Q2 2021 MSA Safety Inc Earnings Call
[music].
Good day and welcome to the MSA second quarter 2021 earnings Conference call.
All participants will be in a listen only mode.
Need assistance, please signal conference specialist by pressing the star key followed by zero.
After todays presentation, there will be and opportunity to ask questions to ask a question you May Press Star then 1 and then you touched him soon.
For all of your question. Please press Star then 2 please note that this event is being recorded.
I would now like to turn the conference every 2 of at least Laurens out of please go ahead.
Thank you Paul Good morning, everyone and welcome to the MSA second quarter earnings conference call for 2020, 1 and joining me on the call today are nish, Vartanian, Chairman, President and CEO, and Ken Krause, Senior Vice President and CFO and Treasurer before.
Before we begin I'd like to remind everyone that the matters discussed on this call. Excluding historical information are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 forward. Looking statements include but are not limited to all projections and anticipated levels of future performance forward looking statements involve risks.
Uncertainties and other factors that may cause our actual results to differ materially from those discussed here. These risks uncertainties and other factors are detailed in our form 10-K filings with the SEC MSA undertakes no duty to publicly update any forward looking statements made on this call except as required by law. We've included certain non-GAAP financial measures.
Part of our discussion this morning, and the non-GAAP reconciliations as well as our earnings press release are available on our Investor Relations website at investors Dot MSA safety Dot com with that I'll turn the call over to our chairman President and CEO Nish Vartanian.
Thanks, Alicia and good morning, everyone.
As you've seen.
<unk> accomplished a lot and the second quarter and most importantly, we closed the acquisition of Baccarat on July 1, which I'll discuss after a brief overview of the quarter.
We had a pretty good quarter of revenue returned to growth up 5% from a year ago core product revenue was up 12%.
Margins are on track as we effectively.
And we manage through inflation, we see and our supply chain.
I mentioned on the April call that we were optimistic that the worst was behind us from a demand perspective.
And I am glad to reiterate that sentiment today.
Not only did revenue come in a bit higher and our expectations. Our order book continued to strengthen throughout the quarter and drove.
And with that you can increase and backlog.
Our fire service business remained strong and we're seeing improved demand for gas detection and industrial products.
Overall, our U S business continues to lead the recovery Europe is starting to recover as the vaccine situation improves.
The Sydney and everyone. We continue to manage through supply chain issues, which is a dynamic situation that requires daily attention.
Our most challenging areas of our electronic components used in our S E B, a and gas detection products our level of revenue indicates we've done a good job of managing through these issues.
Still we.
Like pockets of production starts and stops and extended lead times that contributed to our backlog of bill.
But even with those challenges I remain very confident and our ability to enhance our market positions as business conditions improve Ken.
And we'll provide more color on the quarter.
I'd like to now provide more insight.
We did have to 3 areas that support and my confidence and the long term future of MSA as the leader and advanced safety technology.
First we continue to launch safety technologies that solve our customers' toughest safety challenges and I'll talk about those in a moment.
Second our continuous improvement culture is driving efficiencies.
And of our organization the strong execution of our international margin expansion roadmap is 1 example.
And third we're using our balance sheet to make strategic acquisitions and investments that strengthen our leadership positions in key markets.
We reached we recently closed the acquisition of <unk> and the integration of.
She is the organization is off to a strong start.
Starting with the first area, our innovation engine and R&D pipeline.
We're bringing innovation to the fire service market and the form of connected technologies, we officially launch lunar this spring and our Q2 results include about $1 million of revenue related to prod.
And sales lunar for those of you havent seen or read about it as a handheld device that uses cloud technology to deliver fire scene management capabilities per incident commanders.
The feedback we're getting from early adopters provides encouragement that we've hit the mark with this new technology.
We're also.
Using our strong balance sheet to invest and other forward thinking organizations, who share similar mission of similar mission to protect firefighters and as you may have seen in our press release earlier. This month, we established the joint development agreement with the Swiss Autonomous drone technology company called photo Kate.
We established this partnership to improve firefighter safety and enhance their capabilities when it comes to fire scene situational awareness and decision making.
