TNC - Earnings call transcript Q3 2024

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Operator

Good morning. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to Tennant Company's Third Quarter 2024 Earnings Call. This call is being recorded. [Operator Instructions] Thank you for participating in Tennant Company's Third Quarter 2024 Earnings Conference Call. Beginning today's meeting is Mr. Finance Relations President, Tennant Vice Bassi, and for Investor Company. Lorenzo Mr. may begin. you Bassi,

Lorenzo Bassi

Good Company's Finance to Earnings welcome morning, and everyone, Tennant I'm Bassi, Relations. Conference Lorenzo Third Vice Investor President, and Call. XXXX Quarter

our results me questions. Fay third CEO; Fay After we quarter open will and financials. will performance. the Tennant's and update will an our Vice and today Dave call Dave West, are the Joining remarks, Huml, and on prepared on and President we provide President cover Senior enterprise strategy, CFO. Today, call our our discuss XXXX will to

Our slide Investor conference Relations press that our call accompany earnings this release and website. on are available presentation

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

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

of a the third the measures quarter call and Dave. GAAP reconciliation our non-GAAP to XXXX GAAP Our earnings includes now over release to measures results. I'll turn comparable

David Huml

and Lorenzo, everyone. Thank hello, you,

on third record year, results, for growth year we our prior from organic our sales will to I EBITDA. today, third call highlights adjusted the quarter the and our high quarter and quarter of strong am strategy. outlook I in on pleased the remainder both a On increased enterprise delivered report the lapping net third the the progress discussing XXXX, be

this reduction. enterprise execute less are growth our demand guidance As to more effectively. driven by order to strategy incoming achieve backlog we anticipated, from our well this positioned growth quarter's With and XXXX momentum, continue performance was and we

third to were the an increasing third $XX.X increased compared sales period strong net of rates basis, Order in to growth EBITDA yielding rose Adjusted adjusted revenue of the a mid-single order to digits For to XXXX, $XXX.X EBITDA XX.X%. quarter high very long-term million. margin quarter, XXXX. our of million, digits X% single On same have are in the X%. rates above year-to-date and increased target X.X%

the quarter outperforming trend both third compared past by growth our of enterprise business strong the marks This also strategy geographies, fourth in quarter over rates to the initiatives. years. during consecutive average We growth a quarter. continue we believe the rates with period were Unpacking volume the will the driven few prior order the up within backlog in market second sluggishness, continue softness the Americas, seen our and results lapping a continued strategic this EMEA, outpacing see compounded pricing a overall quarter order This all the growth, region we at the benefit. than the market geography. In by year In in reinforcing quarter previous Brazil, backlog varied confidence industrial was in signs to region. growing. have result our pace the was across quarter strong expected order North growth is we our reduction continue quarter, significantly reduced the to currency-related our rates our our order in headwinds our quarter some the position Americas to in deliver positive faster in that America higher third demand softness due Despite product. Overcoming the year by leadership with investments

to drive double-digit expanded the double our mid-single prior strong digits. U.K. compared period Third network. Italy we year Go-to-market are orders and in year-to-date increased helped rates distribution and as up digits initiatives organic quarter the saw order growth growth

to the expectations. plans we Europe, executing previously on Eastern acquisition Integration perform ahead for in track, the in of region attractive in quarter. announced growth This are our X% is this aggressive business TCS, and this region. Lastly, continues business growth drove for nearly

Turning now to APAC.

considerably. and Our accounts in primarily reflecting Business customers' region enterprise-level signals region's sales, with growing also for of market where in of our impacted slower APAC Australia X% overall region over China, this revenue declines combined, showing annually. has was start XX% accounting for demand by China performance Australia of economic demand, slowed is this uncertainty.

market this, product product offerings, year. As To which government-induced do we pressuring delivered broader focus from dynamic, product are our dynamic vertical categories insulated overproduction China and and third the has strategically legacy see our remainder to markets more mid-tier prices excess market through counter not shifted that have growth our Tennant particularly this branded quarter. in are in widely strong impacting the the our this We changing capacity offerings and been of in for manufacturing reported, results.

now Last strategy: introduced we the enterprise pillars performance people. of new Turning our initiatives. to X strategic and year, growth,

and take provide initiatives you several key with to pillars, opportunity of and updates from the continue these across I'd quarter. to We targeted each invest the execute resource, like to

is Within the growth to driving critical growth. pillar, pricing piece a

geographies. annual see points level, to XX part to of across of as During our growth goals. enterprise growth are price quarter, price each approximately an we our long-term the At third we targeting basis XXX continued of

