Q3 2021 MSA Safety Inc Earnings Call

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Yes.

Good day and welcome to the MSA Q3, 2021 earnings Conference call.

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Now I'd like to turn the conference over to Chris Halfway. Please go ahead.

Thank you Sarah good morning, and welcome to Msa's third quarter earnings Conference call. Joining me today are Nish, Vartanian, Chairman, President and Chief Executive Officer, and Ken Krause, Senior Vice President Chief Financial Officer, and Treasurer before we begin I'd like to remind everyone that the matters discussed on this call exclude.

<unk> 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 Securities and Exchange Commission MSA undertakes no duty to publicly 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 and the non-GAAP.

Reconciliations as well as our third quarter press release are available on our Investor Relations website at investors thought MSA safety Dot com with that I'll hand, the call over to Nish. Thank you Christy and good morning, everyone. This morning, I'll provide an overview of how we're continuing to execute our strategy in this dynamic environment and some insight into the step.

We are taking to strengthen our market position.

Ken will then provide a quarterly financial review and give more texture on the strength, we're seeing in the demand trends across our portfolio.

After that we'll start the Q&A session.

So let's start with quarterly results.

Our revenue was $340 million up 12% overall and 3% on an organic constant currency basis.

Our core organic product revenue increased 9% driven by growth across our fire service and industrial P. P segments, partially offset by lower fixed gas and flame detection business, which was impacted by supply constraints.

Looking more closely at the quarterly comparison I want to note that our 2020.

Third quarter benefited from higher pandemic, driven demand for air purifying respirators in the current quarter. We saw saw our APR business returned to more normal levels, which was a headwind to overall growth.

I noted on our second quarter call that our order book was strengthening and that continues to be the case in the third quarter. As an example, our backlog has increased $50 million year over year.

Notably the backlog across our gas detection as well as our firefighter of payroll is trending at record levels.

Overall, our business remained healthy in the quarter, but supply chain disruptions in electronics and to a lesser degree labor shortages did have impact on our delivery capabilities for some products.

In addition, our quarterly profitability was impacted by variable compensation resets and higher selling commissions, along with discretionary costs as business conditions improve relative to last year.

Lastly in this inflationary environment pricing continues to be a key area of focus for us we implemented off cycle increases to help mitigate higher input costs and we continue to evaluate pricing as market conditions evolve.

With that as a backdrop there are three key takeaways from the quarter that support my confidence in the outlook for MSA and our ability to navigate this environment.

First our strong balance sheet provides plenty of capacity to invest in organic and inorganic growth opportunities.

To the MSA brand continues to be a pillar of strength I'm grateful that our customers see value in our products and have been patient and waiting on delivery.

We're not experiencing any significant cancellations of orders and three.

The engagement level of our associates and their passion for the mission of MSA has never been greater adding fuel to our dedication of protecting the lives of workers throughout the world.

So first let me, let me talk about inorganic growth.

We completed the acquisition of Bacharach in the quarter and are making good progress in our efforts to integrate bacharach into the MSA organization.

Recent milestones include the completion of a number of key initiatives that will help us meet financial targets that we've discussed with you on past calls Ken will provide more deep detail on the excellent progress, we're making with bacharach.

And with our net debt to trailing EBITDA below two times, we continue to evaluate additional inorganic growth opportunities staying focused on how we can continue to create value for our customers and our shareholders.

Second we remain very well positioned as the technology leader in safety, we continue to invest in new product development to drive organic growth, while providing our customers with innovative market, leading solutions to adjust address their challenges of protecting their employees and increasing productivity.

The most recent example of this is the new connected work platform our team unveiled at the National Safety Congress earlier this month.

With the many complexities associated with implementing a world class safety program the value of technology that drives both compliance and efficiency by simplifying safety procedures and remotely connecting safety managers and employees has never been more important.

This connected services platform will help customers create safer and more efficient work environments through reliable and actionable data in real time.

The new offering is a powerful hardware software combination. It features a new wearable cloud ready gas detection device the Altair I O four.

It enables a broad range of capabilities not previously available with unconnected devices.

With direct cellular connectivity real time location live gas readings and automated compliance reporting. This platform provides worksite managers with new safety insights and added peace of mind.

Another element of Msas connected work platform is a safety subscription that extends warranty coverage and provides automatic and ongoing software upgrades with.

With this subscription safety managers have a convenient way to stay on the forefront of safety innovation and on budget.

