Q1 2021 Tennant Co Earnings Call
[music].
Good morning, My name is Rebecca and I will be your conference operator today at this time I would like to welcome everyone to Tennant Company's 2021 first quarter earnings Conference call.
This call is being recorded there will be time for Q&A at the end of the call. Please press star one if you would like to ask a question.
After the Q&A. Please stay on the line for closing remarks from management.
If you have joined our call today via telephone and logged into the conference call presentation on your computer. Please mute the audio on your computer to avoid potential quality issues during the call.
Thank you for participating in Tennant company's 2021 first quarter earnings conference call.
Beginning today's meeting is Mr. William Prate Senior director of Global financial planning and analysis analysis, and Investor Relations for Tennant Company. Mr. Price you may begin.
Thank you Rebecca.
Everyone and welcome the Tennant company's first quarter 2021 earnings Conference call I'm, William Prate Senior director of Global financial planning and analysis of Investor Relations.
Joining me today are Dave Hall, Tennant's, President and CEO and for.
The west our senior Vice President and CFO.
On today's call, we will update you regarding our first quarter performance and guidance for 2021.
Dave will brief you on the operations and enterprise strategy, if they will cover the financials.
After the remarks, we will open the call to questions.
Please note the slide presentation accompanies this conference call and is available on our Investor Relations website at investors Dot Tenneco Dot com.
Before we begin please be advised that.
Our remarks, this morning, and our answers the questions may contain forward looking statements regarding the company's expectations of future performance.
Such statements are subject to risks and uncertainties and our actual results may differ materially from those contained in the statements.
These risks and uncertainties are described in today's news release and the documents, we filed with the Securities and Exchange Commission.
We encourage you to review those documents, particularly our safe Harbor statement for a description of the risks and uncertainties that may affect our results.
Additionally, on this conference call, we will discuss non-GAAP measures that include or exclude certain items. Our 2021 first quarter earnings release include the comparable GAAP measures and a reconciliation of these non-GAAP measures for our GAAP results.
Our earnings release was issued this morning via business wire and is also posted on our Investor Relations website at investors Dot Tenneco Dot com.
Now I'll turn the call over to David.
Thanks, William and thank you everyone for joining us we hope that you on your loved ones are continuing to stay safe.
Today, we are pleased to report a strong first quarter, one that exceeded our expectations due to increased customer demand and highlighted by the or grant organic revenue growth we achieved in all the reasons.
We were able to meet that demand thanks to the operational improvements we made in the past year.
And the way we have navigated the pandemic to date.
Specifically, we've remained committed to resourcing and investing in our enterprise strategy.
Staying focused on serving our customers the <unk>.
<unk> preserved our ability to ramp up quickly as global markets began showing signs of recovery.
I am, especially proud of the way our team works to overcome the unprecedented operational challenges of the past year on.
Also our prudent expense management and ongoing commitment to our long term strategy continues to yield solid bottom line results.
While the pandemic will continue to pose market uncertainties, the Q1 growth and strong order demand are certainly encouraging and gives us optimism that the positive overall sales trends we saw in the second half of last year represented at the beginning of a market recovery, which we have taken into accounts and raising our full year.
Guidance.
Our strong Q1 without a simple or inevitable result for <unk>.
The significant effort from everyone on tenants.
For example, in the past year, our operations and supply chain teams of faced significant challenges from commodity inflation transportation related issues parts shortages and supply base disruption.
They have worked tirelessly to mitigate the impact of these challenges while also driving aggressive cost reduction programs and delivering productivity leverage that allowed us to offset what could have been a much larger financial impact.
2020 was not the year of any of US planned for but it does not stop us from influencing the long term strategy, we unveiled at the end of 2019.
The improvements to our operating model include value engineering plant optimization improved discounting and adjusting our go to market approach in specific regions.
At the same time, we strive to win where we have competitive advantage and the recent sale of our coatings business is an example of redirecting resources toward more strategic and profitable activities.
All of these actions have combined to yield on expansion in gross margin that is now beginning to read out.
