MSA Safety Incorporated (MSA) Earnings Call Transcript & Summary

Great. Thank you. Thank you all for your questions and the great answers. We're going to take a short break, and we're going to restart at 10:20, in about 10 minutes or so. Thank you. [Break]

Okay. We're going to start up again and start our second session of the day, and please welcome Gustavo Lopez to the stage. Gustavo?

Thank you, Larry. Good morning, everybody. Glad to be here. I'm Gustavo Lopez, the Vice President of Product Strategy and Pricing at MSA. And I'm very excited to talk to you today about an area that I've been a part of throughout my 20-year journey here at MSA where I've held roles in R&D, product technology leadership as well as leading the recent acquisition of Sierra Monitor. So let me start by sharing a story about how the MSA mission really becomes embedded in our DNAs. As a young 20-something software engineer, I was part of a development team for one of our gas detectors, which helped protect firefighters from entering a building that had a gas leak. At the time, the customer need was for faster response time on the sensors, which meant you would alert the end user quicker of a potential hazardous situation. And that it did. In this case, the sensors alerted the firefighters as they were arriving on scene, which prompted the fire chief to keep his team outside. Unfortunately, there was an explosion shortly thereafter, but no casualties or injuries occurred because of the technology that we developed and put in the customers' hands. Fire department followed up with a handwritten letter to our team at expressing their gratitude for the technology. This is just one story of the many that we have in which our solutions make a positive impact on society, driven by the commitment of the many MSA employees throughout the world. As Steve said, we truly live our mission. Throughout this presentation, you're going to hear how we differentiate, have a clear strategy for growth and continue to deliver value for our customers, thus commanding a leadership position in the marketplace. This journey really began over 10 years ago when we invested organically in the design and manufacturing of sensor technology rather than purchasing from third parties, which truly became the catalyst for us to become a leader with clear differentiation on performance, speed of response and sensor life, all backed by significant IP. Couple our leverageable tech stack with geographic reach, and we really participate in this area from a position of strength globally. Our main goal for the business is customer driven and is to ultimately help them achieve their desired outcomes, safety, emissions and sustainability. As we look at secular trends like the green energy transition, as well as a shift to connected solutions, our detection portfolio is poised for continued growth and profitability. Lastly, we will leverage our unique expertise and technology breadth to drive scale and diversity on our business. Over the past 5 years, we have experienced 8% growth with combined sales of $635 million. Our detection business is global in nature and diversified both from a market and technology perspective. Fixed monitoring represents about 68% of our business that is composed of fire, gas and refrigerant leak detection systems that are typically installed in a facility to help protect the asset. This is a very sticky business as once the product is installed, there is a big service component over the life of the product as it is critical to ensure that they continue to operate properly as they help ensure the safety of a facility. This includes maintenance work as well as spare parts. Portable gas detectors make up 32% of the detection area. And these devices are worn by workers to protect them from hazardous gases in various types of applications. In this particular category, there's a growing need for connected solutions as real-time accountability of workers is critical. This data, in turn, is extremely valuable as customers evolve safety programs to become more proactive. Both fixed and portable share similar sensor technology, which is a key value driver and differentiator for MSA. Our detection business operates in the sophisticated safety technology space with an accessible TAM of $4 billion, growing in the mid-single digits. Our end markets and customers are diverse, ranging from traditional and emerging energy activities to utilities, food and beverage as well as general industry applications. In all these markets, there is a need to protect both infrastructure assets through our fixed monitors and workers with our portable gas detectors from toxic and flammable gases. When you look at the key markets that we participate in, there are some nice synergies from secular trends, regulatory tailwinds and changing market dynamics, which gives us confidence in the ability to outpace market growth. Later on, I will share some specific case studies on how we developed unique solutions for customers in the energy and food and beverage sectors. One of the case studies will detail how MSA sensor technology is used to drive increased uptime while reducing maintenance cost. We will also cover how through the Bacharach acquisition, we are leveraging a connected enterprise platform to improve detection of refrigerant leaks allowing customers to lower energy costs while ensuring compliance to regulatory requirements. The shift to connected solutions, is also exciting, as Greg alluded to in his presentation. As customers evolve their safety programs to proactive, we are now providing solutions that leverage real-time connectivity, data analytics, guaranteed uptime and advanced reporting. This shift allows us to become a true partner with our customers as we become more embedded in helping them achieve their goals. We have also begun to see significant wins for gas detection systems for the green energy transition as we were recently selected as the fire and gas system provider for one of the largest green hydrogen plants currently under development. Our winning formula really starts with the customer and understanding at a deep level so that we can uniquely solve their spoken and unspoken customer needs. Throughout this customer centricity obsession, we leverage our strong end users and channel relationships to ensure that our solutions and services are designed hand-in-hand with the stakeholders, creating a very collaborative business relationship. Our innovative R&D teams have years of experience in the gas detection field which allows them to provide the widest and most differentiated set of gas detection technologies. Over the past years, we have complemented the detection technology with big investments in connected solutions, allowing us to deliver complete end-to-end solutions going beyond the sale of the initial product. And all these innovations are protected through IP, where we have a strong position in. In particular, we have a unique position with sensor technologies, which, again, you're going to hear a case study later on about how we drive significant value with. We're also in a position where we can take all this data and are able to provide insights to our customers. From providing recommendations on testing cycles, to identifying unsafe behaviors down to the operator level, we're becoming closer to our customers and becoming the trusted advisers as it relates to safety, in turn, helping them achieve their outcomes. Based on our current market position as well as our differentiated story, we believe we can outpace the market growth, achieving mid- to high single-digit growth results over the next few years. We will do this by focusing on our foundation in being the leader in the premium part of the safety solutions space, hitting on the various market drivers that we discussed before. Our diversified and differentiated product portfolio, coupled with a global market-leading position for -- means we are leveraging our strong position for above-market growth. Being application leaders is critical as our customers are looking for partners to help them achieve their goals. Through our recent strategy work, we're also going to drive the implementation of the growth accelerators. In particular, we will look to further diversify our end markets as we did through the Bacharach acquisition, leveraging the tailwinds around regulations as well as general high-growth areas like food and beverage. Capitalizing on the growing trend of connected solutions on the portable gas detection space will also be important as we scale in that -- in this space. There's also an opportunity to drive efficiencies, leveraging MSA's Business System. With the broad portfolio that we have, we will look to further drive scale around the product line through optimization of shared technologies as well as footprint consolidation as was detailed by Jose so that we can better serve our customers from a delivery and simplification of ordering perspective. Lastly, our growth and differentiation strategy has yielded many results. Organically, we created technology leadership in sensors and software, which we will continue to invest in, in -- as core differentiators. Inorganically, both our Sierra Monitor and Bacharach acquisitions have been big successes and bolstered our leadership position in the marketplace. Acquisitions in this space continue to be very attractive to us given the targets and our proven track record. As Greg showed in his presentation, we have a passion for helping our customers increase safety performance while also improving operational efficiency. This particular case study details how a large international customer came to us with a need to increase uptime while reducing maintenance cost. Based on that and the feedback from many other customers, we developed patented technology, which has been deployed allowing this particular customer to reduce up to 75% in maintenance cost, while also ensuring that the product is under compliance and working correctly, all in real time. Now let's start with the background. Fixed toxic detectors are usually installed at a facility and calibration is performed every 90 days per customer standard operating procedures. In many cases, these detectors are installed in hard-to-reach areas. So performing a calibration is not only costly from a materials perspective. It is also challenging to execute from a manpower component. And these are the type of problems where our innovation processes and best-in-class R&D organizations shine. Through continuous voice of customers, our teams got to work and develop our patented TruCal solution. This technology consists of the sensor performing a self-check every 6 hours, ensuring proper functionality as well as compensating for environmental conditions that may cause the sensor to drift out of calibration. It also verifies that the gas path is clear, ensuring that gas can get to the sensor. And all of these results are communicated in real time to the central station. By using this technology, customers can extend their maintenance intervals from 90 days all the way up to 24 months, creating large savings on materials and people, all while giving peace of mind that your critical asset is being protected with gas detection that is under compliance. Again, in this particular case, this large end user implemented TruCal throughout their facility and reported up to 75% savings in maintenance costs after implementation. And more importantly, they have fully standardized on this technology for future projects. This is a great example of how we partner with a customer to understand their needs at a deep level and uniquely solve these needs, all backed by significant IP. It is a testament of what sets the MSA brand apart in the market as a true leader. With the Bacharach acquisition, we further diversified our portfolio and end markets. This following case study outlines some key benefits of our connected leak detection platform. This particular area is one where regulations are creating a nice tailwind for our type of business. More specifically, per the EPA Clean Air Act, companies need to monitor and report the refrigerated leaks on an ongoing basis. On top of the regulatory compliance aspect, these leaks can cause increasing energy costs at facilities as well as potential loss of product. Current solutions require a safety technician to go into the equipment room, take samples, record the results and write up a report to create the paper trail for audit purposes. MSA's unique solution is a fully connected enterprise platform where the refrigerant detection devices are connected in real time to our cloud platform, quickly alerting users of a potential leak. Our cloud platform also has the built-in necessary analytics to comply with the EPA regulations as well as to provide insights through our reporting engine. Giant Eagle, which is a large grocery store chain in the eastern part of the United States, standardize on our solution with really fantastic results. Among the many benefits, they have been able to improve their leakage rates by up to 15% by deploying a real-time system, which allows them to detect and repair leaks quicker. The really exciting part for this solution is that these challenges can be implemented by other grocery store chains as the regulations continue to evolve, which presents a great opportunity for growth in the future. Going back to our winning formula and process for innovation, our North Star really centers around the customer need to deliver increased uptime as well as to evolve safety programs to become proactive through the data incidents that our connected ecosystems provide. To achieve this, we look at driving 4 key areas: Starting with our technology solutions, which revolves around the detection devices, its sensors and the enabling software. By leveraging these solutions, we provide extreme durability, fast sensor response time and advanced analytics to minimize the amount of downtimes on our systems due to preventive maintenance as was showcased by our TruCal example. As you saw in the refrigerant leak detection study, compliance to regulations is another key lever with investments in cloud technology and connectivity, we have created ecosystems where customers can easily manage their fleet of gas detectors and receive real-time information on the various incidents that may happen during a work shift. All this data that is generated would be meaningless without the power of analytics. By applying data science principles, our teams are focused on providing actionable insights to improve both product use and human behaviors. For example, through analyzing product usage of one of our portable gas detectors with real-time data, we were able to push an over-the-year software upgrade to improve battery life by up to 25%. On the human behavior side, we have been able to help customers drive training and accountability to improve unsafe behaviors down to the operator level by identifying trends on incidents. Lastly, we recognize that detection systems are costly to implement and switching costs are high. In order to minimize these costs for our end users and providing a path to newer technology, we ensure that our next generation fixed detectors can use the same wiring as their MSA predecessors, ensuring an easy transition to next-generation technology. As we close out this session, I'd like to reiterate our excitement over this category as we believe it can generate above-market growth results over the next 5 years. There's a good runway for us given the market dynamics and secular trends. We have a proven track record where our customers value our differentiated solutions. We've also grown our business with both organic and inorganic investments. And there continues to be room for continued innovation and growth through connected solutions and technology leadership in diverse applications and end markets. And lastly, we will continue to drive meaningful relationships with our customers and position ourselves as a leader in the safety market. Thank you for your time and interest in MSA. And with that, I'll pass it over to Bob Apel.

