Q2 2024 Tennant Co Earnings Call

Operator: Good morning. My name is Karen, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Tennant Company's second quarter 2024 earnings conference call. This call is being recorded. There will be time for Q&A at the end of the call. Please press star 1 if you'd like to ask a question. After the Q&A, please stay on the line for closing remarks from management. If you've joined our call 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.

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Operator: At this time, I'd like to welcome everyone to Tennant Company's second quarter 2024 earnings conference call. This call is being recorded. There will be time for Q&A at the end of the call. Please press star 1 if you'd like to ask a question. After the Q&A, please stay on the line for closing remarks from management. If you've joined our call 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.

Karen: Good morning. My name is Karen and I'll be your conference operator today. At this time, I'd like to welcome everyone to Tennant Company's second quarter 2024 earnings conference call.

Operator: This call is being recorded. There will be time for Q&A at the end of the call. Please press star 1 if you'd like to ask a question.

Operator: After the Q&A, please stay on the line for closing remarks from management. If you've joined our call 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.

Operator: Thank you for participating in Tennant Company's second quarter 2024 earnings conference call. Beginning today's meeting is Mr. Lorenzo Bassi, Vice President, Finance and Investor Relations for Tennant Company. Mr. Bassi, you may begin.

Lorenzo Bassi: Thank you for participating in Tennant Company's second quarter 2024 earnings conference call. Beginning today's meeting is Mr. Lorenzo Bassi, Vice President, Finance, and Investor Relations for Tennant Company. Mr. Bassi, you may begin.

Operator: Thank you for participating in Tennant Company's second quarter 2024 earnings conference call. Beginning today's meeting is Mr. Lorenzo Bassi, Vice President, Finance, and Investor Relations for Tennant Company. Mr. Bassi, you may begin.

Lorenzo Bassi: Good morning, everyone, and welcome to the Tenant Company second quarter 2024 earnings conference call. I'm Lorenzo Bassi, Vice President, Finance, and Investor Relations. Joining me on the call today are Dave Huml, Tennant's President and CEO, and Fay West, Senior Vice President, and CEO.

Lorenzo Bassi: Good morning, everyone, and welcome to Tennant Company's second quarter 2024 earnings conference call. I'm Lorenzo Bassi, Vice President, Finance and Investor Relations.

Lorenzo Bassi: I'm Lorenzo Bassi, Vice President, Finance and Investor Relations. Joining me on the call today are Dave Huml, Tennant's President and CEO, and Fay West, Senior Vice President and CEO. Dave will discuss our results and enterprise strategy, and Fay will cover our After our prepared remarks, we will open the call to questions. Such statements are subject to risks and uncertainties, and our actual results may differ materially from those contained in the statement

Lorenzo Bassi: Joining me on the call today are Dave Huml, Tenants President and CEO, and Faye West, Senior Vice President and CFO.

Lorenzo Bassi: Today, we will provide an update on our 2024 second quarter performance. Dave will discuss our results and enterprise strategy, and Fay will cover our. After a prepared remark, we will open the call to. Our early press release and slide presentation that accompanied this conference call are available on our investor relations website. Before we begin, please be advised that our remarks this morning and our answers to questions may contain forward-looking statements regarding the company's expectations of future performance.

Speaker Change: Today, we will provide an update on our 2024 second quarter performance.

Lorenzo Bassi: Dave will discuss our results and enterprise strategy, and Fay will cover our financials.

Lorenzo Bassi: After our prepared remarks, we will open the call to questions.

Lorenzo Bassi: Our early press release and slide presentation that accompanies this conference call are available on our investor relations website.

Lorenzo Bassi: 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 in 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 us. Additionally, on this conference call, we will discuss non-GAAP measures that include or exclude certain items. Our 2024 second quarter earnings release includes comparable gap measures and a reconciliation of non-gap measures to our GAAP. I will now turn the call over to Dave.

Lorenzo Bassi: Before we begin, please be advised that our remarks this morning and our answers to questions may contain forward-looking statements regarding the company's expectations of future performance.

Lorenzo Bassi: Such statements are subject to risks and uncertainties, and our actual results may differ materially from those contained in the statements.

Lorenzo Bassi: These risks and uncertainties are described in today's news release and the documents we filed with the Securities and Exchange Commission.

Lorenzo Bassi: 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.

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

Speaker Change: Our 2024 second quarter earnings release includes the comparable gap measures and a reconciliation of non-gap measures to our gap results.

Dave Huml: Thank you, Lorenzo, and hello, everyone. On the call today, I will be discussing highlights from the second quarter of 2024, our outlook for the remainder of the year, and the progress on our enterprise strategy. I am pleased to report on our strong results in the quarter. Lapping a previous record high second quarter in the prior year, we achieved both organic net sales growth and increased adjusted EBITDA. Our performance was driven by generating strong order demand, as well as continued strong backlog benefit.

