MSA Safety Incorporated (MSA) Earnings Call Transcript & Summary

Okay. There you go. Hi, everybody. Welcome to the webcast here. Really happy to have MSA Safety, Lee McChesney, Senior Vice President and CFO. We've got Larry De Maria, Executive Director of Investor Relations here in the audience as well. I think -- my name is Amit Mehrotra. I'm the electrical equipment multi-industry analyst here at UBS. It's been my pleasure to kind of learn about MSA safety for the last couple of weeks, really, really a company with a lot of history, over 100 years of history with great technology, great products. And it's just been a pleasure to kind of get to know this company over the last couple of weeks and really happy to dig into kind of some of the investment points here. We've got a few minutes or maybe 10 minutes of prepared remarks going through presentation, and then we'll dive into Q&A. Lots to talk about with this company. So Lee, thanks for joining, and I'll hand it over to you.

Thank you. Thank you. All right. So again, so number one, I appreciate the invitation a couple of times now, we've been to this conference. And I'd like to take just a few minutes to walk us through MSA, little bit of our mission and why we think it's such a good investment opportunity from a long-term perspective. So before I do that, just obviously required to talk about cautionary statements on forward-looking statements and our non-GAAP measures. And then finally, this session is being webcast, and it will be posted to our website after this today. So if you want to digest that, we encourage you to do that as well. So let's talk about MSA for just a couple of minutes here. And it starts, first of all, with our mission. And our mission goes back to 19 -- in the 1910s here when the company was founded. And that mission is simply this, that men and women go to work. They work in safety, they, their families and the communities really may live in health throughout the world. And that was created with the company's foundation. And it's still what we rally around today 110 years later. We service that mission really through a leadership position in industrial safety and that is driven by innovation. That is one of the key differentiations for us in the marketplace today. Now again, fast forward to, we just celebrated 110-year anniversary. We wanted to share this year, we shared what we've really done in terms of how we keep people safe around the world. So we communicated 40 million workers annually are protected by MSA Safety, and certainly go back to the origins of that mission was created quite a build from those original origins and keeping people safe in our mind. So a little bit of a recap on the company. So if you go backwards on a 12-month basis, about $1.8 billion in sales, we made significant investments in R&D at over 4.5%, almost $80 million a year going to R&D. And that drives a very strong product vitality, certainly for an industrial business of 37%?

And that's measured by percentage of sales that are new introduction over what period of time?

Over a 5-year basis.

Got it. Okay.

And so that focus on innovation I've talked about, and then also our business system, which really focuses on driving productivity, really brings together these really strong gross margin, operating margins, certainly some really good values here from an industrial perspective, and one of the things we'll talk about throughout our session today is also just the consistency and the resiliency of that performance as well based on just how the business is made up. So that's the kind of the P&L side of things. Certainly, a really strong balance sheet, really good cash flow perspective today. Net leverage is below 1. We do that obviously with even digesting several acquisitions over the last decade as well. So we're very disciplined from a capital allocation perspective. Certainly, if you look at our history, good performance organically through acquisitions and then certainly what we do in terms of returning dollars to our shareholders. So quite disciplined, really about 1/3 of it goes into innovation and organic growth, another 1/3 goes into acquisitions and another 1/3 into really a very strong dividend history, and then we certainly do buy back shares to offset any type of dilution and things like that. So that's the business in a snapshot. Now again, very, very diverse. So you see on the slide there, about 70% of that is in the Americas, but that also includes Latin America. So about 53% is in the U.S., 47% really -- rest around the world there. Our product category has been very focused in these areas in the last 3 -- last 10 years. And it's led by fire service, which is almost 40% of our sales, detection which is about 36%, and then Industrial PPE is 25%. And again, these are 3 product categories we're really focused on the last 10 years, has really been a differentiator in terms of how the company has performed over these past decades.

And I assume detection is growing faster with higher margins. Fire safety is kind of stable. What's the margin difference, not to interrupt your prepared remarks?

It's okay. It's -- it's interesting. Detection has all the attributes to grow at a faster rate. So just the TAM itself in terms of what's going on there. Certainly, it's a good margin category for us. It's our highest. But quite frankly, our focus in all 3 of these are high-margin categories. That's how you end up with 48% gross margin, but certainly, detection leads the way. But Fire has been a growth catalyst for us, and has also benefited from some really good acquisitions as well. So probably, if you asked us 5 years ago, we might have said detection was going to be the largest segment and then some really good things happened in fire services organically and through acquisitions.