Thank you, Gustavo. Good morning, everybody. My name is Bob Apel. I'm the Executive Director of Global Fire Services and Digital Experience. And I'll be talking through our fire services business and strategy this morning. I've been with MSA for 28 years, half of that time working in our industrial markets and the latter half of that working in fire service. Prior to my current role, I served as COO of Globe Manufacturing, where we achieved significant sales growth and margin expansion while enhancing performance for our customers. In today's environment, 28 years at one company is a long time. However, as you've heard from many others this morning, our mission drives our associates. I've remained here for 28 years because I believe in our mission. And it's personally fulfilling to go home every night knowing that the work that I've done has contributed to saving a life. If you're looking for purpose in the work that you'll do, you'll have a hard time finding any greater purpose than the work that MSA does. So there are 3 key fire service topics that I'll be covering over the next 15 minutes or so. I'll cover how we're combining industry-leading products and solutions to develop an integrated ecosystem of products that enable sustained growth and resiliency. We'll also discuss the importance of pillar cities to our strategy. These are large influential departments around the globe that are not only important because of their relative size, but also because of the halo effect that they have among surrounding departments. Winning these pillar city opportunities helps create additional conversions and share gain in the surrounding areas. Engaging with these pillar cities at a deep level helps us develop future features and solutions that help advance firefighter safety. Finally, I'll talk about how we will leverage our current capabilities to further extend our leading position in head-to-toe solutions with both NFPA and EN-certified products. Today, we define head-to-toe safety as fire helmets, SCBA, protective apparel or as known in the industry, turnout gear, and boots. We estimate that we have at least one of our products in over 90% of U.S. fire departments. And we're incredibly proud to be the manufacturer of choice for so many firefighters. Over the past 5 years, we've experienced 7% growth to achieve $684 million in revenue in 2023. We currently enjoy leading positions in SCBA, fire helmets, turnout gear. And while revenue by product category is reasonably balanced, you can see that we do have a nice opportunity to grow our international business. For example, by leveraging recent acquisitions such as Bristol, we now have an opportunity to serve the international markets with EN-certified turnout gear. Our gear can be customized to meet regional needs and even individual fire department needs with different material choices, colors, trims, sizing, pockets and other accessories. Our new innovative 1836 fire helmet offers us the opportunity to build upon our current leading position in fire helmets by offering firefighters an innovative helmet that is lightweight, low profile and easy to maintain. Our EN-certified M1 SCBA has had success in Europe similar to the NFPA certified G1 success in the U.S. By listening to our customers, we're able to provide them with the products and solutions they need, ensure firefighter safety and maintain our leading market positions across the globe. We estimate the total addressable market for SCBA, turnout gear and fire helmets to be around $2.5 billion, growing at a 2% to 3% compound annual growth rate over the next 5 years. Starting in SCBA. This market growth is largely driven by SCBA replacement cycles. For example, the G1 SCBA was launched 10 years ago. Over the next few years, fire departments will begin to replace their aging fleets. And there are new standards right around the corner that will drive some attractive new product features for some departments. We intend to ensure these departments re-up with MSA by helping them through that replacement process. Solutions for incident command, remote monitoring and asset management are becoming more in demand as technologies improve. We are on the forefront of this trend and are continually updating our current offering as well as customizing features to accommodate specific departmental operating procedures. This level of customization helps build strong partnerships and helps protect against potential conversion. In turnout gear, as departments increase their focus on maintenance, second sets of gear are starting to become the norm in new bids. This allows firefighters to have a clean set of gear while another set is being washed or maintained. Another growth driver is the historically resilient government funding for firefighter safety. We offer assistance to fire departments and applying for funding grants to help build the relationships and hopefully drive that grant spending towards MSA. By leveraging key differentiators for MSA, we can continue to outperform the market, extending our market-leading positions and driving revenue growth. Our global experience and reach across markets is something that few others can match. For example, when we developed the G1, we lived with firefighters. We went on calls with them. We spent time in the firehouse with them. We serviced product with them. This gave us an intimate understanding of their pain points and how we could potentially solve them. One such development that arose from this effort was our patented central power management system on the G1. We saw how many batteries went -- the fire departments went through on a daily basis. The amount of time they spent checking those batteries, charging those batteries, changing those batteries that were used on multiple SCBA devices. Our sole power source on the G1 changed the game. Now they only have one battery to power the unit, to charge, to maintain, saving departments hours in labor and significantly reducing cost of ownership. As you heard earlier from Stephanie, our innovations haven't stopped there. And our deep connection with our customers and the fire service market has never been better. The connected firefighter ecosystem that we continue to build out focuses on the user experience, how we can provide valuable insights without being obtrusive or adding complexity. Firefighters need to focus on fighting fires. Our technology needs to allow them to keep their focus where it belongs, and we are positioned to do that better than anyone else. In addition to our products and solutions, we also have a highly skilled exclusive channel partner network. Many of these channel partners have been with us for many years, serving as an extension of our sales team. Their knowledge and local relationships help to maintain current and drive new business. They also serve as a critical listening post for us on market conditions. Our growth strategy combines products, services and resources to achieve success. We continue to build upon the proven track record of innovation in R&D. Again, the recent launch of the 1836 fire helmet is evidence of our ability to continue to reinvent products to meet customer needs. We'll continue to optimize our manufacturing capacity as required for protective apparel or turnout gear to meet new demand. You've all probably likely heard that over the past few years, like many others in our space, we suffered through some supply chain challenges as a result of the pandemic. Specifically, as it relates to turnout gear, lead times across the industry reached 12 months. Through a number of lean activities, leveraging the MSA Business System, supplier partnerships, and creative approaches to attract talent, we are now able to deliver turnout gear faster than any of our competitors. The result of this improved lead time is an uptick on incoming orders, faster recognition of revenue and a reenergized sales organization. Building external partnerships to expedite time to market on emerging technologies is also part of our playbook. For example, a few years ago, we began a partnership with an autonomous drone company, expanding our connected firefighter capabilities, and we'll continue to make investments on technologies that further firefighter safety. Altogether, we expect this activity to result in 3% to 5% growth through 2028, which again exceeds market growth. With some of our larger breathing apparatus wins over the past year, like the U.S. Air Force, there can be some lumpiness in the business periods and some challenging comps. That said, we're excited about our momentum, and we're focused on executing our strategy to continue to outpace market growth. As you've heard throughout the presentations this morning, we have a passion for safety. This case study shows how that passion translates to a customer solution. A large West Coast fire department conducted an extensive evaluation for their new SCBA. They were looking for a way to leverage fire scene data to increase firefighter safety through faster, better-informed decisions as well as find a product that offered improved comfort and ease of use for firefighters at a lower cost of ownership. The MSA G1 SCBA platform provided the capability and flexibility they required. The G1 configurations promote inclusive sizing with adjustable lumbar pads for comfort, integrated thermal imaging to eliminate the need to carry a separate thermal imaging camera and connectivity to the FireGrid. In this instance, FireGrid was deployed to work alongside existing fire department tools to provide greater safety awareness to firefighters on the scene. The capability of FireGrid has led to additional discussions about creating APIs to integrate even more external scene management tool. If you're not familiar with APIs, it's essentially a connector between 2 types of software, right? So our willingness to configure these new APIs is how we work with fire departments to bring new capability to the market as quickly as possible to improve efficiency and safety. This West Coast pillar city has resulted in another nearby city purchasing MSA, and we're just getting started. In another example, we recently switched a large U.K. fire brigade from an embedded competitor to MSA's M1 SCBA. The M1 was introduced in 2019 and incorporates many of the features of our G1 SCBA. This fire brigade wanted to improve departmental safety and efficiency. They started with a lack of accessible data logs and fire scene management tools. SCBA maintenance costs and the inability to upgrade their current fleet of SCBA, created a number of operational challenges. They were particularly interested in leveraging SCBA user data to drive lifetime maintenance procedures. Our M1 SCBA and FireGrid solution was exactly what they needed to accomplish their goals. The M1 SCBA is an upgradable with reliable communication capability. The U.K. telemetry system was specifically designed to perform in challenging urban environments, including skyscrapers and underground tunnels. Utilizing repeaters, the system was able to cover 54 floors in a building located inside a large city. FireGrid provides the brigade with the additional maintenance tools and data access that they need to operate more efficiently. The FireGrid monitor app was designed specifically for leadership personnel coordinating operations to monitor air pressure, alarm status and state of all active firefighters. The touchscreen user interface allows commanders to manage team assignments and issue evacuation requests. And the FireGrid cloud platform offers a centralized and easily accessible location for customer data. And if you didn't have an opportunity to see this software in action this morning before the session got started, I would highly recommend that you do that afterwards. We have it on display out there. It's truly an incredible piece of software. This conversion which was aided by our acquisition of Bristol a few years ago, established a strong foothold for us in a large international market, and this partnership serves as a benchmark for other European and international fire brigades. Our North Star in fire service is to create unique market-leading safety solutions to protect firefighters. We achieved this through seamless integration of value-added technology, connected solutions to drive productivity through data analytics, automating burdensome reporting and inventory management processes with intuitive interfaces, and creating true partnerships with fire departments to develop new products and solutions to improve their safety. 2 years ago, I was sitting in my office in Pittsfield, New Hampshire when I was COO of Globe. I received a call about a local firefighter who was injured in the line of duty. He was wearing our turnout gear. His department was fighting a fire in a 3-story structure. He and his team rescued 6 individuals that day. Just after leading a third-floor resident to the rescue ladder, as this firefighter began to exit the building, a flashover occurred. Flashovers can exceed temperatures of 1,100 degrees Fahrenheit. And our gear protected him from that environment. After he was released from the hospital, we exchanged some messages on his recovery and his appreciation for the work our team does to provide industry-leading turnout gear. He credits our gear for saving his life and allowing him to return home to his wife and kids. Having kids myself, it's incredibly rewarding to know that the work I've done, the work the Globe does, the work that MSA does had a hand in keeping a family together. If you remember nothing else from the presentation, remember this, we are a market leader in combining products and solutions to develop an integrated ecosystem that enables a sustained growth and resiliency. This is showcased by the success of our G1 and M1 SCBAs and our FireGrid application. Our focus on serving pillar cities and the associated halo effect those wins have will drive growth and market share gains. You saw real examples of this in the 2 case studies I reviewed. Leveraging and scaling our current connected firefighter capabilities, fire helmets, turnout gear and boots, provides an unmatched head-to-toe solution for firefighters and makes it difficult for our competition to win. Over the past 2 years, we have seen strong double-digit growth in pillar city win percentage and revenue from those pillar cities. The fire services market fundamentals are strong and they're resilient during various business cycles. With our capability in developing products and solutions for firefighters, our market knowledge and customer intimacy, we are well positioned to outgrow the market over the next 5 years. So thank you for your time. We appreciate you being here. And with that, I will turn it over to Rob Willis.

