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MSA Safety Inc (MSA)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 beat on revenue and EPS: net sales $421.3M (+2% GAAP, +4% organic) and adjusted diluted EPS $1.68, with Detection strength and a modest tariff-related pull-forward; GAAP diluted EPS was $1.51 .
  • Wall Street consensus: revenue $402.6M* and EPS $1.58*; actuals were $421.34M and $1.68, respectively — both beats; management maintained low-single-digit organic sales growth outlook for FY2025 .
  • Margins compressed vs prior year/quarter on transactional FX and inflation: GAAP operating margin 18.5% (vs 23.5% in Q4’24) and adjusted operating margin 20.8%; gross margin was 45.9% with FX pressure expected to continue into Q2 .
  • Capital allocation remained balanced (FCF $51.0M; 86% conversion); dividend raised to $0.53 per share (55th consecutive annual increase), and revolver upsized to $1.3B to support growth and optionality .
  • Key stock narrative drivers: Detection momentum (fixed and portable), tariff/FX headwinds, Fire Service normalization in the Americas amid NFPA standard change, and continued connected ecosystem adoption (MSA+, io4) .

What Went Well and What Went Wrong

What Went Well

  • Detection delivered mid-teens growth across fixed and portable gas detection with double-digit incoming orders; management expects Detection to be a “real nice player” in 2025 and sees high-single-digit growth as achievable .
  • Healthy demand and orders with book-to-bill >1; backlog increased sequentially and includes a $10M OCFA SCBA win with connectivity and iTIC features, reinforcing Fire Service leadership and competitive conversions in Southern California .
  • Strong cash generation and capital returns: FCF $51.0M (86% conversion), $20M dividends, $10M buybacks; revolver extended/upsized to $1.3B for strategic flexibility .

Management quotes:

  • “Revenue growth was fueled by robust performance in detection and partnering with our customers to accelerate some shipments in consideration of tariffs.” — Steve Blanco, CEO .
  • “We maintain our low-single-digit organic sales growth outlook for 2025… while closely monitoring elevated macro risks including tariffs.” — Elyse Brody, Interim CFO .

What Went Wrong

  • Margin compression: GAAP operating margin fell to 18.5% and adjusted margin to 20.8% due to transactional FX headwinds and inflation; gross margin declined 140 bps YoY to 45.9% with Latin America FX as a key driver .
  • Fire Service down high-single-digits YoY (Americas -13% organic), reflecting tough comps (USAF tranche) and U.S. demand softness; International Fire Service grew, partially offsetting .
  • Tariff/FX uncertainty: ~15% of cost of sales now subject to tariffs (~1/3 from China); pricing actions initiated in April but take several months to work through backlog, implying near-term choppiness .

Financial Results

Key Financials vs Prior Quarters

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$433 $500 $421.3
GAAP Diluted EPS ($)$1.69 $2.22 $1.51
Adjusted Diluted EPS ($)$1.83 $2.25 $1.68
GAAP Operating Margin (%)21.1% 23.5% 18.5%
Adjusted Operating Margin (%)22.6% 24.0% 20.8%

Q1 2025 vs Wall Street Consensus (S&P Global)

MetricConsensus*Actual
Revenue ($USD Millions)$402.6*$421.34
Adjusted Diluted EPS ($)$1.58*$1.68
  • Result: Revenue beat by $18.7M (+4.7%); EPS beat by $0.10 (+6.3%).
  • Values retrieved from S&P Global.*

Segment Performance (Q1 2025 vs Q1 2024)

Segment MetricQ1 2024Q1 2025
Americas Net Sales ($USD Millions)$295.5 $293.2
Americas Adjusted Operating Margin (%)29.2% 26.8%
International Net Sales ($USD Millions)$117.8 $128.2
International Adjusted Operating Margin (%)11.5% 14.6%

Product Group Breakdown (Consolidated)

Product Group ($USD Thousands)Q1 2024Q1 2025
Fire Service$163,694 $150,616
Detection$139,216 $161,070
Industrial PPE & Other$110,392 $109,654
Total Net Sales$413,302 $421,340

KPIs and Cash Flow

KPIQ1 2024Q1 2025
Adjusted EBITDA ($USD Millions)$101.3 $101.5
Adjusted EBITDA Margin (%)24.5% 24.1%
Free Cash Flow ($USD Millions)$39.7 $51.0
Free Cash Flow Conversion (%)68% 86%
Cash from Operations ($USD Thousands)$50,886 $61,833
Capital Expenditures ($USD Thousands)$11,219 $10,784
Dividends Paid ($USD Thousands)$18,490 $20,033
Share Repurchases ($USD Thousands)$0 $9,996
Net Debt ($USD Thousands, TTM basis)—$331,440
Net Debt / Adjusted EBITDA (x)—0.7x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Organic Net Sales GrowthFY 2025Low-single-digit Low-single-digit Maintained
Below-the-line assumptions (interest, tax, etc.)FY 2025Unchanged (Q4 baseline) Unchanged Maintained
Pricing actions tied to tariffsFY 2025Not disclosedTargeted price increases implemented in April; further adjustments contingent on evolving rates Initiated
Quarterly Dividend per Share2025$0.51 $0.53 (effective June 10, 2025) Raised

