Q4 2023 Federal Signal Corporation Earnings Call

Operator: to order an earnings conference call. At this time, all participants are in a listen-only mode.

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. During the conference. Please press star zero on your telephone keypad.

Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Felix Beauchamp, Vice President of Corporate Strategy and Investor Relations for Federal Signal. Please go ahead.

Minder This conference is being recorded.

In addition, our conference over to your host feel expulsion, Vice President corporate strategy and Investor Relations for federal signal.

Please go ahead.

Felix Beauchamp: Good morning, and welcome to Federal Signal's fourth quarter 2023 conference. I'm Felix Boshin, 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 today. Your slides can be followed online by going to our website, federalsignal.gov, clicking on the investor call icon, and signing into the InvestorTab. 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 and Federal Signal's filings with the Security Department. These documents are available on our website.

Good morning, and welcome to Federal Signal's fourth quarter 2023 conference call I'm feel expulsion of 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, Chief Financial Officer, we will refer to some presentation slides today.

As well as to the earnings release, which we issued this morning.

Slides can be followed online by going to our website federal signal dot com clicking on the investor call icon and signing into the webcast. We've 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 Signal's 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.

Felix Beauchamp: Our presentation also contains some measures that are not in accordance with U.S. generally accepted accounting. In our earnings release and filings, we reconcile these non-GAAP measures to GAAP measures. In addition, we will file our Form 10-K later today. Ian will start today with more detail on our fourth quarter and full year financial results. Jennifer will then provide her perspective on our performance, an update on our multi-year strategic initiatives, and go over our outlook for 2024 before we open the line for any questions. Thank you, Felix.

Generally accepted accounting principles.

<unk> release and filings we reconcile these non-GAAP measures to GAAP measures. In addition, we will file our Form 10-K later today.

We'll start today with more detail on our fourth quarter and full year financial results. Jennifer will then provide her perspective on our performance and update on our multi year strategic initiatives and go over our outlook for 2024 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 financial results for the fourth quarter and full year of 2023 are provided in today's earnings release before I talk about the fourth quarter. Let me highlight some of our full year consolidated results for 2023.

Ian A. Hudson: Our financial results for the fourth quarter and full year of 2023 are provided in today's earnings release. Before I talk about the fourth quarter, let me highlight some of our full-year consolidated results for 2023. Net sales for the year were approximately $1.72 billion, a record high for the company and an increase of $288 million, or 20% compared to the prior year.

Net sales for the year were approximately $1.72 billion a record high for the company and an increase of $288 million or 20% compared to the prior year.

Ian A. Hudson: Organic sales growth for the year was $220 million, or 15%; operating income for the year was $224.5 million, an increase of $63.7 million, or 40% from the prior year; adjusted EBITDA for the year was $286 million, up $71 million, or 33% compared to the prior year. That translates to an adjusted EBITDA margin of 16.6% this year, up 160 basis points from last year. Gap earnings for the year equated to $2.56 per share, up $0.59 per share or 30% from the prior year.

<unk> sales growth for the year was $220 million or 15%.

Operating income for the year was $224 $5 million, an increase of $63 $7 million or 40% from the prior year.

Adjusted EBITDA for the year was $286 million up $71 million or <unk> 33 per cent compared to the prior year.

That translates to an adjusted EBITDA margin of 16, 6% this year up 160 basis points from last year.

Yeah, So earnings for the year equated to $2.56 a share up 59 cents per share or 30% from the prior year on an adjusted basis, We reported full year earnings of $2 58 per share a year over year increase of 62 cents per share or 32%.

Ian A. Hudson: On an adjusted basis, we reported full-year earnings of $2.58 per share, a year-over-year increase of $0.62 per share, or 32%. Orders for the year were $1.87 billion, another company record, and an increase of $178 million, or 11% from the prior year. With strong momentum in customer demand, consolidated backlog at the end of the year was at an all-time high level of $1.03 billion, an increase of $146 million, or 17% from last year. For the rest of my comments, I will focus mostly on comparisons of the fourth quarter of 2023 to the fourth quarter of 2022. Consolidated net sales for the quarter were $448 million, an increase of $57 million, or 15%. Organic sales growth for the quarter was $42 million, or 11%.

Or just for the year were $1.87 billion, another company record and an increase of $178 million or 11% from the prior year with a strong momentum in customer demand consolidated backlog at the end of the year was at an all time high level of 1.13 billion.

An increase of $146 million or 17% from last year.

So the rest of my comments I will focus mostly on comparisons of the fourth quarter of 2023 to the fourth quarter of 2022.

Consolidated net sales for the quarter with $448 million, an increase of $57 million or 15% organic sales growth for the quarter was $42 million or 11%.

Ian A. Hudson: Consolidated operating income in Q4 this year was $63.1 million, up $16.5 million, or 35% compared to Q4 last year. Consolidated Adjusted EBITDA for the quarter was $77.5 million, an increase of $16.4 million, or 27%. That translates to a margin of 17.3%, an increase of 170 basis points from Q4 last year. Gap EPS for the quarter was $0.75 per share, up $0.18 per share, or 32% from Q4 last year.

<unk> operating income in Q4, this year was $63 $1 million up $16 5 million or 35% compared to Q4 last year.

Consolidated adjusted EBITDA for the quarter was $77 $5 million, an increase of $16 $4 million or 27%.

That translates to a margin of 17, 3% an increase of 170 basis points from Q4 last year.

GAAP EPS for the quarter was 75 cents per share up <unk> 18 cents per share or 32% from Q4 last year.

Ian A. Hudson: On an adjusted basis, EPS for Q4 this year was $0.74 per share, a year-over-year increase of $0.17 per share, or 30%. Orders in queue for this year were $465 million, up $21 million, or 5%. In terms of our fourth-quarter group results, ESG sales were $373 million, an increase of $48 million, or 15% compared to Q4 last year. ESG's adjusted EBITDA for the quarter was $73.3 million, up $15.7 million, or 27%. That translates to an adjusted EBITDA margin of 19.6% in Q4 this year, up 190 basis points from Q4 last year.

On an adjusted basis EPS for Q4, this year with 74 cents a share a year over year increase of 17 cents per share or 30%.

Well it is in Q4, this year with $465 million up $21 million of four 5%.

In terms of our fourth quarter group results ESG sales were $373 million, an increase of $48 million or 15% compared to Q4 last year, yes.

Esg's adjusted EBITDA for the quarter was $73 $3 million up $15 $7 million or 27%.

That translates to an adjusted EBITDA margin of 19, 6% in Q4 this year up 190 basis points from Q4 last year.

