Good day, and welcome to the MSA Safety Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Larry De Maria. Please go ahead.

Thank you. Good morning, and welcome to MSA Safety's Fourth Quarter and Full Year 2025 Earnings Conference Call. This is Larry De Maria, Executive Director of Investor Relations. I'm joined by Steve Blanco, President and CEO; Julie Beck, Senior Vice President and CFO; and Stephanie Sciullo, President of our Americas segment. During today's call, we will discuss MSA's Fourth quarter and full year 2025 financial results and provide our full year 2026 outlook. Before we begin, I'd like to remind everyone that the 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 involve 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 Safety 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. The non-GAAP reconciliations are available in the appendix of today's presentation. The presentation and press release are available on our Investor Relations website at investors.msasafety.com. Moving on to today's agenda. Steve will first provide an update on the business. Julie will then review the fourth quarter and full year 2025 financial performance and 2026 outlook. Steve will then provide his strategic priorities for 2026 before giving closing remarks. We will then open the call for your questions. With that, I'll turn the call over to Steve Blanco. Steve?

Thanks, Larry, and good morning, everyone. Thank you for your continued interest in MSA Safety. I'm on Slide 6. We executed well within a challenging environment for 2025. We had a solid finish to the year, guided by our Accelerate strategy, centered on serving MSA's mission for our customers and protecting over 40 million workers worldwide who trust the MSA brand. Just within the last month, I've learned about 2 separate customer save stories where our solutions helped save lives. First, a worker at a water treatment facility was alerted to a flammable gas alarm by his ALTAIR 5X portable gas detector, enabling evacuation before the fire occurred. It's why customers count on the MSA brand, fast response, reliability and durability in the real world. We also heard directly from a firefighter wearing our Globe turnout gear when he was engulfed by a flashover as he entered a structure. As he told us afterwards, "In a moment where everything went wrong, your gear did exactly what it was designed to do, and did it when it mattered most." Save stories like these remind us all at MSA, the importance of fulfilling our mission. Now for our business update on the fourth quarter and full year. Our fourth quarter results reflected strong free cash flow, low single-digit reported sales growth, mid-single-digit adjusted earnings growth and sequential improvement in operating margins. Quarterly consolidated reported sales growth was 2%, with a 3% organic decline, a 3% contribution from M&A and 2% favorable FX. Adjusted earnings per share were $2.38. Organic sales performance in the quarter was driven by continued strength in detection, which was offset by a decline in the fire service, while industrial PPE was up modestly. The M&C TechGroup acquisition contributed $15 million to the quarter. Looking at sales by product…

Thank you, Steve, and good day, everyone. We appreciate you joining the call this morning. Starting on Slide 11 with the quarterly financial highlights. Fourth quarter sales were $511 million, an increase of 2% on a reported basis over the prior year. Sales were down 3% on an organic basis from the prior year, while M&C added 3% to overall growth and currency translation was a 2% tailwind. As expected, GAAP gross margins improved sequentially, rising to 46.9%, an increase of 40 basis points from the third quarter and remaining consistent with the previous year. Year-over-year gross margin reflects the mitigating effect of our pricing strategy on tariffs and inflation as well as positive mix and favorable transactional FX. As we have previously communicated, we remain focused on achieving price/cost neutrality in the first half of 2026. GAAP operating margin was 22.3%, with an adjusted operating margin of 23.9%, which was consistent from a year ago, as lower volume and gross margin pressures were largely offset by mitigating pricing actions, positive mix and favorable transactional FX. Sequentially, adjusted operating margins were up 180 basis points from the third quarter. Entering 2026, we remain diligently focused on SG&A productivity, pricing and tariff mitigation plans to counter headwinds and return to margin expansion. Quarterly GAAP net income totaled $87 million or $2.21 per diluted share. On an adjusted basis, diluted earnings per share were $2.38, up 6% from last year, which included a favorable adjusted effective tax rate of 23.2%, primarily due to a reduction in state income taxes. Now I'd like to review our segment performance. In our Americas segment, sales declined 1% year-over-year on a reported basis or 3% organic as mid-20s organic growth in detection was offset by a low 20s contraction in fire service. As Steve mentioned earlier,…