In 2020, we also maintained investments in resourcing across a broad number of initiatives, including product development on.
Operations and simplifying our product offerings, all of which were designed to better meet the needs of our customers.
As a result, we are now well positioned with the full portfolio of new products, including our autonomous cleaning solutions for <unk>.
Launch into a recovering market.
The initial customer feedback regarding the launches of our T 16, Ahmar industrial robotics for scrubber, new standard product offerings, and the new commercial mid tier offerings have been positive.
While we have not yet reached pre pandemic sales levels across all regions, we remain optimistic for the year ahead.
Going forward, we will continue to execute against our enterprise strategy and will serve our customers with an aim of maintaining our industry leadership in quality service and innovation.
Regarding the future of industrial and commercial cleaning one of the questions. We hear most often is how the pandemic has impacted our customers.
Certainly the importance of cleaning has been elevated with the new desires turn cleaning from something invisible to the visible and tangible benefit for their customers and employees.
At the same time labor challenges of grown all of the more acute which places greater emphasis on the importance of technology and the products and services we offer.
The pandemic has accelerated market trends and taught us new ways of working which we believe will ultimately be beneficial for tennant and the cleaning industry.
We think the long term benefits are less of a COVID-19 and more about how we continue to be a trusted partner for our customers and meeting their needs.
Lastly, I'd like to say a word about our leadership transition.
The first part of the first quarter saw a number of senior level changes, including the <unk> promotion to Chief commercial officer.
Kristen Stopes promotion to general counsel.
And Barb Wolinsky his promotion to senior Vice President of innovation and technology.
And most recently, we welcomed to stay with us as our new CFO.
On accomplished finance executive she is the former senior Vice President and CFO of Sun Coke Energy and has held numerous positions, including leadership positions at the United Airlines, <unk> Americas and <unk> Corporation.
As CEO I am thrilled to be working with such a talented group of executives.
Collectively the or managerial expertise industry knowledge and appreciation of Tennant legacy and corporate culture will ensure a seamless transition as we continue to execute on the enterprise strategy that everyone of the company has worked so hard to put in place.
With that I will turn the call over to pay for a discussion of our financial.
Welcome aboard thank.
Thank you day, Hello, everyone I'm excited to be here, particularly at this point.
Jeremy and I look forward to the opportunity of ahead from.
The first quarter of 2021, Tennant reported net sales of $263 $3 million.
For <unk>, 4% year over year, which included a favorable foreign currency impact of 3% and.
Pending divestiture impact of negative one 7%.
Organic sales, which exclude the impact of currency and divestitures increased three 1%.
Tennant group sales into three geography the.
Americas, which includes all of North America, and Latin America, EMEA, which covers Europe, the middle East and Africa, and Asia Pacific, which includes China, Japan, Australia, and other Asian markets.
In this first quarter sales in the Americas declined 3%, reflecting the divestiture of the coding and hence the earlier this year, which impacted results by negative two 6% along with a foreign currency effect of negative 8% for.
Organically the region grew 4%.
But the and the limited impact and the.
<unk> had on the prior year period, as well as solid growth in the direct and distribution channel in North America, along with growth in Brazil.
Sales for strategic accounts for down from the prior year period due to the lapping of some large orders in Q1 of last year.
Sales in the EMEA region increased 12, 4% or two 3% organically driven by performance in France, Italy, and Germany and also benefited from a foreign currency at the back of 10, 1%.
However, pandemic related restrictions did continue to have an impact in some market.
Particularly in the United Kingdom, Central and Eastern Europe, the Middle East and Africa.
Sales in the Asia Pacific Region Rose, 46% with a foreign currency impact of positive eight 8%.
On an organic basis sales in the region Rose 31, 8%.
Tennant recorded organic growth across all APAC country product category and channel as the region rebounded strongly from the pandemic related slowdown of last year.
Turning to margin <unk>.
Gross margin in the first quarter of 2021 plus 43%.
<unk>, 248% in the prior year period.
Adjusted gross margin was 43% compared to 41, 5% in Q1 of last year.
