Federal Signal Corporation

Greetings and welcome to the Federal Signal Corporation first quarter earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. It is now my pleasure to introduce your hosts, Felix Beauchesne, Vice President of Corporate Strategy and Investor Relations. Thank you. You may begin.

Good morning, and welcome to Federal Signal's first quarter 2026 conference call. I'm Felix Boschen, 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 have 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, current market conditions, our multi-year growth initiatives, and go over our revised outlook for 2026 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 35% year-over-year net sales growth, 52% operating income improvement, gross margin expansion, a 190 basis point improvement in adjusted EBITDA margins, robust cash generation, and strong order intake. Consolidated net sales for the quarter were $626 million of $162 million or 35% compared to last year. Organic sales growth for the quarter was $70 million or 15%. Consolidated operating income for the quarter was $99.7 million of $34 million or 52% compared to last year. Consolidated adjusted EBITDA for the quarter was $126.3 million of $41.2 million or 48% compared to last year. That translates to a margin of 20.2% in Q1 this year of 190 basis points compared to last year. GAAP diluted EPS for the quarter was $1.14 per share of $0.39 per share or 52% compared to last year. On an adjusted basis, EPS for the quarter was $1.18 per share, an increase of 42 cents per share, or 55% from last year. Orders for the quarter were $623 million, up $55 million, or 10% from last year, contributing to a backlog at the end of the quarter of $1.04 billion. In terms of our group results, ESG's net sales for the quarter were $533 million, up $145 million or 38% compared to last year. ESG's operating income for the quarter was $89.1 million, up $29.4 million or 49% compared to last year. ESG's adjusted EBITDA for the quarter was $113.3 million, of $35.8 million, or 46% compared to last year. That translates to an adjusted EBITDA margin for the quarter of 21.3%, an improvement of 130 basis points compared to last year. ESG reported total orders of $534 million in Q1 this year, an increase of $54 million, or 11% compared to last year. SSG's net sales for the quarter were $93 million this year, up $17 million, or 22%. SSG's operating income for the quarter was $23.6 million, up $7.8 million, or 49% compared to last year. SSG's adjusted EBITDA for the quarter was $24.7 million, up $7.9 million, or 47%. That translates to an adjusted EBITDA margin for the quarter of 26.6%, up 460 basis points compared to last year. SSG's orders for the quarter were $89 million, up $1 million, or 1% from last year. Corporate operating expenses for the quarter were $13 million, compared to $9.8 million last year, with the increase primarily due to higher acquisition and integration related expenses, and increased legal stock compensation and incentive-based compensation costs. Turning now to the consolidated income statement, where the increase in net sales contributed to a $48.6 million improvement in gross profit. Consolidated gross margin for the quarter was 28.7%, a 50 basis point increase over last year. as a percentage of net sales of selling, engineering, general, and administrative expenses for the quarter were down 150 basis points from Q1 last year. Other items affecting the quarterly results include a $2.2 million increase in amortization expense, a $600,000 increase in acquisition-related expenses, and a $3.9 million increase in interest expense associated with higher average debt levels. Tax expense for the quarter was $21.8 million, an increase of $6.1 million compared to Q1 last year, with the increase primarily due to the effects of higher pre-tax income levels, partially offset by the recognition of approximately $1 million of excess tax benefits from stock compensation activity. Our effective tax rate for Q1 this year was 23.6%. At this time, we continue to expect that our full-year effective tax rate will be approximately 25%, excluding additional discrete tax benefits. On an overall GAAP basis, we therefore earned $1.14 per share in Q1 this year, compared with $0.75 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. On this basis, our adjusted earnings for the quarter were $1.18 per share compared with $0.76 per share last year. Looking now at cash flow, we generated $101 million of cash from operations during the quarter, an increase of $65 million or 176% from Q1 last year. We ended the quarter with $480 million of net debt and availability under our credit facility of $939 million. Our current net debt leverage ratio remains low, even after paying the full $15 million earn out associated with the hog acquisition and funding the mega equipment acquisition during the quarter. With our financial position remaining strong, we have significant flexibility to invest in organic growth initiatives, pursue strategic acquisitions, pay down debt, and return cash to stockholders through dividends and opportunistic share repurchases. On that note, we paid dividends of $9.2 million during the quarter, reflecting an increased dividend of 15 cents per share, and we recently announced a similar 15 cents per share dividend for the second quarter. That concludes my comments, and I would now like to turn the call over to Jennifer.