Q3 2025 Federal Signal Corp Earnings Call

Greetings and welcome to the federal signal Corporation, third quarter, earnings 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, this conference is being recorded. It is now my pleasure to introduce your host. Felix potion, vice president of corporate strategy and investor relations. Thank you. You may begin.

Good morning and welcome to Federal signals third quarter 2025 conference call. I'm Felix bosion the company's vice president of corporate strategy and investor relations also with me on the call today is Jennifer Sherman or president and chief executive officer and Ian, Hudson or Chief Financial Officer. We will refer to some presentations flights today as well as to the earnings release, which we issued this morning. The slides can be followed online by going to our website Federal signal.com clicking on the investor call icon and signing into the webcast.

We have also posted the slide presentation and the earnings release under the investor tab on our website. Before we begin, 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 us. 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 10q later today. Ian will start today by providing details on our third quarter. Financial results Jennifer will then provide her perspective on our performance, provide an update on our multi-year growth initiatives and and update our guidance for 2025.

After our prepared comments we will open the line for any questions with that. I would now like to turn the call over to Ian.

Thank you, Felix.

Our Consolidated, third quarter Financial results are provided in today's earnings release in summary. We delivered strong financial results, for the quarter with 17% year-over-year, net sales growth double digit, operating income Improvement, a 130 basis points. Increase in adjusted, debit de margin and a record, third quarter order intake,

Consolidated, net sales for the quarter, were 555 million, an increase of 81 million or 17% compared to last year.

Organic net sales growth for the quarter, was 51 million or 11%.

Consolidated operating income for the quarter was 94 million up. 18.1 million for 24% compared to last year.

Consolidated, adjusted ebida for the quarter was 116.2 million of 23.2 million or 25% compared to last year.

That translates to a margin of 20.9% in Q3 this year, up 130 basis points compared to last year.

Gap. Diluted EPS for the quarter was $1.11 per share, or 24 cents per share, an increase of 28% from last year.

On and adjusted basis. EPS for the quarter was 1.114 cents per share of 26 cents per share or 30% from last year.

Order intake was again strong in the quarter at 467 million, an increase of 41 million, or 10% compared to last year.

Backlog at the end of the quarter, stood at 9992 million down 4% compared to Q3 last year.

In terms of our group results esg's, net sales for the quarter, were 466 million, an increase of 67 million or 17% compared to last year.

ESG's operating income for the quarter was $85.3 million, or $13.8 million, a 19% increase compared to last year.

ESG's adjusted EBIT after the quarter was $104.9 million, up $17.7 million or 20% compared to last year. That translates to a margin of 22.5% in Q3 this year, up 60 basis points compared to last year.

The ESG reported total orders of 371 million in Q3 this year, an increase of 18 million, or 5%, compared to last year.

SSG is net sales for the quarter were 90 million this year up, 14 million, or 18% compared to last year.

.9 million of 5.1 million or 30% from last year.

Consolidated gross margin for the quarter was 29.1% compared to 29.6% in Q3 last year.

As a percentage of net sales are selling engineering General and administrative expenses for the quarter were down 160 basis points from Q3 last year.

Other items affecting the quarterly results. Included a $1 million increase in acquisition and integration related costs. A $700,000 increase in advertising expense of dollar increase in other expenses and a $200,000 reduction in interest expense.

Tax expense for the quarter was 22.4. Million up 3.7 million from the prior year, with the increased primarily due to higher pre-tax, income levels.

Our effective tax rate for the quarter was 24.8% compared to 25.8% last year.

At this time, we expect our fourth quarter effective tax rate to be between 25% and 26% excluding any discrete items.

On an overall Gap basis. We therefore earned $1.11 per share in Q3 this year compared with the 87 cents per share in Q3 last year.

The facilitate earnings comparisons. We typically adjust our gaap earnings per share for unusual items recorded in the current or prior quarters in the current year quarter, we made adjustments to gaap earnings to share to exclude acquisition related expenses and purchase accounting expense effects on this basis, our adjusted earnings for the quarter were $1.14, per share, compared with 88 cents per share last year.

Looking now at cash flow, we generated 61 million of cash from operations during the quarter. Bringing our year-to-date, operating cash, generation to 158 million, an increase of 17 million, or 12%, compared to the first 9 months of last year.

With the improved cash flow. We pay down approximately 55 million of debt during the quarter ending the quarter with 159 million of net, debt and availability under our previous credit facility of 570 million, our current net debt, leverage ratio remains low.

