MSA Safety rporated(MSA) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights This section provides an overview of MSA Safety's Q2 2025 financial performance, strategic activities, and management's outlook Q2 2025 Performance Highlights MSA Safety reported $474 million net sales, 3% GAAP growth, flat organically, with $63 million GAAP net income and key strategic investments Q2 2025 Key Financial Metrics | Metric | Value | | :--- | :--- | | Net Sales | $474 million | | GAAP Sales Growth | 3% | | Organic Sales Growth | Flat YoY | | GAAP Operating Income | $86 million (18.1% margin) | | Adjusted Operating Income | $101 million (21.4% margin) | | GAAP Net Income | $63 million | | GAAP Diluted EPS | $1.59 | | Adjusted Earnings | $76 million | | Adjusted Diluted EPS | $1.93 | - Acquired M&C TechGroup, a manufacturer of gas analysis and process safety technologies, for $188 million, net of cash acquired[5] - Returned capital to shareholders through $30 million in common stock repurchases and $21 million in dividend payments[5] - Invested $29 million in capital expenditures, which includes a strategic investment to expand manufacturing and engineering capabilities at its detection Center of Excellence[5][7] Management Commentary & Outlook Management highlighted strong backlog conversion, growth in detection and fall protection, reaffirmed low-single-digit organic sales growth, and noted risks - CEO Steve Blanco emphasized strong backlog conversion and momentum in growth accelerator product categories like detection and fall protection[4] - The acquisition of M&C TechGroup aims to expand the addressable market, diversify end markets, and create a synergistic growth platform in gas analysis and process safety[4] - The company reaffirmed its full-year 2025 outlook for low-single-digit organic sales growth[7][8] - Management acknowledged ongoing risks related to tariffs, industrial demand, and the timing of the National Fire Protection Association (NFPA) approval for its new self-contained breathing apparatus (SCBA)[7][8] Financial Performance This section details MSA Safety's consolidated and segment-level financial results, including sales by product group for Q2 2025 Consolidated Financial Results Q2 2025 net sales grew 3% to $474.1 million, but GAAP operating income and EPS declined, with similar trends for the first six months Q2 2025 vs Q2 2024 Consolidated Results (in millions, except EPS) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $474.1 | $462.5 | 3% | | GAAP Operating Income | $85.9 | $99.9 | (14)% | | GAAP Diluted EPS | $1.59 | $1.83 | (13)% | | Adjusted EBITDA | $116.5 | $121.9 | (4)% | | Adjusted Diluted EPS | $1.93 | $2.01 | (4)% | | Free Cash Flow | $37.9 | $39.0 | (3)% | Six Months 2025 vs Six Months 2024 Consolidated Results (in millions, except EPS) | Metric | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $895.5 | $875.8 | 2% | | GAAP Operating Income | $163.6 | $180.1 | (9)% | | GAAP Diluted EPS | $3.10 | $3.30 | (6)% | | Adjusted EBITDA | $218.0 | $223.2 | (2)% | | Adjusted Diluted EPS | $3.61 | $3.62 | 0% | | Free Cash Flow | $88.9 | $78.6 | 13% | Segment Performance Americas segment sales grew 2% with a 5% operating income decline, while International sales rose 4% but operating income dropped 46% Q2 2025 Segment Performance (in millions) | Segment | Net Sales | % Change YoY | GAAP Operating Income | % Change YoY | | :--- | :--- | :--- | :--- | :--- | | Americas | $320.1 | 2% | $91.3 | (5)% | | International | $154.0 | 4% | $12.2 | (46)% | - The Americas segment's GAAP operating margin decreased by 210 basis points to 28.5% in Q2 2025[6] - The International segment experienced a significant decline in profitability, with its GAAP operating margin falling from 15.4% in Q2 2024 to 8.0% in Q2 2025[6] Sales by Product Group Detection became the largest product group at 41% of sales, driven by acquisition, while Fire Service declined and Industrial PPE remained stable Q2 2025 Sales Mix vs Q2 2024 (Consolidated) | Product Group | Q2 2025 Sales | Q2 2025 % of Total | Q2 2024 Sales | Q2 2024 % of Total | | :--- | :--- | :--- | :--- | :--- | | Detection | $193.8M | 41% | $170.8M | 37% | | Fire Service | $163.3M | 34% | $172.3M | 37% | | Industrial PPE & Other | $117.0M | 25% | $119.3M | 26% | | Total | $474.1M | 100% | $462.5M | 100% | - Detection sales for Q2 2025 include revenue from the newly acquired M&C TechGroup from May 6th, 2025, onward[15] Condensed Consolidated Financial Statements This section presents MSA Safety's condensed statements of income, balance sheets, and cash flows for the reporting period Statements of Income Q2 2025 gross profit slightly decreased, operating income fell to $85.9 million due to higher expenses and currency losses, and net income was $62.8 million Q2 2025 Income Statement Highlights (in thousands) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net sales | $474,116 | $462,463 | | Gross profit | $220,710 | $223,029 | | Operating income | $85,862 | $99,944 | | Net income | $62,773 | $72,234 | | Diluted EPS | $1.59 | $1.83 | - Selling, general and administrative expenses increased to $112.1 million in Q2 2025 from $105.1 million in Q2 2024[11] - The company recorded a net currency exchange loss of $5.3 million in Q2 2025, compared to a gain of $0.6 million in Q2 2024[11] Balance Sheets Total assets increased to $2.55 billion driven by acquisitions, long-term debt rose to $671.0 million, and shareholders' equity reached $1.25 billion Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total current assets | $887,461 | $803,030 | | Goodwill | $733,245 | $620,895 | | Intangible assets, net | $310,934 | $246,437 | | Total assets | $2,550,211 | $2,205,784 | | Long-term debt, net | $670,965 | $481,622 | | Total shareholders' equity | $1,252,642 | $1,143,319 | Statements of Cash Flows H1 2025 operating cash flow was $129.1 million, investing activities used $227.9 million for acquisitions, and financing provided $74.0 million from debt, leading to a $17.2 million cash decrease Six Months 2025 Cash Flow Summary (in thousands) | Activity | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Cash flow from operating activities | $129,051 | $104,188 | | Cash flow used in investing activities | ($227,873) | ($25,486) | | Cash flow from financing activities | $73,979 | ($67,718) | | Net change in cash | ($17,151) | $427 | - The primary use of cash in investing activities was $187.8 million for acquisitions, net of cash acquired[13] - Financing activities included a net increase in debt of $165.2 million, while the company paid $40.9 million in dividends and repurchased $40.0 million of its stock in the first half of 2025[13] Reconciliation of Non-GAAP Financial Measures This section reconciles GAAP to non-GAAP financial measures, including organic sales, adjusted earnings, and leverage ratios Organic Sales Change Q2 2025 consolidated GAAP sales grew 3%, but organic sales were flat after adjusting for acquisitions and currency, with varied segment and product performance Q2 2025 Consolidated Sales Change Reconciliation | Component | % Change | | :--- | :--- | | GAAP reported sales change | 3% | | Currency translation effects | (1)% | | Less: Acquisitions | (2)% | | Organic sales change | 0% | Q2 2025 Organic Sales Change by Segment & Product | Category | Organic Sales Change | | :--- | :--- | | Segment | | | Americas | 2% | | International | (4)% | | Product Group | | | Detection | 6% | | Fire Service | (6)% | | Industrial PPE and Other | (1)% | Adjusted Operating Income, EBITDA, and Earnings Q2 2025 GAAP operating income of $85.9 million was adjusted to $101.4 million, and GAAP net income of $62.8 million to adjusted earnings of $75.9 million Q2 2025 Reconciliation of GAAP Operating Income to Adjusted Operating Income (in thousands) | Description | Amount | | :--- | :--- | | GAAP operating income | $85,862 | | Transaction costs | $6,645 | | Currency exchange losses, net | $5,286 | | Acquisition-related amortization | $3,153 | | Restructuring charges | $488 | | Adjusted operating income | $101,434 | Q2 2025 Reconciliation of GAAP Net Income to Adjusted Earnings (in thousands) | Description | Amount | | :--- | :--- | | Net income (GAAP) | $62,773 | | Transaction costs | $6,645 | | Currency exchange losses, net | $5,286 | | Other adjustments (net) | $1,205 | | Income tax expense on adjustments | ($4,021) | | Adjusted earnings | $75,929 | Debt & Leverage Ratios As of June 30, 2025, Debt to Adjusted EBITDA was 1.5x and Net Debt to Adjusted EBITDA was 1.1x, based on $679.3 million total debt Leverage Ratios as of June 30, 2025 | Metric | Value | | :--- | :--- | | Twelve Months Adjusted EBITDA | $464.2 million | | Total end-of-period debt | $679.3 million | | Net debt | $532.4 million | | Debt to adjusted EBITDA | 1.5x | | Net debt to adjusted EBITDA | 1.1x | Investor Information & Appendix This section provides details for the upcoming conference call, company overview, and important legal disclaimers Conference Call Information A conference call and webcast for Q2 2025 results is scheduled for Tuesday, August 5, 2025, at 10:00 a.m. Eastern time - A conference call is scheduled for Tuesday, August 5, 2025, at 10:00 a.m. Eastern time[9] - The call and slide presentation will be webcast on the company's investor relations website[9] Company Information & Disclaimers MSA Safety is a global safety product leader with $1.8 billion 2024 revenues, providing disclaimers on forward-looking statements and non-GAAP financial measures - MSA Safety is a global leader in advanced safety products with 2024 revenues of $1.8 billion and over 5,000 employees worldwide[26] - The report contains forward-looking statements that involve risks and uncertainties, and readers are cautioned against placing undue reliance on them[27] - The press release includes non-GAAP financial measures which management believes are useful for investors but should be viewed as supplemental to GAAP results[28][30]