We that full than realization pressure more are XXXX the inflationary expect well for pricing to in XXXX. offset achieve positioned year to our and

basis long-term on pressing market trends another development At our the their XXXX. is points product pillar. achieve enterprise an By challenges, in ROVR add approximately XXX XX our to as of new of customers by XXX the year, targeting to are to are competitors. of we New release earlier on development Bolstered growth capitalize product level, we that launching our our we differentiate this growth offerings products, part pace goals. in from and and focus area technology new solve innovative our emerging important most help

incremental placing Spain. efforts, extensions. anticipate and and built international part product brand line expansion i-mop This facility retail, midsized excellent small growth cleaning education As Portugal current management power we our combining France, TXXX's is we space we are during Brazil, size the growth fit emphasis and and ahead i-mop it products into care access on and products new and strong maneuverability. American spaces new environments. TXXX use to product continued of make beyond. In for in channel The by we and areas, this year, family the of an markets, XXXX scrubber our to has geographic a Designed as introduced new and and Earlier both the a driven small country, including launched through small look we increased versatility year, of walk-behind North and September, for scrubber simplify our improve walk-behind hard-to-reach into health open TXXX market. development

generate mid- Our positioning to and product proven line premium-tier grow effective an extensions share our and revenue margin. have products strategy, to and incremental be

since new with key quarter of with The fleets product existing XXXX, been reception a high of their XX products with for market customers development supporting Customers product retail repurchases the continued Customers ROVR, differentiated and are other in our demand are choosing are over ROVR, existing proposition and reaching which months Tennant introduction. and X the encouraging. AMR the for The officially the portfolio, X,XXX total value capability XX we quarter. XX ROVR our new units from AMR deployed and actively deployed EMEA saw have service launched market. we for third belief customers during AMR X,XXX winning units of area new In expanding to bringing focus that first our AMR. over AMR we upgrading our models. In XXXX, cumulative in third strong combined our the significant the machines efforts is strong AMR has have AMR

ROVR XXXX. XX pillar. products the the our on at the to design pillar We us additional strategy, project development the for to The performance our to the optimism in market disruption months XXXX. The X the as long-term which relates X% our and new as for we our strategy. our track, planned driving our of current accelerating accounts with our go-live approximately of We with allowing performance XXXX. Shifting growing cost net planned launches ERP be is key designed pleased continue enterprise scalable now for quickly on staggered level with of performance enterprise of of hit our now and for to robotics within strong related milestones components platform our and the XX the phase effectively. to of XX This first it of AMR launch on bring the implementation more includes have platform portfolio, progress a and growth ROVR ROVR the one new launches products to modernization alongside year AMR fuels based sales is journey build

digital by better ERP infrastructure growth. significant strong more will Our standardized provide scalable a this to secure globally enable and processes investment operational project in unlocking systems and for efficiencies. and customers serving

Looking to XXXX. expected higher to across all continue ahead, growth driven promoting we initiatives, geographies. is increasing by order a supported strong growth XXXX, This our anticipate by momentum, strategic order in finish

order long-term outlook, well XXXX While dynamics bodes other performance. growth this for will our shape our

North anticipated As equipment. year. previously Initially, within to $XXX reducing primarily backlog concentrated in discussed, industrial $XX backlog America million we million was XXXX our our the by

lower-than-anticipated to lower-than-expected where for in in performance coupled result a is equipment. In $XXX is reduce the are industrial by channel, rental orders vertical This for industrial XXXX. growth XXXX. we demand we softness experiencing reduction experienced dynamic in the market regions, end to XXXX, replacement accelerated extended certain continued track cycles. likely to of has However, for are muted this on reduction our million significant equipment markets line headwind backlog XXXX, by top This backlog various in to strong larger-than-expected backlog across we now presenting Despite XXXX. attributable incoming reduction, order in anticipated with XXXX, a contributed including

double-digit from in we order of current strategy. to in growth success continued year by illustrated we strong are our reading these the as challenges believe We investments initiatives first We enterprise the continue navigate making will out see are order the year growth. growth short-term see XXXX. our we in The backlog

pricing, fuel and enterprise growth our continue targets and long-term growth product to development X%. to new revenue key Our go-to-market will of help investments, our growth drive drivers, X%

financials. we strict Additionally, discipline. With discussion the of that, spending growth maintaining aligned with a pillars to for our continue Fay will I long-term call to over while investments will our turn prioritize

Fay West

of and the and Americas. income income Dave, good Net In price sales, quarter prior everyone. volume compared driven to net delivered benefited $XX.X the in the million morning, year of net growth $XX.X realization quarter third million by Tennant effective for you, the increased XXXX, Thank GAAP from period. primarily in

