Federal Signal Corporation · NYSE:FSS
Federal Signal — Q2 2018 Earnings Presentation
19 slides from Federal Signal's earnings presentation, Aug 7, 2018
Slide 1: Federal Signal Q2 2018 Earnings Call
Federal Signal Q2 2018 Earnings Call August 7, 2018 Jennifer Sherman, President & Chief Executive Officer Ian Hudson, SVP, Chief Financial Officer
Slide 2: Safe Harbor
Safe Harbor This presentation contains unaudited financial information and various forward-looking statements as of the date hereof and we undertake no obligation to update these forward- looking statements regardless of new developments or otherwise. Statements in this presentation that are not his
Slide 3: Q2 Highlights
Q2 Highlights * • Net sales of $291 M, up $67 M, or 30% • Organic sales growth of $27 M, or 13% • Operating income of $38.1 M, up $19.3 M, or 103% • Adjusted EBITDA of $47.8 M, up $18.8 M, or 65% • Adjusted EBITDA margin of 16.4%, exceeding target range, up from 12.9% • GAAP EPS of $0.44, up $0.25,
Slide 4: Income from Continuing Operations
Income from Continuing Operations $ millions, except % and per share Q2 2018 Q2 2017 $ Change % Change Net sales 291.0 224.4 66.6 30% Gross profit 79.2 54.7 24.5 45% SEG&A expenses 40.7 34.8 5.9 17% Acquisition and integration related expenses 0.4 1.0 (0.6) -60% Restructuring - 0.1 (0.1) -100% Opera
Slide 5: Adjusted Earnings per Share
Adjusted Earnings per Share ($ in millions) Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Income from continuing operations $ 26.9 $ 11.5 $ 39.8 $ 18.7 Add: Income tax expense 8.3 6.1 12.4 9.9 Income before income taxes 35.2 17.6 52.2 28.6 Add: Restructuring - 0.1 - 0.4 E
Slide 6: Group and Corporate Results
Group and Corporate Results $ millions, except % Q2 2018 Q2 2017 % Change ESG Orders 217.3 214.7 1% Sales 233.3 174.3 34% Operating income 37.2 21.0 77% Operating margin 15.9% 12.0% Adjusted EBITDA 45.8 29.3 56% Adjusted EBITDA margin 19.6% 16.8% SSG Orders 60.3 56.4 7% Sales 57.7 50.1 15% Operating
Slide 7: Financial Strength and Flexibility
Financial Strength and Flexibility * • Generated ~$28 M of cash from operations in Q2, compared to ~$32 M in prior year • YTD capital expenditures of $7.0 M, up from $2.7 M • Paid down ~$18 M of debt in Q2 • $248 M of debt outstanding; $36 M of cash Net debt of $212 M ** • ~$140 M of availability
Slide 8: CEO Remarks
CEO Remarks • Exceptional Q2, with outstanding results in each of our groups TTM revenues exceeded $1 billion, achieving our 2020 goal ~18 months early • SSG starting to see benefits of investments in sales and engineering resources made in prior quarters New product introductions in the U.S. an
Slide 9: Market Conditions
Market Conditions • Demand in most end markets continues to be strong • 3% organic order growth, despite pull forward of orders reported in prior two quarters • Taking actions in response to extended lead times for certain products Adding labor, investing in machinery and equipment and shifting pr
Slide 10: Growth Initiatives
Growth Initiatives • Internal initiative to use a portion of the savings from tax reform to accelerate longer-term growth kicked off in April • ~$61 M of debt paid down in a little over a year since the TBEI acquisition Although we had expected to generate strong cash flow to allow us to de-lever
Slide 11: Application of "ETI" to Acquisitions
Application of “ETI” to Acquisitions • Targeting companies that are operating within our stated EBITDA ranges, or those which have the ability to operate within the ranges, after the application of our ETI principles • Since we completed the JJE acquisition a little over 2 years ago, we have focused
Slide 12: Raising 2018 Outlook
Raising 2018 Outlook Raising adjusted EPS* outlook range to a new range of $1.26 to $1.32, from a range of $1.15 to $1.22 Represents increase of 48% - 55% over 2017 Key Assumptions Adjustments to include items related to Interest expense of ~4% acquisitions Additional operating expenses to D
Slide 13: Federal Signal Q2 2018 Earnings Call Q&A
Federal Signal Q2 2018 Earnings Call Q&A August 7, 2018 Jennifer Sherman, President & Chief Executive Officer Ian Hudson, SVP, Chief Financial Officer 13
Slide 14: Investor Information
Investor Information Stock Ticker - NYSE:FSS Company website: federalsignal.com/investors HEADQUARTERS 1415 West 22nd Street, Suite 1100 Oak Brook, IL 60523 INVESTOR RELATIONS CONTACTS 630-954-2000 Ian Hudson Svetlana Vinokur SVP, Chief Financial Officer VP, Treasurer and Corporate Development IHuds
Slide 15: Appendix
Federal Signal Q2 2018 Earnings Call Appendix 15
Slide 16: Consolidated Adjusted EBITDA
Consolidated Adjusted EBITDA $ millions, except % Q2 2018 Q2 2017 Income from continuing operations $ 26.9 $ 11.5 Add: Interest expense 2.5 1.3 Acquisition and integration-related expenses 0.4 1.0 Restructuring - 0.1 Purchase accounting effects * 0.3 2.5 Other expense (income), net 0.4 (0.1) Income
Slide 17: Segment Adjusted EBITDA
Segment Adjusted EBITDA ESG $ millions, except % Q2 2018 Q2 2017 Operating Income $ 37.2 $ 21.0 Add: Acquisition and integration-related expenses 0.3 0.2 Purchase accounting effects * 0.3 2.5 Depreciation and amortization 8.0 5.6 Adjusted EBITDA $ 45.8 $ 29.3 Net sales $ 233.3 $ 174.3 Adjusted EBITD
Slide 18: Non-GAAP Measures
Non-GAAP Measures • Adjusted net income and earnings per share (“EPS”) - The Company believes that modifying its 2018 and 2017 net income and diluted EPS provides additional measures which are representative of the Company’s underlying performance and improves the comparability of results across rep
Slide 19: Protecting people and our planet
Protecting people and our planet (‘2 FEDERAL SIGNAL “<= a