MSA Safety Incorporated

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 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 touchtone 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 Larry DeMaria. Please go ahead.

Thank you. Good morning and welcome to MSA Safety's first quarter 2025 earnings conference call. This is Larry DeMaria, Executive Director of Investor Relations. I'm joined by Steve Blanco, President and CEO, Elise Brody, Interim CFO, and Stephanie Shulo, 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. 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. We've included certain non-GAAP financial measures as part of our discussions 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. Steve 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 a dynamic operating environment to begin 2025. Financial results for the first quarter exceeded our original expectations while delivering solid free cash flow generation. 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 mix. Overall demand was resilient across our product categories, as evidenced by a healthy order pace in the first quarter. 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 LA City and LA County. 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 Americas segment. This included the remainder of the first tranche of the U.S. Air Force order. 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. Within the category, growth in head and fall protection was offset by contraction in other PPEs. 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. Now turning to slide 5. 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. 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 in action. Key factors contributing to our success included connectivity features, integrated communication capabilities, and our integrated thermal imaging cameras. 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. Building on the momentum from our successful launch of our new Carnes 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. 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. 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 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 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 rates. These could take several months to work through the backlog. Second, 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. From a capital allocation perspective, the team amended and increase the size of our revolving credit facility to $1.3 billion in April, ensuring we're well positioned to execute our growth initiatives. 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. Now I'd like to turn the call over to Elyse. Elyse?