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    FSS
    Earnings call· Dec 2025(Q4 FY25)

    FEDERAL SIGNAL CORP /DE/ Q4 FY25 earnings call FSS

    Feb 25, 2026 Source

    Executive summary

    Federal Signal Q4 FY25 — Record Sales and EPS Driven by Acquisitions and Organic Growth

    Federal Signal delivered record Q4 FY25 results, driven by strong organic growth and contributions from recent acquisitions. The company is focused on integrating New Way and Mega, expanding capacity, and leveraging its aftermarket business, while navigating increased acquisition-related expenses and a shift in its refuse truck distribution strategy. Management provided an optimistic outlook for 2026, projecting continued double-digit growth and record adjusted EPS.

    Highlights

    5

    • Full year 2025 net sales reached a record $2.18 billion, up $319 million or 17% YoY.

    • Full year 2025 adjusted EPS was a record $4.23 per share, up $0.89 or 27% YoY.

    • Q4 2025 consolidated net sales increased $125 million or 27% YoY to $597 million.

    • Q4 2025 adjusted EPS increased $0.29 per share or 33% YoY to $1.16 per share.

    • Full year 2025 operating cash generation was $255 million, up $23 million or 10% YoY, with a cash conversion of 103%.

    Concerns

    3

    • Q4 corporate operating expenses increased by $16 million YoY to $26.5 million, primarily due to $13 million in acquisition and integration-related expenses.

    • The New Way acquisition is expected to be adjusted EPS neutral in 2026 due to intangible asset amortization and industry normalization.

    • The company will wind down $80 million of third-party Labrie refuse truck backlog over the next 4 quarters, impacting sales mix.

    Guidance & targets

    11
    CategoryTargetConfidence
    Full-year Net Sales
    $2.55 billion and $2.65 billion
    high materiality
    High
    Full-year Adjusted EPS
    $4.50 and $4.80 per share
    high materiality
    High
    Full-year Tax Rate
    approximately 25%
    medium materiality
    Medium
    Full-year CapEx
    $45 million and $55 million
    medium materiality
    High
    New Way Acquisition EPS Impact
    approximately adjusted EPS neutral
    medium materiality
    Medium
    New Way Acquisition Annual Synergies
    $15 million to $20 million
    high materiality
    High
    Mega Acquisition EPS Impact
    modestly accretive to cash flow and EPS
    medium materiality
    Medium
    Organic Growth for 2026
    5% to 9%
    high materiality
    High
    Book-to-Bill Ratio
    around 1.0, a little bit better
    medium materiality
    Medium
    Q1 Net Sales and Earnings
    lower than subsequent quarters
    low materiality
    High
    New Way EPS Accretion
    $0.40 to $0.45 EPS
    high materiality
    Medium

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Environmental Solutions Group (ESG)
    Performance driven by contributions from acquisitions, higher production levels, and continued price realization. Focused on building more trucks and reducing lead times for sewer cleaners and 4-wheel sweepers.
    Net sales increase: $108 millionAdjusted EBITDA growth: 31%Adjusted EBITDA increase: $26.1 millionAdjusted EBITDA margin: 21.6%Adjusted EBITDA margin increase: 70 basis pointsTotal orders: $566 millionTotal orders growth: 55%Net sales increased double-digit percent across sewer cleaners, safe digging trucks, street sweepers, metal extraction support equipment, and road marking and line removal trucks.
    		$504 million27%—$109 million
    Safety and Security Systems Group (SSG)
    Improvement primarily driven by a combination of volume increases for public safety equipment in the U.S. and Europe, proactive price/cost management, and realization of certain cost savings. Focused on new product development and targeting underpenetrated customer cohorts and regions.
    Net sales increase: $17 millionAdjusted EBITDA growth: 43%Adjusted EBITDA increase: $7 millionAdjusted EBITDA margin: 25.2%Adjusted EBITDA margin increase: 360 basis pointsOrders: approximately $82 millionOrders comparison: generally in line with last year
    		$93 million23%—$23.4 million

    Operational metrics

    39
    Net Sales
    $2.18 billionup $319 million or 17%
    FY25

    Record high for the company.

