Q4 2024 MSA Safety Inc Earnings Call

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Speaker Change: Good day, and welcome to the MSA Safety 4th Quarter and Full Year 2024 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero.

Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your touchtone phone. And to withdraw your question, please press star and then 2.

Speaker Change: Please note that this event is being recorded. I would now like to turn the conference over to Larry DiMaria. Please go ahead.

Speaker Change: Thank you. Good morning and welcome to MSA Safety's fourth quarter and full year 2024 earnings conference call. This is Larry DiMaria, Executive Director of Investor Relations.

Speaker Change: I'm joined by Steve Blanco, President and CEO, Lee McChesney, Senior Vice President and CFO, and Stephanie Shulow, President of our America Segment. During today's call, we'll discuss MSA City's fourth quarter and full year financial results, along with our full year 2025 outlook.

Speaker Change: Before we begin, I'd like to remind everyone that the matters discussed during this call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Speaker Change: Forward-looking statements include, but are not limited to, projections and anticipated levels of future performance.

Speaker Change: Forward-looking statements involve a number of risks, uncertainties, and other factors that may cause our actual results to differ materially from those discussed today. These risks, uncertainties, and other factors are detailed in our SEC filings. EMSA safety undertakes no duty to publicly update any forward-looking statements made on this call except as required by law.

Speaker Change: Moving on to today's agenda. First, Steve will highlight the importance of our mission and provide a business update from the fourth quarter and full year 2024. We will then review our financial performance in 2025 outlook.

Speaker Change: To conclude, Steve will outline our 2025 strategic priorities before providing closing comments.

Speaker Change: We will then open the call for your questions. With that, I'll turn the call over to Steve Blanco. Steve?

Speaker Change: Thanks Larry, and good morning everyone. Thank you for your continued interest in MSA safety.

Speaker Change: Starting on slide four, 2024 marked MSA Safety's 110th year as a purpose-driven company.

Speaker Change: Over that time, we've remained dedicated to our mission that men and women may work in safety, and that they, their families, and their communities may live in health throughout the world.

Speaker Change: Today, we are better positioned than ever to help our customers solve their toughest safety challenges.

Speaker Change: As we move forward into 2025, we remain focused on fulfilling our mission and protecting the more than 40 million workers around the world that place their trust in the MSA brand.

Speaker Change: I want to personally thank all of our associates for their continued commitment to our singular mission of safety.

Speaker Change: Before we get into our recent performance, I'd like to acknowledge and thank the more than 15,000 first responders, including our customers from the Los Angeles County and Los Angeles City Fire Departments, who have been heroically fighting to end the devastating fires in Southern California.

Speaker Change: As we've done with past disasters, MSA is partnering with the American Red Cross to help those directly impacted. And our team continues to monitor the situation for additional opportunities to provide support.

Speaker Change: Now on slide 5 to provide a business update on the quarter and full year. Our team executed well against the backdrop of a dynamic operating environment to conclude 2024.

Speaker Change: Financial results for the quarter were mixed as we achieved margin expansion through SG&A management, earnings growth, and solid free cash flow generation despite sales growth that was lower than expectations.

Speaker Change: Sales were impacted by pockets of industrial market weakness and softer U.S. fire service demand as well as foreign exchange headlines.

Speaker Change: That said, overall demand was resilient across our product categories, as evidenced by healthy order pace in the fourth quarter, and we continue to see order momentum so far this quarter.

Speaker Change: Sequentially, backlog reduction was attributable to seasonal customer deliveries as well as the anticipated U.S. Air Force delivery.

Speaker Change: From a commercial perspective, we announced the award of a 10-year, $33 million breathing apparatus contract with the U.S. Coast Guard and delivered on the second tranche of the U.S. Air Force Order.

Speaker Change: Additionally, we received our largest ever order for the MSA Plus Connected Portables, which was a competitive win from a large energy customer in North America.

Speaker Change: We remain encouraged by our pipeline for connected devices in 2025 as we continue to meet our customers where they are on their connected journey.

Speaker Change: Moving now to our product categories, sales and fire service on a reported basis were up high single digits year-over-year, primarily due to double-digit growth in SCBA, which benefited from positive impacts of shipping the final units of the US Air Force Order, as well as strong performance in international markets.

Speaker Change: Sales and detection were down low single digits year over year on a contraction in fixed gas and flame detection.