Thank you, Julie. I'm on Slide 16. Overall, we executed well in a very dynamic 2025. As we move into 2026, our strategic priorities remain rooted in our mission and disciplined execution of our strategy. We retain our focus on driving profitable growth while extending our leadership in the markets we serve. We continue to apply the principles of the MSA business system to drive continuous improvement in all we do. Our strong financial profile and balance sheet enabled effective capital allocation through organic and inorganic growth investments and returning capital to shareholders. We remain active and highly disciplined in our M&A approach as we continue to evaluate inorganic growth opportunities that meet our strategic and financial targets. Moving to Slide 17. I'm proud of our team's execution and thank all of our associates for their continued commitment to serving our singular mission of safety. While there are always new challenges, I'm optimistic that we will continue to grow both organically and through acquisitions, and that we have begun to exit some of the most difficult quarterly comparisons. With that, I'll turn the call back over to the operator for Q&A.

[Operator Instructions] And the first question today will come from Rob Mason with Baird.

On detection, really strong quarter, obviously, and able to get some of these larger orders out the door before year-end. Steve, I seem to recall, we were thinking about that business being in the high single digit for '25 and I guess it grew 12% over on a local currency basis, does that delta -- is that explained by the large orders? Or did you have some other things come in, in the fourth quarter?

Yes. Thanks for the question, Rob. I would say it was explained by the large orders. We had a couple of really nice orders come in. We had a customer in late Q3 that we -- that asked us to execute on an order that would have been this year. So we had an additional large order that came in. So if you took that out, it probably would have been a 10-ish number for the year instead of the 12. Obviously, very strong. We said high single digits, I think, pretty early in the year, and I think the team executed very well in that. But the underlying demand continues to be super strong across most of our regions, and we're expecting the investment category for some of the end markets to continue. I mean we're not going to have that same kind of year this year, certainly, but a really solid year.

Yes. Yes. And then trying to get past some of the well-documented headwinds in fire service in the fourth quarter. How do you see maybe the cadence in fire service playing out through the year? I'm sure those don't go away just on January 1, but between the first quarter and maybe you get by the midyear, what -- how does that play out, do you think?

Yes, thanks. It's going to be interesting. So we really -- when you think of the delay, typically the fire service, when they receive the funding, they've got this built-in time horizon of year-end. And part of that is they recognize there's an opportunity, they've got funding and they want to get in their orders before the price increases that most manufacturers put in, in the first quarter. So that didn't transpire, right? They didn't have the funding, they weren't able to do that. So we have that pipeline. We're working through that with our customers. That's why we think most of those orders probably play out sometime in the first half for the ones that had the government delays. And then the remainder, it's probably going to be more like a normal fire service year, what you would typically expect, which would say that you would lean towards the second half again on the overall demand cycle here. So that's how we see this playing out -- excuse me, this year. I think that's the best way to look at it. Except that AFG delay, some of those will come in. We'll see some of that in the first half of the year. But the overall picture is more of a standard year, I think.

I see.

Just to add on to that, I would say that we would expect pretty consistent growth throughout the year in terms of the revenue growth for fire service.

The next question will come from Mike Shlisky with D.A. Davidson.

I'll follow up on that -- on your answer for detection, very impressive in the quarter here. And it's been a trend, you've had some good numbers. Could you maybe comment on the order of [ magnitude ] of growth you'll be seeing here in 2026 for detection? Is there, at some point, where you start seeing tough comps? Or is there enough new product coming out here that there can be a strong tailwind this year?

Yes. Thanks for the question, Mike. I think that last year, certainly, especially as you look at the latter half of the year, the fourth quarter, that's certainly going to be tough comps. And as I talked about with Rob's question, a couple of points that probably would have been in this year. We look at -- this is going to be a good year for detection. I probably -- it's early. But we would expect -- we'd probably look at this in -- at this stage in the mid-single-digit revenue growth year, even with the comps we had last year. And I think at this stage in the game in February, mid-Feb, that's how we would think about it and how we're looking at it for the year. And so the growth is there. We think the macro environment supports that. And certainly, our solutions in both categories of the fixed and the portable detection support that with our customer base.

Great. And I also wanted to turn to the margin outlook. When I think back, you've got that longer-term 30 to 50 basis points a year margin goal to gain every year through '28. Now that goal was released prior to the tariffs and things coming out more recently. But you did end up down a bit in 2025. Is there a catch-up that happens here in 2026 and then you add on top of that the 30 to 50 basis points of margin just as pricing catches up? Just some thoughts as to whether you could be seeing 100 basis points plus of margin in 2026, especially the run rate to exit the year.

