Q1 2025 MSA Safety Inc Earnings Call
Speaker Change: [music].
Good day and welcome to the MSA safety first quarter 'twenty twenty-five earnings conference call.
Operator: Good day, and welcome to the MSA Safety First Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero.
All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please.
Please note. This event is being recorded I would now.
Larry DeMaria: I would now like to turn the conference over to Larry DeMaria. Please go ahead. Thank you.
Speaker Change: Now I'd like to turn the conference over to Larry de Maria. Please go ahead.
Speaker Change: Thank you good morning, and welcome to MSA safety first quarter 2025 earnings Conference call. This is Larry Demaria Executive director of Investor Relations I'm joined by Steve Blanco, President CEO at least Brody interim CFO, it's definitely sure, though president of our Americas segment. During today's call, we'll discuss Msa's first quarter financial results.
Larry DeMaria: Good morning and welcome to MSA Safety's First Quarter 2025 Earnings Conference Call. This is Larry DiMaria, Executive Director of Investor Relations. I'm joined by Steve Blanco, President and CEO, Elise Brody, Interim CFO, and Stephanie Sciullo, President of our America Segment. During today's call, we'll discuss MSA's first quarter financial results and provide an update on our full year 2025 outlook.
Speaker Change: And provide an update on 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.
Larry DeMaria: 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. Forward-looking statements include, but are not limited to, all projections and anticipated levels of future performance. 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. MSA Safety undertakes no duty to publicly update any forward-looking statements made on this call, except as required by law.
Speaker Change: Forward looking statements include but are not limited to all projections and estimated levels of future performance 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 the recipe filings MSA safety undertakes no duty to publicly update.
Speaker Change: Any forward looking statements made on this call except as required by law.
Larry DeMaria: We've included certain non-GAAP financial measures as part of our discussion this morning. The non-GAAP reconciliations are available in the appendix of today's presentation. The presentation and press release are available on our investor relations website at investors.msasafety.com. Moving on to today's agenda, Steve will first provide a business update and strategic actions from the first quarter of 2025. Elise will then review our financial performance and 2025 outlook.
Speaker Change: We've included certain non-GAAP financial measures as part of our discussion. This morning. The non-GAAP reconciliations are available in the appendix of today's presentation. The presentation and press release are available on our Investor Relations website at investors that MSA safety dotcom.
Speaker Change: Moving on to today's agenda, Steve will first provide a business update and strategic actions from the first quarter of 2025.
Speaker Change: We will then review our financial performance in 2025 outlook.
Larry DeMaria: Steve will then provide closing remarks and open the call for your questions.
Speaker Change: He will then provide closing remarks and open the call for your questions with that I'll turn the call over to Steve Blanco, Steve Thanks, Larry and good morning, everyone and thank you for your continued interest in MSA safety I'm on slide four our team executed well against the dynamic operating environment to begin in 2025 financial results for the first quarter.
Steve Blanco: With that, I'll turn the call over to Steve Blanco. Steve? Thanks, Larry, and good morning, everyone, and thank you for your continued interest in MSA safety.
Steve Blanco: I'm on slide four. Our team executed well against a dynamic operating environment to begin 2025. Financial results for the first quarter exceeded our original expectations while delivering solid free cash flow. Higher sales were primarily driven by strong demand across detection and partnering with our customers to accelerate certain shipments in consideration of tariffs. Operating margins declined year-over-year due to gross margin pressure, largely from transactional foreign currency headwinds, which was partially offset by lower SG&A pricing and favorable markets. Overall, demand was resilient across our product categories as evidenced by a healthy order pace in the first quarter.
Speaker Change: Exceeded our original expectations, while delivering solid free cash flow generation.
Speaker Change: Higher sales were primarily driven by strong demand across detection and partnering with our customers to accelerate certain shipments and consideration of tariffs.
Speaker Change: Operating margins declined year over year due to gross margin pressure largely from transactional foreign currency headwinds, which was partially offset by lower SG&A pricing and favorable mix.
Speaker Change: Overall demand was resilient across our product categories as evidenced by our healthy order pace in the first quarter. We've also seen stable order trends in April sequentially.
Steve Blanco: We've also seen stable order trends in April. Sequentially, backlog increased in line with historical trends and remains within normalized levels. First quarter orders included the award of a $10 million breathing apparatus contract from the Orange County Fire Authority in Southern California. The order is expected to be delivered this year, though the exact timing is still being worked out. This marks a key competitive conversion and builds on the previously announced wins in Southern California, such as with our customers in L.A. City and L.A. .
Speaker Change: Sequentially backlog increased in line with historical trends and remains within normalized levels.
Speaker Change: First quarter orders included the award of a $10 million breathing apparatus contract from the Orange County Fire authority in Southern California. The order is expected to be delivered this year, though the exact timing is still being worked out.
Speaker Change: This marks a key competitive conversion and builds on the previously announced wins in southern California, such as with our customers in L. A city and L. A county.
Steve Blanco: Moving to our product categories, sales and fire service would down high single digits year over year, primarily due to the challenging year over year comparable in the America segment. This included the remainder of the first tranche of U.S. Air Force. International growth was up double digits organically in the first quarter on SCBA deliveries in Asia-Pacific, excluding the impact of the U.S. Air Force. Fire service on an organic basis was up low single digits. Mid-teens growth in detection was supported by expansion in fixed and portable gas detection categories across both segments. Industrial PPE sales were up 3% organically.
Speaker Change: Moving to our product categories sales in fire service were down high single digits year over year, primarily due to the challenging year over year comparable in the Americas segment. This included the remainder of the first tranche of the U S Air Force water.
Speaker Change: International growth was up double digits organically in the first quarter on S. E. B a deliveries in Asia Pacific excluding the impact of the U S. Air Force fire service on an organic basis was up low single digits.
