Federal Signal Corporation · NYSE:FSS
Federal Signal — Q3 2018 Earnings Presentation
19 slides from Federal Signal's earnings presentation, Nov 6, 2018
Slide 1: Federal Signal Q3 2018 Earnings Call
Federal Signal Q3 2018 Earnings Call November 6, 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: Q3 Highlights
Q3 Highlights * • Net sales of $269 M, up $21 M, or 8% • Operating income of $30.4 M, up $8.1 M, or 36% • Adjusted EBITDA of $40.2 M, up $6.8 M, or 20% • Adjusted EBITDA margin of 14.9%, up from 13.4% • GAAP EPS of $0.36, up $0.15, or 71% • Adjusted EPS of $0.36, up $0.12, or 50% • Orders of $268 M,
Slide 4: Statement of Operations
Statement of Operations $ millions, except % and per share Q3 2018 Q3 2017 $ Change % Change Net sales 269.4 248.7 20.7 8% Gross profit 69.0 61.3 7.7 13% SEG&A expenses 38.2 38.2 - 0% Acquisition and integration-related expenses 0.4 0.7 (0.3) -43% Restructuring - 0.1 (0.1) NM Operating income 30.4 2
Slide 5: Adjusted Earnings per Share
Adjusted Earnings per Share ($ in millions) Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Net income $ 21.7 $ 12.5 $ 61.5 $ 31.2 Add: Income tax expense 6.5 7.5 18.9 17.4 Income before income taxes 28.2 20.0 80.4 48.6 Add: Restructuring - 0.1 - 0.5 Executive se
Slide 6: Group and Corporate Results
Group and Corporate Results $ millions, except % Q3 2018 Q3 2017 % Change ESG Orders 214.5 178.2 20% Sales 216.3 198.5 9% Operating income 28.3 21.2 33% Operating margin 13.1% 10.7% Adjusted EBITDA 37.0 30.7 21% Adjusted EBITDA margin 17.1% 15.5% SSG Orders 53.6 51.4 4% Sales 53.1 50.2 6% Operating
Slide 7: Financial Strength and Flexibility
Financial Strength and Flexibility * • Generated ~$34 M of cash from operations in Q3, compared to ~$6 M in prior year YTD operating cash flow of $72 M, up 38% vs. prior-year period • Paid down ~$27 M of debt in Q3 Brings total amount of debt paid down since June 2017 to ~$88 M • Debt to EBITDA
Slide 8: Impact of New Lease Accounting Standard
Impact of New Lease Accounting Standard • Like many public companies, we will be required to adopt new lease accounting standards, effective January 1, 2019 • Under these new rules, operating leases will be reflected as a “right-of-use” asset, with a corresponding lease liability on a Company’s bala
Slide 9: CEO Remarks
CEO Remarks • Outstanding Q3, with excellent results in each of our groups Organic growth in orders and sales of 17% and 8%, respectively Year-over-year margin improvement in both groups, with both reporting Q3 margin performance towards high end of target range • SSG continues to see benefits o
Slide 10: Strategic Initiatives – Safe Digging
Strategic Initiatives – Safe Digging Federal Signal is well positioned to establish a leading position in an emerging application for hydro-excavation technology; increased regulation will accelerate growth What is it? Why is it Attractive? Why Federal Signal? • Vacuum excavation or “Safe Digging” •
Slide 11: Raising 2018 Outlook
Raising 2018 Outlook Raising adjusted EPS* outlook range to a new range of $1.33 to $1.36, from a range of $1.26 to $1.32 Represents increase of 56% - 60% over 2017 $0.85 FY17: Actual FY18 Guidance: Feb 2018 $1.10 $1.20 FY18 Guidance: Nov 2018 $1.33 $1.36 * Adjusted EPS is a non-GAAP measure, which
Slide 12: Heading into 2019
Heading into 2019 ▲ Strong backlog, particularly for sewer cleaners and vacuum trucks, providing good visibility into first half of 2019 ▲ Continued momentum with expansion of safe-digging technology into new end-markets ▲ Municipal markets continue to be steady overall, with strong demand for sewer
Slide 13: Q&A
Federal Signal Q3 2018 Earnings Call Q&A November 6, 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 Q3 2018 Earnings Call Appendix 15
Slide 16: Consolidated Adjusted EBITDA
Consolidated Adjusted EBITDA $ millions, except % Q3 2018 Q3 2017 Net income $ 21.7 $ 12.5 Add: Interest expense 2.2 2.7 Acquisition and integration-related expenses 0.4 0.7 Restructuring - 0.1 Purchase accounting effects * - 1.3 Other expense (income), net - (0.4) Income tax expense 6.5 7.5 Depreci
Slide 17: Segment Adjusted EBITDA
Segment Adjusted EBITDA ESG $ millions, except % Q3 2018 Q3 2017 Operating Income $ 28.3 $ 21.2 Add: Acquisition and integration-related expenses 0.3 0.3 Purchase accounting effects * - 1.3 Depreciation and amortization 8.4 7.9 Adjusted EBITDA $ 37.0 $ 30.7 Net sales $ 216.3 $ 198.5 Adjusted EBITDA
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