Thanks, Bob. Good morning, everyone. My name is Rob Willis, and I've been with MSA for just about 20 years now, all within our R&D and marketing functions. I'm proud to say that I've spent my career advancing worker safety, whether that's through regulatory developments, where I attend and help write some of the fall protection and head protection code, or it's getting involved in product demonstrations, webinars or giving training. But it's the commitment to safety that we have at MSA that excites me, and it's why I'm happy to be here to discuss how MSA is advancing worker safety through innovative industrial PPE solutions. There's 4 key messages for today's presentation. Number one, MSA is growing share and gaining above-market growth in fall protection. In head protection, we have a leading position and we're extending that lead every single day. How have we done this? Through our deep customer relationships. At MSA, we understand our customers' problems. We understand their pain points, and we're able to create unique insights that give us compelling reasons to win. We take these insights and then we allow our tenured design teams to create the best products and solutions. These products and solutions ultimately turn into diverse revenue streams. Whether that's revenue generated from our channel partners, or in distribution with the name and safety, or it's revenue generated from our end users from pull-through because we've solved an application-based safety problem. It's the strong foundation that we have in industrial PPE that has me so optimistic about our future. Let's start by looking inside the business where in 2023, we did $469 million between the years of 2018 to 2023. Head and fall protection, had a 4% CAGR. But if I had to describe the business in my own words, there's really 3 parts to it. You've got fall protection, which should be seen as a growth catalyst. We're growing share, gaining above-market growth, and it's one of the largest markets that we participate in. Then you've got our industrial head protection, where we're the #1 position today, and it's been through iconic products like the V-Gard that's been around for 60 years and defined head protection. Industrial head protection should be expected to follow general economic conditions and track with GDP. And finally, we have our other product category, which primarily consists of APR or air-purifying respirators. This is a very sticky business for us. There's high costs associated with switching to other types of products. And historically, it's been a great source of cash generation. These are the 3 elements of industrial PPE. From this point forward, I will focus primarily on fall protection and head protection from a market perspective. Those 2 combined have a total addressable market of $2.5 billion, and we expect a market CAGR of 4% to 5% over the next 5 years. While I won't list all the diverse markets on the left-hand side, what's important to note is that we have threads of consistency with growth drivers. The first one won't come as a big surprise but compliance with government regulation is a key driver. From OSHA's perspective, fall protection and slips, trips and falls continues to be the #1 citation. And I can tell you from talking to customers all over the world, we're hearing a very similar message, new regulation, new compliance and enforcement is coming along with it. This is truly one of the biggest drivers of industrial PPE growth. These -- Speaking of government and government spend, in the U.S., we see things like the Infrastructure Bill continuing to be a source of steady employment. Consistent employment means consistent use of PPE. These markets also have a need for increased productivity. Last year, over 100 million production days were lost due to work time injuries. There is truly an economic need to keep our people safe. When it comes to trends, MSA has always been in front of them, and we react when we need to. Today is no different. We're hearing discussions around the need for comfort, style and what's going on with heat stress. We'll have more on heat stress later. And finally, these markets are looking for technology but they want it done the right way. We have to be careful not to create a product, go out there and look for a problem. You have to start with insight and then use technology in a meaningful way to solve that problem. A great example of this was the V-TEC io1, which was shown in the opening video and Greg went through it in his remarks. Again here, we took fall protection PPE, we worked with an end user, learned some great insight, and then we used technology to allow our PPE to talk to their product. It improved compliance, hence improving safety. But it started with the insight and the customer. And that intimacy is what makes us unique. But how long can it take to really learn the problem? Well, that's what gives MSA such an advantage. We've got individuals with 10, 20, 30 years of safety knowledge. They've talked to different customers. We understand their problems. We've seen the perspective from so many different angles. That's what makes us so unique is that body of safety knowledge. To bring this to light, I'll walk you through how we developed the V-SERIES harnesses. Thanks to the tenacity of the design teams, they watched work being done in harnesses for years. And the #1 complaint was always comfort. What we came to understand is that comfort wasn't solved as it traditionally was by adding more expensive padding in different locations. What we observed was that comfort could be achieved by redesigning the shape of the harness so that it moves with you. And that's why a harness from MSA looks different than anyone else's because we figured out how to solve comfort through mobility. It all comes back to that body of safety knowledge that drives innovation. I'm proud to say in a very specific example that over the past 5 years in the U.S. alone in fall protection, we have over 70 patents issued or pending, just that one small slice. This speaks to when MSA invests in differentiation, we make sure to protect it. And finally, if there's 1 thing that rivals our strength in R&D, it is our strength in distribution, and we are the name in safety. We've got great access to customers. We've got a great network and we can deliver it fast. And what's the growth story going forward? Well, from head protection, we will continue to leverage all the strengths we get from being #1, whether that's our scale, access to customers, or the influence we can give. In head protection, we're going to double down, leverage that size and continue to take more share. In fall protection, the investments we've made in R&D are paying off because we're growing share and gaining above market. And again, it's one of the largest places we participate in. From the fall protection perspective, we see growth coming from our Need it NOW! business. Jose mentioned changes we're making in operations to be producing closer to the customer. Need it NOW! describes a customer that needs innovation. They want a true problem solved, but the reality is they need products delivered 1 to 2 weeks. With the changes we've made, we will be able to supply products quickly through that distribution network and grow revenue because of these changes. Another element of industrial PPE that I'm very excited about is application-based problem solving. This will end up being a very resilient part of our business. And the case study on the next slide will kind of tie this all together. This is all backed by the MBS systems. We will do things like SKU rationalization, footprint optimization. And that best-in-class R&D team, they help us innovate but they also help with margin improvement projects and dual sourcing initiatives. At MSA, we understand it's a total team effort to design and deliver great PPE. So all in, industrial PPE is looking at a 2% to 4% CAGR over the next 5 years. This does include all 3 parts of the business: fall protection, that we anticipate growing above the market; industrial head protection, tracking general economic conditions and GDP; and the other product category, which won't be a growth driver for us but it's a valuable part of our business with some really important customers, and it helps create a diverse product portfolio from MSA. I'd love to spend a minute here on the case study of the WinGrip. So your background is when traditional aviation maintenance occurred or it was had to happen, large scaffolding systems had to be created. You can see a render of it in the bottom corner there. They're big, heavy, custom-made for each plane, and it was very time-consuming to do the work but you could do it at height. So to solve this inefficiency, MSA created the WinGrip, which you can see in the bottom right there. This is a mobile vacuum anchor, and you can install 1, 2, 3, however many you need on the aircraft, and you connect your PPE to it, allowing you to work safely at height. WinGrips are lightweight, portable, can be used in any environment, and there's no electronics on board. This is truly a unique solution from MSA. The results have been fantastic. Our customers see a clear ROI as, again, they're not building complicated staging systems and tearing them down and moving them around from location to location. They're able to just buy the WinGrip, and that's why it's specified in maintenance manuals for major OEMs and military aircraft. My point in showing you this case study is to help us all learn that there's different parts to this business. We've got our great PPE innovation, distribution-led business, and we've got application-based problem solving with products like the V-TEC io1 and the WinGrip. In the WinGrip's example, these can be big-ticket items where a whole set of these to outfit a plane gets into the 6 figures. So it's a nice spectrum of revenue that you can get in fall protection. I'll close with 2 north stars. First is how we developed the V-SERIES of PPE. We're working to reduce OSHA's #1 recordable of slips, trips, and falls. And in talking to customers, we found out style and comfort matter. They have to wear these products all day long so they need them to feel good and they want them to look good. That's why those V-SERIES harnesses have a patent-pending racing-style buckle, redefining comfort and they look really modern. Customers have a job to do, so ease-of-use matters. They need to be able to get back to work. And that's why the V-Shock product line uses colors, iconography, easy-to-understand documentation so that we can quickly train someone on how to use our products safely. Compliance. Your PPE needs to be inspected every single day. And attention to detail matters so MSA uses clear housings on our V-TEC product line, clear housings that you see inside the unit and you know it's working safely. And finally, availability. The world's dynamic and when PPE is needed, it's needed quickly. That goes back to the changes we've made in operations to be building PPE closer to our major markets and leverage that great distribution network. Next slide to head protection. I'd like to close here with how innovation is going to continue to drive our leadership position in head protection. I mentioned earlier heat stress, and there's a lot of discussions around it in the industry, new regulations being developed, which MSA is participating in. And to get ahead of the curve, we recently launched the C1 cooling hard hat. Again, how this works is you've got a patent-pending ReflectIR barrier inside. And so the sun's energy comes down and it bounces right back off. That keeps the inside of that hard hat up to 20 degrees cooler. Cooler people are safer people and they're more productive. We're hearing trends around the ask for climbing helmets or lower profile helmets. That's why we recently launched the H1 and the H2. They come with different levels of lateral protection. My point in sharing this with you is to describe the breadth of head protection solutions. We've got every application covered and that's why we're #1. Finally, innovation can come through product partnerships. So we recently announced that the H2 is available with MIPS technology. MIPS, if you haven't heard of it, is available in biking, skiing, snowmobile. In a nutshell, how it works is you've got a slip layer so that if there's an impact on the side of the helmet, the force translates around it to the other side. It reduces the force through the helmet, reducing brain injury. We've got a sample of that out in the hall if you'd like to check it out after. And finally, process. At MSA, we can take a customer's logo, put it on a hard hat and have it ready to be delivered in 5 days. That's some of the best in the industry. People are looking to catch up with us. So my point here is that innovation can come through product and it can come through process. And now to close again, your key takeaways. In fall protection, we're growing share and gaining above the market. Head protection has that leadership position that's extending every day. How have we gotten here? Through our deep customer relationships, where we learn insights that we're able to turn into great products and solutions. Those products and solutions and in diverse revenue streams, whether it's pull-through our channel partner, distribution network or with the name and safety or through end user pull-through because we've solved those application-based problems. That concludes my presentation for the day. I hope you found some of it insightful. I look forward to meeting you all at the break. And I thank you and I'll turn it over to Lee.