Yesterday, we executed a new 5-year, 1.5 billion credit facility, replacing the 800 million credit facility that was previously in place.

The new credit facility increases.

Our revolver to 1.1 billion. And also includes a 400 million dollar Term Loan facility, which is expected to be drawn down upon completion of the new a acquisition.

The new credit facility provides greater financial flexibility to invest in our internal growth initiatives and pursue additional strategic acquisitions across our ESG and SSU groups.

The terms of our new facility are more favorable to the company, reflecting our strong cash flow and balance sheet.

This marks another important milestone for the company, as we continue to execute on our strategic long-term growth objectives.

We also remain committed to investing in organic growth initiatives and returning cash to stockholders through dividends and opportunistic sharing purchases.

On that note, we pay dividends of 8.5 million during the quarter, reflecting a dividend of 4 cents per share. And we recently announced a similar dividend for the fourth quarter.

% increase in adjusted. EBA

With higher production levels. Strong demand for 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 strong quarter, ESGs adjusted IBA margin expanded by 60 basis points year-over-year to 22.5%, a new third quarter record, and performance in the upper half of our recently raised ESG margin target range of 18% to 24%.

Driven by continued, strong order levels and an extensive pipeline of internal market share expansion initiatives. We remained focused on building more trucks across our family of Specialty Vehicle businesses.

These efforts to improve our throughput at our 2. Largest ESG facilities, contributed to double digit percentage increases in Revenue across our safety. Digging trucks sewer cleaners and street sweeper product lines.

From a capacity perspective, our access to labor remains. Good Supply. Chains are largely stable and our large-scale capacity expansions that we completed between 2019 and 2022 position as well to profitably absorb incremental volumes into our existing footprint,

Additionally within our capex Outlook this year, we are investing in several productivity. Enhancing projects including planned automation initiatives at select facilities including our dump truck, body plant and Rugby North Dakota and the additional incremental warehouse space at our SSG facility in University Park, Illinois.

These growth initiatives will further improve our throughput efficiency within our existing facility footprint and set the foundation for future. Organic growth for perspective, approximately, 50% of our annual capex is focused on various growth initiatives with the other half focused on maintenance capex.

Within our product lines, we saw strong organic revenue growth across our metal extraction support equipment, dump truck bodies, and industrial vacuum trucks. As our team continues to execute on various strategic growth initiatives within our industrial markets, including geographic expansion and sales channel optimization.

Shifting to aftermarket markets where demand remains strong for the quarter after market revenue. We're up 14% year-over-year, primarily driven by higher demand for aftermarket parts, increased service activity, and rental income growth.

Our teams are working to accelerate, the growth of our parts businesses on numerous fronts, including the further integration of recent acquisitions such as hog and trackless across our aftermarket facility footprint and increasing Parts capture within our existing population base.

Lastly, our most recent acquisitions also contributed positively to Topline results in the quarter with hog contributing approximately 20 million dollars of net sales and standard adding approximately 10 million dollars of incremental net sales.

Shifting to our Safety and Security Systems group. The team delivered, another impressive quarter with 18% Topline growth, a 29% increase in adjusted EBA and a 220 basis point Improvement in adjusted. Eva Dum margin. This Improvement was primarily driven by volume growth within our Public Safety and warning system. Businesses proactive price cost management and realization of certain cost savings. On that note, we successfully installed a fourth printed circuit board manufacturing line at our University Park facility in Illinois. In this quarter, this Edition marks, the fourth PCB line installation since 2022, which allows our teams to insource. Certain componentry previously sourced from Asia will providing financial and operational bud.

Benefits in the form of cost. Savings product, quality improvements and expanded available capacity, we expect to realize incremental benefits from this fourth edition in 2026 and Beyond. As we scale production,

Capital deployment opportunities.

Shifting now to current market conditions demand for our products and service offerings remains healthy. With our third quarter order intake of 467, million representing a 10% year-over-year, increase. And the highest ever third quarter order intake on record for federal signal as Ian indicated. Our backlog declined by 4% on a year-over-year basis.

As expected. Approximately 85% of this decline was driven by lower orders for third-party refugees trucks, mostly in Canada.

As we move forward and transition, our refu truck offerings from the third-party supplier to new way. Over time, we expect our existing third-party, refuse backlog to decline in coming, quarters as we deliver these third-party trucks in backlog, but stopped taking new orders for these third-party trucks. Additionally, we are pleased that our various throughput initiatives have improved lead times and slightly reduced backlog for a certain extended product lines.

