MSA Safety Incorporated Q4 FY2025 earnings call

• Executed well in a challenging 2025 environment, with a solid finish guided by the Accelerate strategy. Had save stories like ALTAIR 5X detector saving a worker and Globe turnout gear helping a firefighter.
• Fourth quarter 2025: 2% sales growth, adjusted earnings per share $2.38; organic sales: detection up 17%, fire service down 21%, industrial PPE up 1%.
• Full year 2025: net sales up 4%, organic up 1%, M&A up 2%; order pace mixed, backlog healthy. 2025 achievements: 0 lost time incidents, total recordable incident rate 0.25 (best ever).
• 2026 strategic priorities: focus on profitable growth, leadership in markets, using the MSA business system for continuous improvement.

In the Americas segment, sales declined 1% year-over-year on a reported basis or 3% organic, with mid-20s organic growth in detection offset by a low 20s contraction in fire service. M&C contributed 1 point to total growth and currency translation added a 1% tailwind. The adjusted operating margin was 31%, a 30 basis point increase. In the International segment, sales increased by 8% year-over-year on a reported basis, with a 6% contribution from M&C and a 5% tailwind from FX. Organic sales declined 3% as mid-single-digit growth in detection and industrial PPE was offset by a double-digit contraction in fire service. Adjusted operating margin was 16.8%, 80 basis points below last year.

• 2026 outlook: mid-single-digit full year organic growth; detection and fall protection as key growth drivers; M&C to contribute ~1% to revenue growth; interest expense expected to be $28M-$31M, tax rate in the mid-20s percent.

Uncertainty and volatility in 2026; macro uncertainty and timing challenges pose risks to business performance.

Q: On detection, really strong quarter, obviously, and able to get some of these larger orders out the door before year-end. Steve, I seem to recall, we were thinking about that business being in the high single digit for '25 and I guess it grew 12% over on a local currency basis, does that delta -- is that explained by the large orders? Or did you have some other things come in, in the fourth quarter?

A: Yes. Thanks for the question, Rob. I would say it was explained by the large orders. We had a couple of really nice orders come in. We had a customer in late Q3 that we -- that asked us to execute on an order that would have been this year. So we had an additional large order that came in. So if you took that out, it probably would have been a 10-ish number for the year instead of the 12. Obviously, very strong. We said high single digits, I think, pretty early in the year, and I think the team executed very well in that. But the underlying demand continues to be super strong across most of our regions, and we're expecting the investment category for some of the end markets to continue. I mean we're not going to have that same kind of year this year, certainly, but a really solid year.

Q: Trying to get past some of the well-documented headwinds in fire service in the fourth quarter. How do you see maybe the cadence in fire service playing out through the year? I'm sure those don't go away just on January 1, but between the first quarter and maybe you get by the midyear, what -- how does that play out, do you think?

A: Yes, thanks. It's going to be interesting. So we really -- when you think of the delay, typically the fire service, when they receive the funding, they've got this built-in time horizon of year-end. And part of that is they recognize there's an opportunity, they've got funding and they want to get in their orders before the price increases that most manufacturers put in, in the first quarter. So that didn't transpire, right? They didn't have the funding, they weren't able to do that. So we have that pipeline. We're working through that with our customers. That's why we think most of those orders probably play out sometime in the first half for the ones that had the government delays. And then the remainder, it's probably going to be more like a normal fire service year, what you would typically expect, which would say that you would lean towards the second half again on the overall demand cycle here. So that's how we see this playing out -- excuse me, this year. I think that's the best way to look at it. Except that AFG delay, some of those will come in. We'll see some of that in the first half of the year. But the overall picture is more of a standard year, I think.

Q: Looking at Slide 9 on the end market assumptions. First off, thanks for providing that. I was curious to see that the infrastructure bucket is expected to be neutral this year. Energy and chemicals are up. Can you maybe just provide a little more color on the project activity you're seeing in the funnel? And anything else you can speak to that kind of underwrite those assumptions for the year?

A: Yes. Thanks for the question, Ross. When we think of 2026 -- certainly '25 was choppy in industrial. We did see chemical and energy had continued investment. And the thesis was pretty good in most of the regions around the world. I would anticipate, and the team believes, what we're hearing and seeing is '26 will be similar. A couple of the margin -- or a couple of the regions, you'll probably see it build up in the second half. We know of some announced investments. If you think of Europe, for example there, they really haven't had as much investment going on, but we do see some of that playing out in the second half, probably some improvement in China with that regard. Middle East was strong all year. Expect that to continue most of this year, if not all. And the Americas is in a similar story as well. So we see that as some tailwinds. From a market dynamic perspective, there's a need for energy across the globe. And certainly, most of the players that -- our customers and others are really trying to make sure they're well prepared for that. And I just would say, the overall, at least in our view, when you compare or put together our activity in the Accelerate strategy along with the market dynamics we're expecting, we feel like we're in a pretty good place for '26.