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MSA Safety Inc (MSA)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 net sales were $500M (+1% YoY; +2% organic), adjusted operating margin expanded to 24.0% (+70 bps YoY), and adjusted EPS was $2.25 (+9% YoY) . Management highlighted resilient demand, SG&A discipline, and strong free cash flow conversion despite FX headwinds and softer U.S. fire service demand .
  • Americas adjusted operating margin rose to 30.7% (+90 bps YoY); International adjusted operating margin was 17.6% (-60 bps YoY) amid inflation, partially offset by price .
  • 2025 outlook: low-single-digit organic sales growth, tax rate 24–25%, interest expense $24–27M, increased pension/non-operating income, and FX headwinds to reported sales; cadence to follow normal seasonality with a softer 1Q on volume leverage .
  • Strategic catalysts include largest-ever MSA+ connected portables win, a $33M U.S. Coast Guard SCBA contract, and next-gen G1 SCBA submitted to NFPA for 2025 standard; detection expected to be 2025’s leading growth segment .

What Went Well and What Went Wrong

What Went Well

  • Margin expansion: adjusted operating margin reached 24.0% (+70 bps YoY) on SG&A management and productivity; GAAP operating margin 23.5% .
  • Commercial wins: largest-ever MSA+ connected portables competitive conversion in North America; 10-year $33M U.S. Coast Guard SCBA award (initial ~$22M ordered in Q3) .
  • Free cash generation and balance sheet: Q4 free cash flow $93M (105% conversion), net leverage 0.7x; debt repaid $43M in Q4 .

What Went Wrong

  • Top-line softness versus internal expectations: fire service orders slower pace late in year and mixed industrial demand; FX was ~1% growth headwind .
  • International margin pressure: adjusted operating margin declined 60 bps YoY to 17.6% due to inflationary pressures .
  • Free cash flow conversion for full year (80%) below target on working capital and higher cash compensation/tax payments tied to strong 2023 performance .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Millions)$495.4 $432.7 $499.7
Operating Income ($USD Millions)$102.3 $91.5 $117.6
Net Income ($USD Millions)$76.4 $66.6 $87.9
Diluted EPS ($USD)$1.93 $1.69 $2.22
Gross Profit Margin %48.1% (=$238.2/$495.4) 48.0% (=$207.5/$432.7) 46.9%
Adjusted Operating Margin %23.3% 22.6% 24.0%
Adjusted EPS ($USD)$2.06 $1.83 $2.25

Segment performance

SegmentMetricQ4 2023Q4 2024
AmericasNet Sales ($USD Millions)$333 $337
AmericasAdjusted Operating Margin %29.8% 30.7%
InternationalNet Sales ($USD Millions)$163 $163
InternationalAdjusted Operating Margin %18.2% 17.6%

KPIs

KPIQ4 2023Q3 2024Q4 2024
Orders Growth (YoY)n/an/a+14%
Book-to-Billn/an/aSlightly <1x
Free Cash Flow ($USD Millions)n/an/a$93
FCF Conversion (%)n/an/a105%
Cash from Operations ($USD Millions)$158.9 $84.3 $107.9
Capex ($USD Millions)$11.8 $14.3 $14.4
Debt Repayment ($USD Millions)$144.8 $37.7 $43.3
Net Leverage (x)0.9x (TTM Sep-24) 0.9x (Q3) 0.7x (YE)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Organic Sales GrowthFY 2025n/aLow-single-digit growth; reported sales FX headwind expected New
Sales CadenceFY 2025n/aNormal seasonality; softer 1Q on volume leverage New
Tax RateFY 2025n/a24–25% New
Interest ExpenseFY 2025n/a~$24–27M New
Pension/Other Non-Operating IncomeFY 2025n/a+$4–5M vs 2024 New
Margin FocusFY 202530–50 bps annual improvement target Pursue margin gains, more in gross margin than SG&A Maintained emphasis
Fire Service CategoryFY 2025n/aNegative YoY growth due to tough comps; timing effects from NFPA change New
Detection CategoryFY 2025n/aLeading growth segment New
TariffsFY 2025n/aNot included; management ready to navigate New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
Connected Worker (MSA+) and Portablesio4 adoption; recurring revenue ~15% and growing; backlog normalization in detection; HSD detection growth in Q2 Largest-ever MSA+ connected portables win; detection to lead 2025 growth Strengthening adoption and pipeline
Fire Service demand and NFPA standardsQ2: resilient demand; M1 SCBA momentum; AFG funding timing affects orders Softer U.S. fire service ordering pace late-year; expect some deferrals ahead of 2025 NFPA; next-gen G1 submitted to NFPA Near-term choppiness; well positioned structurally
Supply chain/backlog and seasonalityQ2: backlog normalized; expect normal seasonality and stronger 4Q than 3Q 4Q book-to-bill slightly below 1x; backlog reduced via G1 SCBA deliveries; normal seasonal step-down in 1Q margins on volume leverage Backlog normalization complete; seasonal patterns reassert
Macro/FX and pricing/productivityQ2: modest FX pressure; resilient margins via productivity/price FX ~1% sales headwind; margin gains from SG&A discipline; inflation pressures in International FX a headwind; productivity/price still offsetting
Capital allocation and balance sheetQ2/Q3: net leverage ~0.9x; disciplined buybacks/dividends; M&A optionality YE net leverage 0.7x; 2024 return of $79M dividends and $30M buybacks; strong liquidity Strengthened balance sheet; continued optionality

