Earnings call transcript Q2 2023

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Operator

Good morning. My name is Chris and I will be your conference operator today. At this time, I would like to welcome everyone to Tennant Company's 2023 Second Quarter Earnings Conference Call. This call is being recorded. There will be time for Q&A at the end of the call. Instructions] [Operator

please line Q&A, from closing on management. stay the for the remarks After

our telephone in mute today the you've Thank conference potential call If joined call. the during via XXXX your to presentation call. second your quality earnings issues on for conference on and Company's computer, audio please participating the you computer avoid Tennant call into logged quarter

for is Mr. begin. Lorenzo Tennant Finance Company. meeting President, may Mr. today's Beginning Vice you Bassi, Bassi,

Lorenzo Bassi

Company's Tennant and second XXXX Good morning to everyone Bassi, Finance welcome call. conference President, Lorenzo Investor quarter I'm and earnings Vice Relations.

call Joining me and on Tennant's are the Vice Fay CFO. today and and West, President Senior President CEO; Huml, Dave

on will we will update After call we our at Please and you is Dave remarks, second-quarter our Relations provide cover our investors.tennantco.com. on slide enterprise prepared call Investor performance. conference the update note provide accompanies operations and website strategy, our the with Today, presentation our and will financials. Fay an questions. to on will open an you available with this

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

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

include XXXX our measures Our reconciliation earnings those results. of release and non-GAAP a GAAP to presentation the comparable measures and GAAP second-quarter

also was this our by website is posted investors.tennantco.com. Our a Business and earnings release at morning on Relations Wire issued Investor

over turn to the will Dave. call now I

Dave Huml

hello Thank everyone. you, Lorenzo, and

I Planet, be sustainability the second today, Healthy new our the will call product our discussing remainder XXXX. from and for quarter, On the People new innovations, outlook Thriving highlights framework of

details important performance the of the in analyzing Before quarter, frame it prior to quarters. relation our this to is

to In XXXX, beginning quarters, experience fully straight conditions to to labor started in services reopen, from started supply and issues, continued ability our production our strong to spike in which products shortages, demand XXXX, early and for high experienced have and the we a economy chain we we and increase persisted Also, recover for impacted since time. demand that inflation, and to have as benefit that resilient demand. meet seven

This a to our us investments to substantial unprecedented to production. backlog, led actions circumstances, team mitigate disruptions order our significant these and levels. and reached made took increase increase To short-term address enable incremental which these in

as enterprise also have such well availability help our Leveraging capacity future in investments last two by and success. immediate optimizing the consecutive plant actions as to position long-term strategy, issues address results and as changes, our implemented securing increased to These evidenced labor production parts that structural supply we started for chain yield and quarters. us as the support performance

substantially. almost able of to abated. and availability has reverting our Lead inflation times and parts challenges chain locations the normal and to have been The impact we of has supply critical in are of increased reduce all backlog our

customers' patience loyalty this backlog brands, the and elevated and testament products of of appreciate supporting period. our And our strength our commitment and our to our the during customers. we a quality Our extended is service, to

America will and able that year, remain of will our back the backlog North to satisfy we however, half Industrial services. anticipate We the to with work be reduce will the in further products products. continue diligently customers reduce backlog times and to lead in elevated exceptional specifically We

growth moving EBITDA the to delivered of was some We gross of about by record million or $XXX.X million, on organic achieved quarter, of which XX%. $XX.X sales. net XX.X% underpinned net and sales to In Now, adjusted XX.X% second the of quarter. we specifics expanded margins

net Additionally, of we income converted to XXX% free over cash flow.