Ian A. Hudson: SSG's fourth-quarter sales were $75 million this year, up $9 million, or 14%. SSG's adjusted EBITDA for the quarter was $16 million, up $2.8 million, or 21% from Q4 last year. SSG's adjusted EBITDA margin for the quarter was 21.2%, above the high end of its target range and at 130 basis points from Q4 last year. Corporate operating expenses in Q4 this year were $10 million compared to $10.2 million in Q4 last year. Turning now to the consolidated statement of operations, where the increase in sales contributed to a $22.8 million improvement in gross profit. Consolidated gross margin for the quarter was 26.6%, 190 basis points compared to Q4 last year.

Ssg's fourth quarter sales were $75 million this year up $9 million or 14%.

<unk> adjusted EBITDA for the quarter was $16 million up $2 $8 million or 21% from Q4 last year.

Ssg's adjusted EBITDA margin for the quarter was 21, 2% above the high end of its target range and up 130 basis points from Q4 last year.

Corporate operating expenses in Q4, this year when were $10 million compared to $10 $2 million in Q4 last year.

Turning now to the consolidated statement of operations, where the increase in sales contributed to a $22 8 million improvement in gross profit.

Consolidated gross margin for the quarter was 26, 6% up 190 basis points compared to Q4 last year.

Ian A. Hudson: As a percentage of sales, our selling, engineering, general, and administrative expenses for the quarter were up 30 basis points from Q4 last year. Additionally, during the fourth quarter of this year, we recognized a $1.6 million benefit from acquisition-related activities, compared to $500,000 of expense in Q4 last year, with the majority of the year-over-year change driven by a change in the fair value of contingent consideration associated with acquisitions. Other items affecting the quarterly results include a $500,000 increase in amortization expense, a $100,000 increase in other expense, and a $100,000 reduction in interest expense. Income tax expense for the quarter was $12.1 million, an increase of $4.7 million from Q4 last year, with a year-over-year change largely due to higher pre-tax income levels and a $700,000 reduction in discrete tax benefits recognized in the current year quarter in comparison to the For 2024, we currently expect a tax rate of between 25% and 26%, excluding any discrete tax benefits.

As a percentage of sales, our selling engineering general and administrative expenses for the quarter were up 30 basis points from Q4 last year.

During the fourth quarter of this year, we recognized a $1 $6 million benefit from acquisition related activities compared to $500000 of expense in Q4 last year with the majority of the year over year change driven by a change in the fair value of contingent consideration associated with acquisitions.

Other items affecting the quarterly results include a $500000 increase in amortization expense of $100000 increase in other expense and a 100000 dollar reduction in interest expense.

Income tax expense for the quarter was $12 $1 million, an increase of $4 7 million from Q4 last year with a year over year change largely due to higher pretax income levels and a $700000 reduction in discrete tax benefits recognized in the current year quarter in comparison to the prior quarter.

<unk> discrete tax benefit our effective tax rate for full year 2023 was 22, 5% for.

So 2024, we currently expect a tax rate of between 25% and 26% excluding any discrete tax benefits.

Ian A. Hudson: On an overall gap basis, we therefore earned $0.75 per share in Q4 this year, compared with $0.57 per share in Q4 last year. To facilitate earnings comparisons, we typically adjust our Gap Earnings-to-Share for unusual items recorded in the current or prior quarter. For example, in the current quarter, we made adjustments to Gap Earnings-to-Share to exclude acquisition-related benefits and purchase accounting expenses.

On an overall GAAP basis, we therefore around 75 per share in Q4, this year compared with 57 cents per share in Q4 last year.

To facilitate earnings comparisons, we typically adjust our GAAP earnings per share for unusual items recorded in the current or prior year quarters in the current year quarter, we made adjustments to GAAP earnings per share to exclude acquisition related benefits and purchase accounting expense effects on this basis, our adjusted earnings in Q.

Ian A. Hudson: On this basis, our adjusted earnings in Q4 this year were $0.74 per share compared with $0.57 per share in Q4 last year. Looking now at cash flow, where we generated $103 million of cash from operations during the quarter, an increase of $64 million, or 162% from Q4 last year, with the increase primarily due to working capital improvements and higher net income. For the full year, our operating cash generation totaled $194 million, an increase of $123 million, or 171% compared to last year. With the improved cash flow, we paid down approximately $70 million of debt during the quarter, ending the year with $238 million of net debt and availability under our credit facility of $493 million. Our current net debt leverage ratio remains low.

For this year with 74 cents per share compared with 57 cents per share in Q4 of last year.

Looking now at cash flow, where we generated $103 million of cash from operations during the quarter, an increase of $64 million or 162% from Q4 last year with the increase primarily due to working capital improvements and higher net income for.

For the full year, our operating cash generation totaled $194 million, an increase of $123 million or 171% compared to last year.

With the improved cash flow, we paid down approximately $70 million of debt during the quarter ending the year with $238 million of net debt and availability under our credit facility of $493 million. Our current net debt leverage ratio remains low.

Jennifer L. Sherman: With our financial position remaining strong, we have significant flexibility to invest in organic growth initiatives, pursue strategic acquisitions, and return cash to stockholders through dividends and opportunistic share repurchases. On that note, we paid dividends of $6.1 million during the quarter, reflecting a dividend of $0.10 per share, and we recently announced that we are increasing the dividend by 20% to $0.12 per share in the first quarter of 2024. We also funded $1.2 million of share repurchases during the course of. That concludes my comments, and I would like to turn the call over to Jennifer. Thank you, Ian.

With our financial position remains strong we have significant flexibility to invest in organic growth initiatives pursue strategic acquisitions and return cash to stockholders through dividends and opportunistic share repurchases.

On that note, we paid dividends of $6 1 million during the quarter, reflecting a dividend of 10 cents per share and we recently announced that we are increasing the dividend by 20% to 12 cents per share in the first quarter of 2024.

We also funded $1 $2 million of share repurchases during the quarter.

That concludes my comments and I would like to turn the call over to Jennifer. Thank you Ian overall, our fourth quarter results represent an exceptional finish to a record year outstanding execution by both groups contributed to the strong Q4 results, which included record net sales and adjusted EPS and an all time.

Jennifer L. Sherman: Overall, our fourth-quarter results represent an exceptional finish to a record year. Outstanding execution by both groups contributed to the strong Q4 results, which included record net sales and adjusted EPS and an all-time high backlog. We are also pleased to report that adjusted EBITDA margins expanded 170 basis points to 17.3% in the quarter and were slightly above the midpoint of our recently raised target margin range of 14 to 20%.

