Good day and welcome to the MSA Safety's First Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Chris Hepler. Please go ahead.

Thank you. Good morning and welcome to MSA's first quarter 2022 conference call. This is Chris Hepler, Executive Director of Corporate Development and Investor Relations. I'm here with Nish Vartanian, Chairman, President and CEO; Ken Krause, Senior Vice President, CFO and Treasurer; and Steve Blanco, President of Americas. Before we begin, I'd like to remind everyone that matters discussed during this call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include but are not limited to, all projections and anticipated levels of future performance. Forward-looking statements include a number of risks, uncertainties and other factors that may cause our actual results to differ materially from those discussed today. These risks, uncertainties and other factors are detailed in our SEC filings. MSA undertakes no duty to publicly update any forward-looking statements made on this call except as required by law. We have included certain non-GAAP financial measures as part of our discussion this morning and the non-GAAP reconciliations as well as the first quarter 2022 press release are available on our Investor Relations website at investors.msasafety.com. Moving to today's agenda. Nish will discuss key highlights of the quarter and then turn the call over to Ken to discuss our financial performance. Nish will then provide closing remarks. Following our prepared remarks, we will open the call for questions. With that, I'll turn the call over to Nish.

Thank you, Chris and good morning, everyone. I'll start today's call by recognizing a key milestone at MSA, then talk about highlights for the quarter and the progress we're making around new innovative technologies. First, with the milestone which I'm particularly proud of. We officially completed the first quarter without a lost time incident. We often talk about a culture of safety at MSA. This milestone certainly reflects that mindset and is a great start to the year from this perspective. It reflects the hard work and commitment to safety our associates bring to work every day. As a company focused on workplace safety, we know we have a responsibility to lead by example, to help create a safe work environment. So I want to thank our entire team on this very important achievement. Now moving on to the highlights for the first quarter. We're off to a solid start to the year, performing in line with our expectations. Demand for our products and technology continues to be robust across our core product groups and key geographies. And our teams did a nice job of navigating various challenges throughout the quarter. Our quarterly revenue was $331 million, a 7% increase from a year ago and 9% on a constant currency basis. Organic orders were exceptionally strong, up double digits, resulting in a book-to-bill of 1.2 and record backlog up more than $60 million from the end of the year. Gross margin was healthy and adjusted operating margin improved 90 basis points year-over-year. It was good to see the healthy operating margin again this quarter. This is a trend we believe can continue provided we successfully manage supply chain disruptions going forward. This is a key priority of ours, along with pricing as inflation doesn't show signs of moderating. Supply chain constraints continue to be a challenge, particularly around electronic components. This is most pronounced in our gas detection business. The tight supply chain environment has resulted in price escalation on many of our input costs. Our teams are managing through it. And while there are no quick fixes, we're working diligently to get products into the hands of our customers. To that end, we've invested in resources to help us address these challenges. This includes investments in artificial intelligence software that help our supply chain teams anticipate issues around key inventory items. We're building visibility deeper into our supply chain, adding resources to our sourcing team and working through engineering and approvals to increase flexibility around certain constrained components. We're also working on initiatives to increase flexibility within our production lines so that when constrained parts are obtained, we're able to better accelerate throughput. All that said, given the current environment, we expect these supply chain challenges to continue in the coming quarters. We're staying close to our customers and are actively monitoring our backlog. To date, we're not seeing any signs of material cancellations which makes sense given the nature of our business and is in line with what we'd expect as our products are specified into their processes and procedures. So that gives us confidence that our backlog will ultimately be converted to revenue over the coming quarters. Moving on I want to provide color on two of our end markets: firefighter safety and energy. Starting with firefighter safety, we saw a very strong level of new incoming orders and 5% constant currency sales growth in the quarter. The funding environment remains healthy in support of continued growth of our key products. In the quarter, we saw several meaningful U.S. fire service orders for our G1 SCBA. Demand for turnout gear remains strong and we continue to work to reach our output goals. Next, to energy, across the energy sector, we're focused on protecting the health and safety of workers and facilities, whether in oil, gas, petrochemical or renewable applications. Historically, elevated oil and natural gas prices like we're seeing today have positive impacts on employment and expenditures in the sector. Ultimately, that translates into a nice tailwind for our business as approximately 25% to 30% of our annual sales are related to this sector and we're seeing strong demand across all our product lines. Lastly, before I turn the call over to Ken, I want to highlight the progress we're making in the connected worker space where our innovations are driving improvements in worker safety. Last year, we previewed at the National Safety Congress MSA's connected work platform for industrial markets. This platform is a powerful hardware software combination. It starts with the ALTAIR io 4, a wearable cloud-ready gas detector device when connected with our MSA plus safety subscription service, safety managers will have a powerful platform to enhance worker safety while driving efficiency and simplifying safety program management. It's incredibly exciting to see this area of MSA's business begin to gain traction. We've already begun taking preorders for the ALTAIR io 4 and shipments to customers will begin in early May. Also in May, our team will be hosting a connectivity Summit. This is a virtual three-day event focused on how gas detection wearables and software solutions can help enhance workers' safety and productivity. The Summit is scheduled for May 17, 18 and 19, and will feature MSA experts discussing the future of connected work, the ALTAIR io 4 and our cloud-based software solutions. For the industrial worker, we also launched the V-Gard C1 hard hat. Head protection is an area where we continue to leverage our strong market position to drive innovation. The new V-Gard C1 is a cooling hard hat. By that, I mean, it has a heat-reflective interior liner that essentially reduces the temperature inside the hard hat by as much as 20 degrees Fahrenheit. As we near the summer months here in the Northern Hemisphere, we're seeing a lot of interest in the C1 in Florida, the Gulf Coast region, and other markets where heat stress is an important safety issue that we're helping to address. It's a really exciting time to be at MSA. We're making meaningful strides in advancing our mission of worker safety. And with that, I'll turn the call over to Ken to take you through more detail on our financial results.