    Organic Net Sales Growth
    $205 million11%
    FY25

    Full year organic net sales growth.

    Operating Income
    $340.9 millionup $59.5 million or 21%
    FY25

    Full year operating income.

    Net Income
    $246.6 millionup $30.3 million or 14%
    FY25

    Full year net income.

    Adjusted EBITDA
    $438.9 millionup $88.3 million or 25%
    FY25

    Full year adjusted EBITDA.

    Adjusted EBITDA Margin
    20.1%up 130 basis points
    FY25

    Full year adjusted EBITDA margin.

    GAAP Diluted EPS
    $4.01up $0.51 or 15%
    FY25

    Full year GAAP diluted EPS.

    Adjusted EPS
    $4.23up $0.89 or 27%
    FY25

    Record full year adjusted EPS.

    Orders
    $2.22 billionup $374 million or 20%
    FY25

    Full year orders.

    Organic Net Sales Growth
    $85 million18%
    Q4 FY25

    Q4 organic net sales growth.

    Consolidated Operating Income
    $83.5 millionup $13.4 million or 19%
    Q4 FY25

    Q4 consolidated operating income.

    Net Income
    $60.8 millionup $10.8 million or 22%
    Q4 FY25

    Q4 net income.

    Consolidated Adjusted EBITDA
    $119.4 millionup $30.1 million or 34%
    Q4 FY25

    Q4 consolidated adjusted EBITDA.

    Consolidated Adjusted EBITDA Margin
    20%up 110 basis points
    Q4 FY25

    Q4 consolidated adjusted EBITDA margin.

    GAAP Diluted EPS
    $0.99up $0.18 or 22%
    Q4 FY25

    Q4 GAAP diluted EPS.

    Adjusted EPS
    $1.16up $0.29 or 33%
    Q4 FY25

    Q4 adjusted EPS.

    Orders
    $647 millionup $201 million or 45%
    Q4 FY25

    Q4 orders.

    Corporate Operating Expenses
    $26.5 millioncompared to $10.5 million last year
    Q4 FY25

    Increase primarily due to a $13 million increase in acquisition and integration-related expenses.

    Gross Profit Improvement
    $36.7 millionimprovement
    Q4 FY25

    Contributed to by increase in net sales.

    Consolidated Gross Margin
    28.4%up 30 basis points
    Q4 FY25

    Q4 consolidated gross margin.

    SG&A as % of Net Sales
    down 110 basis pointsfrom Q4 last year
    Q4 FY25

    Selling, engineering, general and administrative expenses as a percentage of net sales.

    Acquisition-related expenses
    $13.3 millionup from $300,000 in Q4 last year
    Q4 FY25

    Recognized during the fourth quarter.

    Amortization Expense Increase
    $1.3 millionincrease
    Q4 FY25

    Increase in amortization expense.

    Interest Expense
    $1.7 million
    Q4 FY25

    Q4 interest expense.

    Other Expense Reduction
    $200,000reduction
    Q4 FY25

    Reduction in other expense.

    Pretax Noncash Pension Settlement Charge
    $3.8 millionnonrecurrence
    Q4 FY24

    Nonrecurrence of a charge recognized in the prior-year quarter.

    Income Tax Expense
    $17.8 millionincrease of $4.9 million from last year
    Q4 FY25

    Year-over-year change largely due to higher pretax income levels and fewer discrete tax benefits.

    GAAP Effective Tax Rate
    24%
    FY25

    Full year GAAP effective tax rate.

    Cash Conversion
    103%slightly ahead of annual target of 100%
    FY25

    Full year cash conversion.

    Credit Facility Replacement
    —
    Q4 FY25

    Executed a new 5-year credit facility, replacing the $800 million credit facility that was previously in place.

    Net Debt
    $501 million
    Q4 FY25

    Net debt at the end of the quarter.

    Credit Facility Availability
    $925 million
    Q4 FY25

    Availability under the credit facility at the end of the quarter.