Speaker Change: primarily due to a challenging comp, partially offset by high single-digit growth in portable gas detection, which continued to perform well across traditional and connected devices.

Industrial PPE sales were down mid-single digits for the year.

Speaker Change: From a full-year perspective, net sales growth finished the year up 1% on a reported basis and 2% on an organic basis, compounding on top of the 17% reported growth we delivered in 2023.

Speaker Change: While top-line growth was more modest than we originally anticipated, we remain encouraged by the positive long-term trends in industrial safety technology, our innovation pipeline, and the overall resiliency of the business.

Speaker Change: Turning to slide six, at our Investor Day last May, we introduced our strategy, which we refer to as Accelerate, to deliver long-term, profitable growth, as well as 2028 financial targets.

Speaker Change: First, we leverage our market-leading innovation and new product development process, which includes a high focus on voice-to-customer, to introduce innovative products and solutions across our categories.

Speaker Change: In fire service, we launched the new Karnes 1836 fire helmet and we completed work on our next generation G1 SCBA, which we recently submitted to the NFPA for its approval to the 2025 standard.

Speaker Change: In detection, we bolstered our fixed gas and flame detection portfolio with the release of the FL5000 multispectrum IR flame detector.

Speaker Change: and an industrial PPE, we released our newest industrial head protection solution, the V-Guard H2 Safety Helmet.

Speaker Change: Our team's ability to deliver innovative products and solutions across our portfolio reinforces our competitive and continued leadership in the premium safety solutions market.

Speaker Change: We also leaned into the implementation of our targeted growth accelerators. This included accelerating our customer solutions and recurring revenue through our MSA Plus Connected Worker platform.

Speaker Change: Connected portables were a fastest-growing category in 2024 and we expect further growth in 2025 via customer acquisitions, existing conversions of customers, and additional product development.

Speaker Change: As an organization, we continue to apply the principles of the MSA business system.

to drive continuous improvement in all we do.

Speaker Change: We further deployed our broad Operational Excellence Program with a strong focus on maximizing our customer experience and operating margin enhancement.

Speaker Change: Our goal remains to deliver productivity and sourcing savings, manage price and inflation, improve quality, and deliver an exceptional customer experience.

Speaker Change: These initiatives are paying dividends and resonating within the organization, helping us drive continued expansion of gross and operating profit while improving customer satisfaction.

Speaker Change: Finally, our strong financial profile and balance sheet enables effective capital allocation through organic growth investments and the return of capital to shareholders in the form of dividends and share buybacks.

Speaker Change: With that, I'd like to turn the call over to Lee to walk us through the fourth quarter and full year 2024 financial results in more detail in our 25 Outlook. Lee?

Lee McChesney: Thank you Steve and good day everyone. We appreciate you joining the call.

Let's start on slide 7 with the quarterly financial highlights.

Lee McChesney: Fourth quarter sales are 500 million, an increase of 1% on a reported basis, and 2% organic over the prior year. Healthy growth in the fire service was partially offset by a low single-digit contraction in detection and a mid-single-digit contraction in industrial PPE.

Lee McChesney: We had contributions from volume and pricing in the quarter and currency translation was a 1% headwind to overall growth.

Lee McChesney: Order pace remains solid in the fourth quarter, up 14% year-over-year, and second half orders are up 10% versus the same prior year period.

Lee McChesney: While macro and geopolitical conditions remain dynamic, we continue to see mixed but generally resilient market conditions and retain an active new business pipeline.

Lee McChesney: Consistent with normal season and patterns, our book to bill was slightly below one times, and as we anticipated, we reduced backlog, following an increase in the third quarter. Backlog conversion was largely in fire service, more specifically related to the G1 SCBA.

Now moving on to margins.

Lee McChesney: Gross profit in the fourth quarter was resilient at 46.9%, down 120 basis points over the prior year. Gross margin contraction was attributable to inflation and large project mix, which was partially offset by price and productivity programs.

Lee McChesney: GAAP operating margin was 23.5%, with adjusted operating margin of 24.0%, up 70 basis points over the prior year, and incremental operating margin of 113%.

Lee McChesney: The margin increase was largely due to effective SG&A management and lower variable compensation expense along with our sustained price inflation focus and continued productivity execution.

Lee McChesney: Our laser focus on driving sustainable marsh improvements continues to yield results.

Lee McChesney: Gap in income in the quarter totaled $88 million, or $2.22 per diluted share. On an adjusted basis, diluted earnings per share were $2.25, up 9% over the prior year. The increase was largely due to higher operating profits, driven by sales growth, and effective SGA management.

