Federal Signal Corporation

Good morning, and welcome to the Federal Signal Corporation fourth quarter earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Ian Hudson, Chief Financial Officer. Please go ahead.

Good morning, and welcome to Federal Signal's fourth quarter conference call. I'm Ian Hudson, the company's Chief Financial Officer. Also with me on the call today is Jennifer Sherman, our President and Chief Executive Officer. We will refer to some presentation slides today, as well as to the earnings release which we issued this morning. The slides can be followed online by going to our website, federalsignal.com, clicking on the Investor Call icon, and signing into the webcast. We have also posted the slide presentation and the earnings release under the Investor tab on our website. Before I turn the call over to Jennifer, I'd like to remind you that some of our comments made today may contain forward-looking statements that are subject to the Safe Harbor language found in today's news release, and in federal signals filings with the Securities and Exchange Commission. These documents are available on our website. Our presentation also contains some measures that are not in accordance with U.S. generally accepted accounting principles. In our earnings release and filings, we reconcile these non-GAAP measures to GAAP measures. In addition, we will file our Form 10-K later today. Jennifer is going to start today with a recap of the year. and then I will provide some more detail on our fourth quarter and full year financial results. Jennifer will then provide her perspective on our performance and go over our outlook for 2023 before we open the line for any questions. With that, I would now like to turn the call over to Jennifer.

Thank you, Ian. I'd like to start by giving my profound thanks to each of our employees and our business partners for their ongoing commitment to the company. As I reflect back on my tenure as CEO, I take great pride in the growth that we've experienced since 2016. Since then, through a combination of organic growth initiatives and M&A, our sales have doubled from a little over $700 million in 2016 to more than $1.4 billion in 2022. That represents a compound annual growth rate of around 13%. With M&A representing about two-thirds of our top-line growth since 2016, acquisitions have played a key role in increasing shareholder value. We are committed to remaining disciplined in our approach to both diligence and valuation and have established a reputation as a partner of choice. In fact, of the 11 transactions announced over this time period, eight have been internally sourced. We have also gained traction on our key organic growth initiatives, which have helped us to further diversify our revenue streams and market exposures and become a more resilient company. I'm also inspired by the manner in which our businesses have achieved these stellar financial results, which are outstanding both in absolute terms and in comparison to our specialty vehicle peers, while navigating through a series of complex challenges, including a global pandemic, unprecedented inflation levels, and worldwide supply chain disruption. Our team's successful execution against our long-term financial framework and growth strategy has created meaningful value for our stockholders with our cumulative returns outpacing each of the key benchmark indices we monitor. As I look ahead, I remain bullish about our long-term prospects and the ongoing execution of our strategy. I take encouragement from our active M&A pipeline, the additional financial flexibility provided by our increased credit facility, and the fact that although we are currently performing at a high level, there is still room for further growth with the capacity we've added in recent years. Despite ongoing supply chain tightness in the marketplace, 2022 was a record year for Federal Signal. Our teams remained relentlessly focused on serving our customers, helping us to deliver the highest net sales and adjusted EPS in the company's history, record orders, and an improved EBITDA margin of 15% towards the high end of our target range. In addition to our strong financial performance, we also made progress against several of our long-term strategic objectives in 2022. Within our environmental solutions group, we again saw increased aftermarket demand with particular strength in rental utilization and parts and used equipment sales. Overall, our aftermarket revenues in 2022 were up 10% over last year. Demand for a range of safe digging trucks also remained high with orders up 41% year over year. This growth follows investments we've made in facility expansions, new product development, and channels for this key strategic initiative. Our investments in electrification projects continued and we are encouraged that these efforts will provide additional opportunities to further diversify our customer base, penetrate new end markets, and gain access to new geographic regions. We made several strategic investments for the future by purchasing new machinery and equipment aimed at automating and insourcing production of certain components. During 2022, we also completed the acquisition of our facility in University Park, Illinois, which is home to our domestic SSG operations and our aftermarket parts business. Our 80-20 improvement initiatives remain a critical part of our culture, and we continue to focus on reducing product costs and improving manufacturing efficiencies across all our businesses. We demonstrated our commitment to returning value to our stockholders, funding a combined $38 million of cash dividends and share purchases. To highlight our ongoing focus on operating in a socially responsible and sustainable manner, we also published our third annual sustainability report in May of 22. I'm incredibly proud of the progress that we've made in our environmental, social, and governance initiatives, and thrilled to share our many accomplishments highlighted in this report. We measure our performance utilizing several leading ESG rating agencies, and we are pleased with the improvement of our ratings during 2022. Our ongoing commitment to the communities in which we operate is also a differentiating factor in our ability to attract talent and support strong labor relations. During 2022, the union at our Rugby North Dakota manufacturing facility was decertified following a process that was in by our employees. I'll turn the call back to Ian to go over the numbers.