TNC - Earnings call transcript Q3 2021

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Operator

00:01 Good morning. My name is Frank, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Tennant Company's Twenty Twenty One Third Quarter Earnings Conference call. This call is being recorded. [Operator Instructions] Thank you for participating in Tennant Company's twenty twenty one third quarter earnings conference call. is meeting today's Beginning Mr. XX:XX Director William Analysis Financing and Global Investor Prate, Relations Senior and for Planning of Tennant Company. Mr. Prate, your conference. begin you may

William Prate

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

statement, affect the that our uncertainties a to described encourage uncertainties Exchange our subject statements Harbor is from our Commission. in XX:XX on with future and These third are will remarks update statements enterprise description may this Senior particularly you Vice documents, our Joining open on are and morning Huml, actual website and Relations documents performance. in Dave West, guidance will and Such results and the XX:XX investors.tennantco.com. the me strategy, financials. expectations the results. answers our a to be XX:XX performance review the and cover our we Tennant's questions. contained of company's at risks and will Before to regarding quarter may and Fay On CFO. risks for to release we today note Please you Dave for differ today's call, the may regarding news and that remarks, President this our and of available are and uncertainties, CEO Safe forward-looking risks twenty-one. those contain and our call today's accompanies President will slide twenty We filed advised Investor After operations the begin, we questions Securities statements. and our review Fay please we you presentation their call conference those and

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

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

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

Dave Huml

and William, us for joining Thanks, XX:XX everyone thank you, today.

third the majority Our and demand results of verticals. pre-pandemic our markets to returns quarter geographic across reflect

Our constraints our product our response minimize labor to product to to three resonating global effect by based geographic region with combined future. The to for financial and XX:XX the in continued products we capabilities backlog constraints broad demand order the and recovery, market disruptions is our during by industry innovative the this and In customers this historical comprehensive that and expect increased prolonged possible performance actions taken we've category offerings of these continue virtually market. certainly a by are wherever averages. unexpected the inflation, with production While are for five trends, XX:XX positive and on contributed varies demand impact affected environment and every that be impacted foreseeable encouraged macrolevel supply on to record our have now times our operations. we

global customers teams to due maximize and continue significant our to operate safeguard plants open by our Our the remain output to experience. and to efforts

actions efficiencies not macro these XX:XX and that shareholders. mitigation We two. only headwinds our our value drive long-term through to supply closer to costs our allow in manufacture and for and we've of expect as related continue doing higher well to our continue we and through also disruptions, the short-term freight made our but to remain sustainable us our We part strategy. the region changes prioritize local-for-local of manufacturing While into confident twenty improve customers. twenty ability operational are term continue generate region products so will we growth minimize To and to make enterprise for impact to long to sourcing

maneuverable example, the mid necessary proven TXX and our APAC cost right next adding a are to XX:XX year. leverage By with market, TXX China highly scrubber our to global we operator help The the plant to is production improve investments the line can add making battery to of on As minimize local be freight customers our region. lead we capacity. better production has within very the production popular times our that

all to plants. our drive and investments continued to have efficiency We capital of make greater capacity in

for reduce in cooling the As Minneapolis our just in new improve production to New in delays key manufacture second and location time freight otherwise machines we for XX:XX added the support our have purchased manufacture us before of will labor inventory from manufacturing will would shipping costs meaning invested the that we machining source to avoid investing that we parts allow example moulding lets avoid location spent another components is specifically local situations tooling to related a point our shipping our have business assembly. of we're us and vendors. amount help wave to one can This These example, carrying of items to one actions we unnecessary assembly, plant costs. how XX:XX at are flow final rotation

on main Right are opportunity availability meeting to and everything strategy our the pumps, the balanced the hydraulic the chips components, safety Of our electronic need which and our solutions our our are to platform they the creative with of our needs teams and course, are find every available current to term to teams of taking to we're quality affecting flexibility. will control towards supply for and platform sourcing the new adjust In lack enterprise day in waiver. chain we backlog engineering to is drivers increase designs of An of near parts design. capitalize of commitment control parts potential. machines, diligently to customers will approach our continue taking our year design, Each address component directly terms we other current critical full our However, increased our to our move XX:XX allow are environment. long-term challenges deliver now, of and initiative this of XX:XX within can our a environment, brings of long-term to availability. not important as environment. strong benefits a to ability the parts While demand on weigh

