Q1 2025 Federal Signal Corp Earnings Call

Operator: Greetings, and welcome to the Federal Signal Corporation First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode.

Greetings and welcome to the Federal Signal Corporation first quarter earnings Conference call. At this time all participants are in a listen only mode. A brief 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.

Operator: A brief 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.

Speaker Change: This conference is being recorded it is now my pleasure to introduce your host Felix Boucher Vice President corporate Saturday in Investor Relations. Thank you Sir you may begin.

Felix Boeschen: It is now my pleasure to introduce your host, Felix Boeschen, Vice President of Corporate Strategy and Investor Relations. Thank you, sir. You may begin.

Felix Boeschen: Good morning and welcome to Federal Signal's first quarter 2025 conference. I'm Felix Boeschen, 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 Slides can be followed online by going to our website, federalsignal.com, clicking on the investor call icon, and signing into the website. We've also posted the slide presentation and the earnings release under the Investor tab on our website.

Speaker Change: Good morning, and welcome to Federal Signal's first quarter 2025 conference calls 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, Our Chief Financial Officer, we will refer to some presentation slides today as well.

Speaker Change: The earnings release, which we issued this morning, the 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 investors tab on our website.

Felix Boeschen: 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 These documents are available on our website. 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.

Speaker Change: 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.

Speaker Change: With U S generally accepted accounting principles in our earnings release and filings. We reconcile these non-GAAP measures to GAAP measures. In addition, we will file our Form 10-Q later today, Ian will start today with more detail on our first quarter financial results. Jennifer will then provide her perspective on our performance and go over our revised out.

Felix Boeschen: In addition, we will file our Form 10-Q later today.

Ian Hudson: Ian will start today with more detail on our first quarter financial results.

Jennifer Sherman: Jennifer will then provide her perspective on our performance and go over our revised outlook for 2025 before we open the line for any questions.

Ian Hudson: <unk> for 2025 before we open the line for any questions with that I would now like to turn the call over to Ian.

Ian Hudson: With that, I would now like to turn the call over Thank you, Felix. Our consolidated first quarter financial results are provided in today's earnings. In summary, we delivered strong financial results for the quarter, with 9% year-over-year net sales growth, double-digit operating income improvement, gross margin expansion, a 170 basis point improvement in adjusted EBITDA margin, and new records in orders and backlogs. Consolidated net sales for the quarter were $464 million, up $39 million or 9% compared to last year. Organic sales growth for the quarter was $28 million, or 7%. Consolidated operating income for the quarter was $65.7 million, up $11.4 million, or 21% compared to last year.

Ian Hudson: Thank you Felix.

Ian Hudson: Consolidated first quarter financial results are provided in today's earnings release in summary, we delivered strong financial results for the quarter with 9% year over year net sales growth double digit operating income improvement.

Ian Hudson: <unk> margin expansion.

Ian Hudson: 170 basis point improvement in adjusted EBITDA margin and New records in orders and backlog.

Ian Hudson: Consolidated net sales for the quarter were $464 million up $39 million or 9% compared to last year.

Ian Hudson: Organic sales growth for the quarter was $28 million or 7%.

Ian Hudson: Consolidated operating income for the quarter was $65 $7 million up $11 $4 million or 21% compared to last year.

Ian Hudson: Consolidated Adjusted EBITDA for the quarter was $85.1 million, up $14.5 million, or 21% compared to last year. that translates to a margin of 18.3% in Q1 this year, up from 16.6% last year. Gas diluted EPS for the quarter was $0.75 per share, compared to $0.84 per share in Q1 last year. On an unjustified basis, EPS for the quarter was $0.76 per share, an increase of $0.12 per share or 19% from last year. Order intake for the first quarter set a new company record, surpassing the previous high, which was set in Q1 last year. In total, orders in Q1 this year were $568 million, an increase of $65 million, or 13% compared to last year.

Ian Hudson: Consolidated adjusted EBITDA for the quarter was $85 $1 million up $14 $5 million or 21% compared to last year.

Ian Hudson: That translates to a margin of 18, 3% in Q1 this year up from 16, 6% last year.

Ian Hudson: GAAP diluted EPS for the quarter was <unk> 75 per share compared to 84 cents per share in Q1 last year.

Ian Hudson: On an adjusted basis EPS for the quarter was <unk> 76 per share an increase of 12 cents per share or 19% from last year.

Ian Hudson: Order intake for the first quarter set a new company record, surpassing the previous high which was set in Q1 last year in.

Ian Hudson: In total orders in Q1, this year with $568 million, an increase of $65 million or 13% compared to last year.

Ian Hudson: Backlog at the end of the quarter was $1.1 billion, another all-time high for the company, and an increase of $3 million compared to Q1 last year. In terms of our group results, ESG's net sales for the quarter were $387 million, up $33 million, or 9% compared to last year. ESG's operating income for the quarter was $59.7 million, up $8 million, or 15% compared to last year. ESG's adjusted EBITDA for the quarter was $77.5 million, up $11 million or 17% compared to last year. that translates to an adjusted EBITDA margin for the quarter of 20 percent, an improvement of 120 basis points compared to last year.

Ian Hudson: Backlog at the end of the quarter was $1 1 billion. Another all time high for the company and an increase of $3 million compared to Q1 last year.

Ian Hudson: In terms of our group results Esg's net sales for the quarter were $387 million up $33 million or 9% compared to last year.

Ian Hudson: Esg's operating income for the quarter was $59 $7 million up $8 million or 15% compared to last year.

Ian Hudson: ESG is adjusted EBITDA for the quarter was $77 $5 million up $11 million or 17% compared to last year.

Ian Hudson: That translates to an adjusted EBITDA margin for the quarter of 20% an improvement of 120 basis points compared to last year.

Ian Hudson: ESG reported total orders of $480 million in queue on this year, an increase of $52 million, or 12% compared to last year.

Speaker Change: <unk> reported total orders of $480 million in Q1, this year, an increase of $52 million or 12% compared to last year.

Ian Hudson: SSG's net sales for the quarter was $76 million this year, up $6 million or $8 billion. SSG's operating income for the quarter was $15.8 million, up $2 million, or 14% compared to last year. SSG's adjusted EBITDA for the quarter was $16.8 million, up $2 million, or 14%. that translates to an adjusted EBITDA margin for the quarter of 22%, up 110 basis points compared to last year. SSG's orders for the quarter were $88 million, up $13 million, or 17% from last year. Corporate operating expenses for the quarter were $9.8 million, compared to $11.2 million last year, with a decrease primarily due to lower post-retirement and stock compensation expenses, partially offset by the non-recurrence of a $1.8 million benefit from an insurance recovery that was recognized in Q1 last year.

Speaker Change: SSG net sales for the quarter was $76 million this year up $6 million or 8%.

Speaker Change: Ssg's operating income for the quarter was $15 $8 million up $2 million or 14% compared to last year.

Speaker Change: <unk> adjusted EBITDA for the quarter was $16 $8 million up $2 million or 14%.

Speaker Change: That translates to an adjusted EBITDA margin for the quarter of 22% up 110 basis points compared to last year.

Speaker Change: Ssg's orders for the quarter were $88 million up $13 million or 17% from last year.

Speaker Change: Corporate operating expenses for the quarter were $9 8 million compared to $11 $2 million last year with the decrease primarily due to lower post retirement and stock compensation expenses, partially offset by the non recurrence of a $1 $8 million benefit from an insurance recovery that was recognized in Q1 last year.

Ian Hudson: Turning now to the Consolidated Income Statement, where the increase in net sales contributed to a $14.8 million improvement in gross profit. consolidated gross margin for the quarter was 28.2 percent, a 90 basis point increase over last year. As a percentage of net sales, our selling, engineering, general, and administrative expenses for the quarter were down 50 basis points from Q1 last year. Other items affecting the quarterly results include a $700,000 increase in amortization expense, a $300,000 reduction in acquisition-related expenses, a $500,000 increase in other expense, and a $200,000 reduction in interest. Tax expense for the quarter was $15.7 million, compared to a benefit of $700,000 in Q1 last year, with the increase primarily due to the effects of higher pre-tax income levels and the non-recurrence of a $13 million discrete tax benefit, which was recognized in the prior year quarter.

Speaker Change: Turning now to the consolidated income statement, where the increase in net sales contributed to a $14 8 million improvement in gross profit.

Speaker Change: Consolidated gross margin for the quarter was 28, 2%, a 90 basis point increase over last year.

Speaker Change: As a percentage of net sales, our selling engineering general and administrative expenses for the quarter were down 50 basis points from Q1 last year.