<unk> is the brand name for a tethered drone system that gives incident commanders of birds eye perspective of of fire scene without requiring a pilot.
This collaboration is an exciting venture for us because it represents a new avenue to advance the MSA mission through revolutionary technology for firefighters.
The second area I want to highlight is our culture of continuous improvement and our margin expansion progress and the international business segment.
Our entire.
Higher International team continues to execute our playbook focused on 3 areas driving growth in select markets.
Optimizing our channels approach and delivering operational efficiencies.
We've been executing this playbook for 3 years now and it's encouraging to see the margin improvement as revenue starts to recover from the pandemic.
And the second quarter, the international segment operating margin Rose 70 basis points to 16, 5%.
And looking back to Q2 of 2019 segment margin is up more than 350 basis points.
With the pipeline of programs, we have in place, we remain confident and our ability.
<unk> the continued driving margin expansion and international.
The third area and want to highlight is how we use our balance sheet to make acquisitions that strengthen our leadership position and key markets on.
And on July 1 we closed the acquisition of Bacharach Bacharach as the leader in gas detection technologies, which you which is used and the HVA.
Refrigeration markets.
With annual revenue of about $70 million, it's headquartered here in Pittsburgh not far from our gas detection center of excellence.
Where we've recently made significant investments.
Bacharach aligns well with our product and manufacturing expertise. Moreover, it provides a strong.
<unk> brand and access to attractive end markets that build further diversification and our gas detection business.
From an integration perspective.
We'll be focused broadly on growing the business and reducing complexity I'm very confident and our teams ability to capture value from the acquisition while strengthening the.
And the brands at both Bacharach and MSA.
From a balance sheet perspective, our leverage remains healthy if we add back of <unk> into our quarter and net leverage the pro forma would be about 1.7 times net.
So we're well positioned to continue investing and our business.
1 additional topic I'd like to mention is our approach to ESG.
Social responsibility is not new to MSA for 107 years, we've been dedicated to helping protect the world's workers.
So we help our customers achieve their own ESG goals by enhancing workplace safety.
But we also.
So focus on internally on the ESG objectives that help us to build greater resiliency and adaptability into our overall business model to safeguard the value that we've created.
It's become clear to me that our investments and worker safety.
<unk> environmental sustainability supply.
Resiliency and various risk mitigation programs, all helped to create a bit better business model.
And I believe that companies, who do these things effectively will be the ones the prosper and be fit for the future.
We're proud of prioritizing areas specific to our strategy.
<unk> and for example, we know that attracting and retaining of quality workforce through broad talent pipelines is not just the top business challenge for any organization today, but particularly for manufacturing companies.
For that reason, we invest a lot of time and resources into talent development and retention.
The change where the first time MSA was recently recognized by Forbes as 1 of the best employers for diversity and 2021. This recognition was based on the survey of more than 50000 employees around the country. We were also ranked number 16 on the Forbes best midsize employers list and we were number 1 for engineering and manufacturing.
And poultry category. So it's encouraging to see further recognition of our efforts to create a top workplace.
So to summarize there are 3 areas that give me confidence and MSA future.
Our innovation engine is very strong and it continues the power new and exciting developments and safety technology.
And our continuous improvement culture across all areas of our business is yielding strong results, especially in the international segment and were effectively using our balance sheet to grow and strengthen our business.
With that I'll turn the call over to Ken to take you through more detail on our financial results Ken.
Thanks, Nish and good morning.
<unk> and done I'll start the discussion with financial highlights centered on revenue profitability and cash flow.
We returned to revenue growth and the second quarter with total sales up 5% and constant currency I'm pleased that our Q2 order pace tracked well above 2020 and increased high single digits from 2019.
And every 1 of the fire service and industrial related products are contributing to the stronger order book that.
And that momentum provides confidence around demand for our products as we look at the coming quarters.
Second our operating margin of 17, 2% showed a nice sequential uptick from Q1, despite $4 million of higher stock compensation expense.
Related to our recently announced the acquisition and its expected revenue and profitability contributions over the coming years, the expenses non cash and negatively impacted operating margin by approximately 130 basis points and the quarter.