High backlog. We are also pleased to report that adjusted EBITDA margins expanded 170 basis points to 17, 3% in the quarter and were slightly above the mid point of our recently raised target margin range of 14% to 20% looking ahead, we remain optimistic about further.

Jennifer L. Sherman: Looking ahead, we remain optimistic about further margin expansion opportunities into 2024 and beyond, driven by a combination of internal efficiency initiatives currently underway, our continued focus on organic growth, planned production increases, and value-added M&S within our environmental solutions group and improving supply chain support higher production levels and with increased sales volumes contributed by our recent acquisitions, robust aftermarket demand, and strong price realization. We were able to deliver a 15 percent year-over-year net sales Despite continued intermittent supply chain issues, we are encouraged by ongoing production improvements across our business units, with fourth-quarter production at our two largest ESG facilities up a combined 11% year over year and up 6% compared to Q3.

Margin expansion opportunities into 2024, and beyond driven by a combination of internal efficiency initiatives. Currently underway. Our continued focus on organic growth planned production increases and value added M&A.

Within our environmental solutions group and improving supply chain supported higher production levels and with increased sales volumes contributed contributions from our recent acquisitions robust aftermarket demand and strong price realization, we're able to deliver a 15% year over year net sales increase and a two.

87% increase in adjusted EBITDA compared to last year.

Despite continued intermittent supply chain issues, we are encouraged by ongoing production improvements across our business units with fourth quarter production at our two largest E. S. T facilities, a combined 11% year over year and up 6% compared to Q3.

Jennifer L. Sherman: We are particularly pleased about the sequential improvement in production compared to Q3 and continue to believe that our large-scale capacity expansions completed in recent years, including our 40% capacity expansion at our Vactor, TruVac, and Guzzler facility in Streeter, Illinois, position us well to absorb incremental volumes as supply chains continue to improve. Our aftermarkets team had another standout quarter, with revenues up 24 percent over last year, with notable strength in used equipment and parts sales. Recall that our acquisition of Joe Johnson Equipment in 2016 marked the onset of a targeted strategy to expand our aftermarket business, and we believe we are starting to reap some of the multi-year benefits associated with that strategic decision. The addition of our rental and used equipment offerings has allowed our teams to target entirely new cohorts of customers for our flagship sewer cleaners, safe digging, and street sweeper offices.

We are particularly pleased about the sequential improvement in production compared to Q3 and continue to believe that our large scale capacity expansion completed in recent years, including our 40% capacity expansion at our Baxter true back cause their facility in Streator, Illinois position us well to absorb.

Incremental volumes and supply chains continue to improve.

Our aftermarket team had another standout quarter with revenues up 24% over last year with notable strength in used equipment and part sales recall, our acquisition of Joe Johnson equipment in 2016 marks the onset of a targeted strategy to expand our aftermarket.

And we believe we are starting to reap some of the multiyear benefits associated with that strategic decision.

The addition of our rental and used equipment offerings have allowed our teams to target entirely new cohorts of customers for our flagship sewer cleaners, and safe digging and street sweeper offerings.

Jennifer L. Sherman: The opportunity to purchase our used equipment at a lower price is an important additional procurement option for industrial contractors in this higher interest rate environment, exemplified by the $12 million year-over-year increase in used equipment sales in Q4. At the same time, we expanded our parts and service network and deepened our relationship with existing customers throughout the life cycle of our equipment. In aggregate, aftermarket revenue represented 27 percent of ESG revenue in Q4 compared to 25 percent last year.

The opportunity purchasing our used equipment at a lower price is an important additional procurement option for industrial contractors in this higher interest rate environment exemplified by the $12 million year over year increase in used equipment sales in Q4.

At the same time, we expanded our parts and service network and in deepening our relationship with existing customers throughout the lifecycle of our equipment and aggregate aftermarket represented 27% of ESG revenue in Q4 compared to 25% last year and.

Jennifer L. Sherman: In addition to strong organic growth, our recent acquisitions also contributed, with Tractless, our most recent acquisition, continuing its strong start. Acquisitions added approximately $15 million to our top line during the quarter. Our Safety and Security Systems Group again delivered impressive results during the quarter with 14% top-line growth and an adjusted EBITDA margin of 21.2%, slightly above the high end of our new SSG margin target range and 130 basis points improvement compared to last year. Top-line strength was broad-based across our SST businesses throughout 2023, with sales of public safety equipment, industrial signaling equipment, and warning systems each up organically by more than 15% this year. As we have indicated previously, we still expect the addition of a third printed circuit board line to yield further benefits this year through a combination of cost savings, reduced reliance on offshore suppliers, and increased production volumes of public safety equipment. Lastly, we are particularly pleased with our cash conversion in the quarter, having generated $103 million of cash from operations, up 162 percent from last year.

In addition to strong organic growth. Our recent acquisitions also contributed trackless. Our most recent acquisition continuing its strong start acquisitions added approximately $15 million to our top line during the quarter.

Our safety and security systems group again delivered impressive results during the quarter with 14% topline growth and an adjusted EBITDA margin of 21, 2% slightly above the high end of our new SSG margin target range, and 130 basis point improvement compared to last year.

Top line strength was broad based across our SSG businesses throughout 2023 with sales of public safety equipment industrial signaling equipment and warning systems, each up organically by more than 15%. This year as we have indicated previously we still expect the addition of a third printed circuit.

Bart line to yield further benefits into this year through a combination of cost savings reduced reliance on offshore suppliers and increased production volumes of public safety equipment.

Lastly, we are particularly pleased with our cash conversion in the quarter, having generated $103 million of cash from operations up 162% from last year on an annual basis, we continue to target, 100% cash conversion levels, which when coupled with a more normalized capital expenditures.

Jennifer L. Sherman: On an annual basis, we continue to target 100 percent cash conversion levels, which, when coupled with more normalized capital expenditures in the $35 to $40 million range per year, should result in substantial free cash flow generation in 2024 and beyond. Now, shifting now to current market conditions. Demand for our products remains rock solid, with fourth quarter order intake of $465 million, representing a 5% increase compared to last year. We believe our targeted end-market diversification efforts are yielding order strength across both our publicly funded and industrial end markets. Specifically, in the fourth quarter, public revenue orders were up mid-single digits over last year, led by a year-over-year increase in domestic street sweeper orders. Industrial orders were up low single digits year-over-year, primarily led by an increase in orders for dump truck bodies and road marking equipment orders, somewhat offset by lower safe digging truck orders.

And the $35 million to $40 million range per year should result in substantial free cash flow generation in 2024 and beyond.

Shifting now to current market conditions demand for our products remains rock solid with fourth quarter order intake of $465 million, representing a 5% increase compared to last year.

