Federal Signal Reports First Quarter Results Including Double-Digit Sales and Earnings Growth, Record Orders and Backlog; Raises Full-Year Outlook
by Admin, on May 2, 2023 7:00:00 AM
Oak Brook, Illinois, May 2, 2023 — Federal Signal Corporation (NYSE:FSS) (the “Company”), a leader in environmental and safety solutions, today reported results for the first quarter ended March 31, 2023.
First Quarter Highlights
- Net sales of $386 million, up $55 million, or 17%, from last year; organic growth of $44 million, or 13%
- Operating income of $39.5 million, up $11.0 million, or 39%, from last year
- GAAP EPS of $0.45, up $0.12, or 36%, from last year
- Adjusted EPS of $0.46, up $0.12, or 35%, from last year
- Record quarterly orders of $475 million, up $22 million, or 5%, from last year
- Record backlog of $968 million, up $216 million, or 29%, from last year
- Raises 2023 adjusted EPS* outlook to a new range of $2.21 to $2.43, from the prior range of $2.15 to $2.40
- Increases low end of 2023 net sales outlook range by $40 million; new range of $1.62 billion to $1.72 billion
Consolidated net sales for the first quarter were $386 million, up $55 million, or 17%, compared to the prior-year quarter. Net income for the first quarter was $27.4 million, or $0.45 per diluted share, compared to $20.5 million, or $0.33 per diluted share, in the prior-year quarter.
The Company also reported adjusted net income for the first quarter of $27.9 million, or $0.46 per diluted share, compared to $20.7 million, or $0.34 per diluted share, in the prior-year quarter. The Company is reporting adjusted results to facilitate comparisons of underlying performance on a year-over-year basis. A reconciliation of these and other non-GAAP measures is provided at the conclusion of this news release.
Customer Demand Remains at Record Levels; Double-Digit Improvement in Net Sales and Earnings
“Our businesses were able to deliver double-digit year-over-year net sales and earnings growth, gross margin expansion, and a 130-basis point improvement in adjusted EBITDA margin during the first quarter,” commented Jennifer L. Sherman, President and Chief Executive Officer. “Within our Environmental Solutions Group, an improving supply chain supported higher production levels, and with increased sales volumes, contributions from recent acquisitions, robust aftermarket demand, and strong price realization, we were able to deliver a 16% year-over-year net sales increase and a 180-basis point improvement in adjusted EBITDA margin. Our Safety and Security Systems Group also delivered impressive results, with double-digit top line growth and an adjusted EBITDA margin of approximately 20%. Demand for our products and aftermarket offerings remains at unprecedented levels, with our order intake this quarter representing the highest quarterly orders in our history, contributing to a record backlog of $968 million at the end of the quarter.”
In the Environmental Solutions Group, net sales for the first quarter were $319 million, up $45 million, or 16%, compared to the prior-year quarter. In the Safety and Security Systems Group, net sales were $67 million, up $11 million, or 19%, compared to the prior-year quarter.
Consolidated operating income for the first quarter was $39.5 million, up $11.0 million, or 39%, compared to the prior-year quarter. Consolidated operating margin for the first quarter was 10.2%, compared to 8.6% in the prior-year quarter.
Consolidated adjusted earnings before interest, tax, depreciation and amortization (“adjusted EBITDA”) for the first quarter was $54.5 million, up $12.3 million, or 29%, compared to the prior-year quarter, and consolidated adjusted EBITDA margin was 14.1%, up from 12.8% in the prior-year quarter.
In the Environmental Solutions Group, adjusted EBITDA for the first quarter was $51.2 million, up $11.9 million, or 30%, compared to the prior-year quarter, and its adjusted EBITDA margin was 16.1%, up from 14.3% last year. In the Safety and Security Systems Group, adjusted EBITDA for the first quarter was $13.2 million, up $4.3 million, or 48%, compared to the prior-year quarter, and its adjusted EBITDA margin was 19.8%, up from 15.9% last year.