Karen: Good morning. My name is Karen and I'll be your conference operator today. At this time, I'd like to welcome everyone to Tenant Company's second quarter, 2024 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'd like to ask a question. After the Q&A, please stay on the line for closing remarks from management. If you've joined our call, 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 Tenant Company's second quarter, 2024 earnings conference call.

Lorenzo Bassi: I will now turn the call over to Dave.

Dave Huml: thank you lorenzo and hello everyone on the call today i will be discussing highlights from the second quarter two thousand and twenty four our outlook for the remainder of the year and the progress on our enterprise strategy

David Huml: I am pleased to report on our strong results in the quarter. Lapping a previous record-high second quarter in the prior year, we achieved both organic net sales growth and increased adjusted EBITDA. For the second quarter of 2024, net sales increased 2.9% to $331 million, and adjusted EBITDA rose to $58.6 million, resulting in an adjusted EBITDA margin of 17.7%.

David Huml: I am pleased to report on our strong results in the quarter. Lapping a previous record high second quarter in the prior year, we achieved both organic net sales growth and increased adjusted EBITDA.

David Huml: Our performance was driven by generating strong order demand as well as continued strong backlog benefit.

Dave Huml: Enabled by the execution of our enterprise strategy initiatives, we expect to drive continued order growth in the second half of 2024. For the second quarter of 2024, net sales increased 2.9% to $331 million, and adjusted EBITDA rose to $58.6 million, resulting in an adjusted EBITDA margin of 17.7%.

David Huml: enabled by the execution of our enterprise strategy initiatives we expect to drive continued order growth in the second half of two thousand and twenty-four

Lorenzo Bassi: Beginning today's meeting is Mr. Lorenzo Bassi, Vice President, Finance, and Investor Relations for Tenant Company. Mr. Bassi, you may begin. Good morning, everyone and welcome to Tenant Company's second quarter, 2024 earnings conference call. I'm Lorenzo Bassi, Vice President, Finance and Investor Relations. Joining me on the call today are Dave Huml, Tenant's President and CEO and Fay West, Senior Vice President and CFO. Today, we will provide an update on our 2024 Second Quarter Performance.

David Huml: For the second quarter of 2024, net sales increased 2.9% to $331 million and adjusted EBITDA rose to $58.6 million, resulting in an adjusted EBITDA margin of 17.7%.

Dave Huml: We are pacing ahead of our year-to-date backlog reduction expectations, and we are confident in our ability to achieve the $80 to $100 million of backlog reduction in the full year 2024, as we previously communicated. With this backlog reduction, we now believe we will exit 2024 with a normalized backlog level and market competitive lead times across the entire product portfolio globally. Second quarter order rates were very strong, up double digits compared to both the first quarter of 2024 and the second quarter of 2023.

David Huml: We are pacing ahead of our year-to-date backlog reduction expectations, and we are confident in our ability to achieve the $80 to $100 million of backlog reduction in the full year 2024 as we previously communicated.

Speaker Change: with this backlog reduction we now believe we will excess two thousand and twenty-four with a normalized backlog level and market competitive lead times across the entire product portfolio globally

Lorenzo Bassi: Dave will discuss our results and enterprise strategy and Fay will cover our financial. After our prepared remarks, we will open the call to questions. Our earnings press release and slide presentation that a company's conference call are available on our Investor Relations website. Before we begin, please be advised that our remarks this morning and our answers to questions may contain forward-looking statements regarding the company's expectations of future performance. Such statements are subjects to risks and uncertainties and our actual results may differ materially from those contained in the statement.

David Huml: Second quarter order rates were very strong, up double digits compared to both the first quarter of 2024 and second quarter of 2023. This order demand generation is a direct result of the investments we made and the execution of our enterprise growth strategy.

Dave Huml: This order demand generation is a direct result of the investments we made and the execution of our enterprise growth strategy. Looking ahead to the second half of the year, we are forecasting continued strong order growth driven by the rigorous execution of targeted growth initiatives. We expect an increased impact on growth from incoming orders as the backlog reduction benefit moderates in the second half. With our strong first half performance as a company, we are increasing full year guidance for both net sales and adjusted EBITDA. Despite known challenges and reasons for caution in the macroeconomic environment, demand for Tennant products and services remains strong.

David Huml: Looking ahead to the second half of the year, we are forecasting continued strong order growth driven by rigorous execution of targeted growth initiatives. In the Americas, order rates during the quarter were up double digits compared to the prior year period, and we continue to reduce the backlog in our industrial machines. Our strategic investments in this region continue to deliver strong order rates, outpacing market growth, giving us reason to believe our strong leadership position is growing.