second-quarter and a predictable and approach price EBITDA. parts to chain backlog, inflation, benefited our increase which of in improvement S&A noticeable resulted gross volume drivers performance and reduction which an a environment, continued Key in adjusted more a drove moderating and were spending, realization, a stable general, cautious improvement an in in margin and which in availability supply in

line to Regarding fewer volumes, availability and just chain, a our as parts backlog. us disruptions. and the more supply we have allowed reduced plants I increased significant mentioned operate improvement have in This meaningfully experienced seen efficiently,

supply landscape an chain fully will predictability, We that that action, agility. continued are remains to and see are do improving and of focus, not with we continue area cautiously we think are but recovered. this necessary optimistic and the pleased Therefore, significant we stability

cost and pleased increase EBITDA benefited both adjusted on and are careful inflation, gross the to Based margin and price resilient quarter. first-half in full-year performance, XXXX guidance. backlog our moderating have we Strong reductions, control our demand, realization, continued

remain We levels cautiously continue global at will are recover. to optimistic that the economy that moderate and inflation will

our Turning now design and recent in facilities. launches technology, product global innovative continue network we of to our see engineering to and utilizing success manufacturing

platforms and IPC and SXXX SXXX. we product branded by quarter, and portfolio the of leveraging our Tennant products innovative solutions the launched broadened Italy-based This

the high These of existing similar-sized environments. improve fit at ride-on indoor our for outdoor products equipment to both sweepers mid-tier legacy and in price maneuverability medium-duty presented but in offerings points. These requiring light tasks range are right different are

set the we through distribution our approach. multi-channel broader markets to across serve us vertical customers of allows broad of This a array reach

platforms resources points allow to different equipment for financial market a us customers bring investment range of the product at to minimal price from acquired diverse Our with our Tennant. and

without technology cost alongside operations, on in Robot but allow environments work ensure equipment. reduces the our with cleaning complex direct The technology the industry potential equipment markets. most of highest consistent products. for This control, floor operates Turning of does the cleaning and today's labor need now the or only our by repetitive also to is expensive and and cleaning Autonomous disruptive this to in operator difficult by innovative the our cleaning innovative Mobile minimize AMR. focus cleaning the helping tight in tasks, variable and These handled be expenses can staff ownership more products to impact for the while labor them not

equipment, value scrubber AMR three like our and industrial scrubber. field been the offers most traditionally Tennant strong support currently in floor warehousing for first Tennant applications and designed our high-performance these reputation product, has our durability, our manufacturing autonomous factory of robots, was direct recent organization. quality markets mobile including This autonomous the and markets. including our well customers as service for industrial ecosystem vertical as TXX

XX% space XXXX, have Since the growth The TXX natural potential a and industrial have rate AMR is significant to and the expand. equipment. of equipment will been of for sales TXX progression the continue markets autonomous our adoption AMR large We version us. about believe

The industrial market areas to and and settings are working these has in of alongside in already automation accustomed robotics outside employees robotics. adopted cleaning

of automation We also allowing measure to believe customers and that the the of it realize is fully our easier AMR in products. our value to the space, industrial manage ROI

adoption positioned about excited AMR we to TXX in AMR potential We these and uniquely drive the enable are verticals. believe customer success are and

zero achieve greenhouse XXXX, announced release Planet. by and set which Along metrics. and weeks, our detail on emissions our ESG in year will XXXX we and report, net Tennant's plan coming the goals progress the sustainability to will to reduce our of turning our with April, Healthy the sustainability goals we People In launch our to commitment gas of sustainability. Thriving first Now new framework,

also We set our goals plan Thriving to Planet the announce under Healthy second framework. of People

support of organization women that perspectives of by percentage to our XX% environment the diversity of expand the the Ultimately, business our increase will success. this that we in the to teams. are aim opportunities believe leadership We of we and work inclusive believe XXXX. providing objective an end Specifically, with by combining there deepen our positively

will over discussion turn Fay to our call With that, I for financials. the a of

Fay West

Thank good everyone. you, Dave, and morning

This our million, and quarter of the improved an from XXXX liquidity, delivered discuss fueled full-year year well guidance. prior by sales was million our increase gross performance Tennant net margins. and morning, higher income $XX.X cash Strong I'm going flow, as second-quarter operating as $XX.X In of period. results, XXXX, of second net the to

and in well both volume and as period driven increases to due administrative growth quarter higher variable by increase prior with employee-related margin as and realization. higher price the Selling expenses costs. were associated were performance, costs sales higher Net as the improvement year operating compared gross to the in higher

expense. income leverage by XX% decreased the net quarter gross As XXXX income as initiative. by our for in to from quarter. interest containment expense the points well the tax decrease higher in a prior-year driven XXX our cost as Also of percentage attributable S&A growth the period and basis and net sales of sales, was was higher margin impacting to The expense second XX.X%