Looking ahead consistent with our typical seasonal patterns. We are expecting orders within our environmental solution group, to increase both on a year-over-year basis and on a sequential basis in the fourth quarter,

To provide more detail on the composition of orders. In the quarter. We are seeing particularly strong demand for our publicly funded Safety and Security products both in North America and in Europe, including a major Police contract. Win in Spain in total SSG orders. Increased 31% year-over-year driven by strength and demand for public, safety equipment, and Warning Systems.

Within SSG, we continue to Target surgical opportunities to gain market, share across several US law enforcement agencies and are seeing success with this particular strategy.

Well, SSG is typically not a backlog, driven business ssg's. Backlog at the end of September includes approximately 20 million dollars earmarked for delivery in 2026.

Within industrial and markets orders were led by improved demand for our safety diving trucks compared to last year. Long term, we continue to see, secular Tailwinds, from increased adoption of Hydro Excavation within the United States. And we believe we are well positioned to capitalize on that secular Trend in summary.

Demand for our products, remain strong and our backlog for certain products provides excellent visibility well into 2026, our teams are focused on executing on our growth initiatives, maintaining a healthy order intake and increasing production.

I now want to provide an update on a number of multi-year strategic initiatives that support our through the cycle Target of double digit, Topline growth recall over the long term. We expect a fairly balanced contribution between organic and inorganic growth as part of those targets. First, we are pleased with the initial performance of The Hog Technologies acquisition which be closed in February of this year. The team has been an excellent cultural addition to the federal signal family and we are excited to more fully integrate hog next year. Financially both Hogs, year-to-date revenue and margin contribution. Have exceeded our initial estimates. Primarily driven by operational. Throughput improvements, strong demand within Hogs airport, vertical and strong aftermarket parts growth.

Consequently, we now expect hog to contribute between 60 and 65 million of net sales in 2025 up from our previous estimate of 50 to 55 million. As we had into next year, we've identified incremental Synergy opportunities that we plan to execute in 2026. Spanning operational efficiencies, including procurement go to market strategy optimization across our various road marking and line removal Brands more efficiently, utilizing our North American aftermarket footprint, and the usage of hogs unique customer education, technology across other Federal Signal products as such. We see hog well-positioned to further. Expand its margins next year as we capitalize on more synergies.

Specialty Vehicle, verticals. We play in health form. What we internally refer to as the power of the platform. These centers of excellence span several categories, such as sourcing supply chain optimization, our federal signal, operational system sales CH Channel alignment dealer development, aftermarket support data analytics and new product development. And we are aimed at elevating, our customer experience across our family of Specialty Vehicle brands.

The power of this platform and execution on our strategic initiatives are important components of our long-term growth algorithm as we look to drive organic growth in excess of and market growth rates as we look ahead to 2026. We see particular opportunities to further accelerate growth through sales, Channel optimization, and our dealer development, efforts with particular Geographic, white space opportunities across our track lists, Switch and Go and Ox body brands.

We have also identified opportunities to optimize our presence and previously underserved territories for our safe digging trucks.

Third, we are highly energized to accelerate our existing build more parts initiative in the coming years, whereby we are vertically integrating certain parts production. In order to drive increased recurring revenue streams, higher aftermarket share, and margin expansion over time, while still in the early stages with less than $10 million in annual net sales, we are expecting another double-digit percentage increase in net sales, resulting from this initiative this year, predominantly comprised of certain street sweepers, vacuum trucks, and dump truck body parts. Going forward, we see additional opportunities to expand this initiative across our other Specialty Vehicle categories and believe our entrance into the refuse space will present an additional untapped parts market opportunity. Importantly, given the essential nature of our products, there are associated high utilization levels through business cycles and stable aftermarket.

Market parts and service needs of our customer. The continued growth in the aftermarket business remains, an important strategic pillar and our efforts to mute cyclicality.

Lastly, we continue to expect the acquisition of new way to close in the fourth quarter of this year. Pending regulatory approval, as we indicated at the time of the announcement, we expect our pro-forma leverage to be less than 1.5 times a time of closing leaving. Sufficient flexibility for additional Capital deployment toward m&a.

Consistent with our long-term growth framework and stated m&a criteria. We are actively reviewing potential opportunities both in our ESG and SSG groups.

Turning now, to our outlook for the rest of the year demand for our products and our aftermarket offerings remains high with our order intake. This quarter contributing to a backlog, which provides us with. Excellent visibility for further, net sales and profit growth in 2026.