David Huml: Looking ahead to the second half of the year, we are forecasting continued strong order growth driven by rigorous execution of targeted growth initiatives. We expect increased impact on growth from incoming orders as the backlog reduction benefit moderates in the second half.

Lorenzo Bassi: These risks and uncertainties are described in today's news release and the documents we file with the Securities and Exchange Commission. We encourage you to review those documents particularly our safe harbor statement for a description of the risk and uncertainties that may affect our results. Additionally, on this conference call, we will discuss non-gap measures that include or excludes certain items. Our 2024 Second Quarter Earnings release includes the comparable gap measures and a reconciliation of non-gap measures to our gap results.

David Huml: With our strong first-half performance as a company, we are increasing full-year guidance for both net sales and adjusted EBITDA.

David Huml: despite known challenges and reasons for cautioned in the macroeconomic environment demand for tenant products and services remain strong

Dave Huml: Tennant's enterprise performance during the quarter gives us momentum, and we are forecasting higher net sales in the second half of the year. However, circling back to our solid second quarter as a company, our business results varied by geography. In the Americas, order rates during the quarter were up double digits compared to the prior year period, and we continue to reduce the backlog for our industrial machines. Our strategic investments in this region continue to deliver strong order rates, outpacing market growth, giving us reason to believe our strong leadership position is growing. In EMEA, it was a challenging quarter across the region, compounded by lapping a previous quarter with higher backlog reduction benefits. Economic activity in EMEA's manufacturing sector remains sluggish, and our sales were flat.

David Huml: Tennant's enterprise performance during the quarter gives us momentum, and we are forecasting higher net sales in the second half of the year.

David Huml: Circling back to our solid second quarter as a company, our business results varied by geography.

David Huml: I will now turn the call over today. Thank you Lorenzo and hello everyone. On the call today, I will be discussing highlights from the Second Quarter 2024, our outlook for the remainder of the year and the progress on our enterprise strategy.

David Huml: In the Americas, order rates during the quarter were up double digits compared to the prior year period, and we continue to reduce the backlog in our industrial machines.

David Huml: Our strategic investments in this region continue to deliver strong order rates, outpacing market growth, giving us reason to believe our strong leadership position is growing.

David Huml: I am pleased to report on our strong results in the quarter. Lapping a previous record-high Second Quarter in the prior year, we achieved both organic net sales growth and increased adjusted EBITDA. Our performance was driven by generating strong order demand as well as continued strong backlog benefits. Enabled by the execution of our enterprise strategy, initiatives, we expect to drive continued order growth in the second half of 2024. For the second quarter of 2024, net sales increased 2.9% to $331 million and adjusted EBITDA rose to $58.6 million resulting in an adjusted EBITDA margin of 17.7%.

David Huml: In EMEA, it was a challenging quarter across the region, compounded by lapping a previous quarter with higher backlog reduction benefit. Economic activity in EMEA's manufacturing sector remained sluggish and our sales were flat.

Dave Huml: Despite this broad-based market softness, we are seeing indicators that give us reasons for optimism in our outlook for the region. In Italy, for example, we are seeing strong order rates as we build out our distribution network with a focus on industrial, BSE, and retail vertical market customers. Also, across the region, we are building a strong pipeline of opportunities leveraging our market-leading AMR product portfolio and value proposition. Overall, order rates in the region are up compared to the prior year quarter, and we expect to see continued improvement during the second half of 2024. In AIPAC, we faced a difficult quarter driven primarily by stark declines in China, where we are experiencing slowing demand.

David Huml: Despite this broad-based market softness, we are seeing indicators that give us reasons for optimism in our outlook for the region. In Italy, for example, we are seeing strong order rates as we build out our distribution network with a focus on industrial, BSE, and retail vertical market customers.

David Huml: Also, across the region, we are building a strong pipeline of opportunities leveraging our market-leading AMR product portfolio and value proposition. This is affecting not just the Chinese market but the broader region as well, and we do not see this dynamic changing for the remainder of the year.

David Huml: Also, across the region, we are building a strong pipeline of opportunities leveraging our market-leading AMR product portfolio and value proposition.

David Huml: We are pacing ahead of our year-to-date backlog reduction expectations and we are confident in our ability to achieve the 80 to $100 million of backlog reduction in the full year 2024 as we previously communicated. With this backlog reduction, we now believe we will exit 2024 with a normalized backlog level and market competitive lead times across the entire product portfolio globally. Second quarter order rates were very strong up double digits compared to both the first quarter of 2024 and second quarter of 2023.

