Federal Signal (US:FSS)2024-02-27 19:21Financial Data and Key Metrics Changes - Operating income for 2023 was $224.5 million, an increase of $63.7 million or 40% from the prior year [28] - Adjusted EBITDA for the year was $286 million, up $71 million or 33% compared to the prior year, with an adjusted EBITDA margin of 16.6%, up 160 basis points from last year [28] - GAAP earnings for the year equated to $2.56 per share, up $0.59 per share or 30% from the prior year [41] - Cash generated from operations during Q4 was $103 million, an increase of $64 million or 162% from Q4 last year [34] Business Line Data and Key Metrics Changes - ESG sales for Q4 were $373 million, an increase of $48 million or 15% compared to Q4 last year, with adjusted EBITDA of $73.3 million, up 27% [29] - SSG's Q4 sales were $75 million, up $9 million or 14%, with adjusted EBITDA of $16 million, up 21% [29] - Aftermarket revenues were up 24% over last year, contributing to 27% of ESG revenue in Q4 compared to 25% last year [52] Market Data and Key Metrics Changes - Orders for the year were $1.87 billion, an increase of $178 million or 11% from the prior year, with a consolidated backlog at an all-time high of $1.03 billion, up 17% [41] - Q4 order intake was $465 million, representing a 5% increase compared to last year [46] Company Strategy and Development Direction - The company remains focused on operational excellence, organic growth, and value-added M&A as strategic building blocks [63] - Plans for a phased rollout of the Federal Signal operating system in 2024 aim to drive efficiency gains and cost savings [64] - The company is optimistic about further margin expansion opportunities driven by internal efficiency initiatives and planned production increases [37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand for products, citing strong order intake and ongoing improvements in production levels [46][51] - The company expects net sales for 2024 to be between $1.85 billion and $1.9 billion, with adjusted EPS projected between $2.85 and $3.05 per share [60] - Management highlighted the potential long-term benefits from infrastructure legislation, although immediate impacts are not expected in 2024 [55][60] Other Important Information - The company paid dividends of $6.1 million during the quarter and announced a 20% increase in dividends for Q1 2024 [35] - The acquisition of Trackless has shown strong sales growth of over 30% in 2023 compared to 2022 [57] Q&A Session Summary Question: How much of the backlog is set for delivery in '24? - Management indicated they are in good shape for Class 8 chassis and are monitoring availability for Class 5 and Class 7 chassis, expecting improvements in the second half of the year [75][76] Question: How much of your 2023 growth would you attribute to price versus volume? - Management stated that for 2024, they expect 7% to 10% growth, with price contributing about 2.5% to 3% of that, while in 2023, price impact was between 3% and 4% [77] Question: What are the cash deployment priorities for 2024? - Management prioritized investment in organic growth initiatives, followed by M&A, competitive dividend yield, and opportunistic share buybacks [109]