MSA Safety rporated(US:MSA)2021-07-31 17:15Financial Data and Key Metrics Changes - Revenue returned to growth, up 5% year-over-year, with core product revenue increasing by 12% [6][18] - Operating margin improved to 17.2%, despite a $4 million increase in stock compensation expenses related to acquisitions [18][22] - Quarterly revenue reached $341 million, with a 9% increase, and a 5% increase on a constant currency basis [19][22] Business Line Data and Key Metrics Changes - Fire service and industrial-related products contributed to a stronger order book, with SCBA revenues exceeding 2019 levels [20][21] - International segment operating margin rose by 70 basis points to 16.5%, reflecting successful margin expansion efforts [11][26] - Core product revenue growth was driven by fire service and industrial PPE, with industrial PPE showing growth rates of 20% to 30% compared to 2020 [19][20] Market Data and Key Metrics Changes - U.S. business led the recovery, while Europe began to recover as vaccination rates improved [7][19] - International revenues increased by 3%, reflecting a lag in vaccine deployment and economic recovery compared to the U.S. [19] - Backlog increased by 15% from the end of Q1, particularly in gas detection products, indicating strong demand despite supply chain challenges [21][22] Company Strategy and Development Direction - The company is focused on innovation, continuous improvement, and strategic acquisitions to strengthen market positions [8][12] - The acquisition of Bacharach is expected to enhance product offerings in gas detection technologies and improve operational efficiencies [12][13] - The company is prioritizing ESG initiatives to enhance workplace safety and build resilience into its business model [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about demand recovery and the ability to navigate supply chain challenges [6][34] - The company anticipates continued strong demand across various markets, including utilities and nonresidential construction [61][62] - Supply chain constraints are expected to persist into the second half of the year, impacting delivery capabilities [21][32] Other Important Information - The company completed the acquisition of Bacharach for $337 million, with a pro forma net debt-to-EBITDA ratio of 1.7x post-acquisition [28][29] - The company invested $7 million in restructuring programs to drive margin expansion, expecting $15 million in savings for 2021 [25][28] - The company was recognized by Forbes as one of the best employers for diversity in 2021, highlighting its commitment to talent development [16] Q&A Session Summary Question: How long does it take to integrate Bacharach and focus on growth? - Management indicated that integration will take time, but there are opportunities for cross-selling and efficiencies [37] Question: What drove the better-than-expected revenue? - The strong finish in June was attributed to securing additional supplies and materials to meet demand [46] Question: How much revenue was impacted by supply chain constraints? - Management estimated that around $20 million in revenue was pushed off due to supply chain issues [54] Question: What is the outlook for LUNAR product sales? - Initial sales of LUNAR reached $1 million, but it is not recurring revenue; future opportunities for subscription services are being explored [55][56] Question: What is the current book-to-bill ratio? - The book-to-bill ratio is approximately 110%, indicating strong demand across various product lines [61]