This new connected technology platform is a great example of the market leading work being done by our engineering marketing and sales teams to drive productivity for our customers.

And third I want to acknowledge our associates for their incredible level of passion for the MSA mission and their spirit of innovation.

MSA was recently recognized as a 2021 top workplace by the Pittsburgh Post Gazette.

What makes this award, particularly gratifying is the fact that it is based exclusively unemployed feedback for 2021. We also earned the New ideas Award. The award is based on having the highest positive response rate to the prompt question new ideas are encouraged at this company.

These recognitions are reflective of the truly special culture, we have at MSA.

Associate a gate engagement is always important to us and it's and it's especially inspiring to know that this kind of sentiment exists at a time when we faced a myriad of challenges associated with the pandemic.

We're executing a number of strategic programs to position MSA for continued success and none of that happens without attracting developing and retaining the brightest talent and these recognitions will certainly help us on that front.

With that I'll now turn the call over to Kevin to take you through our financial results Ken.

Thanks, Nish and good morning, everyone I'll start the discussion with financial highlights centered around revenue profitability and cash flow revenue growth was healthy in the third quarter with core revenue growth of 19%. This included 9% growth in organic core revenue on a constant currency basis, we're seeing robust customer demand.

Especially in the Americas segment, however, the persistent electronic component shortage and labor challenges to a lesser extent.

Have impacted our ability to fulfill orders and is driving backlog to record levels.

Adjusted operating margin was 15% in the quarter, which was down year over year, driven by driven primarily by variable compensation resets and higher selling commissions and discretionary costs. These costs were resetting from an abnormally low base in 2020.

Cash flow performance was very healthy in the quarter and continues to support ongoing investment in growth opportunities and return of capital to our shareholders, We're managing working capital well and that resulted in strong improvements in quarterly cash flow.

Now, let's take a closer look at the financial results in the third quarter I'll start with a focus on revenue quarterly revenue of $340 million was up 12% overall and 3% on an organic constant currency basis, while our noncore business was off considerably on the lower level of APR revenues It was <unk>.

Courage in to see core product revenues up 19% with 9% organic growth in the quarter.

We are seeing robust demand in the Americas segment, while revenue in the international segment is being impacted by the prevalence of COVID-19, resulting in a very uneven economic recovery across those regions with particular weakness in the emerging markets and the international segment.

The quarterly book to Bill was above one times in the quarter, while order pace strengthened throughout the quarter supply chain constraints around electronic components and labor availability to a lesser extent are impacting our ability to deliver in certain areas. This has resulted in backlog increasing approximately $50 million year over year at the end of.

The quarter, it's difficult to predict how long the supply chain challenges will last but at this point, we expect that the constraints around the electronic components.

Will persist well into 2022.

Turning to profitability gross profit was 42, 9% of sales in the quarter compared to 43, 4% of sales in the prior year gross profit margin was negatively impacted by 120 basis points for deal related costs and amortization excluding this gross.

Profit margin was up a healthy 70 basis points compared to a year ago.

We have implemented an off cycle price increases to offset offset inflation, we're seeing in electronic components resins and other materials that said the timing difference between pricing go in effect going effective and persistent cost inflation, resulting in a tough price cost environment in the quarter, we continue to evaluate pricing.

Opportunities and have another price adjustment in Q4 in North America and early next year in international.

SG&A expense of $87 million was up $23 million from a year ago on a reported basis I want to spend a moment to dissect that amount as there are a lot of moving pieces in the quarter. The level set Q3, 2020 SG&A of $65 million was abnormally low due to favorable compensation related adjustments.

And the lack of discretionary spending.

The key drivers of the year over year increases our first we had an increase of approximately $10 million of expense from the acquisitions of bacharach in Bristol of which about $6 million will be recurring going forward.

Variable compensation resets and higher selling commissions added $6 million compared to last year.

Lastly, discretionary costs are up $3 million associated with the increase in customer facing activities.

Our quarterly adjusted operating margin was 15% down 260 basis points from a year ago looking at our segment performance. The Americas margin was 19.

4% down 160 basis points year over year, the higher SG&A cost I discussed previously had a significant impact on the segment International margin was 11, 3% down 290 basis points year over year International margins were impacted by lower organic revenue and higher.

SG&A on the drivers discussed previously.

Our quarterly effective tax rate was 31, 5% on a GAAP basis, adjusting for nonrecurring transaction costs and other restructuring matters. The effective tax rate was 24, 7% in the quarter.