And third our cash flow performance was healthy receivable performance was excellent.
And on the increase in revenue and our inventory levels position us to deliver a stronger second half compared to the first half we completed the <unk> acquisition earlier this month for $337 million with and after tax cost of debt of less than 2% and his initial indicated our balance sheet is strong and we are positioned.
<unk> very well to invest and our business.
Now, let's take a closer look at the financial results and the second quarter I'll start with the focus on revenue quarterly revenue was up 9%, reaching $341 million revenue was up 5% on a constant currency basis, while we saw about a 2.5% benefit.
<unk> associated with the addition of Bristol, our APR business presented of 5% headwind on a year over year basis.
And constant currency revenue and the Americas was up 6% while international revenues were up 3%. The international performance reflects the lag and vaccine deployment and economic.
<unk>, which is tracking a few months behind the U S.
Core product revenue was up 12% on growth across fire service and industrial PPE, partially offsetting a lower FTE FD business.
The strong core of recovery was partially offset by a difficult comparison and you are.
Purifying respirators looking at industrial PPE, it's great to see the strong growth rates in these areas upwards of 20 or 30% compared to 2020. It was also good to see head protection sales back at 2019 levels and the second quarter touching on fire service backlog remains very healthy and we're.
Recovered about the recent product launches for our lunar and connected firefighter.
The mission critical nature of our products and our strategic investments provide a healthy outlook for the global fire service business I should note that the CBA revenues came in ahead of 2019 levels.
Our <unk> business declined 4% compared.
And the last year on challenging comps and the middle East. However, we continue to see incoming business strengthen through the second quarter and June we booked 1 of the largest EFT GSD orders and our history. Our <unk> backlog is back to pre pandemic levels heading into the second half.
For MSA overall quarterly incoming.
Excited surpassed 2019 levels at the same time supply chain constraints with electronic components are presenting challenges to our ability to deliver and certain areas. This has resulted and backlog increasing 15% from the end of Q1.
Particularly in gas detection products, while it's difficult.
Orders and how long the supply chain challenges will last we expect the constraints around electronic components will persist into the second half.
Turning to profitability gross profit was relatively consistent compared to last year pricing and stronger throughput and our factories offset higher material costs. Despite.
Spite of number of headwinds and margin associated with input costs gross margins were roughly in line with prior year levels.
We have implemented and off cycle price increase to respond to the inflation that we're seeing and the U S across electronic components resins and other inputs, we will continue to evaluate additional pricing opportunities through the second.
Half as we navigate these inflationary pressures.
SG&A expenses was worth the $83 million or 24, 4% of sales and was up $12 million from a year ago and constant currency as I had indicated on the April call, we expected of difficult SG&A comp and the second quarter.
Order because of the variable comp resets at the onset of the pandemic.
This trend played out as expected and impacted the quarterly comparison and SG&A by about $3 million quarter.
Quarterly SG&A also includes about $8 million of costs related to Bacharach, and Brent and the <unk> and Bristow acquisition.
<unk>, including the stock compensation of about $4 million that adjustment that I spoke about previously backer.
<unk> transaction cost of about $2 million.
And the remainder of being the Bristol base SG&A.
Our cost savings from restructuring programs, effectively offset discretionary costs coming back into.
The business, we continue to control the controllable and bring costs back into the business at a slower pace than revenue improvements, we expect SG&A to approximate 23, 5% of sales for the second half of 2021, we.
We invested $7 million and restructuring programs and the quarter, primarily and our international.
<unk> segment as we continued to execute on our margin expansion roadmap.
Our restructuring actions have produced excellent results to date and position us well for the economic recovery together with the programs we.
And I discussed in 2020, we continue to expect to deliver approximately $15 million.
Of the savings across the income statement and 2021 and annual savings of $25 million thereafter, our quarterly adjusted operating margin was down 150 basis points from a year ago. The decline reflects the impact of the Bristol noncash stock compensation adjustment I mentioned earlier, which is booked and our corporate segment.