Speaker Change: Other items affecting the quarterly results include a $700000 increase in amortization expense of $300000 reduction in acquisition related expenses of $500000 increase in other expense and a $200000 reduction in interest expense.

Speaker Change: Tax expense for the quarter was $15 $7 million compared to a benefit of $700000 in Q1 last year.

Speaker Change: The increase primarily due to the effects of higher pretax income levels and the non recurrence of a $13 million discrete tax benefit which was recognized in the prior year quarter.

Ian Hudson: Our effective tax rate for Q1 this year was 25.3%. At this time, we continue to expect that our full-year effective tax rate will be between 25% and 26%, excluding discrete tax benefits. On an overall gap basis, we therefore earned $0.75 per share in Q1 this year, compared with $0.84 per share in Q1 last year. To facilitate earnings comparisons, we typically adjust our gap earnings-to-share for unusual items recorded in the current or prior quarters. In the current year quarter, we made adjustments to gap earnings-to-share to exclude acquisition-related expenses and purchase accounting expense effects, whereas in Q1 last year, we also excluded the $13 million discrete tax benefit that I previously mentioned.

Speaker Change: Our effective tax rate for Q1. This year was 25, 3% at this time, we continue to expect that our full year effective tax rate will be between 25, and 26% excluding discrete tax benefits.

Speaker Change: On an overall GAAP basis, we therefore, <unk> 75 per share in Q1, this year compared with 84 cents per share in Q1 last year.

Speaker Change: 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 expenses and purchase accounting expense effects, whereas in Q1 last year. We also excluded the <unk>.

Speaker Change: $13 million discrete tax benefit that I previously mentioned.

Ian Hudson: On this basis, our adjusted earnings for the quarter was $0.76 per share compared with $0.64 per share last year. Looking now at cash flow, we generated $37 million of cash from operations during the quarter, an increase of $5 million or 17% from Q1 last year. We ended the quarter with $220 million of net debt and availability under our credit facility of $509 million. Our current net debt leverage ratio remains low, even after accounting for the acquisition of Hogg Technologies, which we completed during the quarter for an initial payment of approximately $82 million.

Speaker Change: On this basis, our adjusted earnings for the quarter was <unk> 76 per share compared with 64 cents per share last year.

Speaker Change: Looking now at cash flow, we generated $37 million of cash from operations during the quarter, an increase of $5 million or 17% from Q1 last year.

Speaker Change: We ended the quarter with $220 million of net debt and availability under our credit facility of $509 million. Our current net debt leverage ratio remains low even after accounting for the acquisition of <unk> technologies, which we completed during the quarter for an initial payment of approximately 82.

Speaker Change: Yeah.

Ian Hudson: With our financial position remaining strong, we have significant flexibility to invest in organic growth initiatives, pursue strategic acquisitions like HOG, and return cash to stockholders through dividends and opportunistic share repurchasing. On that note, we paid dividends of $8.6 million during the quarter, reflecting an increased dividend of $0.14 per share, and we recently announced a similar $0.14 per share dividend for the second quarter. During the first quarter, we also repurchased approximately $20 million of stock, buying back around a quarter of a million shares. And so far in April, we have repurchased an additional $20 million of stock under our authorized repurchase program.

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

Speaker Change: On that note, we paid dividends of $8 6 million during the quarter, reflecting an increased dividend of <unk> 14 per share and we recently announced a similar 14 cents per share dividend for the second quarter.

Speaker Change: During the first quarter, we also repurchased approximately $20 million of stock buying back around a quarter of a million shares and so far in April we have repurchased an additional $20 million of stock under our authorized repurchase programs. As you may have seen last week, our board recently approved an additional.

Ian Hudson: As you may have seen last week, our board recently approved an additional stock repurchase authorization of $150 million.

Speaker Change: <unk> stock repurchase authorization of $150 million.

Jennifer Sherman: That concludes my comments and I would now like to turn the call over to Jennifer. Thank you, Ian. Our first quarter performance represents a strong start to 2025, inclusive of first quarter records across consolidated net sales, adjusted EPS, and adjusted EBITDA margin, thanks to the outstanding contributions from both of our groups. Within our environmental solutions group, we delivered 9% year-over-year net sales growth and a 17% increase in adjusted EBITDA with higher production levels, growth in sales of our aftermarket offerings, proactive management of price-cost dynamics, and contributions from recent acquisitions representing meaningful year-over-year contributors. In what is typically a seasonally softer quarter, ESG's adjusted EBITDA margins expanded by 120 basis points year-over-year to approximately 20%, representing a new first quarter record and performance within the upper half of our current margin target range.

Speaker Change: That concludes my comments and I would now like to turn the call over to Jennifer.

Jennifer Sherman: Thank you in our first quarter performance represents a strong start to 2025 inclusive of a first quarter record across consolidated net sales adjusted EPS and adjusted EBITA margin. Thanks to the outstanding contributions from both of our groups.

Jennifer Sherman: Within our environmental solutions group, we delivered 9% year over year net sales growth and a 17% increase in adjusted EBITDA with higher production level growth in sales of our aftermarket offerings proactive management of price cost dynamics and contributions from recent acquisitions.

Jennifer Sherman: Representing meaningful year over year contributors in what is typically a seasonally softer quarter esg's adjusted EBITDA margins expanded by 120 basis points year over year to approximately 20%, representing a new first quarter record and performance within the upper half.

Jennifer Sherman: Of our current margin target range.

Jennifer Sherman: On the back of our strong backlog and continued healthy order levels, our teams remain focused on building more trucks across our family of specialty vehicle businesses. As such, combined first quarter production at our two largest ESG facilities rose double digits year over year. From a capacity perspective, our access to labor remains good, supply chain fluidity and supply chain consistency has improved materially, and our large scale capacity expansions that we completed between 2019 and 2022 position us well to profitably absorb incremental volumes into our existing footprint. Additionally, we've made important investments at our Elgin Street Sweeper plant, inclusive of several management hires, expansion of our hourly workforce, and continued optimization of our fabrication process.

Jennifer Sherman: On the back of our strong backlog and continued healthy order levels. Our teams remain focused on building more trucks across our family of specialty vehicle business.

Jennifer Sherman: As such combined first quarter production at our two largest ESG facilities rose double digits year over year from a capacity perspective or access to labor remains good supply chain fluidity and supply chain consistency has improved materially and our large scale capacity.

Jennifer Sherman: The expansions that we completed between 2019, and 2020 to position us well to profitably absorb incremental volumes into our existing footprint.

Jennifer Sherman: Additionally, we have made important investments at our Elgin Street sweeper plant inclusive of several management hires expansion of our hourly workforce and continued optimization of our fabrication processes with these investments we are confident that we could meet structurally higher demand requirements.

Jennifer Sherman: With these investments, we are confident that we can meet structurally higher demand requirements on the back of market share gains.

Jennifer Sherman: And the back market share gains.

Jennifer Sherman: Shifting to aftermarkets. Demand for our aftermarket products and services remains high as revenues grew 11% year over year. Given strong rental utilization levels, our teams are diligently managing between ensuring sufficient rental equipment availability and used equipment sales to best serve our customers' In the quarter, both rental revenue and used equipment sales grew double digits year-over-year. In the aggregate, aftermarket represented approximately 26 percent of ESG revenue in Q1 this year. I'm particularly encouraged by the progress we've made on our various strategic initiatives in the quarter aimed at expanding our market share, some of which I will address throughout the call.

Jennifer Sherman: Shifting to aftermarket demand for our aftermarket products and services remains high as revenues grew 11% year over year.

Jennifer Sherman: Given strong rental utilization levels. Our teams are diligently managing between ensuring sufficient rental equipment availability and used equipment sales to best serve our customers' needs in the quarter, both rental revenue and used equipment sales grew double digits year over year in the aggregate.

Jennifer Sherman: Aftermarket represented approximately 26% of ESG revenue in Q1 this year.

Jennifer Sherman: I'm, particularly encouraged by the progress we've made on our various strategic initiatives in the quarter aimed at expanding our market share some of which I will address throughout the call. As a reminder, through cycles, we target annual double digit topline growth split roughly evenly between inorganic and organic.

Jennifer Sherman: As a reminder, through cycles, we target annual double-digit top-line growth split roughly evenly between inorganic and organic growth. Execution on our strategic initiatives is an important component of that long-term growth algorithm as we look to drive organic growth in excess of end-market growth. In the quarter, we reported double-digit organic growth in net sales of road market equipment and dump bodies driven by healthy end-market demand, continued market share expansion efforts, and our reputation for high-quality products. In particular, our OXBODYS business, with its primary manufacturing facility in Alabama, continues to expand its geographic reach into key southeastern markets such as Texas and Florida, enabling strong market share expansion, runway, and critical markets, with additional opportunities available going forward.

