FEDERAL SIGNAL CORP /DE/ Q1 FY2025 earnings call

• Delivered strong financial results with 9% net sales growth, double-digit operating income improvement, gross margin expansion, and new records in orders and backlog. • ESG had 9% net sales growth, 15% operating income increase, and 17% adjusted EBITDA growth, with production at two largest facilities up double-digits. • Aftermarket revenue grew 11%, with rental and used equipment sales both up double-digits. • Strategic initiatives like market share expansion, new product development (e.g., simplified control systems, RegenX street sweeper), and supply chain optimization (insourcing PCB manufacturing at SSG). • Publicly funded orders up high-single-digits and industrial orders up double-digits, with dump truck body business seeing over 75% growth from conquest customers.

Consolidated net sales for the quarter were $464 million, up 9% year-over-year. ESG's net sales were $387 million, up 9% with operating income $59.7 million (+15%) and adjusted EBITDA $77.5 million (+17%). SSG's net sales were $76 million, up 8% with operating income $15.8 million (+14%) and adjusted EBITDA $16.8 million (+14%). ESG's orders were $480 million (+12%) and SSG's orders were $88 million (+17%).

• Raised full year adjusted EPS outlook to $3.63 to $3.90 from prior $3.60 to $3.90. • Reaffirmed net sales outlook between $2.02 billion and $2.1 billion. • Reaffirmed expectations for double-digit improvement in pre-tax earnings and EBITDA margin in the upper half of target range. • Reaffirmed CapEx guidance of between $40 million and $50 million for the year.

• Mention of global tariffs and potential impact on supply chains, though supplies directly sourced from China comprise less than 1% of annual cost of sales. • Need to strategically manage price cost dynamics in response to tariff changes.

Q: How do lead times compare to three months ago and what about open capacity?

A: Across the enterprise, running 70%-72% capacity. Lead time for three-wheel street sweeper is about six months, working on reducing lead times for four-wheel line.

Q: How have April ESG orders trended and was there pull forward of demand ahead of tariff impacts?

A: April ESG orders showed strength across board, no pull forward of demand due to backlogs stretching into 2026 and no fundamental change in end market demand.

Q: Thoughts on rental business in 1Q and near-term outlook?

A: Rental business grew double-digits, used equipment sales also up double-digits, important for access to different customers and accelerating new product adoption.

Q: Ability to raise prices on orders in backlog due to tariffs?

A: Backlogs are relevant for over 50% of business, and ability to surcharge backlog if tariffs impact, but no pull forward of demand seen.

Q: Update on integrating HOG into MRL and road-marking business?

A: Team led by COO integrating HOG, positive reception at trade shows, progress ongoing.