With our third quarter performance, our current backlog and continue to execution against our strategic initiatives, we are raising our full year. Adjusted EPS Outlook to a new range of $4.99 to $4.17 from the prior range of $3.92 to $4.10. We are also increasing our full year. Net sales Outlook to a new range of 2.1 billion to 2.14 billion from the previous range between 2.07 billion to 2.13 billion. This Outlook reflects our view of continued healthy,

Demand for our new equipment parts and aftermarket services. For clarification, this Outlook does not include any contribution from the pending acquisition of new way.

Lastly, we are maintaining our capex Outlook of 40 to 50 million for the year.

In closing, given that this is our last earnings call of this year, as I sit here today, I believe we are well positioned to achieve another record year in 2026 with the attraction of our strategic initiatives, the new product development pipeline, throughput improvements we have achieved this year, and M&A opportunities.

At this time, I think we're ready for questions, operator.

Phone will indicate your line is in the question queue? You may press star 2 if you'd like to move your question from the queue.

Your participants using speaker equipment, it may be necessary to pick up your handset, before pressing, the star Keys 1 moment, please let me pull for your questions.

Our first question comes from the line of Ross Fair and Black with William Blair. Please proceed with your question.

Good morning, guys.

Good morning, Jennifer. Thanks for taking the question. Um, just to level set on orders really quick. Uh, what was the m&a contribution from hog and standards at ESG in the quarter?

Yeah. So, so hog added. Um, it was looking just about 20 million in the quarter and, and standard was about 10.

Okay, and then the SSG that's any FX to call out there. Is that just all organic

All organic right there is very not. The FX is very nominal.

There. Okay uh, all right. And then maybe just to, you know,

dig in a little bit on the refuse truck so I didn't fully appreciate that. You guys were going to stop taking orders for the third party uh within your network. And can you just help us kind of you know frame the backlog contribution from that and then you know kind of expectations or margin lift going forward as

Yeah, those kind of step away and hopefully new way.

Fills it in.

So, you know, we're transitioning from a third-party, refugees manufacturer to New Way. Um, we've stopped taking orders.

Um, I guess I'll reiterate um that you know, 85% of the year-over-year backlog reduction was driven by the decline of third-party. Um

Back to you backlog. Um, which, um, we expect this Dynamic to kind of continue in subsequent quarters. As we've worked through the transition from the third part party. Refugees OEM, um, to, uh, new way.

and yeah, yeah, I think what I'm trying to, you know, the other thing I would add is it could take you know, well into 2026

Um, for us to do this, and this should be margin accretive over time.

Yeah, this was I trying to get out. I guess it's just, we should expect somewhere in the range of that 85% number over the next 3 quarters, uh, impacting orders as well.

Yeah, it'll vary quarter to quarter, um, but we would expect.

That it would take, you know, the next 12 months to um, deliver the trucks that are currently in backlog.

All right, very helpful. Thank you. Thank you.

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

Good morning. Hey, good, good morning. Thanks for.

In a couple. Um, so, so maybe just stay with new way for a second. Uh, I know that that

You guys a new way to share a number of exclusive dealers. Uh, now that you've made the announcement just wondering kind of what you're hearing from the dealer Channel. Um, you know, is there any potential negative from the combination or just, you know, kind of big picture? What what what you're hearing at this stage?

Yeah, you know, the feedback has been overwhelmingly positive, um, as you stated um, Federal Signal does share some dealers with new a. Um, but there's also a group of dealers that we don't share, and we're really excited to welcome those dealers to the federal signal family. And we think collectively, um, this um, gives us a lot of opportunity going forward.

Um, so, you know, really overwhelmingly positive reaction from um, existing dealer Channel and the new dealer Channel.

Got it, perfect.

And maybe just just 1 follow-up on on new way. So we're talking about, you know, 40 to 45 cents. Accretive, uh, to EPS in, in fiscal 28, uh, 26 is, is roughly flat. Just trying to get a sense. Is that, will it be back loaded as the in from, as the integration happens? Or or, you know, is, is is

you know, reasonable expect that that 27 will will share a, a, you know, a reasonable portion of that of that, uh,

40 to 45% secretion.

Yeah. I I think Chris will probably give more color on that when we closed the acquisition, but I think generally speaking, you know we we have a, a synergy

Is going to be more gradual, with them being fully realized really by the end of 2028.

What I'm really encouraged by is the teams are working together with respect to um, you know, post-closing initiatives.