Jennifer Sherman: Right.

Jennifer Sherman: Execution on our strategic initiatives is an important component of that long term growth algorithm as we look to drive organic growth in excess of end market growth rates in there in the quarter, we reported double digit organic growth in net sales of road, marking equipment and dump bodies.

Driven by healthy end market demand continued market share expansion efforts and our reputation for high quality products in particular, our ox bodies business with its primary manufacturing facility in Alabama continues to expand its geographic reach into key south eastern Mark.

Jennifer Sherman: <unk>, such as Texas, and Florida, enabling strong market share expansion runway in critical markets with additional opportunities available going forward.

Jennifer Sherman: Further, our most recent acquisitions also contributed positively to top-line results with Standard adding approximately $6 million of incremental net sales in the quarter and Hogg contributing around $5 million of net sales in a little over six weeks post-acquisition. On a full-year basis, we continue to expect that HOG will contribute net sales of between $50 million and $55 million in 2025.

Jennifer Sherman: Further our most recent acquisitions also contributed positively to topline results with standard, adding approximately $6 million of incremental net sales in the quarter and hog contributing around $5 million of net sales and a little over six weeks post acquisition.

Jennifer Sherman: On a full year basis, we continue to expect that hog will contribute net sales of between 50 million and $55 million in 2025 shifting to our safety and security systems group. The team delivered another outstanding quarter with 8% top line growth.

Jennifer Sherman: Shifting to our Safety and Security Systems Group, the team delivered another outstanding quarter with 8% top-line growth, a 14% increase in adjusted EBITDA, and a 110 basis point improvement in adjusted EBITDA margin. This improvement was primarily driven by a combination of volume increases and favorable sales mix. Within our SSG Group, our Public Safety business led the charge in form of 13% revenue growth with strong margin expansion as the team continues to execute on an active pipeline of opportunities within police and market. Lastly, we had another strong quarter of cash generation, with $37 million of cash generated from operations, up 17% over the prior year.

Jennifer Sherman: 14% increase in adjusted EBITDA, and a 110 basis point improvement in adjusted EBITA margin. This improvement was primarily driven by a combination of volume increases and favorable sales mix within our SSG group, our public safety business led the charge inform us.

Jennifer Sherman: 13% revenue growth with strong margin expansion as the team continues to execute on an active pipeline of opportunities within police and markets. Lastly, we had another strong quarter of cash generation with $37 million of cash generated from operations up 17% over the prior year.

Jennifer Sherman: As a reminder, on a full-year basis, we target 100% cash conversion on a net income basis.

Jennifer Sherman: As a reminder, on a full year basis, we target, 100% cash conversion on a net income basis.

Jennifer Sherman: Shifting now to current market conditions, demand for our products and aftermarket offerings remain strong with our first quarter order intake of $568 million representing a 13 percent year-over-year increase and the highest ever quarterly order intake on record for Federal Signal. The addition of HOGS backlog contributed approximately $21 million of orders in the quarter, as such excluding the impact of HOGS acquired backlog, orders increased 9 percent year-over-year. Our record backlog at the end of the quarter provides excellent visibility for the remainder of the year and for certain key product lines into the first half of 2026.

Jennifer Sherman: Shifting now to current market conditions demand for our products and aftermarket offerings remained strong with our first quarter order intake of 568 million, representing a 13% year over year increase and the highest ever quarterly order intake on record for federal signal.

Jennifer Sherman: The addition of hogs backlog contributed approximately $21 million of orders in the quarter as such excluding the impact of hogs acquired backlog orders increased 9% year over year, a record backlog at the end of the quarter provides excellent visibility for the remainder of the year and.

Jennifer Sherman: For certain key product lines into the first half of 2026 within our end markets publicly funded orders increased high single digits year over year led by strength in domestic street sweepers and public safety equipment, primarily within our North American police business industrial orders rose double digits.

Jennifer Sherman: Within our end markets, publicly funded orders increased high single digits year over year, led by strength in domestic street sweepers and public safety equipment, primarily within our North American police business. Industrial orders rose double digits, led by strength and demand for dump truck bodies, safe digging trucks, and road marking equipment, as our teams continue to execute on several important strategic market share initiatives. As an example, within our dump truck body business, more than 75% of the revenue growth in the quarter was derived from conquest customers representing meaningful market share gains. This success has been a direct result of our strategic initiative.

Jennifer Sherman: Led by strength and demand for dump truck bodies safe digging trucks and road, marking equipment as our teams continue to execute on several important strategic market share initiatives.

Jennifer Sherman: As an example, within our dump truck body business more than 75% of the revenue growth in the quarter was derived from conquest customers representing meaningful market share gains. The success has been a direct result of our strategic initiatives beginning with our 80 20 processes aimed.

Jennifer Sherman: beginning with our 80-20 processes aimed at rationalizing our product offerings, which has set the foundation to allow our business to expand geographically while commanding industry-leading lead time. This lead time advantage is an important competitive differentiator in the marketplace as it significantly decreases working capital costs for our distribution partners. Looking ahead, we are excited about future geographic white space opportunities within our dump truck body businesses, and we are executing on various cross-selling initiatives across the enterprise, such as driving higher municipal customer penetration.

Jennifer Sherman: Rationally sizing our product offerings, which has set the foundation to allow our business to expand geographically, while commanding industry, leading lead times. This lead time advantage is an important competitive differentiator in the marketplace as it significantly G curious as working capital costs for our.

Jennifer Sherman: <unk> partners looking ahead, we are excited about future geographic white space opportunities within our dump truck body businesses and we are executing on various cross selling initiatives across the enterprise such as driving higher municipal customer penetration.

Jennifer Sherman: Lastly, our SSG team had a record order intake of $88 million in the quarter, up 17 percent compared to prior year, as we continue to gain traction across our various market share initiatives within the police market. As an example, within North America, we continue to make progress expanding our share with existing customers as we secured an order from a large strategic customer in the quarter that is expected to ship later this year. We are also seeing incremental opportunities to gain share across several U.S. state agencies amidst an ever-increasing need to keep our communities and law enforcement personnel safe.

Jennifer Sherman: Lastly, our SSG team had a record order intake of $88 million in the quarter up 17% compared to prior year as we continue to gain traction across our various market share initiatives within the police market. As an example, within North America, we continue to make progress expanding our.

Jennifer Sherman: Sure, we think listing customers as we secured an order from a large strategic customer in the quarter that is expected to ship. Later. This year. We are also seeing incremental opportunities to gain share across several U S state agencies and missed an ever increasing need to keep our communities and law enforcement person.

Jennifer Sherman: And I'll say it <unk>.

Jennifer Sherman: Similarly, our European public safety business, Vama, secured a strategic contract win in France, underpinning our future growth ambitions in Europe in this arena. In short, demand for our products and services remains strong. Our teams are focused on reducing lead times for certain product categories while maintaining a healthy order intake.

Jennifer Sherman: Similarly, our European public safety business pharma secured a strategic contract win in France, underpinning our future growth ambitions in Europe in this arena and Shimmer in short demand for our products and services remained strong our teams are focused on reducing lead times for certain product categories, while maintaining a.

Jennifer Sherman: The order intake.

Jennifer Sherman: I now want to take a moment to expand on our various internal initiatives, many of which form the foundation through which we believe we can outgrow our end migrants through cycles. Firstly, I want to address the current macroeconomic environment and how we are positioning Federal Signal in light of the recently announced global tariff. From a high-level perspective, our strategy remains largely unchanged. The vast majority of our supply chains are localized to the regions and countries in which we sell our equipment, which results in us sourcing more than 95% of our direct supplies from North America, the majority of which are from the United States.

Jennifer Sherman: I now want to take a moment to expand on our various internal initiatives many of which form the foundation through which we believe we can outgrow our end markets through cycles.

Jennifer Sherman: Firstly I want to address the current macroeconomic environment and how we are positioning federal signal in light of the recently announced global tax from a high level perspective, our strategy remains largely unchanged. The vast majority of our supply chains are localized to the regions and countries in which we sell.

Jennifer Sherman: Our equipment, which results in a sourcing more than 95% of our direct suppliers from North America. The majority of which are from the United States going forward, we want to continue our strategy of producing in country for country and are proud of our domestic manufacturing.

