Federal Signal Corporation · NYSE:FSS
Federal Signal — Q3 2019 Earnings Presentation
35 slides from Federal Signal's earnings presentation, November 2019
Slide 1: Disciplined Growth Investor Presentation
Disciplined Growth Investor Presentation November 2019
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains unaudited financial information and forward-looking statements. Statements that are not historical are forward-looking statements and may contain words such as “may”, “will” ,“believe”, “expect”, “anticipate”, “intend”, “plan”, “project”, “estimate”,
Slide 3: Federal Signal at a Glance
Federal Signal at a Glance • Founded in 1901, joined NYSE in 1969 (“FSS”) • Diversified industrial manufacturer of specialized vehicles for maintenance and infrastructure markets such as street sweepers, sewer cleaners, vacuum/hydro-excavators (“safe-digging trucks”), industrial vacuum loaders, wate
Slide 4: An Experienced Leadership Team
An Experienced Leadership Team Jennifer Sherman Mark D. Weber President and Chief Executive Officer Senior Vice President and Chief Operating Officer ▪ Appointed January, 2016 ▪ Appointed January, 2018 ▪ Previously Chief Operating Officer, Chief Administrative ▪ Previously served as President and Ch
Slide 5: Two Attractive Platforms
Segment Two Attractive Platforms Environmental Solutions Safety and Security Systems Group $958 M* Group (ESG) (SSG) Serves municipal, industrial, Serves the needs of and utility markets for surface $228 M* municipalities and industrial Markets and sub-surface cleaning, verticals for audible and saf
Slide 6: Environmental Solutions Group (ESG)
Environmental Solutions Group (ESG) Have established a platform serving maintenance and infrastructure markets to provide customers with a comprehensive suite of products and services; acquisition of MRL will further augment this platform Street Sewer Safe Industrial Materials Hauling Road Applicati
Slide 7: Acquisition of Mark Rite Lines Equipment Company, Inc. (MRL)
Acquisition of Mark Rite Lines Equipment Company, Inc. (“MRL”) Acquisition represents strategic addition to Federal Signal’s portfolio of niche, market-leading specialty vehicle manufacturing companies serving maintenance and infrastructure markets • MRL is a leading U.S. manufacturer of truck-mount
Slide 8: MRL Acquisition is Aligned with FSC's M&A Strategy
MRL Acquisition is Aligned with FSC’s M&A Strategy 8
Slide 9: Safety and Security Systems Group (SSG)
Safety and Security Systems Group (SSG) Serves the needs of government and industrial verticals for audible and visual safety and security notification devices Public Safety and Security Signaling Systems Lights and siren products for Police, Fire and Audible and visual Warning Systems Application H
Slide 10: Key Strategic Initiatives
Key Strategic Initiatives Specialty Vehicles for Areas of Aftermarket Parts and Audible and Visual Focus Safe Digging Diverse Services Warning Devices End-Markets Supported By Flexible New Product Technology as an Manufacturing & “ETI” Disciplined M&A Development Enabler Culture 10
Slide 11: Strategic Initiative – Safe Digging
Strategic Initiative – Safe Digging Federal Signal is well positioned to establish a leading position in an emerging application for vacuum-excavation technology; increased regulation expected to accelerate growth What is it? Why is it Attractive? Why Federal Signal? • Vacuum excavation or “Safe Dig
Slide 12: Strategic Initiative – Aftermarket Parts & Services
Strategic Initiative – Aftermarket Parts & Services Optimizing platform to transform Federal Signal’s aftermarket business into an industry leader of parts and services to maintenance and infrastructure markets • Unified platform to serve municipal and industrial Rentals customers across all ESG bus
Slide 13: Strategic Initiative – Audible & Visual Warning Devices
Strategic Initiative – Audible & Visual Warning Devices SSG businesses focused on optimizing their existing channels and expanding product offerings Optimize Channel Product Portfolio Expansion Smart Products • Pricing / Promotion Strategy • “Allegiant” – low cost lightbar to • CommanderOne – moneti
Slide 14: Eighty–Twenty Improvement (ETI) Culture
Eighty–Twenty Improvement (“ETI”) Culture Manufacturing Efficiency Material Cost Reduction • Lean manufacturing focus • Waste reduction • Throughput flexibility • SKU rationalization • Labor pool management • Savings through volume aggregation • Flexible manufacturing model • Sourcing optimization •
Slide 15: New Product Development (NPD)
New Product Development (“NPD”) Customer-Focused Process • Complete change in approach to innovation, starting in 2013 • Current innovation organization has had a number of successes, including the record- breaking launch of the ParaDIGm vacuum excavator • Most successful new product launch in over
Slide 16: Profitable Growth Execution and Strong Financial Position
Profitable Growth Execution and Strong Financial Position Net Sales Adjusted EBITDA Margin** Q3 2019 Highlights3: (Consolidated) 1,186 • Net sales of $309M, up $39M, or 15%; 1,090 899 15.4% 15.6% organic sales growth of $17 M, or 6% 228 $ in millions Adjusted EBITDA 226 14.6% 779 768 708 13.0% 12.0%
Slide 17: Priority Driven Long-Term Capital Allocation
Priority Driven Long-Term Capital Allocation • Organic projects leverage existing assets, generally require limited cash investment Cash Deployment • Innovation R&D efforts target new and updated products Reinvest in the (2016-18)1 • Generally, funded within operating results, cash flow and normal c
Slide 18: Raising 2019 Outlook
Raising 2019 Outlook Raising adjusted EPS* outlook range to a new range of $1.70 to $1.76, from a range of $1.64 to $1.72 Represents increase of 21% - 25% over record 2018 FY19 Guidance $1.48 $1.60 - Feb 2019 FY19 Guidance $1.50 $1.60 - May 2019 FY19 Guidance $1.64 $1.72 - July 2019 FY19 Guidance $1
Slide 19: Positioned for Long-Term Growth
Positioned for Long-Term Growth With continued focus on organic growth and M&A, and margin performance above that of many of our peers, our financial framework aims to create long-term shareholder value Adjusted Earnings per Share1 Long-Term Organic $1.70 - Value-Added (US$/share) Revenue Growth $1.