Lee McChesney: Lower interest expense as a result of ongoing deleveraging, and a lower year-over-year effective tax rate.

Lee McChesney: Now I'd like to review our segment performance. In our America segment, sales increased 1% year-over-year on a reported basis.

Lee McChesney: as growth in fire service was partially offset by contractions in detection and industrial PPE.

Currency translation was a 2% headwind.

Adjusted operating margin was 30.7% up 90 basis points year-over-year.

Lee McChesney: Margin expansion was largely driven by price utilization, productivity, and SG&A management.

Lee McChesney: In our international segment, growth was flat year-over-year on both a reported and organic basis.

Lee McChesney: 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.

Lee McChesney: An adjusted operating margin was 17.6%, a year-over-year decrease of 60 basis points due to inflationary pressures partially offset by price.

Lee McChesney: Now moving on to slide 8 where I'll review our full year 2024 results.

Lee McChesney: Relatively broad-based demand offsets some pockets of weakness throughout the year, leading to total net sales of 1.8 billion, up 1% reported and 2% organic compared to last year.

Lee McChesney: Positive contributions from price were partially offset by modest FX pressure, primarily in Latin America.

Both segments contributed low single-digit growth.

Lee McChesney: Gross profit margin was 47.6% in 2024 about flat year-over-year. Adjusted operating margin was 22.9% up 70 basis points compared to the prior year. Incremental operating margins were 81%.

Lee McChesney: Adjusted diluted earnings per share were $7.70, up 10% over the prior year. Our continued ability to generate capital-efficient growth was evidenced by our 22.9% adjusted return on capital employed.

Now turning to slide 9.

Lee McChesney: Pre-cash flow in the fourth quarter was $93 million, representing a conversion rate of 105%.

Lee McChesney: With that said, we did finish the year slightly below our target levels tied to the sales shortfall and balance sheet hedging programs.

Lee McChesney: We invested 14 million in CapEx, repaid 43 million in debt, and returned 20 million in dividends to shareholders, and repurchased 10 million of shares.

Lee McChesney: For the full year, free cash flow was $242 million compared to $397 million in the prior year, which was adjusted for the divestiture of MSA LLC, completed in January of 2023.

Lee McChesney: Full year conversion rate of 80% was below our targeted levels, primarily due to working capital and higher cash compensation and tax payments related to our strong performance in 2023.

Lee McChesney: During 2024, we invested $54 million in CapEx, repaid $94 million of debt, returned $79 million in dividends to shareholders, and repurchased $30 million of shares.

Lee McChesney: Net debt at the end of the year was $343 million, including cash of $165 million.

Lee McChesney: Adjusted EBITDA for the full year was $469 million or 26% of sales.

Lee McChesney: We strengthened our financial position in 2024, ending the year with significant liquidity and net leverage of 0.7 times.

Lee McChesney: Our overall financial strength provides us with ample liquidity, enables our balanced capital deployment strategy, and continued investments in growth.

Lee McChesney: Through the continued implementation of the MSA business system, we've made great progress this year reducing our backlog to normalized levels and lowering back orders.

Lee McChesney: This has had meaningful benefits, including improved delivery times and fill rates, as well as greater productivity measures and reduced working capital.

Lee McChesney: And while we're still in the early innings of implementing our business system, it has been very rewarding to see these projects come to life across the globe.

Lee McChesney: I'm now on to slide 10. Before turning to our 2025 outlook, I wanted to take a minute to reflect on our financial performance trends.

Lee McChesney: At a high level, our resiliency is reflected in organic growth, incremental margins, and our improved balance sheet.

Lee McChesney: As I look towards our 2028 goals, we can look at the last three years as a baseline to why we remain optimistic, even with a dynamic 2025 upon us.

Let's turn to our 2025 Outlook on slide 11.

Lee McChesney: We've taken a balanced approach in our outlook based on the positive long-term dynamics inherent in our industry that underpin demand, the essential nature of our differentiated products and solutions, and the stability and diversity of our portfolio and end markets.

Lee McChesney: However, the operating environment will be dynamic with continued uncertain macroeconomic and geopolitical climate.

Lee McChesney: Additionally, we've noted since our May 2024 Investor Day, we have challenging comps to the delivery of the US Air Force orders and incremental backlog conversion in 2024.