Jennifer Sherman: Going forward, we want to continue our strategy of producing in-country, for-country, and are proud of our domestic manufacturing operations in the United States, Canada, and Europe. As such, we estimate that supplies directly sourced from China comprise less than 1% of our annual cost of sale. In fact, insourcing certain componentry out of Asia has been an important strategic lever within our SSG business for several years. Since 2022, we have invested several million dollars in three printed circuit board manufacturing lines at our University Park facility in Illinois. These additions have not only reduced our reliance on offshore Asian suppliers, but have also expanded our available capacity while further increasing the quality of our products and realizing important cost savings.

Jennifer Sherman: Operations in the United States, Canada, and Europe, as such we estimate that supplies directly sourced from China comprise less than 1% of our annual cost of sale in fact in sourcing certain componentry out of Asia has been an important strategic lever within our S. S. G.

Jennifer Sherman: For several years.

Since 2020 to be a invested several million dollars and three printed circuit board manufacturing lines at our University Park facility in Illinois.

Jennifer Sherman: These additions have not only reduced our reliance on offshore Asian suppliers, but have also expanded our available capacity, while further increasing the quality of our products and realizing important cost savings given the recently announced tariffs. We're currently accelerating several other in sourced.

Jennifer Sherman: Given the recently announced tariff, we are currently accelerating several other in-sourcing activities at SSG, including the addition of a fourth printed circuit board manufacturing line. While it is more difficult to quantify the exact indirect exposure resulting from tariffs, I would note that chassis costs have historically been treated as a pass-through item for many of our specialty vehicle products within the ESG group. As such, we would expect that any potential resulting changes in the price of chassis would be directly passed on to the end customer. In addition, similar to the post-COVID inflationary period, we will look to strategically optimize our supply chains and continue to proactively manage price-cost dynamics where necessary.

Jennifer Sherman: Activities at SSG, including the addition of a fourth printed circuit Board manufacturing line.

Jennifer Sherman: Well it is more difficult to quantify the exact indirect exposure, resulting from tariffs I would note that chassis costs have historically been treated as a pass through item for many of our specialty vehicle products within the ESG group as such we would expect that any potential resulting changes in the price.

Jennifer Sherman: The chassis would be directly passed on to the end customer. In addition, similar to the post Covid inflationary period, we will look to strategically optimize our supply chain and continue to proactively manage price cost dynamics, where necessary. Moreover, with 18 principal manufacturing.

Jennifer Sherman: Moreover, with 18 principal manufacturing facilities in the United States and three in Canada, we have ample flexibility to strategically shift North American production as needed should the tariff environment change. Finally, from an underlying demand standpoint, we have seen no material changes in customer behavior in response to the announced tariffs thus far. We are also encouraged by the progress we are making on several important new product development projects across the enterprise that we are starting to accelerate as supply chains have stabilized.

Jennifer Sherman: The United States and three in Canada, we have ample flexibility to strategically shift North American production is needed should the tariff environment change finally from an underlying demand standpoint, we have seen no material changes in customer behavior in response to the announced tariffs thus far.

Jennifer Sherman: We are also encouraged by the progress we're making on several important new product development projects across the enterprise that we are starting to accelerate our supply chain to stabilize one of our core competitive advantages within the ESG group is the scale and power of our specialty vehicle platform spanning several opera.

Jennifer Sherman: One of our core competitive advantages within the ESG group is the scale and power of our specialty vehicle platform spanning several operational categories, such as sourcing, supply chain optimization, our federal signal operational system, sales channel alignment, dealer development, aftermarket support, data analytics, and new product development. As part of our growing specialty vehicle platform, we've established a centralized new product development group supporting our various business units led by our chief technology officer. In the long term, we believe the centralized approach for certain new product development initiatives will drive important scale advantages and ultimately support above market growth rates.

Jennifer Sherman: <unk> categories, such as sourcing supply chain optimization, our federal signal operational system sales channel alignment dealer development aftermarket support data analytics and new product development.

Jennifer Sherman: As part of our growing specialty vehicle platform, we've established a centralized new product development groups supporting our various business units led by our Chief Technology Officer, and the long term.

Jennifer Sherman: We believe this centralized approach for certain new product development initiatives will drive important scale advantages and ultimately support above market growth rates. One. Such example is the recent launch of our simplified control systems across many ESG vehicle categories, originally launched in or factor back.

Jennifer Sherman: One such example is the recent launch of our simplified control systems across many ESG vehicle categories. Originally launched at our Vactor vacuum truck business and currently being rolled out across our dump truck businesses, our new control systems simplify ease of use and are aimed at alleviating one of our customers' greatest challenges at the moment, qualified labor availability. We are also excited about the progress we are seeing for adoption of two NPD initiatives, both of which are creating meaningful market share opportunities.

Jennifer Sherman: Truck business and currently being rolled out across our dump truck businesses, our new control system simplified ease of use and are aimed at alleviating one of our customers' greatest challenges at the moment qualified labor availability. We are also excited about the progress we are seeing for adoption of two N P D initiatives.

Jennifer Sherman: Both of which are creating meaningful market share opportunities within our street sweeper business. We previously launched the region X product a big dump regenerative air Sweeper. This product enables us to strategically expand share in the historically underserved air sweeper market for Allergan and so far we've re.

Jennifer Sherman: Within our street sweeper business, we previously launched the RegenX product, a mid-dump regenerative air sweeper. This product enables us to strategically expand share in the historically underserved air sweeper market for Elgin, and so far we have received outstanding customer interest. We are currently in the process of structurally raising our production capabilities to accommodate our expansion into this subset of the street sweeper market.

Jennifer Sherman: Received outstanding customer interest we are currently in the process of structurally raising our production capabilities to accommodate our expansion and to this subset of the street sweeper market.

Jennifer Sherman: In the fourth quarter of 2024, our SSG group launched its Pathfinder Perimeter Breach Warning System, a patented system that enhances police officers' safety by providing increased situational awareness and alerting law enforcement personnel of a threat within a 25-foot radius around the police car. When activated, the Perimeter Breach Warning System signals the officer audibly and visually to allow for sufficient reaction time. Initial interest in the product has been very strong, and we see this innovation not only as market share additive within our public safety business, but we also see an opportunity to increase overall Federal Signal content per police car sold.

Jennifer Sherman: In the fourth quarter of 2024, our SSG group launched its pathfinder perimeter breach warning system, a patented system that enhances police officers safety by providing increased situational awareness and alerting law enforcement personnel of a threat within a 25 foot radius around the police car.

Jennifer Sherman: When activated their perimeter breach warning system signals, the officer audibly and visually to allow for sufficient reaction time initial interest in the product has been very strong and we see this innovation not only as market share additive within our public safety business, but we also see an opportunity to increase over.

Jennifer Sherman: Or a federal signal content per police car sold.

Jennifer Sherman: Finally, we are pleased to announce that we have transitioned a multi-state territory within our exclusive dealer channel to five selected dealer partners with a combined 250 years of experience representing Federal Signal products. As a reminder, our exclusive dealer channel primarily serves certain municipal product lines including sewer cleaners, street sweepers, and multi-purpose maintenance vehicle and accounts for approximately 36% of total sales.

Jennifer Sherman: Finally, we are pleased to announce that we have transitioned a multi state territory within our exclusive dealer channel two five selected dealer partners with a combined 250 years of experience representing federal signal products. As a reminder, our exclusive dealer channel primarily serves certain municipal product lines, including.

Jennifer Sherman: Sewer cleaners, and street sweepers, and multipurpose maintenance vehicle and accounts for approximately 36% of total sales net sales turning tour now to our outlook for the remainder of 2025.

Jennifer Sherman: turning now to our Outlook for the remainder of 2025. Despite current global macroeconomic uncertainty, our record backlog provides us with visibility to the rest of the year, and with our predominantly North American-centric supply base and continued execution against our strategic and operational initiatives, we are raising our full-year adjusted EPS outlook to a new range of $3.63 to $3.90 from the prior range of $3.60 to $3.90. At the midpoint, this revised guidance represents another year of double-digit growth and the highest adjusted EPS level in the company's history. Additionally, we are reaffirming our net sales outlook of between $2.02 billion and $2.1 billion.

Jennifer Sherman: Despite current global macro economic uncertainty our record backlog provides us with visibility to the rest of the year and with our predominantly North American centric supply base and continued execution against our strategic and operational initiatives, we are raising our full year adjusted EPS.

Jennifer Sherman: Outlook to a new range of $3 63 to.

Jennifer Sherman: The $3.90 from the prior range of $3.60 to $3 90 at.

Jennifer Sherman: At the midpoint. This revised guidance represents another year of double digit growth and the highest adjusted EPS level in the company's history.

Jennifer Sherman: Additionally, we are reaffirming our net sales outlook of between 2.02 billion and $2 1 billion. We are also reaffirming our expectations for double digit improvement in pretax earnings and EBITDA margin performance in the upper half of our target range. This updated outlook assume.

