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MS

MSA Safety Inc (MSA)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 delivered modest beats on revenue, EPS and EBITDA: net sales $468.4M vs cons. $461.4M*, adjusted EPS $1.94 vs cons. $1.87*, and adjusted EBITDA $118.9M vs cons. $113.7M*; strength in detection and fall protection offset fire service timing headwinds tied to delayed AFG awards and the U.S. government shutdown .
  • Margins improved sequentially: GAAP operating margin rose to 20.1% (Q2: 18.1%), adjusted operating margin to 22.1% (Q2: 21.4%); GAAP gross margin was 46.5% (down ~140 bps YoY) amid tariffs, inflation and transactional FX, partly offset by pricing and SG&A controls .
  • 2025 outlook maintained at low-single-digit organic growth; management now expects the shutdown to trim ~1% from the full‑year organic growth pace (mostly fire service), shifting some Q4 revenue into 2026; M&C adds ~2 pts and FX ~+1% to FY revenue growth .
  • Cash generation and balance sheet remained strong (FCF $100.5M; net leverage 1.0x; liquidity ~$1.1B) supporting capital returns; Board declared a $0.53 Q4 dividend and management expects Q4 buybacks .

What Went Well and What Went Wrong

What Went Well

  • Detection growth and mix: Detection sales up 17% reported and 6% organic YoY; fixed gas was double-digit and portables single-digit with over half of portable growth from connected devices (MSA+) sop] .
    • Quote: “We continued our broad-based momentum in fixed and portable detection…” — CEO Steve Blanco .
  • Fall protection momentum: Industrial PPE grew 9% reported and 7% organic; fall protection delivered double-digit organic growth, supported by improved availability and “need-it-now” inventory .
  • Cash & leverage: FCF $100.5M (144% conversion) with $50M debt repaid; net debt/adj. EBITDA at 1.0x; liquidity ~$1.1B provides dry powder for M&A and buybacks .

What Went Wrong

  • Fire service timing: Fire service declined organically ~3% YoY as delayed AFG awards and the U.S. shutdown slowed order conversion; some 4Q sales likely shift into 2026 .
  • Margin pressure YoY: GAAP gross margin 46.5% (down ~140 bps YoY) on tariffs, inflation and transactional FX; adjusted operating margin down 50 bps YoY despite SG&A discipline .
  • International fire softness: International fire service modestly contracted; APAC delays (notably China) and European funding shifts toward defense weighed, though protective ballistic helmets benefited industrial PPE .

Financial Results

Core P&L vs Prior Quarters (USD, except per-share and %)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($M)$421.3 $474.1 $468.4
GAAP Diluted EPS$1.51 $1.59 $1.77
Adjusted EPS$1.68 $1.93 $1.94
GAAP Operating Margin %18.5% 18.1% 20.1%
Adjusted Operating Margin %20.8% 21.4% 22.1%
Adjusted EBITDA ($M)$101.5 $116.5 $118.9

Year-over-Year (Q3 2025 vs Q3 2024)

MetricQ3 2024Q3 2025
Revenue ($M)$432.7 $468.4
GAAP Diluted EPS$1.69 $1.77
Adjusted EPS$1.83 $1.94
GAAP Operating Margin %21.1% 20.1%
Adjusted Operating Margin %22.6% 22.1%
Adjusted EBITDA ($M)$111.6 $118.9

Performance vs. S&P Global Consensus (Q3 2025)

MetricConsensusActualSurprise
Revenue ($M)461.4*468.4 +7.1*
Adjusted/Primary EPS ($)1.87*1.94 +0.07*
EBITDA ($M)113.7*118.9 +5.2*

Consensus values marked with * retrieved from S&P Global.

Product Category Mix (Sales)

ProductQ3 2024 ($K)Q3 2024 (%)Q3 2025 ($K)Q3 2025 (%)
Detection163,150 38% 191,188 41%
Fire Service160,515 37% 158,654 34%
Industrial PPE & Other109,014 25% 118,603 25%
Total432,679 100% 468,445 100%

KPIs & Balance Sheet

KPIQ2 2025Q3 2025
Free Cash Flow ($M)$37.9 $100.5
FCF Conversion (%)60% 144%
Net Debt / Adj. EBITDA (TTM)1.1x 1.0x
Debt Repayment in Qtr ($M)—$49.9
Liquidity—~$1.1B
Wtd Avg Interest Rate—4.1%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Organic Sales GrowthFY 2025Low-single-digit growth maintained Low-single-digit growth maintained; U.S. shutdown to reduce ~1% from full-year organic growth pace (mostly fire) Maintained; quantified ~100 bps drag
M&C TechGroup ContributionFY 2025~+2 pts to FY revenue growth ~+2 pts to FY revenue growth Maintained
FX ImpactFY 20250–1% tailwind ~+1% tailwind Maintained (clarified)
Price/Cost Neutrality (Tariffs)TargetEarly 2026 H1 2026 Timeline clarified
Q4 Sales/MarginsQ4 2025Q4 typically strong Expect Q4 sales growth and slight margin uptick; seasonality muted by fire service timing Reiterated with timing caveat
Share Repurchases4Q 2025Repurchases to offset dilution YTD Expect repurchases in Q4 given YTD FCF Increased activity signaled
DividendQ4 2025—$0.53 per share declared, payable Dec 10, 2025 New declaration