Slide 20: Appendix
Appendix I. Segments Overview II. Non-GAAP Measures III. Executive Compensation IV. Investor Information 20
Slide 21: Appendix I: ESG Products
Appendix I: ESG Products . a VACTOR OTRUVAC EsSolutions
Slide 22: Appendix I: ESG Products (continued)
Appendix I: ESG Products (continued) 22
Slide 23: Appendix I: ESG - Market Influencers & Where We Play
Appendix I: ESG - Market Influencers & Where We Play Market Dynamics ▪ Economic recovery supports state and local funding for 2018 Sales by Geography street sweepers and sewer cleaners ▪ Funding for sewer cleaners through water tax 18% revenues adds further stability 82% ▪ Continued recovery in oil
Slide 24: Appendix I: MRL's Broad Product Portfolio & Service Offering
Appendix I: MRL’s Broad Product Portfolio & Service Offering Road-Marking Equipment Thermoplastic Marking Paint Marking Trucks Line Removal Trucks Trucks Plural Component Marking Self-Propelled / Ride-on Trucks Marking Equipment Road-Marking Services Parts and Repair Services • HighMark provides roa
Slide 25: Appendix I: MRL Transaction - Attractive Industry Fundamentals
Appendix I: MRL Transaction - Attractive Industry Fundamentals MRL is well-positioned to benefit from numerous industry tailwinds, which are driving demand for road-marking equipment and services Key Demand Drivers • Decades of under-investment in U.S. infrastructure has resulted in significant pent
Slide 26: Appendix I: SSG Products
‘a@ FEDERAL SIGNAL Safety and Security Systems Public Safety Systems f FEDERAL SIGNAL Safety and Security Systems Integrated Systems fi FEDERAL SIGNAL VAMA Safety and Security Systems
Slide 27: Appendix I: SSG - Market Influencers & Where We Play
Appendix I: SSG - Market Influencers & Where We Play Market Dynamics 2018 Sales by Geography ▪ Increased national focus on issues of public safety and law enforcement, and rising public expectations for transparency and accountability driving demand for safety and security products 37% 63% ▪ Recover
Slide 28: Appendix II: Non-GAAP Measures
Appendix II: Non-GAAP Measures ▪ Impact of New Lease Accounting Standard on Non-GAAP measures - Effective January 1, 2019, the Company adopted the new lease accounting standard, which resulted in a change to the Company’s recognition of the deferred gain associated with historical sale lease-back tr
Slide 29: Appendix II: Adjusted Earnings per Share
Appendix II: Adjusted Earnings per Share Three Months September 30, ($ in millions) 2019 2018 Net income $ 28.4 $ 21.7 Add: Income tax expense 7.9 6.5 Income before income taxes 36.3 28.2 Add: Acquisition and integration-related expenses 0.4 0.4 Purchase accounting effects (1) 0.2 0.1 Adjusted incom
Slide 30: Appendix II: Adjusted Earnings Per Share
Appendix II: Adjusted Earnings Per Share Year Ended December 31, (1) Purchase accounting effects relate to adjustments to exclude the step-up in the valuation of equipment acquired in connection ($ in millions) 2016 2017 2018 with recent acquisitions that was sold subsequent to the acquisition dates
Slide 31: Appendix II: Consolidated Adjusted EBITDA
Appendix II: Consolidated Adjusted EBITDA $ millions, except % Q3 2019 Q3 2018 Net income $ 28.4 $ 21.7 Add: Interest expense 2.1 2.2 Acquisition and integration-related expenses 0.4 0.4 Purchase accounting effects * - - Other expense, net 0.2 - Income tax expense 7.9 6.5 Depreciation and amortizati
Slide 32: Appendix II: TTM Consolidated Adjusted EBITDA
Appendix II: TTM Consolidated Adjusted EBITDA The Company uses adjusted EBITDA and the ratio of adjusted EBITDA to net sales (“adjusted EBITDA margin”) as additional measures which are representative of its underlying performance and to improve the comparability of results across reporting periods.
Slide 33: Appendix III: Executive Compensation Aligned with Long-term Objectives
Appendix III: Executive Compensation Aligned with Long-term Objectives • The Company continues to focus on executing against a number of key long-term objectives, which include the following: ▪ Creating disciplined growth ▪ Improving manufacturing efficiencies and costs ▪ Leveraging invested capital
Slide 34: Appendix IV: Investor Information
Appendix IV: 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 Deve
Slide 35: Federal Signal – Moves. Cleans. Protects.
ff FEDERAL SIGNAL Moves. Cleans. Protects.