Oak Brook, Illinois, July 27, 2023 — Federal Signal Corporation (NYSE:FSS) (the “Company”), a leader in environmental and safety solutions, today reported results for the second quarter ended June 30, 2023. 

Second Quarter Highlights

• Record net sales of $442 million, up $76 million, or 21%, from last year; organic growth of $54 million, or 15%
• Operating income of $59.4 million, up $13.2 million, or 29%, from last year
• GAAP EPS of $0.66, up $0.11, or 20%, from last year
• Record adjusted EPS of $0.67, up $0.14, or 26%, from last year
• Record orders of $480 million, up $67 million, or 16%, from last year 
• Record backlog of $1.01 billion, up $212 million, or 27%, from last year
• Operating cash flow of $36 million, up $21 million, or 133%, from last year
• Raises 2023 adjusted EPS* outlook to a new range of $2.30 to $2.46, from the prior range of $2.21 to $2.43
• Increases low end of 2023 net sales outlook range by $30 million; new range of $1.65 billion to $1.72 billion

Consolidated net sales for the second quarter were $442 million, the highest quarterly net sales in the Company’s history, and an increase of $76 million, or 21%, compared to the prior-year quarter. Net income for the second quarter was $40.3 million, or $0.66 per diluted share, compared to $33.5 million, or $0.55 per diluted share, in the prior-year quarter.

The Company also reported adjusted net income for the second quarter of $41.4 million, or $0.67 per diluted share, compared to $32.2 million, or $0.53 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
“In a record-setting quarter for the Company, our businesses were able to deliver double-digit year-over-year net sales and earnings growth, gross margin expansion, and a 120-basis point improvement in adjusted EBITDA margin,” 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 22% year-over-year net sales increase and a 220-basis point improvement in adjusted EBITDA margin. Our Safety and Security Systems Group also delivered another impressive quarter, with double-digit top line growth and an adjusted EBITDA margin of approximately 22%. Our order intake represented the highest quarterly orders in our history, contributing to a record backlog of $1.01 billion at the end of the quarter.”

In the Environmental Solutions Group, net sales for the second quarter were $373 million, up $67 million, or 22%, compared to the prior-year quarter. In the Safety and Security Systems Group, net sales were $69 million, up $9 million, or 15%, compared to the prior-year quarter.

Consolidated operating income for the second quarter was $59.4 million, up $13.2 million, or 29%, compared to the prior-year quarter. Consolidated operating margin for the second quarter was 13.4%, up from 12.6% in the prior-year quarter. 

Consolidated adjusted earnings before interest, tax, depreciation and amortization (“adjusted EBITDA”) for the second quarter was $75.5 million, up $17.3 million, or 30%, compared to the prior-year quarter, and consolidated adjusted EBITDA margin was 17.1%, up from 15.9% in the prior-year quarter. 

In the Environmental Solutions Group, adjusted EBITDA for the second quarter was $70.7 million, up $19.1 million, or 37%, compared to the prior-year quarter, and its adjusted EBITDA margin was 19.0%, up from 16.8% last year. In the Safety and Security Systems Group, adjusted EBITDA for the second quarter was $15.2 million, up $3.8 million, or 33%, compared to the prior-year quarter, and its adjusted EBITDA margin was 21.9%, up from 18.9% last year. 

Consolidated orders for the second quarter were $480 million, the highest quarterly orders in the Company’s history, and an increase of $67 million, or 16%, compared to the prior-year quarter. With the strong momentum in customer demand, consolidated backlog at June 30, 2023 was at an all-time high level of $1.01 billion, an increase of $212 million, or 27%, from last year.

Increased Operating Cash Flow Further Strengthens Financial Position, Providing Flexibility to Fund Growth Opportunities and Cash Returns to Stockholders
Operating cash flow during the second quarter was $36 million, up $21 million, or 133%, from the prior-year quarter. At June 30, 2023, consolidated debt was $409 million, total cash and cash equivalents were $49 million and the Company had $381 million of availability for borrowings under its previous credit facility. During the second quarter, the Company completed the acquisition of Trackless Vehicles Limited. 

“Our operating cash flow generation in the first half of 2023 was up 92% year-over-year, despite increased rental fleet investment and higher tax payments,” said Sherman. “This improvement has helped further strengthen our financial position, providing us significant flexibility to invest in organic growth initiatives, pursue additional strategic acquisitions, like Trackless, and fund cash returns to stockholders.”

The Company funded dividends of $6.1 million during the second quarter, reflecting an increased dividend of $0.10 per share, and recently announced a similar dividend that will be payable in the third quarter of 2023.

Outlook
“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 second quarter performance, our record backlog and improving supply chain conditions, we are raising our full-year adjusted EPS* outlook to a new range of $2.30 to $2.46, from the prior range of $2.21 to $2.43. We are also increasing the low end of our full-year net sales outlook range by $30 million, establishing a new range of $1.65 billion to $1.72 billion.”

CONFERENCE CALL
Federal Signal will host its second quarter conference call on Thursday, July 27, 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 10181049. 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, ihudson@federalsignal.com

* Adjusted earnings per share (“EPS”) is a non-GAAP measure, which includes certain adjustments to reported GAAP net income and diluted EPS. In the three and six months ended June 30, 2023, we made adjustments to exclude the impact of acquisition and integration-related expenses (benefits) and environmental remediation costs of a discontinued operation. In prior years, we have also made adjustments to exclude the impact of debt settlement charges and certain other unusual or non-recurring items. Should any similar items occur in the remainder of 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).