Federal Signal (US:FSS)2022-07-27 20:22Financial Data and Key Metrics Changes - Consolidated net sales for Q2 were $367 million, an increase of $32 million or 10% compared to last year [5] - Consolidated operating income for the quarter was $46.2 million, up $7.7 million or 20% compared to last year [5] - Consolidated adjusted EBITDA for the quarter was $58.2 million, up $6.3 million or 12% compared to last year, with a margin of 15.9%, up 40 basis points [5] - GAAP EPS for the quarter was $0.55 per share, up 15% compared to last year, while adjusted EPS was $0.53 per share, up 6% [6][13] - Order intake for the quarter was $413 million, representing an increase of $53 million or 15% compared to Q2 last year [6] - Backlog at the end of the quarter was $795 million, an increase of $358 million or 82% compared to Q2 last year [6] Business Line Data and Key Metrics Changes - Environmental Solutions Group (ESG) net sales were $306 million, an increase of $25 million or 9% compared to last year [6] - ESG's operating income was $39.1 million, up $600,000 or 2% compared to last year, with adjusted EBITDA of $51.6 million, up $1 million or 2% [7] - Safety and Security Systems Group (SSG) reported net sales of $60 million, an improvement of $7 million or 13% compared to last year, with operating income of $10.3 million, up 32% [8] Market Data and Key Metrics Changes - Demand for rental parts and used equipment sales increased, with aftermarket revenues totaling $161 million, a 12% improvement over last year [20] - Year-to-date orders from municipal and industrial customers were each up around 20% year-over-year [25] - Demand for safe digging products saw orders in the first half up $26 million or 69% year-over-year [28] Company Strategy and Development Direction - The company is focused on expanding its supply base and enhancing product offerings through R&D initiatives [31][34] - Recent acquisitions and capacity expansions are expected to contribute to long-term growth [37] - The company is well-positioned to benefit from federal stimulus and infrastructure legislation, which is anticipated to provide multi-year momentum [105] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating supply chain challenges and expects margins in the second half of the year to be higher than the first half [21][38] - The company raised the midpoint of its full-year adjusted EPS outlook to a new range of $1.85 to $2 [39] - Management highlighted the importance of government funding and infrastructure investments as key drivers for future demand [26][66] Other Important Information - The company generated $15 million of cash from operations during the quarter, representing a 16% increase over Q2 last year [14] - The company paid dividends of $5.4 million during the quarter and funded $2.5 million of share repurchases [15] Q&A Session Summary Question: Details on post-closing adjustment related to acquisition - The post-closing adjustment was related to the OSW acquisition, resulting in a $2 million cash inflow during the quarter [43] Question: Performance of safety and security products - Strong performance was noted across major product lines, particularly in public safety systems, driven by new product development and major project shipments [44] Question: Update on heavy truck chassis availability - Chassis availability remains a challenge, but the company is receiving allocated chassis for certain businesses [47] Question: Impact of supply chain issues on production - Supply chain issues are expected to continue affecting production schedules, but the company is adapting to these challenges [93] Question: Organic growth rates for revenue and orders - Of the 15% order improvement, about 9% was organic, with a fairly even split between volume and price [92]