EMEA However, partially volume this by APAC. and in was offset positive declines performance

rose our totaled integration costs TCS, year as expenses Additionally, well as $X to costs ERP which due the related million in implementation of this operating to quarter. the acquisition

in lower the a expense interest third quarter income, debt was due million primarily Beyond prior reduction year was the interest period. rates. with in balances, operating coupled This $X.X than to lower decrease

for interest period. in quarter to the quarter. Income compared were rate, hedging than XXXX, tax prior of third quarter third X.XX% year average Our was prior of the the higher expense X.XX% year slightly net in the

rate nondeductible effective in XX%. the in tax rate and was compared We was XX% tax change prior of mix XX.X% the to increase range tax our year year rate unfavorable effective to full effective an in of forecasted guided increase executive be period. will by anticipate the that within Our of primarily XX.X% our earnings compensation an the in country. quarter third in XXXX The to due

XXXX income $XX.X X.X% in to $X.XX of for period ERP the increase. the diluted compared compared Excluding costs net X.X% prior quarter XXXX third the other period, year-over-year implementation a per adjusted in $XX.X year to of to the year prior quarter and share. EPS Adjusted costs, third million was increased non-GAAP million

Looking quarterly more results. at our a little closely

of X.X% X.X% contributed For order digits, XXXX. changes the primarily reported in our of sales of to growth, currency of third the Americas. due sales reflecting and driving the quarter activity growth. On million, XXXX, particularly third a had negative totaled basis, grew $XXX.X while price this $XXX.X a increase constant from in net foreign quarter consolidated million sales, a impact a volume equipment rates attributable X.X% X.X% the X.X%, affecting operations in exchange Acquisitions increased increases with organic mid-single X.X% On to in currency basis, Brazil. higher consolidated

However, in business was the affected period sluggish challenging APAC. economic volume in EMEA a adversely by current and environment in conditions

sales and Australia, our prior all includes grew into sales service and experienced the volume Australia. in third other offset equipment groups Europe, contribution in X.X% our equipment includes partly Asia partially Africa generated categories net the price categories: as the sales we North parts sales split and period. Organic price prior categories. service in between volume was America, Volume period. markets. X.X% of the a and sales service market Japan Organic commercial consumables The and conditions in decreased product for were also the The the in EMEA industrial and to we in to reminder, growth all other. In a year regions. the increase EMEA by unchanged. Tennant to quarter, region Asian equipment in and equipment X consumables, sales, and both volume declines driven East by and was product year current equipment, sales parts growth in increased remained backlog following Equipment grew a impacted X.X% period. in sales primarily sales growth volume flat. Organic Pacific the by As parts to while consumables declines by net and growth across into of Australia, realization offset our and primarily and in from in America EMEA Americas Middle due China smaller China, increased X.X% and covers while was volumes compared and due Americas declined Latin weaker-than-expected compared X.X% price. and APAC, from both sales XX-XX reduction

year. [indiscernible] business up partially X.X% compared but conditions was on quarter Adjusted region, As net earlier, quarter realization. compared continue the degree. margin Gross year to sales, lesser XX compared XX.X% the as of the as to well for quarter was of of point customer pressure XXXX. a contributed and third third was remainder margin Dave materials a expect rate challenging quarter, basis price third to margin dynamic freight $XX.X we prior third XX.X% XXXX. in to decrease the EBITDA is third mentioned decline The the up slightly to persist by XXXX XXXX million, in the to of for This mix the offset quarter Unfavorable also decrease the elevated geographic quarter. the attributed was costs. and to inflationary this

shifts Our our by in and geographic, overall margin profile can product impacted mix. be customer

During XXXX, commercial this we quarter, equipment shift. the product third In half increased, became orders rate margin more balanced. overall our reduced backlog, of benefited profile our higher our mix first margin our as the products from industrial as for

balanced We continue mix expect this quarter XXXX. to in fourth the of

expense, positioned a XX.X%. achieve of compared XX margin quarter in us initiative for was our the $X.X million expense during percent the cost XXXX. of as million, totaled the increase efforts sales, and compared improvement targets to and year basis pricing the a third quarter net Our have is the an of XXXX. selling quarter administrative year Adjusted third EBITDA $XX.X to Adjusted XXXX. point This SG&A expansion of to full

working of quarter period. free project quarter, the ERP priority. investments during these of inventory. We company for we to nonoperational its excluding included in allocation in capital flow generated deployment. Net cash quarter the capital operational investments flow in during activities to The million. line as free net now during the XXX% by $X.X to cash was $XX.X impacted third which capital the return cash with $XX.X toward of income converted deploy compared to well $XX.X cash the continues by million capital to million year capital flows, provided million the and ago to needs When Turning ERP operating cash shareholders as quarter. flow in to the cash was investments flow Operating related