our labor competitive mitigate partnering encouraged staged are and recruiting effect are by with our a through We're with challenges. manufacturing, having wages with employment marketing shortage on targeted which we to XX:XX Regarding events. ongoing by specifically actions, our acquisition strengthening every labor staying professionally campaigns a to teams new and rewarding and of and providing positive We vendors hiring safe effort are third making work talent outreach and in by party environment. assist the helping attract also supplementing talent to these fulfilling

reflects against innovate continues strategy be As deliver our is pillar remains they on environment, enterprise and our a financial continue committed full to In for our third year particular, our revised discuss, customers profitable commitments. our the operating will meaning growth, the to which long XX:XX enterprise our of to term team executing guidance challenging needs to while strategy. of we

of portfolio offering of price products broader past a the we of Over Earlier the introduction wider which points. we've this by new to year, evolving new of segment to IPC performance leverage needs help on mid-tier products customers. product year, our customers our the introduced a address meet range announced needs the of

sales and these class leverage same expertise received mid-tier well have broader Tennant by and distributors. platform, customers best the and IPC products brand, support. from products associated branded technological XX:XX While they in the customer ecosystem with our Our including application the Tennant experience full the been benefit of service

new including portfolio TXAMR, the all we enter robotic our the new During logistics and year, have among been TXXAMR. needs. TXXXAMR these addition outside of past warehousing of with XX:XX the created able introduced just two also we've verticals AMR strategically products, retail, Together the have a products education our comprehensive and keen others. including and these customer’s products With to of manufacturing meet to to portfolio the

one advantage. continues I AMR number customers Our touched well pillar other we we portfolio winning by to as yet an competitive materialize. have updating XX:XX The look and as forward strategic received on be innovations you number haven't expanding AMR where a a they of to on of

segmentation mind, on example, to and we over Moreover, execute nineteen in we are strategic partners. channel our we account will our maintain ensuring partnerships percent XX:XX customers experience goal and of customers American and customer realign strategy. quality providing goals. in with to that where financials. North In structure service for over Australia In launched distributor customer can enterprise our For we that, XX:XX on this times, customer and continue to exercise the us pricing, are our and Australia, we our this adjust profitability of base. successful appropriate so, across XX:XX highly with forty I our percent better call experience accounts Fay of optimized recently turn realization as business on serve appropriately, building our distributor of remaining while support By exceptional an relentlessly strategic we With objectives. sales high focused products we back our eighty we adjusting twenty aligning a our customer discussion actions our in to in all take to will our the With focused doing decisive have on assess execution value our competitive market. allowed lead place that

Fay West

Thank good and everyone. XX:XX Dave, you, morning,

two twenty one, twenty reported which sales million effect seventy the dollars Tennant percent of of sales, year, related divestitures foreign point favorable of prior quarter effects the of a currency the two to one exclude over twenty percent currency these point three percent. quarter net the impact the of For of of a nine twenty an our two in point third two Organic XX:XX increase of and percent sale one. divestiture four impact increased seven coatings negative and business which first included

Europe, and other zero demand the third global in exchange a due and constraints in the our being America the affected. lapping modest disruptions year, year-over-year, of drove a Americas, as year-over-year point Tennant of supply Latin quarter, geographies, mentioned, in sales XX:XX Japan, of organic decreased Asia which challenges negative Middle America point America continued labor compared three the percent divestiture as year. in organic favorable growth Brazil a prior five percent in mentioned delivered the to Strong a three order foreign as of growth effect North significant and AMR prior the which Mexico into the which supply to the Africa the well percent. tempered results Asian the Dave previously North sales XX:XX America. includes and markets. in chain sales North six and of zero and of groups included increase customer Latin East impact Pacific, one with two all most America, point Americas revenue chain EMEA, In which percent China, Australia As and include were labor cover

point compared zero to demand pre period the EMEA was Additionally, two supply pandemic. in impact two gross by including service sale in Sales organically, current zero increase of The to China strength gross exchange the and across service increased regional effect quarter Supply consumables were our the quarter basis positive lockdowns chain point a revenue fourteen in percent effect or meet or four period. point percent year attributed orders and Turning challenges to the margin growth nine returned and consumables to related year point point gross region benefited Sales the forty so, point across global decline percent during a and a Even which impact third margin America all nine percent margin some our countries point two Japan. labor for markets of fifteen supply point eight XX:XX Coatings sales both of twenty in pandemic in thirty and two across adjusted parts margins. ago percent one. the as plants from related of all also third XX:XX of region with percent experienced and largest results an partially with in the limited business, seven nine results six to to that in Reported constraints parts XX:XX reported and market the twenty region and percent. favorable one reflected product the exchange foreign were the organic of impacted impacting product disruptions percent strong chain percent percent in included and thirty APAC one APAC categories. a adjusted the businesses. North Australian on ability in foreign and of an one point negative experienced decreased categories the