And there's a lot of energy, um, and commitment to the plan.

Um, as soon as we get regulatory approval and close, um, you know, I think that we will be in a position to hit the ground running.

Perfect, I'll leave it there. Appreciate it, guys.

Thank you. Our next question comes from the line of Mike Shulski with D.A. Davidson. Please proceed with your question.

Thank you, and good morning. Good morning.

Can you let me give us uh a little more commentary on the current go, the current federal government shutdown. Uh, I know that a lot of what you sell to, you know, local state, um agencies. But there is some support obviously that the federal government's Supply to those agencies. I'm curious whether you've seen any changes to funding or any delays with any orders or just any kind of issues that some of the local players have been mentioning given what's been going on over in Washington DC.

Yeah.

So, as we previously discussed, last year we did about $10 million of direct business with the federal government that was really military, comprised of two things: a military contract for one of our dump body businesses and then some military.

Installations um, for 1 of our SSG businesses. Um, so we don't expect, um, any kind of meaningful disruption um from the federal government, um shutdown. Um and you know, our SSG orders, um, were strong in Q3 and we haven't heard anything um to that, we believe would change that.

So, as far as the federal government supporting, um, businesses and local budgets, I haven't seen any kind of disruption or changes in the funding.

And the and the actual flow of cash.

Yeah so far as yeah as you know, kind of the biggest single source of funding for us is water taxes.

Um and then with respect to on the local level. Um, there is some, you know, certain funding in terms of Municipal sales tax, um, for our street, sweeper, for example, and certain track was part of products, Canada's important and Market, um, Europe is important and Market, um, for our public

Funded side of the business. So given that diversification and our lack of direct sales and the funding sources that we rely upon. We wouldn't expect any meaningful impact.

Okay, great. Um, secondly, I wanted to ask a little bit about the broader environment for for a new way. Um, I'm a little out of breath this morning, it's because another large waste truck company. Just announced that their, uh, a, um, they, uh, also announced the merger, um, curious. Whether, um, I don't know if you had a chance to look at it yet. I just just saw it myself for the first time a couple hours ago but I'm curious whether you think, uh, uh, you know, 1 of the other players, having some more cost cities being taken out and it makes the pricing, uh, environment a little sharper going forward. Maybe after the after that merger has been uh, integrated over the next 12 months or so.

Um, yeah, just so the only area that we would compete. Um, with respect to the tracks Rob merger, as you know, noted would be garbage trucks. Um, you know, we continue to believe that new way is extremely well, positioned with its ASL, product line, and um, the Canadian opportunity through our JJ team and frankly, the strength of its Municipal Channel,

Um so you know, we believe um our view hasn't changed at all.

um, since we announced the acquisition and, you know, we continue to be um excited and energized um, by the new way team and the opportunities that

Super, thank you so much. I'll pass it along.

Thank you. Once again as a reminder. If you would like to ask a question. Please press star 1 on your telephone keypad.

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

Good morning.

And End Market strength should allow you to keep the growth momentum going in core ESG. Meaning, you know, everything in the portfolio right now, can you continue to drive solid Topline growth?

Yeah, I mean you know I believe we're extremely well positioned to achieve another record year in 2026 and it's going to be a combination of execution on the Strategic initiatives.

You know, continue um, throughput improvements, our new product development pipeline, um, and you know, we've got um, you know, good visibility um, through our backlog for about half of our businesses, I'm encouraged by the throughput improvements, um, that are um, sewer cleaning team, and our street sweeping team have achieved and um, our road marking business. Um, as I talked about in my prepared, comments has a number of opportunities that we're going to be executing on, in 2026, our mineral extraction business. As I talked about in my prepared remarks,

Um, had a strong quarter and we expect that to continue. Um, so when I look at both the combination of the organic growth initiatives and the m&a, um, opportunities.

I feel like um, we're set up to achieve another record year in 2026.

You know, I I get it. I mean, a record year seems like a lot even excluding new way, but I guess the question is, do you feel like some of the mid to high single digit organic growth momentum that you've had, is still achievable? Just given the conditions, the backlog, the initiatives that you have

No, we remain committed to our long-term growth algorithm.

In terms of low double-digit Revenue growth, split equally between m&a, um, and uh, our organic growth initiatives, and we'll update this in February.

Um and and you do also have a, you know, a really nice track record of margin expansion and ESG over the past few years. You've talked about 26 being an investment year for new ways. Specifically, when that closes. Um, can you just talk about how you think about the pace of margin expansion going forward or or maybe what?

