TNC - Earnings call transcript Q3 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. My name is Chris and I'll be your conference operator today. At this time, I'd like to welcome everyone to Tennant Company's 2020 Third Quarter Earnings Conference Call. This call is being recorded. [Operator Instructions] Thank you for participating in Tennant Company's 2020 third quarter earnings conference call. Mr. is meeting today's Beginning William Prate, and Planning Analysis Global Director Relations for of Investor Financial Tennant and Senior Company. Mr. Prate, you may begin.

William Prate

Thank welcome to earnings morning, and Analysis everyone, third Financial Relations. of Good William XXXX Investor Director I'm conference you, quarter call. Planning Senior Global and Tennant Chris. Company's Prate, and

Chris Tennant's and CEO me Andy Cebulla Joining Killingstad, today and are CFO. President our Interim

call, and is we is our performance Please Officer, operations the Operating website you a call at to strategy, on Chief their call. regarding note, then presentation Relations tending On progress update accompanies financials. and enterprise on our Dave the will open Huml, today's After Investor able toward remarks, the you third not and matter Chris we're Our to full-year our Andy we is will our join questions. the today will available a investors.tennantco.com. this family quarter making and outlook. slide conference cover will to brief call

you Before results. statements. description from encourage be may that a advised the forward-looking remarks we to and release are risks for review our file may our to our These risks Company's our to our documents, we harbor Exchange described Such are the documents statement We and those news and and begin, and expectations materially with in and subject affect the uncertainties in actual questions today's Commission. the safe of Securities uncertainties contain particularly the regarding and statements statements differ risks please future this those answers performance. may contained uncertainties morning of results that

certain or discuss non-GAAP Additionally, on this call, conference measures items. that include will exclude we

a these includes quarter measures GAAP measures our reconciliation third earnings to the comparable XXXX results. GAAP Our of non-GAAP release and

and earnings now was via over at Relations Investor this the website release Wire turn also Chris. investors.tennantco.com. Business I'll issued on is posted call our morning Our to

Chris Killingstad

your and today. joining and this you hope to stay safe managing you, through We everyone, that loved William, thank ones for you, pandemic. us are Thank

XXXth have anniversary. may you Tennant's we celebrated As seen, in September,

environment customer's founder adapt George Tennant be and While to a recover. different principles; the pandemic started, respond and markets of safe, costs our provide by our to always up needed customers customers. same ability stay commitment with safe. current to ramp innovative to the our their to the not our demonstrated maintained than relevant our operating tradition more were when cash in guiding clean resilience, flow, and our keep and our keep could a innovation At encountered XXXX, we position time honored has to manage solutions stay quick and and established When Company and they in the three what to employees our quickly we to facilities to

quarter recovery the approach that with encouraging all our regions. signs across third in of continued We of saw and

in avoid global supply organic Our our we challenges and carriers operational third EBITDA growth, operating the sales. and resulting quarter Strategy despite unprecedented to from partners, customers, have our chain improvements Furthermore, and performance worked year-over-year teams hard in Enterprise pandemic, our COVID-XX closely sales with in work operational related of the yielded execution decline the disruptions. a overcoming with

in considerable a to in macro COVID uncertainty, While some especially our level level see markets confidence cases, pose near-term continues of as the pandemic spikes high have outlook. we XX business

competitive innovating in a processes, to building advantage, and our year our revenue guidance reinitiating our our few complexity XXXX we to in we for business investing our That but expectations, reducing to not and growth. which full speak will only support also where moments, commitment and scalable for enterprise winning Andy strategy. strategy long-term As reflects are includes, profitable profitability have

has it our could anyone or control. global execute elements impact on the year of our pandemic all have the pandemic nothing impact ago, key within because is ability strategy are our enterprise diminished the the not predicted to economic While a

to for example, like leverage to A ideal; is in take quarter capabilities with maneuverability profitable and sound a recent October a solve our that tremendous real provide providing smaller separate enhances Brain For two illustration to continued introduction engineering to our partnership innovating our our national which and robotic retailer this Corporation suite we world growth floor insights a complements it scrubbers. might machine footprints. agreements This of with autonomous by current while commitment enabled customer smaller-sized full lofty and our of the navigation represents and third for how new TXXXAMR, help problems. product offering new Xst Tennant us retailers of regional our with customers finalize

to starting logistics, in education are and like verticals aviation. wins achieve we Additionally, additional

