Executive Summary / Key Takeaways

• Resilient Core Business & Strategic Focus: MSA Safety, a century-old leader in industrial safety, demonstrates consistent resilience through economic cycles, underpinned by its essential product portfolio and the "ACCELERATE" strategy focused on innovation, connected worker solutions, and operational excellence.
• Innovation Driving Growth: The company's significant R&D investments are yielding tangible results, particularly in its Detection segment with the MSA+ connected portable gas monitors (ALTAIR io 4) and in Fall Protection, which are experiencing double-digit growth and expanding market share.
• Strategic Inorganic Expansion: The recent acquisition of M&C TechGroup for $188 million significantly bolsters MSA's Fixed Gas and Flame Detection capabilities, expanding its total addressable market by $500 million and is expected to be accretive to adjusted EPS by $0.10 in 2025.
• Disciplined Capital Allocation & Strong Balance Sheet: MSA maintains a healthy balance sheet with a net leverage of 1.1x, providing ample liquidity for organic investments, strategic M&A, and consistent shareholder returns, including 55 consecutive years of dividend increases.
• Navigating Headwinds with Agility: While facing macroeconomic uncertainties, foreign currency headwinds, and tariff impacts, MSA is proactively implementing targeted price increases and productivity initiatives, aiming for a favorable cost-price balance by early 2026, supporting its low single-digit organic sales growth outlook for 2025.

A Century of Safety Leadership: MSA's Enduring Mission and Strategic Evolution

MSA Safety Incorporated, founded in 1914, has built a century-long legacy on a singular mission: to protect workers and facility infrastructures globally. This unwavering commitment has fostered a resilient business model, enabling the company to thrive through various economic challenges, including an industrial recession, a global pandemic, and supply chain disruptions. Over the past decade, MSA has consistently delivered mid-single-digit sales growth and double-digit earnings growth on average, a testament to its diversified portfolio and steadfast focus on safety.

The company's strategic evolution is encapsulated in its "ACCELERATE strategy," unveiled in May 2024. This framework emphasizes innovation-led leadership, expanding customer solutions through recurring revenue models, leveraging the MSA Business System for continuous operational improvement, and maintaining disciplined capital allocation. This strategy positions MSA to capitalize on the positive long-term trends in industrial safety technology, driven by increasing regulatory demands and a global imperative for worker protection. The company's 2024 Impact Report reaffirmed its reach, protecting over 40 million workers globally, underscoring its foundational strength and market relevance.

Technological Edge: The Core of MSA's Competitive Moat

MSA's competitive advantage is deeply rooted in its differentiated technology and relentless innovation. The company invests significantly in research and development, contributing to a robust "mid-30s product vitality index." This commitment ensures a continuous pipeline of market-leading solutions that address critical safety challenges.

A prime example is the MSA+ Connected Worker platform, particularly the ALTAIR io 4 gas monitor. This technology has seen exponential growth, with over half of MSA's absolute growth in portable gas detection stemming from MSA+ solutions in recent quarters. Over half of MSA+ customers are new, indicating successful market penetration and expansion of the customer base. The ALTAIR io 4 offers tangible benefits through integrated hardware, software, and services, simplifying safety operations and generating recurring revenue via subscriptions. This platform's technology has been significantly refined over the last 12 months, enhancing its performance and user experience. The "so what" for investors is clear: this platform not only drives high-growth revenue but also fosters durable, multi-year contracts and opportunities for service add-ons, promising strong and scalable profitability.