    Dividends Paid
    $8.5 million
    Q4 FY25

    Dividends paid during the quarter.

    Aftermarket Revenue Growth
    20%year-over-year
    Q4 FY25

    Primarily driven by higher demand for aftermarket parts, increased service activity and rental income growth.

    Current Capacity Utilization
    70%
    current

    Company is currently running at about 70% capacity, with additional capacity from New Way and Mega.

    Underlying Orders Growth
    14%year-over-year
    Q4 FY25

    Improved demand across both publicly funded and industrial product lines.

    Backlog-Intensive Products as % of Sales
    45%compared to more than 50% in 2015
    2025

    Composition of product portfolio has changed, making the business less backlog intensive.

    Annual Top Line Growth Target
    low double-digit
    long-term

    Consistent with long-term growth strategy through cycles.

    Organic Growth CAGR
    7%
    since 2015

    Historical organic growth rate.

    Industry KPIs

    4
    MetricValueDetails
    Capacity expansion70%%
    Tariff cost impactnominal impact
    Parts aftermarket business20%%
    Order backlog order intake by segmentaround 1.0, a little bit betterratio

    Orderbook & backlog

    3
    Total Backlog$1.04 billionend of Q4 FY25

    up $45 million or 5% from last year

    Provides excellent visibility for certain product lines throughout the next 6 to 12 months.

    Acquired Backlog (Q4 Orders)$132 millionQ4 FY25

    Included in Q4 orders.

    Third-party Labrie Backlog$80 millionQ4 FY25

    Expected to deliver over the next 4 quarters and eventually wind down to zero.

    Deals & partnerships

    3
    New WayManufacturer of refuse trucksapproximately $413 million

    Completed in Q4 FY25. Synergies include increased penetration of Canadian market, dealer development, aftermarket parts optimization, sales channel alignment, and new product development. General manager from another facility is working with the New Way team on 80/20 opportunities.

    Mega EquipmentManufacturer of parts and equipment for the metal extraction support equipment sectorapproximately $45 million

    Completed in early January (Q1 FY26). Expected to accelerate strategic growth initiatives, increase reach into underpenetrated geographic regions (e.g., South America), create cross-selling opportunities with Ground Force and TowHaul, and offer incremental opportunities for aftermarket parts business (historically 25% of sales). Identified operational benefits include production savings and freight cost opportunities.

    UndisclosedAssets and territory rights in Texas

    Acquired in Q4 FY25 as part of a strategy to invest in internal centers of excellence and drive sales, new product development, and dealer optimization initiatives across various verticals.

    Capital programs

    2
    Annual CapEx Programplanned
    Period spend: $45 million and $55 million

    Approximately half of annual CapEx expenditures in 2026 to be focused on various growth initiatives with the other half focused on maintenance investments.

    University Park PCB Manufacturing Lineinstalled in Q4

    Benefit: additional efficiency improvements

    Recent addition of a fourth printed circuit board manufacturing line at University Park facility, installed ahead of schedule in Q4. Expected to drive additional efficiency improvements in 2026, accelerate new product development, and address customer needs.

    Risks & headwinds

    5
    Higher acquisition-related intangible asset amortization expenseFY26

    $0.16 per share headwind (aggregate with tax rate normalization)

    Mitigation: Offset by overall growth and synergies from acquisitions.

    Normalization of tax rateFY26

    $0.16 per share headwind (aggregate with amortization expense)

    Mitigation: None explicitly stated, but factored into guidance.

    New Way acquisition EPS neutralityFY26

    approximately adjusted EPS neutral

    Mitigation: Long-term synergies ($15M-$20M by 2028) expected to drive accretion; cost synergies more evenly split, revenue synergies more back-end loaded.

    Winding down third-party Labrie refuse truck backlogNext 4 quarters (FY26)

    $80 million backlog to be delivered over 4 quarters

    Mitigation: Expected margin tailwinds in 2027 and 2028 as New Way sales increase.