David Huml: Overall, order rates in the region are up compared to the prior year quarter, and we expect to see continued improvement during the second half of 2024.

David Huml: In APAC, we faced a difficult quarter driven primarily by stark declines in China, where we are experiencing slowing demand. As has been widely reported, excess manufacturing capacity and government-induced overproduction in China are pressuring market prices in our mid-tier product offerings.

Dave Huml: As has been widely reported, excess manufacturing capacity and government-induced overproduction in China are pressuring market prices for our mid-tier product offerings. This is affecting not just the Chinese market but the broader region as well, and we do not see this dynamic changing for the remainder of the year.

David Huml: This is affecting not just the China market, but the broader region as well, and we do not see this dynamic changing for the remainder of the year.

David Huml: This order demand generation is a direct result of the investments we made and the execution of our enterprise growth strategy. Looking ahead to the second half of the year, we are forecasting continued strong order growth driven by rigorous execution of targeted growth initiatives. We expect increased impact on growth from incoming orders as the backlog reduction benefit moderates in the second half. With our strong first half performance as a company, we are increasing full year guidance for both net sales and adjusted EBITDA.

David Huml: In Australia, we are seeing customer caution and a moderating in demand as some customers delay order decisions. Last year, we introduced the three pillars of our new enterprise strategy: growth, performance, and people. We continue to invest in and execute targeted initiatives across each of these pillars. And I'd like to take the opportunity to provide you with several key updates from the quarter.

Dave Huml: In Australia, we are seeing customer caution and a moderating in demand as some customers delay order decisions. As a result of the Q2 slowdown, we are expecting minimal growth in the APAC region for the full year 2024. Last year, we introduced the three pillars of our new enterprise strategy: growth, performance, and people. We continue to resource invest in and execute targeted initiatives across each of these pillars. And I'd like to take this opportunity to provide you with several key updates from the quarter.

David Huml: In Australia, we are seeing customer caution and a moderating in demand as some customers delay order decisions.

David Huml: As a result of the Q2 slowdown, we are expecting minimal growth in the APAC region for the full year 2024.

David Huml: Last year we introduced the three pillars of our new enterprise strategy growth, performance, and people. We continue to resource, invest, and execute targeted initiatives across each of these pillars and I'd like to take the opportunity to provide you with several key updates from the quarter.

Dave Huml: Within the growth pillar, pricing is a critical piece to driving growth. Our pricing strategy is about maximizing our market position to realize growth and capture the value we deliver to our customers. During the second quarter and throughout the first half of 2024, we saw price growth across each of our key geographies. At an enterprise level, we are targeting approximately 50 to 100 basis points of annual price growth as part of our long-term goals.

David Huml: Despite known challenges and reasons for caution in the macro economic environment, demand for tenant products and services remain strong. Tenets enterprise performance during the quarter gives us momentum and we are forecasting higher net sales in the second half of the year.

David Huml: Within the growth pillar, pricing is a critical piece to driving growth. Our pricing strategy is about maximizing our market position to realize growth and capture the value we deliver to our customers.

David Huml: During the second quarter and throughout the first half of 2024, we saw price growth across each of our key geographies.

David Huml: At an enterprise level, we are targeting approximately 50 to 100 basis points of annual price growth as part of our long-term goals. We are well positioned to achieve that in 2024 as we continue to monitor market dynamics to capture both long-term price and volume growth. During the second quarter of 2024, we started shipping our first X4 Rover orders to customers. As previously discussed, the X4 Rover is our first purpose-built autonomous floor cleaning machine and our fourth robotic scrubber. The new X4 Rover is the first machine to be powered by the Gen 3 Brain OS robotics platform available exclusively to Tennant.

David Huml: Circling back to our solid second quarter as a company, our business results varied by geography. In the Americas order rates during the quarter were up double digits compared to the prior year period and we continue to reduce the backlog in our industrial machines. Our strategic investments in this region continue to deliver strong order rates outpacing market growth giving us reasons to believe our strong leadership position is growing.

David Huml: at an enterprise level we are targeting approximately fifty- one hundred basis points of annual price growth as part of our long-term goals we are well positioned to achieve that in two thousand andtwenty four as we continue to monitor market dynamics to capture both long-term price and volume growth

Dave Huml: We are well positioned to achieve that in 2024 as we continue to monitor market dynamics to capture both long-term price and volume growth. New product development is another important focus in our growth pillar. During the second quarter of 2024, we started shipping our first X4 Rover orders to customers. As previously discussed, the X4 Rover is our first purpose-built autonomous floor cleaning machine and our fourth robotic scrubber. The new X4 Rover is the first machine to be powered by the Gen 3 Brain OS Robotics Platform, available exclusively to Tennant.