This increase was attributed to increased productivity product mix and the actions related to the company's enterprise strategy, including pricing and cost reduction initiatives.
This more than offset commodity and freight cost.
Pressures, we experienced in the quarter.
As far as expense during the first quarter, our adjusted SG&A expenses for 32% of net sales.
<unk> to 31, 8% in the year ago period.
In addition to careful expense management. This improvement included some temporary savings related to the suspension of most business travel and the in person trade shows and customer of that.
Net income increased to $25 $7 million for $1 37 per diluted share compared to $5 2 million or 28 per diluted share and a year ago period.
Adjusted EPS, which excluded non operational items and amortization expense was $1 17 per share compared to 57 per share in the year ago period.
Adjusted results in the quarter excluded the gain on sales from the divestiture of the coatings business.
Adjusted EBITDA in the first quarter of 2021 increased to $40 7 million or.
For 15, 5% of sales compared to $26 $1 million for 10, 4% of sales in the first quarter of 2020.
As for our tax rate in the first quarter Tennant had an adjusted effective tax rate, excluding the amortization expense adjustment of 21, 4% compared to 25% in the year ago period, which increased primarily due to the mix.
And full year taxable earnings by country, and a decrease in certain discrete tax items.
Turning to cash flow and balance sheet items, Tennant generated $18 $4 million on cash flow from operations in the first quarter of 2021, mainly due to strong business performance.
As of March 31, 2021, the company had $175 2 million in cash and cash equivalents.
In April after the close of the first quarter the company restructured its credit agreement to optimize its debt structure. This REIT structure allows for enhanced flexibility with minimal covenants and no prepayment penalties, while also reducing future interest expense by approximately <unk> <unk>.
$1 million per month.
Lastly, turning to guidance as Dave mentioned, our raised guidance reflects our optimism regarding the eighth of the continued and broad economic recovery.
And tenants the ability to implement it on term growth strategy.
As included in today's earning announcement of our guidance for full year 2021 is as follows.
Net sales of $1, one 9 billion to $1 1 billion with organic sales rising 9% to 11%.
GAAP EPS of $3 45 to $3 85 per share.
Adjusted EPS of $4 of intent to $4 50 per share, which excludes certain non operational items and amortization expense.
Adjusted EBITDA in the range of $140 million to $150 million capital expenditures of $20 million to $25 million.
And an adjusted effective tax rate of approximately 20%, which excludes the amortization expense adjustment.
With that we will open the call for questions. Operator. Please go ahead.
At this time of you would like to ask a question. Please press star one on your telephone keypad.
And your first question comes from the line of Mike <unk> with call your Securities.
Good morning can you hear me okay.
Yes, we can hear you Mike good morning, Alright, great.
Great Good morning.
And say welcome aboard.
I kind of wanted to touch on the <unk>.
Question, we were asking for really a whole year now you've kind of provided an answer to it on your prepared comments.
We're seeing the more.
Larger focus on being visible about your cleanliness in the commercial space.
And I'm just kind of curious have you given any thought as to whether that.
That makes your organic growth outlook beyond 2021, which of the pandemic bounce back but is your longer term growth outlook more than just like on a few percent.
Does it kind of doublet, perhaps even over the maybe.
Maybe through the five year range here.
Thanks, Mike we have given out some thoughts on I will tell you. It's just too early to take the of the signs and signals, we're getting from the marketplace and try to project that into our long term potential for our business. So we're for holding to our long range plan for now the <unk>.
Comment that you made that I made the you will be focusing on is on an important one I think the our customers are viewing the cleaning of differently than many of their spaces, where it used to be something they wanted to hide from their employees and hide from their customers and have it be largely invisible now there seems to be and our customers are talking about the value in their floor cleaning the <unk>.
<unk> as a sign of that their space is it safe to operate in one of the b for their employees or their customers. So long term impact on both the industry our applications our customers on our business. It's too early to tell but we do believe that it's neutral to positive for us that our customers will have a broader range of.
