Federal Signal Corporation

please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Felix Boshin, Vice President of Corporate Strategy and Investor Relations. Thank you, sir. You may begin.

Good morning, and welcome to Federal Signal's first quarter 2025 conference call. I'm Felix Boshin, the company's Vice President of Corporate Strategy and Investor Relations. Also with me on the call today is Jennifer Sherman, our President and Chief Executive Officer, and Ian Hudson, our Chief Financial 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've also posted the slide presentation and the earnings release under the investor tab on our website. Before I turn the call over to Ian, 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-Q later today. Ian will start today with more detail on our first quarter financial results. Jennifer will then provide her perspective on our performance and go over our revised outlook for 2025 before we open the line for any questions. With that, I would now like to turn the call over to Ian.

Thank you, Felix. Our consolidated first quarter financial results are provided in today's earnings release. In summary, we delivered strong financial results for the quarter. with 9% year-over-year net sales growth, double-digit operating income improvement, gross margin expansion, a 170 basis point improvement in adjusted EBITDA margin, and new records in orders and backlog. Consolidated net sales for the quarter were $464 million, up $39 million, or 9% compared to last year. Organic sales growth for the quarter was $28 million, or 7%. Consolidated operating income for the quarter was $65.7 million, up $11.4 million, or 21% compared to last year. Consolidated adjusted EBITDA for the quarter was $85.1 million, up $14.5 million, or 21% compared to last year. That translates to a margin of 18.3% in Q1 this year, up from 16.6% last year. Gas diluted EPS for the quarter was 75 cents per share, compared to 84 cents per share in Q1 last year. On an adjusted basis, EPS for the quarter was 76 cents per share, an increase of 12 cents per share, or 19% from last year. Order intake for the first quarter set a new company record, surpassing the previous high, which was set in Q1 last year. In total, orders in Q1 this year were $568 million, an increase of $65 million, or 13% compared to last year. Backlog at the end of the quarter was $1.1 billion, another all-time high for the company, and an increase of $3 million compared to Q1 last year. In terms of our group results, ESG's net sales for the quarter were $387 million, up $33 million, or 9% compared to last year. ESG's operating income for the quarter was $59.7 million, up $8 million, or 15% compared to last year. ESG's adjusted EBITDA for the quarter was $77.5 million, up $11 million, or 17% compared to last year. That translates to an adjusted EBITDA margin for the quarter of 20%, an improvement of 120 basis points compared to last year. ESG reported total orders of $480 million in Q1 this year, an increase of $52 million, or 12% compared to last year. SSG's net sales for the quarter was $76 million this year, up $6 million, or 8%. SSG's operating income for the quarter was $15.8 million, up $2 million, or 14% compared to last year. SSG's adjusted EBITDA for the quarter was $16.8 million, up $2 million, or 14%. That translates to an adjusted EBITDA margin for the quarter of 22%, up 110 basis points compared to last year. SSG's orders for the quarter were $88 million, up $13 million, or 17% from last year. Corporate operating expenses for the quarter were $9.8 million, compared to $11.2 million last year, with the decrease primarily due to lower post-retirement and stock compensation expenses, partially offset by the non-recurrence of a $1.8 million benefit from an insurance recovery that was recognized in Q1 last year. Turning now to the consolidated income statement, where the increase in net sales contributed to a $14.8 million improvement in gross profit. Consolidated gross margin for the quarter was 28.2%, a 90 basis point increase over last year. As a percentage of net sales, our selling, engineering, general, and administrative expenses for the quarter were down 50 basis points from Q1 last year. Other items affecting the quarterly results include a $700,000 increase in amortization expense, a $300,000 reduction in acquisition related expenses, a $500,000 increase in other expense, and a $200,000 reduction in interest expense. Tax expense for the quarter was $15.7 million compared to a benefit of $700,000 in Q1 last year, with the increase primarily due to the effects of higher pre-tax income levels and the non-recurrence of a $13 million discrete tax benefit, which was recognized in the prior year quarter. Our effective tax rate for Q1 this year was 25.3%. At this time, we continue to expect that our full-year effective tax rate will be between 25% and 26%, excluding discrete tax benefits. On an overall gap basis, we therefore earned 75 cents per share in Q1 this year, compared with 84 cents per share in Q1 last year. To facilitate earnings comparisons, we typically adjust our GAAP earnings per share for unusual items recorded in the current or prior quarters. In the current year quarter, we made adjustments to GAAP earnings per share to exclude acquisition-related expenses and purchase accounting expense effects, whereas in Q1 last year, we also excluded the $13 million discrete tax benefit that I previously mentioned. On this basis, our adjusted earnings for the quarter was 76 cents per share compared with $0.64 per share last year. Looking now at cash flow, we generated $37 million of cash from operations during the quarter, an increase of $5 million or 17% from Q1 last year. We ended the quarter with $220 million of net debt and availability under our credit facility of $509 million. Our current net debt leverage ratio remains low. even after accounting for the acquisition of Hogg Technologies, which we completed during the quarter for an initial payment of approximately $82 million. With our financial position remaining strong, we have significant flexibility to invest in organic growth initiatives, pursue strategic acquisitions like Hogg, and return cash to stockholders through dividends and opportunistic share repurchases. On that note, we paid dividends of $8.6 million during the quarter, reflecting an increased dividend of 14 cents per share, and we recently announced a similar 14 cents per share dividend for the second quarter. During the first quarter, we also repurchased approximately $20 million of stock, buying back around a quarter of a million shares, and so far in April, we have repurchased an additional $20 million of stock under our authorized repurchase programs. As you may have seen last week, our board recently approved an additional stock repurchase authorization of $150 million. That concludes my comments, and I would now like to turn the call over to Jennifer.