David Huml: New product development is another important focus in our growth pillar. During the second quarter of 2024, we started shipping our first X4 rover orders to customers.

David Huml: In Emea, it was a challenging quarter across the region, compounded by lapping a previous quarter with higher backlog reduction benefit. Economic activity in Emea's manufacturing sector remains sluggish and our sales were flat. Despite this broad-based market softness, we are seeing indicators that give us reasons for optimism in our outlook for the region. In Italy, for example, we are seeing strong order rates as we build out our distribution network with a focus on industrial, BSE and retail vertical market customers.

David Huml: As previously discussed, the X4 Rover is our first purpose-built, autonomous floor-cleaning machine and our fourth robotic scrubber.

David Huml: The new X4 Rover is the first machine to be powered by the Gen 3 Brain OS Robotics Platform, available exclusively to Tennant.

Dave Huml: Last quarter, we evaluated increasing production due to strong initial customer interest and an opportunity pipeline. As orders and customer interest for the X4 Rover continue to increase throughout the second quarter, we decided to increase our manufacturing capacity to support the anticipated order demand. In addition to the strong market reception for our new export rover, we also continue to see high demand for each of our existing AMR products as customers are replacing and expanding their existing AMR fleet with new units.

David Huml: Last quarter, we evaluated increasing production due to strong initial customer interest and opportunity pipeline. These reorders demonstrate the continued market preference for the Tennant AMR value proposition and the potential for continued growth across each of our AMR product lines. The T-16 AMR, our first industrial robotic floor scrubber targeting manufacturing, warehousing, and logistics verticals, has seen some of the strongest adoption rates.

David Huml: Last quarter, we evaluated increasing production due to strong initial customer interest and opportunity pipeline.

David Huml: As orders and customer interest for the X-4 rover continue to increase throughout the second quarter, we decided to increase our manufacturing capacity to support the anticipated order demand.

David Huml: Also across the region, we are building a strong pipeline of opportunities leveraging our market leading AMR product portfolio and value proposition. Overall, order rates in the region are up compared to the prior year quarter and we expect to see continued improvement during the second half of 2024.

David Huml: In addition to the strong market reception for our new X4 rover, we also continue to see high demand in each of our existing AMR products as customers are replacing and expanding their existing AMR fleet with new units.

David Huml: In APAC, we face the difficult quarter driven primarily by stark declines in China where we are experiencing slowing demand. It has been widely reported excess manufacturing capacity and government-induced overproduction in China are pressuring market prices in our mid-year product offerings. This is affecting not just the China market but the broader region as well and we do not see this dynamic changing for the remainder of the year. In Australia, we are seeing customer caution and a moderating in demand as some customers delay order decisions. As a result of the Q2 slowdown, we are expecting minimal growth in the APAC region for the full year 2024.

Dave Huml: These reorders demonstrate the continued market preference for the Tennant AMR value proposition and the potential for continued growth across each of our AMR product lines. The T-16 AMR, our first industrial robotic floor scrubber targeting manufacturing, warehousing, and logistics verticals, has seen some of the strongest adoption rates.

David Huml: These reorders demonstrate the continued market preference for the Tennant AMR value proposition and the potential for continued growth across each of our AMR product lines.

David Huml: the t sixteen mr our first industrial robotic flloor scrubber targeting manufacturing warehousing and logistics verticals has seen some of the strongest adoption rates

Dave Huml: Customers in those verticals are already familiar with the benefits of robotics and are excited to take advantage of the T16AMR capabilities. AMR unit sales, including the X4 Rover for the first half of 2024, are trending well ahead of both the prior year and previous multi-year averages. This trend supports our belief that we have a winning product portfolio and strong value proposition in the market. Also, within our growth pillar is our M&A strategy, which prioritizes opportunities that provide tenants with the right strategic value, operational fit, and financial return. Our focus is on three areas. One is growing the core. Two, driving value through connected autonomy.

Speaker Change: Customers in those verticals are already familiar with the benefits of robotics and are excited to take advantage of the T16 AMR capabilities.

David Huml: AMR unit sales, including the X4 Rover for the first half of 2024, are trending well ahead of both the prior year and previous multi-year averages.

David Huml: Last year, we introduced the three pillars of our new enterprise strategy, growth, performance and people. We continue to resource, invest and execute targeted initiatives across each of these pillars. I would like to take the opportunity to provide you with several key updates from the quarter. With the growth pillar, pricing is a critical piece to driving growth. Our pricing strategy is about maximizing our market position to realize growth and capture the value we deliver to our customers.

