MSA Safety Incorporated

Good day and welcome to the MSA Q3 2021 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Chris Hepler. Please go ahead.

Thank you, Sarah. Good morning, and welcome to MSA's third quarter earnings conference call. Joining me today are Nish Vartanian, Chairman, President, and Chief Executive Officer, and Ken Krause, Senior Vice President, Chief Financial Officer, and Treasurer. Before we begin, I'd like to remind everyone that the matters discussed on this call, excluding historical information, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include but are not limited to all projections and anticipated levels of future performance. Forward-looking statements involve risks, uncertainties, and other factors that may cause our actual results to differ materially from those discussed here. These risks, uncertainties, and other factors are detailed in our Form 10-K filings with the Securities and Exchange Commission. MSA undertakes no duty to publicly update any forward-looking statements made on this call, except as required by law. We have included certain non-GAAP financial measures as part of our discussion this morning, and the non-GAAP reconciliations, as well as our third quarter press release, are available on our Investor Relations website at investors.msasafety.com. With that, I'll hand the call over to Nish.

Thank you, Chris, and good morning, everyone. This morning, I'll provide an overview of how we're continuing to execute our strategy in this dynamic environment and some insight into the steps we're taking to strengthen our market position. Ken will then provide a quarterly financial review and give more texture on the strength we're seeing in the demand trends across our portfolio. After that, we'll start the Q&A session. So let's start with quarterly results. Our revenue was $340 million, up 12% overall and 3% on an organic constant currency basis. Our core organic product revenue increased 9%, driven by growth across our fire service and industrial PPE segments, partially offset by lower fixed gas and flame detection business, which was impacted by supply constraints. Looking more closely at the quarterly comparison, I want to note that our 2020 third quarter benefited from higher pandemic-driven demand for air-purifying respirators. In the current quarter, we saw our APR business return to more normal levels, which was a headwind to overall growth. I noted on our second quarter call that our order book was strengthening, and that continued to be the case in the third quarter. As an example, our backlog has increased $50 million year over year. Notably, The backlog across our gas detection as well as our firefighter apparel is trending at record levels. Overall, our business remained healthy in the quarter, but supply chain disruptions in electronics and, to a lesser degree, labor shortages did have impact on our delivery capabilities for some products. In addition, our quarterly profitability was impacted by variable compensation resets and higher selling commissions along with discretionary costs as business conditions improve relative to last year. Lastly, in this inflationary environment, pricing continues to be a key area of focus for us. We implemented off-cycle increases to help mitigate higher input costs, and we continue to evaluate pricing as market conditions evolve. With that as a backdrop, there are three key takeaways from the quarter that support my confidence in the outlook for MSA and our ability to navigate this environment. First, our strong balance sheet provides plenty of capacity to invest in organic and inorganic growth opportunities. Two, the MSA brand continues to be a pillar of strength. I'm grateful that our customers see value in our products and have been patient in waiting on delivery. We're not experiencing any significant cancellations of orders. And three, The engagement level of our associates in their passion for the mission of MSA has never been greater, adding fuel to our dedication of protecting the lives of workers throughout the world. So first, let me talk about inorganic growth. We completed the acquisition of BACARAC in a quarter and are making good progress in our efforts to integrate BACARAC into the MSA organization. Recent milestones include the completion of a number of key initiatives, that will help us meet financial targets that we've discussed with you on past calls. Ken will provide more detail on the excellent progress we're making with Baccarat. And with our net debt to trailing EBITDA below two times, we continue to evaluate additional inorganic growth opportunities, staying focused on how we can continue to create value for our customers and our shareholders. Second. We remain very well positioned as the technology leader in safety. We continue to invest in new product development to drive organic growth while providing our customers with innovative market-leading solutions to address their challenges of protecting their employees and increasing productivity. The most recent example of this is the new Connected Work platform our team unveiled at the National Safety Congress earlier this month. With the many complexities associated with implementing a world-class safety program, the value of technology that drives both compliance and efficiency by simplifying safety procedures and remotely connecting safety managers to their employees has never been more important. This connected services platform will help customers create safer and more efficient work environments through reliable and actionable data in real time. The new offering is a powerful hardware-software combination. It features a new wearable cloud-ready gas detection device, the Altair IO4, that enables a broad range of capabilities not previously available with unconnected devices. With direct cellular connectivity, real-time location, live gas readings, and automated compliance reporting, this platform provides worksite managers with new safety insights and added peace of mind. Another element of MSA's connected work platform is a safety subscription that extends warranty coverage and provides automatic and ongoing software upgrades. With this subscription, safety managers have a convenient way to stay on the forefront of safety innovation and on budget. This new connected technology platform is a great example of the market-leading work being done by our engineering, marketing, and sales teams to drive productivity for our customers. And third, I want to acknowledge our associates for their incredible level of passion for the MSA mission in their spirit of innovation. MSA was recently recognized as a 2021 Top Workplace by the Pittsburgh Post-Gazette. What makes this award particularly gratifying is the fact that it's based exclusively on employee feedback. For 2021, we also earned the New Ideas Award. The award is based on having the highest positive response rate to the prompt question, New ideas are encouraged at this company. These recognitions are reflective of the truly special culture we have at MSA. Associate engagement is always important to us, and it's especially inspiring to know that this kind of sentiment exists at a time when we faced a myriad of challenges associated with the pandemic. We're executing a number of strategic programs to position MSA for continued success, and none of that happens without attracting, developing, and retaining the brightest talent. And these recognitions will certainly help us on that front. With that, I'll now turn the call over to Ken to take you through our financial results. Ken?