Net period. The from increased due rates with in year QX, $X.X increase year. in interest $X interest coupled decrease mix expense prior $X.X to rate by variable discrete between periods by debt higher impacted in on earnings was country. interest offset prior debt. rising to levels expense and higher changes than our million favorable by in tax Income of million quarter, during up forecasted the the recognized The comparisons million was the benefits $X.X a was tax the partly million

XX.X% full-year quarter's with in The of tax second line our is rate effective expectations.

to of assets, which share, share per charges, and earnings year from $X.XX per in the Second than excludes quarter restructuring share on per the more diluted doubled period. adjusted prior gains sale $X.XX amortization,

million, the quarter $XXX the parts fulfill a For the and growth increase an first Increased to customer We volume. orders. prior XX% sales was year us million service compared reported by to XX% the ended end Approximately backlog XXXX, of and was backlog, to period driven $XXX.X allowed of of our a year-over-year approximately outstanding reduction production of net or of XX% to $XX million Tennant quarter. of on availability the with increase from quarter the organic remaining basis. the second XX.X% attributed pricing

into quarter and which America; of North East, and Asia-Pacific, Australia, reduction. the Latin markets. primarily sales Net the covers other was Tennant China, sales backlog the growth Middle million to and groups includes America its Asian Americas, in Africa; which geographies, Europe, which due and $XX.X include EMEA, three Japan, this

of All achieved net the year-over-year sales geographic growth. regions

in our parts $XXX.X basis, while on significant net year-over-year increases, volume Americas sales had million largest strong and consumable driven region North led Net This and grew realization and in an equally X.X%. growth in sales approximately by organic to by XX.X% of unfavorable was America. impact or price equipment FX XX.X% a the

of EMEA in approximately categories by Net across volume X.X%. exchange over service This quarter the declines both in the sales basis. increased impact organic and the product from equipment was favorable realization in net $XX an to the price offset had a on X.X% region partly driven year by or X.X% million region, second prior also foreign

region to Net sales Pacific $XX.X the or realization over This in was X.X% million primarily price and on in Asia growth prior the basis. year by increased volume Australia in by China. driven organic X.X% an

partly by impact exchange was X.X%. a of However, net it offset currency from unfavorable approximately foreign

also in sales, which group and experienced of We compared grew XX.X% We net other. year-over-year. period, and categories; service as second in equipment, our categories following prior most XXXX, the consumables, notably quarter into parts year to the sales equipment and the growth all in

XX.X%, to basis adjusted prior margin $XX.X of Adjusted an was year. XXX $XX.X of EBITDA, the Turning the versus points for EBITDA prior an versus year was million adjusted QX period. increase million, EBITDA increase

of the adjusted margins EBITDA second XXX of in and of The last XX.X% growth, higher $XX.X same sales significant of million than second the million by points year. growth. driven $XXX.X of improved basis gross most the quarter XXXX and price gross margin quarter expanded both were period to Our profit year. drivers the volume prior Gross compared the in was

gross offset We returned on materials margin on and realization, to impact successfully price based labor. of strong have the multiyear pre-pandemic rates inflation which

to was quarter costs up compared the higher prior with year's and S&A expense due employee to performance, as costs. associated $XX million such variable of million costs increased warranty operating compensation $X.X

by driven XXX attributable for growth XX.X% S&A decreased basis initiatives. well of and to the As last to QX as a sales, of adjusted second margin expense XX.X% quarter containment gross the percentage from both the points line leverage our our top cost as in year, net