Thank you, Rob, and my thanks to all of our presenters today. So each did a nice job really sharing really what drives our 5,000 associates each and every day. So again, I'm Lee McChesney. I am privileged to serve as the CFO for MSA Safety. Our presentation today has shown you that MSA Safety is a unique company. Yes, we have a great business. We have a compelling financial history, but it all starts with our mission. Our mission-driven culture serves as the foundation of everything we do. That mission started in 1914, that people go to work and they come home safe to their families each and every day. That mission drove us then and it still drives us today. I wake up each day with that mindset, that motivation, that purpose. We really have been fueled for over 100 years. It guides us, our minds and our hearts every day, the responsibility of those 40 million workers we protect. That mission and culture, it's our competitive advantage. We bring that to life through unwavering focus on innovation and serving our end users. This morning, you've seen innovation come to life. Our innovation engine is fueled by experts in their field. Many of them have been doing this for decades, creating the best customer-driven solution out there. So while the mission and innovation aren't new to MSA, neither is our mindset to improve. The MSA Business System has been coming to life for the last 10 years. It started out in operations under Steve's guidance and is now firmly established across the organization. It's a continuous commitment to drive lean principles throughout MSA Safety. The combination of all these elements really comes together in our value creation model that generates consistent strong cash flow and delivers a balance sheet most organizations would aspire to achieve. So as we look forward, our leadership team is optimistic on the next phase for the MSA Safety journey. Our strategy is an evolution, what's really served us well over the past 5 years. So let's begin our dive into the next phase of growth with a quick update on 2024. So last month, Steve and I provided an update on the first quarter and reaffirmed our outlook for 2024. In the first quarter, we were encouraged with a solid start to the year with mid-single-digit sales growth, expanding operating margins, and a balance sheet that really provides us tremendous optionality. Our view for 2024 remains the same again today. Our sales outlook of mid-single-digit growth matches what we're seeing on the order front across our global portfolio. We still see a path to 30% to 40% incremental margins, and our free cash levels will be close to 100% of net income. So as I consider that outlook, the growth performance in '22 and '23 and compare it to some of the best-in-class peers in the industrial space, MSA Safety remains on a path of differentiated performance here in 2024. So these performance trends in '24 and over the past 5 years are proof points of what MSA Safety can deliver. The results came from a consistent value creation model. And that model starts with our growth enablers, which to no one's surprise, are rooted in an innovation foundation, one that consistently delivers 30%-plus product vitality across a broad set of diverse and resilient product lines that are focused on growing in the secular safety market. As Greg and his team shared today, we spend significant dedicated time with our end users, understanding their challenges and identifying the right solution. Those solutions are then brought to market through a long tenured MSA Safety commercial team, who work with global channel partners to ensure market responsive commercial execution. Many of our best products come from this connection. You don't have to look much further than MSA+ solutions where you see the power of innovation and commercial connectivity coming together. That focus on growth, when combined with our expanding profitability enablers, provides a differentiated level of performance. The MSA Business System is the engine that brings those streams to life and enables long-term resilient outperformance. Our MBS toolkit of common behaviors, ever-improving processes and best-in-class tools are a powerful combination. MBS provides us the foundation to deliver NPD that will generate improvements in margin and fuel sales momentum. It provides us the foundation to our teams to deliver increased levels of productivity, deliver pricing discipline that's focused on value propositions and really enables the functional groups to look at challenges in a different way and remove complexity in our organization. Now the combination of the growth, the profitability and efficiency enablers fuels industry-leading financial performance. We can consistently invest in organic growth, deliver returns to our shareholders and complete high-quality acquisitions. As you've heard several times today, that capability has been on display well over the past decade. During a period of time that can only be described as challenging, MSA Safety has continued to perform. We've delivered 5% growth CAGR despite the pandemic, supply chain challenges and a broad rotation of geopolitical challenges. Our well-positioned business groups serve as a broad mix of diverse markets, which really help us avoid the cyclicality often experienced by many industrials. That growth foundation has served us well as we're really focused on improving our margins over the past decade from a 12.7% adjusted operating margin to 22.2% in 10 years. The momentum, it started in operations and our SG&A cost structure and has really blossomed again, into the MSA Business System, and we still see more opportunity in costs and on the balance sheet. With that said, all of this comes to life in a pretty compelling return on capital employed over 20%. Our consistent growth, improving margins and a compelling level of capital efficiency deliver really a differentiated level of performance amongst industrials. So let's turn to the balance sheet and the breadth of liquidity that's really available to us historically and as we look forward. Our balance sheet has been always an asset, and we've been able to leverage it, and it continues to get stronger and ultimately provides us exceptional optionality again. Over the past 10 years, we've maintained 90% free cash flow conversion that has allowed us to continually invest in the business while keeping leverage levels quite low. I mean, consider the investments we've been able to make to fuel our business. Market-leading innovation that's fueled 30% vitality rates, long-term investments in the connected worker you've heard about today, acquisitions that significantly expand our fire services and detection business. And we've been able to fully fund the legacy liability divestiture. And of high importance here today, we've delivered strong, consistent returns to our shareholders that significantly exceed market average shareholder returns. So as we look forward, this balance sheet strength will continue to be our foundation to drive returns to all of our stakeholders. Our debt-to-EBITDA ratio has been healthy over the past decade, and it's a good indication of what we can do going forward. Broadly, our debt ratios on average will stay between 1.5 and 2.5x EBITDA as we consistently generate cash flow and improve those ratios quickly each year. I'd also note that we have, in the past decade, exceeded 2.5x for a short period of time for a few quarters for strategic actions like the General Monitors acquisition. And you might see us from time to time consider that on a really compelling basis. So with that said, let's think about how we're going to really use this robust cash flow over the next 5 years. So let's start on the left side of the chart, which shows you our history of capital deployment. At a high level, there have certainly been a nice balance to investing in both organic and acquisitive growth and returning cash to our shareholders. We'll certainly start with our focus on organic growth, where about 1/3 of our dollars have been allocated to invest in our customers, innovation, and really building a stronger, leaner MSA. We've also continued to deliver on the important commitment of dividends and share repurchases for our shareholders. As you've seen -- as you may have seen, we just increased our dividend 8.5%, which represents our 54th year of dividend increases. And we also just communicated that our Board of Directors authorized $200 million of share repurchase authorization that will enable us to fully offset dilution pressures from our employee compensation plans and provides us opportunistic