Consolidated orders for the first quarter were $475 million, the highest quarterly orders in the Company’s history, and an increase of $22 million, or 5%, compared to the prior-year quarter. With the strong momentum in customer demand, consolidated backlog at March 31, 2023 was at an all-time high level of $968 million, an increase of $216 million, or 29%, from last year.
Strong Financial Position Provides Flexibility to Fund Growth Opportunities and Cash Returns to Stockholders
Operating cash flow during the first quarter was $7 million, generally in line with the prior-year quarter. At March 31, 2023, consolidated debt was $376 million, total cash and cash equivalents were $38 million and the Company had $415 million of availability for borrowings under its previous credit facility.
During the first quarter, the Company completed the acquisition of Blasters, Inc. and also closed the acquisition of Trackless Vehicles Limited in April 2023.
“Our current financial position provides us significant flexibility to invest in organic growth initiatives and pursue strategic acquisitions, like Blasters and Trackless,” said Sherman. “As demonstrated with the recent increase in our dividend, we also remain committed to returning cash to stockholders.”
The Company funded dividends of $5.5 million during the first quarter, reflecting a dividend of $0.09 per share, and as recently announced, the Board of Directors increased the dividend that will be payable in the second quarter of 2023 to $0.10 per share, an 11% increase from the prior dividend.
“Demand for our products and our aftermarket offerings remains at unprecedented levels, with both our orders and backlog this quarter again setting new Company records,” noted Sherman. “With our first quarter performance, our record backlog and improving supply chain conditions, we are raising our full-year adjusted EPS* outlook to a new range of $2.21 to $2.43, from the prior range of $2.15 to $2.40. We are also increasing the low end of our full-year net sales outlook range by $40 million, establishing a new range of $1.62 billion to $1.72 billion.”
Federal Signal will host its first quarter conference call on Tuesday, May 2, 2023 at 10:00 a.m. Eastern Time. The call will last approximately one hour. The call may be accessed over the internet through Federal Signal’s website at www.federalsignal.com or by dialing phone number 1-844-826-3035 and entering the pin number 10178056. A replay will be available on Federal Signal’s website shortly after the call.
About Federal Signal
Federal Signal Corporation (NYSE: FSS) builds and delivers equipment of unmatched quality that moves material, cleans infrastructure, and protects the communities where we work and live. Founded in 1901, Federal Signal is a leading global designer, manufacturer and supplier of products and total solutions that serve municipal, governmental, industrial and commercial customers. Headquartered in Oak Brook, Ill., with manufacturing facilities worldwide, the Company operates two groups: Environmental Solutions and Safety and Security Systems. For more information on Federal Signal, visit: www.federalsignal.com.
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995
This release contains unaudited financial information and various forward-looking statements as of the date hereof and we undertake no obligation to update these forward-looking statements regardless of new developments or otherwise. Statements in this release that are not historical are forward-looking statements. Such statements are subject to various risks and uncertainties that could cause actual results to vary materially from those stated. Such risks and uncertainties include but are not limited to: direct and indirect impacts of the coronavirus pandemic and the associated government response, risks and adverse economic effects associated with emerging geopolitical conflicts, product and price competition, supply chain disruptions, work stoppages, availability and pricing of raw materials, cybersecurity risks, risks associated with acquisitions such as integration of operations and achieving anticipated revenue and cost benefits, foreign currency exchange rate changes, interest rate changes, increased legal expenses and litigation results, legal and regulatory developments and other risks and uncertainties described in filings with the Securities and Exchange Commission.
Contact: Ian Hudson, Chief Financial Officer, +1-630-954-2000, email@example.com
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* Adjusted earnings per share (“EPS”) is a non-GAAP measure, which includes certain adjustments to reported GAAP net income and diluted EPS. In 2022, we made adjustments to exclude the impact of acquisition and integration-related expenses (benefits) and debt settlement charges, where applicable. Should any similar items occur in 2023, we would expect to exclude them from the determination of adjusted EPS. However, because of the underlying uncertainty in quantifying amounts which may not yet be known, a reconciliation of our Adjusted EPS outlook to the most applicable GAAP measure is excluded based on the unreasonable efforts exception in Item 10(e)(1)(i)(B).