Federal Signal capped 2025 with record fourth-quarter net sales of $597 million (up 27%) and Adjusted EBITDA of $119.4 million (up 34%), lifting full-year net sales to a record $2.18 billion and Adjusted EPS to a record $4.23. Orders surged 45% in the quarter, aided by $132 million of acquired backlog, and full-year cash conversion reached 103%. The company completed the ~$413 million New Way acquisition and closed Mega in early January, while beginning to wind down its lower-margin third-party Labrie refuse business in Canada. Corporate expenses rose sharply on acquisition and integration costs, including contingent-consideration remeasurements.
Good morning. Welcome to Federal Signal's Fourth Quarter 2025 Conference Call. I'm Felix Boeschen, 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 I turn the call over to Ian, 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. We will file our Form 10-K later today. Ian will start today with more detail on our fourth quarter and full year financial results. Jennifer will provide her perspective on our performance, current market conditions, our multi-year growth initiatives, and go over our outlook for 2026 before we open the line for any questions.
With that, I would now like to turn the call over to Ian.
Thank you, Felix. Our financial results for the fourth quarter and full year of 2025 are provided in today's earnings report. Before I talk about the fourth quarter, let me highlight some of our full-year consolidated results for 2025. Net sales for the year were $2.18 billion, a record high for the company and an increase of $319 million, or 17% compared to last year. Organic net sales growth for the year was $205 million, or 11%. Operating income for the year was $340.9 million, an increase of $59.5 million, or 21% from last year. Net income for the year was $246.6 million, an increase of $30.3 million, or 14% from last year.
Adjusted EBITDA for the year was $438.9 million, up $88.3 million, or 25% compared to last year. That translates to a margin of 20.1% this year, up 130 basis points from last year. GAAP diluted EPS for the year equated to $4.01 per share, up $0.51 per share or 15% from last year. On an Adjusted basis, we reported record full-year earnings of $4.23 per share, up $0.89 per share or 27% from last year. Orders for the year were $2.22 billion, an increase of $374 million, or 20% from last year.
Backlog at the end of the year was $1.04 billion, an increase of $45 million or 5% from last year. For the rest of my comments, I will focus mostly on comparisons of the fourth quarter of 2025 to the fourth quarter of 2024. Consolidated net sales for the quarter were $597 million, an increase of one hundred or 27% compared to last year. Organic net sales growth for the quarter was $85 million, or 18%. Consolidated operating income in Q4 this year was $83.5 million, up $13.4 million, or 19% compared to last year. Net income for the quarter was $60.8 million, an increase of $10.8 million, or 22% from last year.
Consolidated Adjusted EBITDA for the quarter was $119.4 million, up $30.1 million, or 34% compared to last year. That translates to a margin of 20%, an increase of 110 basis points from last year. GAAP diluted EPS for the quarter was $0.99 per share, up $0.18 per share, or 22% from last year. On an Adjusted basis, EPS for Q4 this year was $0.01 per share, an increase of $0.29 per share or 33% compared to last year. Orders for the quarter were $647 million, up $201 million, or 45% from last year. Orders in Q4 this year included $132 million of acquired backlog.
In terms of our fourth quarter group results, ESG's net sales were $504 million, an increase of $108 million, or 27% compared to last year. ESG's Adjusted EBITDA for the quarter was $109 million, up $26.1 million, or 31% compared to last year. That translates to an Adjusted EBITDA margin of 21.6% in Q4 this year, up 70 basis points from Q4 last year. ESG reported total orders of $566 million in Q4 this year, an increase $1 million, or 55% from last year. SSG's fourth quarter sales were $93 million, up $17 million or 23% compared to last year.
SSG's Adjusted EBITDA for the quarter was $23.4 million, up $7 million or 43% from last year. SSG's Adjusted EBITDA margin for the quarter was 25.2%, up 360 basis points from last year. SSG's orders for the quarter were generally in line with last year at approximately $82 million. Corporate operating expenses in Q4 this year were $26.5 million, compared to $10.5 million last year, with the increase primarily due to a $13 million increase in acquisition and integration-related expenses. Turning now to the consolidated statement of operations, where the increase in net sales was $36.7 million improvement in gross profit. Consolidated gross margin for the quarter was 28.4%, up 30 basis points compared to last year.
As a percentage of net sales, our Selling, Engineering, General and Administrative Expenses for the quarter were down 110 basis points from Q4 last year. During the fourth quarter of this year, we recognized $13.3 million of acquisition-related expenses, up from $300,000 in Q4 last year. The increase included an aggregate expense of $6.8 million to increase the fair value of contingent consideration associated with the acquisitions of Hog and Standard, as well as expenses incurred in connection with the acquisition of New Way. Other items affecting the quarterly results included a $1.3 million increase in amortization expense, a $1.7 million interest expense, a $200,000 reduction in other expense, and the non-recurrence of a $3.8 million pre-tax non-cash pension settlement charge recognized in the prior quarter.