our and Enterprise transformation important leadership our XX implementation we will the a Strategy in and years our is critical support position a we roll-out President Vice in chain our and demonstrate Huml. local optimize as reporting Walmart he world. of a directly for advance strategy, Dave wins standardization for and Global leadership all more year, Tennant Following initial diverse with we're product this area to more supply Senior operations focus our to experience with our customer has like an management, enterprise important earlier local In and continuing our COO, these Tennant. as expertise broad of an recently deep hire Dan to chain deliver as Dan post functional role than how of and innovation Glusick pandemic to and brings Operations, Operations play operations, value Dan of manufacturing of enterprise short, support is success supply In enterprise our we lead across hired base. of initiatives. to this aspects

pandemic. talent. improving best May This our guiding our Lastly, roles, and and the the and backfill of recognize continued emerge investments given strong start to trajectory as We execution strategic trends we shareholder continue our in can to QX are will outlined and With we've at since such customers, our essential investments we we'll drive business, and is the how for call to so demand that, making markets of the seen in improved recognize began value. recover, need to the that the support confidence Andy. key the strategy, continue we over to to core our turn do to to support principles now I retain They QX. in the leadership of

Andy Cebulla

diluted comments GAAP Chris, share, note a you, and Thank are to earnings hello, basis. on and everyone. that my in per Please any today, fully both references non-GAAP,

XXXX, year-over-year. results while impact third the the Chris of Tennant's reported net sales XX% noted, regions. our third impact the see the effects across of quarter. of when we As for all currency did the second X.X%. of reflected trends we pandemic, X.X% in down some the Organic Overall, sales, our to million, the significant encouraging declined in exclude which trajectory continuing experienced compared decline quarter $XXX.X improvement sales Tennant quarter of represents This

of organically. EPS, strong distributor market and third EMEA, net growth includes Sales in and in in region the were in at compared China, of in ago business earnings sales non-operational million business which we Japan, the year-over-year experienced direct sales or per the Southeast which service we declined the down down The which now quarter the Asia down X.X% Industrial We'll excludes were Asia Declines which offset parts reported declined Company's X.X% organically Overall, items United sales divide quarter, France Middle Brazil. The were and the growth $X.XX Korea we in Sales to spot. closer take of in in APAC For in and in the share, a all the year. and partially and Americas million period. per geography, markets. $XX.X which in year America; region. $XX.X look the direct $X.XX third and across with bright a Australia. from Sales Iberian declines success Africa; continued Peninsula, X.X% be East X.X%, continued growth and offset by amortization, platform and organically. trends into or and $X.XX by our in Australia result other covers which and certain results weakness prior AMR EMEA includes Latin Italy. offset the Adjusted sales $X.XX of share Americas, or in Europe, regions; Asia a declined Kingdom North America were and X.X% and quarter by Declines mainly the three partially Pacific, X.X% consumables as down the Tennant's totaled

quarter, period last While equipment cleaning revenue the rapidly our needs sales up efforts customers over meet year, were year-over-year approximately same their was the reflecting in for XX% X% helping evolving pandemic. down the during aftermarket

lower on actions decrease margins. which Adjusted and strategic XX.X% and XXXX by third number respectively. initiatives. cost of investments deleverage strategic out the onto gross of by margins XXXX partially and were XX.X% were year-over-year during quarters a reflects The Now offset driven volume

of sales compared strategic our we quarter. in Turning investments of as to third the during with net number of and during result mainly This a XX.X% efforts adjustments adjusted ago cost XX.X% that the to a period, expenses, expenses year incentives. management containment included quarter, made the S&A were

that uncertainties results, compared third or adjustments incentives with was careful S&A $XX.X in by important created in implemented continues were macroeconomic The and sales our management part in the of Given the EBITDA XXXX. the million management Combining to pandemic, XX.X% sales third discretionary quarter response. increase of of $XX.X XXXX as the reductions in was the quarter spending XX.X% sales these percent million of or to our of be a an quarter. of attributed to

in mix ago tax tax discrete period. tax the As resulted from favorable rate effective quarter, primarily an the of rate, adjusted in The third the items for a XX.X% in year increase compared an Company the earnings. in lower and of quarter tax XX.X% our rate to had

by cash $XX.X and allocation quarter the Also repaid million quarter, an In $XX in to Tennant capital. of now flow in additional in million balance the from and operations, performance Turning primarily XXXX, we business debt. third generated driven working third capital sheet improvements of flow, cash items.