reinvestment. We are in the market today under that program. Finally, we have made a meaningful allocation toward 3 acquisitions and the strategic legacy liability divestiture, investments that clearly accelerated our business performance and delivered significant value creation for our shareholders. So as we look forward, there's an opportunity to see a similar balance across all 3 priorities, 1/3 going towards organic growth to continue our innovation, our customer and business capability journey, up to 1/3 going to our shareholders again through dividend and consistent series of share repurchase activity, and then finally, 1/3 going towards M&A, which has been a clear value creator and potentially could play a larger role going forward. So let's take a few minutes to explore that M&A opportunity a bit more. Now it goes without saying, our first focus is organic growth for MSA Safety. The mix of products, the diversity of markets, the strength of our product lines that fuel our business across the globe, it's been our consistent first priority. However, with our focus on the mission, serving our customer, we've also enhanced that journey with a more consistent approach to finding high-quality acquisitions and has increased our impact to all of our stakeholders. So I'm delighted to have Chris Hepler and his team now turning their full attention to organic growth and include acquisitions and capability investments. Chris will partner with the global leadership team and really find the right opportunities to enhance our portfolio. So where will these efforts be focused? Well, our core objective is to enhance the 3 major business portfolios we have today. We continue to seek out strategic bolt-ons and look for really complementary adjacencies. Certainly, we like the characteristics of detection. Bacharach was a great example of a group with strong brands, excellent market position in a space we already had some experience in. Within fire services, there could be a geographic opportunity or a further expansion what a firefighter uses to fight a fire. And finally, as you just heard from Rob, we like head and fall protection. So if there are assets that could accelerate our progress, we'd certainly look at them as well. Now broadly, we have a clear acquisition filter that requires leading market and brand positions, an ability to expand our TAM, businesses, again, where technology fuels differentiated solutions, and opportunities that could further diversify our end markets and the geographic regions we serve. With all that said, we'll continue to be disciplined on the financial returns we target with acquisitions. Generally -- again, we're looking for opportunities that enhance growth and bring accretive margins within the first few years of ownership and enhance the portfolio. As I've said before, M&A has been an enhancement to the MSA story, the results, and we're positioned well to bring the right opportunities forward. So on that note, we have a strong track record of doing M&A by being selective. On this slide, you can see really an assessment of our most -- 4 most recent acquisitions. You understand that we looked at over 50 before we got to these 4. So we have a standard set of strategic and financial criteria that every opportunity is assessed against. So when you bring these deals together, think about the amount of capital we deployed and the value creation, you can understand the investments have delivered really a really strong return. And we continue to look for lessons learned. So recently, Chris and Stephanie championed the process to really deeply dive into these past investments through our toolkit of the Business System and identified several improvement areas that are now being enhanced into our integration toolkit for future deployment. So with that said, let's turn to what that all means. Well, it all starts with what you've really seen from the team throughout the day. We're going to continue to be the leader in premium safety solutions. We'll follow our mission. We'll fuel that with market-leading innovation and continue to focus on markets where our product lines have served us so well. We've also identified growth accelerators that have the capacity really to enhance our trajectory and fully offset headwinds that likely will come our way. But our continued focus on delivering full solutions versus products, increasing our recurring revenue through an expanded focus on service offerings, pursuing connected solutions in higher growth areas like detection, we're going to leverage the MSA Business System fully across the organization and deliver benefits to our customers and to our shareholders. And then finally, we will continue to leverage our cash flow and resulting stellar balance sheet to fuel our business and deliver strong returns to our shareholders. So what does it all mean as you think about where MSA Safety can go over the next 5 years? So first, we foresee really a compelling opportunity to generate differentiated value creation. Yes, we are an industrial, but again, we're not your average industrial that brings a fair amount of volatility. Our resilient business has come through consistently year in and year out. And that's the same mindset we have as we look forward here. Over the next 5 years, we have the growth programs to drive consistent mid-single-digit organic growth, leverage our market position and enhance the journey with our consistent investment in innovation. We will continue to leverage the business system to target operating margin and working capital improvements annually across the organization. 30 to 50 basis points is what we'll target at each of those areas, and we stand ready for whatever the macro brings our way. Productivity, driving positive product line mix, managing inflation, value pricing and really the ability to deliver an adjusted operating margin that approaches 25%. Broadly, this is a platform with an organic EPS beyond $10 with a significant platform for M&A to drive an expansion even further. So all of this is fueled by disciplined capital deployment, leverages over $1 billion of free cash flow generation and a really nice mix of broad debt liquidity we have at our disposal. We have this balance sheet that provides us the fuel to drive organic growth and invest in M&A, and it's just a powerful optionality we have to look at, all again coming together to sustain a strong ROCE, over 20% on an expanding capital base. So as we look forward, we see an opportunity to deliver over $2 billion of sales organically. As you heard today, our detection business growing up to 7% organically, our fire service business growing up to 5% organically, our industrial PPE business growing up to 4% organically. The Business System's serving to accelerate our performance and provides that platform again to continue driving improvements in our margins and our working capital levels. Keep in mind our history. Our adjusted operating margin rate, again, was in the low teens. We went to work to get it to the mid-teens, then the high teens and then 20%. You heard that when we kicked off the day. Certainly, it gets harder to drive the rate further, but we do see that path to approaching 25% adjusted operating margin. These objectives represent really a continuation of our mindset to deliver sustainable value creation like we have over the past decade. So we began this presentation with highlights from Nish on shareholder value created over the last 3 CEOs. I want to bring that view to our shareholder performance over the -- really, the last 10 years. So whether you compare MSA Safety to the S&P 400 MidCap, the S&P 400 Industrials, the S&P 500, MSA has delivered differentiated value. The business has grown resiliently and increased its margin rate close to 1,000 basis points. So my final thoughts are all about where we began. For MSA Safety, it's not about the number, it's about the mission and our culture that is our competitive advantage. Our organization is focused on serving that mission and fueling that pursuit with customer-influenced innovation. That focus drives a strong business model that provides our stakeholders an outperformance opportunity and does so really with a level of resiliency not often seen. That formula is why this business has survived for 110 years, why it's performed so well over those past 3 CEOs and really why it's thrived over the past 10. And while you still see the team here today with a mindset that we can do it again. I will now pass you back to Steve to close our prepared remarks. I say thank you for your time and your interest in MSA Safety.