Income tax expense for the quarter was $17.8 million, an increase of $4.9 million from last year, with the year-over-year change largely due to higher pre-tax income levels and the recognition of fewer discrete tax benefits in the current year quarter compared to the prior year. Our GAAP effective tax rate for full year 2025 was 24%, including discrete tax benefits. For 2026, we currently expect a tax rate of approximately 25%, excluding any discrete tax benefits. On an overall GAAP basis, we therefore earned $0.99 per diluted share in Q4 this year, compared with $0.81 per share in Q4 last year. To facilitate earnings comparison, GAAP earnings per share for unusual items recorded in the current or prior periods.
In the current year quarter, we made adjustments to GAAP earnings per share to exclude acquisition and integration-related expenses, debt settlement charges, and purchase accounting expense effects. In the prior year quarter, we also excluded the pension settlement charge that I just noted. On this basis, our Adjusted earnings in Q4 this year were $1.16 per share, compared with $0.87 per share in Q4 last year. Looking now at cash flow, where we generated $97 million of cash from operations during the quarter, an increase of $7 million or 7% from Q4 last year. That brings our full-year operating cash generation to $255 million, an increase of $23 million or 10% compared to last year.
Early in the fourth quarter, we executed a new five-year credit facility, replacing the $800 million credit facility that was previously in place. During the fourth quarter, we completed the acquisition of New Way for an initial payment of approximately $413 million. In early January, we completed the acquisition of Mega for an initial payment of approximately $45 million. Our current net debt leverage ratio remains at a comfortable level, even after factoring in recent acquisitions. We ended the quarter with $501 million of net debt, an availability under our credit facility of $925 million.
With the increased borrowing capacity under our new credit facility and our improved cash generation, we have significant flexibility to invest in organic growth initiatives, pursue additional strategic acquisitions like Mega, pay down debt, and return cash to stockholders through dividends and opportunistic share repurchases. On that note, we paid dividends of $5 million during the quarter, reflecting a dividend of $0.14 per share. That concludes my comments. I would now like to turn the call over to Jennifer.
Thank you, Ian. We are proud of our record-setting fourth quarter performance, which included new quarterly records across net sales, Adjusted EPS, and Adjusted EBITDA, thanks to the outstanding results from both of our operating groups. Within our Environmental Solutions Group, we delivered 27% year-over-year net sales growth, a 31% increase in Adjusted EBITDA, and a 70 basis point improvement in Adjusted EBITDA margin. Contributions from acquisitions, higher production levels, and continued price realization were all meaningful year-over-year contributors. Given 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 and reducing lead times for sewer cleaners and four-wheel sweepers.
These efforts to increase throughput across our manufacturing sites contributed to double-digit % increases in net sales across several ESG product verticals, including sewer cleaners, safe digging trucks, street sweepers, metal extraction support equipment, and road marking and line removal trucks. From a capacity perspective, the combination of large-scale capacity expansions that we completed between 2019 and 2022, good access to labor, and continued investments in several productivity-enhancing projects, position us well to profitably absorb more volume into our existing footprint. As in recent years, we expect approximately half of our annual CapEx expenditures in 2026 to be focused on various growth initiatives, with the other half focused on maintenance investments. Shifting to aftermarkets, where demand remains strong, aided by contributions from acquisitions.
For the quarter, aftermarket revenue increased 20% year-over-year, primarily driven by higher demand for aftermarket parts, increased service activity, and rental income growth. We are identifying new, attractive aftermarket parts growth opportunities across the enterprise and are highly energized by the long-term prospects of our internal Build More Parts initiative, whereby we are vertically integrating certain parts production. Over a multi-year timeline, this initiative will allow our teams to drive increased recurring parts revenue streams while expanding margins. Additionally, our aftermarket teams are working diligently to integrate our most recent acquisitions, New Way. Shifting to our Safety and Security Systems Group, the team delivered another excellent quarter with 23% top-line growth, a 43% increase in Adjusted EBITDA, and a 360 basis point improvement in Adjusted EBITDA margin.
This improvement was primarily driven by a combination of volume, increases for public safety equipment in the U.S. and in Europe, proactive price cost management, and realization of certain cost savings. Our SSG teams are laser-focused on new product development initiatives while surgically targeting under-penetrated customer cohorts and regions, a strategy that is yielding share gains. We expect the recent addition of a fourth printed circuit board manufacturing line at our University Park facility to drive additional efficiency improvements in 2026. We had another strong year of cash conversion, $155 million of cash generated from operations. For the full year, our cash conversion was 103%, slightly ahead of our annual target of 100%.