Management Commentary

  • CEO: “We closed 2024 with solid performance…double-digit EPS growth and solid operating margin expansion, supported by effective SG&A management…headwinds included pockets of industrial end market weakness, softer U.S. fire service demand and FX.”
  • CFO: “Gross profit in the fourth quarter was resilient at 46.9%…adjusted operating margin of 24.0%, up 70 basis points…The margin increase was largely due to effective SG&A management and lower variable compensation expense…”
  • CEO: “We received our largest ever order for the MSA+ connected portables…a competitive win from a large energy customer in North America.”
  • CFO: “We expect our tax rate to be between 24% and 25% in 2025…interest expense is expected to be approximately $24 million to $27 million…current foreign exchange rates imply a further headwind to reported sales.”
  • CEO: “We completed work on our next-generation G1 SCBA, which we recently submitted to the NFPA for its approval to the 2025 standard.”

Q&A Highlights

  • Order cadence and start to 2025: December slower in industrial; early 2025 start “solid,” with detection strong; pipeline aligns with expectations .
  • NFPA standard change: Expect some deferrals, but changes are “fairly minor”; promulgation likely early 2026; MSA well positioned with next-gen G1 .
  • Margin trajectory: Americas ~31% exiting 4Q; aim to move margins up in 2025 “more in the gross margin area”; International has 1Q step-down due to volume leverage .
  • Category outlook: Fire service negative growth in 2025 on comps; detection expected to lead growth; focus on improving fall protection .
  • Competitive dynamics: MSA+ portables win was a competitive conversion against “primary competitors” .

Estimates Context

  • Wall Street consensus via S&P Global for Q4 2024 EPS and Revenue was unavailable due to API request limits at the time of retrieval; as a result, specific beat/miss versus consensus cannot be assessed here [GetEstimates errors].
  • Given management’s 2025 low-single-digit organic growth outlook, FX headwinds to reported sales, and emphasis on gross-margin-driven improvements, near-term estimate revisions may focus on mix, FX translation, and the cadence implications of NFPA timing .

Key Takeaways for Investors

  • Q4 delivered margin expansion and EPS growth with resilient demand; SG&A discipline and productivity remain key levers, supporting continued gross margin focus in 2025 .
  • Detection is positioned as the leading 2025 growth driver, underpinned by connected portables momentum and recent competitive wins; track MSA+ attach rates and recurring revenue build .
  • Fire service will face tough comps and NFPA-timing effects; watch departmental ordering behavior and the commercialization of next-gen G1 around standard promulgation .
  • FX headwinds and normal seasonal cadence imply a softer 1Q; model tax rate 24–25% and interest expense $24–27M for 2025, with potential upside from non-operating income .
  • Balance sheet strength (net leverage 0.7x) enables continued dividends/buybacks and optionality for targeted M&A; capital deployment remained disciplined in 2024 .
  • Orders up 14% YoY in Q4 and backlog normalized; near-term sales growth relies on converting pipeline in detection and select industrial categories .
  • Watch for shifts in narrative from margin expansion to growth acceleration as macro and NFPA effects play through 2025; detection and connected offerings are likely stock catalysts on execution .