Jennifer Sherman: We are also reaffirming our expectations for double-digit improvement in pre-tax earnings and EBITDA margin performance in the upper half of our target range. This updated outlook assumes that the current trade agreements and recently announced tariff policies remain in place. Lastly, we are reaffirming our CapEx guidance of between $40 million and $50 million for the year.

Jennifer Sherman: At the current trade agreements and recently announced tariff policies remain in place lastly, we are reaffirming our capex guidance of between 40 million and $50 million for the year with that we're ready to open the line for questions operator.

Felix Boeschen: With that, we are ready to open the line for questions. Operator. Thank you.

Speaker Change: Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue. You May press star two if he would like to remove your question from the queue, we ask that analysts limit themselves to one.

Operator: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue.

Operator: We ask that analysts limit themselves to one question and a follow-up so that others may have an opportunity to ask questions. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.

Speaker Change: And then a follow up so that others may have an opportunity to ask questions for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment. Please I'll we poll for questions.

Jacob Moore: Our first question comes from Steve Barger with KeyBank Capital Markets. Please proceed with your question. Good morning, Steve. Hi, good morning.

Speaker Change: Our first question comes from Steve Barger with Keybanc capital markets. Please proceed with your question.

Speaker Change: Good morning, Steve.

Speaker Change: Hi, Good morning, this is actually Jake or more on for Steve today. Thank you for taking my questions absolutely.

Jacob Moore: This is actually Jacob Moore on for Steve today. Thank you for taking our Absolutely.

Jennifer Sherman: First, for me, I just wanted to ask about lead times compared to, you know, three months ago, or maybe a year ago, and how that relates to open capacity. I mean, the big backlog is great for visibility, but it sounds like you're working rather hard to deliver more to your customers. I'm trying to get a sense for a potential need for you to invest in additional capacity from here versus how much capacity you still have that just needs to be unlocked. Sure.

Speaker Change: First for me I, just wanted to ask about lead times compared to three months ago, or maybe a year ago and how that relates to open capacity.

Speaker Change: The big backlog is greater visibility, but it sounds like youre working with other hard to deliver more to your customers I'm trying to get a sense for a potential need for you to invest in additional capacity from here versus how much capacity you still have that just needs to be unlocked.

Jennifer Sherman: We'll start with the capacity question. Across the enterprise, we're running between 70% and 72% capacity, so we think we have plenty of capacity at our existing facilities to support the increased production going forward. So I'll stop there. We also have opportunities within our service centers where we can build trucks. A good example of that would be that currently we're building guzzler trucks in Leeds, Alabama. With respect to lead time, I'm pleased to report about the progress we've made, particularly with our three-wheel street sweeper, and that lead time right now is running at about six months, which is where we'd like it.

Speaker Change: First let's talk we'll start with the capacity question.

Speaker Change: You know across the enterprise.

Speaker Change: You know were running between 70 and 72% capacity. So we think we have plenty of capacity at our existing facilities to support the increased production going forward. So I'll stop there. We also have opportunities with in our service centers.

Speaker Change: Where we can build trucks are a good example of that would be that currently we're building guzzler trucks in Leeds, Alabama.

Speaker Change: With respect to lead times I am pleased to report about the progress we've made particularly with our three wheeled street sweeper and that lead time right now is running at about six months, which is where we'd like it.

Jennifer Sherman: That was the project that we referenced last year, where we started with respect to our throughput improvement initiative at Elgin to support our strategic growth initiative, and we're working diligently also on our four-wheel line to reduce those lead times. So as we talked about, you know, production was up at our two largest facilities within our ESG group in Q1, and overall, we were pleased with the progress that we're making.

Speaker Change: That was the project that we referenced last year, where we started with respect to our throughput improvement initiatives at Elgin to support our strategic growth initiatives.

Speaker Change: And we're working diligently also on our four wheel line to reduce those lead times.

Speaker Change: As we talked about you know production was up.

Speaker Change: At our two largest facilities within our ESG group in Q1 and overall, we were pleased with the progress that we're making yeah and Jacob just just as it relates to kind of the investments you know we continue to make investments in a number of our businesses certainly nothing to the law.

Ian Hudson: Yeah, and Jacob, just as it relates to kind of the investments, you know, we continue to make investments in... a number of our businesses, certainly nothing to the level that we have the last couple of years. About 50% of that CapEx guide that Jennifer referenced earlier on the call, that $40 to $50 million, about half of that is growth investments. The rest would be maintenance. As an example, we've made some investments in adding capacity within our water blasting business, as well as our mineral extraction business, as we see some nice potential on the mineral extraction side.

Evel that we know that we have in the last couple of years.

Speaker Change: About 50% of that Capex guide that Jennifer referenced earlier on the call that $40 million to $50 million about half of that is growth investments the rest would be maintenance.

Speaker Change: As an example, we've made some investments in adding capacity within our water blasting business as well as on mineral extraction business as we as we see kind of some nice potential on the mineral extraction side. So we've made some investments, but it's it's certainly not to the level that we had when we did the large expansion of our streator facility for <unk>.

Jacob Moore: We've made some investments, but it's certainly not to the level that we had when we did the large expansion at our Streeter facility, for example. That's all factored into that $40 to $50 million CapEx. Okay, great. That's really great call.

Speaker Change: Example, so that's that's all factored into that 40 to 50 million Capex guide.

Speaker Change: Okay, Great that's really great color.

Jacob Moore: As my follow up, I just wanted to ask about what you're seeing in the backlog as it relates to the cadence for the rest of the year. Is there anything in there that would indicate lumpiness in a particular quarter for either sales or margin? Nothing stands out. Understood. Thank you very much. Thank you.

Speaker Change: That was my follow up I, just wanted to ask about what youre seeing in the backlog as it relates to the cadence for the rest of the year is there anything in there that would indicate lumpiness in a particular quarter, where either sales or margin.

Speaker Change: Nothing stands out yeah, I mean, the one thing Jacob just as Jennifer alluded to it the backlog gives us it gives us good visibility to the rest of 25 and for certain key product lines. It stretches into the first half of 'twenty six so from a cadence standpoint, there's a there's a portion of the backlog that stretches into 2026.

Speaker Change: Yeah.

Speaker Change: Understood. Thank you very much thank you.

Sam Karlov: Our next question comes from Ross Sparenbrink with William Blair. Please proceed with your question.

Speaker Change: Our next question comes from Ross <unk> with William Blair. Please proceed with your question.

Sam Karlov: Good morning, Roth. Good morning, Jennifer. This is Sam Karlov on for Ross. Thanks for taking my questions. Uh, can you give us a sense of how April ESG orders have trended? I know you touched on this in your prepared remarks, but I just wanted to confirm that the first quarter strength in ESG orders was not a pull forward of demand ahead of tariff impacts on chess. So, I'll start with a couple things, you know, given our backlogs for certain products. particularly sewer cleaners and certain street sweepers that stretch into 26th. It would be difficult to kind of pull forward to avoid tariffs.

Speaker Change: Good morning Ross.

Sam carload: Good morning, Jennifer This is Sam carload on for Ross, Thanks for taking my questions Hi, Sam.

Speaker Change: Can you give us a sense of how April ESG orders have trended I know you touched on this in your prepared remarks, but I just wanted to confirm but the first quarter strength in ESG orders was not a pull forward of demand out of tariff impacts on chassis.

Speaker Change: Yeah. So I'll start with a couple of things you know given our backlogs for certain products.

Speaker Change: Particularly sewer cleaners, and certain street sweepers that stretch into 'twenty six.

Speaker Change: It would be difficult to kind of pull forward to avoid tariffs.

Jennifer Sherman: with our ability to surcharge backlogs if we would need to. The second thing is just, I would point you again to the strength of the orders across the board. Again, you know, our publicly funded orders increased high single digits, industrial orders increased double digits year over year, and again, it wasn't any one particular business. For example, on the industrial side, we saw strength in dump truck body orders, safe digging trucks, and road marking equipment. I guess I also want to emphasize, you know, we spent some time on the call talking about the success that we've had regarding execution on our strategic initiatives around gaining additional market share.

Speaker Change: Particularly with our ability to surcharge backlogs, if we would need to.

Speaker Change: The second thing.

Speaker Change: Is just I would point you again to the strength of the orders across the board.

Speaker Change: Again, you know our publicly funded orders increased high single single digits industrial orders increased double digits year over year and again it wasn't any one particular business for example on the industrial side, we saw strength and dump truck body order safe digging.

Speaker Change: Trucks and road marking equipment.