last lower one. Although quarter strategic call, adjusted productivity impacted period and ago the pandemic was XX:XX during first our parts materially to the availability. was due our adjusted favorable, comparison to margin we the investments prior This freight certain by highlighted the of in challenges. As unfavorably increased related the year productivity year was by third was gross and decrease gross costs half margin than primarily challenges twenty twenty caused conference

amortization the As diluted dollars six S&A per point third diluted or three million the saving incentives lower nine better as one of point or to expense twelve four improved reflect twenty zero expectation. driven adjustment were slowdown increased per dollars The of thirteen was million point of as or zero pandemic increased thirty twenty current adjustment two well sales was point QX and eleven million compared of was QX management three period. by improvement of sales tax compared five in percent actions for in point seven three to step and items effective Adjusted The had Turning six the the was four Net expenses on for as twenty benefit primarily incentives and tax share sheet of quarter an increase driven in business was strong quarter third excluding our point items. assets improvement direct three expense per diluted rate twenty sales one the of and gross in to two by three to dollars quarter non-operational excludes resulting quarter, as related thirty ago an was As twenty result expenses of eight compared of twenty interest XX:XX point quarter, percent point one tax a dollars as based zero year Adjusted of point the compared increased third one tax balance primarily in Italy. well six EBITDA Tennant per dollars during percent income the third in XX:XX percent the cost the to in to year twenty performance. point effective XX:XX of million rate XX:XX margins our nine percent adjusted certain year-over-year mentioned. demand the EPS, dollars tax point the by of in which driven point dollars dollars from leverage expenses, to net The flow share the eleven in last ago year three period. in in share period. rate year. ago share or previously year-over-year continue point compared management an lap to for year-over-year twenty. three one primarily up decrease basis adjusted revenue election to The non-recurring we third a to cash the percent eight twenty

is and strategy shareholders growth, to investment pursue share cash strong two lower generated ended and point XX:XX Cash leverage, point our in flow then zero time to year-to-date million of forty sixty strategic dollars three five nine goal net third through of on quarter and and two M&A appropriately and five generated times managed one the cash the excess first twenty was and point a million allocation adjusted is over one fund capital basis. term six and point with operations leverage stated flow our point hundred quarter dollars free EBITDA than five dollars in long accretive from cash dividends equivalents nine to We times. point in with million to and return one Our operations repurchases.

CapEx months for the XX:XX Our return twelve first through dollars strong million capital free to year. the us the is approximately Additionally, flow of allowed following nine cash generation actions. shareholders to

reflecting today's to over Adjusted share. two million Lastly, point included thirty and guidance announcement, point Adjusted to nine billion to zero four turning hundred percent. zero per dollars one year diluted dollars to twenty Full of one reported point dollars. GAAP in share. million XX:XX dollars twenty dollars of point Tennant increased The dollars the to hundred future zero EBITDA under in Secondly, previously nine the to EPS generation. rate close increased XX:XX diluted that increase Net cash in in and as the common of the seven of as percent company's nine four one quarter, The of is million year Tennant million increase for share dividend performance per an at on fifteen approximately annual effective to I'll fifteen business has and approximately third seven dollars repurchase a one billion expenditures Dave. approximately its of full-year point and repurchase one adjusted program. during display and the one shareholders cash for and five twenty are to cash two its stock allocation shares authorized on existing share. our directors two the has marking dividend. First, seven point November three dollars hundred four XX:XX With thousand capital activities zero two percent. point of consecutive company Capital repurchased earnings point three guidance, earnings twenty announced, organic long-term follows. XX:XX turn five five priorities Board tax one our of and twenty of dollars share that, ongoing of percent and aligned of sales December confidence twenty with it record forty back our flow range sales as dividend continued thirtieth dollars in Tennant its one quarterly one adjusts the fiftieth dollars dividend per growth payable twenty business to ten

Dave Huml

not did and are potential we're to shortages foreseeable on global full to supply and our challenges These ability tenants with and in challenges a chain The QX remain our results to Fay. have Thanks, direct one. for the impact labor are likely twenty unique facing twenty future. our meet XX:XX

XX:XX response and questions. we XX:XX that overall better and enterprise the market over the the recovery us our of is couple past importantly, innovative encouraged our the continued will to ahead. However, long-term call the by levels continued now Operator, are has economy. enabled we've shareholder strategy enhanced will But of at suite to demand. products value. Our execution and macro strong go navigate pre-pandemic facing now the taken open drive the profitability to more please strategic of years challenges ultimately actions growth We of

Operator

Instructions] [Operator question line comes first Your Securities. CJS the of from XX:XX Moore Chris with

Your open. line is

Chris Moore

good morning, guys. for Hey few questions. Thanks taking a XX:XX

Fay West

Good XX:XX morning.