Thanks, Lee. So first of all, thanks to the team. I hope you heard the passion and got a sense for just how optimistic the team is about the future, leveraging what we've done in the past but continuing well into the future. I think we're well positioned to continue driving value for our shareholders. We feel good about that. We think we've made excellent progress over the past several years staying focused on our customers and on the mission. We're in attractive and resilient end markets and we expect that to continue. We think the innovation engine, which has fueled us for 110 years is what's going to continue to fuel us well into the future as we serve our mission for our customers. And the Business System, you heard a lot about it. You've got some good examples, I think, from the team on how we've utilized it. And really, it's permeated throughout the enterprise. We believe it's just really in the beginning stages. We think there's a lot more opportunity for what it can do to the organization. And of course, as you look at the capital deployment, as you heard Lee talk about, we think that's a great opportunity for us to really leverage what we do and to be more effective in the utilization of capital going forward inorganically as well as what we do from the organic side. So we've put targets out there. We're excited about what those targets show, and we're looking forward to your feedback and the growth story as we go forward. So with that, I think I'll turn it over to Larry and we got another Q&A.

Thank you, Steve. Okay. We're going to turn to our final Q&A. And this concludes our prepared remarks. Please give us a moment while we get [ seated ] on stage here, and we'll get going in a second. And as a reminder, for those of you on the webcast, please feel free to submit your questions online and we'll get to those as we proceed through the Q&A. Right. Let's get started. Rob, thanks.

Thanks for the presentations. Lee, towards the end, you mentioned value pricing in your commentary. And I'm curious how really the company thinks about within this 3% to 5%, how you're -- what you're including for price? And maybe more specifically over the last 3 years or so, as you've had to go out for more price, has it changed your thinking about MSA's entitlement around pricing, particularly in this premium part of the segment that you play in?

Yes. Yes, I'll start. I appreciate the question, Rob. So we have built really a nice capability around pricing over the past decade as part really under the MSA Business System banner, and it served us well, right? And it's really a tool that we've built a team around. It's deployed across the globe, it's deployed in all the businesses. So it's enabled us to really offset certainly what's been a period of high inflation. But I think we're now moving into this more period of a normalized inflationary environment, and that's one certainly where there's kind of a range of options on the pricing spectrum. So I think we're well prepared. As we look out over the next 5 years, I think a safe assumption is more moderated levels of inflation kind of between 1% and 2%. And we think between all the different tools you have and the pricing toolkit, we'll be able to mitigate and deal with that inflation. But I also think we're ready to respond no matter what happens in the market. There's some elections that come up that could change some things. We know we've built a really nice team around the globe, and we've proven that we've been able to navigate that. So I think we're still in a very good place, Rob.

Just to follow-up a question real quickly on fall protection. You've been in this status of #3 player in the market but gaining share. Could you just update us on where you think that share gap stands today, how it may have changed over the last few years? And then I'm curious if, you're obviously innovating in fall protection, how your top 2 competitors are -- is any 1 or 2 or both innovating -- trying to innovate at the same pace, would you make a distinction there?

Yes. Thanks for the question, Rob. So if you think of fall protection, there are -- there's a number of different participants in the market globally. Where we see that space, you can kind of parse it out 2 ways. There's really 3 bigger players that participate and we're 1 of those 3. We are third right now in market share. And then there's a lot of other players in the market. There's some right behind us, but by and large, that bottom 50% is -- it's a long tail that's pretty broad. And we have participated in a market over the last, gosh, we -- I think it's 2016 we determined we're going to make that core. And once we determined that was core, we said that's going to get the same innovation investment resource that some of our other core categories got. We acquired Latchways for the mechanical side and we've been reinvesting in that business. So our market share, we're still third but we're now double digits in our market share. We've doubled that market share over the last 5.5 years, 6 years, I guess, because that included COVID. And we're super bullish about the opportunity to continue to grow. Now we've got in the market scale that really previously, we were trying to get people knew the brand of MSA. Fall protection wasn't what they really kind of leaned into in MSA until the last couple of years. And our brand recognition is now at the top of the game, even with the other competitors. And how they're participating? We got strong competitors. We've got a couple of big competitors that are global in nature. They continue to be really strong competitors. But we do feel like where we're innovating, the things that Rob talked about, are really creating a gap in product capability. What stopped us from growing faster, quite frankly, is our supply chain issues and our ability to deliver. This is a product category where you need it now, right? Its -- helmets are very similar. We've got great scale in helmets and we've got great coverage because of distribution. But with the challenges we've had, it's really -- we've had these stops and starts where we've gotten product to the customer, and then we've had supply chain issues and we can't deliver in a timely manner. The unique thing for us and what really makes me pretty passionate about this is most of the times, when you can't deliver to the customer because you've got a supply chain issue, they don't come back to you, right? They get something else and they say, "Okay, well, I got this from this other competitor", and they're satisfied. With fall protection, every time we have product available, they come right back to us and they continue to tell us, "Your brand, we trust what you guys do here." So we've -- that's why we've done that footprint rationalization and changed our strategy and really have a center of excellence we put in Mexico to really improve our delivery performance and we're following that up with the supply chain. So we're equally excited by what the next 5 years can do on fall protection, too.