And when I look at like Honeywell or 3M, I was doing this a couple of days ago and like looking at some of their PPE business, they sell a lot of the same stuff you guys do, but I think the differentiator here is that maybe they're a little bit more higher volume, lower tech and you guys are kind of deeper on the technology side. Can you talk a little bit about that?

Sure. Sure. I mean just overall, I mean, innovation really is the driver for everything we do. So you're right. In these 3 product categories, we certainly lead with innovation. And as a result, really in the product lines that we focus on, we have a strong kind of leading position, #1, #2 in many cases. And you're right, that's a great description of, we focus on the end user, what do they need, what's the solution, and bring that to marketplace, and that's really what we're known for. That's why people turn to us often times. In many cases, they need to solve a problem, you're addressing a safety issue. And we're seeing, as many cases, having really some of the best solutions out there.

And on the Detection side, can you break down fixed versus wearables and how that's growing and some of that? Yes, again, sorry.

No, it's good.

If you want to say your prepared remarks.

You've probably have seen the slides a little bit as well. So this is actually perfect. So let me give you a little bit of background there. So again, real 3 product categories, as I just mentioned here. So detection is certainly a growing category we just talked about, really benefits from some really strong organic growth and acquisition growth over the past decade, and really 2 orientations to that. So number one, you think about detection connected to a worker, that's what we call portable solutions and then think about Detection that's really about critical infrastructure, attaching to facilities and things like that. That's what we call our fixed business. The fixed business is about 2/3 of Detection today and the portable is about 1/3. And the portable also includes our connected worker platform, what we go through with MSA+ today, it's really a nice high-growth category. So I'm sure you'll ask about it in a second as well. So certainly been a nice driving category there. Fire Service, as we just talked about, still our leading category today, head-to-toe solutions for firefighter. That's certainly been a benefit again from a good organic growth, but also through acquisition.

A lot of that rely on some funding. And can you talk about kind of the outlook for the funding piece?

Yes. So in the fire service category, certainly, we sell to large departments and then municipal departments all over the world. And certainly, funding from a federal level, local level is important. We have -- historically has been and it's been very consistent. So really, around the world, no matter which way the leaning administration is, a lot of support for firefighters. I mean I think the way we've seen it is if there is a good environment, people want to fund first responder, certainly firefighters. And then if there's even a bit of a challenged economic cycle, is a good place for -- to invest in, good place to put dollars. And so as we look forward, we think that will still continue really no matter what happens in the administration because there's just broadly a lot of support here. And for us, what's nice about that is it adds to the stability, this diversity of the business. So I'll show in a chart in a second here. If you look back in time, this business is quite steady, and it's a nice foundation for the business. It's a good cash business, enables us to really stay on mission with safety. We're not having to deal with as big a swing as you can get in some other industrial companies and things like that.

Got it.

And then finally, Industrial PPE. So certainly, the largest 2 pieces of that start with our iconic industrial head protection.

I have a hard hat, by the way, made by MSA, great technology, which is one of the best hard hats I've ever had.

Well, that's perfect because a good amount of what we do there is also branded for end users because it's obviously part of their safety protocols to do that. So leading position there. Iconic V-Gard, you look on a construction site, really anywhere, except for residential, you're probably likely to see a V-Gard hat today if you take a look. We've also focused on really, again, following our end users, fall protection still one of the top issue on a job site. So we really brought our innovation mindset there as well, and we think it's a big growing category. Today, that's the one business we are in a leading position, but we are seeing almost near double-digit growth there consistently over the last 5 years as we really double down on our fall protection business. So that's a nice growing category as well here. So if we pivot just a little bit, I just want to give a quick update on '24. So no change in our outlook. Back in September or in October when we released our 3Q results, we gave a bit of an update. And I really look at '24 as example of really the stable makeup of the business. Obviously, it's been a dynamic environment. You've had lots of conversations. We still have really persevered quite well. Here in the fourth quarter, we're looking at mid-single-digit growth. The orders that we saw early in the quarter still playing out that way.

And the full year low single-digit growth, a little bit misleading because -- I mean, I always look at this company interestingly like a GDP plus plus plus business. But then you have obviously that big Air Force contract that's kind of messing up the comps a little bit. Can you talk a little bit about that?