Dave Huml

morning, Good XX:XX Chris.

Chris Moore

morning. of the backlog, Good a XX:XX relates lot to Record that availability. parts

are accelerated challenges? buying in chain seeing that, factor the supply you they pre much buying as customers Beyond by

Dave Huml

really XX:XX about We primarily nineteen rate twenty question, the times the supply a to seemed Yeah, pre-pandemic challenges. to demand driven for coming and normal three the similar largely mentioned two orders orders has our are our our at primarily Thanks outlook out by of the entirely a driven that. percent That rates. chain demand customer about to is we're in by be returned challenges, our putting by Chris. chain period. at five by levels, to The and encouraged supply We're are strengths was quarter. our plant on prior time rate to backlog three Driven

are well, had for in times those customers ahead in spot period lead as buying instances at the of but line We've real order, ahead few rather customers production, they the to to because exception queue the are buying they customers long they want the We and distributors rule. of want the or on the instances their for and to, ahead. a get driven our by are own Not few in buying get of have a but our period. demand demands of increase price than recognize

to two. So twenty look really twenty encouraged by forward that as we QX in

Chris Moore

the unique That's unique of in the bigger and are cover part here of supply industries only labor operate a Tennant, the few all most is really XX:XX but the Got you kind we US dominant Tennant Player is Obviously, market that out not it. chain in freight, of boat, that with group competitors. helpful. players

player? just just the for impact of supply picture [Indiscernible] more the your in less or I So, chain that mean, looks see US they impacting kind of understand America, trying how Europe. the to in positioning kind big how trying than example, North you that say and both competitive fact to you're given are that North in in US challenges America loan

Dave Huml

Yes, let Chris. that dimensional for XX:XX try and you, me

important be our supply as of where one what's So, competitor how to ability a react our would be product our couple And other the local-for-local facets chain chain determinant challenges or low or two to less bigger headquartered on is, the to a platform business. supply is. would how

supply of us competitors global and these as of said are And are our chain The our and were and our assets way labor. so, this challenges and predominant when a where all environment of XX:XX by through freight respond you look all from macro perspective. across the really to these impact react ability we're region. in from those the parts bigger availability vary at of that, kind as within sales is and in determinants Having chain challenges headquartered nature market and supply does nature well

chain expanding chain the which based seen react the products, to regional strategy. North [Indiscernible] one notable what some local-for-local infrastructure, of have on our differences challenges. on regions, these dynamics plants What our we But think a in of are, supply our again of And our in and when the in force for some platform labor so, I very example. every the our in local in we've supply and would is of seen about the are in more then we capabilities call the what America, some we've relative to you of system

time we're They're based robust the competitor. at here affect draw telling to to given you I chain I'm which line us our booking competition. out as with product lead would in that us very line a advantages, based speaking, on or channels that tell right from we're it's from what are par competitor customers think are a given And our that but European telling at competitors. largely a we one to we global is the that's have I say supply a us rate. will situation, this perspective conclusions with XX:XX over customers may not extent orders about point on US in versus based believe difficult competitor the

So, time on respond this as as will comes, tell quickly be wears can think will recovery our as largely we by and marked success I the macro markets recovers.

Chris Moore

it. back Extremely will helpful. Appreciate, Got guys. XX:XX I jump in line.

Dave Huml

XX:XX Thanks, Chris.

Operator

Your question comes from [Operator Instructions] with the Ferazani Steve line XX:XX Sidoti. next of

line Your is open.