We believe our targeted end market diversification efforts are yielding order strength across both our publicly funded and industrial end markets specifically.

Specifically in the fourth quarter public revenue orders were up mid single digits over last year led by year over year increase in domestic street sweeper orders industrial orders were up low single digits year over year, primarily led by an increase in orders for dump truck bodies and road, marking equipment orders somewhat.

Offset by lower safe digging truck orders.

Jennifer L. Sherman: Looking ahead, we see several internal and external tailwinds continuing to positively impact demand for our products and services. On the internal front, we remain energized by the market reception of our new product development initiatives, such as our MicroPlus lighting product within our SSG segment, our recently introduced Elgin Regen-X Street Sweeper, and our growing aftermarket offering. I'm also pleased to announce that Dr. Scott Robau has rejoined the company as our Chief Technology Officer in January at Federal Signal. Scott previously drove the process that resulted in an acceleration of our safe digging product line. Scott also brings additional expertise in new product development for electric and autonomous solutions.

Looking ahead, we see several internal and external tailwind continuing to positively impact demand for our products and services.

On the internal front, we remain energized by the market reception of our new product development initiatives, such as our micro plus lighting product within our SSG segment. Our recently introduced Allergen region X Street sweeper, and our growing aftermarket offerings.

I'm also pleased to announce the Doctor Scott Robot has rejoined the company as our Chief Technology Officer in January at Federal signal. Scott previously drove the process that resulted in an acceleration of our safe digging product offerings. Scott also brings additional expertise and new product development for electric and autonomous.

<unk> solutions externally, we expect to continue to see benefits from the American Rescue Plan Act and our publicly funded markets, which in 2021 earmarked 350 billion for state local and territorial government for a variety of purposes, including the maintenance of essential infrastructure such as sewer.

Jennifer L. Sherman: Externally, we expect to continue to see benefits from the American Rescue Plan Act in our publicly funded markets, which in 2021 earmarked $350 billion for state, local, and territorial governments for a variety of purposes, including the maintenance of essential infrastructure, such as sewer systems and streets. Similarly, we believe the $550 billion bipartisan infrastructure bill to be a substantial opportunity for many of our Federal Signal products and aftermarket offerings as projects begin to come online in the upcoming year. Although we don't believe the infrastructure bill will have a meaningful impact on our profits in 2024, we are beginning to see examples of the use of our products in early infrastructure projects. These projects include the Atlanta-Hartsfield International Airport expansion as well as a lead replacement project in upstate New York and include the use of our street sweeping and safe digging product offerings.

Systems and streets. Similarly, we believe the 550 billion bipartisan infrastructure bill to be a substantial opportunity for many of our federal signal products and aftermarket offerings as projects began to come online in the upcoming years.

Although we don't believe the infrastructure Bill will have a meaningful impact on our profits in 2024, we are beginning to see examples of the use of our products in early infrastructure projects. These projects include the Atlanta Hartsfield International Airport expansion as well as the led replacement project in Upstate New York.

And include the use of our street sweeping and safe digging product offerings.

Jennifer L. Sherman: In short, even despite our consistent production increases throughout 2023, lead times for certain products remain extended given the strength and new order trends. As such, we remain focused on increasing production levels to build more trucks as we aim to reduce the current backlog and lead times while continuing to maintain a healthy order intake. Turning to 2024, I am passionate about further improving and building on the successful strategies we have put in place since 2016. We remain committed to our strategic building blocks of operational excellence, organic growth, and value-added M&A, all of which would represent the foundation on which we raised our through-cycle EBITDA margin targets in our last earnings year. After codifying our federal signal operating system in 2023, which includes our 80-20 programs and lean initiatives, we are planning a phased rollout across our businesses in 2024. The goal of this continuous improvement initiative is to drive incremental efficiency gains, cost savings, and process simplification across the organization.

In short even despite our consistent production increases throughout 2023 lead times for certain products remain extended given the strength in new order trends as such we remain focused on increasing production levels to build more trucks as we aim to reduce current backlog and lead.

Times, while continuing to maintain a healthy order intake.

Turning to 'twenty 'twenty four I am passionate about further improving and building on the successful strategies. We have put in place since 2016, we remain committed to our strategic building blocks of operational excellence organic growth and value added M&A all of which would represent the foundation.

Which we raised our through cycle EBITDA margin talker targets on our last earnings call.

After codifying, our federal signal operating system in 2023, which includes our 80 20 programs and lean initiatives. We are planning a phased rollout across our businesses in 2020 for the goal of this continuous improvement initiative is to drive incremental efficiency gains cost saving and process simplification.

Across the organization. We believe this renewed initiative will provide multiyear benefits to shareholders and customers in the form of reduced lead times and cost savings.

Jennifer L. Sherman: We believe this renewed initiative will provide multi-year benefits to shareholders and customers in the form of reduced lead times and cost savings. Secondly, our team remains laser-focused on executing on our organic growth and new product development pipeline, which includes several electrification projects across the family of Federal Signal vehicles. Orders for our electric sweepers reached a new high point in Q4, and we expect to deliver all of our 2023 electric sweeper orders this year. We are also excited about a host of other electrification projects across the company, and we'll exhibit several of our dump truck body products mounted on electric chassis at the upcoming NTEA Work Truck Show in Indianapolis. In recent weeks, I had the opportunity to attend two other major trade shows, both of which confirmed our view of strong underlying demand for Federal Signal products. At the WETS show in Indianapolis, we showcased a range of vacuum truck products, including our sewer cleaners, guzzler industrial vacuum trucks, and safe digging equipment. Our long-term outlook on the hydro-excavation market remains unchanged.

Secondly, our team remains laser focused on executing on our organic growth and new product development pipeline, which includes several electrification projects across the family of federal signal vehicle.

Orders for our electric Street first reached a new high point in Q4, and we expect to deliver all of our 2023 electric sweeper orders. This year. We're also excited about a host of other electrification projects across the company and will exhibit several of our dump truck body products mounted on electric chassis at the upcoming.

N T E H <unk> work truck show in Indianapolis in recent weeks I had the opportunity to attend to other major trade shows both of which confirmed our view of strong underlying demand for federal signal products at the wet show in Indianapolis, we showcased a range of vacuum truck products.

Including our sewer cleaners, guzzler industrial vacuum trucks, and safe digging equipment, our long term outlook on the hydro excavation market remains unchanged. We continue to believe that safe digging remains a critical organic growth driver for federal signal as adoption and use cases proliferate across North America.

At the asset trade show in San Diego, the combined or out in Blasters booth generated substantial customer interest for our road, marking and water blasting solutions. In addition to organic growth, we see an array of external levers, including active M&A pipeline and opportunities to drive future.