Speaker Change: Mid teens growth in detection was supported by expansion in fixed and portable gas detection categories across both segments industrial PPA sales were up 3% organically within the category growth in head and fall protection was offset by contraction in other PPE.
Steve Blanco: Within the category, growth in head and fall protection was offset by contraction in other PPE. In the first quarter, we delivered reported sales growth of 2% or 4% organically, while delivering adjusted earnings growth per share of 4%. Despite the tariffs and macroeconomics uncertainty, we remain encouraged by the positive long-term trends in industrial safety technology, our innovation pipeline, and the overall diversification of the business.
Speaker Change: In the first quarter, we delivered reported sales growth of 2% or 4% organically, while delivering adjusted earnings growth per share up 4%.
Speaker Change: Despite the tariffs and macroeconomic uncertainty we remain encouraged by the positive long term trends in industrial safety technology, our innovation pipeline and the overall diversification of the business.
Steve Blanco: Now turning to slide five. While the operating environment has become more uncertain since we last reported in February, we remain focused on advancing our Accelerate strategy and delivering long-term profitable growth aligned with our 2028 financial targets. I'd like to highlight key year-to-date strategic and commercial progress. First, we continue to extend our innovation-led leadership in our product categories. As I mentioned earlier, we saw excellent growth in detection and remain well-positioned for continued above-market growth in fixed and portable devices. Within portable gas detection, we continue to see momentum in our connected MSA Plus offerings and the IO4 gas monitor, which grew substantially again this quarter.
Speaker Change: Now turning to slide five.
Speaker Change: While the operating environment has become more uncertain since we last reported in February we remained focused on advancing our accelerate strategy and delivering long term profitable growth aligned with our 2028 financial targets I'd like to highlight key year to date strategic and commercial progress.
Speaker Change: First we continue to extend our innovation led leadership in our product categories. As I mentioned earlier, we saw excellent growth in detection and remain well positioned for continued above market growth in fixed and portable devices.
Speaker Change: Within portable gas detection, we continue to see momentum in our connected MSA plus offerings and the I O four gas monitor which grew substantially again this quarter I'm pleased to note that over half of our MSA plus customers continue to be new.
Steve Blanco: I'm pleased to note that over half of our MSA Plus customers continue to be new. In the fire service, we continue to navigate the 2025 National Fire Protection Association, NFPA, standard change cycle by introducing innovative, industry-leading products and solutions. The Orange County Order, I mentioned earlier, is an excellent example of our innovation and action. Key factors contributing to our success included connectivity features, integrated communication capabilities, and our integrated thermal imaging camera. I recently attended the Fire Department Instructors Conference, or FDIC, in Indianapolis, and it was a pleasure to interact with our customers, channel partners, and the MSA Fire Service Building on the momentum from our successful launch of our new Karnes 1836 Fire Helmet last year, we introduced the G1 SCBA XR Edition and the new Globe G Extreme Pro Turnout Gear Jacket at this year's show.
Speaker Change: In the fire service, we continued to navigate the 2025 National Fire Protection Association NFPA standard change cycle by introducing innovative industry, leading products and solutions.
Speaker Change: The Orange County Order I mentioned earlier is an excellent example of our innovation in action. He factors contributing to our success included connectivity features integrated communication capabilities and our integrated thermal imaging camera.
Speaker Change: I recently attended the fire Department instructors conference or FDIC in Indianapolis, and it was a pleasure to interact with our customers channel partners and the MSA fire service team.
Speaker Change: Building on the momentum from our successful launch of our new Karnes 18, 36 fire home at last year, we introduced the G. One S E B, a XR edition and the new Globe G. Extreme pro turnout gear jacket at this year's show.
Steve Blanco: In addition, with the NFPA standards change, the XR Edition features many elements outlined in the 2025 standard, allowing our customers to replace now rather than waiting. Customer feedback has been positive as we continue to advance our mission of safety in the fire sector.
Speaker Change: In addition, with the NFPA standards change the XR edition features many elements outlined in the 2025 standard, allowing our customers to replace now rather than waiting customer feedback has been positive as we continue to advance our mission of safety in the fire service.
Steve Blanco: Now let's talk about tariffs for a moment. They've been a bit of a moving target. While it's generally our strategy to manufacture as much in-region for region, we have a global supply chain and some cross-border material. We're evaluating the potential impacts in this rapidly evolving situation while considering our best long-term strategic path. To quantify this, based on the current tariff situation, about 15% of our cost of sales is now subject to tariffs, with about a third of that coming from China. To mitigate the impact, we implemented targeted price increases in April, with further adjustments contingent on the evolving tariff.
Speaker Change: Now, let's talk about tariffs for a moment.
They've been a bit of a moving target.
Speaker Change: While it is generally our strategy to manufacture as much in region for region, we have a global supply chain and some cross border material flows we're evaluating the potential impacts in this rapidly evolving situation, while considering our best long term strategic path to quantify this based on the current tariff.
Speaker Change: And about 15% of our cost of sales is now subject to tariffs with about a third of that coming from China.
Speaker Change: To mitigate the impact we implemented targeted price increases in April with further adjustments contingent on the evolving tariff rates. These could take several months to work through the backlog.
Steve Blanco: These could take several months to walk through the back. Second, our teams are also leveraging the MSA business. drive productivity savings through sourcing initiatives, supply chain and manufacturing initiatives, and value engineering efforts among other activities. While we anticipate some tariff headwinds, we're working diligently with our customers and internal teams to mitigate the higher input costs as much From a capital allocation perspective, the team amended and increased the size of our revolving credit facility to $1.3 billion in April, ensuring we're well-positioned to execute our growth initiative. We remain disciplined in our approach to M&A as we continue to evaluate our actionable pipeline for inorganic growth opportunities that meet our strategic and financial targets.