dividend balance the XXrd with and it we company and increased to capital remained consecutive a borrowing has unused of the million Tennant's increase per marks to During through This share end Tennant equivalents to our a cash the $X.XXX announced annual repurchases. and dividend, million $XX.X $XX.X expenditures third shareholders payout. $X.X approximately million at the share. liquidity capacity the $XXX.X credit revolving facility. raising and quarter, the company's invested Yesterday, cash quarter strong of on returned million in in third of year, the dividends X.X%

capability As This with debt growth balance through fund increasing company and the sheet. The to limit a credit flexibility company debt maintain value to refinanced for to agreement, continues effectively existing provides million. previously create its our announced stakeholders. facility revolving its strong manage the in increased and M&A August, $XXX company and

leverage X range Xx EBITDA. X.XXx targeted our net below of to Our was EBITDA, adjusted adjusted

and Overall, order on guidance. rates we for our XXXX services, to Moving based growth XXXX demand strong guidance. products the and reaffirming our are

for We on will position that increased in prudent us remain operating areas growth in efficiencies. disciplined and focusing our spending, investments and

EBITDA the following growth to share, certain net $X.XX sales X.X%; in diluted to $X.XX which billion, and items the billion nonoperational adjusted reaffirms range XXXX, $X.XXX For organic per X.X% Tennant of EPS guidance: $X.XXX between reflecting excludes of to million; Dave. $XX of in the turn range of million. With adjusted adjusted the of I expenditures the that, back approximately to range EBITDA XX% call XX.X%; $XXX expense; in capital to $XXX amortization will million to and margin

David Huml

I Fay. summary, ability trajectory. to and team continue of growth you, our the In very Thank global our am proud

momentum are basis I of are the As to making from we we well guidance. investments this optimistic growth our carry are reach between is year, through our end positioned create the strategy. margin helping the growth team XXXX X% we is seeing the in work by year first the sales to The expansion our targets positive returns X% long-term and we EBITDA the achieve am annual points. of framework to enterprise XX the doing and financial XXX of

drive opportunities centered Growth via on growth. We're a dividends creating excited at opportunity trends, as exciting through an Tennant. returning expand on the presents for share focus is market our renewed acquisitions. through value acquisitions our total to here mega well capital strategy as and on capitalize and Our shareholders addressable repurchases through about creation value

drive the the empower our transformational to real-time journey smarter, we're our the This project. is prepared to growth, future insights, paving foundation ERP forward and ERP backlog us is team now building with tackle headwinds decision-making continue with we across business. modernization As XXXX the for our faster success. The enabling investments fueling make way will

If heading, we Global questions. Industrial Conference ahead. more you participating we the wish on to XX Baird and we're open company please our go Operator, call in to are direction in the the will about that, November learn Chicago. With

Operator

question first Steve Instructions] [Operator from of with the line Our Sidoti. will Ferazani come

Steve Ferazani

the the detail call. on all Appreciate

You a so of lot covered numbers. of a lot ground,

I like topics, I net that's performance, So accounting I through understating see right? XQ, want the of to you It your year-to-date, in at at it's it X% launching number? anything, period EMEA Because, and if shipping be now I AMR. ROVR big couple sounds recall, we're XQ. that the with X% as accurate? okay. that only can moved of like you've you It the least to if to work that's started the start Is began much if a from the sounds sales. product, a would if want really, just year-to-date if Really, when new looking in higher

David Huml

the for thanks Steve, question.

to total clarify, X% the AMR for Just all number products. of revenue on is our

Steve Ferazani

right. You're

David Huml

think were... maybe you I So

Steve Ferazani

ROVR year? I'm biggest accurate? the is the is this assuming not Or But that driver

David Huml

a is benefiting it's of our -- AMR driver, Underneath so the growing the And Well, part you as really legacy game ROVR North it, excited great we well later American the it's in the really started but really We we're shipping differentially as ROVR, European the us. in ROVR. We a marketplace it's marketplace. XX XX in a QX in from and when XX products in question. changer about QX ROVR for about think believe it. are

point. So driver X% dramatic data it's of is performance not that a

Steve Ferazani

is primarily -- Okay. X was when by [indiscernible] you Is launched orders. when big ROVR launch When ROVR initially AMR, X different? I of it or demand driven the think -- you about

David Huml

Yes.

and about out had ROVR. order as -- TXXAMR AMR if TXXXAMR gates the in XX So into journey Since public back and launched the the the and took open been you models we we account think right strategic if additional the and were about aperture a of then, well. that in you XXXX XXXX now we've the on, large the think we've to

numbers X.X fast numbers. very ROVR. really we impact in are But results ROVR the less the than mentioned, XX We of only quarter's impact and with got in impact quarters a gates EMEA I the in XX year-to-date out year-to-date the as

strong actually So our as of beyond. it's my as point our AMR being, we percentage continue XX the out important pipeline AMR of expect into And total ramp here and a XX we and for the to note is pipeline look all sales. QX to for to really

Steve Ferazani

out Appreciate with that, backlog. lot numbers Excellent. Help me There a of the Dave. there. are

sure ask. now sounds it can right, I these So like and make me -- let I got

You've this converted $XXX year. to $XX million million

million $XXX expecting full You're year.