Yes. So I mean, I think actually, the fourth quarter is a perfect example, right? So we're looking at mid-single-digit growth, and we're going to comp on top of mid-teens from last year. So really, you think about the whole year, we have low single-digit growth on top of almost mid-teens growth from last year. So we're actually quite happy with that. And you're right, we have some large wins over the last several years that have been helpful and great. And then to your point, you can get some lumps here and there. But as I'll show you in a second, that is part of the business. But in the end, it's really the diversity of all these end markets and all these different places we serve that give us this nice stability. And so I think the last thing I'll just say on here for '24, again, no change in outlook. And beyond that growth, still looking at really strong incrementals, kind of the high end of 30% to 40% for the full year and cash flow still being in that kind of 90% to 100% zone for the year.

And so the growth algorithm outside of maybe this comp issue, is it mid-single -- mid- to high -- a little mid-plus single digit? Obviously, you're converting at 30%, but so there's GDP, there's pricing, there's maybe some market share gains, kind of dissect that for us.

Yes. So yes, the investment thesis in us is definitely about mid-single-digit growth, and that's from the detection category, has the opportunities to grow a little bit faster than that. Certainly, Fire overall depends on the large wins and things like that, is going to be in the middle, and then you can get some swings in Industrial PPE. You look at a year like this where you've got a little bit more slower broader growth, you could have a little bit lower growth there. And then you get into more of a boom cycle, lower interest rates and things like that, Industrial PPE could be actually a nice positive. But on average, about mid-single-digit growth. We talk about incrementals between 30% to 40% and then very strong cash flow, very consistently delivering 90% to 100%.

Is there an opportunity for the incrementals -- I mean, international margins are obviously lagging here, domestic margins, talk about kind of the opportunity there, and then I know in Europe, you maybe went from like a model where you're everything to everybody to more focused. What type of opportunity? Are we through the benefits of that? Or what's the opportunity prospectively there?

So yes, I'll mention this in a second. But just I mean, broadly, a lot of progress in margin over the last decade, certainly the last 5 years. So we show almost 1,000 basis points of operating margin improvement, and what's great about that is certainly the Americas team has done a wonderful job. They've brought their margins, in many cases, up to the high 20s, low 30s. But the international business, like I think a lot of industrials has challenges just based on things that happen in Europe and the infrastructure you need in different countries and things like that. We've made a lot of progress. Our industrial international business has moved from single-digit operating margin to the mid-teens. So probably one of the most popular questions asked is, can the international get to the Americas level. And I think it has certainly equal levels of improvement, but I think there will be always some difference just because of the nature of the international business versus the U.S., particularly the dynamics of what happens in Europe. But overall, as we look forward, we really see some consistent 30 to 50 basis points of operating margin opportunity. That's going to come from the business system I mentioned earlier. Certainly, we've done a nice job of managing inflation and price. And then we are -- we have innovation and innovation that's helping fuel the businesses. Obviously, that's a nice help from margins and also there's been an orientation towards the detection and detection is our highest margin category. So we consistently, just by strategy, have a nice positive mix element that comes out as well.

And I was intrigued by that product vitality. I think it was almost 40% or something like that. And that is such a key -- just in my experience, companies that constantly invest in R&D and have an innovation funnel. Obviously, that translates directly to growth. Is that a high number for you guys? Or is that more normal? And as you look over the next couple of years, do you think that the innovation pipeline is more robust where we can actually grow that number? What's the view there?

Yes. Well, I think number one, if you look at us, we are a pure safety company. It's 100% of what we do is how we think about it all day. So I think one of our biggest advantages over the last decade is no matter what's happened, economic cycles, COVID, we've continued to invest in innovation. And so as I said today, we're going to spend over $80 million this year. We spent a very similar amount during COVID year as opposed to like trying to pull back because we're trying to avenge some type of massive swing. We still had a pretty stable growth environment in that year, which enables us to continue to focus on innovation. So I think the trick for us is the consistency. We drive that vitality rate, and we bring products to market, and these products become 5-, 10-, 15-year products for us, so certainly, where you're putting more dollars into certain categories, that's certainly a process we've gone through just as we consistently review the portfolio. So detection certainly gets a higher ratio than that 4% today. We spent a lot of money, for example, on the connected worker, which has really helped drive growth in both industrial, and we're seeing some really nice opportunities in firefighters over time as well. So I think it's the consistency and the discipline. But again, it's how we service that mission is we are known for having, in many cases, the best solutions out there and you only do that by consistently investing.

