Federal Signal Corporation · NYSE:FSS
Federal Signal — Investor Presentation (May 2017)
34 slides from Federal Signal's investor presentation, May 31, 2017
Slide 1: Disciplined Growth Investor Presentation June 2017
Disciplined Growth Investor Presentation June 2017
Slide 2: Safe Harbor Statement
Safe Harbor Statement 2 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: About Federal Signal
About Federal Signal • Founded in 1901, joined NYSE in 1969 (“FSS”) • Diversified industrial manufacturer of specialized environmental cleaning vehicles such as street sweepers, sewer cleaners and hydroexcavators; as well as safety and security products including audible and visual warning devices •
Slide 4: An Experienced Leadership Team
An Experienced Leadership Team 4 Ian Hudson Vice President and Interim Chief Financial Officer Appointed March, 2017 Joined Federal Signal in August 2013 as Vice President and Corporate Controller Previously served as Director of Accounting – Latin America and Asia Pacific at Groupon, Inc. 1
Slide 5: Two Attractive Platforms
Serves the needs of municipalities and industrial verticals for audible and visual safety and security notification devices and systems Two Attractive Platforms 5 *TTM 3/31/17 Environmental Solutions Group (ESG) Safety and Security Systems Group (SSG)$503 M* $210 M*Serves municipal, industrial, and
Slide 6: Positioned for Long-Term Growth
Positioned for Long-Term Growth Two platforms poised for profitable growth Attractive mix of municipal and industrial end markets Revitalized new product development initiative Active M&A pipeline Strong balance sheet and cash flow Ongoing focus on continuous improvement utilizing “80/20”
Slide 7: Federal Signal Strategic Focus
Federal Signal Strategic Focus Optimize Existing End-Markets Invest to grow revenue faster than GDP Continue to improve manufacturing efficiencies and costs Leverage our existing plants and invested capital Organic Growth in New End-Markets Innovate to develop new product applications for ad
Slide 8: 2020 Revenue Goal $1.0B+
2016-2020 CAGR ≥ 9% Our 2020 Revenue Goal 8 $1.0 B+ $708 M Key Drivers • Full-year impact of 2016 completed acquisitions • In 2016, JJE generated ~$87 M of sales in ~7 months, on a standalone basis • Modest recovery in our end markets • GDP growth • Strategic initiatives that drive growth above GDP
Slide 9: Safety and Security Systems Group (SSG)
Safety and Security Systems Group (SSG) 9 Serves the needs of government and industrial verticals for audible and visual safety and security notification devices Public Safety and Security Signaling Systems Brands Lights and siren products for Police, Fire and Heavy Duty (HD) end-markets Audible and
Slide 10: SSG: Market Influencers and Where We Play
SSG: Market Influencers and Where We Play 10 65% 35% 2016 Sales by Geography U.S. Non-U.S. Municipal/Government Industrial Cleaning Construction & Industrial Utility Oil and Gas Other 2016 End Markets by Users Increased national focus on issues of public safety and law enforcement, and rising publ
Slide 11: SSG Strategic Initiatives
SSG Strategic Initiatives 11 Defend and expand leading market share positions in police, signaling and outdoor warning markets New products and portfolio optimization Grow into heavy duty and fire adjacencies “Go to Market” initiatives Capture higher share of municipal spending by police d
Slide 12: Environmental Solutions Group (ESG)
Environmental Solutions Group (ESG) 12 During 2016 we expanded our product portfolio to offer customers a comprehensive solution of new and used equipment, parts & service and rental offerings Markets Served Rental/Aftermarket Distribution Brands End Markets and Channels Aggregate addressable market
Slide 13: ESG Strategic Initiatives
ESG Strategic Initiatives 13 Maintain or achieve leading market position in all product categories for North American governmental market Refocus on dealer development Renewed focus on product development Increase equipment sales in North American non-governmental markets Utility market in
Slide 14: Agreement to Acquire TBEI
14 Latest Significant Development: Agreement to Acquire Truck Bodies and Equipment International (“TBEI”) Strong strategic fit with ESG businesses and broadens focus on maintenance and infrastructure markets Diversifies into non-oil and gas, higher growth end-markets, while balancing municipal v
Slide 15: Deal Size and Implied Valuation
Deal Size and Implied Valuation Purchase Price of US$ 270M, subject to customary closing adjustments 7.2x multiple of FY 2016 EBITDA, before synergies Financial Impact The transaction is expected to be accretive to earnings in 2017 Expected to be $0.07-0.12 accretive by year 2 and $0.12-0.17
Slide 16: Establishing a Maintenance and Infrastructure Vehicle Systems Platform
16 Establishing a Maintenance and Infrastructure Vehicle Systems Platform TBEI expands ESG’s specialty vehicle expertise and is expected to become part of a platform serving maintenance and infrastructure markets, providing customers with a comprehensive suite of products and services ESG Rental/Aft
