MSA Safety Inc Q4 FY2024 earnings call

• 2024 marked MSA Safety's 110th year as a purpose-driven company, dedicated to the mission of ensuring safety at work and health in communities.
• 2024 financial results: Mixed quarter with margin expansion through SG&A management, earnings growth, and solid free cash flow generation despite lower sales growth; overall demand resilient across top product categories; announced a ten-year $33M breathing apparatus contract with US Coast Guard and received largest ever order for MSA Plus connected portables.
• Full-year net sales growth: Up 1% reported and 2% organic; strong operating leverage led to adjusted operating margin expansion and 10% adjusted earnings growth.
• 2024 accomplishments: Leveraged innovation and new product development; leaned into targeted growth accelerators like MSA Plus Connected Worker platform; deployed operational excellence program; strong financial profile enabled effective capital allocation.

In the Americas segment, sales increased 1% year over year on a reported basis, with growth in fire service partially offset by contractions in detection and industrial PPE; currency translation was a 2% headwind, and adjusted operating margin was 30.7%, up 90 basis points year over year. In the 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. Product categories: Sales in fire service were up high single digits YOY, primarily due to double-digit growth in SCBA. Sales in detection were down low single digits YOY on a contraction in Fixed Gas and Flame Detection, but portable gas detection had high single-digit growth. Industrial PPE sales were down mid-single digits for the year, with low single-digit growth in industrial head protection, offset by a low single-digit decline in fall protection and double-digit contraction in other PPE sales.

• Expect low single-digit organic sales growth in 2025, balancing opportunities and risks with a dynamic operating environment.
• Tax rate expected to be between 24% and 25% in 2025; interest expense expected to be approximately $24M to $27M; pension and other non-operating income expected to be $45M higher than 2024 levels; current foreign exchange rates imply a headwind to reported sales.
• Sales cadence in 2025 in line with historical trends, and agile in responding to operating environment differing from expectations.

• Dynamic macro and geopolitical conditions; foreign exchange headwinds; potential impact of tariffs (though not included in outlook but ready to navigate).

Q: Can you size the cadence as we move through the quarter and into January and frame growth expectations throughout 2025?

A: December was lighter than anticipated in industrial, but year-to-date has been solid; order pace and pipeline match expectations.

Q: Do you get the sense that there's been any deferred ordering anticipation of the new product launches with the coming NFPA standard change?

A: Fire service business is resilient, pipeline is good; some customers may wait to see new standard, but well positioned.

Q: How does the margin potential head into 2025 for Americas, which exited the year at almost thirty-one percent?

A: Goal is to target 30-50 basis points of improvement, more in gross margin area.

Q: Talk through the variability in international margins as we head into 2025 and how margins should trend through the remainder of the year?

A: Step down in one quarter due to volume leverage, more normal seasonal pattern; working on productivity, NPD, cost base restructuring.

Q: How are you thinking about the cadence to the fire service sales given the challenging comp in the fourth quarter?

A: Low single-digit organic growth target, normal seasonal pattern with larger back half; detection and fall protection are key growth categories.

Q: What are you doing in terms of product innovation in 2025 and into 2026, and could innovation initiatives create demand for replacements and upgrades in the detection segment?

A: Focus on customer insights, innovation in fire service G1 next generation, detection portable side with connected platform and software updates, fixed side with expanded solution set from acquisitions.

Q: What needs to happen for the fire service business to normalize under the new NFPA standard and how do you see the time frame playing out?

A: Standards change every 5-6 years, customers may wait, but 2025 standard likely to promulgate early 2026, changes are fairly minor, well prepared with G1 platform enhancements.