Turning to cash flow and the balance sheet quarterly free cash flow was $36 million well above 100% conversion.

While overall working capital performance was strong and improvements in receivables, we built some inventory in the quarter, which aligns with our backhaul.

We continue to execute on our balanced capital allocation strategy in the third quarter, we completed the acquisition of Bacharach and the buyout of our joint venture interest in China in the quarter, we borrowed a net $282 million of debt to fund our corporate development activity funded $17 million of dividends to shareholders and inverse.

At $11 million in Capex.

We finished the quarter with cash of $117 million and net debt of $495 million or one eight times adjusted EBITDA.

While we continue to take a measured approach on M&A, our strong balance sheet provides ample capacity to continue to invest in organic and inorganic growth opportunities.

Before moving on I want to provide an update on bacharach now that we have had a full quarter of contribution the integration effort is progressing as planned and the teams are working well together.

<unk> contributed about $15 million of sales in the quarter in line with what we communicated when we closed the acquisition earlier this quarter.

The Bacharach business is contending with many of the same electronic component challenges we are experiencing at MSA looking forward. We're pleased with the order book and backlog and are focused on driving conversion to sales. We continue to expect earnings accretion from the acquisition in line with the range. We previously discussed.

Just in.

In the quarter, we had a noncash adjustment to the product liability reserve, which resulted in just about $9 million of additional expense compared to a year ago. This increase as a result of an increase in the number of asserted cumulative trauma claims pending against our subsidiary MSA LLC, we continue to monitor developments and falling rates, we will be.

Conducting our annual review process in the fourth quarter, which we expect to be finalized with our 10-K filing early next year.

As we look ahead, we continue to operate in a very dynamic environment supply chain is the largest variable for us raw material availability as well as the cost of those inputs can be difficult to predict.

To put it in perspective, we had $11 million lower revenue versus 2019, this quarter, but backlog is up well over $70 million versus the same period in 2019, we're laser focused on executing initiatives to mitigate the impact of the supply chain challenges on our business both on the top.

Line and the margin profile.

It is clear that the economic recovery is progressing and we see good strength in our Americas segment. COVID-19 continues to have an impact on the world to varying degrees. We are seeing the impact in our international segment, where the demand recovery has taken a little longer over.

Over the course of the year, we have continued to invest in organic and inorganic growth programs that enhance our position as the safety technology leader I'm proud of our team's unwavering commitment to our mission our business and our customers. We've recently launched innovative new products and services with the Altair I O <unk>.

For an MSA plus service and enhanced our gas detection products suite with the acquisition of Bacharach.

And to finish it out we remain committed to investing in growth and profit improvement programs that will drive value and best position MSA for long term value creation with that I'll turn the call back over to nish for some concluding commentary nish.

Thanks, Ken for all of Us at MSA safety as our mission, our passion and it's our purpose.

And that's and that's one reason I wanted to conclude my comments. This morning with one more recognition of our team. It goes to our associates, who work at our Cranberry Township production facility and corporate center.

This team recently surpassed a remarkable 10 million hours without a lost time incident. This means this means it's been more than five years. Since we've had an LTI at our Cranberry Township campus. So I want to congratulate and thank every associate who works at our Cranberry facility for such a great commitment to the mission of MSA.

<unk> right here at home.

While the balance of 2021 will continue to present us with various challenges I have tremendous confidence in our strategy and the team we have executing at our business has demonstrated its resiliency through a number of economic cycles today, our products people and passion position us to manage through this current cycle.

As I've communicated to our global workforce I believe we are positioned extremely well as the leader in safety technology ready to emerge as an even stronger organization in 2022 and beyond.

Thank you for your interest this morning at this time, Ken and I will be glad to take any questions. You may have please remember that MSA does not give guidance, having said that we'll now open up the call for your questions.

Thank you we will now begin the question and answer session.

The question you May Press Star then one on your Touchtone phone.

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At this time, we will pause momentarily to assemble our roster.

Our first question comes from Stanley Elliott with Stifel. Please go ahead.

Hey, good morning, everyone. Thank you all for taking the taking the question.

I guess starting off could you all talk a little bit more about the subscription services.

Do you envision this kind of developing whether it's going to be on like a monthly charge is it going to be based into the price of the product upfront, but curious to see how you think about this evolving.

Good morning Stanley. Thanks for the question and your interest.