Before I shift to current market conditions, I would like to spend a moment to update you on our refuse truck distribution strategy in Canada now that we've completed the acquisition of New Way. As many of you know, we have extensive internal experience in the refuse market, as we have been distributing third-party Labrie refuse trucks through our Joe Johnson Equipment sales channel for more than 20 years, primarily in Canada. This existing internal refuse service infrastructure and sales expertise was an important synergy consideration as part of the New Way transaction. Prior to the acquisition, New Way had not penetrated the Canadian market at scale, creating unique market share growth opportunities for us, starting in 2026.
As such, beginning in Q4 2025, we stopped taking orders for third-party Labrie refuse trucks and instead began selling New Way through our Joe Johnson network in Canada. Given these dynamics, we have provided additional disclosures in this morning's earnings presentation, outlining our historical third-party Labrie refuse orders and sales levels to facilitate more appropriate comparisons. We will continue to provide this reconciliation as we move through 2026. From a financial perspective, we expect to deliver the remaining $80 million of third-party Labrie backlog over the next four quarters and eventually wind that backlog down to zero. As we wind down the sale of these lower-margin, third-party refuse trucks and increase New Way sales in Canada, we expect to realize margin tailwinds in 2027 and 2028. Shifting to current market conditions.
On an underlying basis, excluding the impact of acquired backlog and third-party refuse orders, Q4 orders increased $64 million or 14% year-over-year, with improved demand across both our publicly funded and industrial product lines. Within product lines, we experienced particular strength in sewer cleaners, safe digging, and vacuum trucks, fueled by continued demand for infrastructure and water projects in North America and rising safe digging adoption within the U.S. Similarly, we are seeing especially constructive demand environments for our metal extraction support equipment and road marking and line removal products. Lastly, I wanted to provide some context around our backlog, which stood at $1.04 billion at the end of fourth quarter, up approximately 5% year-over-year.
When I first became CEO, I put in place a multi-year growth strategy aimed at building a best-in-class specialty vehicle and industrial equipment growth company while decreasing the cyclicality of earning streams. As we've executed this strategy, both organically and through M&A, the composition of our product portfolio has changed over time. Consequently, our business has become less backlog intensive compared to historical periods. In fact, many of our least cyclical and fastest growing product lines, such as aftermarket parts, are not really backlog relevant at all. To illustrate this impact, in 2025, net sales of our backlog-intensive products, which include vacuum trucks, street sweepers, metal extraction support equipment, refuse trucks, road marking, and line removal trucks, comprised approximately 45% of our sales, compared to more than 50% in 2015.
While we internally continue to view backlog as an important metric, and our current backlog provides excellent visibility for certain product lines throughout the next six to 12 months, the overall importance of backlog relative to enterprise-wide forward sales has decreased over time as we have decreased the cyclicality of the business. As a reminder, consistent with our long-term growth strategy, through cycles, we target annual low double-digit top-line growth, split roughly evenly between inorganic and organic growth. Looking ahead to 2026, we are laser-focused on driving three critical multi-year growth initiatives forward that will benefit the company for years to come. First, the successful integration of our recently acquired businesses. Second, New Product Development. Third, continuing to strengthen The Power of our Platform. Let me share a couple of highlights. First, our teams are moving full steam ahead with the integration of New Way.
As a reminder, we remain committed to achieving our targeted $15 million-$20 million in annual synergies by the end of 2028, with approximately half of those synergies tied to cost savings and the other half tied to various sales synergies, including the increased penetration of the Canadian market, dealer development, aftermarket parts optimization, sales channel alignment, and New Product Development. Consistent with the outlook we provided in our September acquisition announcement call, we are expecting the acquisition of New Way to be approximately Adjusted EPS neutral in 2026, inclusive of a preliminary estimate of Intangible Asset Amortization Expense. Second, we were pleased to close the acquisition of Mega Equipment last month. Mega is a manufacturer of parts and equipment for the Metal Extraction Support Equipment sector.
We have been following them for a number of years, having identified the company as a highly complementary asset to our Ground Force and TowHaul businesses. We believe Mega can accelerate several of our strategic growth initiatives within this space. As an example, Mega will substantially increase our reach into certain underpenetrated geographic regions, such as South America. As we optimize our combined sales channel between Ground Force, TowHaul, and Mega, we see important cross-selling opportunities similar to the playbook we have been deploying since 2022. We also see incremental opportunities to accelerate Mega's aftermarket parts business, which has historically represented about 25% of Mega's net sales, and we have identified several operational benefits, including production savings and freight cost opportunities.
From a financial perspective, Mega generated approximately $40 million in net sales over the last 12 months. We expect the acquisition to be modestly accretive to cash flow and EPS in 2026. Third, we continue to invest in our internal centers of excellence to widen our competitive advantage within the niche markets that we operate. In 2026, we see specific opportunities to drive several sales, new product development, and dealer optimization issues forward across our vacuum trucks, street sweepers, multipurpose maintenance vehicle, refuse collection, road marking, and safety and security systems verticals. As part of this strategy, we acquired certain assets and territory rights in Texas in the fourth quarter, which we think will allow us to increase market share for several key product lines. Turning now to our outlook.