add to that because, you know, beyond that, you know, that’s we’ve talked about that since May. We still have our focus on, you know, detection being our leading growth segment. That’s still our view for 2025 as well. And then, you know, industrial PPE, certainly default protections are focused to get that into a positive as well in 2025.

Sarim BoraDietzki: I appreciate the color. Thanks so much.

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

Jeff Van Sinderen: Good morning, everyone. You touched a little bit about this on your prepared comments, but wondering if you can speak a little bit more about what you’re doing in terms of product innovation in 2025 and, I guess, even into 2026. And then could some of those innovation initiatives create demand for replacements and upgrades in the detection segment. Just curious about what you’re seeing there.

Steve Blanco: Yeah. Thanks for the question. So, I mean, broadly speaking, as you know, and we talked a bit about this in the prepared comments, but innovation is where we lead, and it helps us differentiate who we are in the market. We spend a lot of time with our customers, a lot of VOC or voice customer activity to inform us and gain the insights to really come up with solutions to the challenges they identify. So I would look at 2025 and 2026. You know, 2025, you think about what we talked with fire service. We’ve taken advantage of this switch to enhance the G1 specifically with what we see as the next generation G1 that will showcase at this year’s FDIC. And that’s focused on optimizing comfort, functionality, ergonomics, etcetera.

And then if you lean in the detection space a little bit more, I think what’s really good for us, and I’ll talk about this in two categories, because we see detection as a fixed monitoring, and then we look at the portable side of this. So if you look at the portable side of this business, we really are leaning into the connected platform a lot. We have the iO4. We also have a robust plan for product software updates and cloud capabilities that will continue to roll out throughout 2025 and beyond, so you’ll see some of that show up this year. Certainly, that does have that’s part of our strategic initiative set, the Accelerate strategy we talked about in May. That’s coming to fruition and should see some really nice benefits. A lot of that might be the latter half of the year, as far as when you see the revenue side of that, but really good progress there.

And in the fixed side, you know, that fixed monitoring space. It’s a really strong business, great diversity in the portfolio, we’ve got an expanded solution set because of our HVAC refrigeration and automation that came through Bacharach that came through the MSA SMC acquisitions. That adds to the strong base in energy that we already have including clean, including the best storage space where we play in, and that strong installed base. So I think we think of detection, it’s really fitting out or filling out really well with what we expected and it’s gonna be a a key growth driver into the future.

Jeff Van Sinderen: Okay. Terrific. And then just wanted to follow up a little bit on the new NFPA standard change this year. As you think about that, what do you feel needs to happen for that business to normalize under the new standard? And then I guess, I know this is a tough question, but how do you see sort of the time frame of that playing out?

Steve Blanco: Well, these standards come out usually every five to six years. So this is something that’s not new. So we do have a lot of experience with this. Typically, what you see is you see customers evaluate where they’re at in the buying cycle, and a lot of customers can’t wait. And then they also evaluate what’s changing in the standard and how do they view that relative to the needs they have as a specific department. So the 2025 standard, which, you know, the timing is really up to the NFPA when they get through all of the approval processes, they have to do all the testing. We’ve submitted our platform, and certainly, our competitors we think are doing the same. But they have to go through all of that process and then they validate those different platforms for approval.

And we would expect that to promulgate probably early 2026. You know, again, we don’t know the timing exactly, but that would be likely. But if you look at that standard, the changes on it relative to typical standard changes are fairly minor. They’re not significant in nature. So that’s kind of the the thoughts our team has. There certainly will be customers that wait. We expect that to happen. There always are. But it’s a fairly normalized standard change in our view. And we did as I said, I think we we look at our G1 platform, and we’ve continued to enhance that for our customers. So including the 2018 standard, we’ve each taken advantage of each standard change opportunity to really upgrade that. But this latest enhancement for the G1 and what we’ve done on the next Gen, we think the timing’s perfect.

So next year when it promulgates, the 2025 standard, we’ll be twelve years out from that. First, fourteen, 2014 G1. Perfect timing for those first units to come back up. So we feel really good as we go into the future on this. 2025 is gonna be a little choppy the comp for Air Force and certainly the standard change, but we think we’re well prepared.

Jeff Van Sinderen: Good to hear. Thanks for taking my questions.

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

Larry De Maria: Thank you. We appreciate you joining the call this morning, and thank you for your continued interest in MSA Safety Incorporated. If you miss a portion of today’s call, an audio replay will be made available later today on our Investor Relations website and will be available for the next ninety days. We look forward to updating you on our continued progress again next quarter.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.