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Tariffs & PricingTargeted price hikes; aim for price/cost balance by early 2026; tariff impact to ramp 2H Gross margin 46.5% pressured by tariffs/inflation/FX; pursuing pricing and SG&A discipline; target H1 2026 neutrality Still a headwind; mitigation on track
Fire Service Timing (AFG/NFPA)Expected AFG release by Aug; NFPA approval later 2025/early 2026; Q4 typically strong AFG awards issued very late Sept; shutdown delaying acceptance; NFPA approval expected by early 2026; some Q4 revenue shifts to 2026 Near-term timing headwind; demand intact
Detection & MSA+Strong fixed and connected portables; MSA+ drove majority of portable growth Fixed double-digit; portables single-digit; >50% of portable growth from connected; new io6 introduced Structural strength; expanding ecosystem
Industrial PPE & Fall ProtectionDouble-digit growth in fall protection; improving availability Fall protection remains double-digit; “need-it-now” inventory and availability driving wins Sustained momentum
Regional DynamicsLatin America FX pressure; detection strength; fire mixed APAC delays (China) to improve; Europe shifting funding to defense impacts fire, but supports ballistic helmets in industrial PPE Mixed; certain offsets in PPE
M&A / M&C IntegrationClosed M&C; neutral margin; ~+$0.10 FY EPS accretion M&C contributed ~$15M in Q3; integration on track; cross-sell opportunities identified in U.S. Accretive growth vector

Management Commentary

  • Strategy and execution: “Our financial performance in the third quarter reflected solid results, demonstrating our continued execution of our Accelerate strategy.” — Steve Blanco, CEO .
  • Portfolio growth drivers: “We continued our broad-based momentum in fixed and portable detection and delivered double-digit growth in fall protection.” — CEO .
  • Capital allocation: “Following our strong free cash flow generation year-to-date, we expect to repurchase shares in the fourth quarter… we reaffirm our low-single-digit organic sales growth outlook for 2025.” — Julie Beck, CFO .
  • Outlook nuance: “We now anticipate that the [U.S.] shutdown will take roughly 1% of growth off the full-year organic pace we were on, mostly in fire service.” — CFO .

Q&A Highlights

  • Seasonality and Q4: Expect “relatively consistent between Q3 and Q4, maybe a slight uptick,” with shutdown/AFG timing muting the usual seasonal lift; management still forecasts Q4 sales growth and slight margin uptick .
  • Margin drivers: Costs up from inflation and tariffs; transactional FX slightly negative; pricing actions and SG&A controls to support sequential margin improvement into Q4 .
  • Fire service cadence: Delays in AFG acceptance and NFPA timing push some revenue into 2026; demand and pipeline remain solid; international fire pressured by APAC delays and European funding shifts .
  • Detection split: Fixed double-digit growth; portables single-digit with connected solutions driving more than half of the growth; io6 launch extends use cases .
  • Capital returns and M&A: $130M remaining on authorization with Q4 buybacks expected; active M&A pipeline; net leverage ~1x affords flexibility .

Estimates Context

  • Q3 beat broadly: Revenue $468.4M vs $461.4M* (+$7.1M), Primary/Adjusted EPS $1.94 vs $1.87* (+$0.07), EBITDA $118.9M vs $113.7M* (+$5.2M) .
  • Near‑term estimate implications: Management’s quantified ~1% FY organic growth drag from the shutdown and AFG timing suggests modest reductions to Q4 revenue/eps forecasts in fire service‑exposed models; however, sequential margin uptick and continued detection/fall protection strength may partly offset .

Consensus values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Healthy beat-and-raise tone on the quarter, but FY growth cadence is now more back‑half constrained by external timing (AFG/shutdown), not demand — supports a constructive medium‑term view as revenue shifts into 2026 .
  • Mix tilting toward higher-quality detection and connected solutions (MSA+), plus fall protection momentum, underpin resilient EBITDA and cash generation despite tariff/inflation headwinds .
  • Tariff headwinds are real near term, but management targets price/cost neutrality by H1’26; sequential margin progression into Q4 provides an intermediate catalyst .
  • Capital deployment remains supportive: $100.5M FCF, net leverage ~1x, $1.1B liquidity; with a $0.53 Q4 dividend and expected Q4 buybacks, shareholder returns should continue near term .
  • Watch fire service order flow and NFPA approval milestones; each could drive booking inflections and narrative shifts as timing uncertainty resolves .
  • M&C integration is progressing and contributed ~$15M in Q3; expanding cross‑sell in the U.S. suggests incremental growth optionality in fixed gas and analysis .
  • Trading implication: Near-term prints may be choppy around fire timing, but the beat, sequential margin improvement, and Q4 buybacks position the stock favorably into year‑end, with 2026 set up aided by deferred fire demand and ongoing detection/fall protection strength .