$XX.X result approximately strategic net now Turning million second operating performance the of year-ago activities with in compared The used quarter, deployment. to capital significant in in Net the operating provided the was improved spend. reduction increase $XX.X activities period. was to cash a of coupled by operating cash in inventory million

as now with investments we output our without we have as procured previous reading Those our In safety stock X in further behalf increase position. in results through inventory components, as fulfill actions of increasing to quarters, are increased well our targeted direct our which Tier been our inventory suppliers. on orders and we able

expenditures are shares were of with on shareholders line allocation million our and our for with dividend returned $X.X our meet pace in expectations $X of capital approximately to alignment to our guidance. million payments XX,XXX we our Capital of capital $X approximately stock and common In with million. full-year we repurchased priorities,

strong Xx million of X.Xx. of liquidity cash X.Xx adjusted second borrowing guidance goal Tennant's revolving remained At stated unused Company's million balance the capacity range, a $XX.X our with $XXX.X at lower than net our and end EBITDA, the our on the midpoint to of of leverage was full-year quarter credit facility. the of

million $XX.X interest the on environment, We balance we maintaining rate cash have quarter. have focused remained second strong reduce the given and by current directed to a in debt sheet

with strength our results, our half we the are first guidance. full-year quarter are the of Moving second on to pleased of based we raising the and year, guidance,

results of we in we see improvement continue year-to-date a will greatly in the and have overall to chain. benefited parts Our increase significant from our believe supply availability

improvement increase our to parts allowed reduce open to us orders meaningfully The and fulfill backlog. production in availability

products. locations at same our in to XXXX. in times, the backlog approaching further first months able concentrated industrial heavily we back remains levels our America, will of that we be the We backlog normal particularly in are in North of lead and of the not elevated rate that backlog reduce many anticipate half year, six but experienced the and While our

very are closely. Overall, been rates monitoring order we and has resilient global demand

of the our the We will the quarter in our to We lower believe same will to experience sales in year. in third actions expect has the pricing quarter be second seasonality, it historically, EMEA as region half of level and read especially out net as quarter. will third second the compared that continue the slightly

the and strong Based in as margins materialize. timing the second that continue be slightly half R&D of the will price the on expect back anticipate higher of coupled realization remain will we half gross in will actions Further, strong cost-out year improved of productivity with we spends, year. to expenses the

our all on been cautious evidenced discussed prior very have we calls, by low S&A spending as percentage. we've specifically discretionary As S&A on

revert our employees, We will on invest that remain back spending of normal strategic initiatives in higher cautious in will will but put to EBITDA. back anticipate the and year prudent travel, half in S&A we adjusted the be pressure as and which some

year growth these the in half we and XXXX. first factors our the outlook Given strong year, profitable raising of the are of for the full

the million to we to sales Specifically, in in of reflecting of XX% $X.X EBITDA billion, $XXX sales $XXX now of expect adjusted XX% and to billion to $X.XX million. the be to be net organic range range growth

turn call I the will back that, Dave. to With

Dave Huml

Thank you, Fay.

the proud behalf and record It Tennant I our strategy, was globally. the of crisis a half years for who couldn't Tennant more managing tirelessly team enterprise be first worked have diligently on working of supply for and executing chain

please Operator, questions. to call the go open ahead. we'll that, With

Operator

Chris [Operator Securities. CJS Instructions] The with first Moore question is from

line open. is Your

Chris Moore

of a for morning good amazing taking Thanks guys, questions. couple quarter. Hi,

it's remind million, year-to-date, $XXX a half. range an in at, little $XX this down - backlog down kind that the point? at look of to Can going So me further optimal you there what you is come second the bit backlog just million

Dave Huml

as the that quarter. normal Yes, delivered Thanks and normal team in question your Tennant we testament for backlog levels with several a years, $XX to Chris. going of we our - we're these the kudos backlog I range. would are, million pricing put million with what significant I'll is readjust use past on amazing the entire obviously range, $XXX through put backlog exited the a the million through backlog, but really in the of price It's backlog, $XX normal we the Thanks, to accept results. the amount

as million comments XXXX. the million second So with as we given range that $XXX in we in mind, these to the $XXX backlog our reduce with guidance, around exit - exited QX implied of will half and down

Chris Moore

Okay, they or I'm QX orders is sure year-over-year, here Fay look did got not, it. in but if like? That's helpful. what not

Dave Huml

choose. flat. are resilient, word orders the that Orders would surprisingly I Sequentially is Yes.

mentioned, if as plan we as way to backlog. at that of monitoring And we've, fulfill deliver and it orders our are year-to-date, lowest closely an We're didn't kind of look underlying so full kind we to work year. normal outlook diligently we of orders then - - plan QX to as that so expecting demand the reduce our seasonality QX. on into our to orders historically and we're generate Fay as we we the need you indication quarter. And QX how is we'll flat

Chris Moore

like a just pricing it volume. Got versus much of QX was in it. still sounds helpful. kind from there pricing catch-up and - it coming And Is Very XX-XX QX?