Beyond connected devices, MSA's innovation extends across its portfolio. In Fire Service, the company proactively introduced the G1 SCBA XR Edition and the new Globe G-XTREME PRO turnout gear jacket in early 2025. The G1 SCBA XR Edition incorporates many elements of the upcoming 2025 NFPA standard, allowing customers to upgrade their equipment ahead of the standard's promulgation (expected early 2026). This strategic move provides customers with flexibility and ensures MSA remains at the forefront of compliance and performance. In Fall Protection, recent launches of the V-TEC and V-Shock platforms have been major catalysts, driving double-digit growth in Q2 2025 within one of the fastest-growing areas of the safety market. Furthermore, the Fixed Gas and Flame Detection portfolio was bolstered by the FL5000 multi-spectrum IR flame detector and expanded capabilities in HVAC-R and automation through acquisitions like Bacharach and MSA SMC, complementing its strong base in energy, including clean energy and battery storage. These technological advancements enhance MSA's competitive moat by offering superior performance, reliability, and integrated solutions, allowing the company to command premium pricing and capture market share.

Competitive Dynamics: Specialization Versus Scale

MSA operates in a competitive landscape with both direct and indirect rivals. Direct competitors include diversified industrial giants like Honeywell International (HON), 3M Company (MMM), and Johnson Controls International (JCI), each with their own strengths.

MSA's competitive standing is defined by its specialization and deep expertise in high-risk industrial safety. Its products, such as its fixed gas detection systems and breathing apparatus, emphasize reliability and durability in harsh environments, potentially offering greater longevity in utility and mining applications compared to Honeywell's broader, more technology-focused solutions. MSA's strategy centers on specialized safety products with a strong brand in core markets, positioning it as a dedicated safety specialist. This contrasts with Honeywell's diversified portfolio, which offers broader exposure but may dilute focus. MSA's unique value proposition lies in its legacy expertise and customer loyalty in niche areas like firefighter helmets and fall protection, which translates to stronger recurring revenue from replacements.

Against 3M Company, known for its materials science and extensive PPE lineup, MSA's products like its V-Gard helmets and ballistic gear may offer enhanced protection in high-risk environments. MSA's direct sales channels provide efficient access to end-users, enhancing capital efficiency and potentially faster innovation cycles. While 3M's larger scale might offer lower operating costs, MSA's niche expertise helps it compete effectively in high-stakes applications. Similarly, compared to Johnson Controls International, which focuses on integrated building technologies and fire safety systems, MSA's comprehensive suite of flame detectors and fall protection provides more tailored solutions for specific industrial applications like oil, gas, and mining. This specialized focus allows MSA to excel in customer relationships, though Johnson Controls' emphasis on integrated systems could lead to different growth trajectories.

MSA is actively gaining market share, particularly in Detection and Fall Protection, demonstrating its ability to win against rivals through superior product performance and customer value. For instance, the Orange County Fire Authority contract was a "key competitive conversion," highlighting MSA's connectivity features, integrated communication, and thermal imaging camera. The largest-ever order for MSA+ connected portables was also a "competitive win from a large energy customer." While competitors are expected to raise prices to manage rising input costs, MSA's brand strength and focus on total value allow it to maintain pricing power. The company's international fire service strategy, which includes offering products tailored to specific market price points while emphasizing functionality and performance, further underscores its adaptive competitive approach.

Recent Performance and Strategic Execution

MSA Safety delivered a mixed but resilient performance in the second quarter of 2025, with consolidated net sales reaching $474.1 million, a 3% GAAP increase year-over-year, though organic sales remained flat. For the six months ended June 30, 2025, net sales were $895.5 million, up 2.2% reported and 1.7% organically. This growth was supported by stronger backlog conversion and strategic acquisitions.

The Detection segment continued its robust performance, achieving mid-single-digit organic growth in Q2 2025, building on high single-digit growth in 2024. This was driven by expansion in both fixed and portable gas detection, with the M&C TechGroup acquisition contributing $11 million to reported sales in Q2 2025 ($3.6 million in Americas, $7.3 million in International). The Fire Service segment saw organic sales decline mid-single digits in Q2 2025 due to market dynamics surrounding the NFPA standard change impacting order pace, but the pipeline remains intact. The Industrial PPE segment experienced a low single-digit organic sales decline, with contractions in head protection and ballistic helmets offset by double-digit strength in fall protection.