Speaker Change: Our teams are also leveraging the MSA business system to drive productivity savings through sourcing initiatives supply chain and manufacturing initiatives and value engineering efforts among other actions.
While we anticipate some tariff headwinds, we're working diligently with our customers and internal teams to mitigate the higher input costs as much as possible.
Speaker Change: From a capital allocation perspective, the team amended and increased the size of our revolving credit facility to $1 3 billion in April <unk>.
Speaker Change: Sharing we're well positioned to execute our growth initiatives.
Speaker Change: We remain disciplined in our approach to M&A as we continue to evaluate our actionable pipeline for inorganic growth opportunities that meet our strategic and financial targets.
Elise Brody: Now I'd like to turn the call over to Elise. Thank you, Steve, and good morning, everyone. We appreciate you joining the call.
Elise: Now I'd like to turn the call over to Elise Elise.
Elise: Thank you Steve and good morning, everyone. We appreciate you joining the call let's start on slide six with our quarterly financial highlights first quarter sales were 421 million an increase of 2% on a reported basis and 4% organic over the prior year, which includes mid teens growth in detection and a low single digit.
Elise Brody: Let's start on slide 6 with the quarterly financial highlights. First quarter sales were $421 million, an increase of 2% on a reported basis and 4% organic over the prior year, which includes mid-teens growth and detection and a low single-digit increase in industrial PPE, partially offset by a high single-digit contraction in fire service. We had positive contributions from volume and pricing, and currency translation was a 2% headwind to overall growth, primarily on the Brazilian real, Mexican peso, and the euro. Order pace remained healthy in the first quarter, and we continue to see a stable order pace so far in the second quarter.
Elise: Faithful industrial P. P E, partially offset by a high single digit contraction in fire service.
Elise: We had positive contributions from volume and pricing.
Elise: Currency translation was a 2% headwind to overall growth primarily on the Brazilian real Mexican peso and the euro.
Elise: Order pace remained healthy in the first quarter and we continue to see a stable at whatever pace. So far in the second quarter, well macro and geopolitical conditions have become increasingly difficult to predict we have generally seen resilient market conditions to date consistent with seasonal patterns, our quarterly book to Bill was above one.
Elise Brody: While macro and geopolitical conditions have become increasingly difficult to predict, we have generally seen resilient market conditions to date. Consistent with seasonal patterns, our quarterly book-to-bill was above 1. Growth margin in the first quarter was 45.9%, down 140 basis points from last year. Growth margin was impacted by transactional foreign exchange headwinds and inflation, which was partially offset by price, higher volume, and favorable mix. We expect FX pressure on gross margins to continue in the second quarter, mostly due to Latin American currency. Gap operating margin was 18.5%, with adjusted operating margin of 20.8%, down 50 basis points from a year ago on the contraction in gross margins, partially offset by effective cost management and discrete items within SG&A.
Elise: Gross margin in the first quarter was 45, 9% down 140 basis points from last year.
Gross margin was impacted by transactional foreign exchange headwinds on inflation, which was partially offset by price higher volume and favorable mix. We expect FX pressure on gross margins to continue in the second quarter, mostly due to Latin American currencies.
Elise: GAAP operating margin was 18, 5% with adjusted operating margin of 28% down 50 basis points from a year ago on the contraction in gross margin, partially offset by effective cost management and discrete items within SG&A.
Elise Brody: Quarterly GAAP net income totaled $60 million, or $1.51 per share. On an adjusted basis, diluted earnings per share were $1.68, up 4% from last year. The increase was mainly due to revenue growth, lower SG&A, and lower interest expense due to lower debt and interest rates.
Elise: Quarterly GAAP net income totaled 60 million or $1 51 per share.
On an adjusted basis diluted earnings per share were $1 68.
Elise: Up 4% from last year.
Elise: The increase was mainly due to revenue growth lower SG&A and lower interest expense due to lower debt and interest rates.
Elise Brody: Now, I'd like to review our segment performance. In our America segment, sales decreased 1% year-over-year on a reported basis, but were up 1% on an organic basis, as strong growth in detection and mid-single-digit growth in industrial PPE was offset by a contraction in fire search. Adjusted operating margin was 26.8%, down 240 basis points year-over-year. Margin contraction was mainly due to transactional foreign currency headwinds in Latin America and inflation, partially offset by lower SG&A and MIX. In our international segment, sales increased by 9% year-over-year on a reported basis, or 11% organically. Double-digit organic growth in detection and fire service was countered by a low single-digit contraction in industrial PPE.
Elise: Now I'd like to review our segment performance.
Elise: In our Americas segment sales decreased 1% year over year on a reported basis, but were up 1% on an organic basis as strong growth in detection and mid single digit growth in industrial P. P. E was offset by a contraction in fire service.
Elise: Adjusted operating margin was 26, 8% down 240 basis points year over year.
Elise: Margin contraction was mainly due to transactional foreign currency headwinds in Latin America, and inflation, partially offset by lower SG&A on mix.
Elise: In our international segment sales increased by 9% year over year on a reported basis or 11% organic.
Elise: Double digit organic growth in detection and fire service was countered by a low single digit contraction in industrial P. B.
Elise Brody: Currency Translation posed a 2% headwind in the quarter.
Elise: Currency translation posted a 2% headwind in the quarter.
Elise Brody: Adjusted operating margin was 14.6%, 310 basis points above last year due to double-digit organic revenue growth, favorable mix, and SG&A leverage.
Elise: Adjusted operating margin was 14.6% 310 basis points above last year.
Double digit organic revenue growth.
Elise: Next and SG&A leverage.
