Yahoo Finance Federal Signal Corp (FSS) Q1 2024 Earnings Call Transcript Highlights: Robust Growth and ...
Consolidated Net Sales: $425 million, up 10% year-over-year.
Organic Sales Growth: $28 million, or 7% increase.
Consolidated Operating Income: $54.3 million, up 37% from last year.
Consolidated Adjusted EBITDA: $70.6 million, up 30% year-over-year.
EBITDA Margin: Increased by 250 basis points to 16.6%.
GAAP EPS: $0.84 per share, up 87% from last year.
Adjusted EPS: $0.64 per share, up 39% from last year.
Orders: $503 million, up 6% year-over-year.
Backlog: $1.1 billion, up 14% from last year.
Gross Margin: 27.3%, a 240-basis point increase over last year.
Cash from Operations: $31 million, up $24 million from Q1 last year.
Net Debt: $223 million with availability under credit facility of $516 million.
Dividends: Paid $7.3 million, reflecting an increased dividend of $0.12 per share.
Release Date: April 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: What percentage of the dealers have a market share where realistically it will be hard to grow share versus what percentage have lower share in their region and you'd consider substantial opportunity for share? A: Jennifer Sherman, President and CEO of Federal Signal, noted that the company has undertaken initiatives to work closely with dealer partners to better understand and potentially increase market share. She highlighted that there are significant opportunities to grow market share, particularly through organic growth initiatives.
Q: What percentage of the channel is optimized for rental and aftermarket meaning all the infrastructure is in place to drive meaningful revenue as you push those initiatives out? A: Jennifer Sherman explained that while there are always opportunities for improvement, the company has several strong dealer partners who are well integrated into the ecosystem of new equipment, rental, and used equipment sales. This integration is expected to open doors for new customers and continuous improvement.
Q: Can you compare margin or return on capital for aftermarket and rental versus selling equipment on a third-party basis? A: Ian Hudson, CFO of Federal Signal, described that the lifecycle of a piece of equipment in the rental fleet, which includes rental income, parts and service revenue, and eventual sale as used equipment, offers a more attractive return compared to a straightforward new equipment sale. This strategy is part of the rationale behind the company's investment in the rental fleet.
Q: Could you provide more details on the impact of the third-party component supply issue on the rental fleet and its potential impact on Q2? A: Jennifer Sherman acknowledged that some production intended for the rental fleet in Q1 was shifted to Q2. Additionally, the company plans to invest up to $20 million in safe digging and guzzler equipment, which has been factored into the improved guidance for the year.
Q: How do you see the timing of infrastructure spending impacting your product lines? A: Jennifer Sherman indicated that the company has seen some early usage of its equipment in infrastructure projects, particularly street sweepers and safety equipment. She expects these projects to provide multiyear tailwinds for the company, suggesting a gradual increase in demand related to infrastructure spending.
Q: What are your thoughts on the electrification of your products and the challenges related to cost? A: Jennifer Sherman emphasized the importance of continuing development in electric vehicles (EVs), noting that while there is increasing interest and orders for their electric street sweeper, the main challenge remains the high cost associated with EV chassis. The company remains committed to its EV initiatives, expecting gradual growth in sales.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