Profitability faced headwinds in Q2 2025. Gross profit was $220.7 million, with a margin of 46.6%, down 170 basis points year-over-year. This contraction was primarily due to inflation, transactional foreign currency headwinds (especially Latin American currencies), lower organic volumes, and the early impacts of tariffs. Selling, General, and Administrative (SGA) expenses increased to $112.1 million, driven by the M&C acquisition and related strategic transaction costs ($6.6 million in Q2 2025). However, organic SGA decreased due to the absence of a prior-year legal matter, discretionary expense management, and lower professional service costs. Consolidated operating income was $85.9 million, down from $99.9 million in Q2 2024, reflecting the gross margin pressure and increased SGA. Net income for Q2 2025 was $62.8 million, or $1.59 per diluted share, with adjusted diluted EPS at $1.93, including $0.03 accretion from M&C.

From a liquidity standpoint, MSA's balance sheet remains strong. Operating activities provided $129.1 million in cash for the six months ended June 30, 2025, an increase of over 25% year-over-year, primarily due to lower cash used for variable compensation. Free cash flow for Q2 2025 was $38 million, representing a 60% conversion rate of earnings. The company ended Q2 2025 with net debt of $532 million and a net leverage ratio of 1.1x. MSA utilized $165.2 million in net proceeds from long-term debt to fund the M&C acquisition, demonstrating its disciplined capital deployment. The company also returned $40.9 million in cash dividends and repurchased $48.9 million in shares during the first half of 2025, including $40 million under its share repurchase program. The $1.3 billion senior revolving credit facility, with $915.4 million in unused capacity, provides ample financial flexibility.

Outlook and Strategic Trajectory

MSA Safety maintains its low single-digit full-year organic sales growth outlook for 2025, building on a solid 2% organic sales growth in the first half. The M&C TechGroup acquisition is expected to contribute approximately 2 points to full-year revenue growth and be accretive to adjusted EPS by approximately $0.10. Management anticipates a 0% to 1% tailwind from currency translation for the full year.

The company's confidence is rooted in the continued robust performance of its Detection business, which is expected to be a "real nice player" for 2025, with high single-digit growth achievable. Momentum in fall protection is also encouraging. However, the Fire Service segment's execution in the second half will be predicated on the timing of the NFPA standard approval (expected late 2025 or early 2026) and the release of Assistance for Firefighter Grants (AFG) funding, which is anticipated to begin in August 2025 and conclude by September 2025. Industrial head protection demand is expected to remain soft due to weaker market conditions.

To counter ongoing gross margin pressures from FX and tariffs, MSA has implemented targeted price increases and is pursuing further adjustments. The company is leveraging its MSA Business System to drive productivity savings through sourcing, supply chain, manufacturing, and value engineering, aiming for a favorable cost-price balance by early 2026. Interest expense for 2025 is projected to be approximately $29 million to $32 million, and the effective tax rate is expected to be between 24% and 25%. Capital expenditures are expected to normalize in the second half after a strategic $19.6 million footprint investment in Cranberry Township in Q2 2025, supporting future R&D and manufacturing expansion.

Conclusion

MSA Safety Incorporated stands as a testament to enduring purpose and strategic adaptability in the industrial safety sector. Its century-long commitment to protecting workers, coupled with a disciplined "ACCELERATE" strategy, positions the company for sustained value creation. The ongoing success of its innovation-led approach, particularly with the MSA+ connected worker platform and advancements in fall protection, demonstrates a clear path to organic growth and market share expansion.

Despite facing macroeconomic uncertainties, foreign currency headwinds, and tariff-related cost pressures, MSA's proactive management of pricing and productivity, alongside strategic acquisitions like M&C TechGroup, underscores its resilience. The company's robust balance sheet and consistent shareholder returns further reinforce its investment appeal. While short-term choppiness may persist, particularly in the Fire Service segment due to NFPA standard timing, MSA's technological leadership, diversified portfolio, and commitment to operational excellence provide a strong foundation for achieving its long-term financial targets and maintaining its competitive edge.