As had approximately cash we million of on September and million revolver. undrawn and funds our cash in of $XXX.X $XXX equivalents, XXth,

guidance. to turning Lastly,

we As the in you pandemic. February nature the may uncertain of to full-year recall, due withdrew in April, guidance provided we the had

full-year is of there still uncertainty and have level confidence the XXXX. reinitiating projections near-term a While are do for guidance higher we we our in in market,

and believe is subsidies which as benefits, government does business organic in our primarily which driven of support reflect include sales organic this sales to quarter ever. Also, worth effective wage our and announcement, approximately items that increase that results. in per million mentioning $X.XX EBITDA it's million; $XXX comparison is share; approximately and we is adjusted improving second range certain we earning year QX $X,XXX mentioned XXXX per highest EPS time, by amortization $X.XX declining the million quarter received $XXX revenue in and underlying follows; non-operational XX.X%; of capital expect $XX enterprise XX.X% expenditures of in It's share, the tax difficult an was million GAAP our continued noted, guidance to business $X.XX to $X as XX%. included with guidance incorporates today's our sales important our to million excludes strategy. same the sequentially full of Tennant's $X.XX Net At to will quarter-over-quarter, revenue XXXX million; to note expense; of continue approximately of the of to $X we rate as and performance $XXX would adjusted a As to to earnings investing million year-over-year guidance second while Chris our

that, decline our that now be due will anticipated quarter; go open lower just of revenue anticipating will are fourth continued questions. that implied to percent and we organic strategic Chris. than be I greater investments we the result, previous third and EBITDA than our quarter mentioned, dollar a to will ahead. With the call the quarters. As Please

Operator

question first is The Shlisky Michael Colliers from Instructions] [Operator Securities. from

is line Your open.

Michael Shlisky

gone to I so and about TXXX ask first the it's how wanted far.

products has mentioned they a for recent not the of since are several some just what rates the just on I'm us as launch? are more tests customers. been from sense full those You going the are entire or adoption there And trial that kind to scale give had sure, chains.

Chris Killingstad

Yes.

launched in that the these period. did We we prior rolling - the out the we October that all officially to we so that that that to third we on mode. demo - Xst. in started and referenced are All So happened full quarter, actually the it retailers sales

core smaller given target that the So, we're we of product. product market with And aviation, relevant the in excited really footprints, in the requiring the third XXXAMR have like of that logistics, greater we quarter with forward, is is did maneuverability. think with smaller for healthcare retail sales prospects footprints that and education, going business and some it facilities the

Michael Shlisky

regional in Okay, several you of said and a their finalized test? just couple national suites one stores just with for in scrubber, that autonomous full to all agreements is you scale a for as clarify, stores but a remarks or that store your had of

Chris Killingstad

Yes.

for - the first it first know is number significant in a the their all you So of stores for of that's phase. stores is phase. their in It

So being just a test, couple it's units no. is not of broadly. rolled out This

Michael Shlisky

Excellent.

step to we to new CTX back follow also up a if the on quarter, wanted So I product, and last CSX. previously

You well. were Curious were are going they mentioned They are those of to but as products those how for good. autonomous not also good far? as smaller course, spaces efforts so

Chris Killingstad

to proactively mechanized switching bucket space North to are we at perform to they well. America in off the a These great - so, cleaning both automated to product people start have point to They and to products No, continue to cleaning. price mop or not from for Yes. did Europe and start. right small - right get in

we've So excited a market we're and this the going underrepresented is forward. by prospects where been

Michael Shlisky

Okay.

So maybe lastly from me.

business there hearing last, of make had about to has changes to more they some this whether the - news effort how intensified their additional lot forward. a to big you're policies pandemic? the reconsidering cleaning or pandemic ahead real go they if and some a choose make questioning think sanitation going there some two their spaces be companies as there quarters, Any talking and be permanent been a to out beyond how customers has it been theory that Over clean you've I had was could

Chris Killingstad

yet. seeing believe in couple I last future. move mean remains quarters a more robust focus that place still of Yes, dramatic the that areas, - the high-touch cleaning protocol said over really and disinfecting not the we've We that realistically be in what cleaning put on We're sanitization. direction would in a do

higher would what the and revenue. use to in that the do more a equipment X% leading So equipment, tend that That's their more often business, quarter, they activity they more our than is say because what as service it buy cleaning and intensely existing Andy service much we up is happens, aftermarket indicated, of requires indicator customers new equipment our before aftermarket.