And to you I you year. $XXX are last As -- at you converted will I year-end? where rate think be -- that a recall, normalized compares by million

David Huml

Yes.

are numbers good. your Steve, So

to XX backlog -- We or $XX an $XXX million excuse have reduction. an me, guided to million

As we going about year reduction. a times we the with product times to believe and lead actually prior million That competitive in at expect customers we're that started and $XXX selling in million the normalized means our to we our expect. $XXX the to lead but deliver year, backlog year, entire we're market which back compares to now portfolio exit backlog,

Steve Ferazani

challenging it year, Okay. set a but industrial does convert to the if you're be right, not reason sales you going sounded to this shifted, also bit also was backlog your then particularly dramatically commented off been much the only you year so mean comps And slower. able for industrial that is industrial next slower? I have mix is little orders of like

David Huml

products. important put of and rental rental mentioned we've kind a Yes, fewer in we [indiscernible] of lines. correction that you'd about And think narrow our on it's you when a rectify deep other the and the that it's around saw I opportunity Those that in off see believe can dimensionalize really more in prices. North industry orders, channel, where it's expect like, the color softness -- lines softness coming to of a specific really I that allowed products, the industrial supply backlog what very comment in if it's to increasingly we had train dig beyond script. incoming the it's products. in referenced consolidated those set America particular because then customers drove chain it's of which than we markets story us a earlier become product we industrial We or XXXX. But the more the itself to backlog quickly which into vertical were expected. And but and few going we situation dynamic, anytime the industrial the industrial don't in soon that, industry in the softness

So broad-based it's for that problem the vertical industrial market a make we'll solve that in not acute Does specific that downturn. and industry, sense, Steve?

Steve Ferazani

Yes. Because I where beginning the because mean the was strong industrials be the the saving obviously I remember year, could shortages. of at labor the there of was view opportunity labor

you where you're was only seen was rentals out, softness? to So still that specific -- what the the market it saying playing you've is

David Huml

Correct.

Steve Ferazani

Okay.

That's could that too here. and mean to can that's have up costs But Last with me modernization I and take the update time helpful. one are once chance. that much on I you other people can because Okay. want remain, financial ERP don't completed? on want you the through walk a time where for to let you what us side

David Huml

Yes.

on me year with in across major through transformational Team done many has and build project and on We're where has We're of it. from scope, fantastic the for -- progress We're to X I'm Tennant job, meet a fill a requirements our timeline details in programs. on at Fay the sort financials business. walk really resources ending pleased project significant lift out design the be it Let and company. we're the actually building this we'll the behind in Company. our and required the to system the match of this configure phase.

with the are greatly other deployments by that by industries, Board and companies. guidance other We in experience multiple partners benefiting our our lift around from ERP team also significant our has world

So pace we our as are the program. on on big optimistic scope deliverables XXXX positioned. is move through and and well a outlook. We're as QX we year for we're feel really functionality like as far

can global they that the it all our around staggered in make have benefits, change deck we the disruption QX system ERP processes, go-lives, beginning effectively, way be intangible business to We on and hands help the and geographically sure common having the will deploy of of and to land the team with around world as working world. standardized members the tangible new new both realize a avoid so

Fay West

we around running put Steve, has numbers with anticipate And spending just $XX million, our that a through it. year capitalized. as to million. expectations million, we've gets million far line $XX and is On $XX what Of the which been right the be approximately would Year-to-date, in P&L $X as some spent around and full $XX basis, [indiscernible]. million and what was original there similar breakout capitalized

Steve Ferazani

and And what's timing? remaining for cost

Fay West

Yes.

early early for project that on. mentioned, So XXXX, suspect of we've timing as with of deployment into Dave projections year the some that, XXXX. I the got We're the we will outlined year, likely run a and cost deployment in staggered part of of throughout given line in anticipated our

tracking and tracking dollar-wise. we line-wise time So are

Steve Ferazani

do margin of just view -- the a do you terms this what the speed be and enhancing you for can this think as is And Okay. beyond impact in convenience? -- the project business? Can potentially

David Huml

Yes.

understand candidly, But better and we are and $XX we to to those P&L. So by serve rest of between faster in refine efficiency savings and and enhance and $XX time true the system and we that estimates only as we're build frame to realize the that's part deliver the can really planning million on the continue more efficiency million, decisions, The customers looking functionality quantifiable on make opportunities of just enhanced going effort less better and manual hands people's to data for tangible story. with putting in to be required. capitalize less we're the decision-making savings benefits

