TNC - Earnings call transcript Q1 2022

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Operator

Good morning, my name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to Tennant Company's 2022 First Quarter Earnings Conference Call. This call is being recorded. There will be time for Q&A at the end of the call. [Operator Instructions] Thank you for participating in Tennant Company's 2022 first quarter earnings conference call. Fay Tennant Vice Company is Financial and meeting for Officer Ms. today's West, President Senior Chief Beginning West, you may begin.

Fay West

Vice am Good morning, XXXX West, I quarter Company's Tennant CFO. Senior Fay everyone and earnings welcome conference to President and first call.

we operations Dave XXXX. Joining Tennant's CEO. you Dave you our will President the update accompanies and Investor the After and financials. will and performance I remarks, note our presentation Huml, open at to prepared first me slide is brief will call cover quarter this we and our Please questions. and the regarding investors.tennantco.com. on will Relations enterprise website our call is our call strategy available a on Today, guidance conference on for

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

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

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

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

David Huml

our with results thank us for joining first from in strong XXXX. today. and momentum In our line Fay performance our everyone quarter you sustained Thanks, expectations

and continue Our solution-oriented comprehensive resonate customers. portfolio innovative to with offerings product and product

to dynamic market are and employees gross while have robust. with conditions, remains the on pressures in for margin delivered materials and managing freight shortages of by the our levels by were ability Parts We ramp needs and volatility impact production, line pricing environment supply Macro committed actions. creating for of results impacting the who year-over-year I'm constrained QX customers. driven expectations, and part the chain volumes products offset to our of our and backlog. thankful our levels quickly of million remain been production risks pre-pandemic outlook. and on have decrease primarily this order was compression. as reflected Inflationary demand were that as has focused has not We $XX.X availability moderated related the and our in adjusted and are or EBITDA parts achieved margin full in turn our encouraged and and in our and corrected impact year expected, services we higher but inflation

adjusted market $XXX guidance million did million, to our we on full based believe We a to evolving prudent, make range lightly, million to a range million for $XXX not year but a that was of conditions. are lowering $XXX from EBITDA of $XXX decision

to our to We the continue output experience. to worldwide steps customer and maximize take safeguard

our local expanded and availability to to risk disruptions, reduce sourcing, production of supply for predictability. dual has chain Our components improve accelerated suppliers sourcing engaged team supply tier-two address and options to local the

tactical currently limiting team add are and new capacity. engineering that the that production components value projects redesign Our launched yield benefits, has of strategic including

and projects as continuous building to part commitment last added assembly are and that short quickly enhance our executing Our enterprise operations to capacity output machines are and when team of be has line designed shift of can ahead a long-term we of schedule, improvement. driving further These our moves measures consistent step. components production and with is strategy

to our an developing products deliver new in commitment and differentiated innovation includes features also that unwavering strategy profitable value enterprise Our to customers.

technology lithium-ion technology to and we or As added longer TXXAMR. maintenance provides announced new machines, and of hassle-free and the run our month, autonomous simplified productivity, operations, in traditional TXAMR, This costs. mobile AMR reduced versus battery TXXXAMR, robots portfolio acid resulting this batteries, maximized times including earlier we've lead

the our products customers the over that, providing position a environment challenges, to discussion will navigate us financials. for near-term high-quality, Fay we With the service. when our remain actions significant exceptional call investments committed we of and exceptionally focused sales to While accelerate to innovative improves. and I well These with turn macro

Fay West

Thank you, Dave.

freight, the to compared driven million, higher to was ago net expenses quarter income compared XXXX containment margin partly year, reduction in compression net the by cost related to and company's due First efforts. the in inflation prior SG&A due first This period. materials pricing offset year $XX.X was part income were $XX.X million to primarily the in gross of lower actions. by to quarter in

also a first Additionally, from the in quarter quarter second to results interest debt expense, due of the benefited lower XXXX. refinancing of

diluted share per the the in earnings and Adjusted quarter first per as exclude year a prior business to quarter gain was First from compared adjusted as share sale in EPS the per on diluted $X.XX Coatings amortization restructuring $X.XX charges, period. XXXX. well share numbers the of

by exchange divestiture reported business. the sales the components, increase year, of a effect the well $XXX.X further increase Tennant as of to of decline Coatings X% quarter net offset of delay growth in our well due an This of X.X% first availability approximately turn the prior to in million, to Volume parts in an which was the as constrained sales a unfavorable as a primarily in certain backlog compared X.X%. realization. as organic For of price contributed XXXX, was partly foreign and by

As net first The Australia and North China, which into the Europe, $XXX.X and million Americas in the the from Latin of groups increase were covers Americas, three America strong sales first million sales and quarter the decrease Africa Middle markets. and net prices of were commercial XXXX, higher Organic our partly quarter sales you offset America, the and XXXX. due of of a X.X% all categories, for first in the other Net the Tennant for consumables first geographies. growth which Asia-Pacific, Asian of EMEA revenue in X.X% sales East, includes EMEA, softness and sales includes of other impacted sales channel. $XX.X which and an XXXX. to may of know, Japan, quarter of X.X%, parts quarter XXXX, selling Americas, from by mainly favorably in by