Elise Brody: Now turning to slide 7. Free cash flow was $51 million, representing a conversion rate of 86%. Earnings growth and lower variable compensation payments drove 29% year-over-year expansion.
Elise: Turning to slide seven.
Elise: Free cash flow was 51 million, representing a conversion rate of 86% earnings growth and lower variable compensation payments drove 29% year over year expansion.
Elise Brody: We return value to shareholders through $20 million in dividends and $10 million of share repurchases, invested $11 million in CapEx, and repaid $7 million of debt. Steve mentioned that we recently amended and resized our revolving credit facility up to $1.3 billion. This strategic action provides ample liquidity for investment in future growth initiatives aligned with our Accelerate strategy. Net debt at the end of the quarter was $331 million, including cash of $171 million. Adjusted EBITDA for the trailing 12 months is $470 million, or 25.9% of net sales. We ended the quarter with net leverage of .7 times.
We returned value to shareholders through 20 million in dividend and 10 million of share repurchases.
Elise: Adjusted 11 million in Capex, and repaid 7 million of debt.
Elise: Steve mentioned, we recently amended and resize, our revolving credit facility up to $1 3 billion.
Elise: This strategic action provides ample liquidity for investment in future growth initiatives aligned with our accelerated strategy.
Speaker Change: Net debt at the end of the quarter was 331 million, including cash of 171 million.
Speaker Change: Adjusted EBITDA for the trailing 12 months is $470 million or 25, 9% of net sales. We ended the quarter with net leverage of <unk> seven times.
Elise Brody: Our balance sheet provides capital allocation optionality to invest in our business and return value to shareholders.
Speaker Change: Our balance sheet provides capital allocation optionality to invest in our business and return value to shareholders.
Elise Brody: Let's turn to our 2025 outlook on slide eight. We maintain our low-single-digit, full-year organic growth outlook and have made a solid start in 2025. The business remains healthy, supported by stable order trends into April.
Speaker Change: Let's turn to our 2025 outlook on slide eight.
Speaker Change: We maintain our low single digit full year organic growth outlook and have made a solid start in 2025. The business remains healthy supported by stable order trends into April.
Elise Brody: Our broad diversification across products, geographies, and markets, along with favorable underlying market trends in the safety industry and a strong commercial pipeline, provides confidence as we move forward. In contrast, there has been increased macro uncertainty recently, and we continue to navigate the global tariff activity, which could present risks to our growth outlook. That said, you can expect us to remain agile as the operating environment evolves.
Speaker Change: Our broad diversification across products geographies and markets, along with favorable underlying market trends and the safety industry and a strong commercial pipeline provides confidence as we move forward in.
Speaker Change: In contrast, there has been increased macro uncertainty recently and we continue to navigate the global tariff activity, which could put at risk to our growth outlook that said you can expect us to remain agile as the operating environment evolves.
Elise Brody: For modeling purposes, our expectations for the full year are unchanged, but we realized a bit more sales in the first quarter based on order acceleration. Assumptions for below-the-line drivers for the full year remain unchanged from our fourth quarter release.
Speaker Change: For modeling purposes, our expectations for the full year unchanged, but we realized a bit more sales in the first quarter based on order acceleration.
Speaker Change: Functions for below the line drivers for the full year remain unchanged from our fourth quarter release.
Steve Blanco: With that, I'll now turn the call back to Steve. Thanks, Elyse. I'm on slide nine.
Steve Blanco: With that I'll now turn the call back to Steve. Thanks.
Steve Blanco: Thanks, Elyse I'm on slide nine before we conclude today's presentation I want to emphasize the resilience of our business, which is enabled by the diversity of our products and markets and geographies and add some perspective on how our company has proven to perform well during challenging periods.
Steve Blanco: Before we conclude today's presentation, I want to emphasize the resilience of our business, which is enabled by the diversity of our products in markets and geographies. and add some perspective on how our company has proven to perform well during challenging periods. Since the end of 2014, we've had the industrial recession, a recession caused by the global pandemic, and unprecedented global supply chains. At the same time, despite these economic pressures, MSA grew sales by mid-single digits and earnings by double digits on average over the 10-year period.
Steve Blanco: Since the end of 2014, we've had the industrial recession and recession caused by the global pandemic and unprecedented global supply chain challenges at the same time. Despite these economic pressures MSA grew sales by mid single digits and earnings by double digits on average over the 10 year period.
Steve Blanco: MSA's mission has always been to protect workers around the world. Well, we're not immune to the recent events that have caused some confusion in our industries and introduced heightened macro- We will continue to focus on market-leading safety innovation and launching new safety solutions that solve our customers' most significant The need for safety and compliance continues to grow around the world, and MSA is well positioned to help drive the industry forward.
Steve Blanco: Msas mission has always been to protect workers around the world, while we're not immune to the recent events that have caused some confusion in our industries and introduced heightened macro risks, we will continue to focus on market, leading safety innovation and launching new safety solutions that solve our customers' most significant challenges.
Steve Blanco: The need for safety and compliance continues to grow around the world and MSA is well positioned to help drive the industry forward.
Steve Blanco: Moving to slide 10, to close, I'm proud of our team's execution and thank all of our associates for their continued commitment to serving our mission in the first quarter.
Steve Blanco: Moving to slide 10 to close I'm proud of our team's execution and thank all of our associates for their continued commitment to serving our mission in the first quarter with that I'll turn the call back to the operator for Q&A.
Operator: With that, I'll turn the call back to the operator for Q&A. Thank you.
Steve Blanco: Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2.
Operator: At this time, we will pause momentarily to assemble our roster.
Steve Blanco: Yeah.
Speaker Change: And our first question comes from Rob Mason from Baird. Please go ahead.
