MSA Safety Incorporated Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Third Quarter Performance: Consolidated reported sales grew 8% (3% organic), with adjusted earnings per share at $1.94. Detection had 6% organic growth driven by fixed and portable instruments. Fire service organic sales declined 3%, while industrial PPE organic sales increased 7% (fall protection with double-digit growth). The M&C TechGroup acquisition contributed $15 million. Order pace was mixed: Detection orders up double digits, industrial PPE orders mid-single digits, and fire service orders down double digits.
• ACCELERATE Strategy: Strengthened industrial safety technology with new products like ALTAIR io 6 and H2 V-Gard. Fall protection performed excellently. Tariff mitigation programs target price/cost neutrality by H1 2026. MSA+ platform had strong performance with customer wins.
• Fire Service Dynamics: AFG funding release was late, and the U.S. government shutdown delayed fire service order timing, shifting revenue to 2026. NFPA certification is expected early 2026.

Segment Performance

• Americas Segment: Reported sales increased 5% year-over-year, with 3% organic growth. Detection had high single-digit organic growth, Industrial PPE had low single-digit growth, and fire service had a low single-digit contraction. Adjusted operating margin was 28.3%, down 240 basis points year-over-year.
• International Segment: Reported sales increased 16% year-over-year, with 7% contribution from the M&C acquisition and 5% organic growth. Industrial PPE had double-digit organic growth, Detection had mid-single-digit growth, and fire service had a low single-digit contraction. Adjusted operating margin was 16%, 240 basis points above last year.

Guidance

• Maintain low single-digit full year organic growth outlook. The fourth quarter is impacted by AFG timing delay and U.S. government shutdown. M&C is expected to add ~2 points to full year revenue growth, and FX is expected to be ~1% positive. Fourth quarter SG&A is expected to return to normal levels.

Risks

• Delayed AFG funding release and U.S. government shutdown affecting fire service order timing and revenue.
• Uncertainty around NFPA certification timing impacting fire service business.
• Transactional FX and inflationary pressures affecting margins.

Question and Answer

• Q: Impact of fourth quarter seasonal uplift due to fire service? A: Correct. Sales are relatively consistent between Q3 and Q4, with a slight uptick expected.
• Q: Timing of fire department orders after AFG awards? A: Typically, fire departments act quickly upon receiving funds, but the government shutdown delayed the acceptance process, shifting order timing.
• Q: MSA+ subscriptions ramp-up? A: Strong quarter for MSA+, with continued growth and signature wins, contributing to portable instrument growth.
• Q: International fire service performance? A: Delays in Asia and funding shifts to defense in Europe, with expected improvement in 2026.
• Q: M&A pipeline and leverage? A: Active M&A pipeline, leverage down to 1x, with expectations of buybacks in Q4 and focus on strategic deals.