Does it change the algorithm for incremental margin? Um, when you think about factoring a new way in whether it's to ESG or on a consolidated basis?

Yeah, I think Steve, obviously we have ESG margin targets, that are really kind of long-term through the cycle, margin targets. And I think, when we talked about the new way opportunity, a couple of weeks back, uh, we talked about, you know, the need to make some Investments, um, in the business. Um, so so I think, you know, um, I still think there's there's a lot of opportunity in the other areas, particularly if you think about the leverage, we can get from increasing production at some of our, our main facilities, a larger facilities, I would, I should say where we have capacity the growth in the aftermarket business which is slightly more attractive from a margin profile. So so there can be there can be some various puts and takes as we, you know, in 26. But I think long term we're still committed to that. You know, that 18 to 24% margin Target for the business.

and, you know, you

Extremely detailed plans.

Um, and so is, you know, we look, you know, we've got a 26, 27 and 28 year, uh, plans for each of those years. You know, we would expect as you implied that new way would be margin dilutive in 2026.

but um you know we feel very confident in our ability, given the Synergy opportunities that exist both on the cost and the revenue side, um, that this business long term will run within the ibida, target margin ranges that we've given

and, um, we spent a lot of time studying this

And um, if anything I'm more encouraged by the planning and work that the teams are doing now. Um, for post-closing.

I really appreciate the detail. Thank you, thank you.

Thank you. Our next question comes from the line of Greg burns with sidian company. Please proceed with your question.

Morning.

Are currently in sourced or I guess reflecting that kind of 10 million of sales that you you called out.

Very small.

There's a lot of untapped.

here, um, particularly with the addition of The Refuge business,

I teased this, your only group that doesn't have to go get orders.

You got enough internal orders to last your lifetime?

Is is there like a a a goal in terms of kind of what percent of your parts business, you'd like to kind of vertically integrate and what what kind of margin uplift is there relative to um you know Outsourcing it.

We're still in early stages.

Um, I'm encouraged by the

um, you know

um, you know, as we move forward, build more parts, um, can be, um,

Multiples bigger over time. Uh,

And particularly, with the refugees opportunity.

And, you know, I guess I'll say in kind of typical Federal Signal fashion, we pilot something, we get good at it.

Um and then we start to accelerate, I think we're closing. Um finishing our pilot phase and it's again a credit to that team and we're really looking as we moved into 26 and 27 for opportunities to accelerate that initiative.

Okay. Um, and could you just

um, give us maybe a little bit more color on, where the lead time stand, um, relative to maybe some of your

Your larger product lines, what are your expectations for next year, given some of the initiatives you have in place? And do you expect to be able to bring your backlog down next year?

Yeah.

So we talked about, you know, just reminding you of the impacts that the transition.

On the third party, um, refugees to Manu.

Make sure we'll have um, during 2026 um, with respect to lead times. Um, right now, sewer cleaners are running around 11 months.

Our 3-wheel sweepers, um, we've made great progress and credit to the team. They are running in that 5 to 6 month range, which is where we'd like. And then, um, our 4-wheel sweepers, um, we still have some work to do; they're running 12 to 18 months. Um, it really varies. You know, road marking equipment, we'd want again in that 5 to 6 months, but with some stock available. So, it depends on the particular product line. But, um, my expectation is.

That we would continue to reduce lead times for sewer cleaners and for our 4 wheel, sweepers.

okay, and then I guess,

Excluding the impact of the third party.

Refuse trucks.

Do you think you could?

Do you think production rates will increase?

Next year, when do you expect to start bringing down the core backlog? I know it's going to depend on order input rates and all that, but just based on what you're seeing now and what you have planned in terms of capacity or production.

um,

Expansion initiatives do do you think that that's the case? I think, Greg, we've, you know, we've talked for a number of quarters now about wanting to increase production, you know, to, to leverage the capacity that that that's available to us. Um, so I, I think that's the goal is to, you know, to keep, um, working those lead times down, um, as specifically as it relates to 26. I think we'll come back in February with the, with the, with the guys at 26.

Okay, all right, great. Thank you.

Thank you. We have reached the end of our question and answer session. I'd like to turn the call back over to Jennifer Sherman for any closing remarks.

In closing, as we enter this Thanksgiving season, I want to take a moment to thank our dedicated employees, loyal customers, dealers, and distributors. Thank you for joining us today, and we will talk to you soon.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.