And there's also like -- you think about innovation in products, but there's also, I think, innovation in kind of how you guys go to market. And one of the things that I was struck by, I was talking to Larry earlier on was really the subscription model in detection and kind of the SaaS approach. Can you just dig into that a little bit like what the margin profile of having a more recurring stream of business and what that actually means for you guys?

Yes. No, absolutely. I'm actually going to pivot here just have this as a backdrop for you. So that highlight there is a key part of what we just back in May, we did an Investor Day. And we identified, obviously, we want to still stay in these secular trends in leading with industrial safety. And we picked these product categories, they've served us well over the last 10 years. But we've also identified these really nice growth catalysts. And certainly the connected worker is one of them. And so what we've been doing for the last now probably almost 7 years is investing in this connected worker strategy, and we see opportunities that can play out really in all 3 of the product categories I highlighted. Certainly, firefighter today, every SCBA we sell is connected. So that data is being captured. We can turn that into productivity, analytical solutions. We can help them do tracking of their items and really just overall inventory control. So those are features that are out there today. In the -- even in the fall protection space, we've had work with large distribution clients really working on how do I make sure people use that safety gear because one of the challenges with safety gear is make it comfortable, but also make sure they're using it. So imagine a fall protection device is connected and tells people whether they're using it. If they're not using it, a piece of equipment won't work or something like that. So all that's been going on over the last 5-plus years. But probably the fastest adoption has been in industrial. So today, we have a product, for example, called io 4 and that is a portable detection device that's attached to the worker. And we have the actual detection unit, and now it's also connected to our grid software platform. So imagine a facility, an EH&S manager trying to oversee 1,000 employees and making sure that they are safe. They are now on that -- on scene, and instead of that unit before that used to just be attached to them, they kind of would wear for the day, and it was kind of really up to the employee to follow the directions. It's all connected. So I can see if I'm in a certain area of the facility, I'm picking up maybe trace amounts of some type of contaminant. Maybe not enough that it's a safety issue that you stop doing that, but imagine now I have the power of all those employees going all over the site. So I have a great solution, but now it's fully connected, and I can start building out these additional insights to help them from not only a safety perspective, but really from a productivity perspective.

It sounds like a ways for detection.

Well, and it really, again, solve the safety solution. Compliance is really important, recordkeeping and compliance is really important safety, but also there's some productivity savings. In the old days, someone to get a device, they'd have to check it in. Today, you can tap it to your badge. I mean -- so we're seeing really a rapid acceleration of adoption for us. We're just a little bit over 2 years into this, and we're seeing really a strong adoption rate, and what we're doing is we're also selling it on a subscription basis. So you can buy the unit and then turn on these features over time or you can come to us and sign up for a 3- or 4-year model. We guarantee performance. If there's any issue, just get a replacement, and we're seeing to date, really a lot of interest in signing up for that type of model, and we're seeing some really good incremental business because we have seen new customers coming to us that we didn't necessarily have before just in our traditional units.

Can we talk about the short-cycle piece of the business a little bit? So on the Industrial PP&E side, obviously, you have great market position in hard hats and fall protection, maybe another growing area where you're taking market share. But I assume like a lot of your customers, when they need it, they need it. And so that creates little bit of challenges from a stocking perspective, especially in an industrial environment that's a little bit weaker. So one, can you talk about, have you seen any trends? I mean we're a global industrial conference here. You guys are a little bit different because you're so critical to every company, safety is the #1 priority because the cost of being unsafe is just so significant. So it's a little bit of an isolated kind of dynamic. But anything on the short cycle side that you think is notable? And how do you guys manage kind of the ability to kind of deliver on big orders that come very quickly on the Industrial PPE?

Yes. No, let me answer your question directly first. So for us today, about 25% of the business is what I'd call more shorter cycle, and that number used to be like 40% plus, but what's really happened is these other parts of the business have grown faster. This business has still continued to grow, but it's just become a smaller percentage. But what we're seeing across the globe to your question there is surprising resiliency. Again, I think over the last 20 years that you and I can imagine, you kind of see the cycle where it is today, and you'd expect a bit more a falloff. We've seen it hold. Now keep in mind, we obviously are selling safety products. Again, this is the nice thing about the resiliency of the business. It doesn't really matter what the economy is, people need to be kept safe. Maybe people even think about protecting the workers even more after COVID than they did before. But we are seeing -- just to give you some insights around the world, certainly in the U.S. where the unemployment levels are still quite low, we're seeing maybe what would have been something that would have been a bit more negative is kind of more flattish. And then certainly, you go into Latin America, a combination of, it's mix, but we're doing a nice job ourselves just in terms of winning share. So we're seeing actually some nice positive numbers there, and then if I move over to the international market. Certainly, we saw the slowdown in China that a lot of people did see, but we've now, I would say, lax kind of what was this year, a long period of decline, and it's now a bit more stable. I still think Europe is challenged. We're doing some good things to drive share. But certainly, when you look at the core market, it's a bit negative on those more short cycle times today.