Dave Huml

as are in our referencing backlog? you think I trapped pricing

Chris Moore

Yes.

Dave Huml

Yes, trapped pricing of catch-up in got orders so products there'll we've in as reduces, backlog the as be a less and result - are that backlog.

note component, look that If think just versus at important you it's our results were price I volume. XX-XX future to

getting we growth So volume results. underlying in our are

was about about Backlog $XX the reduction is half. first million in second implied our half in million and guidance the in reduction $XX

expect and work more impact, would that slightly And on were we get similar the as backlog sort the so you of more in - as impact in the of building down, - less similar second lower placed half, revenue be at orders a will price. there pick-up kind So we but pricing recent line.

Chris Moore

it Got I it. I there. appreciate it. will leave

Dave Huml

Thanks, Chris.

Operator

from is Sidoti The next and Ferazani question Company. with Steve

Your open. line is

Steve Ferazani

tried to in a and huge in Guidance I'm guidance. I record understand, implies revenue revenue comments Dave. Fay, trying bit plant morning, just on trying think, quarter, than remain point, just second-half your the Good given was the you some just get are I'm of this and healthy to there trying capacity first and or Fay. terms labor - little Good how constraints morning, to size? half this Obviously, lower either and address backlog orders obviously to EPS understand, at lower, I'm

Dave Huml

Thanks. Yes. Thanks, Steve.

just the half most the to second our lines normalized around output assembly our comment a Let me necessarily and to underpinning capacity of getting as returned constraints of the response implied signals backlog. assumptions that It's and have level not they're in mentioned, level take and a demand Fay world on full-year guidance. of in the normal

in And our North in is we've our overweighted in America and products backlog calls, think mentioned I earlier industrial region.

production North and fewer more because concentrated that's so so And more we've products becomes to it reason fewer and the and is America consolidated and reduced in industrial backlog, important - is, backlog change concentrated primarily as our Those in lines fewer are and effect fewer products. challenging lines. in our is backlog

We've get just parts, product labor the can the fewer as in door capacity shown out plant - to that when becomes productive productivity got more respond increasingly and the drive we've get challenging and we the and that lines that fewer it take means fewer work mean fewer longer and affect it doesn't change, the remaining backlog we're trying we and will change. effect products It down. time to a can't to

Fay West

And especially half which guidance Steve, QX. is of for half. in higher normal, the what's will QX down of be you're right, slightly and kind implied seasonality, versus is EMEA, in revenue first we than second that Part anticipate is which

about, The rate which Dave probably range. backlog reduce piece be going to as around just be other to the XXX right talking at we're able is the said we'll we was

we in a half. And bit the lower which implies what so reduction a backlog, than first saw million is in that roughly $XX

Dave Huml

mentioning strategic I on reverting some be spend S&A adding remain also - anticipate in you half worth in a while restrictions normal think, - mentioned we some of HX investments and we already question also from Steve, of result EPS a total the mentioned our Fay And presentation also benefited around as to anticipate and investments of back we operational to S&A. And on travel. some during that the the that, level second cautious, employee will will higher had

So that's of kind part of half second guidance.

Steve Ferazani

Okay, makes sense. that

differentiation And more is quarter, us you up any than again regional give can opening or this books? in you is bump nice if color that? Asia-Pacific, that China widespread kind on order of it

Dave Huml

we're Zealand I'd realized having Fay APAC. have products a a in to we're launch as of to, in our as mentioned marketplace is, there price on Australia market happy we and a specifically I strong year strong position and well. there, including and macroeconomy commanding New AMR be really new on the Yes, And capitalizing think

start strong a to year. had China the

place seeing the will, returns. And so we're will our will a that into early stalling stimulate surge I to on markets. kind putting but in that The tell macroeconomic that softening whether appears broad the of cautious China we're read some basis. government to in try pleased to with the through are and economy, post-COVID is you be we stimulus

customers And what they're as cautious we're is hearing from well.