We're hopefully in equipment into it's been to starting indicator that monitoring the anyway, also and trend leading that starts is historically robust quarters. So a high outside take more and to place cleaning touch it sanitizing growth subsequent lead disinfecting. sales

Operator

with next Capital Stonegate is Partners. question The Marco Rodriguez from

line is Your open.

Marco Rodriguez

if on here. was bit we talk I wondering could maybe little a more actions the cost reduction

kind you of You to bit trying color in once of the sort wage better major sort received the just handle some strategic at issues saw the putting Also of of nice the helping provided but a an the pandemic, well. benefits perhaps not I'm a volume you're it trying sort you rate implies be little initiatives I'm little at? get margin bit on run to despite or expansion to is to just that a year-over-year can uncertainty issues, better we some least S&A - declines. where layer just gross cost the of normalized obtain that clear as of through here your understanding terms reduce the related of of trying to of in you get

get a to trying handle that. Just on

Andy Cebulla

Yes.

it you talking been of saw certainly we won't but from saw our QX. playing the out numbers that in in know have and margin it get benefits - QX, again specific both certainly and is see about we we've S&A, So in quarters past improvements nicely we in on had strategy in we seen,

by in the of right some out we're sales S&A of the and now making, nicely. the and cost we're lower both just So in frankly, obviously and that play pandemic continuing experiencing investments the volumes the area. muted It's to

thinking basis So, still S&A, expansion do we it's without our certainly and XX making we margin longer we goal, know term, just about XXX rather getting respect that's exit think are on than of that about about commitment pandemic, that assured, I'd our our into point think progress getting specifics, you within this - in to we kind point just EBITDA and something specific that we reach. as our focus that's I on talked talked rest or basis and it's still about think strategy we think

Marco Rodriguez

obtaining any you as where to basis stick adjusted are a XX question, us in kind I there know the you point if EBITDA find that then way sort mean of to I And themselves now, measuring of But this to XXX difficult on perhaps you point as right is in a basis line? strip can leverage away give the that everybody answer. is far try situation

Andy Cebulla

Yes, you're of volume past. that this talking for Part is the about dependent. talked XXXX. We've in

we make things volume and those get impacts as the our manufacture of So up. or way the goes to certainly toward benefits lot we can a - you

certainly say in we're and last talked on I'd we quarter, So how I'd improvement executing haven't strategies. about we our say focusing down our efforts slowed

slowed haven't we've We well back. the improvements volume made advantage we to of that are We as ourselves take positioning think down. comes

would on So the for because say we're on we're certainly I being - of implemented. But although we our about strategy through it's feel track, XXXX track for pandemic. muted how

Marco Rodriguez

in volumes. in demonstrated areas? investors the moving terms you issues that kind your can Are that or of of of staying your kind your onto just the business. the of topic and and data to of there reduction of strategic Is direction show initiatives, the that right to then manufacturing the that those kind or again complexity sort And point information any to there notwithstanding improvements brought process improving switching of specific has or pandemic and any on of specifics, you're sort that

Andy Cebulla

and just line year level you resulting guidance. has in rate XX% being look Yes, call EBITDA impact, the at record certainly of our perspective, of that XX% thing the guidance think our from a we're near one last bottom was at it the implying a you roughly down, despite the if at midpoint I'd say,

me guiding way So to time we're terms that our a EBITDA and last was you an there. the you can that substantially we're see you midpoint internal of point roughly $X think And look if at billion. guidance is in at lower that to history, reflected dollars. in around if back to our we can $X And about, billion,

made just strategy just points there we certainly is as how to, in a differently progress we're year our that in last say executing company. can guide focusing some point and how we're the that or So you two facts

Marco Rodriguez

And kind that's us on perhaps you guys then right last or issues chain or kind sort question, just if color update how disruptions working you for supply wondering in of terms of now? of could us of some give any

Chris Killingstad

our we that's and disruptions Well, to our deliver script things our I intensely on need. today our that supply think in they freight providers in the of And quantities no stated in and of suppliers to the on and one customers with in able really are we have terms material the we worked we chain. with time

So is extremely going well. that all of

Andy Cebulla

maybe but China, wonderful have goods. a risks of done that really kind we think suppliers, And just that the to in And build Initially mitigating about they've we one was it that done as I we really Obviously, first finding a job the talked out any in first pandemic quarters. all rolled has heard on team sources Yes. about prior nice job. concerns. for that, of multiple our with

we point, closely watch really go to-date. So just monitor but issues. and to it any we so continue something we'll no had It as haven't is we to Chris' forward, far echo issues