Lee McChesney: Overall, fire service remains healthy and we have confidence in our strategy to navigate the upcoming North America NFPA standard change for fire service.

Though there could be some timing dynamics throughout the year.

Lee McChesney: With this backdrop, we remain cautiously optimistic in our outlook, which balances the opportunities and risks we see ahead of us.

as well as the resilient nature of our business.

Lee McChesney: We expect to generate low single-digit organic sales growth in 2025.

Lee McChesney: which would be in our normal mid-single-visit range, if not for the comparison headwinds I just mentioned.

Lee McChesney: Finally I would also note that our sales cadence in 2025 will be in line with historical trends.

Lee McChesney: For modeling purposes, I will also provide some below-the-line drivers that impact the results. We expect our tax rate to be between 24% and 25% in 2025.

Lee McChesney: Based on current rates, interest expense is expected to be approximately $24 to $27 million.

Lee McChesney: We expect pension and other non-operating income to be $45 million higher than 2024 levels.

Lee McChesney: In addition, while we expect organic sales growth to be up low single digits, certainly current foreign exchange rates imply a further headwind to reported sales.

Lee McChesney: We are not immune to external factors that could impact our top and bottom line, but we will continue to be agile in the event of the operating environment differing meaningfully from our expectations. For example, while we do not include tariffs in our outlook, we stand ready to navigate any potential impact we see.

Lee McChesney: Finally, I'd like to share my gratitude to our global team for their solid execution and operating performance in 2024.

Lee McChesney: We are well positioned entering 2025, and we will continue to be fully focused on executing our Accelerate strategy, delivering on our financial commitments, and creating sustainable value for our shareholders.

Lee McChesney: Now I'd like to turn the call back to Steve and he can outline the key areas of focus for 2025.

Thanks, Lee, and I'm on slide 12.

Lee McChesney: As I look ahead into 2025, our team around the world continues to maintain their focus on serving our mission, and executing our strategy while controlling what we can control.

Lee McChesney: Our 2025 initiative strongly emphasized growth and extending our leadership position in safety technology through innovation, implementing the MSA business system, and delivering continued improvements in operations and maintaining our disciplined approach to capital allocation.

On slide 13.

Lee McChesney: Overall, we executed well in what we see is a dynamic environment in 2024, a tribute to the team's focus on serving that mission and the inherent resiliency of our business.

Lee McChesney: As we turn to 25, we remain focused on driving profitable growth and building on the foundational work we completed in 2024 for our Accelerate strategy.

Lee McChesney: I'm confident our focus and determination will help drive long term value creation for our shareholders and continue to make MSA safety the preferred choice for our customers around the world.

Lee McChesney: With that, I'll turn the call back over to the operator for Q&A.

Thank you.

We will now begin the question-and-answer session.

Speaker Change: To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.

Speaker Change: And your first question today will come from Ross Sparenbleck with William Blair. Please go ahead.

Hey, good morning, gentlemen.

Morning, Russ.

Speaker Change: Yeah, for, you mean the order pace we've seen thus far, Russ? Exactly, yeah.

Speaker Change: Yeah, so if we if we looked at the the overall fourth quarter You know we started out. We would say where we hope to be in fourth quarter December was lighter than we anticipated

Speaker Change: A lot of that industrial-wise, a slower December than we thought, and I think it fit that thesis of...

Speaker Change: The choppiness of industrial which you know our distributors kind of shared with us as well

Speaker Change: So we weren't seeing what we thought maybe in December, but as we looked into year-to-date thus far, it's been a really solid start across the board, especially in our detection business. Fire service has been good. So as we look at it,

Story, The Incoming, and The Pipeline.

really matching up with what we anticipated.

Speaker Change: You know, as we talk even back to Investor Day, I think it fits really well with what we initially thought strategically we'd focus on and how we've kind of moved forward in the detection space, and fall protection is clearly a category as well.

Speaker Change: So, so far I'd say the order pace is just as we'd hoped it would be and the pipeline is the same.

Speaker Change: Okay I mean with the coming NFPA standard change I mean you get the sense that there's been any deferred ordering and anticipation of the new product launches?

Speaker Change: Yeah, that's a good question too. First, the fire service business continues to be resilient and the pipeline is good.

Speaker Change: I would say that the pace of ordering wasn't to the level we anticipated as we entered the year. We had the fire service...

but at a slower pace.