XXXX, higher X.X%. sales parts exchange impacted net of growth first higher were due currency within the million the Foreign prices, and X.X%, in services, in net and EMEA EMEA of decrease selling primarily XX.X% of first by sales unfavorably sales quarter $XX.X sales approximately for by favorably impacted sales of Organic to APAC in net consumables. growth a XXXX. approximately quarter

EBITDA S&A in approximately inflation Foreign approximately were impacted as softer primarily was reduced organic markets, QX sales The by government X.X%. within expenses, for prices decline which demand was $XX.X volume sales cost reflecting adjusted XXXX. decline in $XX.X mandated China and selling to or net in million partly by increases EBITDA related Adjusted of of unfavorably XX.X% currency sales exchange certain compared freight driven lower APAC Australia. partly in APAC in management. offset million sales XX.X% material sales by in in as net due to XX.X%, shutdowns to and higher costs, by upside offset COVID-XX effective by or primarily well The outbreaks,

lead $XX.X cash long to capital, levels used flow deployments. inventory which quarter of investments safety flow in stocks cash an and related approximately reflects capital XXXX the in rising million increase $XX and due and first In million, in was of time to to specifically operations Turning incremental working costs components. inventory

XXXX, Additionally, temporarily lower CapEx times net which with our by we $X of X.X expectations. is approximately increased line quarter to the debt goal outstanding of than of $XX stated and was ended million quarter the with adjusted times million X.X first we times. of X.X EBITDA, in leverage In

cash paying We our million capital shareholders We in allowing approximately allocation ended with $XXX.X of capital against for by strong $XXX.X and $X.X dividends. of liquidity QX progress also returned a QX our priorities. million, million approximately to continued approximately balance in

to guidance. Turning

inflation prolonged previously recovery Our reflects flatter than full updated more expected. for XXXX guidance and chain and year supply higher a

will like local region take and for help output maximize necessary sourcing production local measures We manufacturing to and inflation. to continue for region offset

we our evaluating actions. continue the to call, year, throughout As pricing additional have year for we the increases need and price monitor enacted we'll on this already discussed last

sales demand patterns. be market than cadence driven will to produce quarterly mainly by Our rather by our ability

gross expect throughout We margins that the will year. improve

In terms improvement we also price and cost drive EBITDA profitability, will initiatives out of expect realization, management strong that XXXX. throughout adjusted in increased quarterly expense

share, million. Adjusted certain our $XX which non-operational XX% and Adjusted as the the which adjustment. to please to range in EBITDA $X.XXX $XX With updating to to items per reported diluted of $X.XX amortization Net of of to ahead. billion, to guidance follows. EPS go open Capital excludes $XXX Full we of call rate of amortization will XXXX, and million $X.XX X.X% per sales organic the adjusted questions. expense sales expenditures an $X.XX $X.XX of million, we XX%, diluted earnings share. GAAP expense. growth year are reflecting of billion excludes that, to effective Operator, X.X%. tax $XXX $X.XX For to

Operator

of Instructions] from question CJS from your the line [Operator Moore Chris Securities. comes And first

open. is line Your

Stefanos Crist

is Crist questions. for my Stefanos for taking This in calling Thanks Chris.

Fay West

morning. Good

David Huml

morning. Good

Stefanos Crist

Good morning.

more but XXXX? provide on bit, strategy you the little on touched just First, this pricing detail you a little a can for

David Huml

year. that we've our grew, then, of we of read in acted offset price impact it's coming were by and of the expect the the here begin another increase the step back and we effective well when in from markets QX. last out QX price have getting the period our that we expect to been within we cost -- to, muted combined was that QX and month, that as business price we be signals April to year inflation which that's our in and effectively took saw key the at XXXX of October look effect since increase. reflected guidance. expected inflation happy I'd that we we backlog we to grown an our backlog will year, Since the our impact out realization in and XXXX, we've readout to full that exited and expected actions of relative increase perhaps given price actions and our What a through our When last last the effective muted

volatile in inflation and open that remain we're sensing business. However, fact fairly still seeing we the the we're is what to

So to needed. pricing we need additional the take actions as remain open to

Stefanos Crist

any then one interest more, Got you. have makes impact rate environment rising is on it. Thank the That just sense. impact demand? or potential And market

David Huml

services. It's that Rising the rates interest rising as don't and great interest and the macroeconomic question. rates well. see make to -- a conditions, correlation customers' not we our but ourselves can between in general ask we there affect It's direct Yeah. one our a investments products ability

a rates but as interest not vertical economics of and a trickle-down there such we rising correlation, it's certainly range direct impact So serve some result that can rates. rising be broad effects overall of can markets a ancillary

Stefanos Crist

questions. Got it. for my Thanks taking

David Huml

Thank you.