Jennifer L. Sherman: We continue to believe that safe digging remains a critical organic growth driver for Federal Signal as adoption and use cases proliferate across North America. At the AFSA trade show in San Diego, the combined MRL and blaster booth generated substantial customer interest for our road marking and water blasting solutions. In addition to organic growth, we see an array of external levers, including an active M&A pipeline and opportunities to drive future efficiency gains from already-completed acquisitions, including tow-hawks, blasters, and trackers. Across all of our recently completed acquisitions, we strive to optimize distribution, aftermarket parts capture, and operational cost reduction initiatives as we fully integrate these businesses into the broader Federal Signal organization. Our latest acquisition, Trackless, is off to a fantastic start in year one. To size some of the progress made since the acquisition closed, we are proud to announce that Trackless has grown sales by over 30% in 2023 compared to 2022, having only been under Federal Signal's ownership since April of 2023.

See gains from already completed acquisitions, including tow hot.

Last year's and trackless across all of our recently completed acquisitions, we strive to optimize distribution aftermarket parts capture at operational cost reduction initiatives as we fully integrate these businesses into the broader federal signal organization. Our latest acquisition trackless is off to a.

Fantastic start in year, one to size some of the progress made since the acquisition closed we are proud to announce that trackless has grown sales by over 30% in 2023 compared to 2022, having only been under federal Signal's ownership since April of 2023 importantly, the integration of.

Track with products across our direct sales channel was critical in unlocking that sales growth with sales of trackless products through our channel more than doubling compared to last year. The deeper integration between our existing municipal distribution network and trackless is expected to a lot of track with products to reach.

Jennifer L. Sherman: Importantly, the integration of Trackless products across our direct sales channel was critical in unlocking that sales growth, with sales of Trackless products through our channel more than doubling compared to last year. The deeper integration between our existing Municipal Distribution Network and TrackList is expected to allow TrackList products to reach entirely new customer cohorts and geographies into 24. We plan to further integrate TrackList into our aftermarket platform by scaling rental opportunities, an initiative we believe should yield incremental earnings growth in the coming years. While we believe TrackList remains in the early stages of a multi-year growth opportunity, we think it proves an excellent example of the value we are able to extract after completing acquisitions and integrating businesses into our Federal Signal family. For most acquisitions, key synergies typically span both revenue and costs, with major opportunities across distribution, aftermarket optimization, and material cost reduction initiatives.

<unk> entirely new customer cohorts and geography into 'twenty four we plan to further integrate trackless into our aftermarket platform by scaling rental opportunity initiative, we believe should yield incremental earnings growth in coming years, why we believe trackless remains in the early stages of a multiyear.

Your growth opportunity, we thought it proved an excellent example of the value we are able to extract after completing acquisitions and integrating businesses into our federal signal family for most acquisition key synergies typically span both revenue and costs with major opportunities across distribution at.

Aftermarket optimization and material cost reduction initiatives.

Lastly, as our teams continue to navigate an improving but still fluid supply chain backdrop. We believe we have ample capacity to further scale our output after having completed major facility expansions in recent years.

Turning now to our outlook conditions in our end markets remain healthy and with ongoing execution against our strategic initiatives and opportunities to drive improved efficiencies. We are confident that we will have another record year in 2024 for the full year, we are expecting net sales of between $1 eight.

Jennifer L. Sherman: Lastly, as our teams continue to navigate an improving but still fluid supply chain backdrop, we believe we have ample capacity to further scale our output after having completed major facility expansions in recent years. Turning now to our outlook. Conditions in our end markets remain healthy, and with ongoing execution against our strategic initiatives and opportunities to drive improved efficiencies, we are confident that we will have another record year in 2024. For the full year, we are expecting net sales of between $1.85 billion and $1.9 billion, a double-digit improvement in pre-tax earnings, and EBITDA margin performance in the upper half of our new target range. We also currently expect to report adjusted EPS of between $2.85 and $3.05 per share for the year, which would represent a year-over-year increase of between 10 and 18 percent and the highest EPS level in the company's history.

<unk> 5 billion and $1 9 billion double digit improvement in pretax earnings and EBITDA margin performance in the upper half of our new target range.

We also currently expect to report adjusted EPS of between $2 85, and $3.05 per share for the year, which would represent a year over year increase of between 10, and 18% and the highest EPS level in the company's history. Our outlook does not include and.

Get a tax benefit of approximately $14 million that we expect to realize in Q1 and also assumes continued improvement in production output and a robust aftermarket activity in Q2 through Q4.

Jennifer L. Sherman: Our outlook does not include an anticipated tax benefit of approximately $14 million that we expect to realize in Q1 and also assumes continued improvement in production output and robust aftermarket activity in Q2 through Q4. Lastly, although seasonal effects typically result in Q1 earnings being lower than subsequent quarters given less aftermarket revenue capture and more production slots earmarked for our internal rental fleet, we are expecting Q1 to represent between 19 and 20 percent of our full-year earnings.

Lastly, although seasonal effects typically resolved in Q1 earnings being lower than subsequent quarters, given lots of aftermarket revenue capture and more production slots earmarked for our internal rental fleet. We are expecting Q1 to represent between 19 and 20% of our full year earnings.

In closing I want to express my profound thanks to all of our employees suppliers and stakeholders for a tremendous 2023 with an active M&A pipeline ongoing investment in new product development available capacity, good access to skilled labor and anticipated multiyear tailwind from infrastructure.

Operator: In closing, I want to express my profound thanks to all of our employees, suppliers, and stakeholders for a tremendous 2023. With an active M&A pipeline, ongoing investment in new product development, available capacity, good access to skilled labor, and anticipated multi-year tailwinds from infrastructure legislation, our businesses are well positioned for long-term sustainable growth. With that, we are ready to open the line for questions. Operator?

Legislation, our businesses are well positioned for long term sustainable growth with that we are ready to open the line for questions operator.

Thank him if he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question can you.

You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Operator: Thank you. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue... You may press star 2 if you'd like to remove your question from the queue.

Our first question comes from the line of Steve Barger with Keybanc capital markets. Please proceed with your question.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star 2. Our first question comes from the line of Steve Barger with KeyBank Capital Markets. Please proceed with your question. Good morning, Steve. Hi, good morning. This is Jacob Moore. I'm on behalf of Steve Barger.

Good morning, Steve Hi, Good morning. This is Jacob more on for Steve Margaret Thanks for taking my questions absolute first one backlog was up again for the 12th straight quarter and is still looking very strong.