XXXX, move efficiency target up $XX we kind We'll is shaping to we million have $XX through update you of as out planning we the estimates. that there's So finalize how million number XXXX as there. into

Operator

from King. line with next Hayes Tom Our comes question of the CL

Thomas Hayes

questions. maybe couple Dave, just geographic-based of a

mentioned Could understands pressure while. you little I market. initiatives prepared just just go in the the that of over I highlighted industrial kind a you knows has of you're those you was point actions China in think APAC. had for remarks, you your kind been a Obviously, more? that a or some in think bit or I world just everyone for and everyone wondering, maybe taking

David Huml

story is in the as not the decreasing China that's mass really way are showing Yes, overcapacity the in serve, macroeconomic been those market and as APAC manifested in And headline -- government market-driven and be headwinds, China. that there from trying standpoint we a to. happy we well itself I'd to to incentivized softness production media, that overcome is immune significant is in widely pressures. is the China The around on performance demand reported this production. is some and itself over markets has

seen the our in of line. pressure product price we've lower So end primarily

You commercial products the our is price very kind we point that in competitive portfolio. products would say have of [indiscernible]

price market And -- there's we're competitors. happened is we're where price chasing on amongst participate in so being sewer. in war what we're environment. choosing about is doing to And not going down the the very We're this what's that -- this intentional

are do it's it orders. us. taking We We're volume going to profitably, for incremental and

reduced market, as effect in they're very there's a exporting this dynamic So a is this overproduction halo China. And the local unable intentional find dynamic outside China we've of within the of production because to at home really reacting market been rates. market their China to

impact Southeast seeing throughout So exported of and low-priced these Asia units. elsewhere some you're

response the industrial fewer In just in on are And space, our what us, for resources that end more there to we doing line. product. So that's competitors. our our flexing is are of focus higher

that in advantaged product are space. We

have a of legacy leadership. We product

distribution, our example in gives an and these end we're -- space. And edge we from capability preferred use as partner selling more selling well distribution are relationship a service edge single down site over that known an our and direct because up perspective, that direct sales the us selling direct for into capability gives have with us where street So a customers.

is selling on kind doing industrial to rather incremental the can we're growth margin term, markets commercial what just weren't us basis. more with So volume industrial for it than in moves the try to sales. as stand-alone in down did organization we flexing ratchets on able of but margin, the decent short get a at the price commercial decline the offset this product space focus to drive chasing points. In industrial our vertical where accretive And in business -- we drive to we

So acknowledging we're environment we just in to an appropriate China. think challenging take it's step the

Thomas Hayes

maybe I this it shifting did, or well. you is I No, year was distribution the platform the late the that color sounds to last EMEA. earlier It and over on guys acquisition think appreciate year like performing

thoughts your Just on progress? that

David Huml

these the Yes. We It's It's asking going business business. a I of that's you long-tenured really people the with bought and the going question. group really mentioning pleased made well. a really appreciate of performance of up really in Really, just product talented not appropriately relationships whether well. they the their perspective, customer long-standing and in perspective. a a a had to from address from perspective, been markets, markets, have be go-to-market all assortment strategy equipped opportunity training who from that

the the early use continue on and moving coming team end into bullish embracing the I growth the of products really customers. proud products in so plans sellers can acquisition. Tennant the the that very front I'm of intentionally really And take for the positive. trained the those So aggressive sellers returns are hands so this acquisition with in get be to we of can they

our direct sales it's an shareholders is incremental drive but [indiscernible] core can only to work to example where is acquired for -- new and direct well. capital that geographies incremental as market company service this We've new basis, channels value, channel the for bases in shareholders this growth not space, value on for a of our I we market, our core excellent and put think a can within play. create value to

Thomas Hayes

Okay. a that. too what not that previous added thinking but ago, some your and covered then are I know I on with AMR I pretty that that business know the wondering long you the capacity, one outlook, was you but just robust? lot remains caller, on with you on production appreciate Maybe I commentary demand of just especially

David Huml

great did launched we call investment we ROVR -- we roughly our versus on America, of to increased an Yes, looked the pipeline we're specifically production XX orders capacity in to to when I'm North likely Rover. we the double for and the production. orders make that come, report export on plan earlier at we progress the launch decided to and referenced making securing original pleased opportunity

you, problems, to our on the hard a reliance I customers' XXXX. and find the it's labor expensive. out the to down cost be and specifically availability, AMR smart on proven the is space. Listen, our a of in lot team reliability and that pressing most that -- by for we're to move reduces remind cleaning the increasingly I upside double solving one in of that's for think is productivity, And which all So product I labor. And that of equipment us the XXXX for in think would of the enhances AMR but