Operator

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

open. Your is line

Stephen Ferazani

morning, was Dave, was the was said, bit Good Thanks you side that I about offset to surprised little in expectations, much And with that guess, significant that Fay. there impacted line questions. it. the on a of shutdown that your that to a since think number that China? a I China taking I kind how weren't I'm negative surprised you something my for little slowdown on revenue in was expecting And that offered just upside the number. trying

David Huml

by line top plant, our for of Thanks the production Yeah. And is ability volume. metered to our out largely the put question. so being product your

becomes So on chain that production its and shortages impact management supply as of volume.

expected So also we in to known effects. factored ability produce the our

that upside right the holding a outlook. we line ability some downside on to revenue felt it's with perspective are on happen risk, impacts that see how because to we now a fleets, some of well. from impact, reflected as chain the seeing supply China from was the line, produce that And top We our well guidance we that's and revenue expect as combination in and our price but as prudent what the

Stephen Ferazani

on give compared number to but a ago? I stands growing? And now you Is a a sense backlog, -- of backlog what can don't quarter Okay. where that still know you give

David Huml

We're and now if range Yeah. we've backlog we've grown characterized last X times in normal recall that normal. our of in at high Listen, terms about the quarter, we times what a to end talked backlog of being QX. given backlog you X backlog multiple of

we're rate that having the normal plants that parts who customers we're because our So the turns to representation pricing to more our and equipment backlog of to produce is are despite the times decisions X continuing as extended value Tennant actions able products obviously operational at backlog we able end move we're of ahead. to backlog and some shipping, are gets really times. and we proposition, backlog, choose -- and manage make a challenging that lead The the about we're and

we And our we like like see, so from customers backlog vote still a don't as able prefer we'd and be of higher level disappointing to much Tennant. at the they to a that while demand strong we're that customers, confidence taking produce service

Stephen Ferazani

made you can guidance, then a what and XX going if XX months given change expecting and pricing give And no months? your you're CapEx you're in next to that perhaps shifting of demand to us for sense the priorities you change CapEx the

Fay West

were of that initiatives -- ultimately CapEx the in I we composition relatively I cost There of in for number was savings result included unchanged. think, see, the CapEx a that us. this remains point, at CapEx

want that ahead make so, we we that CapEx. And with sure to move

Stephen Ferazani

Okay.

David Huml

Yeah.

if of mitigate there's shift constraints. CapEx, in some investments strategic our been accelerating say, we've I'd short-term to longer-term any been So help

our productivity So productivity, welders reduce labor reliance but in robotic also improve in on plants. our laser, investments help vertical not like our only mill, that robotic

guidance we some made, within all on of investments CapEx. examples provided it's we Some but the

Stephen Ferazani

little then declining AMRs provide products and get you I what talked show shift could we know there demonstrations the the are quarter expectation AMRs can that, in any there those with do? you if restrictions about that COVID and the previous of more out And are Okay. get with seeing seeing acceptance you're out more bit a the

David Huml

Yeah.

and and -- than opened freely China, in seeing get on-site able dramatic have operate markets and are more our the customers with products and fashion up key a We other we're demonstrations. around pretty to our move demonstrate to

is a that So positive.

We are about AMR optimistic very our platform.

be of really they a our up now inflation of it we investment AMR. quarter our on so are We the and that they opening recently what for Scan environment. our as customers of in as to manage and it about attractive key and make product last Inventory It their customers. accelerating now benefits the adjacency that the back business, allows are launched having we standalone about that solve for also bullish talked And operating our with product, a in labor. the Robotics to us a in our terms customers serve continue very post-pandemic very problems think we're provides availability and because improves to many customers progress ROI to in

So investment rate it lowers customers those the hurdle robotics. for in that an were contemplating

we're for that we're forward-looking freely So The and by operate very the the group can robust the really demonstrate excited wider to a AMR. fact of we pipeline prospects product customers. about more is encouraged and

adopt it get we in of to front So are to [indiscernible] location. to in customers anxious when see to and them makes sense the continue technology their

Stefanos Crist

Dave. Great. Thanks Thanks, so Thanks, much. Fay.

Fay West

Thank you.

David Huml

Thank you.

Operator

closing time, there I turn at remarks. management since this some questions to for further no would over call the to And are like

David Huml

Thank you.

seeing we're demand strong consistently the across by our encouraged are We global markets.

are to resonating I and increases part our production diligently output, costs overcome with customers solutions and inflation justified and and the products offset reduce customer shortages teams price are innovative and working to our want Our great increased safeguard to their day. experience. have our Thank every personally and as world. your we work, safer, a for you and to This together employee healthier a thank customer call. concludes time create hard Tennant globally for collaboration, work earnings cleaner, definitely commitment,

Operator

your This concludes participation. Thank you call. today's for conference

now You may disconnect.

Tennant (TNC) 30 Apr 222022 Q1 Earnings call transcript