Of hours that they can use our equipment and will result in overall leaner spaces for our customers. So we'll wait and see but early early signs are certainly positive for us.
Hum.
I kind of line of up there in the past unpack that a bit.
I am sorry on to see ways. The commercial spaces can get a certification of a certain level of cleanliness I guess from an outside entity in some cases of the sponsored entity for example, and Barber shops, the people that make the the Barbara cleaning the the physical cleaning fluids have create a day.
Barbara Shopkorn the certification.
Of course.
And some of the bigger spaces of that Youre seeing more care being an important part of some of the wider showcasing the efforts out there.
Yes, Mike I've seen some of the similar that Youre referencing wears on.
Some companies are offering from sort of agencies or offering some sort of of certification of clean for AR.
Cleaning standard Thats something that we think has always been missing in our industry, we call. It the proof of the clean allowances highlights of the role of the tenant can play on that with our technology is we can actually provide our customer assurance that the floor scrubber has been used when it was used how long that was used and the in the case of <unk>, whether it was used to cover the.
For the entire floor space and so from a proof of claim perspective, we think the role. We can play is give the customer proof that the equivalent of was used for cleaning their floors and then they can apply the proof and then whatever where they'd like to out of their stakeholders.
Alright, Great and then I also wanted to touch on.
On the cash balance on the balance sheet, you out of $175 million or so here I mean, you've had higher in the past.
Yes.
The point in time, but not by much.
And <unk> got a really strong.
Here's to be free cash outlook for the rest of this year Im kind of curious if you can maybe outline some of your M&A outlook.
For some other areas of capital allocation that we should be thinking about over the next 12 months.
So youre right. So I think the cash balance where it sits at about $175 million and we do have.
Some nice liquidity of nice liquidity profile up for Tennant.
Certainly we will always evaluate opportunities that are shareholder begin.
And look for ways to provide shareholder return from a capital allocation perspective.
Focus on maintaining the right leverage as well as returning capital to share holders by way of dividend and you wanted to.
Yes, I'll just add we don't specifically comment on forward looking at M&A activity I'll just assure you that this team is committed to putting our cash to work to return on a positive return for our shareholders.
Okay I'll leave it there guys. Thanks appreciate it thanks, Mike Thank you.
Your next question comes from the line of Chris Moore with CJS.
CJS Securities.
Good morning, Thanks for taking a few questions. So maybe just a quick follow up on on the cash flow. So obviously good cash flow in Q1, given the revenue growth that youre looking for I would assume there's going to be a little more working capital needs.
And can you give us unless I missed it.
So that's on what cash flow look like in 'twenty one.
So I think with kind of where we are with our guidance.
And Youre right the will probably be a little bit of working capital is here.
Just on the way the working capital.
So we will have really strong full year operating cash flow, we have not significantly changed our capex, our free cash flow should be strong.
For the year.
And we will be down slightly from 2020, and that's just really driven by changes in working capital, but really trying and working cash on free cash flow for 2000.
Got it.
All of that I think what Youre seeing is really the the result of the structural changes that we're driving of our business and our enterprise strategy and it is beginning to read out of the spread out.
In 2020, it was a bit more difficult to see because of the muted top line, but I think youre seeing really the benefits of of executing against our long term strategy and I'm really pleased to have day of her rollout to help US chart of our forward looking strategies around the capital allocation.
<unk> and use of cash.
Got it.
Switch.
Steel conversation.
My understanding is that <unk>.
This increases.
At the beginning of this year were perhaps a little less aggressive than usual to help drive demand.
Just trying to understand from where you sit right now that balance between.
Sure.
With the rapid rise in steel.
Between increasing prices and demand, maybe you could talk to that a little bit.
You saw the expansion of gross margins in Q1, So let me comment in that context, let me comment a bit about what happened in Q1, and then I can comment on our forward looking projections.
Relative to the notably steel of other commodities and I'll broaden information comments about supply chain in general because I think it's of relevant topics of top of mind for many of our stakeholders of investors.