Looking at our segment performance International margins were up 70 basis points to 16, 5% of sales our cost reductions and pricing programs remained very much on track, it's great to see the return the margin expansion for the segment as the volume starts to improve.
America margins were down 140 basis.
Points to 22, 6% of sales variable compensation resets associated with the improved revenue performance drove a 140 basis point decline and the quarter and we continue to navigate the inflationary pressures and are assessing additional levers that will help mitigate these pressures and future quarters.
Our quarter.
Basis tax rate was 27, 8% on a GAAP basis or 27, 4% on an adjusted basis. There were 2 discrete items that drove the quarterly rate up first the statutory tax rate increase and the U K from 19% to 25% drove a 1 time adjustment to our deferred taxes.
Orderly turret higher non deductible expenses associated with the acquisition of <unk>.
From a cash flow and capital allocation perspective quarterly free cash flow conversion was more than a 100% of net income while overall working capital performance was strong and improvements in receivables and we did build some inventory and the quarter, which.
We and <unk> with our backlog build as well as managing supply chain risks, our strong balance sheet positions us well to gain share as the market rebounds.
We continue to execute on our balanced capital allocation strategy and the second quarter, we paid down $25 million of debt funded 17.
A lot of.
Of the dividends to shareholders and invested $11 million and Capex programs.
Since we completed the <unk> acquisition on July 1.
Its impact is not yet reflected on our balance sheet on a pro forma basis. Following the acquisition net debt to EBITDA would be $1.70.
<unk> mines compared to <unk> 6 times at June 30, we continue.
And to expect Bacharach to provide 10% to 15 of adjusted earnings per share and the second half of 2021 in line with our existing methodology adjusted earnings will exclude purchase accounting amortization.
In connection with the acquisition we funded 2.
$7 million of 15 year senior notes with a fixed interest rate of $2.6 9%. The remainder of the transaction was funded with our revolving credit facility, which we amended and extended and may to provide greater borrowing capacity and flexibility. We also included of sustainability linked pricing structure.
200 on a revolver, our borrowing cost flexes up or down based on our performance on certain ESG metrics with the pro forma debt for Bacharach, we'd expect the interest expense to be in the range of 3.5% of $4 million and Q3 and Q4 of this year.
We also completed a buyout of our.
The minority partner and our China business for about $19 million in July China is a key market for us and it's important it's an important part of our growth strategy moving forward, China has consistently been accretive to msas growth over time as a result, we continue to invest and this business and this buyout represent.
Represents a key strategic milestone for us we funded the investment with local cash balances and as part of this deal we expect to repatriate between $10 million to $15 million of cash back to the U S and the third quarter. The transaction provides full ownership of our business and a highly strategic market as well as.
And is optimized foreign cash balances.
Before we move on let's touch on the adjustment to the product liability reserve, which drove $12 million of expense and the quarter. We increased our product liability reserve as a result of an increase and the number of asserted cumulative trauma claims pending against our subsidiary of MSA LLC.
Contingent.
And helping monitored development developments and filing rates, we plan to conduct our annual review process. Later this year, where we will evaluate many factors, including the potential developments and filing trends.
As we look ahead, we're operating and a very dynamic environment, while the strong rebound and order pace.
Continued in quarter and elevated backlog provide a sense of optimism heading into the second half the supply chain challenges. We are facing are having an impact.
From where we operate today the supply chain constraints of the largest variable for us raw material availability as well as the cost of those inputs can be difficult to predict.
And the secondly monitoring the situation and we're laser focused on executing initiatives to mitigate the impact of this on our business. Both on the top line and our margin profile our market positions have never been stronger and we continue to invest and growth programs and acquisitions that support our position as the safety technology.
Workload leader, we've taken a number of steps through this recession to position ourselves for strong performance upon the recovery, the Bristol and <unk> acquisitions significant cost takeout programs mid year pricing actions and expanding our borrowing capacity at historically low rates are just a few examples I remain very.
<unk> of it and that these actions will benefit our shareholders and stakeholders as conditions continue to improve with that I'll turn the call back over to nish for some concluding commentary nish.
Thank you Ken the <unk>.
Returned to revenue growth and improving order book positions positions us well for the future and the second half of 2000.