Yes, the I O four is.

Really an exciting device for us right cellular connectivity, which will be fully connected.

On demand of the product fleet management software live monitoring software location bumper to bumper warranty and that'll be available through a number of different subscription services, both subscriptions will be done on a monthly basis.

They'll be paid for on a monthly basis by our customers and it really presents us with a new tool for our customers to simplify the documentation for the safety programs.

That they have and it will really improve their efficiency.

Great about the product Stanley is.

Today, when an employee goes to sign out a multi gas device at a site.

There's a lot of paperwork involved with.

With the I O four we have it set up from a software system, where it's connected to that employee it knows the employees thats using the device.

Maintains all of its readings and then when he employee puts the device back into its station and automatically calibrates and updates the device for the workers and downloads all the information. So everything is real time monitoring and we're really excited about the efficiency that we're going to drive with our customers as we introduce this product.

I was very excited.

And switching gears to the supply chain piece I mean, when would you anticipate being kind of price cost neutral. It sounds like you are fourth quarter might have a little bit of headwind maybe the first part of next year before.

You're kind of getting level set and then I guess as a second piece of that or the supply chain disruptions that youre seeing right now seasonally your business picks up 10% to 20% sequentially third quarter to fourth quarter should we not expect that sort of historic or seasonal ramp kind of given what youre seeing from the supply chain.

Yeah. So you have a couple of things in there. So I'll hit a few of them and then Ken will add some more color from a supply chain standpoint, you know obviously there are a number of challenges right. So it hits across a number of areas. The electronics metals textiles cylinders packaging, we have an intense focus around that we've got great teams that are monitoring critical components <unk>.

Managing and prioritizing mitigation plans that we have around that we're working with suppliers on a 12 month rolling rolling demand plans and working with second tier suppliers to us to give them better line of sight.

What we're seeing from a demand standpoint and were qualifying alternative parts, where we can from an engineering standpoint.

It gives us some better flexibility and expanding our second source suppliers.

So as mentioned we've been taking a lot of pricing action throughout the year, we've tightened up on special pricing requests.

We implemented off cycle price increases and typically those will lag a bit when it comes to catching up to the price increases we're seeing on the inputs.

But when you look at the margins here for Q3, they've held up really well when you. When you when you pair back and Ken talked a bit about the the gross profit side of the business.

We did a nice job in offsetting things.

I certainly expect you will see sequential improvement in our business from the third quarter to the fourth quarter from a revenue standpoint.

We will.

We'll see some nice improvement there we've got a nice backlog in place that demand for our products continue to be really strong.

So we'll work our way through this.

One area, where we've excelled.

From the standpoint of supply chain is resins for the industrial Hardhats.

Going through that entire situation with with the resin shortage.

Throughout 2021, we didn't have a single stock out on our on our hard hats industrial Hardhats and we believe we were able to pick up some market share with that and we're running three to five day delivery on logo hardhats today. So that's been a real bright spot for us where we manage that supply chain really effectively and we hope to do that as we go forward is.

The resin situations getting a little bit better electronics will probably be battling through through 2022 can you want to add to that sure.

Let me put a finer point on the price cost equation Stanley. So you had asked about price cost.

First and foremost I just want to emphasize how how well the team is doing on the price cost equation on the gross margin we saw actually in our organic business. We saw improvements in gross margin in both the Americas as well as the international segment and so despite seeing a challenging operating.

The gross margins are holding up.

And our business and really whats weighing down the operating margin are all of the SG&A resets that we saw coming back into the business in the quarter. So the team is doing a really good job on the price cost as initial well pointed out there is risk in the backlog with a backlog that is growing considerably.

It impacts this was specifically the product groups can you can you.

Go through you know, which is it kind of.

Equal across the board are there specific product groups that are getting hit more than others.

Hey, Brenda yeah. So it's it's it's been uneven to be to be Frank U. We saw some spiking in in the residence for hard hats.

We saw some shortages due.

Due to the winter storm down through Texas.

You know, but that's beginning to plateau toe and normalize a bit the electronic components are probably the area that gives us the greatest frustration today, that's where we're seeing some real spikes in certain components.

There is certainly a supply demand imbalance and and we're seeing a lot of pricing pressure in that area. So that's where we've had some off cycle price increases to really.

Tighten up our special price request.

And we've also had some off cycle increases up here in the month of July we we we had an increase in North America. So so we continue to deal with that will continue to make adjustments as we go forward work were watching and monitoring the aluminum the textiles cylinders and some other.

