Federal Signal delivered a record third quarter, with net sales up 17% to $555 million and Adjusted EBITDA up 25% to $116.2 million as margin expanded 130 basis points to 20.9%. Both groups contributed, with SSG orders up 31% on a major Spanish police contract and ESG posting a record Q3 margin of 22.5%. The company executed a new five-year $1.5 billion credit facility to fund the pending New Way acquisition and raised its HOG contribution estimate. Backlog dipped 4%, driven largely by the planned wind-down of lower-margin third-party refuse trucks in Canada.
Good morning and welcome to Federal Signal's third quarter 2025 conference call. I'm Felix Boschen, the company's Vice President of Corporate Strategy and Investor Relations. Also with me on the call today is Jennifer Sherman, our President and Chief Executive Officer, and Ian Hudson, our Chief Financial Officer. We will refer to some presentation slides today as well as to the earnings release which we issued this morning. The slides can be followed online by going to our website, federalsignal.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 U.S. 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 10-Q 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 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 EBITDA 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 or 24% compared to last year. Consolidated Adjusted EBITDA for the quarter was $116.2 million, up $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.
GAAP diluted EPS for the quarter was $1.11 per share, up $0.24 per share or 28% from last year. On an adjusted basis, EPS for the quarter was $1.14 per share, up $0.26 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 $992 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, up $13.8 million or 19% compared to last year. ESG's Adjusted EBITDA for 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. ESG reported total orders of $371 million in Q3 this year, an increase of $18 million or 5% compared to last year. SSG's net sales for the quarter were $90 million this year, up $14 million or 18% compared to last year. SSG's operating income for the quarter was $21.9 million, up $5.1 million or 30% from last year. SSG's Adjusted EBITDA for the quarter was $22.9 million, up $5.1 million or 29% from last year. That translates to a margin for the quarter of 25.6%, an increase of 220 basis points compared to last year. SSG's orders for the quarter were $96 million, up $23 million or 31% in comparison to order intake in Q3 last year.
Corporate operating expenses for the quarter were $13.2 million compared to $12.4 million last year, with the increase primarily due to higher acquisition and integration related expenses. Turning now to the consolidated income statement, where the increase in sales contributed to a $21.1 million improvement in gross profit, consolidated gross margin for the quarter was 29.1% compared to 29.6% in Q3 last year. As a percentage of net sales, our 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 $1,000,000 increase in acquisition and integration related costs, a $700,000 increase in amortization expense, a $400,000 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 increase 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 GAAP basis, we therefore earned $1.11 per share in Q3 this year compared with $0.87 per share in Q3 last year. To facilitate earnings comparisons, we typically adjust our GAAP earnings per share for unusual items recorded in the current or prior year quarters. In the current year quarter, we made adjustments to GAAP earnings per 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 $0.88 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 nine months of last year. With the improved cash flow, we paid 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 five-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 term loan facility, which is expected to be drawn down upon completion of the New Way acquisition.
The new credit facility provides greater financial flexibility to invest in internal growth initiatives and pursue additional strategic acquisitions across our ESG and SSG 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 share repurchases. On that note, we paid dividends of $8.5 million during the quarter, reflecting a dividend of $0.14 per share, and we recently announced a similar dividend for the fourth quarter. That concludes my comments and I would now like to turn the call over to Jennifer.
Thank you, Ian. We reported another strong quarter of results, which included third quarter records across consolidated net sales, Adjusted EPS, and Adjusted EBITDA margin, thanks to outstanding contributions from both of our groups.
Within our Environmental Solutions Group, we delivered 17% year-over-year net sales growth and a 20% increase in Adjusted EBITDA 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, ESG's Adjusted EBITDA 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%-24%. Driven by continued strong order levels and an extensive pipeline of internal market share expansion initiatives, we remain focused on building more trucks across our family of specialty vehicle businesses. These efforts to improve our throughput at our two largest ESG facilities contributed to double-digit percentage increases in revenue across our safe 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 us 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 in 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 continued to execute on various strategic growth initiatives within our industrial end markets, including geographic expansion and sales channel optimization. Shifting to aftermarkets, where demand remains strong for the quarter, aftermarkets revenue were 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 Technologies 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 top line results in the quarter with HOG Technologies contributing approximately $20 million of net sales and Standard Equipment Company adding approximately $10 million of incremental net sales. Shifting to our Safety and Security Systems Group, the team delivered another impressive quarter with 18% top line growth, a 29% increase in Adjusted EBITDA, and a 220 basis point improvement in Adjusted EBITDA 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 addition marks the fourth PCB line installation since 2022, which allows our teams to insource certain componentry previously sourced from Asia while providing financial and operational benefits in the form of cost savings, product quality improvements, and expanded available capacity. We expect to realize incremental benefits from this fourth addition in 2026 and beyond as we scale production. Lastly, we are pleased with our cash conversion in the quarter. Having generated $61 million of cash from operations representing 90% of net income on an annual basis, we continue to target 100% cash conversion levels, providing dry powder for organic and inorganic 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 Corporation.
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 refuse trucks, mostly in Canada. As we move forward and transition our refuse 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 stop 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 line. Looking ahead, consistent with our typical seasonal patterns, we are expecting orders within our Environmental Solutions 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 in demand for public safety equipment and warning systems within SSG. We continue to target surgical opportunities to gain market share across several U.S. law enforcement agencies and are seeing success with this particular strategy. While SSG is typically not a backlog driven business, SSG's backlog at the end of September includes approximately $20 million earmarked for delivery in 2026. Within industrial end markets, orders were led by improved demand for our safe digging 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 remains 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 top line 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 we 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 HOG's year-to-date revenue and margin contribution have exceeded our initial estimates, primarily driven by operational throughput improvements, strong demand within HOG's airport vertical, and strong aftermarket parts growth. Consequently, we now expect HOG to contribute between $60 million and $65 million of net sales in 2025, up from our previous estimate of $50 million to $55 million. As we head 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 HOG's 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. Second, we continue to invest in scaling our internal Centers of Excellence, which combined with our scale within the niche specialty vehicle verticals we play in, help 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 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 end 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 Trackless, Switch-N-Go, and Ox Bodies brands. We have also identified opportunities to optimize our presence in previously underserved territories for our safe digging trucks.