Speaker Change: As we look into 25, you know, we are cautious because of the NFPA standard change in, you know, the latter part of the year, the promulgates probably early 26.

Speaker Change: But I think we're really well positioned, you know, our team's done a nice job really talking to the customer base on who will potentially wait and who won't. And in our view, we've got a pretty good base of business that won't wait, but there certainly are customers that are going to consider, hey, I want to wait and see what the new standard does.

Speaker Change: Okay, that's very helpful. And just one more for me, you know, you also referenced a large NSA Plus order. Excuse me if I missed it, was this a new or existing customer? I'd just like to better understand some of the competitive dynamics. This was new. This was nice.

Speaker Change: Yeah, thanks for the question. So this was a competitive conversion, a large customer in North America. Great competitive conversion where we competed against all of the primary competitors you might expect and the team did a fantastic job.

Speaker Change: That's great to hear. All right, I'll jump back in queue. Thanks, guys.

Thanks, Ross.

Speaker Change: Your next question today will come from Sari Boroditsky with Jefferies. Please go ahead.

Sari Boroditsky: Hi, good morning. Thanks for taking the questions. Maybe just focusing a little bit on the margins. America margins exit in a year at almost 31%. How does this set you up as you think about the margin potential heading into 2025?

Yep, so good morning.

Sari Boroditsky: 30 to 50 base points of improvement, that's certainly what we're going to do each year. I would say when we think about 25, that will be a bit harder. Certainly FX is out there. I've said this a number of times.

Sari Boroditsky: We go after that type of improvement and if something goes wrong, you know, you got something to combat it

Sari Boroditsky: Right now, I'm not going to get into the game of predicting FX, but we certainly know that if I look at the rates today, it's at least a point, and times even in the last few weeks have been more than that. But I still think for the year, we're looking to...

Sari Boroditsky: to move the margins up, and it's going to be more in the gross margin area than in the SG&A area as we think about our outlook for 2025.

Sari Boroditsky: That's helpful. Then maybe switching to international, a similar question. Could you just talk through the variability in international margins as we head into 2025? How do you think about the step down into the first quarter sequentially? And then how should margins trend through the remainder of the year?

Sari Boroditsky: Yes, good question. I think for international, but also just for the entire portfolio, there's definitely a step down in 1Q just simply because of volume leverage.

large orders or backlogs and things like that, but um...

Sari Boroditsky: There is a variability in international, it doesn't have the same market position and market dynamics that we do in North America.

Sari Boroditsky: We are working on the same things. We're working on productivity, launching NPD. We certainly have done restructuring over time to attack our cost base.

Sari Boroditsky: And I think, you know, it's one of these, it's more of a long-term play. You know, there are structural differences between the international markets in North America, so there'll be a difference. But certainly, you know, we have this margin objective, you know, we're going after it across the globe. Sorry.

Speaker Change: I appreciate that. And then just one more, you mentioned just the normal seasonality for the year, but if we just kind of focus on Americas and fire service, just talk about how you're thinking about the cadence to the fire service sales given the challenging comp in the fourth quarter.

Speaker Change: I'll give you a couple of dynamics to think about. We're talking about low single-digit organic growth as our target for the year. It's certainly, when I say of a normal seasonal pattern,

Speaker Change: You know, it's always going to have that lower first quarter, a little bit step up the second quarter, and there's a larger back half.

You know, typically, our sales overall, you know,

Speaker Change: are probably about 47 to 48 percent in the first half of the year and the remainder is in the back half so

When you drop that in...

into 25, that's going to give you just a...

Speaker Change: A different V because in the first half of 24, we had Air Force. We also had a, you know, kind of our final rundown of extra backlog. In fire overall, you know, as we share, we think for the year, it will be a negative growth year because of those comps.

Speaker Change: and certainly the harder comp is in the first half of the year versus the second half.

And I'll just add to that because, you know...

Speaker Change: Beyond that, we've talked about that since May, yet we still have our focus on...

Speaker Change: Detection being our leading growth segment, that's still our view for 2025 as well. And then, you know, industrial PPE, certainly default protections are focused to get that into a positive as well in 2025.

I appreciate the color. Thanks so much.

Speaker Change: Again, if you have a question, please press star and then 1.

Speaker Change: And your next question today will come from Jeff Van Sinderen with B. Reilly FBR. Please go ahead.

Speaker Change: Good morning everyone. You touched a little bit about this on your prepared comments but wonder if you can speak a little bit more about what you're doing in terms of product innovation in 25 and I guess even into 26.