Conant very closely and we'll make adjustments as we go forward, but it's uneven it's not across the board, we're not seeing similar price increases with resins as we are with the electronic components will continue to work through that as as we progress.

Great. Thank you and then.

On time this timeframe.

You talked about.

These pressures going one of 2022 do you have what what's a realistic timeframe to really reach normal backlog levels and will that take even a little bit longer potentially just for the orders to float there or what's your view on the backlog.

Is a really good question, we we have plenty of capacity in our plants and so from a labour standpoint, if we get ourselves ramped up from a labour standpoint in certain areas, where we have some shortages of labor and then we get the supply chain ramped up we can work through our backlog over a matter of.

Two to three months.

Time, but that's I think we're going to be dealing with some of the supply chain issues into 2022. So I think we're going to be dealing with with elevated backlog to a certain degree off throughout twenty-two how severe that is or or the challenges with a different product groups. We just don't have real good line of sight to that right now.

Brendan there's two or three scenarios, we're running through in the business with respect to that Nish pointed out one where you can work through in two to three months that certainly is very optimistic.

Another scenario could be middle part of the year things start to free up you hear others talk about supply chain challenges may be abating into the second half of next year, so that could be another scenario and the worst case scenario could be this persistent twenty-three and so we're certainly meant trying to do everything we can to manage around this but it is.

Is very very fluid environment and.

And a very challenging environment.

Okay. Just just a quick follow up to that just thought of what's the.

What the capacity you're talking about obviously.

Get those or has done at some point is there any.

Is there any risk to.

Labour variability, obviously, we have the.

Mandate coming in place and do you guys. How how is that going and do you have a plan for that.

Do you expect to see an impact on labor there.

Hope this point, where vaccination rates are reflective of society in general So were are vaccination rates.

It's decent across the board and improving we continue to have employees vaccinate.

There is always a little bit of risk with with the workforce and if there's a mandate from osha that all employees vaccinate there could be some some risk with.

Some fall out in the workforce, but we think we will continue to deal with that and offset that with with new hires and and finding new people. We do a nice job of attracting employees. We've got a fantastic mission of the organization rallies around people.

Field, there's there's a purpose to working with MSA, a higher purpose, so to speak and working with MSA and and we do a nice job of attracting and developing our people and retaining those individuals off for long periods of time. So we think will work through it as as the employment and that Labour situation begins to improve.

Great. Thank you I appreciate it thank you.

Hi. This question comes from Rob Mason, Let's add please Carl.

Good morning, Thanks for taking the question.

Rob Good morning.

I wanted to start just.

I wanted to see if you could comment around it fixed gas flame business or maybe just.

The broader energy related businesses, just give us some and continued improvements and certainly in commodity prices and whatnot. How you are seeing the order book shape up there I know you had a very large order earlier this year, but just speak to how that sectors trending for Ya.

Well in general the oil and gas space forces has really improved nicely. So we hardhats, we've seen up demand for Hardhats portable gas detection fall fall protection and of course fixed guess inflamed detection really ramp up.

Throughout the third quarter and in here to the through the fourth quarter. So we're seeing some nice demands they're not only here in the U S. But also in the middle East.

The demands beginning to pick up and we think that will continue.

That's the fixed gas and claimed detection space is the is the year that we struggled most with with getting product into the hands of our customers and we continue to work through that but demand around around that area has improved nicely we've.

We've seen demand across the entire portfolio for oil and gas improve nicely. So we've always had the belief that the oil and gas prices would come back with the economy and demand would come back and we've seen that what's really interesting is that.

We're beginning to see some breathing apparatus orders a significant breathing apparatus orders go into oil and gas, which really tells us that their capital equipment budgets are in really good shape.

So we think that that space is healthy and we will see some good spend as we go forward and and will begin to see some benefit there.

Just given where the supply constraints may be your most concentrated though nish is is it is it fair to assume fixed gas wouldn't.

You know be at the lower end or below any other seasonal increase in the fourth quarter.

I'm not sure the the fixed gas typically.

It's a later cycle product for us. So it comes in is capital budgets improve.

And typically customers are willing to wait for delivery on fixed gas and flame detection, because they are installing that and we'll keep it on site for upwards of 15 years and replace sensors.