Com and <unk>.
The level of optimism about demand is higher today and it has been since the onset of the pandemic.
Months, we'll remain focused on acquisition integration and evaluating addition, additional pricing opportunities navigating supply chain constraints and improving our leadership positions across core Mark.
'twenty, 1 and geographies at this time, Ken and I will be glad to take any questions. You may have please remember MSA does not give guidance, having said that we'll now open up the call for your questions.
And we will now begin the question and answer session to ask a question you May Press Star then 1 on your Touchtone phone.
And we're using a speakerphone please pick up your handset before pressing and Keith.
For all of your question. Please press Star then 2.
And at this time, we will pause momentarily to assemble the roster.
And our first question today will come from Stanley.
With Stifel. Please go ahead.
Hey, good morning, everyone. Thank you for taking the question and congratulations on a nice quarter.
Yeah.
You talked about.
Baccarat and being able to focus on growth and reducing the complexity how long does that take 2 to 2.
And the Oh and by the they had such a nice product mix kind of going in and just curious kind of what expectations should be from of ramp standpoint.
Good morning, Stanley and thanks for the question your participation here today.
Yeah, the bacharach opportunities really interesting for US you know they align really well from.
<unk> and manufacturing perspective, and manufacturing technologies, and R&D perspective, and of course of the markets, we sell approximately $10 million of products and today at Hvac's, our market and so we see some nice opportunity.
The cross sell some products and some of our channels of distribution and some of our products through there.
So there is some nice opportunity as we go forward to grow that business and really that's a key focus area for us is to grow that business and along the way. Obviously there are some opportunities to drive some efficiencies and simplify the business model between the 2 organizations and will be focused on that and that'll take some time to.
Their channel as you know we.
Moving the general monitors Lake Forest facility here into Cranberry, we've completed that expansion and are executing that and very close to getting that up and running and have also added to the general monitors facility in Ireland.
Work.
We've got a playful with with some of the things that we've done from from a manufacturing perspective, but we're really going to be focused on this from the sales and marketing standpoint, as we go forward.
Perfect and then I apologize I had to hop off I've got juggling multiple calls, but in terms of the margins and in the U S. A little bit of headwinds did.
Did you all called out kind of what the raw material impact was.
And you'll given that some of the the shorter cycle of higher margin products.
Were so strong and the quarter.
We did not call that out specifically Stanley It's Ken what we did call out was the fact that we saw about 140 basis point decline.
And associated with less leverage and SG&A, notably and discretionary comp adjustments that we had a variable comp and adjustments that we had in the quarter.
You know it's a it's a really good question, it's a very dynamic environment when it comes to pricing and cost and and I think the second quarter we bid.
We were pretty successful at managing the gross margin.
But as we go forward there is certainly a lot of risks on the horizon and what we're seeing is orders that are and the backlog, which may have some pricing at at rates that are not necessarily matched with the cost that we're seeing products come in.
And the inventory side. So so were certainly managing through that we've done a good job. Thus far we've implemented off cycle price increases and we're looking at further price increases as we move forward.
Perfect and then lastly, if you do decide kind of on additional pricing since you've been very good at price of around the kind.
Of a value based approach and how quickly could that additional or the last round of pricing starting to flow through into the results.
And certainly it typically takes US 60 to 90 days the start teed up to start to see that pricing come through so we're analyzing some different avenues, we can take as we get into the third quarter fourth quarter, and we typically of a price adjustment.
In January so we have a number of options that we're looking at the we pulled that forward so to speak into 2021 and not have that price increase in January or do we do something here and the third quarter and then again in January so we're analyzing that and 1 thing that we take great confidence and is the fact that we do a nice.
Job of maintaining a good margin profile of this business.
And whether we lag a quarter or 2 when it comes to these inflationary.
The inflationary situation that we have today.
And we'll catch up with that and we will get our margins to the appropriate level that we expect as we go forward because we think we've earned the right to do that with our.
Position and the value, we bring to our customer base.
Great guys. Thanks, so much time and best of luck. Thank.
Thank you Stan Thank you Stanley.