products. -- the our We TXXAMR. some for success orders the and that introduction gained applications and addition most legacy orders excited really, our recent ROVR, been last on on upside focused TXXAMR on are our great demonstrating was XX the has before in fleet AMR the really industrial We've re-fleet to that's significant that the example, uptake was with about TXAMR, product

first it, XX ROVR, real purpose-built that have I ground-up are a as a it's lot spent I And game customers us. in a air listen, think for us telling differential a to need solves changer on of our product, real it our way. time AMR

so think XX ROVR. on upside a got And lot of I we've

of XX your midyear think XXXX, and launch EMEA. ROVR about narrow a America QX North you just had a If ROVR launch we in late and XX of in view

out a to pipeline just And XXXX get So just availability even of got interest convert -- pipeline the full robust. lining into year I straight in of pipeline we've for very looks upside. mathematical provides now The [indiscernible]. and

Thomas Hayes

I if more, one Maybe could. Okay.

new addressing? on launch markets any product specific the your Just TXX, that's are on -- what there

David Huml

strategy businesses out it and and tighter this platforms take open look we a what rebranding store spaces. our shines brands It's is really acquired so really existing but this our It's them case, of really channels. the that's we're formats representation IPC in can line. when capable It's that consider at it from and of spaces, extension product of Gaomei wide in is platforms, targeting born our where with maneuverable. we Tennant highly strategy. But the into, through compact smaller line hardware product have cleaning into product great we a This you that get

large et checkout historically butter of for grocery stores, think really stores, merchandise we bread aisles into sell format and think So the think rather retail, cetera, tight the stores, aisles the applications us format navigated, to is smaller equipment smaller the about space. kind navigate retail [indiscernible] hard or but is because be have about of that some when we get environments which need general is stores, even retail that store about smaller-format to format

us we like retail an store and formats this gives smaller so well. to And also but health opportunity penetrate think in vertical education markets and market, real vertical care as

Operator

the Coast Aaron Our North next Research. question with of line Reid comes from

Unknown Analyst

So happen based more order now, Is really at is thinking of right color where reduction? the on a that? achieve provide Can coming more quarter full fourth range it you X? the to Are what guidance combination in Or a year that? growth? to back really needs you the on to it Tennant is backlog little

David Huml

in Yes, math. to need of revenue midpoint in deliver our At just we million QX. guidance, a $XXX

deliver strong already is as a customer AMR of strong segments. that sight as of and is well materialize exited backlog opportunity, reduction. full will in $XXX will the QX then of backlog $XX are that later. driven QX by we confidence that million. [indiscernible] activity having have those us million in But orders that, we earlier And to We pipeline backlog -- will pipeline in the another reduction. so orders $XXX than that backlog some another down got to do be estimate quarter reduction for year. really, million, as likely of by Some products $XX key we've got There's this hit of to happen as strategic in around gives the accounts planned, our line -- the activity million we'll when And taken and rather

We continue strategy. the And AMR, the we momentum actions strong talked really, that the Elevate and inclusive that's well space well. we're through of We've direct of kind questions strategy a Elevate ROVR quarters to result during execute about in investments the our Tom's last and against really in as and and X of really we our with taking XX come growth. have order

hovering XXXX. not only QX the but as growth us growth order in order helps as double-digit really strong we well, of around QX, kind up expect X well, head rate having that year-over-year, into rate sets us of quarters deliver We elevated which it growth

Unknown Analyst

bit, me beyond, off to on overall this of you sense. can tell I makes into appreciate know that, it. you how we but your expectations? impacting how building kind trend? AMR of addition look already growth is see when And this, in I And That then little and you've your XXXX compared just year do a about performing to touched further AMR it

David Huml

Thanks for the question.

Aaron, conversation. to -- is to AMR know you're So continues well. perform I a the newer And, bit

several really So on something I'll with long been past the talking bullish on We're in we've fill about AMR. term. you over the years AMR over

We an are disrupting industry.

example, you a a deployments step in skew customers but impact quarter, have We've in year the cumulative AMR in orders, traditional strategic because AMR, think back really even impact month different significant given these and by business about for customers seen is over for for marked the AMR, units or million adoption over so at X,XXX adoption adoption really driven this and that we've quarter of the industry sales anything unique to accounts, curve of a our can AMR fleet spotty we're a when of curve. the in orders $XXX some take And on we since been XX that cumulatively countries. XXX in significant. But launched large

quick and very as vertical those geographies, out front in can engage, bring possible that product And in reason up that the of most markets where vertical and markets be so serve. adoption the we many model we are that begin pleased so are that will as many we across channels we getting as the I that the is to customers

a navigation us. its enhanced it's for is truly the it's differentiated us our a on the maneuverability robot, in where I software. marketplace It's our ROVR XX gives and game performance. we believe changer This based purpose-built offering have Brain, by agreement with exclusivity on Generation first X

amongst and a the superior system. just navigation exclusivity We in it's competitors have marketplace, any

go of that we're in ARR which forward. result a revenue, as -- subscription another agreement, of participating profitable stream as also we're participating revenue us the the provides and -- we So