Rob Mason: And our first question comes from Rob Mason from Baird. Please go ahead. Hi, good morning.
Steve Blanco: Hi, good morning.
Steve Blanco: Steve, you somewhat indirectly address this with just the order commentary, but I'm just curious if you drill in a little bit and speak to how project decision making may have changed or not, I guess, during the quarter, just as tariffs came to the forefront. Thanks, Rob. Well, I'll kind of hit it two ways. You know, we talked a little bit about some customers, you know, in North America, really in Canada, I think the biggest piece, right, Elise, but customers, you know, enabling acceleration of shipments for a little bit of, you know, our Q1 revenue. So we took advantage of that.
Steve Blanco: Morning.
Steve Blanco: Steve.
Steve Blanco: You somewhat indirectly addressed this with just the order commentary, but I'm just curious if you drill in a little bit speak.
Steve Blanco: Speak to how project decision, making.
Steve Blanco: <unk> may have changed or not I guess during the quarter just as a tariff it came to the forefront.
Speaker Change: Thanks, Rob.
Speaker Change: Well it all kind of hit it two ways you know, we talked a little bit about some customers in North America really in Canada I picked.
Speaker Change: The biggest piece right Elyse, but customers are you know, enabling an acceleration of shipments for a little bit of you know our Q1 revenue. So we took advantage of that and we wanted to support them with that.
Steve Blanco: We wanted to support them with that, which made a lot of sense.
Speaker Change: Which made a lot of sense and I think when you think of the project work I'd, probably talk more broadly that it was very strong in.
Steve Blanco: And I think when you think of the project work, I'd probably talk more broadly that it was very strong. In the first quarter, you know, energy, petrochem, were really solid across the globe. And you saw some of that play out in detection as we continue to see that really, I'd say, strength across the globe and the pipeline there supports a really nice year, at least is what we see going on for 2025. It's fair to say that the acceleration that happened in the quarter was primarily detection then. I would say that the growth, you know, you saw the numbers on detection, we had a really nice quarter in detection, not on the tariff, the customer shipments, that was released, that was a mix, really similar to what our product mix is, I think actually a little heavier, but 40% in fire service, right?
Speaker Change: In the first quarter, you know energy Petro Chem were really solid across the globe and you saw some of that play out in detection as we continue to see that really.
Speaker Change: Hey strength across the globe and the pipeline there.
Speaker Change: <unk> supports a really nice year and at least as what we see going on for 25.
Speaker Change: So is it fair to say that the acceleration that happened in the quarter was primarily detection that.
Speaker Change: I would say that the growth you know you saw the numbers on detection, we had a really nice quarter in detection not on the tariff the customer shipments that was released that was a mix.
Speaker Change: Really similar to what our product mixes I think actually a little heavier, but 40% in fire service right. So a little heavier in fire service for that piece Rob.
Steve Blanco: So a little heavier in fire service for that piece, Rob. But what I'm talking about is the ongoing, you know, when you think about the demand cycle and what we see and saw in Q1, yeah, I'd say detection's really leading the charge. Yeah, yeah.
Speaker Change: But when I'm talking about is the ongoing you know when you think about the the demand cycle and what we see and saw in Q1, Yeah, I'd say detection is really leading the charge.
Speaker Change: Yep Yep.
Elise Brody: And then police, you know, anyway, to tease out what a local currency, gross margin would have been, you know, just help us understand the magnitude of the transactional Edwin.
Speaker Change: And then leave.
Speaker Change: At least you know any way to tease out what our local currency.
Speaker Change: Gross margin would have been you know just help us understand the magnitude of the transactional headwinds.
Elise Brody: Rob, good morning. Thanks for the question. The biggest impact on gross margins in the quarter was from FX and that's primarily on the Latin American currencies. So it's a meaningful impact when you look at the overall gross margin. And based on where rates are today, that continues into the second quarter. We also had, you know, in the first quarter, a higher level of business ship from the 2024 price book. And as we move forward, that's now.
Rob Mason: Rob Good morning, Thanks for the question.
Rob Mason: The biggest impact on gross margins in the quarter was was from FX and that's primarily on the Latin American currencies.
Rob Mason: Currencies.
Rob Mason: It's it's a meaningful impact when you look at the overall gross margin and based on where rates are today that continues into the second quarter. We also had in the first quarter a higher level of business shift from the 2024 price book and as we move forward that's behind Us now.
Rob Mason: So as we look to the second half, we would start to see the impact of the tariffs in the second half, as well as the mitigations that Steve talked about. Very good. Well, I'll hop back in queue. Thank you. Thanks Rob. Thank you.
Rob Mason: As we look to the second half we would start to see the impact of the tariffs in the second half as well as the mitigation that Steve talked about.
Rob Mason: Very good well I'll hop back in queue. Thank you. Thank.
Rob Mason: Thanks, Rob Thank you.
Speaker Change: The next question comes from Ross Sparing Black from William Blair. Please go ahead.
Ross Sparenblek: The next question comes from Ross Sparenblek from William Blair. Please go ahead. Hey, good morning, guys. Hey, there was a, you know, some strong momentum there in the detection business, just trying to maybe parse out the fixed versus portable growth, if you could, I know portables have been growing around a 40% tier stack. But then again, we did have some second half 24 order slippage on the fixed side. Just anyway, you can help us kind of conceptualize where those ended up. Thanks, Ross. You know, it's for both fixed and portables, we had some really nice incoming and performance.
Speaker Change: Hey, good morning, guys.
Rob Mason: Morning.
Rob Mason: Hey, there was a you know some strong momentum there in our detection business just trying to maybe parse out the fixed first portable growth you could I know portables had been growing around 40% to your stack, but then again, we did have some second half 'twenty four order slippage in the fixed side.