down, - much economy it's exports in if China So, of the and down exports versus look China at prior-year you exports, driven XX%. by are is June June,

deliver don't a think We it's solve we our on And there, confidence in look a so got a will still with our on like bullish and Having and China it's not, we've at and basis. year that, to macroeconomic our guidance. in quick ability for results line we China. portfolio line we're go-to-market said China our product full-year of position sights our

order portfolio an high-pressure commercial seen our we've softening product competitors the believe of, same including macroeconomics, kind it's We've echoing EMEA, other washers. the in by heard on end, and sentiment. in driven seen lower we've product categories, it we From perspective, broad

country. We've within particular, Germany, would seen has it's geographies But broad-based a in seen some and macroeconomic EMEA. hyperinflation the softness within demand countries across that note, I softening by particular driven across and conditions, in the

closely the our also are positioned that and calibrated short sure EMEA spending, we rightsized that term. monitoring So make that present we've given any but opportunities have cost we our are capitalize in to we opportunities the to themselves, structure

can price robust. book reduced We're against lead orders Orders we our inflation when productively to are operate holding we've and moderating realization targets, when have very And when backdrop. the to able getting we demonstrated America but strong extended we're Americas, and are both America North Latin a are backlog times up. parts. get ability And

geographies. cylinders kind those in we're on of So hitting all

cautious QX to guidance. QX outlook and the about geographies our of our to support sight remain heading delivering those to we're to order resilient demand line we through have need confident we pipeline feel while in and And full-year

Steve Ferazani

Great. Thanks, Thanks, Fay. Dave.

Dave Huml

Thanks, Steve.

Fay West

you. Thank

Operator

next question with is [Operator EF from Tim Hutton. Instructions] The Moore

line Your open. is

Tim Moore

and Thanks this and the year. have strong in on sales the both I guidance raise organic growth very, three very very for impressive congratulations EBITDA growth questions.

start penetration, aftermarket So, some a you've service bit services off the added on trucks. maybe just I'll first

I think that things. your technicians that up estimating truck telling of March have service can maybe be equipment count might leads, in been based I've about just and some competitors been orders new triggered the and they're from to possibly on they other one-third get customer there XXX on-site from your focused

maybe bit So this aftermarket focus a us of on it be little could you just give think color do more a year? And will you more service? the

Dave Huml

an Yes, thanks, second the the year. not business critically service - run a compliments, ecosystem measure delivering business, and the it the view its focused the its half results remains service the of own to Service the is metrics, just critical of but to integrated over proud Tim. in component part P&L and really to of Thanks of for stand-alone own do our on a and customer of product. the the provide we and on cycle life services a ownership as we value

time. and you the Tennant want that's machines are it, satisfied important, And getting Tennant and next with buy from and noted buy benefit one full back to is what the our customers coming of facet reason that we ROI more pleased

in performance, a much when them that risk old service too you the product as a customers stand-alone functionality, and of investment in solely service require new a run they products keeping really better ROI. better run gives that better in business, should you If be

strategy of go-to-market channel philosophically. approach we that's And so it our part and it's an how integrated and

investing in are service We our capabilities.

fully in an our training service invested our have broad have need and they're so technicians in including product to our in can drive of capable technicians, that's across have adoption AMR set portfolio, that customers that order we so experience to for category. capabilities new that the We service our entirely

gives customers capacity we need and terms can that the service coverage, for in commitment. to where trucks, to us you have retailer can and regional that on We've service especially national you invested but additional so a additional mentioned we what all or make the in order that a on is to customers response level in - commitment largest go deliver in truck time coverage deliver large agreements of

We that customers adding coverage and are sure the our believe verticals. service we factory and each direct the we differentiated in to strategic and of can to largest business the make make new of because organization earn customers uniquely areas commitments positioned we're for

and customer data And that's spend everything on the hands-on we're that's as dispatching improving protocols orders less as the or last so at the and our infrastructure, repairs entering and capability customers. for a but computer or efficiency more system time, service and from as we reach not performing use investing to deliver maintenance parts uptime orders and in of orders actual our digital technician, infrastructure as enables well service looking necessary telemetry with capability our they broad working and can that well spend equipment least, our time sitting to at processing for IT

the time, first side make significant every sure that experience, the of to IT deliver So for our in customers. of can kind we - well as a service investment excuse customer me, time a fantastic