Tennant was not immune to the global supply chain challenges that the the globe experienced in the first quarter of 2021, we did see commodity inflation across our key commodities and for us Thats steel resin and lead which is used in batteries. We also saw challenges in transportation and freight logistics.
Whether it was container availability for the cost of freight the airfreight or ocean freight and we also managed through a number of general supply based challenges, including everyone's familiar with the electronics and chip shortage challenges going on globally. Some capacity constraints on also financial solvency of.
Of our supply base and so our team our operations and supply chain team has done an absolutely fantastic job monitoring the health of our supply chain and taken definitive action to mitigate both the financial impact of tenants, but also insulate our customers from the impacts of those challenges for managing so I couldnt be more proud of the work the team has done.
And how the team has positioned us the weather what is a really broad base of significant portion of supply chain challenges in Q1, we offset the impact through increased productivity in the plants leveraging of the volume from favorable product mix.
And as I mentioned earlier, continuing to execute and benefit from our enterprise strategy, notably strategic pricing and cost reduction activities. So while we expect the supply chain challenges to continue into 2021, we have reflected that in our full year guidance and again I'm. Just so proud of the actions of the team has taken to help the.
Tennant overcome the challenges here in 2021.
That's really helpful.
When I look at the three 1% organic growth.
How does that breakdown between price and volume.
We haven't really broken that out for all of while Chris.
Chris So this is William.
In terms of price, we did take pricing actions, but just knowing the market that we were coming into it probably not for the historical which would have been around of one 5% net so it's definitely lower than that.
But we haven't really broken it out from that vantage point for a while.
Got it thanks for all of you to Barrick on units and the price fell this year.
I appreciate it and we'll leave it there thanks guys.
Thank you. Thank you.
And your next question comes from the line of Steve <unk> with Sidoti <unk> Company.
One of a follow up a little bit on the.
On the guidance.
So with $41 million and adjusted the EBITDA in the quarter the implied so more than 25% even at the high end of your guidance range I'm, just trying to get a sense of you being relatively conservative that you're concerned about costs why that why this wouldn't be the low point of the year.
So our guidance is based on our current visibility into order rates and assumes the continuing trends and and at the microeconomic.
Environment and improvement there.
And we are no. Thank you note that we will start to lap the highest month in the prior year that were hit by that.
On the pandemic.
I think that that our guidance is balanced at the point.
And our Q1 results did come in above our initial expectation and that's reflected in our revised guidance.
But we're encouraged by the trends of our statement that we're seeing at this point and I think our range is reflective of that.
Based on the accounts yes.
Steve the the Bill I think of that I'd, just add is maybe taking a step further on that today's price points around the headwinds that we're facing in commodity pricing right. We've also improving that as we're moving ourselves in terms of revenue and gross margin early in the year, we will invest back into the business to drive other strategic initiatives in the back half of the year. So the youll see.
On the SG&A line like you would have seen last year and in 2019.
So we've embedded those items both of the things that we see positives and the headwinds that we feel on the commodity pricing right and the investments will make into our business into our guidance. So the.
On how we're thinking through what we provided.
And then noting that the call was at the end of February did you see significant significant improvement in March of <unk> has that carried on.
And really we did actually see an uptick in the month of March and so post our year end call on.
Which was on the end of February increased saw really strong performance in March.
On continuing here into April.
And last one for me of just can you give any kind of updates on the.
Marketing and sales effort with the new industrial EMR.
The I'll comment briefly on that we're really excited about our 2016 ALR on this is our as you noted this is our industrial robotics offering.
Most of our interest is very very high in our entire robotics offering.
But with the introduction of the <unk>, we now have a product to enter into industrial vertical markets and importantly, with our <unk> product portfolio of robotics, we can engage a broad range of customers across a broad range of vertical markets broadest in the industry and so we were able to activate our global sales organization.
And attack the AMR.
<unk> and earnings across every geography.
It is important an important point around the EMR that are early adopters are reordering and expanding their robotics programs. So we're drawing some confidence from that from optimism from that were really well positioned around AMR with our product offerings. Our teams are doing a fantastic job supporting deployment and delivering a fantastic customer experience.