Speaker Change: I guess I also want to emphasize you know we spent some time on the AR call talking about the success that we've had regarding execution on our strategic initiatives around gaining additional market share. We're really encouraged by the result.

Jennifer Sherman: We're really encouraged by the results that we saw, for example, at our dump truck body business, where over 75% of the growth in net sales was from Conquest customers. And, you know, overall, we just haven't seen any kind of fundamental change in the underlying demand. in our end markets for our profits.

Speaker Change: What we saw for example at our dump truck body business, where over 75% of the growth in net sales was from conquest customers.

Speaker Change: And overall, we just haven't seen any kind of fundamental change in the underlying demand.

Speaker Change: In our end markets are.

Speaker Change: Alex.

Jennifer Sherman: got it that's what we figured but that's helpful uh and then just quick follow-up uh on that dealer reassignment there are that 13 million of orders that were going to push out of the fourth quarter were those all recaptured in the first quarter or some of those expected to come later in the Yeah, there was some, there was some as it relates to the transition. There was, there was some, you know, some of the dealers placed placed orders that was so it but it wasn't a meaningful driver of the growth that we saw year over year.

Speaker Change: Got it and that's what we figured that that's helpful and then just.

Speaker Change: Quick follow up on that do you every assignment.

Speaker Change: $13 million of orders that were pushed out in the fourth quarter were those all recaptured in the first quarter or some of it is expected to come later in the year.

Speaker Change: Yeah. There was some there was some as it relates to the transition that was.

Speaker Change: There was some you know some of the dealers placed are placed orders that was so it but it wasn't a meaningful driver of the growth that we saw year over year.

Sam Karlov: Got it.

Speaker Change: Got it I appreciate the color thanks, guys.

Sam Karlov: I appreciate the call. Thanks, guys.

Yeah.

Tim Stein: Our next question comes from Tim Stein with Raymond James. Please proceed with your question. Good morning. The first question, maybe for Ian, was just on... The ESG margins, obviously the aftermarket growth that you realized was certainly helpful and supportive, but I'm just curious if there's anything else that we should be mindful of in what is normally a seasonally softer quarter from a margin perspective. Was there anything in terms of like, you know, maybe accelerated product shipments or any kind of mixed benefit or along those lines that, you know, may have taken some, may have pulled forward into the quarter?

Speaker Change: Our next question comes from Tim Thein with Raymond James. Please proceed with your question.

Tim Thein: Good morning, good morning, good morning.

Tim Thein: The first question maybe for Ian was just on.

Tim Thein: The ESG margins.

Tim Thein: Obviously that the the.

Tim Thein: Aftermarket growth that you realized it was certainly helpful and supportive, but I'm just curious if there's anything else to that.

Tim Thein: We should be mindful of what is normally a.

Tim Thein: Seasonally softer quarter from a margin perspective.

Tim Thein: Was there anything in terms of like.

Tim Thein: Maybe accelerated product shipments or any kind of mix benefit or along those lines that you know may may have taken some oh, maybe pulled forward into the quarter I'm just I'm just trying to think of us as to how we should be thinking about the balance that's there yeah, no nothing particularly unusual Tim I think you you're wrestling.

Ian Hudson: I'm just, I'm just trying to think as to how we should be thinking about the balance of the year. Yeah, nothing particularly unusual, Tim. I think you referenced, you know, in your question, the fact that Q1 is typically on the, you know, the softer side because of the aftermarket business typically is lower in Q1 than in subsequent quarters, you know, as the weather improved, there's more projects, so that has some benefits to the rentals, parts, and service business. The other thing that we've talked about, and Jennifer talked about, the production increases at Baxter and Elgin, that has some, you know, operating leverage as we ramp up production and actually leverage the capacity we've added the last couple of years, so as we ramp up production, that has an impact and was one of the drivers of, you know, the year-over-year margin improvement.

Tim Thein: So you know when you're in your question. The fact that Q1 is typically on the you know the softer side because of the after market business typically is low lower in Q1 that is that is then in subsequent quarters you know as the weather improved our small projects. So that has some benefits to the rental is parts and service business.

Tim Thein: The other thing that we've we've talked about in jet engine of Jennifer talked about the production increases that Teva and Allergan that has some you know.

Tim Thein: Operating leverage as we ramp up production and actually leverage the capacity. We've added the last couple of years. So as we ramp up production that has that that had an impact and was one of the drivers of.

Tim Thein: The year over year margin improvement.

Ian Hudson: You know, we would expect that to continue as we move forward and we, you know, continue to make progress with increasing production and trying to reduce those lead times, but there was nothing really unique or unusual in the quarter as it relates to ESG margins other than, you know, the continued progress on production and just the seasonality of Q1. Beside that, nothing unusual.

Tim Thein: We would expect that to continue.

Tim Thein: As we move forward and we continue to make make progress with increasing production and trying to reduce those lead times, but there was nothing really unique or unusual in the quarter as it relates to ESG margins. Other than you know the continued progress on on production and just the seasonality of Q1.

Tim Thein: Beside that nothing unusual.

Tim Stein: I guess I'd add that we continue to see further margin expansion opportunities through execution on strategic initiatives going forward. Okay, helpful. And then just on the industrial orders, I think, you know, in a in a quarter that, you know, that the government's telling us where GDP is going backwards, and, you know, all these kind of cautious comments from pretty much everything across industrial land. Then you see your your orders up double digits. And I think, you know, it's kind of trying to understand what's underneath some of this, but specifically. within that dump truck business, you know, not one you've had for super long.

Tim Thein: I think I'd add that we continue to see further margin expansion opportunities through execution on strategic initiatives going forward.

Tim Thein: Okay helpful. And then just on the industrial orders I think you know in in a quarter that you know that.

Tim Thein: The government is telling us where GDP.

Tim Thein: GDP is going backwards and it's all these kind.

Tim Thein: Kind of a cautious comments from pretty much everything across industrial land and then you see your orders up double digits and I think you know it's there.

Tim Thein: Everyone's just kind of trying to understand.

Tim Thein: What what's underneath some of them.

Tim Thein: Specifically.

Tim Thein: Within that dump truck business.

Tim Thein: Not one you had for Super long end and so I'm just curious how how that behaves in a you know in a normal cycle I guess, if if what we're in now is it all normal but.

Tim Stein: And so I'm just curious how that behaves in a, you know, in a normal cycle, I guess, if what we're in now is at all normal. But I'm just trying to understand, you know, if we've heard from several of the OEMs talking about them, you know, taking their build rates down on the chassis side. I know that that's not going to perfectly marry up with your business. But, you know, it's become a sizable piece. So maybe just a minute or so in terms of what you're seeing within that business. Thank you.

Tim Thein: I'm just trying to understand you know what we've heard from several of the Oems talking about them, taking their build rates down and then on the chassis side I know that that's not going to perfectly marry up with your business, but.

Tim Thein: It's become a sizeable piece, so maybe just a minute or so in terms of what youre seeing within that business. Thank you.

Jennifer Sherman: Sure. So, kind of dissecting that, I'll start with, you know, the essential nature of many of the products that we manufacture, particularly road marking and the initiatives we've had to gain market share. With respect to safe digging, I referenced last year a team that we put together to examine how do we go to market and what improvements we can make with respect to both the product and go to market. And, you know, we're tracking success on that initiative. The teams are doing a really good job in terms of expanding market share, and we saw success on those initiatives in Q1.

Tim Thein: Sure.

Tim Thein: So kind of dissecting that I'll start with you know the essential nature of many of the products that we manufacture.

Tim Thein: Particularly road marking.

Tim Thein: And the initiatives, we've had to gain our market share.

Tim Thein: With respect to safe digging I referenced last year, a team that he put together to examine how do we go to market and what improvements we can make with respect to both the product and go to market and you know we're tracking success on that initiatives and teams are doing a really.

Tim Thein: Good job in terms of expanding market share and we've seen we saw success on those initiatives in Q1 to dump trucks. When we bought the dump truck business and back in 2017, one of the initiatives that we had was to mute cyclicality of that business in terms.

Jennifer Sherman: To dump trucks, when we bought the dump truck business back in 2017, one of the initiatives that we had was to mute cyclicality of that business in terms of diversification of the end market. It was a very geographically focused set of businesses where they predominantly focused on a range of 750 miles around the plant where the trucks were manufactured. As part of our integration efforts and leveraging the power of the Specialty Vehicle Platform, we a couple years ago started an initiative to expand into new territories, and we're in the beginning innings of that initiative. I talked about on the call about the success that we've had in Florida and Texas.

Tim Thein: The diversification of the end markets. It was a very geographically focused set of businesses.