Rob Mason: Just any way you can help us kind of conceptualize, where those ended up.
Speaker Change: Thanks Ross.
Speaker Change: For both fixed and portables, we had some really nice incoming and performance certainly fixed was a little softer in the fourth quarter. As you as you noted, but we had double digit incoming for detection overall and when you look at the performance we had across that business it really fits.
Steve Blanco: Certainly, fixed was a little softer in the fourth quarter, as you noted, but we had double digit incoming for detection overall. And when you look at the performance we had across that business, it really fits.
Steve Blanco: I'd come back to this accelerate strategy we talked about at the investor day. When you think about what we've done here and where we're headed, the initiatives that we've delivered on have really played out. Fixed, just tremendous business performance and pipeline, as I was saying earlier to Rob, across the energy segments globally. And portables, we're seeing a similar story. Now, the nice thing about portables, you know, certainly we've seen it across the entire portfolio. As I said, we've got this excellent combination for customers to choose from between the traditional detection as well as our MSA plus connected device.
Speaker Change: I'd come back to this accelerate strategy, we talked about at the Investor Day. When you think about what we've done here and where we're headed the initiatives that we've delivered on it really played out fixed just tremendous business performance and pipeline as I was saying earlier, Rob across the energy segment.
Speaker Change: Much globally and portables were seeing a similar story now the nice thing about portables, you know certainly we've seen it across the entire portfolio as I said, we've got this excellent combination for customers to choose from between the traditional detection as well as our MSA plus connected device, but the growth was you know pretty much.
Steve Blanco: But the growth was, you know, pretty much, I'd say level between the two, between the traditional and the connected on an absolute basis. So that just gives you an idea of the percentage on the connected. It's really doing well. Okay, so nothing really to call out that would kind of change this run rate looking into the second quarter and beyond. You know, we're expecting Detection to be, you know, a real nice player for 25. It was a super strong quarter. I know the comps in the second quarter are going to make that a little tougher, certainly, but we are expecting 25 to be really good.
Speaker Change: I'd say level between the two between the traditional and the connected on an absolute basis. So that just gives you an idea of the percentage on the connected it's really doing well.
Speaker Change: Okay. So nothing really to call out that would kind of change the run rate looking into the second quarter and beyond you know, we're expecting detection to be a real nice player for 25.
Speaker Change: It was a super strong quarter I know the comps in the second quarter Youre going to make that a little tougher certainly, but we are expecting a 25 to be really good I don't you know double digits is a little.
Steve Blanco: I don't, you know, double digits is a little, a little aspirational, maybe, but certainly we, you know, our numbers tell us high single digits is achievable. Absolutely. And then maybe just one last one here. Just putting the finer point on some of the moving parts. I believe you called out maybe a tariff pull forward. Second quarter has this $40 million backlog headwind. And then I think there was an international IPPE from the second half that was pushed out for ballistic helmets.
Speaker Change: A little aspirational, maybe but certainly we you know our numbers tell us high single digits is achievable.
Speaker Change: Absolutely and then maybe just one last one here just putting a finer point on some of the moving parts I believe you called out maybe a tariff pull forward second quarter has this 40 million backlog headwind and then I think there was an international.
Speaker Change: I P. P E from the second half that was pushed out from the list ballistic helmets.
Steve Blanco: I know there's a lot to unpack, but I mean, can you maybe just help us size any of those as we think about where the starting point is for the second quarter? Well, I think the second quarter, I'll let Elise take the second half of this, too. I think the second quarter, you talked about the comps, that's a challenge. The FX, certainly, the exchange that's going to play out a little more in this quarter as we saw in the first quarter. Those are two pressure points, certainly, we call out. Obviously, as we look longer into the year, some of those, you know, kind of go away.
Speaker Change: Lots of impact, but I mean can you give yourself the size of any of those as we think about where the starting point is for the second quarter.
Speaker Change: Well I think the second quarter I'll, let at least take the second half of this too I think the second quarter you talked about the comps that's a challenge the FX certainly the exchange that's going to play out a little more in this quarter as we saw in the first quarter those are too.
Speaker Change: The pressure points are certainly we'd call out obviously as we look longer into the year. Some of those kind of go away, but tariffs don't you know frankly, when you think of the tariff impact you're really not going to see much of an impact in the first half.
Steve Blanco: But tariffs don't. You know, frankly, when you think of the tariff impact, you're really not going to see much of an impact in the first half. We implemented a targeted price increase in April. We'll have further adjustments contingent on the evolving rates. But as you know, it takes several months for that to work through the backlog. And so the impacts of the tariffs and the respect the respective pricing or cost actions we take are going to play out more so in the second half. But from a demand perspective, I think I think you're right. It's going to be you know, the comps are tough.
Speaker Change: We implemented a targeted price increase in April we'll have further adjustments contingent on the evolving rates.
Speaker Change: As you know it takes several months for that to work through the backlog and so the impacts of the tariffs and the respect and respective pricing or cost actions. We take are going to play out more so in the second half, but from a demand perspective, I think I think youre right its going to be you know the comps are tough.
Speaker Change:
Elise Brody: and certainly the FX. Elyse, anything else you want to add to that?
Speaker Change: And certainly the FX Elyse anything else you want to add to that sure. Good morning, Ross I'm building on on what Steve said just to unpack a few of the areas you mentioned the pull forward in Q1 was just under 10 million and most of that in in Americas. As you had mentioned the backlog Comping in Q2, we converted 40 million.
Elise Brody: Sure. Good morning, Ross. Building on what Steve said, just to unpack a few of the areas you mentioned, the pull forward in Q1 was just under $10 million and most of that in Americas. As you had mentioned, the backlog comp in Q2, we converted $40 million of backlog in the second quarter last year. That was the quarter where we really got back to a normalized backlog level. We had really strong orders in the first quarter here, high single-digit growth, but we are up against that backlog comp heading into the second quarter. Then, as you look to the second half, you had mentioned ballistics.