Slide 17: ESG+TBEI: Market Influencers and Where We Play
ESG+TBEI: Market Influencers and Where We Play 17 Municipal/Government Industrial Cleaning Construction & Industrial 20 16 E nd M ar ke ts by U se rs 1 75% 25% U.S. Non-U.S. Economic recovery supports state and local funding for sweepers and sewer cleaners Funding for sewer cleaners through wate
Slide 18: Balance Sheet and Liquidity Remain Strong
Balance Sheet and Liquidity Remain Strong 18 Debt Levels 5.9x 2.9x 1.3x 0.5x 0.4x 0.8x 2.7x 0.0x 1.0x 2.0x 3.0x 4.0x 5.0x 6.0x 7.0x 2011 2012 2013 2014 2015 2016 Pro Forma* To ta l D eb t / A dj us te d EB IT D A *At TBEI acquisition closing TBEI acquisition will be financed with cash on hand and
Slide 19: Priority Driven Long-Term Capital Allocation
Priority Driven Long-Term Capital Allocation 19 Organic projects leverage existing assets, generally require limited cash investment Innovation R&D efforts target new and updated products Generally, already funded within operating results, cash flow and normal capital expenditures Reinvest in
Slide 20: Q1 2017: In Review
Q1 2017: In Review Q1 2017 Highlights: Significant increases in orders, both sequentially and compared to Q1 2016. • $79 M, or 58%, year-over-year order growth, largely driven by organic order growth within ESG and effects from the 2016 JJE acquisition • $49 M, or 30%, sequential order improvement
Slide 21: 2017 Outlook
2017 Outlook* 21 + Stable municipal demand + Improving recent order patterns and sales funnels + Full year of Paradigm sales into utility and construction end-markets + Full year impact from 2016 acquisitions Adjustments to include items related to acquisitions Depreciation to increase by ~$8 M
Slide 22: Positioned for Long-Term Growth
Positioned for Long-Term Growth Two platforms poised for profitable growth Attractive mix of municipal and industrial end markets Revitalized new product development initiative Active M&A pipeline Strong balance sheet and cash flow • Profitably grow revenue in excess of $1.0 B by 2020 – ti
Slide 23: Appendix
Appendix 23 I. New Product Development II. M&A Target Evaluation III. Company Products IV. Total Debt to Adjusted EBITDA V. Adjusted EBITDA Margins VI. Investor Information
Slide 24: Appendix I: New Product Development
Appendix I: New Product Development 24 Kicked off innovation refocus in late 2013 Re-allocated engineering resources toward innovation Implemented innovation development processes and project management – several projects underway that have originated from customer & market-based needs assessm
Slide 25: Appendix I: New Product Development
Appendix I: New Product Development Environmental Solutions Group (ESG) Safety and Security Systems Group (SSG)New Markets Optimize Existing Markets • Vactor ParaDIGm • Water recycler • Vehicle-based monitoring and reporting solutions • Trailer-mounted jetter • Improved air sweeper offerings • Globa
Slide 26: Appendix II: M&A Target Evaluation
• Niche market leader (product, geography, end-market) • Sustainable competitive advantage • Deep domain expertise (technology, application, manufacturing) • Strong management team • Leverages FSC’s distribution and manufacturing capabilities • Solid growth potential • Through-the-cycle margins comp
Slide 27: Appendix III: Environmental Solutions Group
Appendix III: Environmental Solutions Group 27
Slide 28: Key Competitive Strengths
28 Key Competitive Strengths Strong regional brands with leadership positions in distinct product categories Operational excellence through unwavering focus on Variable Cost Productivity philosophy and best-in-class cycle times Strong distribution network – over 600 dealers & distributors complement
Slide 29: Appendix III: Public Safety and Security (SSG)
Appendix III: Public Safety and Security (SSG) 29
Slide 30: Appendix III: Signaling and Systems (SSG)
Appendix III: Signaling and Systems (SSG) 30 Enterprise Integrated Command Solution Sensors/Detectors Control Modules/Nodes Public Address Cameras Intercoms Visual Signals Telephony Audible Devices Outdoor Warning Sensors/Detectors SmartMsg Enabled Systems Control Modules/Nodes Control Modules/Nodes
Slide 31: Total Debt to Adjusted EBITDA
The Company uses the ratio of total debt to adjusted EBITDA as one measure of its long-term financial stability. The ratio of debt to adjusted EBITDA is a non-GAAP measure that represents total debt divided by the trailing 12-month total of income from continuing operations before interest expense,
Slide 32: Adjusted EBITDA and Adjusted EBITDA Margin
The Company uses adjusted EBITDA and the ratio of adjusted EBITDA to net sales (“adjusted EBITDA margin”), at both the consolidated and segment level, as additional measures which are representative of its underlying performance and to improve the comparability of results across reporting periods. W
Slide 33: Appendix VI: Investor Information
33 Appendix VI: 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 VP, Interim Chief Financial Officer IHudson@federalsignal.com Svetlana Vino
Slide 34: Federal Signal
FEDERAL SIGNAL Pr