Tim Thein: We're they've predominantly focused on a range of 750 miles around the plant where the trucks were manufactured.

Tim Thein: As part of our integration efforts and leveraging the power of the specialty vehicle platform.

Tim Thein: We a couple of years ago started initiative to expand into two new territory.

Tim Thein: And we're in the beginning innings of that initiative.

Tim Thein: I talked about on the call about the success that we've had in Florida, and Texas, we have a number of initiatives to continue expanding both market share and diversifying the end markets for the dump truck body business.

Tim Stein: We have a number of initiatives to continue expanding both market share and diversifying the end markets for the dump truck body building. All right. Thank you.

Tim Thein: Alright, thank you.

Tim Thein: Thanks, Tim.

Chris Moore: Our next question comes from Chris Moore with CJS Securities. Please proceed with your question. Hey, good morning, guys. Thanks for taking a couple. Good morning, Chris. Good morning. You know, you guys historically have good pricing power, you know, contractually have the right to reprice backlog. Is that something that's happened at all? And just trying to understand the possibility of that for the balance of the year.

Speaker Change: Our next question comes from Chris Moore with C. J S. Securities. Please proceed with your question.

Chris: Hey, good morning, guys. Thanks for taking a couple of good morning, Chris Good morning.

Chris: You guys historically have good pricing power you know contractually have the right to to re price backlog is that something that that has happened at all in and just trying to understand the possibility of that for the balance of the year.

Chris: Yeah.

Jennifer Sherman: Again, let's talk about our direct supply base. As you know, 80% of our sales are in the United States and they're supported by 18 manufacturing facilities. 15% of our sales, I'm talking about for 24, are in Canada, supported by three manufacturing facilities. We have a couple percentage points in Europe supported by a manufacturing facility there. So, again, our supply base is in country for country, and it also gives us some flexibility there. So, to date, given that 95% of our supply base is in North America, with the vast majority of that being in the U.S., you know, we're in a pretty good position with respect to the direct suppliers in results of any tariff.

Chris: Again, let's talk about our direct.

Chris: Supply days as you know, 80% of our sales in the United States and they're supported by 18 manufacturing facilities.

Chris: 50% of our sales I'm talking about for twenty-four Canada supported by three manufacturing facilities. There are a couple of percentage points in Europe supported by many of our manufacturing facility. There. So again, our supply base is in country for country and it also.

Chris: Gives us some flexibility there.

Chris: So to date.

Chris: Given that 95% of our supply basins in North America with the vast majority of that being in the U S. And you know we're in a pretty good position with respect to the direct suppliers and results of any tariffs with respect to chassis. That's typically a pass through.

Jennifer Sherman: With respect to chassis, that's typically a pass-through expense, and to the extent the chassis manufacturers have different surcharges, we will be passing those on to customers. Also, as we've talked about in previous calls, we're also reducing the amount of chassis that we supply. And, you know, for example, in our dump truck business, we never supply the chassis. So, we think we're very well positioned as we sit here today, and as we move forward, we'll continue our efforts with respect to supply chain optimization and price-cost optimization as needed to respond to any Got it.

Chris: And to the extent the chassis manufacturers have different surcharges them, we will be passing those on to customers also as we've talked about in previous calls we're also reducing the amount of chassis that we supply.

Chris: And you know for example in our dump truck business, we never supply the chassis. So we think we're very well positioned as.

Chris: As we sit here today and as we move forward. We will continue our efforts with respect to supply chain optimization and price cost optimization as needed to respond to any changes.

Speaker Change: Got it I appreciate it.

Chris Moore: I appreciate it.

Jennifer Sherman: along those same lines. You had talked about less than 1% sourcing from China. My understanding is that some SSG competitors source quite a bit from China. Just trying to figure out if that's accurate and is that helping you or do you expect it to help you in the second half of the year? Great question. So the 1% we've sourced from China is predominantly our SSG businesses and if you would have gone back five, six years ago, that number would have been higher. And it's lower and continuing to decrease because of the on-shoring initiatives that we have in place that we're currently accelerating.

Speaker Change: Oh, along those same lines. So you had talked about less than 1%.

Speaker Change: Sourcing from China. My understanding is that you know some SSG competitors source quite a bit from China, just trying to trying to.

Speaker Change: Figure out if that's accurate and is that helping you or do you expect it to help you in the second half of the year.

Speaker Change: Yeah, Great question, so the 1% we source from China, it's predominantly our SSG businesses and if you would have gone back five six years ago that number would have been higher.

Speaker Change: And it's lower than continuing to decrease because of the onshoring initiatives that we have in place that we're currently accelerating.

Jennifer Sherman: Vis-a-vis the competition, we do believe that it gives us an advantage on the inside.

Speaker Change: Vis vis the competition, we do believe that it gives us an advantage on the SSG side.

Speaker Change: Perfect and maybe just the last one and this honor.

Jennifer Sherman: And maybe just the last one in this. Obviously a very uncertain market, just from an M&A standpoint. Curious from a valuation perspective, you know, kind of what you're seeing out there. Yeah, our pipeline continues to remain full. Again, as we've talked about in the past, we've developed a reputation as a buyer of choice. And, you know, we talk about long-run, double-digit revenue growth with about low double-digit with about half of that coming from M&A, and we would expect that to continue.

Speaker Change: We see very uncertain market just from an M&A standpoint are curious from a valuation perspective, you know kind of what you're seeing out there.

Speaker Change: And our pipeline continues to remain full.

Speaker Change: Again, as we've talked about in the past we've developed a reputation as the buyer of choice.

Speaker Change: And you know we talk about long run double digit revenue growth with about low double digit with about half of that coming from M&A.

Speaker Change: And we would expect that to continue.

Chris Moore: Sounds good. I will leave it there.

Speaker Change: It sounds good I'll leave it there thanks guys.

Speaker Change: Yeah.

Linda Omali: Our next question comes from Michael Shlisky with D.A. Davidson. Please proceed with your question.

Speaker Change: Our next question comes from Michael Slutsky with D. A Davidson. Please proceed with your question.

Linda Omali: Hi, this is Linda Omali on 4MIC. Thank you for letting us ask questions. My first question is, what are your thoughts on your rental business in 1Q? Did it grow, and what's your near-term outlook for that business? Yes, so the rental business grew. You know, it was part of the aftermarket businesses that was up 11 percent. The rental income was up double digits year over year. It continues to be a very important strategic initiative for us, and not just the pure rental, but that used equipment sale is key. It gets us access to different customers at different price points.

Linda: Hi, This is Linda and wildly on for Mike. Thank you for letting us ask the questions My.

Linda: My first question is what are your thoughts on your rental business in one queue did it girl and what's your near term outlook for that business.

Linda: Yeah. So yeah. So the rental business grew you know it was policy aftermarket businesses that was up 11 since the the rental income.

Linda: Was up double digits year over year.

Linda: It continues to be a very important strategic initiative for us and not just the pure rental Budd that used equipment sale as key it gets us access to different customers at different price points. So so that that's a very important strategic initiative of US in addition to the <unk>.

Jennifer Sherman: So that's a very important strategic initiative of ours, you know, in addition to the rental income being up double digit, used equipment sales were also up double digits. So, you know, that's an important tool to have in our toolbox as, you know, in the situation we have with sewer cleaners and sweepers with the long lead times, having the ability to rent or to sell used equipment to those customers is important. And I'll add, you know, as we continue to execute on our new product development initiatives, the rental fleet also provides an opportunity for us to accelerate adoption of some of those new product development features or functionality that we're introducing to the market.

Linda: To link up being up double digit in used equipment sales were also up double digits.

Linda: So it you know that that's an important tool to have in our toolbox as you know within the situation, we have with them sewer cleaners and sweepers with the long lead times.

Linda: Having the ability to rent or to sell used equipment to those customers is important.

Linda: Yeah, and I'll add you know as we continue to execute on our new product development initiatives. The rental fleet also provides an opportunity for us to accelerate adoption of some of those new product development features or functionality that we're introducing to the market.

Jennifer Sherman: Got it.

Linda: Got it and then I'll double click on the questions are asked about our backlog and pricing.

Jennifer Sherman: And then I'll double-click on the questions the others asked about backlog and pricing. Did you get a sense that there was a pull-forward of demand from folks looking to get in front of price increases from tariffs? And then I also wanted to check, seeing higher costs from tariffs, what is your ability to go back and raise prices on orders already in backlog? Any color there will be helpful. Sure. No, we did not get any sense that there was a pull-forward with respect to tariffs. And, you know, backlogs are relevant for a little bit more than 50% of our business.

