• Net Sales (Full Year 2024): $1.86 billion, an increase of $139 million or 8% compared to last year.
• Operating Income (Full Year 2024): $281.4 million, up $56.9 million or 25% from last year.
• Adjusted EBITDA (Full Year 2024): $350.6 million, up $64.6 million or 23% from last year; margin of 18.8%, up 220 basis points.
• GAAP Diluted EPS (Full Year 2024): $3.50 per share, up $0.94 or 37% from last year.
• Adjusted EPS (Full Year 2024): $3.34 per share, up $0.76 or 29% from last year.
• Orders (Full Year 2024): $1.85 billion, second highest in company history; backlog of approximately $1 billion.
• Net Sales (Q4 2024): $472 million, an increase of $24 million or 5% compared to last year.
• Operating Income (Q4 2024): $70.1 million, up $7 million or 11% compared to last year.
• Adjusted EBITDA (Q4 2024): $89.3 million, up $11.8 million or 15% compared to last year; margin of 18.9%, up 160 basis points.
• GAAP Diluted EPS (Q4 2024): $0.81 per share, up $0.06 or 8% from last year.
• Adjusted EPS (Q4 2024): $0.87 per share, up $0.13 or 18% from last year.
• Orders (Q4 2024): $446 million, compared to $465 million in Q4 last year.
• Cash Flow from Operations (Q4 2024): $91 million; full year operating cash generation of $231 million, up $37 million or 19% from last year.
• Net Debt (End of 2024): $133 million; availability under credit facility of $574 million.
• Dividends (Q4 2024): $7.3 million, reflecting a dividend of $0.12 per share; announced increase to $0.14 per share for Q1 2025.
• Share Repurchases (Q4 2024): $2.2 million funded.

• Warning! GuruFocus has detected 3 Warning Sign with FSS.

Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Federal Signal Corp (NYSE:FSS) achieved record net sales of approximately $1.86 billion for 2024, marking an 8% increase from the previous year.
• The company reported a significant increase in operating income, up 25% to $281.4 million compared to last year.
• Adjusted EBITDA for the year rose by 23% to $350.6 million, translating to a margin of 18.8%, an improvement of 220 basis points.
• Federal Signal Corp (NYSE:FSS) successfully completed the acquisition of Hog Technologies, which is expected to enhance their road marking and water blasting business.
• The company announced a 17% increase in dividends, reflecting strong financial health and commitment to returning value to shareholders.

Negative Points

• Orders for the fourth quarter of 2024 were $446 million, down from $465 million in the same quarter last year.
• The company faced a $7 million headwind from fewer chassis pass-through sales in the fourth quarter.
• There was a $3.8 million pre-tax non-cash pension settlement charge recognized during the quarter.
• Federal Signal Corp (NYSE:FSS) expects a higher effective tax rate of approximately 26% in 2025, up from 18% in 2024.
• Extended lead times for products like street sweepers and sewer cleaners have impacted orders, with backlogs stretching into 2026.

Q & A Highlights

Q: Can you discuss the impact of municipal spending changes on Federal Signal's business, particularly in big cities versus smaller local governments? A: Jennifer Sherman, President and CEO, explained that the essential nature of their equipment, rising water taxes funding sewer cleaners, and strong police orders position them well for 2025. The diversification of revenue streams and reduced reliance on major cities for police business also contribute to their positive outlook.

Q: How is Federal Signal handling pricing strategies in light of potential tariffs and rising material costs? A: Jennifer Sherman stated that they have locked in raw material inputs for most of the year and are well-protected against tariffs. They have a history of passing on costs to customers due to the essential nature of their equipment and are exploring alternative domestic suppliers.

Q: What are the expectations for rental fleet growth in 2025, especially after the acquisition of Standard and Hog Technologies? A: Ian Hudson, CFO, noted that aside from Standard's rental fleet, there wasn't much incremental investment. They monitor fleet additions monthly and expect similar levels of fleet growth as in 2024. Hog Technologies does not have a rental business, focusing instead on direct equipment sales and aftermarket parts.

Q: Have there been improvements in lead times for popular products like sewer cleaners and street sweepers? A: Jennifer Sherman mentioned progress with sewer cleaners and three-wheel Pelican street sweepers, but not as much with four-wheel models. They are making fundamental changes to increase production, with lead times extending into 2026, providing excellent visibility.

Q: Are there concerns about losing market share due to extended lead times for sewer cleaners and street sweepers? A: Jennifer Sherman acknowledged the concern but highlighted tools like rentals, used equipment, and queue adjustments to address it. The products are typically municipal purchases with longer lead times expected, and they are focused on reducing lead times and increasing production.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.