Thanks, Nish and good morning, everyone. I'll review our consolidated financial results for the quarter and our balance sheet on today's call. I'd like to start with a focus on first demand and secondly, margins. First, demand remains exceptionally strong across our core products and key geographies. Overall, we saw organic orders in the quarter, up mid-teens over last year. There was strong demand across our core products and each of our segments. Book-to-bill for the quarter was 1.2x and we continue to build backlog, ending the quarter at another record level. Order pace continues to be robust in April with orders growing approximately 20% organically and gross profit margins remained healthy in the quarter. We continue to take action on the pricing side, and that is helping us navigate the inflationary environment. Incremental margins finished the quarter at just under 30%. It was good to see healthy incremental margins for a second quarter in a row. We remain committed to delivering strong incremental margins going forward. Let's now review the quarterly details, starting with a focus on sales. First quarter sales were $331 million, up 9% on a constant currency basis, driven by core growth of 11%. The 9% growth was balanced with acquisitions adding 5% and organic activity contributing 4%. It was good to see healthy growth across the core and across both of our reporting segments. Sales in our Americas segment were up 9% on a constant currency basis, with acquisitions contributing 6% and organic activity driving 3% of growth. Sales in our International segment were up 10% on a constant currency basis with growth of 5% equally from acquisitions and organic activity. Currency translation drove a 5% reduction in International's reported sales in the quarter on a strong dollar relative to a number of international currencies, most notably the euro. Orders were very healthy in the quarter. Unfortunately, we continue to navigate ongoing supply chain constraints and tight labor conditions. The supply chain challenges and the strong order pace I spoke about earlier led us to end the quarter with record backlog. Backlog was up more than $60 million from year-end and more than $150 million from the end of Q1 2021. While revenues benefited from the strong pricing environment, we are seeing strong demand and unit growth across the business as evidenced by the 16% organic order growth in the quarter. As Nish mentioned, availability of electronic components continues to be a challenge. Supplier allocations are unpredictable and have not been pacing with the growth and demand for our products. Our global teams are working together to secure components where and when available. They're designing in and qualifying new components and expediting approvals when required. As far as we can tell, supply chain constraints will most likely persist for the remainder of the year. Now turning to profitability and earnings. Gross profit totaled $143 million or 43.2% of sales in the quarter compared to $135 million or 43.7% of sales in the prior year. Higher amortization from acquisitions was the primary driver of the gross profit decline as well as a less favorable mix. Looking at the underlying performance, it's good to see that price cost held in well despite the challenging inflationary environment. I commented earlier on the constrained nature of the supply chain. Another aspect that is prevalent is the cost of labor and materials which have risen sharply. This has been particularly pronounced in the electronic components we source. It's a challenging and dynamic environment. With that said, we continue to be proactive with the variables under our control. Our increased volumes and pricing actions helped us offset inflation in the quarter. We are keeping inflation and pricing front and center. We continue to evaluate and implement price increases to mitigate the impact of the rising costs. As we've said in the past, we continue to be focused on staying positive on the price cost equation. While it may vary quarter-to-quarter, when we think about the year, our objective is to stay positive. Given the robust demand and broad-based nature of inflation in wages and materials throughout the value chain, pricing remains healthy. We had an off-cycle price increase take effect in April in our Americas segment and we announced an off-cycle price increase in our International segment that will take effect midyear. We'll continue to have a sharp focus on price cost going forward to mitigate the impact on our margins and profitability profile. SG&A expense in the quarter was $78.6 million or 23.8% of sales, up about $3 million from the prior year. Despite the inclusion of additional costs associated with our acquisitions, SG&A leverage improved by 70 basis points as a percentage of sales. Q1 reported operating margin was 12.9%, down 140 basis points compared to the prior year. Adjusted operating margin was 16.3%, up 90 basis points versus last year as a result of higher volumes and improved SG&A leverage. It was especially good to see about 60 basis points of accretion from our Bacharach acquisition in the quarter with a positive impact in both gross profit and SG&A leverage. Looking at our segment performance, Americas' adjusted operating margin was just over 23%, up 150 basis points over the comparable period. International's adjusted operating margin was 8.6%, down 20 basis points over the comparable period, driven primarily by lower gross margins on a less favorable product mix. We are continuing to execute on initiatives to increase throughput and deliver cost savings across our business. On a GAAP basis, we reported net income of $35.5 million which equates to $0.90 per diluted share. This compares to GAAP earnings of $36.5 million or $0.92 in the prior year. On an adjusted basis, adding back in both periods for product liability expense, restructuring and similar items, net income was $43.6 million or $1.10 earnings per diluted share which is a 16% increase over the prior year. Turning to cash flow and the balance sheet. Quarterly cash flow was $16.5 million. We invested in inventory in the quarter as we secured scarce components to help us serve demand and orders for the year ahead. Inventory was up 15% from year-end driven in part by higher costs and also by an increase in volume associated with the higher backlog in our business. In the quarter, we invested $8 million in CapEx and paid $17.3 million of dividends to shareholders. At the end of the quarter, we had cash of $147 million and net debt of $452 million or 1.5x our last 12 months adjusted EBITDA. The health of our balance sheet and our liquidity position provides us with ample capacity to invest in the long-term growth opportunities for our business. We will continue to execute our capital allocation strategy that balances profitable growth and returning capital to our shareholders. In summary, Q1 provides a solid start to the year. We had balanced growth and improvement in adjusted operating margin, driven by both acquisitions as well as organic activity. Our end markets are healthy, demand is strong and our team is working diligently to deliver products for our customers. We continue to navigate a very challenging environment and remain focused on driving improvements in our supply chain to meet the growing demand for our products. At the same time, we also continue to manage our margin profile in light of the ongoing inflationary pressures. With that, I'll turn the call back over to Nish for closing remarks.