So we start to see that later in the cycle and and I think that's proven to be the cases as we watch the incoming business improved the fixed Gazzam claimed detection has been a later cycle can do you want to add to that the only thing I would say I think Rob. Your question is getting to the point around electronic component shortages and ability to deliver in queue for relative.

The other product categories I think that's a fair statement I mean this this is a business. We certainly do have some large projects that we're looking at potentially delivering but this business for the most part is being hampered more so than other businesses. So I think it's a fair assumption that the growth will be a little bit challenged relative to our other areas like for example.

Hardhats that nish call it out [noise].

Okay Fair just last question the [noise].

Can I. Thank you you've noted there was some one time or acquisition related.

Expenses in the in the gross profit on cost of goods sold line. Overall, you you called out about seven 7.4 million or so of acquisition related costs.

Where exactly does that 747.4 million show up as just the 120 basis points in gross profit.

And then then you know relatedly.

You know to the extent you reporting 94 cents a adjusted earnings.

How does that distributed relative to the 94 cents between SG&A cost of goods sold and how much of that should we think about is ongoing relates to amortization versus just one time Yep sure great question and thank you for the question Rob the seven four approximately $4 million of that is.

As in gross profit and the remainder three and a half or so is in your SG&A line item three and a half that's in SG&A will not repeat that was related specifically to the deal and closing out the deal that was an SG&A Ah roughly half of the cost of goods sold impact is.

Amortization, which will go on for some time non-cash related charges the.

The residual is a step up in backlog, which for the most part falls off here in the early fourth quarter.

Okay, Okay, and how do you feel about you know bacharach gross profit margin yeah.

That was a thought to be you know the.

[noise] amount above.

MSA overall, when you purchased the business, but you know is it still at that level has an inflation or just the supply chain constraint that they're dealing with eaten into that any how should we think about I guess modeling that out in the near term.

Yeah. It certainly is still very attractive and when you Peel back the onion with some of these non-cash charges, it's actually accretive when the gross line as well as the operating line to Msas profile. This.

Stepping back a few comments on bacharach in the quarter.

Very robust order growth booked a bill was north of 130%.

And we're seeing good demand and our organic business, but also new opportunities in that in the portfolio. So we're pretty excited about what we can continue to do with that business and the growth dynamics.

Very good.

Thank you thank you Rob.

I've gone if you'd like to ask a question Coke or diet, then one uncle Tom.

Our next question comes from.

Five age with.

<unk>.

Hi, guys. Thanks for taking my question two questions today. The first one given the changes in the regulatory of my environment around sustainability and packaging in the United States and and Wow. Early has this sparked a greater conversations with potential customers.

Oh, Ryan yet we continue to look at our packaging for instance, up and how we package our product we think that there's some nice opportunity for us from from that standpoint, you know ESG is really driven.

Driven us to take a look at some of those opportunities funeral from an engineering standpoint, we're we're looking at repackaging and and you know the beauty as as as we've looked at this and gone down the path.

There's actually some cost savings associated with that so it's one of the great. Examples of how ESG makes us a better organization more efficient helps to drive some profitability as a company. So we continue to look at those opportunities as we go forward and certainly with new products that we're introducing the market where we're looking at the packaging of those products as as we go.

[noise] forward.

Great, Great and and just wanted to follow up and haven't seen any change in the competitive landscape around sustainability at all.

That'd be my second one.

No Ryan I, you know I don't think we have seen anything from a customer standpoint, and what they are bringing to market or or any dynamics that are pushing things what I, what I will say, though is that with.

With the S. G safety certainly has Ah continue to come to the forefront of importance for protecting workers with what we've gone through with Covid and with the S. G and a highlight around that protecting workers' has never been more important and with the tight labor force up you know.

Companies are certainly doing everything they can to make sure that they protect workers and created a work environment for their workforce that provides them a high level of safety equipment, and we benefit by that we benefit when customers are looking for a high value products to better protect our employees.

Well educated customer who's looking for a high value products is typically our best customer so.

So we think the environment overall will be beneficial for MSA.

[noise] [noise] [noise] [noise]. Thank you Ryan Thank you Ryan.

No skin cleared that question and answer session I would like to turn the conference background, Okay heparin clothing amount.

Thank you on behalf of our entire came here I want to thank you for joining US. This morning. If you missed the portion of the conference call and audio replay and transcript will be available on our Investor Relations website for the next 90 days, we look forward to talking with you again soon thank you.

The conference is now concluded. Thank you for attending today presentation you may now disconnect.