Thanks. Let's go to Stanley over here, please?

Lee, could you guys talk a little bit about the margin targets you framed down? So the 23, 25 how should we think about that split versus the International business versus the Americas business? And then is this going to be coming from gross margin expansion or is it just kind of leveraging the cost structure?

Thank you, Stanley. So we spoke just together in the same place about 30 to 50 basis points of operating margin improvement being targeted each year. And I think similar to what you've seen from us over the last several years, it's a good balance of both gross margin and SG&A opportunity. It's certainly something we look for everyone to participate in. We've made a lot of progress. If you look at -- go back to the history of where we've moved from 12% to 22% operating margin, really, we saw that come to life across the board. So that came across in the Americas, in International markets. And then if you double click down, you get into things like Latin America, Latin America is really almost up to line average now. So I think overall, there's opportunities, there's still plenty of opportunity out there. You do have some parts of the world where maybe the competitive set or scale is not quite where it is in the strongest places they are. There's going to be that dynamic and then maybe there's a little bit of a cost structure in some parts, like Europe's going to be a challenged place. We love the progress. We think it will continue to improve. But I think most people have found that Europe doesn't have the same operating margin at the end as others. But again, we love the growth there. We love the progress we're showing there as well.

And then maybe a little bit more color, I guess, on the leverage assumptions that are based within these numbers, right? I mean, if you could do a 90% free cash flow conversion off of $11, you're basically close to that $1.5 billion. That's before you'd even lever up to 1.5, 2x, whatever that number is. How should we think about leverage that you guys want to comfortably run with? Is it opportunistic around M&A? Any color there would be great.

Yes. No, I appreciate the question. So to your point, good math. You look out on those targets and U.S. cash flow of about $1.5 billion over 5 years. And again, I'll go back to the capital allocation I talked about earlier. 1/3 of that certainly goes to organically reinvesting in the business, 1/3 going back to our shareholders, and then 1/3 for M&A opportunities. So you're right, just that alone is an incredible amount of optionality for us to utilize on the M&A front. But as you look at kind of some of the things we're interested in, whether it's in the fire space or in the detection, and we even talked again about things like PPE and the multiples you got to pay, you're going to need that cash flow and some level of debt. I think I want to try to give color out there that 1.5x and 2.5x is a comfortable zone. We can -- the P&L, the balance sheet can support that. Our challenge will be to find the right opportunities at all to meet all that criteria. But I think our message today is we have that capacity. That's where the bolt-ons. And a bolt-on today is different than a bolt-on than what it was 5 years ago in terms of size we can do. And then you really look at these near neighbor opportunities that we're also interested in the world. They are really like natural extensions, increases the TAM that we planned. I think you got right to the core, to the heart of it. We have more opportunity in this area than we've ever had.

Thanks. Ross, please?

Thinking about the Detection growth, international piece has historically lagged the Americas. Anything we should read into that? And how do we think about the greater market opportunity going forward? And then just given that detection is expected to be a bigger piece of that mix, what does that imply for the margins and just looking for the overall resiliency of those targets?

Ross, can you repeat the first? I'm sorry, I didn't catch it.

Just your expectations for International versus Americas on the detection growth?

Okay, on Detection specifically. Yes. Thanks for the question. So when we think of Detection, you probably noticed strategically this time on Investor Day, we focused on product market categories. We didn't focus on regions. And that's because we believe we can participate and win globally with these 3 categories. So when you think Detection specifically, the markets there, I'm going to parse it out a couple of different ways. So I'm going to start with what we would call infrastructure, the fixed -- fixed monitoring, really, categories. And we're really -- we look at that internationally as a real growth driver, an opportunity, especially in the Middle East and Asia. The Middle East infrastructure spend continues to go up. We think historically about energy and oil and gas in the Middle East but there's a lot of hydrogen work going on there as well as carbon capture, right, the CCUS, carbon capture, utilization and supply, as they're trying to capture that, that technology has been out for a little while but they're now really leaning into applying that technology to make sure that they hit certain goals that they've set. And we've seen that play out well for our business and we expect that to continue in the hydrogen space. So you've got this energy spectrum that's fairly broad. And when you add those all up, it's a pretty good story from a growth perspective over the next probably 7 or 8 years, at least. And the Middle East is going to play in that. Asia Pacific and then Latin America and North America as well. Europe, we think, is pretty stable in that regard. And then when you get to the portable detection, this is an area where we've already seen strength outside of the U.S. for this ALTAIR io 4, this connected device. We've seen some really nice progress, and we just again have been launching this globally. We started in the U.S. but getting these approvals across the globe because of the cellular coverage, et cetera, we've just been knocking through. I think we're in over 60 countries now. LAR, as soon as we got it out there, we got this big customer that said, "I really want to move this way," and we got a really nice win there. We just had a nice road show in the Middle East. The team was in Saudi Arabia and the reviews were fantastic. So again, I would say Detection overall, we're very bullish internationally. I think the growth will probably come more Middle East and Asia than Europe. Europe is more of a stable business. They like the technology. That Europe -- if I could just swing a little bit, Europe is going to be a focus on Fire Service share and Detection share.

And then just maybe parsing out the framework on the 3% to 5% market growth, it looks like implied 3% overall market. You had a couple of points of share in price. But then we also have this digital narrative and recurring revenue stepping up to, I think, 20% of sales in the coming years. I'm not sure that overlaps with the share, but I mean, maybe just help us conceptualize?

Yes. No, I'll do that. You got a pretty good math there, Ross. So just in case you didn't hear the question, just, hey, you think about that revenue outlook, what's the dynamics within price and GDP and market share. So it's a similar that we've talked about in the past with the mid-single-digit growth. There's probably a point or so, price 1 to 2 points, depending on what's going on with the inflationary environment. Certainly, GDP, certainly some, I'll say, depressed views of GDP over the next 5 years. But normally, that might be a little bit higher. And then the rest of it really goes to just what we're doing through innovation and commercially to win in the marketplace. So it's the same mix. I think the GDP is probably a little bit of the difference maker as you look out for the next couple of years.

And we had a question online that maybe build on Ross's question around recurring revenues, maybe where they are now and what they could look like going forward in the future?

The question is on looking...

Where are we now and where can they go?

Recurring, recurring revenues. We're about 15% right now on recurring revenues. We're not going to put a number out there for the future yet. And part of that is because what we're trying to do is make sure we provide our solutions the way the customer wants to buy. I think Greg hit this earlier. We think the industrial space is more mature and probably will make that transition a little more quickly. They'll adapt that technology. We've seen a bit of a pull, right, when we've had these discussions and showed them the technology. Fire Services, a very traditional market, high interest in the technology but how they apply it and use it, at this stage, it's fairly early in the game. Some of the bigger departments, we looked at this and see this as something that helps us win not by itself but it's one of that -- really the suite of different capabilities we have that then we're able to win some of these larger opportunities. But I think going forward, we're going to see that appreciate. The question is the time line that it happens. We've studied other firms in how they've done this in other types of businesses. And that time horizon is different. So we're very aware of that and we're very measured in how we go after it. We're going to have the suite of technologies to make it happen, but I think the percentage is going to be -- it's going to be up to the customer how quickly they adapt. I don't know, Greg, if you got anything else you want to add to that.

No, I'd just add, that 15% is really our standardized recurring parts, services, our contractual subscriptions, all of that, and we see that growing at a much faster pace than our standard business because you have adoption and uptake but then you also have market expansion on top of that. So we really do see that growing nicely over the next cycle.

Thanks. Another one online. It looks like you've taken a step forward in terms of growth with your long-term targets. What has to go right to hit these targets? And if we fast forward a couple of years and you missed these targets, what went wrong?