With all this, obviously, one of the big topics for us in industrials in the U.S. is this kind of reshoring of industrial manufacturing capacity in North America. I don't know if it's U.S., but it's North America, maybe it's more U.S. prospectively. Is that a huge -- I mean is that -- we haven't necessarily seen the output of that because the construction capacity is actually being put in place as we speak. But is that -- as you guys think about kind of your longer-term opportunity, is that something that is really top of mind for you? Or is that something that, yes, it comes great, but it's not necessarily something that we're necessarily hanging our head on in terms of prospective growth?

Yes. I think a couple of things. I mean you bring up -- that's -- generally, that's a positive, right? So if you go around the world, there's certainly different levels of dollars put into safety. Certainly, more Western markets spend probably more per worker. So I would say that equation is changing over time. You see that number growing really across the globe universally. I think to your point, whether it's onshoring, whether it's infrastructure spending, those are positive things for us. Maybe that's also part of why we see some of those short-cycle things not seeing the same pressure maybe we would have seen in the past. And as we look forward, I think trends like that, I would just say broadly, safety is just a secular trend as well. So you mix that combination together. I think it's been a positive for us. And as we look forward, we think it's actually one of the nice positives for us as well.

Okay. So the long-term algorithm, mid-single-digit kind of organic growth, pricing market share plus GDP, you've got 30% to 40%, high 30% incremental margins. So that's maybe high single, low double-digit EPS growth. So that's a great organic algorithm. But let's talk about the $1.5 billion you have with respect to firepower. So that's kind of fun in terms of the opportunity to drive inorganic growth. Can you talk about -- I'm not super familiar with the company, but can you just talk about your history of -- it seems like a company that's not overly focused on buying products that don't have great market positions already. You want to stick with quality and kind of focus on that. But just talk about the M&A history and where -- I assume you're going to be focused on detection going forward, but talk about if that's not right.

I love the question, and I got a couple of good slides for that. It's actually...

Okay. Good. I kind of hijacked your prepared remarks, sorry about that.

Let me go back here for a second. So this is a slide that -- obviously, this is all public information. This is the last 10 years of performance. This really was the basis for something we showed back in May. So we speak about the resiliency of the business. So this shows you the last 10 years of MSA safety. And certainly, I think the numbers speak for themselves.

By the way, the CAGR is pretty consistent. There's only a couple of years where it's down actually. So that's pretty interesting.

Again, very steady business model, right? We talked about the fire services in detection, in fixed detection. Once you install that devices, there's a lot of replacement work and things like that. So over 60% of the business is very stable, really no matter what happens with the economy. But we've certainly focused on bringing the business system to life. We talked about innovation before. You see the operating margins expanding almost 1,000 basis points. But the numbers are impressive, but also is the consistency. So this is the backdrop and think about what happened in the last 10 years, right, 2 recessions, COVID, supply chain changes, you name it. And this is certainly -- this speaks to really the makeup of the business and where we are today. So with that backdrop, and again, we touched on really the strategy, as we look forward here, we did put out in May goals for 2028. So going back to your perspective here. So yes, on the growth perspective, really a resilient business as we just showed there, and that's certainly the mindset. We haven't put out targets ever in our history. So Steve and I felt with the rest of the leadership team felt this is the appropriate time to do that based on this momentum we've been building as an organization. And these are the organic growth goals, which would push us into the $2 billion-plus range. Certainly, the focus on innovation, the business system really driving that margin acceleration we talked about. And then just frankly, volume leverage puts us an opportunity to really have an operating margins approach 25%. And then ultimately, an EPS that gets into the $10-plus range. And then to your point, that's all organic. And certainly again, you look at those charts looking 10 years back, acquisitions were really important. There's probably 5 acquisitions to help support those financial returns as well. So part of our message is M&A has been important. We have been very disciplined in what we bring in. We're very focused on what they do, they lead with innovation, what are their financials, where do you think the financials can go? And that's why it's been very complementary. We haven't had to really step backwards with this M&A. And with that said, there's $1.5 billion of capital that can be deployed here. This is after doing dividends and share buybacks.