And our next question will come from Rob Mason with Baird. Please go ahead.
Yes, good morning Nish Ken.
Maybe Ken first.
The market the nice job on the quarter. The revenue came in a little bit better it seem then.
And maybe what you were thinking earlier in the month and I was just curious maybe what drove that was it just the mix of business that played out and your ability to fulfill that or did the order strength in later in the quarter.
And what accounted for the.
The upside if you will.
Thanks for the question, Rob and congratulations on your promotion as well.
The quarter finished very strongly when we had our webcast and the first half of June.
We were seeing and we continue to see supply chain challenges and it but as I had.
<unk> said in the in my prepared comments, it's a very dynamic environment and so what we were able to do is be able to secure a source of of.
Supplies and materials and the second half of June and that helped us meet some demand levels that we're seeing so it was really it's very a very dynamic environment, we were able to secure.
Some additional inventories and materials that helped us meet some customer demand that we were seeing but that was primarily the driver of that was the second half of June we just had a really strong finish.
I see and just to just to clarify the commentary around.
Pricing and your price strategy.
You mentioned and off cycle price increase and perhaps the.
The evaluating something and the second half so just the U.
To be clear you have implemented off cycle price increase to start the third quarter is that correct and we.
Had we had earlier, Rob we implemented a price increase during.
<unk> and quarter, and we expect that to come in and see some impact from that.
Through the second half of the year and now we're looking at another price increase and the timing of that.
We still haven't button that up and we're really analyzing what we're seeing from an inflation standpoint, and we'll continue to make those adjustments as we go forward.
The second thing and we've been successful with our price increases and the past is as you know.
No with the.
What we had with some of the tariffs and and the challenges we had back during the Trump administration, we did a nice job of implementing price increases kind of mid cycle, there to offset that and we're confident we'll be able to do the same here 2 to offset.
Offset inflation, we see and the supply chain.
I see I see.
Just last question.
Going back to Baccarat and me.
<unk> be the the simplification efforts or synergies if you want to call it that.
And I'm curious what is built into the expectation for.
The the 25% to 35.
And contribution next year.
Around those efforts.
Sure.
As we have historically done Rob we certainly have built some synergies into it both on the top and on the cost of the topline as well as.
On the cost side.
With that this business is a very profitable business on a standalone basis, and we're taking a very pragmatic approach with the business to.
And to ensure that we don't lose any key talent talent is always a big part of our acquisition strategy and.
We look at this business, it's no different than any of our other businesses and so we're taking a pragmatic approach and and stepped approach as we think about some of those cost synergies that we think are out there.
But also just being sure that we're we're walking that fine line and keeping the business intact, because it's a very.
So when we on a standalone basis, it's a very profitable and a very attractive business.
Right right and as I recall.
Its international footprint.
It seems to offer some opportunity for you as well how quickly.
Could that start to play out and contribute.
You leverage your footprint.
Very definitely could contribute its of its business today is comprised of approximately 75% and the U S and 25% abroad.
We obviously have a larger footprint and they do abroad, and we think theres an opportunity to leverage that business as we think about some of our key geographies across the world. So it certainly.
And so on the plan and certainly something that we're discussing internally and we're starting to approach some of our channel is about as well.
I see very good thank you.
Thank you Rob.
And our next question will come from Brendan Hoffman with CJS Securities. Please go ahead.
Yes, good morning, I just wanted to ask on the.
On your orders.
Outpacing 2019, but obviously the revenue was about the 10 million lives.
So I was just thinking of you quantify how much you think of the supply chain constraints.
How much revenue is incremental backlog or.
Our revenue and it was pushed off.
Oh and into future quarters of like 15, and $20 million of that does.
Does that make sense or can you help me there.
That's exactly right, that's youre right and the ballpark of that it fits and the range of $20 million that we saw with that incremental backlog.
And that was missed out on due to supply chain issues I think thats the.
Sort of go with.
Okay, great. Thanks, and then.
Looking at our lunar and <unk>.
Great to hear you guys.
Give us a number even though the small now, but obviously a really strong start getting $1 million and I just wonder is that millions of all recurring.
No it's not.