    Potential prebuy activityLater in the year (FY26)

    Not quantified, but discussed as a potential driver for orders

    Mitigation: Company will monitor and be prepared to respond; publicly funded customers don't materially engage in prebuying.

    What to watch in Q1 FY26

    5

    Organic Revenue Growth

    Next quarter (Q1 FY26)
    Current18% (Q4 FY25)
    Target5% to 9% (FY26 guidance)

    Why it matters

    Verifying the organic growth trajectory is key to assessing the underlying health of the business beyond acquisition impacts.

    if you think of the guide, the revenue guide, obviously, on the -- in the aggregate, 17% to 20% -- sorry, 17% to 22% year-over-year growth, that's about 5% to 9% is organic and the rest would be contributions from New Way and Mega.

    Q&A highlights

    6

    How much of the $2.6 billion revenue midpoint for 2026 is organic growth versus contributions from New Way and Mega?

    Ian Hudson clarified that 5% to 9% of the 2026 revenue growth is expected to be organic, with the remainder from acquisitions. This organic growth rate is consistent with the company's historical CAGR of about 7% since 2015.

    “if you think of the guide, the revenue guide, obviously, on the -- in the aggregate, 17% to 20% -- sorry, 17% to 22% year-over-year growth, that's about 5% to 9% is organic and the rest would be contributions from New Way and Mega.”

    asked by Timothy Thein · answered by Ian Hudson

    2 min read6 chapters

    Detailed Narrative

    01

    Q4 Performance Highlights

    Federal Signal achieved record Q4 FY25 performance with consolidated net sales of $597 million, up 27% YoY, and adjusted EPS of $1.16, up 33% YoY. Both Environmental Solutions Group (ESG) and Safety and Security Systems Group (SSG) contributed significantly, with ESG sales up 27% to $504 million and SSG sales up 23% to $93 million. This growth was driven by contributions from acquisitions, higher production levels, and continued price realization across product verticals.

    02

    Acquisition Strategy and Integration

    The company completed the acquisition of New Way for an initial payment of $413 million in Q4 FY25 and Mega Equipment for $45 million in early Q1 FY26. Integration efforts for New Way are targeting $15 million to $20 million in annual synergies by the end of 2028, split between cost savings and revenue synergies. Mega is expected to accelerate strategic growth initiatives in metal extraction support equipment, particularly in South America, and be modestly accretive to cash flow and EPS in 2026.

    03

    Refuse Truck Distribution Shift

    Federal Signal is transitioning its Canadian refuse truck distribution strategy from third-party Labrie trucks to its newly acquired New Way brand. This involves winding down an $80 million Labrie backlog over the next four quarters. The company expects to realize margin tailwinds in 2027 and 2028 as it increases New Way sales through its Joe Johnson Equipment network in Canada.

    04

    Capacity and Production Initiatives

    The company is leveraging past large-scale capacity expansions (2019-2022) and continued investments in productivity-enhancing projects to profitably absorb more volume. Approximately half of the $45 million to $55 million CapEx planned for 2026 will be focused on growth initiatives. Unit production for sewer cleaners and street sweepers increased double-digits in Q4 and for the full year, aiming to reduce extended lead times.

    05

    Aftermarket and Product Development

    Aftermarket revenue increased 20% YoY in Q4, driven by higher demand for parts, increased service activity, and rental income growth. The 'build more parts' initiative aims for vertical integration to drive increased recurring revenue streams and expand margins. The SSG team is focused on new product development and targeting underpenetrated customer cohorts and regions, supported by the recent addition of a fourth printed circuit board manufacturing line at its University Park facility.

    06

    Market Conditions and Backlog Evolution

    Underlying Q4 orders, excluding acquired backlog and third-party refuse orders, increased 14% YoY, with improved demand across publicly funded and industrial product lines, particularly in infrastructure and water projects. The total backlog stood at $1.04 billion, up 5% YoY. However, the company notes that the overall importance of backlog relative to enterprise-wide forward sales has decreased as its product portfolio shifts towards less backlog-intensive, less cyclical businesses like aftermarket parts.

    AI-generated summary of the company’s earnings call. Not investment advice.