What we know is critical to driving an accelerated adoption and we're bullish on the potential. So we are well prepared to ramp as the base of subs for adoption in arms globally.
Great. Thanks, so much for everyone. Appreciate the time. Thank you. Thank you.
Once again, if you would like to ask a question. Please press star one on your telephone keypad.
Your next question comes from the line of Marco Rodriguez with Stonegate capital.
Hey, good morning, everyone and thank you for taking my questions.
Hello, Mark wanted to.
Good morning, I wanted to follow up a little bit just share on the on the supply chain I. Appreciate the commentary that you provided is very helpful.
But in terms of just the rising inflation can you maybe just talk a little bit about what your expectations are there I mean, obviously everyone's seen prices go up FX markets are continuing to show.
A lot of rising commodity prices.
How are you guys thinking about your ability to continue the pass through these costs in raising prices perhaps.
That's a great question of top of mind for US I mentioned earlier some of the of sensing we're doing in the marketplace and how proud I am of team.
Rallying around the specific set of actions to help us offset and mitigate the mitigate the risks I will tell you that our confidence in our ability to offset the supply chain challenges as reflected in our guidance and so we do expect to have to manage against these headwinds for the rest of 2021.
And we do expect that these will subside over time, we'll be prepared ourselves for managed against it in in.
In the remainder of 2021 and Thats reflected in our guidance.
And then in terms of the supply chain constraints that you're seeing is there any way or any sort of color that you can kind of help us understand I mean, what sort of how long of the lead times or any other information that might kind of give some of them a better sense as far as the constraints youre seeing.
Yes.
It's a great question. It's so broad based it's also difficult to quantify a specific on data point that would be meaningful to you. All of those I gave you the major buckets I'll repeat them again really there as a commodity inflation component.
There is transportation freight and logistics challenges that we're seeing which is which is both availability and the cost.
And I loved the rest of the just general supply based challenges.
As our supply base has come back online post pandemic, they've had to ramp the capacity to meet to meet their demand and so you saw on youre familiar with the chip shortage and that there is a halo effect around electronics in general there is capacity constraints across many of our parts of the suppliers as they ramp of backup to their capacity on trying to.
Jack Port capacity they'll need the sort of 2021 and then I noted also we're tracking the financial solvency of of our supply base from suppliers.
Whether the pandemic as well as others and so where we have an early signal that a supplier may be in trouble, we reach out and talk for them to understand what the recovery plan is on if we need to augment the.
On the supplier with someone else then we'll certainly take action to get ahead of any supply chain disruptions. So it's tough to sub to Dimensionalize I will just tell you that again the team did a fantastic job responding to it in Q1, and we expect challenges to continue for 'twenty, one, but we've reflected our ability to mitigate and offset it in our guidance.
Understood and last one for me here, obviously, you guys saw some really strong growth in Asia.
I'm just wondering how you guys are thinking about that region, just kind of given the the.
The rising coronavirus cases that we see out there driven by the new variant in that part of the world.
Yes, we are like everyone. We are watching the various aspects of this pandemic whether its vaccination.
Adopt box of explanation deployments as well as on a case spread and then importantly, what government restrictions are being put in place in response to try to manage the pandemic.
In Asia Pacific, specifically really the the in China. The pandemic started and that economy was hardest hit early on so in some regards the are further ahead on the journey of what recovery looks like and I think what you see in China.
The choppy uneven recovery is not of straight line trajectory and the different governments are trying to manage this thing as we as we dig our way out of it.
Generally speaking we see we saw in Q1 organic growth rate across the entire APAC region and that was in every product category every geography on every channel. So we really view APAC as on the trajectory of broad based economic market recovery, which we are prepared to capitalize on but I do expect a bit of unevenness as we get back.
Back to normal or say pre pandemic levels, because we've seen that in every other geography, it's just not of straight line for coverage.
Understood absolutely your pitch for the time guys. Thank you.
Thank you.