Speaker Change: There's a backlog in the second quarter last year that was the quarter, where we really got back to a normalized backlog level. So we had really strong orders in the first quarter here high single digit growth, but we are up against that that backlog comp heading into the second quarter.
Speaker Change: And then as you look to the second half you had mentioned ballistics. We're very pleased that we got a nice order in ballistics and in Europe. So we should see that support industrial P. P E and the international segment.
Elise Brody: We're very pleased that we got a nice order in ballistics in Europe. We should see that support industrial PPE in the international segment in the future.
Speaker Change: Perfect very helpful guys. Thank you.
Ross Sparenblek: Perfect. Very helpful, guys. Thank you.
Speaker Change: Thank you and kiss.
Speaker Change: The next question comes from Jeff Van <unk> from B Riley FBR. Please go ahead.
Jeff Van Sinderen: The next question comes from Jeff Van Sinderen from B-Rally FBR. Please go ahead. Hi, good morning, everyone. We wanted to see if we could drill down on a couple things. Possible to quantify how much was pulled forward into Q1 and then any color on what specifically that consisted of. I know you did touch on kind of various things more generally, but just wondering specific product there. And then obviously, you had the anniversary of the Air Force, but just as we think about Q2 and the remainder of the year, how that pull forward might impact. Sure, Jeff.
Speaker Change: Good morning, everyone.
Speaker Change: I wanted to see if we could drill drill down in a couple of things.
Speaker Change: Possible to quantify how much was pulled forward into Q1, and then any color on what specifically.
Speaker Change: That consisted of I know you did touch on kind of various things more.
Speaker Change: <unk>, but just wondering specific product there and then obviously you had the anniversary of the Air Force, but.
Speaker Change: Just as we think about Q2 and the remainder of the year, how did that pull forward might impact.
Speaker Change: Sure Jeff at least you want to capture that sure Jeff. Good morning, So the pull forward in the first quarter was just under 10 million and as I mentioned before it's a pretty similar mix to the overall mix of our business, maybe a little bit heavier weighted to fire service.
Elise Brody: Alyse, you want to capture that? Sure, Jeff. Good morning. So, the pull forward in the first quarter was just under $10 million, and as I mentioned before, it's a pretty similar mix to the overall mix of our business, maybe a little bit heavier weighted to fire service. Okay, that's helpful.
Speaker Change: Okay. That's helpful. And then realize this is a tough subject given the fluidity of the situation.
Steve Blanco: And then realize this is a tough subject given the fluidity of the situation. But as you're thinking about kind of the potential tariff impact and supply chain areas that could impact you if trade deals don't materialize in a favorable way, could you maybe speak more to mitigation efforts and help us understand a little more about what is controllable at this juncture versus what is not? And then I guess just how you're generally evolving your supply chain. Yeah, thanks, Jeff. I mean, as you know, it's, it's got some variability right now. And as I said, in the prepared remarks, we're really approaching this both from pricing and cost management, we did implement that implement that one price increase very targeted.
Speaker Change: But as Youre thinking about kind of the potential tariff impact in supply chain areas that could impact U S trade deals don't materialize in a favorable way.
Speaker Change: Could you maybe speak more gen mitigation efforts in and help us understand a little more about what is controllable at this juncture versus what is not.
Speaker Change: And then I guess, just how you're generally evolving your supply chain.
Speaker Change: Yeah. Thanks, Jeff I mean as you note. It's a it's got some variability right now and as I said in the prepared remarks, we're really approaching this both from pricing and cost management, we did implement that implement that one price increase very targeted when.
Steve Blanco: You know, when we think about this, as I said, then, you know, we really have a nice business system, I think we're well positioned with our playbook. And it's going to really go after we're evaluating everything here. But pricing, you know, we have some nice pricing with our brand that will leverage but we're also cognizant of the customer needs in the market and trying to minimize or mitigate as much as we can from the cost element. I think the thing I would I would probably point to, you talked about the numbers right now. But until we have clear visibility and line of the longer term tariff numbers, it's going to take some time to shake out.
Speaker Change: When we think about this as I said, then we really have a nice business system I think we're well positioned with her playbook and it's going to really go after we're evaluating everything here, but.
Speaker Change: But pricing you know we have some nice pricing with.
Speaker Change: With our brand that will leverage, but we're also cognizant of the customer needs in the market and trying to minimize not minimize or mitigate as much as we can from the cost element I think the thing I would I would probably point to you.
You talked about the numbers right now.
Speaker Change: But until we have clear visit visibility and line of sight to the longer term tariff numbers, it's going to take some time to shake out and that might provide or cause some short term choppiness.
Steve Blanco: And that might provide or cause some short term choppiness. But you know, I was thinking about this, and we had a similar story play out with margins in 21. Really, when you think about the inflation and some of the challenges we had on the supply chain side. But once that leveled out, we had a much stronger business. And our playbook on the MBS side is even stronger now. So I think you can trust over the long term, that we're going to focus on what we do that's right, not reactionary, not short term. And the decision making, I think I've got a great team around the world in support of our mission to our customers, and we'll continue to adjust accordingly.
Speaker Change: No I was thinking about this and we had a similar story play out with margins in 'twenty. One are really when you think about the inflation in some of the challenges we had on the supply chain side, but once that leveled out we had a much stronger business and our playbook on the MBS side is even stronger now so I think you can trust over there.
Speaker Change: Long term that we're going to focus on what we do that's right not reactionary not short term and the decision, making I think I've got a great team around the world in support of our mission to our customers and we'll continue to adjust accordingly, so it might be a little choppy.