Well, it was a dynamic 2025, for sure. The tariff situation certainly played out to impact that as we talked about last year. I would just tell you, our overall approach on that continues to be a combination of efficiency and pricing. I think the business system has helped us. But as we've noted, as we noted last year, we've implemented some price increases, and we really -- for us, our focus was the long term and executing in a way that we position ourselves for neutralizing on the price cost in the first half of this year. And we are right where we anticipated we'd be. So you should see that continue to improve. You saw it sequentially in the fourth quarter. So you'll see that continue to go as we look forward.

Yes. I would expect -- just to add on to that, I would expect that our margins improve sequentially. So we recover that price/cost neutrality at the end of the second half, and we would expect to return to those 30% incremental margin targets this year.

The next question will come from Ross Sparenblek with William Blair.

Looking at Slide 9 on the end market assumptions. First off, thanks for providing that. I was curious to see that the infrastructure bucket is expected to be neutral this year. Energy and chemicals are up. Can you maybe just provide a little more color on the project activity you're seeing in the funnel? And anything else you can speak to that kind of underwrite those assumptions for the year?

Yes. Thanks for the question, Ross. When we think of 2026 -- certainly '25 was choppy in industrial. We did see chemical and energy had continued investment. And the thesis was pretty good in most of the regions around the world. I would anticipate, and the team believes, what we're hearing and seeing is '26 will be similar. A couple of the margin -- or a couple of the regions, you'll probably see it build up in the second half. We know of some announced investments. If you think of Europe, for example there, they really haven't had as much investment going on, but we do see some of that playing out in the second half, probably some improvement in China with that regard. Middle East was strong all year. Expect that to continue most of this year, if not all. And the Americas is in a similar story as well. So we see that as some tailwinds. From a market dynamic perspective, there's a need for energy across the globe. And certainly, most of the players that -- our customers and others are really trying to make sure they're well prepared for that. And I just would say, the overall, at least in our view, when you compare or put together our activity in the Accelerate strategy along with the market dynamics we're expecting, we feel like we're in a pretty good place for '26.

Okay. And then maybe just on the portables, it seems like it was a little bit more measured growth in the quarter. Anything stand out there as we think about maybe perhaps tougher comps? Or is it the switch over to io 6 that's causing a pause? Just -- yes, any updates around portable gas?

Well, thanks. The portable business again, continued to grow in both categories, both -- when I say both categories, both 4 gas categories. So again, portables includes single dual gas and then the 5 gas, which we'll see the io 6 come out later to replace our 5X or be an option for the 5XR. So the 4 gas has been growing exceptionally well. Last year was our best year ever for units. And what's interesting is -- we're on a revenue for -- the revenue for the year, the io 4, the MSA+ piece of the business is in just over 10% of portables. But when you look at units, you're close to twice that, which gives you a little bit of color of that being something that's going to continue to pay dividends because of the subscriptions as we go forward. So that grew at a really nice rate. It was a fantastic business for us, and it's shaping up to do the same in 2026.

The next question will come from Tomo Sano with JPMorgan Chase.

This is Ethan on for Tomo. My question would be -- how should we view the mid-single-digit growth outlook on pricing and a volume standpoint, considering roughly like 1 point of it is from the fire services delay?

I think we're going to get contribution from both. So I would say you're going to see both probably lean more towards the price side, right, Julie? But you'll get contribution from both. A little bit more on the pricing side.

And would we expect this to be more of a first half weighted on a volume standpoint versus price? Or can we see like pricing due to tariffs flow through kind of in the first half?

Yes. So we'll have some more pricing early on because we have a carryover from last year and pricing actions that we took that are going to start to flow through at the beginning of the year here in the first 6 months, as we talked about. So we'll see it in the first half.

The next question will come from Jeff Van Sinderen with B. Riley FBR.

Most of my questions were answered. But I guess, when you look at the competitive landscape, how are you seeing that evolve in detection? What do you think the key factors are that are driving new business wins for you in detection? In other words, why do you believe your customers are choosing you versus competitors in latest wins? And then anything more you can say about product innovation that could drive upgrades or new business wins in detection?