Earnings Call Themes & Trends

TopicQ3 2024 (Prev-2)Q4 2024 (Prev-1)Q1 2025 (Current)Trend
Tariffs/MacroExecution resilient; timing issues and delays; no tariff detail Macro/geopolitical and FX headwinds called out ~15% of cost of sales subject to tariffs (~1/3 China); pricing in April; choppiness near term Rising risk
Detection MomentumStrong Detection; double-digit portables Supportive dynamics and connected adoption Mid-teens growth across fixed/portable; double-digit incoming; 2025 high-single-digit achievable Strengthening
Fire Service DemandSCBA shipment timing; customer delays Softer U.S. demand; NFPA change noted Down high-single-digit YoY; Americas comp headwinds; International up double-digit organic; $10M OCFA win Mixed/normalizing
FX HeadwindsCurrency losses; margin pressure FX headwinds to sales/earnings Gross margin hit by FX (Latin America) with continued Q2 pressure Ongoing pressure
Orders/BacklogOrders up high-single-digits; backlog increased Backlog normalized; USAF non-recurrence Healthy orders; book-to-bill >1; Q2 comp: $40M backlog conversion last year Normalized with tough comp
Connected Ecosystem (MSA+, io4)Double-digit portables Continued connected worker adoption Strong io4 and MSA+ momentum; >50% of MSA+ customers are new Accelerating

Management Commentary

  • CEO: “Revenue growth was fueled by robust performance in detection and partnering with our customers to accelerate some shipments in consideration of tariffs… While we expect the environment will become more dynamic… we’re positioned to create long-term value” .
  • CFO: “Gross margin… impacted by transactional foreign exchange headwinds… we expect FX pressure… to continue in the second quarter… adjusted operating margin of 20.8%… EPS up 4% driven by revenue growth, lower SG&A and lower interest” .
  • CEO on tariffs: “About 15% of our cost of sales is now subject to tariffs… implemented targeted price increases in April… could take several months to work through the backlog” .
  • Strategic/Capital: Revolver increased to $1.3B; disciplined M&A pipeline; committed to 2028 targets despite choppy 2025 setup .

Q&A Highlights

  • Tariff pull-forward quantified: just under $10M in Q1, mostly Americas; mix slightly heavier in Fire Service; Detection leading demand run-rate .
  • FX magnitude: Latin American currencies were the biggest gross margin headwind; pressure to persist into Q2; pricing book transition behind them from 2024 .
  • Q2 comp dynamics: $40M backlog conversion in Q2’24 creates tough comp; tariffs’ pricing/cost actions impact more in H2 as backlog clears .
  • Detection outlook: Fixed and portable both strong; management targets high-single-digit growth for 2025; double-digit aspirational .
  • 2028 goals: Management reaffirmed commitment to 2028 targets despite tariff uncertainty; cost/productivity actions viewed as long-term .

Estimates Context

  • Consensus (S&P Global): Revenue $402.6M*, Adjusted EPS $1.58* for Q1 2025; Actual: Revenue $421.34M, Adjusted EPS $1.68 — both beats; # of estimates: 5 for both metrics* .
  • Implications: Consensus likely revises upward for Detection-led revenue and EPS, but margin trajectory may be tempered by FX/tariffs unless pricing and productivity fully offset in H2 .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Quality beat with Detection strength and healthy orders; narrative positive despite margin compression, supporting near-term sentiment and potential estimate raises on top-line and EPS .
  • Near-term margin headwinds from FX/tariffs likely persist into Q2, with mitigation (pricing, sourcing, value engineering) more visible in H2 as backlog reprices; expect choppy prints before improvement .
  • Fire Service normalization in Americas continues, but strategic wins (OCFA $10M) and NFPA-driven product innovation (G1 XR, Globe G-XTREME PRO) underpin medium-term trajectory .
  • Balance sheet optionality intact (net leverage 0.7x; $1.3B revolver) enabling continued capital returns (dividend increased to $0.53) and selective M&A; FCF conversion improved to 86% .
  • Watch Q2: tough backlog comp and FX pressure; Detection comps get harder, but pipeline remains strong; H2 should reflect tariff-related pricing/cost actions .
  • Longer-term: management reaffirmed commitment to 2028 targets; connected products and Detection momentum, plus diversified portfolio, support EPS compounding beyond near-term macro noise .

## Appendix: Additional Data (Non-GAAP Reconciliations)
- Adjusted EBITDA (Q1 2025): $101.5M; Adjusted Operating Income: $87.5M; reconciling items include restructuring, currency exchange losses, amortization of intangibles, transaction costs **[66570_20250429NE76040:4]**.  
- Adjusted EPS (Q1 2025): $1.68; adjustments include restructuring, FX losses, amortization, transaction costs, tax effects **[66570_20250429NE76040:5]**.  
- Net Debt and Leverage (TTM to Mar-31-2025): Net Debt $331.44M; Net Debt/Adj. EBITDA 0.7x **[66570_20250429NE76040:6]**.