David Huml: This trend supports our belief that we have a winning product portfolio and a strong value proposition in the market. Our focus is on three areas. One, growing the core. Two, driving value through connected autonomy.

David Huml: This trend supports our belief that we have a winning product portfolio and strong value proposition in the market.

Speaker Change: also within our growth pillar is our a strategy which prioritizes opportunities that provide tenant with the right strategic value operational fit and financial return

Dave Huml: And three, expanding into select adjacent markets. Our previously mentioned investment in BrainCorp aligns with our second focus area, driving value through connective autonomy, and has been a key driver in our AMR success this year. Our investment in BrainCorp provides us with exclusive access to Gen 3 technology, increased selling efficiency, and the opportunity to benefit from annual recurring revenue. We are realizing the intended benefits of our strength in relationship with Rain Corp and are excited to continue to lead the robotics disruption of the global mechanized cleaning equipment industry. Our previously announced acquisition of TCS, Tennant's long-standing distributor based in Austria, aligns with the first focus area within our M&A strategy, growing the core.

David Huml: And three, expanding into select adjacent markets. Our previously mentioned investment in BrainCorp aligns with our second focus area, driving value through connective autonomy, and has been a key driver in our AMR success this year. Our investment in BrainCorp provides us with exclusive access to Gen 3 technology, increased selling efficiency, and the opportunity to benefit from annual recurring revenue. We are realizing the intended benefits of our strength in relationship with Rain Corp and are excited to continue to lead the robotics disruption of the global mechanized cleaning equipment industry.

David Huml: Our focus is on three areas. One, growing the core. Two, driving value through connected autonomy. And three, expanding into select adjacencies.

David Huml: During the second quarter and throughout the first half of 2024, we saw price growth across each of our key geographies. At an enterprise level, we are targeting approximately 50 to 100 basis points of annual price growth as part of our long term goals. We are well positioned to achieve that in 2024. As we continue to monitor market dynamics to capture both long term price and volume growth.

David Huml: Our previously mentioned investment in BrainCorp aligns with our second focus area, driving value through connective autonomy, and has been a key driver in our AMR success this year.

David Huml: Our investment in BrainCorp provides us exclusive access to Gen 3 technology, increased selling efficiency, and the opportunity to benefit from annual recurring revenue.

David Huml: New product development is another important focus in our growth pillar. During the second quarter of 2024, we started shipping our first X4 Rover orders to customers. As previously discussed, the X4 Rover is our first purpose built autonomous floor cleaning machine and our fourth robotic scrubber. The new X4 Rover is the first machine to be powered by the genuine three brain OS robotics platform available exclusively to tenant. Last quarter, we evaluated increasing production due to strong initial customer interest and opportunity pipeline.

David Huml: We are realizing the intended benefits of our strengthened relationship with Rain Corp. and are excited to continue to lead the robotics disruption of the global mechanized cleaning equipment industry.

David Huml: Our previously announced acquisition of TCS, Tennant's long-standing distributor based in Austria, aligns with the first focus area within our M&A strategy, growing the core. Our TCS integration is on track to date, and the business is performing in line with expectations. In June, Tennant published its 2024 Sustainability Report. This year's report marks the first year of reporting aligned to our new sustainability framework, Thriving People, Healthy Planet

David Huml: Our previously announced acquisition of TCS, Tennant's long-standing distributor based in Austria, aligns with the first focus area within our M&A strategy, growing the core.

Dave Huml: Our TCS integration is on track to date, and the business is performing in line with expectations. We are impressed by the teams in these geographies and are developing aggressive growth plans for the business in this attractive region. Our successful execution on our M&A strategy is due to our financial strength and disciplined capital allocation strategy. As we continue to generate strong cash flow and maintain a strong balance sheet, we are well positioned to act on those target opportunities aligned with our M&A strategy.

David Huml: our tcs integration is on track to date and the business is performing in line with expectations

David Huml: We are impressed by the teams in these geographies and are developing aggressive growth plans for the business in this attractive region.

David Huml: As orders and customer interest for the X4 Rover continue to increase throughout the second quarter, we decided to increase our manufacturing capacity to support the anticipated order demand. In addition to the strong market reception for our new X4 Rover, we also continued to see high demand in each of our existing AMR products as customers are replacing and expanding their existing AMR fleet with new units. These reorders demonstrate the continued market preference for the tenant AMR value proposition and the potential for continued growth across each of our AMR product lines.

David Huml: Our successful execution on our M&A strategy is due to our financial strength and disciplined capital allocation strategy.

