Federal Signal Corporation · NYSE:FSS
Federal Signal — Q2 2019 Earnings Presentation
35 slides from Federal Signal's earnings presentation, August 2019
Slide 1: Disciplined Growth
Disciplined Growth Investor Presentation August 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 environmental cleaning vehicles such as street sweepers, sewer cleaners, vacuum trucks, dump bodies and trailers; as well as safety and security products including audible a
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 $920 M* Group (ESG) (SSG) Serves municipal, industrial, Serves the needs of and utility markets for $227 M* municipalities and industrial Markets surface and sub-surface verticals for audible and cleaning, 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: 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 9: 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 9
Slide 10: 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 11: 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 12: 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 13: 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 14: 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 15: Disciplined M&A
Disciplined M&A Target companies that accelerate our current strategic initiatives or provide a platform for growth in adjacent markets or new geographies • Niche market leader (product, geography, end-market) Characteristics • Sustainable competitive advantage Business • Deep domain expertise (tech
Slide 16: MRL Acquisition is Aligned with FSC’s M&A Strategy
MRL Acquisition is Aligned with FSC’s M&A Strategy 16
Slide 17: Profitable Growth Execution and Strong Financial Position
Profitable Growth Execution and Strong Financial Position Net Sales Adjusted EBITDA Margin** Q2 2019 Highlights3: (Consolidated) 1,090 1,147 • Record net sales of $324M, up 899 $33M, or 11% $ in millions 226 227 779 768 708 206 • Adjusted EBITDA* of $57M, up 243 234 217 $10M, or 21% 864 920 537 534
Slide 18: 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 19: 2019 Outlook
2019 Outlook Raising adjusted EPS* outlook range to a new range of $1.64 to $1.72, from a range of $1.50 to $1.60 Key Assumptions ▪ Adjustments to include acquisition-related items ▪ Interest expense of ~4% ▪ Depreciation and amortization expense to increase ▪ Increase in pension expense (non-operat
Slide 20: Positioned for Long-Term Growth
Positioned for Long-Term Growth With continued focus on organic growth and M&A, and margin performance above that of many of our peers, our financial framework aims to create long-term shareholder value Adjusted Earnings per Share1 Long-Term Organic Value-Added (US$/share) Revenue Growth Acquisition
Slide 21: Appendix
Appendix I. Segments Overview II. Non-GAAP Measures III. Executive Compensation IV. Investor Information 21
Slide 22: Appendix I: ESG Products
Appendix I: ESG Products . a ccc, = Ss eee (or allFi VACTOR sd ~~ -@ amr) i QTRUVAC Jetstream», WESTECH Aa. EsSolutions
Slide 23: Appendix I: ESG Products (continued)
Appendix I: ESG Products (continued) 23
Slide 24: 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 sweepers and sewer cleaners ▪ Funding for sewer cleaners through water tax 18% revenues adds further stability 82% ▪ Continued recovery in oil & gas m
Slide 25: 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 26: 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 27: 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 28: 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 29: 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 30: Appendix II: Adjusted Earnings per Share
Appendix II: Adjusted Earnings per Share ($ in millions, except per share amounts) Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Net income $ 32.8 $ 26.9 $ 50.3 $ 39.8 Add: Income tax expense 11.6 8.3 17.5 12.4 Income before income taxes 44.4 35.2 67.8 52.2 Add: Acquisiti
Slide 31: Appendix II: Consolidated Adjusted EBITDA
Appendix II: Consolidated Adjusted EBITDA $ millions, except % Q2 2019 Q2 2018 Net income $ 32.8 $ 26.9 Add: Interest expense 2.0 2.5 Acquisition and integration-related expenses 0.9 0.4 Purchase accounting effects * 0.1 0.3 Other (income) expense, net (0.1) 0.4 Income tax expense 11.6 8.3 Depreciat
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
ff FEDERAL SIGNAL Moves. Cleans. Protects.