Federal Signal Corporation · NYSE:FSS
Federal Signal — Q4 2018 Earnings Presentation
23 slides from Federal Signal's earnings presentation, Feb 28, 2019
Slide 1: Federal Signal Q4 2018 Earnings Call
Federal Signal Q4 2018 Earnings Call February 28, 2019 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: 2018 in Review
2018 in Review • Record revenues and earnings delivered by our businesses Revenues exceeded $1 B for the first time in over a decade • Adjusted EBITDA up 41%, with improved EBITDA margin of 14.7% Margin up 210 bps from last year; towards high end of target range Margin improvement in environme
Slide 4: CEO Remarks
CEO Remarks • Strategic initiatives continue to gain traction • Ongoing momentum on “safe-digging“ initiative contributing to increased demand • Recently announced expansion of Vactor facility to add capacity • Acquisitions remain on track to deliver on financial and strategic objectives • New produ
Slide 5: Full-Year Financial Highlights
Full-Year Financial Highlights * • Net sales of $1,090 M, up $191 M, or 21% • Organic sales growth of $93 M, or 12% • Operating income of $121.5 M, up $47.9 M, or 65% • Adjusted EBITDA of $160.5 M, up $47.0 M, or 41% • ESG up $43.8 M, or 42% • SSG up $6.1 M, or 19% • Adjusted EBITDA margin of 14.7%,
Slide 6: Q4 Highlights
Q4 Highlights * • Net sales of $279 M, up $32 M, or 13% • Operating income of $33.4 M, up $12.3 M, or 58% • Adjusted EBITDA of $43.0 M, up $10.9 M, or 34% • ESG up $7.5 M, or 27% • SSG up $2.7 M, or 27% • Adjusted EBITDA margin of 15.4%, compared to 13.0% • GAAP EPS of $0.53, up $0.05, or 10% • Incl
Slide 7: Group and Corporate Results
Group and Corporate Results $ millions, except % Q4 2018 Q4 2017 % Change ESG Orders 239.6 246.8 -3% Sales 217.3 192.0 13% Operating income 26.9 19.9 35% Operating margin 12.4% 10.4% Adjusted EBITDA 35.5 28.0 27% Adjusted EBITDA margin 16.3% 14.6% SSG Orders 58.2 55.9 4% Sales 62.1 55.6 12% Operatin
Slide 8: Income from Continuing Operations
Income from Continuing Operations $ millions, except % and per share Q4 2018 Q4 2017 $ Change % Change Net sales $ 279.4 $ 247.6 $ 31.8 13% Gross profit 72.0 61.6 10.4 17% SEG&A expenses 38.4 39.9 (1.5) -4% Acquisition and integration related expenses 0.2 0.5 (0.3) -60% Restructuring - 0.1 (0.1) NM
Slide 9: Adjusted Earnings per Share
Adjusted Earnings per Share ($ in millions) Three Months Ended December 31, Twelve Months Ended December 31, 2018 2017 2018 2017 Income from continuing operations $ 32.2 $ 29.3 $ 93.7 $ 60.5 Add: Income tax (benefit) expense (1.0) (16.9) 17.9 0.5 Income before income taxes 31.2 12.4 111.6 61.0 Add:
Slide 10: Financial Strength and Flexibility
Financial Strength and Flexibility * • ~$21 M of operating cash flow in Q4, consistent with prior year Full-year cash from operations of $93 M, up $19 M, or 26%, from prior year • Paid down $8.5 M of debt in Q4 Brings total amount of debt paid down during 2018 to ~$62 M Given cash outflows ass
Slide 11: Impact of New Lease Accounting Standard
Impact of New Lease Accounting Standard • Like many public companies, we will be required to adopt the new lease accounting standard, effective January 1, 2019 • Under the new guidance, operating leases will be reflected as a “right-of-use” asset, with a corresponding lease liability on a Company’s
Slide 12: Headwinds and Tailwinds in 2019
Headwinds and Tailwinds in 2019 ▲ Strong backlog, particularly for sewer cleaners and vacuum trucks, providing good visibility into first half of 2019 ▲ Industrial demand remains healthy, particularly from rental customers ▲ Steady municipal markets ▲ Continued expansion of safe-digging technology i
Slide 13: 2019 Outlook
2019 Outlook Adjusted EPS* ranging from $1.48 to $1.60 At the midpoint, represents increase of ~9% over record 2018* Key Assumptions Adjustments to include acquisition- Interest expense of ~4% related items Increase in pension expense (non- Depreciation and amortization expense operating) of
Slide 14: Long-Term Financial Framework
Long-Term Financial Framework With continued focus on organic growth and M&A, and margin performance above that of many of our peers, our financial framework aims to create long-term shareholder value Adjusted Earnings per Share* Long-Term (US$/share) Value-Added Organic Revenue Acquisitions Growth
Slide 15: Q&A
Federal Signal Q4 2018 Earnings Call Q&A February 28, 2019 Jennifer Sherman, President & Chief Executive Officer Ian Hudson, SVP, Chief Financial Officer 15
Slide 16: 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 17: Appendix
Federal Signal Q4 2018 Earnings Call Appendix 17
Slide 18: Consolidated Adjusted EBITDA
Consolidated Adjusted EBITDA $ millions, except % Q4 2018 Q4 2017 Income from continuing operations $ 32.2 $ 29.3 Add: Interest expense 2.1 2.7 Pension settlement charges - 6.1 Hearing loss settlement charges - 1.5 Acquisition and integration-related expenses 0.2 0.5 Restructuring - 0.1 Purchase acc
Slide 19: Segment Adjusted EBITDA
Segment Adjusted EBITDA ESG $ millions, except % Q4 2018 Q4 2017 Operating Income $ 26.9 $ 19.9 Add: Acquisition and integration-related expenses 0.1 0.3 Purchase accounting effects * - 0.2 Depreciation and amortization 8.5 7.6 Adjusted EBITDA $ 35.5 $ 28.0 Net Sales $ 217.3 $ 192.0 Adjusted EBITDA
Slide 20: 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 improve the comparability of results between rep
Slide 21: Impact of Lease Accounting Change
Impact of Lease Accounting Change • Effective January 1, 2019, the Company will adopt the new lease accounting standard, which will result in the recognition of right-of-use assets and lease liabilities on the Company’s Consolidated Balance Sheet and will result in a change to the Company’s recognit
Slide 22: Impact of Lease Accounting Change on 2018 Adjusted EPS
Impact of Lease Accounting Change on 2018 Adjusted EPS Year Ended ($ in millions) December 31, 2018 Income from continuing operations $ 93.7 Add: Income tax (benefit) expense 17.9 Income before income taxes 111.6 Add: Acquisition and integration-related expenses 1.5 Purchase accounting effects (1) 1
Slide 23: FEDERAL SIGNAL
FEDERAL SIGNAL Moves. Cleans. Protects. om : : bn " a a : ¢ « ae 2 | ; . cacti (Zi " aa