And so keeping the leverage obviously very reasonable.

Yes. And we said we probably think the leverage over time is probably more between 1.5% and 2.5%. But again, we're going to be disciplined. We do have a tremendous amount of optionality, which is really a strategic advantage. Again, we got this really core strong organic business and then we can continue to add through acquisitions. And we're certainly in the marketplace participating, but we're looking for things that, again, complement what we do today. We certainly -- our disciplined investors are looking for EPS, it's accretive pretty soon after ownership. Our cost of capital is pretty low. It's about 8. So we certainly went across that, I'll say, in the first 5 or 6 years. And that's why you see today with the confidence level organically, we can do this. And then certainly, we have this cash flow to enhance that with acquisition.

And is that $1.5 billion kind of specifically, I assume, obviously, Detection is growing above that mid-single digit. Is that where you want to be? And talk about like I assume you have a lot of SKUs and there's places where maybe you're underrepresented relative to that growth. What does that -- how does that inform kind of where you want to deploy that capital?

Yes. So yes, it's interesting. Clearly, if you look at the business today, detection has been a key focus area, and that business almost doubled in size. So certainly, that will remain a key focus area. And I think it's detection, it's adjacencies that we're already in today would be natural enhancements to that, where you get into instrumentation and monitoring and things like that, which again, is an outtake from what we do in the safety space. But fire is still interesting to us. So yes, we have a strong position, but there's also a lot of global opportunities out there. And there's other things in the firefighter space that would be interesting. And then I think in the Industrial PPE probably fall protection is probably the focus area. As I mentioned earlier, that's still the #1 solution that needs to be solved for in the workplace, and we think there's a lot of inherent growth really around the world for us, and we'd like to get our share even stronger. We've moved that share from single digits to low teens, but we're still #3 in that space today.

And in terms of the -- when I think about the pipeline of opportunities, you obviously have some very large competitors, but just give us a sense of how fragmented it is and how you think about the funnel of opportunities from an M&A perspective?

So clearly, if we step back, there's -- we have a good funnel. We've been focused on even probably growing that funnel over the last couple of years as the market has been a little bit softer and just creating those relationships. But certainly, I think fragmentation-wise, there's probably more opportunities in detection. So it would be a natural bolt-on types, there's things out there. If you look at what we've done, the most recent acquisition was Bacharach and here's a business that just was just a bit under $100 million. It was squarely in the detection space. We did some in that space, but they were certainly the leaders in that, that was owned by private equity. We've also done a lot of private as well. Those are probably the likely scenarios for us to do on a common basis. Certainly, there's larger things out there. They just would have a higher level of, I'll say, financial discipline to make sure they check all the boxes or something like that. But certainly, we participate in those as well. I mean if you look at our history over the last 10 years and kind of where we are today, we certainly have the capacity to do even more in terms of quantity but also just size.

So that 1050 2028 target, what does that imply from like a compounded organic growth perspective from your starting point? And then I guess the M&A piece is accretive to that, right?

Okay. Yes. So what we have out here for growth is we have a 3% to 5% organic growth in here from an organic perspective. The EPS growth here is just kind of high single digit about 8% and again, if you put that in perspective, that we just showed in the 10-year.

12% whatever yes.

Yes. Obviously, M&A becomes an option to take those numbers to a higher level, which is what you saw over the last.

And that 3% to 5% is probably maybe on the conservative side a little bit relative to the history and obviously the opportunity?

Well, to your point, that is solely just linked to this special '24 we're having, where we also have this Air Force business, which, again, $75 million of business, but it won't be there next year, so it just becomes a little bit part of the math.

Yes, makes sense. Makes sense. Okay, cool. I think we're going to -- do you have any final remarks or may I can finish it, might you talk about.

Yes. I'll just have a final thought here. So again, I'll start where I did as well, just the focus on the mission. We serve that mission. We are -- we wake up each and every day focused on safety, that's when the organization has rallied around. Certainly, we have leading positions in these areas around the world in these 3 product categories. Innovation, combination with the business system has really put us in a really good place from a financial perspective, and we're focused on really leveraging that to drive organic growth, and then to complement it with smart M&A and that's why we put out those objectives for '28, and we're on track for those.

Yes, it's great. I mean it's like a great mission, 40 million people made safer combined with good financial performance. So it's kind of a win-win. So thanks, Lee, for taking the time. Really appreciate it, and I hope you have a great day.

Thanks, Amit.

Thank you.