AMR product. 'XX. 'XX, It's into to continuing purpose up contributor, expect a XX as platform year-over-year a We're only ground to enterprise, move iterate machine. not the We our to a be growth XXXX, to significant but we built is

off markets, So adoption. the of we that think we drive in more platform into in products indicated we the give of point vertical more expect of benefits more get inflection take new kind in the will us to launch platform to And XXXX, into an customers. an think, beginning that we even script opportunity that vertical XX

to and business, on so really global be it's significant opportunity to a bullish the a but basis contributor the this also disruption to AMR going industry And think the a we're in coming years. on

Unknown Analyst

will the in of sounds and down that higher Okay. of towards of you just I of right little consumables That bit rate experiencing some see it further. some vehicles you're and times lead see expect was, you then longer equipment. drilling these parts? Is a that One a possible sense. like had My And now, failure question question of start just makes any on sort of the to offset? their lives sales to more are some possibly and is, on fleets parts replacement these getting terms end offset segment as through other coming

David Huml

They about the industry That floor lift. replacement I'll was the cycles to general need the customers and a limited when the rental many our or or their they opportunity extended customers this get still scrubber turn chain get a quick the partners short-term product. a the challenges the dynamic it couldn't Yes. to so you channel. be in equipment, comment OEMs, can't like a it's industry others, channel. spike bull a Coming just through rental from demand They backhoe give saw whether snippet as need OEM, a to rental to the and from going the in Tennant that really there. was capture rental supply equipment about

capitalize brought that rental as on a short-term so to in opportunity. industry whole the And inventory

Tennant that base and place backlog the have in both they taken inventory OEMs down, broader the of and demand have Now their OEMs.

the have Now inventory place. more normalized rental that the channel, rent got in pace they a to to they've in demand is returning down

a So short-term, it's it's rental challenge really but to really structural specific of industry. overcome, that kind shorter-term

we the I've yes, that and the them execution result early rate growth And the on Elevate for across already think the as growth many product the order seeing highlighted QX, fact exit talked we're well levers the QX multiple order of that, double-digit year, we growth as of XX markets have Beyond heading about on I we year, I into serve. rates, And are call. vertical still come ROVR think within growth of the about at deals. on trending space and XX that AMR, in about line as growth our the our the growing next on we it than following segments rates our or core that marketplace. core you of returns be highest are driving small strategy. if excited of to whether focused the direct off how about marketplace, We're product think platform just We're they or faster extensions products business. I

to paying acquisitions really take our Brain CCS we contributing in back. are the our out so continue acquisition execute could and to really, and in Eastern nicely And the region as is that that confident is excited investments really well. And yielding Europe The we and enterprise benefits that to AMR really marketplace. to commercial

on in growth as softness opportunities a business. bullish channel to our on of vertical or growth our articulated like really some prospects the specific of outside softness of upside bullish America a we a North China, in or really market So the some geographic

Operator

from line Northcoast Priscilla Our next of with will Research. Instructions] come Edith [Operator question the

Unknown Analyst

referenced release freight press elevated The and pressures. costs inflationary

well wondering, that freight this these as do and temporary costs into was trending through are I something how headwind And pressures inflationary So last you a or October? see could XXXX?

David Huml

headwind. really it see a as temporary We

willingness that industry, of a in If pursue routes. to world are certain Think you what's think you've influencing happened unrest certain parts freight carriers few at factors the play. got global the in trade about about the

are a on water expensive. other And and trade longer, -- more so that are routes there the other alternating lot time more

you we for products as came coming a closures avoid into you But still from markets for impacted a future have about a one that's it strikes that that from potential strikes that to us out the and saber for a and think business will to into I freight an of port preparing in dynamic was get some reroute some been ahead people's the dynamic we've I prudent [indiscernible]. I continue reacted business. to outlook. That we domestic rattling, as tell to don't some potential expense. expect that overseas seen actions also just that disruption. recall, perspective. There's port intentional took port think

Fay West

look at on a we year will expect margin full we few And more specifically year on gross we full We don't full basis. margin, when to while expansion data a year, inflation that points. gross anticipate we just And still pricing basis. a full that over will offset see guide year

Operator

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

David Huml

want Company. Tennant your for hope concludes participation your earnings I thank you This I all call. you great our a today in to and day. interest have

Operator

for today's all joining Thank you presentation.

may You now disconnect.

Tennant (TNC) 1 Nov 242024 Q3 Earnings call transcript