Federal Signal Corporation · NYSE:FSS
Federal Signal — Investor Presentation (March 2018)
34 slides from Federal Signal's investor presentation, Mar 19, 2018
Slide 1: Disciplined Growth Investor Presentation March 2018
Disciplined Growth Investor Presentation March 2018
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 Senior Vice President and Chief Financial Officer Appointed October, 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.
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 *Net Sales for 2017. ESG includes 7 months of TBEI. Environmental Solutions Group (ESG) Safety and Security Systems Group (SSG) $693 M* $
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 cash flow and healthy financial position Ongoing focus on continuous improvement utili
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: Safety and Security Systems Group (SSG)
Safety and Security Systems Group (SSG) 8 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 9: SSG: Market Influencers and Where We Play
SSG: Market Influencers and Where We Play 9 66% 34% 2017 Sales by Geography U.S. Non-U.S. Municipal/Government Construction & Industrial Utility Oil and Gas Other 2017 End Markets by Users Increased national focus on issues of public safety and law enforcement, and rising public expectations for t
Slide 10: SSG Strategic Initiatives
SSG Strategic Initiatives 10 Defend and expand leading market share positions in police, signaling and outdoor warning markets New products and portfolio optimization Grow presence in heavy-duty and fire adjacencies “Go to Market” initiatives Capture higher share of municipal spending by p
Slide 11: Environmental Solutions Group (ESG)
11 Environmental Solutions Group (ESG) Have successfully established a platform serving maintenance and infrastructure markets in order to provide customers with a comprehensive suite of products and services ESG Rental/Aftermarket Distribution Brands End Markets and Channels Street sweeping Municip
Slide 12: ESG+TBEI: Market Influencers and Where We Play
ESG+TBEI: Market Influencers and Where We Play 12 2017 End Markets by Users Economic recovery supports state and local funding for sweepers and sewer cleaners Funding for sewer cleaners through water tax revenues adds further stability Recovering oil & gas markets expected to benefit hydro-exc
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: Our 2020 Revenue Goal $1.0 B+
2016-2020 CAGR ≥ 9% Our 2020 Revenue Goal 14 $1.0 B+ $708 M Key Drivers • TBEI acquisition essentially achieves our previously announced $250 M revenue goal by 2018 • Modest recovery in our end markets • GDP growth • Strategic initiatives that drive growth above GDP growth rates 2020 Goal Anticipate
Slide 15: Eighty–Twenty Improvement (ETI) Culture
Eighty–Twenty Improvement (“ETI”) Culture Each of our businesses are targeting savings from our ETI program in 2018, which are intended to reduce the impact of material/wage inflation 15 Manufacturing Efficiency Working Capital Optimization Pricing Strategy Material Cost Reduction Manufacturing Effi
Slide 16: EBITDA Margin Targets
EBITDA Margin Targets 16 • EBITDA margin targets: ESG: 15% - 18% SSG: 15% - 17% Consolidated: 12% - 16% • Underlying assumptions: Absence of extraordinary factors affecting demand from end-markets No unusual hearing loss litigation expenses • Historical EBITDA margins and targets place Fed
Slide 17: 2017: Year in Review
2017: Year in Review 2017 Highlights: Acquisition of TBEI on June 2, 2017 Strategic initiatives and benefits from acquisitions contributed to significant year-over-year growth in orders, sales and earnings Total orders for the year exceeded $1 B, and were up $343.6 M, or 51%, compared to last
Slide 18: Balance Sheet and Liquidity Remain Strong
Balance Sheet and Liquidity Remain Strong 18 TBEI acquisition was financed with cash on hand and borrowings available under our existing credit facility Although increasing our leverage in the short-term, we expect that the healthy cash flows generated by combining our existing businesses with T
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: 2018 Outlook
2018 Outlook 20 ▲Full-year impact of TBEI ▲Acquisitions remain on track to deliver on previously-announced accretion estimates ▲Strong backlog, particularly for sewer cleaners and vacuum trucks ▲Positive economic conditions in most end markets ▲Amount of used vacuum trucks in end markets appears to
Slide 21: 2018 Outlook: Adjusted EPS
2018 Outlook Adjusted EPS* ranging from $1.10 to $1.20 Represents increase of 29% - 41% over 2017 21 Adjustments to include items related to acquisitions Depreciation and amortization expense to increase by ~$8 M to $10 M • Reflects full year of TBEI and additional investment in rental fleet I
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 cash flow and healthy financial position • Profitably growing our revenues in excess o
Slide 23: Appendix
Appendix 23 I. New Product Development II. M&A Target Evaluation III. Company Products IV. Adjusted EBITDA Margins V. TBEI Transaction Summary 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 • ParaDIGm Vacuum Excavator • Vehicle-based monitoring and reporting solutions • Sewer Cleaner productivity improvements such as new boom design and up
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 our distribution and manufacturing capabilities • Solid growth potential • Through-the-cycle margins compar
Slide 27: Appendix III: Company Products
Appendix III: Company Products 27
Slide 28: Appendix III: Company Products
28 Appendix III: Company Products Products Class 6 – 8 Standard Dump Bodies Class 6 – 8 Custom Dump Bodies Dump & Transfer Trailers Class 3 – 5 Standard Dump Bodies & Hoists Class 3 – 8 Custom Dump Bodies & Hoists Class 3 – 8 Custom Dump Bodies & Hoists Ox Bodies J-Craft Rugby Manufacturing DuraClas
Slide 29: Appendix III: Company Products
Appendix III: Company Products 29
Slide 30: Adjusted EBITDA and Adjusted EBITDA Margin
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. We believe that investors use versions of thes
Slide 31: Appendix V: TBEI Transaction Summary
31 Appendix V: TBEI Transaction Summary 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 vs. industrial exposure Provides strong platform to drive future
Slide 32: 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 TBEI contributed approximately $0.03 of accretion in 2017 Expected to be $0.07-0.12 accretive by year 2 and $0.12-0.17 accre
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 SVP & Chief Financial Officer IHudson@federalsignal.com Svetlana Vinokur VP,
Slide 34: Federal Signal
FEDERAL SIGNAL Pr