David Huml: as we continue to generate strong cash flow and maintain a strong balance sheet we are well positioned to act on those target opportunities aligned with our im strategy

Dave Huml: Now, turning to our performance pillar and sustainability. In June, Tennant published its 2024 Sustainability Report. This year's report marks the first year of reporting aligned to our new sustainability framework, Thriving People, Healthy Planet. We are proud of the work we are doing to embed sustainability in how we think, plan, and operate our business. We believe that by setting ambitious goals, we will drive progress for our customers, our business, our people, our communities, and the planet.

David Huml: Now, turning to our performance pillar and sustainability.

Speaker Change: In June, Tenet published our 2024 Sustainability Report. This year's report marks the first year of reporting aligned to our new sustainability framework, Thriving People, Healthy Planet.

David Huml: The T16 AMR our first industrial robotic floor scrubber targeting manufacturing, warehousing and logistics verticals has seen some of the strongest adoption rates. Customers and those vehicles are already familiar with the benefits of robotics and are excited to take advantage of the T16 AMR capabilities. AMR unit sales, including the X4 Rover for the first half of 2024 are trending well ahead of both the prior year and previous multi year averages. This trend supports our belief that we have a winning product portfolio and strong value proposition in the market.

David Huml: We are proud of the work we are doing to embed sustainability in how we think, plan, and operate our business. We believe that by setting ambitious goals, we will drive progress for our customers, our business, our people, our communities, and the planet.

Dave Huml: The report details the significant progress we made, including integrating our net zero goals into our product line strategies, and continuing progress toward our validated net zero targets by reducing our scope one and two greenhouse gas emissions by 13%, sourcing 92% of our global electricity from renewable energy sources, and reducing our scope three emissions by 18%. Our ERP modernization journey is the second piece of our performance pillar. The project is on track, and our focus in 2024 will continue to be on the design and build phase of the implementation.

David Huml: The report details the significant progress we made, including integrating our net-zero goals into our product line strategies,

David Huml: continuing progress toward our validated net zero targets by reducing our scope one two greenhouse gas emissions thirteen percent sourcing ninety two percent of our global electricity from renewable energy sources and reducing our scope three emissions by eight percent

David Huml: Also within our growth pillar is our M&A strategy, which prioritizes opportunities that provide tenant with the right strategic value, operational fit and financial return. Our focus is on three areas, one, growing the core, two, driving value through connected autonomy and three, expanding into selective agencies. Our previously mentioned investment in BrainCorp aligns with our second focus area, driving value through connected autonomy and has been a key driver in our AMR success this year.

David Huml: Our ERP modernization journey is the second piece of our performance pillar.

David Huml: The project is on track and our focus in 2024 continues to be on the design and build phase of the implementation.

Dave Huml: Our significant investment in this ERP consolidation project will provide a strong and secure digital infrastructure to enable globally standardized processes and systems for scalable growth by better serving more customers and unlocking operational efficiency. Overall, our second quarter results reflect solid execution on our enterprise growth strategy, providing strong momentum for the remainder of 2024 and the years ahead. With that, I will turn the call over to Fay for a discussion of our finances.

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

David Huml: Our investment in BrainCorp provides us exclusive access to Gen3 technology, increased selling efficiency and the opportunity to benefit from annual recurring revenue. We are realizing the intended benefits of our strength and relationship with BrainCorp and are excited to continue to lead the robotics disruption of the global mechanized cleaning equipment industry.

David Huml: Overall, our second quarter results reflect solid execution on our enterprise growth strategy, providing strong momentum for the remainder of 2024 and the years ahead.

Fay West: Thank you, Dave, and good morning, everyone. In the second quarter of 2024, Tennant delivered GAF-Net income of $27.9 million, compared to $31.3 million in the prior year. This was partly offset by volume declines in the EMEA and APAC regions. Looking beyond operating income, interest expense in the second quarter was $1.5 million lower than the prior year period. Our average interest rate net of hedging for the second quarter of 2024 was 3.88 percent compared to 4.35 percent in the prior year quarter. Income tax expense in the quarter was $0.4 million higher than the prior year period. Our effective tax rate was 24.4% in the second quarter of 2024, compared to 21.6% in the prior year.

Fay West: Thank you, Dave, and good morning everyone. In the 2nd quarter of 2024, Tennant delivered GAF-Net income of $27.9 million, compared to $31.3 million in the prior year. Net income performance in the quarter was driven by higher net sales from price realization, although this was partly offset by volume declines in the Emea and A-Pakery. Overall, while our volumes remain flat, we are pleased with the net volume growth we are seeing in the Americas.

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

Fay West: thank you days in good morning everyone in the second quarter of two thousand and twenty four tenant delivered gas net income of twenty seven point nine million dollars compared to thirty one point three million dollars in the prior year period

David Huml: Our previously announced acquisition of TCS tenant longstanding distributor based in Austria aligns with the first focus area within our M&A strategy, growing the core. Our TCS integration is on track to date and the business is performing in line with expectations. We are impressed by the teams in these geographies and are developing aggressive growth plans for the business in this attractive region.