A good number and revenue so thats product sales that go into fire departments I think of it similar to a breathing apparatus today at this point at this point, we don't have subscription services built around lunar and certainly that's something that we're exploring and there is some nice opportunity around that that we're investigating and and and we think for future.
Future opportunities there'll be some some recurring revenue built around that on a sort of subscription service.
But those of product sales and we hope to see that build nicely as we go forward the.
Uptake there has been really strong.
Okay makes sense and and then.
Whereas the trajectory for that and do you have any idea of where that.
Rick or coming quarters of it it's hard to tell at this point.
It's really difficult to put a fine point on that.
We see some nice growth opportunity and but the uptake of a of a new technology like lunar is really hard to put a fine point on it but we do think that there is nice global application for this.
This product and the market could be a good size 1 force.
Okay, great. Thank you.
Thank you Brendan.
And our next question will come from Larry de Maria with William Blair. Please go ahead.
Hey, Thanks, good morning, everybody and.
I apologize as well the jumping on late.
Can you specifically discuss if you haven't already.
And where the book to Bill is and the timing of the how it converts because obviously, it's a bit bigger and I think you asked and the last question in terms of revenue that may have been missed but when you think about the backlog.
You are getting bigger.
And how much of the backlog getting bigger is or how it would be quantify the backlog.
The real demand and strength versus the supply chain issues and we.
And I would like to see that backlog just incremental color on that would be great.
Good morning, Larry and.
Thanks for the question.
I'll do is I'll answer that and then maybe Ken.
And can I add a little more color to it sort of book to Bill was about 110, 110% and so the demand was really strong I was and we all were quite surprised by the snapback in demand and the strength and demand throughout the second quarter and.
And so obviously, we had some supply chain issues as that continued and our.
And our level of booking was.
Well above 2019 levels. So when you look at those specific product groups and the breakout of the revenue that you can see.
The growth of those and the 30% and 40% range, that's significant and so we've seen of real snapback in demand and it's really indicative of the.
It's that we've seen recovery, whether it's utilities oil and gas the nonresidential construction market came back and a nice way. So it's broad based and the demand for fire service products really remains strong we saw some big orders coming in for fire helmets, which was missing in 2020. So it was nice to see that business start to come.
And Mark So, it's really broad based and and.
We think that the demand will continue there as all systems are goes from a demand standpoint, we just need to work through some of the supply chain issues as we go forward and and I think that will balance out as you as you look at the markets and the end markets.
And that should work its way out from an inflation standpoint.
The end point, we should be able to.
Offset that with our pricing and price increases and discipline around that and some efficiencies will gain and manufacturing.
We'll work through some of the supply chain issues over the next few quarters and I think we're going to land and a really good place as we go forward with this business into 'twenty, 2 and even 'twenty.
<unk>, Ken do you want to add and the only thing I would say is the second half is going to be it is going to be of challenge.
It's hard to see the supply chain challenges going away and the next 30.60 or 90 days and so so we think we're going to continue to face some of this and and as a result, some of the some of the at times from a cost perspective.
And very volatile we might be doing broker buys that may not be at standard prices and and things like that so so it's definitely a challenging inflationary environment of challenging supply chain environment, but I definitely would agree with what initially indicated the demand level is very strong.
Very very good to see our customers coming back it's good to see our products really the demand level of around our products, we've talked about our market share positions for some time and how they remained strong through the recession and now we're seeing the growth come through so it's really a it's really a good demand environment to be and.
Yeah.
It can be great. Thanks, and then.
And I guess my life product oriented questions and.
Apologize if you already addressed some of this but any movement or.
The change of direction on respirators, and given the investment and now obviously the unfortunate resurgence of Covid and mentioned some firefighter.
Inc.
Excluding obviously the lunar but also the hard hats.
The safety of it.
Do we think about the seasonal buying this year from firefighters because of cash.
Carriers income or spending could it be a bit stronger or are we seeing it yet and he talks discussion and just any color of that that could be above average and the ability to obviously you satisfy the demand.
Yes.
And I guess the parts I'll address the fire service market and opportunities first.