One is how much of that backlog is up for delivery in 24, how much additional on booked capacity do you think you have in 'twenty, four and what kind of chassis availability headwinds are you baking into your assumptions if I may.

Jacob Moore: Thanks for taking the questions. Absolutely. First of all, backlog was up again for the 12th straight quarter, and it's still looking very strong. My question is, how much of that backlog is set for delivery in 24? And how much additional unbooked capacity do you think you have in 24?

Yeah. So it really depends on the business as I talked about in my prepared remarks, some of our lead times are longer than we would like.

And we have initiatives in place or build more trucks initiatives to reduce those lead times and we are making progress in some areas.

Jennifer L. Sherman: And what kind of chassis availability headwinds are you baking into your assumptions, if any? Yes, so it really depends on the business, as I talked about in my prepared remark. Some of our lead times are longer than we would like, and we have initiatives in place, our Build More Trucks initiative, to reduce those lead times, and we are making progress in some areas, notably safe digging, which we have talked about repeatedly as an important growth area for the company. With respect to chassis availability, we are in pretty good shape for Class 8 chassis, which support the vast majority of our businesses. We do have some pockets of areas.

Notably safe digging, which as we talked about repeatedly an important growth area for the company.

With respect to chassis availability, we are in pretty good shape for a class eight chassis.

Which support you know the vast majority of our businesses.

We do have some pockets.

Of areas for example class seven chassis for our Street sweeper business, we're continuing to monitor that and with respect to class five chassis.

Jennifer L. Sherman: For example, the Class 7 chassis for our Street Sweeper business, we're continuing to monitor that, and with respect to Class 5 chassis for a very small percentage of our dump truck business, they're flat year-over-year, and as we move forward, we are hopeful that in the second half of the year we will see more of those Class 5 and Class 7 chassis. But overall, we're in pretty good shape.

For a very small percentage of our dump truck business, they're flat year over year and you know we as we move forward we are.

Hopeful that the second half of the year, we will see more of those class five and class seven chassis, but overall, we're in pretty good shape and then I would conclude with you know the capacity expansions that we've invested in particularly in factor and some of our dump truck business as you know.

Jacob Moore: And then I would conclude with, you know, the capacity expansions that we've invested in, particularly at Factor and some of our dump truck businesses. You know, we're very well positioned with improving supply chain conditions to be able to leverage those investments.

We're very well positioned with improving supply chain conditions to be able to leverage those investments.

Understood. That's helpful. Thank you and my second question is how much of your 2023 gross would you attribute to price versus volume and what sort of expectations are embedded in your roughly 10% growth guidance for 'twenty four.

Jacob Moore: And my second question is, how much of your 2023 growth would you attribute to price versus volume? And what sort of expectations are embedded in your roughly 10% growth guidance for 2024? Yeah, so as we think about the guys for 24, I think we're implying, you know, 7 to 10% growth, pretty much all of that is organic. And I would say prices are about 2.5%, 3% of that. In 23, it was between 3% and 4% with the price impact on the. Got it. Thank you very much. Thanks, Jacob.

Yeah, So as we think about.

The guide for 'twenty for I think we were implying you know 7% to 10% growth is pretty much all of that is on the what was organic and I'd say you know prices about about two and a half 3% of that in 'twenty. Three it was it was between three and 4% was that was the price impact on the topline.

Got it. Thank you very much thanks, Jackie thank you.

Thank you. Our next question comes from the line of Chris Moore with CJS Securities. Please proceed with your question.

Operator: Thank you. Thank you. Good morning, guys. Congratulations on two great years.

Good morning, guys. Congrats on a great credit to two great years, Alright. So that's just you know kind of multiple ways, but clear.

Operator: All right. So we've asked this, you know, in kind of multiple ways. But clearly, Jennifer, you said that, you know, you still don't expect much in the way of in 24 from, you know, some of the infrastructure bills. But I'm trying to look at it from, you know, a three to five-year perspective. Is it reasonable to think that these these bills could add a couple of points to annual revenue growth over that timeframe? Just curious kind of how you guys look at that. Yeah, absolutely. You are correct that we're not expecting a lot in 24.

Clearly China for you said that you still don't expect much in a way of of in 'twenty. Four from you know some of the infrastructure bills, but I'm trying to look at it from a three to five year perspective, you know is it is it reasonable to think that that could these these bills could add.

A couple of points to annual revenue growth over that time frame just curious kind of how you guys look at that.

Yeah, absolutely you are correct that we're not expecting a lot in 'twenty four I think our transportation Secretary beauty Chad She had a pretty good quote about it. He said one way to think about it is the first year was about passing the money in 'twenty two the second year. It was about the programs launching in 'twenty three and 'twenty.

Jennifer L. Sherman: I think Transportation Secretary Buttigieg had a pretty good quote about it. He said one way to think about it is the first year was about passing the money in 22, the second year was about the programs launching in 23, and 24 is about the money moving so we can get the dirt flying. As we move forward, we think there are opportunities for almost all of our products, and we expect that to continue over a five-year period. So, you know, in terms of quantification of it, I think I started with the Buttigieg quote because we've got to really understand what those projects are, but again, we saw some early examples that we talked about in the prepared marks, specifically around street sweepers and safe digging, and, you know, Thank God!

Four it's about the money moving so we can get the dirt flying.

You know as we move forward, we think theres opportunities for almost all of our products and we expect that to continue over a five year period.

So.

You know in terms of quantification of it.

When I started with the Buda Church quote because we got to really understand what those products projects are but again you know we saw some early examples that we talked about in the prepared remarks, specifically around street sweepers and safe digging.

And you know, we're pretty energized about this five year plus tailwind.

Jennifer L. Sherman: It's very helpful. You talked in a couple of remarks about planned production increases, and I just wanted to maybe understand, you know, where we're focused on there. Sure, so if we look at backlogs for certain products, we look at those associated lead times.

Got it that's very helpful. You had talked in the prepared remarks about plant production increases and I just wanted to maybe understand you know where where we're focused on there.

Sure.

So if we look at backlogs for certain products, we look at those associated lead times.

Jennifer L. Sherman: We're very focused on reducing those lead times, and we've made some progress with respect to some of our safe digging products. We're also focused on reducing lead times for other product lines at our facility in Streator and for our street sweepers in Elgin, Illinois. So those are the two primary areas and the teams, you know, have goals for 2024. The Federal Signal Operating System that we talked about is going to be an important part of that initiative, and we're continuing to see sequential improvement, which is encouraging. I got it.

We're very focused on reducing those lead times and we made we made some progress with respect to some of our safe digging project products and were focused on reducing lead times for other product lines at our facility in Streator and for our Street sweepers.