Tim Moore

or there seeing or remember do that's you uptick I any Are place sales going Thanks, for a customers service question Dave more infrastructure you rental in interest Europe reconditioning in of deep for infrastructure. notable next a surface how I had those insights is think maybe to, maybe my second leasing that color equipment in a and was know, year? smaller is America you model the helpful. think and story South And for and as very

Dave Huml

as long-term a from from I today think first. for We break a equipment model, our of I'll service with, to banking have the variety and start leasing we called capital with a we transacting purchase models. contracted partner all-in ways with I'll kind a and model. leasing partners that customer a model, fix set service of full backdrop of service

that a people directly as with rental users short-term up we a the day, serve partner week, a industry's treat serve channel a them our do set rental and to best need channel not We're We so relationship to strategic that partners. month. through machine for partners the

do where have And with very as to to equipment to targeted and we've with where deeper it specific we the have in the used notably as a we the Western to then support all-in infrastructure this tool LatAm amount as success a service and world, this expects provide around of customers of one-price it's you significant model embedded model model. parts and a can geographies really very service. have Europe. the it And if several service really we get service, We've equipment have customer and equipment verticals so profitably a capability and demonstrated

successful few the want want But appealing to that geographies. we're sure customer take as to broadly analysis learning customer well and outside to for all make - understand to sure success those into for geographies the can it's to is this deliver additional it been move a to we've - direction the make would we us. reasons using that compelling compelling as well. what customer We leaning within experience So, to we a other fantastic as it's that more some outside and in pockets scale of demonstrated that

then do And and to and we'll to targeted a where makes need time support in last fashion to we what it and and and offering what at we'll and time so so spending what very infrastructure to we we a model, want can compelling around least, look make that opportunity it local target sense an world. to works model could doesn't, then sure ourselves but the not really scaling the proposition, profitably potentially And it we're the competition. smaller, it's don't support have infrastructure differentiate It's customers, sticky. this, it's proposition target as as us business to differentiated verticals value that competitors versus well versus make more much a some regional, understand over

where recurring us appeal both and capable model, we our look all it And know makes advantage revenue so we're take to of would customers. sense we to again look and and for financially of where the a that,

Tim Moore

was Okay, that terrific and once again, color. great

this inorganic thunder, you that whenever you completed core Fay. year it believe there study next do for this assets, still and I only and leverage for is a acquisitions review Dave might your for to started and but update question on final that don't it or larger my I targets want in steal our in be, have to adjacencies Day halfway maybe may any possible is Investor point? case review detail at maybe early So

Dave Huml

Yes.

So thanks the question. for

direction the now, We stealing view. and work of it's all. it's heading at fact bit little actually we're the think but proud thunder are this starting in actively to investment I We're past into in engaged come don't that in this we're the really that halfway, making second M&A terms of our see business of disparity creation, investments in in of you up half, defining a reason future is that's ourselves the incremental we're first the value one results. why performance set strategy and kind that to for half

capabilities that and Earlier, compelling companies a and this the will us leverage value-creation looking compelling reason for that assets that of owner really some can an got We there. more unique out at opportunity we as us a we're rightful we've some is, other we enterprise. think make it's think

be interesting globally a a maybe from of attractive adjacencies growth the market of core strategic in cleaning sort some close-in, near as and near some perspective. mechanized and support we strategy hybrid and accelerate our find will that that and some core space financial a and will as investments even our well further defend believe We out to

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Tim Moore

Well for Dave, a well-deserved weekend. That's nice have it peek. sneak thanks And for that questions. my

Dave Huml

Tim. Thanks, Hi,

Operator

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

Dave Huml

and to great in call everyone year. to concludes great Company. today. day. Thank congratulate start on call I a the on a entire Tennant want Have fantastic you. for the This Tennant team I'd thank your interest global the to like our quarter a

Operator

This concludes for you today's participating. Thank conference call.

You may now disconnect.

Tennant (TNC) 4 Aug 232023 Q2 Earnings call transcript