Thank you, Ken. In closing, I want to highlight a couple of things. As Ken mentioned, it was good to see Bacharach contributing positively to our overall performance. The integration works on track and we're seeing the benefits of the synergies we expected from this acquisition. And lastly, you'll see that we issued a press release earlier this week regarding the annual Fire Department Instructors Conference. As many of you know, this is among the largest fire service shows in the world and it returns to a full-scale event for the first time since the start of the pandemic. We're excited to be in Indianapolis again this week where we'll be showcasing our market-leading fire safety products and our connected firefighter platform, including LUNAR and FireGrid. We're rolling out several new features which will help keep firefighters connected in ways never before possible. It will be an exciting time to be with our customers and distributors, demonstrating our latest innovations. Overall, I'm really pleased with how we executed in Q1 and a robust pace of incoming business through April gives me a high level of confidence in our business going forward. At this time, Ken and I will be glad to take any questions you may have.

We will now begin the question-and-answer session. And the first question will be from Stanley Elliott from Stifel. Please go ahead.

Good morning, everyone. Thank you for joining the call. I have a quick question. Ken, you mentioned that the supply chain issues will persist for the remainder of the year. Given the recent news from China about certain markets shutting down, what kind of expectations should we have regarding the supply chain? Will it improve or worsen? I'm curious about your thoughts on this with all the variables at play.

Thank you for joining the call today. Regarding the supply chain and the situation in China, we are currently not experiencing any disruptions from China's recent shutdowns. However, we may see some effects at our Suzhou plant, which manufactures for the Chinese market, as we move forward. At this moment, we haven't observed any impacts. As I reflect on the supply chain situation at the end of April, I feel more confident about our ability to meet our goals for 2022 compared to February. We've made good agreements with suppliers and have a positive outlook on receiving electronic components in the third and fourth quarters. We are also preparing our factories to handle the throughput efficiently. While I'm optimistic about our prospects for the remainder of the year, we are still navigating an unpredictable environment where supplier commitments can change. Overall, my confidence today is higher than it was in February.