Steve Ferazani

morning, Good guidance? that supply Good on entirely Fay. morning, chain Dave. change ask XX:XX related. EBITDA Why your to Is

quarter yet seen as Even what you thinking is and the you improvements? have good, timing were worse not was significantly it

Dave Huml

recall, six five as last results, impact we of quarter. enter of impact the we and business a to we've signal question. chain the you year – the wrestle and in days of our quarter really we're through who impact third took sixty the we now months the at from through the from and couple in challenges where a lower reflects it's Yes, great our the as chain range obviously and tighten really One business, supply we're trend to QX kind with we seen decision had a spoke XX:XX move the on third over getting months we about move guidance months, of only supply if the five kind and the after

though. thought working to worth and a are I to deteriorate trend noting overcome hard the challenges, in have guidance. from We but think our that as macro appropriate situation it's perspective year it we reflect full seen quarter-to-quarter XX:XX those given the saw we we from

the issued, one of If that delivering QX seven hundred And kind and We back million and the look when dollars guidance to provide one you we're one P&L, million and to one guidance. the hundred now one on the raise original you we to we've fantastic forty split original one thirty in forty results distance given we EBITDA. year our thirty to across think fifty dollars at strike of at to difference really between forty to strength and were two guidance the Tennant. within of we hundred from raised our the hundred

And the to we're and the chain year. we're facing for so, revise challenges proud mitigate that’s communicating, guidance, of all those supply impacts still very and and efforts we're team's we'll results the despite of that the deliver the

Steve Ferazani

EPS And that of in, on guess sequentially entirely the then to your in SG&A our stronger in XX:XX quarter? shift SG&A of and think how but incentive? necessarily been with was on I about terms what thinking As terms not fourth estimates changed you're year-over-year,

Fay West

here But part. too change it's So change drives, a the XX:XX guidance driver incentives. big is management in the in

And so, as benefited that adjustment the initiatives all of had also here it's cumulative savings we of reflective well. a cost but quarter,

Steve Ferazani

XX:XX Can in give you you how a sense thinking SG&A about QX?

Fay West

And QX, dollars probably through with line in eighty million of it kind XX:XX saw be I about normal more think kind at look I of benefit will our that same that five QX. I we're we not rate when run going that in quarter. to see of come think a

Steve Ferazani

helpful. That's Great. Okay. XX:XX

Dave Huml

travel about from business, is and our structural weight cutting and reflection in our strategy. year the spending And organization's noting drive [Indiscernible] it's the to to that execute returning so think think picking drive and of demand continue perspective, up GPS delivering not our and out business in a our up Steve, against direct provided to These business results as what’s to we're that twenty returning I will work, Everything, office, to the changes results. expect XX:XX for for be two support in twenty we're back are also benefit seeing customers ability we set happening the ourselves that we're through worth full in, years.

Steve Ferazani

in sheet more one get could I If continues XX:XX terms to balance improve. in of

dividend year, how typically the repayments you buckets? you're than that potential more actually those and thinking thinking when about raise you're small given balance a debt You raised three expecting sheet buyback once we're about buyback additional versus the

Fay West

and XX:XX So, targeted think the two is not is of right and now one we business capital leverage changes, return the least five investment goal our below our risk largest our allocation priorities to exists times. and point to into really owing leverage manage our first five has really range in where have this is amount point

had the is fifty first very positioned. as We through well very think of strong. balance the is approximately year, free I nine generated of you So, the months sheet which very, say cash million flow dollars

increase of shareholders repurchase really balance return basis it cash effort against execute did strong and without to and an growth. the our to strong on dividends allow excess compromising flows, share to to sheet cash free So, us our

Steve Ferazani

four would three you How quarters? that XX:XX think about or the over next

Fay West

share far XX:XX as As repurchases?

Steve Ferazani

Yep. XX:XX

Fay West

going it's be of be part of it management, discretion to priorities strategy. it Yes, deployment capital will capital component is but of a an allocation our the XX:XX integrated at and

Steve Ferazani

XX:XX Fay. much - Dave Dave. Thanks, Thanks, it. Steve. A XX:XX Got Thanks Huml

Operator

XX:XX questions There over call turn I like management their remarks. would to this closing no to time. the for at are further

Dave Huml

that will website. IR XX:XX And note we Thank before close, you. our be please on we soon posting

growth and The videos of a our strategy. series first to deeper offer and a business look

concludes earnings enterprise creative solutions to and team thank day. our operations our who sincere continue our Tennant directly and be notified XX:XX support all each investors.tennantco.com. and enabling our we're I their alerts This want else service global and of dedication. environment. can our to signing a And for challenging our this find across Have I to up and our moment call. thank teams to you. customers back in From You engineers supply hard to teams business. video good and customers also office supporting our take work at by for email today's help sales our

Operator

today's you XX:XX conference call. your gentlemen, Ladies thank for This and concludes participation.

You may now disconnect.

Tennant (TNC) 2 Nov 212021 Q3 Earnings call transcript