Mike Schliske: So it might be a little choppy. But we get on the other side of this, I think you come back to that strategy we talked about, our accelerate strategy, and we feel like we'll be in a good place. Okay, good to hear. Thanks for taking my questions. I'll take the rest offline. Thank you.
Speaker Change: But we get on the other side of this I think you'd come back to that that strategy, we talked about our accelerated strategy and we feel like we'll be in a good place.
Speaker Change: Okay. Good to hear thanks for taking my questions I'll take the rest offline.
Speaker Change: Thank you.
Speaker Change: The next question comes from Mike Slutsky from D. A Davidson. Please go ahead.
Steve Blanco: The next question comes from Mike Schliske from D.A. Davidson, please go ahead. Good morning. Thanks for taking my question. Steve, I wanted to follow up on that last comment that you just made, that last question. The cost reduction actions that you've been taking here, if tariffs end up being resolved or eventually are lower than where they are today, Do you expect to actually keep some of those gains? Are these potentially long-term margin gains? Or does a lot of this kind of revert back if tariffs revert back? Yeah, thanks for the question. I would say that depends, but on a cost side, we're looking at these as long term strategic initiatives from a cost and productivity side.
Mike Slutsky: Good morning, Thanks for taking my question.
Mike Slutsky: People wanted up all of them that last kind of or do you just need the last question, but.
Mike Slutsky: But the cost reduction actions that you've been taking here if tariffs end up being resolved or eventually are lower than where they are today.
Mike Slutsky: Do you expect to actually keep some of those gains are these are potentially long term RT cranes are just there's a lot of this kind of revert back if tariffs.
Mike Slutsky: Brought back yeah.
Speaker Change: Yeah. Thanks for the question I would say.
Speaker Change: It depends but want a cost side, we're looking at these as long term strategic initiatives from a cost and productivity side. So you should see we expect.
Steve Blanco: So you should see, we expect that whatever we're able to take action on will continue to play out for the long term. Pricing, you know, pricing, we're going to have to measure the market. And that's one of the reasons I talked about the choppiness is certainly it's not our plan to price to the customer. And three months later, if the tariffs disappear, there's a trade agreement, then, you know, peel that back. So we're trying to be strategic about how this looks to our customer base on the long term. But certainly cost, we expect those to hold.
Speaker Change: Whatever we were able to take action on we will continue to play out for the long term pricing.
Speaker Change: We're gonna have to measure the market and that's one of the reasons I talked about the Choppiness is certainly its not our plan to price to.
Speaker Change: To the customer and then three months later, if the parents tariffs disappear. There's a trade agreement then peel that back. So we're trying to be strategic about how this looks to our customer base on the long term, but certainly cost cost we expect those to hold.
Okay, Great and then maybe secondly, just taking a bit of a step back does anything that you're experiencing now.
Steve Blanco: Okay, great. And then maybe secondly, just taking a bit of a step back, does anything that you're experiencing now... Effect your ability to reach your 2028 targets. That's the last year of the current presidential administration. If tariffs don't get any better, if they get worse from here by maybe just a little bit, does the current environment, is this still conducive to that $10 to $11 EPS target or should we be thinking differently about that? Things just don't get out of where they are today. Well, I guess I'd step up. Thanks for the question. I'd step up and say our Accelerate Strategy initiatives are on pace.
Speaker Change: Back to your ability to reach a 2028 targets.
Speaker Change: The last year of the current.
Speaker Change: Dental administration, if tariffs don't get any better if they get worse from here.
Speaker Change: Maybe just a little bit.
Speaker Change: The current environment is still conducive to that 10 to $11 EPS target or should we be thinking differently about that things just don't get it out of where they are today.
Speaker Change: Well I guess I'd step up thanks for the question I'd step up and say our accelerate strategy.
Speaker Change: Initiatives are on pace the macro trends are still very very good and we got a great diverse portfolio. So you know in our view and what we look at in our business. We're fully committed those 28 targets you know that that growth the margin expansion over time and of course compounding that EPS number.
Steve Blanco: The macro trends are still very, very good. And we got a great, diverse portfolio. So, you know, in our view, and what we look at in our business, we're fully committed to those 28 targets. You know, that growth, the margin expansion over time, and of course, compounding that EPS number. And we don't see that changing. I would say, you know, there's, we don't know the economic environment, you know, whether there's a growth period or some recessionary pressure, that could certainly play out in some degree, if tariffs stayed at this current level. But I think we're well positioned, Mike, to make sure that we achieve those targets.
Speaker Change: And we don't see that changing I would say you know, there's we don't know the economic environment, whether theres a growth period or are some recessionary pressure that could certainly play out in some degree if tariffs stayed at this current level, but I think we're well positioned.
Speaker Change: To make sure that we achieve those targets, we feel really good about where we're at this.
Steve Blanco: We feel really good about where we're at. You know, this year is going to be kind of choppy, as we said, as many are talking about. And we'll be in a really good position to manage through this and come out on the other side. Thank you.
Speaker Change: This year, it's going to be kind of choppy as we said as many are talking about and we'll be in a really good position to manage through this and come out on the other side.
Speaker Change: Thank you I'll pass it along.
Operator: I'll pass it along. There are no more questions in the queue.
Speaker Change: There are no more questions in the queue. This concludes our question and answer session I would like to turn the conference back over to Larry de Maria for any closing remarks.
Larry DeMaria: This concludes our question and answer session.
Larry DeMaria: I would like to turn the conference back over to Larry DeMaria for any closing remarks. 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 Arrested Relations website and will be available for the next 90 days.
Speaker Change: 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 and look forward to updating you on our continued progress again next quarter.
Larry DeMaria: We look forward to updating you on our continued progress again next Wednesday.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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