Great news. And along the supply chain, I mean, certainly, the volume put out on the fixed gas flame detection, is something happening internally or externally as it relates to the chip shortage issues that everybody has been hearing about because there's lots of momentum in that business currently?

Yes, there is. So from an incoming standpoint, the business is super healthy. We had one real large order that was shipped internationally and a lot of that build for that delivery was done in the fourth quarter, and we shipped that in the first quarter. So that helped the revenue in the first quarter. But with fixed gas and flame detection and portable gas detection, those are two areas that have been really constrained by electronic components. And we're going to continue to battle through that in the second quarter but we believe that we'll have some daylight as we get into third and fourth quarters due to some of the commitments we're getting from some of our suppliers.

And then lastly, kind of thinking about incremental margins with margins and price cost staying a focus. Should we think about incrementals staying pretty similar both for the two regions through the balance of the year? Or do they improve? Just curious how we're thinking about the ramp there.

Yes, Stanley, it's Ken. I want to share some thoughts on incremental margins. As I mentioned earlier, we plan to actively pursue a 30% to 40% incremental margin profile. Looking back at the first quarter, I’m pleased with the 29% margin we achieved despite the ongoing inflationary challenges. Moving forward, we are optimistic about seeing improvements, particularly in the International segment. The first quarter represented a low point for margins in that segment as we have been aggressively pursuing price adjustments. We also expect improvements in the business mix we're shipping. As Nish noted, we shipped some larger orders with lower margins, which impacted our margin profile. Throughout the year, we anticipate gaining traction and momentum in our overall margin profile.

Great, guys. Thank you very much for your time. And congratulations and best of luck.

Thanks, Stanley.

And the next question is from Rob Mason with Baird. Please go ahead.

Yes, good morning. Thanks for taking the question. Nish, I don't want to put words in your mouth but your commentary around feeling more confident on the plan for the year. At one point, we were talking about prospects for high single-digit growth for revenue. Can I assign the confidence to that level of growth through the year, sales growth?

Rob, yes, absolutely. We have a high degree of confidence of that mid-high single-digit level growth rate for the business. And again, that's providing we can get the components in. And then I have a higher degree of confidence that we can get those components in versus when I was sitting here in February. So I do feel better about the business. The demand is strong. The pipeline is strong. We just have to work hard to make sure that our suppliers hold up to their commitments to get those components to us.

Rob, it's Ken. I want to add some insight into the scenarios we're considering for our business as we look ahead to 2022. The pace of orders remains very strong. As I mentioned earlier, we are experiencing nearly a 20% organic growth in April following a 16% increase in the first quarter. If we see an improvement in the supply chain, we could end the year strongly in the second half, potentially leading to significant double-digit growth for our business. However, as Nish pointed out, we currently face challenges, and it seems a high single-digit growth rate is a more realistic expectation for 2022.

The ongoing tightness in the supply chain has become a common issue that most companies are facing. The question is when it will begin to ease up. Additionally, labor challenges have also persisted. I'm curious about how these factors influence our ability to scale up and your thoughts on this aspect of the business.

Rob, that aspect has really impacted our turnout gear sales. And that comes out of predominantly out of our Pittsfield, New Hampshire facility. And that has been a tight labor market. And it has improved. We've seen more job applicants. We've increased the headcount. We're doing a nice job in ramping up and training and retaining employees. So we're seeing some nice improvement in the throughput in that plant but we're still well below our internal goals and what we expect. Anne, Steve and the team are working hard to make sure we continue to ramp up on the headcount and get the throughput in that plant. But that's predominantly an issue around labor and tightness of labor but we're beginning to see that improve a bit and we hope that, that continues to show improvement throughout the year.

Sure. I understand your expectations regarding incremental margins. In the quarter, SG&A performed better than I anticipated, which may influence your projections for the second half of the year concerning SG&A levels. How do you see that trend continuing through the rest of the year based on the first quarter results? What are your thoughts on that?

Yes. So the cost structure continues to be a focus for us, Rob, as we look at our business, both internationally as well as in our Americas and corporate segment. I think we finished the quarter at roughly 23.8% of sales. As we see the business improve, we expect to continue to gain leverage in SG&A and that should benefit us on the operating margin profile. Historically, we've leveraged SG&A fairly nicely in terms of being at around 23% to 24% of sales when we think about the SG&A performance. So that's generally the view and the expectation for us as we think about the SG&A performance for the balance of the year.

Understood. Okay, thank you.

Thank you, Rob.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Chris Hepler for any closing remarks.

Thank you, Chad. And thank you all for joining us this morning. If you missed a portion of the conference call, an audio replay and transcript will be available on our Investor Relations website for the next 90 days. We look forward to speaking with you again soon. Thank you.

And thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.