Well, we have -- we put a strategy together and define some targets that the team has high confidence in and believes in. So I would start there. We feel good about the targets. Obviously, it's the first time we put targets out. So we felt this was important to define them and share our perspective in a way that showed you confidence in where we think we can be. So certainly, we expect the execution requirements that some of the team laid out today as part of that story and how we do that. But as we said earlier, certainly, we know that the economy can do different things. We know that based on what we've seen over the last 5 years. So there's possibilities that something different would happen. If that didn't happen, if the economy was a lot tougher than we think, again as we said, we've got a very resilient business. It's shown its ability throughout economic cycles to really be able to weather those storms. And we also know how to pull the right levers. We do a nice job. The team is very focused on making sure we keep the balance sheet intact, and we would do that again if we needed to.

So another question looking for additional color on the M&A assumptions, which obviously feature a lot of the presentations today. Can you maybe talk a little bit about the M&A pipeline multiples and what we're seeing in the market?

Yes. How about I start, and then I'm going to hand it to Lee to close it out a little bit? First, the 3 categories we play in, right? There's 3 product market businesses we have. Those are -- we're staying within those swim lanes, so to speak, because we feel like there's just a lot of opportunity to participate in those. And we view the markets as very strong and providing a lot of opportunity for expansion and growth. So it's going to be in those spaces, first and foremost. We're excited. Lee's super excited. I think Chris is, too. We've got Chris dedicated, which gives you a perspective on our belief of the need for M&A and the capability we have, again, in a disciplined way. But yes, we're -- I think we think that it's an area that we can grow. And why don't you talk a little bit about what's the sizing and the criteria?

Yes, I'll do that and maybe just get a little bit of a market update as well in terms to the question. So as we've talked about today, M&A has been important, has enhanced the journey for MSA Safety. So we've had really the entire leadership team has some relationships in the marketplace that we leverage and we have, obviously, our dedicated M&A team. And we're always keeping the funnel warm. Certainly, the last year or 2, the numbers speak for themselves. Not a lot of transactions have occurred. But I would say over the last 9 months, it's a lot warmer. So conversations are occurring. People clearly know we're interested and we're going through our valuation process. We've been through some processes. I mentioned earlier, we're disciplined and they got to hit all those boxes. So I think we're optimistic. I think everyone -- I think I heard this quote even this morning, the dollars are increasing in the M&A space, the number of transactions are still lower. But that's a good place to start because that means there's going to be more coming. So -- and I think just again, as Steve said, we've oriented towards this, whether it's the resources we're putting into finding opportunities or making sure we're prepared to do the integration well, as I mentioned also. In terms of sizing, I mean, I would start off with, look at what we've done in the past, right? We've done these nice bolt-on acquisitions. You could certainly size it a bit higher because we're a larger group. The balance sheet is even stronger than it was in the past. But I still give you those guidelines on leverage on purpose because it defines who we are as a safety company and kind of the level of risk and the level of how important that balance sheet is to us to give us optionality. But I said there could be some scenarios like General Monitors. General Monitors, we went into low 3s. It checked every box we're looking for, and it really helped accelerate our journey in the detection space. Again, we were already in the detection space. It wasn't a surprise we did that, but it really accelerated our journey. So -- but it would be within those financial thresholds.

Another one for Stephanie. You've had good growth in the Americas segment over the past several years. Where do you see the best opportunities going forward? And what should we expect in terms of margins?

Sure. So I'll tie together a couple of the things that we've been talking about this morning. The Americas certainly has had a very strong position and strong track record for many years. And I'll take this generally from a product portfolio and from a geographic point of view as well. If we think about this generally, we see opportunities in top line growth and margin expansion. Speaking to some of these questions over here, first, just GDP. I mean, your basic market growth throughout the Americas provides some of our opportunity to grow. And that's before you get to possible TAM expansion, pricing, mix sophistication from that perspective or before you even think about the point or 2 that we can be taking on share. And the time that I've spent in the Americas, talking with customers, talking with partners, I like the position of strength that we have in our strong market share positions and the strength that, that allows us to be able to move from, and strength of brand recognition, strength of scale and reach, strength of customer intimacy. So that's actually, to me, a very good position to continue to grow and to have all of those different levers between market share, GDP mix, the TAM expansion and pricing opportunities. So with that portfolio, I continue to see good opportunities for profitable revenue growth generally across the Americas. From a product portfolio standpoint, we also see opportunities across each of these lines. In particular, Bacharach, you heard a little bit about refrigerant detection. That is fueled by regulatory tailwinds in multiple geographies and that includes Europe as well. Our connected portable devices, we have a considerable runway here. Steve talked a little bit about some of those geographies where we're announcing these products. Customers are saying, yes, we want this and we want it from MSA because you're a brand that we trust. If I look at detection, continued opportunities in that energy security and the clean energy applications and energy transition. Serving all of our fire departments throughout the Americas, and we have continued runways, particularly in Latin America on fire detection and some of the larger departments down there. Fall protection, we certainly talked about this morning as well. And then finally, I see some opportunities across the 2 continents in turnout gear. That's a place where we have replacement cycles but also the ability to continue to win share and serve all of those fire departments that know us from fire helmets and our breathing apparatus as well. And then in terms of other margin expansion, the productivity improvements that we have an opportunity there, we'll continue to be able to drive some of those efficiencies through our Business System behaviors. So I really see a lot of opportunities and a lot of different levers that make me excited about our runway.

Great. Just a couple of more online here. But On the Fire Services presentation, you showed, obviously, U.K. Fire Brigade and the West Coast win. Are there more pillar cities out there over the next few years to keep an eye on?

Yes, thanks for the question. I'll just parse that out a little bit. There are -- I would say when we look at the globe, there are certainly some pillar cities still in the Americas that are front and center over the next few years within this time horizon, which we're participating in and feel like we have a great opportunity to compete. International, over the next 2 to 3 years, we expect to see a lot more opportunities because of our M1 that's bringing to bear our chances to compete in some of those things. So you're going to see some of those in Asia over the next 24 to 36 months even and some in the European theater as well. So we are expecting to see more pillar cities. I think in the international market, the comments that Bob Apel talked about with the pillar city and the ability once you have that city to be able to participate in other adjacent departments and get those wins is probably even more important. And we've got -- when you think of the U.K. when we were able to win London and have that customer, we're really fortunate and we've got a great relationship we continue to build with London. But the amount of wins we've already had for a country where we had no participation before London's win has been fantastic. So we expect that to play out again in some of these other big opportunities in the International segment. In the U.S., in Latin America again, there's some not as many relative to the scale of the business but there's some really nice opportunities coming forward.

Yes. If I could add, in the Americas, we have opportunities with pillar cities, and we're really proud of the pillar cities that we've been able to win, earn their trust and continue to serve. But we really think about this as G1 for all. We have the ability to serve those large departments with our most sophisticated products, the top technologies with G1 and certain connected devices and doing something pretty custom for those top departments. But for even the smallest volunteer departments, there's a modularity with the M1. There's the ability to have certain features that are an essential G1 that might not be all of the bells and whistles but are still available that are sophisticated technology and add a strong margin profile that we're able to play at any size of the department across the Americas.

And then maybe the last 1 here. What part of the investment thesis is least appreciated or most misunderstood by the market, maybe something that came up today that you want to double down on?

Yes. Thanks for the question. I think we talked a lot about the mission. I would start with the mission because it really enables us to have this really inspired and dedicated team focused on the customer. It's -- and I didn't start with MSA but as I've been here, it brought me here, brought Lee here. You think about the talent we have and their passion to serve the customer. It's really unique. It's a team of associates that every day are going to do everything they can to support the customer, and that helps our business, right? It helps the customer because we protect that customer with our solutions. But it really, I think that's something that the reason we talk about that so much is just how innate it is within the buildings of MSA and our culture. So I would say that would be first and foremost. I also would say that number two, this transition we've made into the solution set is not to be taken lightly. And we believe that this is where the industry is going and our ability to pivot, which we've been doing for years with some of the technology we've been creating. But what we think the market is going to do with that over the next 5-plus years should be really good for the business.

Great. Okay. Well, that concludes our Q&A session. I want to thank everyone for your time today. We're excited about our positioning and the journey ahead. We hope this was an informative presentation and event for everyone with us here and those who are on the webcast. Thanks for joining us, thanks for your ongoing support, and we look forward to connecting with you again. Thank you, and have a great day.