<unk> and Elgin, Illinois. So those are the two primary areas and the teams have goals in 'twenty 'twenty four the federal signal operating system that we talked about it's going to be important part.

Of that initiative.

And.

We're continuing to see sequential improvement which is encouraging.

Jennifer L. Sherman: That's helpful. And I think after Q3, you talked about lead times for sewer cleaners and street sweepers being in the eight to nine month range versus the typical four to five. Are they a little bit improved from Q3 or still in that range? It depends on which product line you're talking about in terms of the lead time. Certain Street Sweeper product lines are extended.

Got it that's helpful and.

Think after Q3, you talked about lead times for for sewer cleaners and Street Sweepers, you know being in the eight to nine months range versus typical four to five are they a little bit improved off of Q3 are still in that range or.

Yeah.

It depends on which product line you are talking about them in terms of the lead times.

I'm certain street sweeper product lines are extended.

Jennifer L. Sherman: You know, I always talk about this being a high-class problem to have because our orders continue to remain strong, and while our production rates are increasing, and our aftermarket business continues to remain strong, which is an important driver of the use of those particular products. I appreciate it, guys, and we'll leave it there. Thank you very much. Thank you very much, Chris.

You know I always talk about this is a high class problem to have because our orders continue to remain strong.

While our production rates are increasing and our aftermarket business continues to remain strong which is an important driver of use of those particular products.

Got it I appreciate it guys I'll leave it there. Thank you very much. Thank you very much Chris.

Operator: Thank you. Our next question comes from the line of Walt Liptak with Seaport Research. Please proceed with your question. Good morning, Walt.

Thank you. Our next question comes from the line of Walt Liptak with Seaport Research. Please proceed with your question.

Good morning, Walt good morning, guys. Good morning.

Walter Scott Liptak: Good morning, guys. Good morning. Congratulations on the great end to the year. I guess my first question is for Ian. Just thinking about the way that you're looking at the guidance for 2024, and you made a comment that you're going to be at the upper end of the EBITDA range. And so I guess the question is, you know, what determines where you are within that range?

Congratulations on the great into the year I guess my first question is to to Ian just thinking about the way that youre looking at the guidance for 2024, and you made a comment that you're going to be at the upper end of the EBITDA range.

So I guess the question is.

What determines where you are within that range is that the amount of revenue that ship in leverage or is it some of these.

Ian A. Hudson: Is it the amount of revenue that you ship and leverage, or is it some combination of these? Productivity Programs or Capacity coming online, what you know that helps you either plus or minus in the range? Yeah, I think, firstly, well, I think just to correct what we said in the prepared comments is that we expect to be in the upper half of the new target range, so not necessarily at the upper end of that range. So I just wanted to clarify that. Okay, that's important. Yeah, Yeah, but in terms of what helps us get that margin improvement, I think, you know, we think about the expansion at the VACTA facility and being able to actually tap into that expansion. Yeah, Yeah, Yeah,

Productivity programs or capacity coming online what do you know what helps you either plus or minus range.

Yeah, I think firstly I think just just to correct. What we said in the prepared comments is that we expect to be in the upper half of the new target range. So not necessarily at the upper end of that range. So just wanted to.

Okay that's important.

Yeah, but in terms of what.

Helps us get that margin improvement I think you know, we think about what the expansion. The fact that facility and being able to actually tap into that expansion from in the sense of increasing the billed AR production rates at that facility that has some pretty attractive drop through so as we think about ramping up production of that.

Ian A. Hudson: From the sense of increasing the build production rates at that Facility, that has some pretty attractive drop through. So as we think about ramping up production at that facility, that should have some margin benefits there. The other thing that would be a consideration is just the continued growth in our aftermarket business. We've seen some nice growth there again this year; I think we were up north of 20% year over year in terms of our aftermarket business. So that should be, you know, margin positive.

Facility that should have some margin benefits. The other thing that would be a consideration is just the continued growth in our after market business. We've seen some nice growth. There again. This year I think we were up north of 20% year over year in terms of our after market business, so that should be margin accretive.

Jennifer L. Sherman: I think the other things would be some of the acquisitions we've completed in recent years, some of the value-added M&A we've done, that can have some margin benefits. And then, Jennifer touched on it, the Federal Signal Operating System and just our ability to execute and to drive some efficiencies in our production processes. So those would be the main drivers from a margin. Okay, great. Okay, thanks for that. In the prepared comments, you guys called out warning systems as having a good quarter. If memory serves, warning systems might have been lagging for some time. I know that's not that big of a part of the business, but if it's picking up, does it tell you something about some of the larger municipal projects? Yeah, so.

The other things would be some of the acquisitions. We've completed in recent years some of the value added M&A. We've done that can have some margin benefits and then finally, Jennifer touched on it would be the federal signal operating system and just our ability to you know to execute and to drive some efficiencies in our production processes. So those would be the the may.

And drivers from a margin standpoint.

Okay, great. Okay. Thanks for that.

In the the prepared comments you guys called out a warning systems.

Having a good quarter and if my memory serves a warning systems had been might've been lagging for some time.

You know as you know I know, there's not that big of a part of the business, but if it's picking up does that tell you something about you know.

Some of the larger municipal projects.

Yeah. So.

Jennifer L. Sherman: What I spoke about was that the warning systems were up year over year, and we have seen that's an area where we have seen benefits from FEMA. And again, you know, we live in a very uncertain world, and the need for redundant warning is critical. And so we've seen applications of that equipment, and the use cases continue to proliferate.

What I spoke about is that the warning systems was up year over year and we have seen that's an area, where we have seen the benefits from the FEMA funds.

And again, you know we live in a very uncertain world.

And the need for redundant warning.

Is critical and so we've seen applications of that equipment do you use cases continue to proliferate.

Jennifer L. Sherman: And, you know, I'd be remiss if I didn't add there that one of the encouraging things that occurred in 23. And as we move into 2024, we just have broad-based strength across all of our SSGs. Okay, great. Okay.

And on you know I'd be remiss, if I didn't add there that one of the encouraging.

Things that occurred in 'twenty, three and as we move into 'twenty 'twenty four we just saw broad based strength across all of our S. S cheap brands.

Okay great.

Jennifer L. Sherman: And along those lines, in SSG, you're putting in the third production line. Can you tell us if this is because of market growth or is it market share gains? I know you were going after some international markets for some of the police lights and other... Yeah, the good news is that it's in, and so the teams have done a really nice job in terms of the installation. It's a major project.

Okay.

Along those lines in SSG, you're putting in the third production line.

Can you tell us.

You know if this is because the market grows.