Speaker Change: And then could some of those innovation initiatives create demand for replacements and upgrades in the detection segment? Just curious about what you're seeing there.

Yeah, thanks for the question. So, I mean, broadly speaking...

Speaker Change: as you know, and we talked a bit about this in the prepared comments, but innovation is where we lead and it helps us differentiate who we are in the marketplace.

Speaker Change: We spend a lot of time with our customers, a lot of VOC, or voice of customer activity, to inform us and gain the insights.

Speaker Change: to really come up with solutions to the challenges they identify.

Speaker Change: I would look at 25 and 26. You know, 25, you think about what we talked about with fire service. We've taken advantage of this switch to enhance the G1, specifically with what we see as the next generation G1 that we'll showcase at this year's FDIC.

Speaker Change: And that's focused on optimizing comfort, functionality, ergonomics, etc. And then if you lean into the detection space a little bit more, I think what's really good for us, and I'll talk about this in two categories, because we see detection as the fixed monitoring.

Speaker Change: and then we look at the portable side of this. So if you look at the portable side of this business,

We really are leaning into the connected platform a lot.

Speaker Change: We have the I04. We also have a robust plan of products, software updates, and cloud capabilities.

that will continue to roll out throughout 25 and beyond.

So you'll see some of that show up this year.

certainly that does have

Speaker Change: That's part of our strategic initiative set of the Accelerate Strategy we talked about in May.

Speaker Change: that's coming to fruition and should see some really nice benefits. A lot of that might be the latter half of the year.

Speaker Change: as far as when you see the revenue side of that, but really good progress there. And then the fixed side, that fixed monitoring space.

Speaker Change: It's a really strong business, great diversity in the portfolio, and we've got an expanded solution set because of our HVAC refrigeration and automation, and that came through BACARAC, came through the SMC acquisitions. That adds to the strong base in energy.

Speaker Change: that we already have, including clean, including the best storage space where we play in, and that strong installed base. So I think when we think of detection, it's really fitting out or filling out really well with what we expected, and it's gonna be a key growth driver into the future.

Speaker Change: Okay, terrific. And then just wanted to follow up a little bit on the new NFPA standard changes this year.

Speaker Change: As you think about that, what do you feel needs to happen for that business to normalize under the new standard? And then I guess, I know this is a tough question, but how do you see sort of the timeframe of that playing out?

Speaker Change: Well these standards come out usually every five to six years. So this is something that's not new. So we do have a lot of experience with this.

Speaker Change: Typically, what you see is you see customers evaluate, you know, where they're at in the buying cycle, and a lot of customers can't wait. And then they also evaluate what's changing in the standard and how do they view that relative to the needs they have as a specific department.

So the 25 standard, which...

Speaker Change: You know, the timing is really up to the NFPA when they get through all of the approval processes. They have to do all the testing.

Speaker Change: We've submitted our platform, and certainly our competitors, we think, are doing the same. But they have to go through all of that process, and then they validate.

Speaker Change: Those different platforms for approval and we would expect that to promulgate probably early 26 You know again, we don't know the timing exactly but that would be likely

Speaker Change: But if you look at that standard, the changes on it...

Speaker Change: Relative to typical standard changes are fairly minor. They're not significant in nature. So that's kind of the thoughts our team has. There certainly will be customers that wait. We expect that to happen. There always are.

Speaker Change: But it's a fairly normalized standard change in our view. And we did, as I said, I think we look at our G1 platform, which we launched in 14.

And we've continued to enhance that for our customers.

Thank you very much.

Speaker Change: But this latest enhancement for the G1 and what we've done on the next gen, we think the timing's perfect. So next year when it promulgates, this 25 standard, we'll be 12 years out from that first 14, 2014 G1. Perfect timing for those first units to come back up.

Speaker Change: So we feel really good as we go into the future on this. 25 is going to be a little choppy.

Speaker Change: the comp for Air Force and certainly the standard change, but we think we're well prepared.

Good to hear. Thanks for taking my questions.

You bet. Thanks for the questions.

Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Larry DiMaria for any closing remarks.

Larry DiMaria: Thank you. We appreciate you joining the call this morning and for your continued interest in MSA safety. If you missed a portion of today's call, an audio replay will be made available later today on our Investor Relations website and will be available for the next 90 days. We look forward to updating you on our continued progress again next quarter.

Larry DiMaria: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.