Speaker Change: Did you get a sense that there was a pull forward of demand from folks are looking to get in front of our price increases from tariffs and then I also wanted to check seeing higher costs from terrorists are what is your ability to go back and raise prices on orders already in backlog.

Speaker Change: Any color there would be helpful. Sure no we did not get any sense. If there was a pull forward with respect to tariffs.

Speaker Change: And you know backlogs are relevant for a little bit more than 50% of our business.

Jennifer Sherman: And given that our lead times for certain products stretch into 26, it'd be hard to, you know, jump ahead of those particular tariffs. If, in fact, the tariffs did impact our products going forward, we would have the ability to surcharge the backlog. The other thing I would add, one of the things that we closely look at, is where did the order strength come from? And in this quarter, the order strength was really across the board. Publicly funded orders increased high signal digits, and then industrial orders increased double digits. And again, it was strength in dump truck bodies, safe digging trucks, and road marking equipment.

Speaker Change: And given that our lead times for certain.

Speaker Change: Product stretch into twenty-six it'd be hard to you know jump ahead of those particular tariffs.

Speaker Change: If in fact.

Speaker Change: The tariffs did impact our products going forward, we would have the ability to surcharge the backlog and the other thing I would add one of the things that we closely look at is where did the order strength come from and in this quarter. The order strength was really across the board.

Speaker Change: Publicly funded orders increased high single digits, and then industrial orders increased double digits and again. It was strength then dump truck bodies safe digging trucks and road marking equipment. So we look you know what product lines are driving those increases in orders.

Jennifer Sherman: So we look, you know, what product lines are driving those increases in orders, and we're pleased that we saw strength across the board.

Speaker Change: And we're pleased that we saw strength across the board.

Speaker Change: I see and I I'll squeeze in one more could you give us any update on integrating cog into and morale and the rest of their lives boxing business yeah.

Jennifer Sherman: I'll squeeze in one more. Could you give us any update on integrating HOG into MRL and the rest of the road marking business? Yeah, absolutely. You know, we owned it for a little bit over six weeks in Q1. We have a team led by Mark Weber, our Chief Operating Officer, that is leading that integration. We had a corporate team that was assigned to the hog operations who was in Stewart. Several of us attended their large trade show, which fell shortly after closing, the ATSA show in Orlando. Very positive reception by the customers, and we're pleased with the progress that we're seeing thus far on the integration.

Speaker Change: Yeah absolutely.

Speaker Change: We owned it for a little bit over six weeks in Q1.

Speaker Change: We have a team led by Mark Weber, our Chief operating officer that is leading that integration.

We had a corporate team that was assigned to on T. <unk>.

Speaker Change: Hog operations, who was in Stewart.

Speaker Change: We several of US attended they're large trade show, which fell shortly after closing the ads to show in Orlando I'm very positive reception.

Speaker Change: By the customers and you know we're pleased with the progress that we're seeing thus far on the integration side.

Linda Omali: Thank you. I appreciate the time this morning. Thank you.

Speaker Change: Thank you I appreciate the time this morning.

Speaker Change: Thank you.

Greg Burns: Our next question comes from Greg Burns with Sudotienko. Please proceed with your question. Good morning. When we look at the demand you're seeing on the industrial side of the business, you didn't mention the infrastructure bill, but I just wanted to kind of... Circle back on that and see where we are in terms of the. The benefit that you might derive from from the spending there on those projects and you know, maybe what ending we're in in terms of your ability to to monetized that demand. Sure, so, you know... Less than 20% of the funds have actually been spent.

Speaker Change: Our next question comes from Greg Burns with Sidoti <unk> Co. Please proceed with your question.

Greg Burns: Good morning.

Greg Burns: When we look at the demand you're seeing on the industrial side of the business you didn't even mention the.

Greg Burns: The infrastructure Bill, but I just wanted to kind of.

Greg Burns: Circle back on that and see where we are in terms of the.

Greg Burns: The benefit that you might derive from some of the spending there on those projects and you know maybe what inning. We're in in terms of your ability to to.

Greg Burns: A lot of times that the men.

Greg Burns: Sure. So you know.

Greg Burns: Less than 20% of the funds have actually been spent.

Jennifer Sherman: Less than 50% has been obligated, and another 70% has been announced. You know, we believe that, you know, we'll see benefits with respect to a number of our vehicle businesses, specifically dump trucks. Safe Digging, and Roadmark. To date, it has been nominal. given the dollars that have been spent. We think that we've seen nominal benefits on the dump truck side, but really the benefits, the increase in orders on dump trucks, we've been able to tie back to our market share expansion efforts and our conquest account efforts.

Greg Burns: Less than 50% has been obligated and another 70 per scientist funding now.

Greg Burns:

Greg Burns: We believe that on we will see benefits with respect to a number of our vehicle businesses, specifically dump trucks safe digging.

Greg Burns: Wood and road marking.

Greg Burns: To date it has been nominal.

Greg Burns: Given the dollars that have been spent.

Speaker Change: We think that Ah, we've seen nominal benefits on the dump truck side, they're really the benefits the increase in orders on dump trucks, we've been able to tie back to our market share expansion efforts.

Speaker Change: And our conquest and account efforts.

Jennifer Sherman: So we're going to continue to monitor this going forward, and we think it creates opportunities over a multi-year period. Great, thanks.

Speaker Change: So.

Speaker Change: We're going to continue to monitor this going forward and we think it creates you know opportunities over a multiyear period.

Speaker Change: Okay, great. Thanks, and then when you look at.

Jennifer Sherman: And then when you look at You have to market business in terms of maybe your need to invest in that fleet. Where do you stand there? And is there a chance maybe you at some point prioritize maybe some of your own? Production. I know in the past, maybe there's been some quarters where that's created a little bit of a revenue. Headwind. I just wanted to get a feel if that might be something you consider for this year. Yeah, it's something, Greg, that we monitor very closely. And every month, we have a meeting with the team to track by product, by geography.

Speaker Change: Your aftermarket business in terms of maybe your need to invest in that fleet.

Speaker Change: Where where do you stand there and is there a chance maybe you at some point prioritize maybe some of your own.

Speaker Change: Production I know in the past, maybe theres been some quarters were.

Speaker Change: That's created a little bit of a revenue.

Speaker Change: Headwinds I just wanted to get a feel if that might be.

Speaker Change: You consider for this year.

Speaker Change: Yeah, It's it's something Greg that we monitor very closely and every month, we have a meeting with the team to track byproduct by geography, we look at utilization both time and financial.

Jennifer Sherman: We look at utilization, both time and financial. We also track used equipment sales. We track the number of turndowns. And I think we have invested in the fleet. Q1, I think we've mentioned it, that it's typically a period that we would use some of our production to add units. to the fleet, essentially because you want them to be added to the fleet in kind of the April-May time frame, getting ready for kind of the season as the weather improves, certainly in the northern parts of the U.S. and in Canada. I think what it gives us is it gives us some flexibility on the production side.

Speaker Change: We also tried to used equipment sales were tracking the number of turn downs and I think you know we have invested in the fleet Q1, I think we've mentioned it is typically a period that we would use some of our production to add units to the fleet essentially because you want them to be added.

Speaker Change: To the fleet in kind of the April may timeframe timeframe.

Speaker Change: Getting ready for kind of the season as the weather improves suddenly in the northern parts of the U S and in Canada, I think what what we what it gives us it gives us some flexibility on the production side you know if we see the need to add units to the fleet.

Operator: You know, if we see the need to add units to the fleet, we can. And if we see things slow down, we can adjust the production schedules accordingly. But it's something we monitor closely, and we balance the production levels at the factories accordingly. All right, thank you. There are no further questions at this time.

Speaker Change: We can and if we see things slow down.

Speaker Change: We can we can adjust our production schedules accordingly, but it's it's it's something we monitor closely and we balance you know we balanced.

Speaker Change: The production levels at the factories accordingly.

Speaker Change: Alright, thank you.

Speaker Change: Yeah.

Speaker Change: There are no further questions at this time I would now like to turn the floor back over to Jennifer Sherman for closing comments.

Jennifer Sherman: I would now like to turn the floor back over to Jennifer Sheehan for closing comments. In closing, I would like to reiterate that we are confident in the long-term prospects for our businesses and our markets. We remain focused on executing against our strategic framework and managing through the current macroeconomic uncertainty.

Speaker Change: In closing I would like to reiterate that we are confident in the long term prospects for our businesses and our markets. We remain focused on executing against our strategic framework and managing through the current macroeconomic uncertainty we would like to express our thanks to our stockholders employees.

Operator: We would like to express our 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.

Speaker Change: <unk> distributors dealers and customers for their continued support thank you for joining us today and we'll talk to you soon.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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