Operator

with is Securities. Chris The from Moore next question CJS

open. Your line is

Brendan Popson

about little you I revenue XXXX, more similarities levels hear FY when a and it return environment, want it your Chris. 'XX Can there. thoughts FY reasonable Brendan quickly about around and 'XX just to is is 'XX, this to comparing about to and time can environment level. on to talk returned think you like this differences just your circumstances, to This revenue three years XXXX different but to like took ask it's obviously for

Andy Cebulla

Yes.

So, today, guidance obviously we're XXXX. not giving for

near-term the we about of predict. getting to visibility guidance greater said to be and why months. going XXXX. What we this you a it's talk year there to to was, rest and didn't not difficult felt for and the - giving have three that's the comfortable clear it's just And So we're

of lot in trends still understand. uncertainty my up have will there's lot that year-over-year Chris talked lot service about. - I like that quarter the know It's was out things for So to way that remarks to in There and mentioned of recession. the And still a market. of that in good - out 'XX, the is 'XX, are play guided a some us

the it's a that should thing I here. be so same could say, possibility, that And

but we're So positive sign this a it's monitoring point. that, at

Chris Killingstad

well the - knows given with Yes, of are that, equation, XXXX, the situation really initiatives know cleaning future different if strategy, say and than with XXXX. recover. a you positive and like bode this knows us once would on what side nobody uncertainties. the you on today But good who results compare all that is to very our I what versus in GPS at input this markets look the But XXXX the have I going is going think AMR things small more we for other space point,

Brendan Popson

autonomous how moving with then sales, at then, - And QX could forward? they impacted you speak looking to and

Andy Cebulla

positive said in remarks, to continue there trend. be Yes, my like I

bright year-over-year. market. have the but prospects So trend an on a us. like easy Same not large with a But won't QX, year-over-year positive and product launch the We even that our up in in us, for specific that it new feel get spot decline. good good comparison. future it position in was was QX up the we for It despite was feel certainly for that, was we with and the about about and we that

Chris Killingstad

diversify us constrained we're have sign. capacity been our is part. we've which a know with good been customer - lot base starting I And AMR, Right. our to on a

verticals board that into retail So like - retailer we aviation. on mean retailers. I regional and and we're on now mainly and large other now we some a logistics focused diversifying have

sign. positive really a that's think I So

a and we continue So, our chances we do to that to have and we're those bid. we've retail bit, side, now - they those we able of great but verticals superior other seeing starting believe have focus shift that winning the come well in on increase, says to and our interest as up it of contracts many as little relationships they solution for is been

Operator

next Gabelli from Our Funds. Kearney Instructions] Brett is with question [Operator

open. Your line is

Brett Kearney

guys, for Hi taking my market thanks obviously, great and and question then here. environment execution, difficult very

Chris Killingstad

Thank you.

Brett Kearney

guess in the with seeing that the and then profile strength of I past given of platform? also guided of could the typically, at you the So the you're is high geographically. kind the recoveries, how as and in And part that's how aftermarket business profile provide maybe maybe any level, a AMR color service on consumables what trending parts of

Chris Killingstad

perspective, from Yes across a regions. geographic consistent the fairly it's

it's and early positive a that new a a than obviously, across fairly think that trajectory others, road, of still all year down it's good than AMR less for fairly relatively product little process consistent. sign, So I more which in you the regions, a two. certainly mean some AMR still, that you or it's an a but is opportunity is there's know

fully play as we certainly yet. go it's seen think we So But haven't out an we forward. opportunity that

Operator

are I'd back over turn to for to like there questions this call closing time, no further at management Since remarks. the

Chris Killingstad

Chris. you, Thank

everyone at during and, in support needs the across the their members secure customers' and position operations the They conclude, and support are same our want allowing globe. So our changing global dedication us to I our sales our before leadership team ever for tech our environment and us from we time, helping to industry. teams ones Tennant to our this service thank

well and our you, quarter concludes earnings us We joining This I have their a team truly and again, support. for appreciate that, third dedication thank Be today. call. great everybody. With

Operator

conference concludes you Thank participating. disconnect. call. And for Ladies this and now gentlemen, you today’s

Tennant (TNC) 31 Oct 202020 Q3 Earnings call transcript