Or is it market share gains I know you were going after some international markets for awesome that police lights and others.

Yeah. The good news is that it's it's in and so the teams have done a really nice job in terms of the installation of a major project. It's a combination of <unk> to support organic growth initiatives.

Jennifer L. Sherman: It's a combination to support organic growth initiatives. We're also bringing back, previously, our supply chain was in Asia. And so we're on-shoring some of that work, and it supports the approach that we have in terms of being the total supplier for certain pieces of equipment. So it was a hole in our product portfolio that we sourced from a third party.

We're also bringing back we previously our supply chain was in Asia.

And so we're onshoring some of that work.

And it supports also.

Approach that we have in terms of being the total supplier for certain pieces of equipment. So it was a hole in our product portfolio that we sourced from a third party and now as the teams move strategically to supply more and more of that equipment.

Jennifer L. Sherman: And now, as the teams move strategically to supply more and more of that equipment, this fills one of those product holes. But overall, very successful in this. Okay, great. And then the last one for me is, you talked about the phased rollout of the Operational Excellence Program that you talked about last year. So what inning are we in?

This feels one of those product holes, but overall very successful initiative.

Okay great.

And then the last one for me is are you.

You you talked about the phased rollout of the operational excellence program that you talked about last year.

What so what inning are we in.

Jennifer L. Sherman: Obviously, SSG has done a great job with the lights, but are there other businesses that you could tell us that you're going to be working on or are working on? In M&A, it sounds like Trackless is doing great. Do they get operational excellence first? Yeah, great question.

Obviously SSG has done a great job with the lights, but are there other businesses that you could tell us that you're going to be working on or are working on them.

On M&A it sounds like trackless is doing great. You know do they get operational excellence, you know first or do you let them grow.

Yeah, Great question. So as we talked about last year, you know we added resources to our 80 20 and lean initiative program. So we had a number of wins last year with our ox body group in particular is a great example.

Jennifer L. Sherman: So as we talked about last year, you know, we added resources to our 80-20 Unlean Initiative Program. So we had a number of wins last year with our Oxbody group, in particular, a great example in Alabama. And as we roll out this particular system, we are focused on, for example, Elgin. Teams are already out there in 2024.

In Alabama, and as we roll out. This particular system. We are focused for example, Elgin teams are out there already started in 2024 and that's an area because we're very focused on reducing lead times for that particular product line and increasing obviously increasing.

Jennifer L. Sherman: And that's an area because we're very focused on reducing lead times for that particular product line and increasing, obviously increasing throughput. Mark Weber and the team have identified a number of different opportunities. Typically, with acquisitions, you know, we wait until kind of year two for that type of work. But put it this way, there's more demand right now for the resources, which is fantastic. And we're looking at how we kind of increase demand in order to respond to what we think is meaningful opportunity going forward. All right, thank you. Thank you. Thank you. As a reminder, if you'd like to join the question queue, please press star 1 on your telephone keyboard. Our next question comes from Dave Storms with Stonegate Capital Markets. Good morning.

Throughput.

But mark Weber and the teams have identified a number of different opportunities typically with acquisitions, we wait until kind of year to them for that type of work, but I'll put it this way there's more demand right now for the resources, which is fantastic.

Caustic I mean, we're looking at how do we kind of increased demand in order to respond to what you think is meaningful opportunity going forward.

Okay, Great alright, thank you.

Thank you.

Thank you as a reminder, if you'd like to join the question queue. Please press star one on your telephone keypad. Our next question comes from the line of Dave storms with Stonegate capital markets. Please proceed with your question.

Good morning.

Good morning, Dave.

Operator: So, it looks like there was a slight divergence in patterns for ESG and SSG, scowl, at least since last quarter. Is that just a blip from, you know, orders being inherently? There's more to that story.

So it looks like there was a slight diversion and sequential orders Pat Pat.

Patterns for ESG, and SSG with SSG, just seeing orders down slightly.

Since last quarter.

Is that just a blip from you know orders being inherently lumpy or is there more to that story that we should be thinking about yeah.

Ian A. Hudson: Yeah, there's some, you know, lumpiness in terms of large fleet orders, and I think we talked about a large fleet order that we got in the first half of the year for the SSG business. We also, I think on the last call, made reference to Ford having a model year changeover for some of its police vehicles. So that had some impact. It probably had less of an impact than we originally anticipated in Q4, but that could have had some impact, and that's primarily timing. People wouldn't place the oars in Q4, but then they would place them in Q1.

Yeah. There's there's some you know lumpiness in terms of large fleet orders in and I think we talked about a large fleet towards what are we going to sort of stop the yes. So the SSG business. We also I think on the last call made reference to Ford was having a model year changeover for its some of its police vehicles.

So that had some impact it it probably was less less of an impact than we originally anticipated in Q4, but that could have had some impact and that's primarily timing I'm you know people wouldn't place the orders in Q4, but then they'll place them in Q1, so I wouldn't necessarily say within SSG, there's anything.

Ian A. Hudson: So I wouldn't necessarily say within SSG there's anything that we weren't expecting. Probably the opposite, the orders probably came in certainly higher than we'd expected with that model year change, understood very helpfully. Just a quick one on your cash deployment priorities. I know you touched on it, everything in 2020. 5X, Dividend Raises, CapEx, and M&A; if you had to prioritize them for 2024, what would those be? Tour, number one, Investment in Organic Growth Initiatives, number two, M&A, on number three, competitive dividend yields, number four, opportunities to take share buybacks, very helpful.

<unk>.

You know, we weren't expecting probably the opposite the oldest probably came in you know certainly higher than we'd expected with that model year changeover.

Understood very helpful. And then just a quick one on your cash deployment priorities I know you touched on it.

But it seems like you did everything in 2023 from buybacks dividend raises capex and I'm and I. If you had to prioritize them for 2024, what would that look like.

Sure number one.

That's been an organic growth initiatives number two M&A are number three competitive dividend yield number for opportunistic share buybacks.

That's very helpful. Thank you for taking my questions.

Dave Storms: Thank you for taking my question. Thank you. Thank you. Ladies and gentlemen, this concludes our question and answer session. I'll turn the floor back to Ms. Sherman for any final comments. Thank you. We would like to express our sincere thanks to our stockholders, employees, distributors, dealers, and customers for their continued support. Thank you for joining us today, and we'll talk to you soon. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Thank you.

Thank you ladies and gentlemen, this concludes our question and answer session I'll turn the floor back to MS. Sherman for any final comments.

Thank you.

We would like to express our sincere thanks to our stockholders employees distributors dealers and customers for their continued support. Thank you for joining us today and we'll talk to you soon.

Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.