From the fire service standpoint demand looks really really good for our product. So I think that we're in pretty good shape. There. We think the second half will look a lot like what we saw in previous years fourth quarter will be strong for us as those AFG.
<unk> funds are in the marketplace and customers are are coming in to buy and so we think the demand side will be really good for fire for the breathing apparatus with and fire helmets will continue to be good force of course, and the turnout gear is a matter of getting product out the door, we have a nice backlog of around turnout gear of the business there remains strong.
Let me take and so thats, just going to be a factor of getting product out the door throughout the second half from and APR standpoint, as we've talked about we have some real headwinds. There 2020 was a strong year for air Purifying respirators, we saw some really strong demand net tailed off of there are some opportunities around some national stock piling of respirators.
<unk> I think we will see some some orders from that.
But I don't think that that will really move the needle and a significant way and we're not talking about $20 million, where we're talking about something in the <unk>.
Single millions of dollars, probably sub $5 million range that we will see here over the second half.
Half.
And and then that'll come through and the under maybe some opportunities and the future for more of that so also there is some opportunities for national stockpile and and we should see some of that but.
But thats not going to really move the needle so to speak.
Ken do you want add and no.
Nothing to add there nish.
The really good summary.
Great. Thanks, and last clarification that was very helpful as far as the <unk>.
Backlog growth and you've talked about potentially more price increases are you protected on the backlog or is there any risk of the backlog on price given material costs or just any color on that or do you need to reprice anything and have the ability of we just don't even need to do.
There is I had mentioned.
And maybe you had missed and you weren't on but there always is the risk if backlog sits and the and the backlog and the pipe too long, we don't see it being a material risk necessarily but theres always a risk that you have and order that comes in and say April doesn't ship until October and prices.
Change a bit between those time periods, but again it it doesn't I don't see that as a overly material risk because backlog is not and.
Overly significant part of our business, we do have backlog, but a large of lot of our business is also booked book and ship business.
Got it alright, thank you and good luck.
Thank you Larry.
And once again, if you'd like to ask a question. Please press Star then 1 of our next question will come from Chris Mcginnis with Sidoti and company. Please go ahead.
Good morning, Thanks for taking my question.
I was just wondering with the strength of the orders and saw protection.
Does that.
The mean that you are taking share and that market and and I guess, just as the economies reopen and have you maybe invested more to go out and take more share and that marketplaces I think that was prior to the pandemic of the initiative of yours. Thanks.
Good morning, and yes.
We have seen some obviously, a nice increase and demand.
The fall protection products and and as you mentioned, we had very strong growth pre pandemic. We had 3.3 years of double digit growth and we did feel we were taking market share and.
And during that time period.
I think things just kind of retrenched, a bit through 2020, where there wasn't a whole lot of market share shift.
And that time period.
And it's hard for us to tell at this point, whether or not we've taken market share. We're confident that we've invested and some of the right products. We are introducing new products, we'd know theres been some good uptake of those products, but it's a little too soon to say that we're taking market share here in 2021, we'll have a better view of that as we get a little deeper into the year, but we're confident with the product.
Product line, we have we think we'll continue to do well there we think that the growth per fall protection products remained strong.
It's an area of focus for a number of companies throughout the world to to enhance their safety.
Walls are still a number 1 killer here and the use of construction workers and as you see construction snapback on whether it is nonresidential.
Construction or even infrastructure build falls are going to continue to be and area of focus of of construction companies and major utilities.
And the U S and throughout the World. So we think that there's some nice opportunity to continue the good growth curve with fall protection and we believe we are well positioned with the product.
Okay, great. Thanks for taking my questions and good luck and Q3. Thank.
Thank you thank you Chris.
And this will conclude our question and answer session I'd like to turn the conference back over to at least learns how to you for any closing remarks.
On behalf of our entire team here I want to thank you again for joining US. This morning, if you missed a portion.
<unk> the conference call and audio replay and transcript will be available on our Investor Relations website for the next 90 day, we look forward to talking with you again soon thank you and have a great day.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
Portion of it.
[music].
And then.
Yes.
And.
Okay.
1 of them.
[music].