Yes. Thanks for the questions. So if I start with the landscape, there's some really strong competitors in this space. What we've really -- I feel like have done a nice job of is try to stay close to the customer and understanding our VOC, the voice of the customer, in a way where we create solutions based on the challenges they have. So when you look at our portfolio and you think about detection -- I'll break it out because I think it's a really interesting storyline. Detection and fixed, we've expanded through some great acquisition activity as well as matching up the needs from the voice of customers. So we've got this traditional gas detection that's been really a strength for the company. But then you add to that, last year, we launched a new flame detector that has really taken off and done very well. We've got the field server and the controller business that came from an SMC acquisition a few years ago. Now that's integrated with our platform. So it's now a holistic solution for the customer on how they can communicate for a site. And now you're adding to that, we're seeing some growth, and you should see more of that this year with our refrigeration businesses from Bacharach. And then last year, of course, we added M&C from the processing side. So the fixed side, we've continued to build out a business that has expanded some our TAM and also created an opportunity for us to have more holistic solutions for our customers. So it's really somewhat of a one-stop shop that they're able to access. And I think that's an advantage, and that's something that our customers appreciate. The portable side, this is a space where predominantly, most of them buy a…

That's correct, yes.

So that -- hopefully, that helps give you a little color on that.

No, that's great. And then just as a follow-up to that, I know you mentioned Bacharach. Is there anything, just in the refrigerant area, and I think about HVAC there, is there anything that you're doing there that's being applied in the data center area for new data center builds or even retrofits?

There is a bit. I mean, we -- yes. The short answer is yes. When we think of data center build-out, certainly, for us, it would be more on the fixed monitoring and you hit the key area in the Bacharach area. So we do have opportunities there. We also have it in some other fixed monitoring, but that's the key category. We had a nice order a couple of weeks ago. It's not going to be the big change in our growth story, but it certainly is complementary to what we do. And when they build those sites, that's certainly an opportunity for us on the industrial PPE as well.

The next question will come from Brian Brophy with Stifel.

So just a modeling question. SG&A, how should we be thinking about that this year?

Yes. So SG&A, I would say, in the first quarter, kind of consistent with the fourth quarter. And I would say SG&A as a percentage of sales is relatively consistent for 2025 to 2026. We're going to have some nice growth projects that we're going to fund in SG&A this year, and so we're excited about that.

Okay. That's helpful. And then just wanted to get an update on what you're seeing from some of your shorter-cycle businesses. Obviously, we've seen PMI flip back above 50, but then there's some more mixed signals from an employment standpoint. So just kind of curious what you're seeing there near term?

Yes. Thanks for the question. So the fourth quarter was similar to '25 overall, choppy. You'd have a good month and kind of choppy and then it decelerate a little bit. We see '26 cautiously optimistic when it comes to that industrial space on the short cycle. We've seen improving demand so far play out, which actually is a really good thing. We're hoping that holds. The PMI you talked about is certainly -- we were pleased to see that. But the indicators from the channel seem to be that as well. There seems to be some building optimism of perhaps getting out of this, I'll just say, this choppiness that we've seen for, what, the last 18-plus months. So we're hopeful that's the case. Early indicators seem to support that.

Okay. And then one last one, more of a big picture question. You touched on this a little bit, but obviously, you've had a lot of success with portables on the connectivity side. Curious how you're thinking about expanding connectivity across additional product lines and how we should be thinking about any progress on that front this year?

Well, we -- thanks for the question. So we look at it as how do we interact in a way that the customer wants us to interact. It all starts with the customer as we think about how we're addressing those challenges I referenced earlier. We have -- every one of our G1 SCBAs is connected right now for availability for the customer to access. It's a matter of making sure that we continue to kind of build out that ecosystem in a way that enables value for the customer that we can support. I would expect that would be the next horizon that you might see some growth in, but it's really a longer-term play, Brian, as you think forward, I think we start with detection, portable specifically, and we're really -- we're having a lot of discussions where we're pulling customers for some of these workshops, some VOC workshops on where they want it to be informed in the longer term, for sure. And we'll be well prepared for that.

This concludes our question-and-answer session. I would like to turn the conference back over to Larry De Maria for any closing remarks.

Thank you. We appreciate you joining the call this morning and for your continued interest in MSA Safety. If you missed a portion of today's call, an audio replay will be made available later today on our Investor Relations website and will be available for the next 90 days. We look forward to updating you on our continued progress again next quarter. Thank you.

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