Your next question comes from the line of Mike <unk> with <unk> Securities.
Hey, guys. Thanks for taking my questions here.
I wanted to ask about the margin performance in the quarter. It was one of your best EBITDA margin quarter as ever I mean, I guess, the only better quarter was last year's second quarter. When you had some of the ex.
Dream Furloughs and extreme cost cuts during the worst of the pandemic.
I'm kind of curious.
You alluded to.
We're still some tailwind.
Tailwind from pandemic related reductions, but can you maybe help us quantify how much of the EBITDA in the quarter was.
Yes.
Come back in future quarters.
So a couple of things I think improve.
The improvement that you saw on the quarter really reflects higher productivity, which we mentioned the mix of product.
On a number of action the company taken including price actions and cost reduction.
So that wasn't a big impact into kind of the gross margin percentage and performance for the.
The quarter.
On.
From an M&A perspective, there was significant.
The management that we saw in the first quarter.
Part of that one anthemic related the cash.
On one time certain often it's for not occurring line travel and trade shows and other costs like that so.
The quarter benefited M.
Specific actions taken by the company as well as just kind of actions that were related to that.
Yes, I would just add Q1 in my mind is an important proof point youll recall during the entirety of 2020, we discussed our ability to continue to execute against our enterprise strategy and drive the structural improvements on our business. So that we can get leverage with volume and we were we call did emerge strong we were good.
Our house in order so that when the markets recovered we found only be in a position the service the demand, but get the leverage with the volume of those I think what youre seeing in Q1 as we're demonstrating we can deliver of productivity and use the volume drove leverage from the volume to our benefit so to me. It's a proof point of the actions of the themes book in 2020 does.
<unk>, a very challenging operating environment to drive structural improvements in the business and now we're beginning to reap the rewards in Q1.
Oh absolutely.
Great job of all along here, but there is no number you can give us as to what travel and Tradeshow may have impacted the.
The EBITDA by or is that really just not much of a material number that flow of 15, 5% was almost entirely due to the ongoing initiatives.
I think Mike the.
The SNA impact of those items is maybe a couple of million dollars.
But I also then wouldn't then say if you add a couple of million dollars to our Q1 numbers that wouldn't necessarily be.
A good baseline for our future quarter SG&A, either though to acquire point that I made we are continuing to make strategic investments into our business. So we can continue to implement our strategic.
Plan and get dividends in future years so.
On the question is really getting to can we take Q1, and just extrapolate out I'd be careful there and really lean on our guidance that we've provided that accounts for the headwinds that Dave and Bay of talked about on the gross margin line and the incremental investments we want to make in the business.
Got it perfect.
Perfect.
And perhaps the law.
Last one for me.
Comment on on the pricing environment from competitors out there or is anybody being irrational in the current environment.
I'll take the.
The pricing in our business is difficult to assess.
Because of the only way you find out about it as sort of that channel for customers on there, they're hesitant to share because it removes their leverage from there.
The negotiations are.
Our competitors are in large part very rational competitors on pricing is rational in the marketplace that doesn't mean that we don't see some odd behaviors from time to time.
At the end of the day.
We're going to be rational about our pricing and we're going to get paid for the value. We're delivering on one of the tenants one of the pillars of our enterprise strategy is just that and to make sure that we price to market and we price strategically to make sure that we're delivering value to our customers and getting paid for the value that we're delivering to our customers. So yes.
The pricing is interesting and something we need to we need to.
Take the take mind oven and our customers are ultimately the gauge of whether we are in command of more premium or not when we price and so.
No we haven't seen anything crazy this year, but we will continue the coupon on it.
Perfect. Thank you so much I appreciate it thank you.
Since there are no further questions at this time I would like to turn the call over to management for closing remarks.
Thank you again, all for joining us on for your interest in Tennant I also want to give a special thank you to our global tenants. The teams for all they have done in the continue to do on meeting the challenges of the ongoing pandemic.
This concludes our earnings call Hope you have a nice day.
Thank you for participating this concludes today's conference call you may now disconnect.