Fay West: net income performance in the quarter was driven by higher net sales from price realization this was partly offset by volume declines in the ama and apac region

Speaker Change: overall while our volumes remains flat we are pleased with the net volume growth we are seeing in the americas

Fay West: Operating expenses were higher in the current year due to the ERP implementation, as well as transaction and integration costs associated with our investment in BrainCorp and the acquisition of. Looking beyond operating income, interest expense in the second quarter was one and a half million dollars lower than the prior year period. This was driven mostly by lower debt balances as we meaningfully reduce debt during the second half of 2020. Our average interest rate net of hedging for the second quarter of 2024 was 3.88% compared to 4.35% in the prior year quarter. Income tax expense in the quarter was $0.4 million higher than the prior year period. Our effective tax rate was 24.4% in the second quarter of 2024, compared to 21.6% in the prior year.

David Huml: Our successful execution on our M&A strategy is due to our financial strength and discipline capital allocation strategy. As we continue to generate strong cash flow and maintain a strong balance sheet, we are well positioned to act on those target opportunities aligned with our M&A strategy.

Fay West: Operating expenses were higher in the current year due to the ERP implementation, as well as transaction and integration costs associated with our investment in BrainCorp and the acquisition of PCS.

Fay West: Looking beyond operating income, interest expense in the second quarter was $1.5 million lower than the prior year period.

David Huml: Now turning to our performance pillar and sustainability. In June, Tennant published our 2024 Sustainability Report. This year's report marks the first year of reporting aligned to our new sustainability framework, driving people healthy planet. We are proud of the work we are doing to embed sustainability on how we think, plan, and operate our business. We believe that by setting ambitious goals, we will drive progress for our customers, our business, our people, our communities, and the planet.

Fay West: This was driven mostly by lower debt balances as we meaningfully reduced debt during the second half of 2023.

Fay West: Our average interest rate net of hedging for the second quarter of 2024 was 3.88% compared to 4.35% in the prior year quarter.

Fay West: Income tax expense in the quarter was $0.4 million higher than the prior year period. Our effective tax rate was 24.4% in the second quarter of 2024, compared to 21.6% in the prior year.

David Huml: The report details the significant progress we made, including integrating our net zero goals into our product line strategies, continuing progress toward our validated net zero targets by reducing our scope one and two greenhouse gas emissions 13%, sourcing 92% of our global electricity from renewable energy sources, and reducing our scope three emissions by 8%.

Fay West: The increase was primarily due to an increase in non-deductible executive compensation and unfavorable changes in the mix of forecasted earnings by company. Adjusted EPS for the second quarter of 2024 decreased 1.6% to $1.83 per diluted share compared to the prior year period. On a constant currency basis, organic sales increased 2.7%, driven primarily by strong price realization across all regions. We experienced growth in both equipment and service product categories in the second quarter as compared to the prior year period; parts and consumables declined 3%, driven primarily by distributor consolidation.

Fay West: The increase was primarily due to an increase in non-deductible executive compensation and unfavorable changes in the mix of forecasted earnings. Excluding ERP implementation and other non-GAAP costs, adjusted net income in the second quarter of 2024 was $35.2 million compared to $34.7 million in the prior year period, a 1.4% increase. Adjusted EPS for the second quarter of 2024 decreased 1.6% to $1.83 per diluted share Looking a little more closely at our quarterly results, for the second quarter of 2024, consolidated net sales totaled $331 million, a 2.9% increase compared to $321.7 million in the second quarter of 2023.

Fay West: The increase was primarily due to an increase in non-deductible executive compensation and unfavorable changes in the mix of forecasted earnings by country.

Fay West: Excluding ERP implementation and other non-GAAP costs, adjusted net income in the second quarter of 2024 was $35.2 million, compared to $34.7 million in the prior year period, a 1.4% increase.

David Huml: Our ERP modernization journey is the second piece of our performance pillar. The project is on track and our focus in 2024 continues to be on the design and build phase of the implementation. Our significant investment in this ERP consolidation project will provide a strong and secure digital infrastructure to enable globally standardized processes and systems for scalable growth by better serving more customers and unlocking operational efficiencies.

Fay West: Adjusted EPS for the second quarter of 2024 decreased 1.6% to $1.83 per diluted share compared to the prior year period.

Speaker Change: looking a little more close than at our quarterly results for the second quarter of two thousand and twenty four consolidated ess sales total three hundred and thirty one million dollars a two point nine percent increase compared to three hundred twenty-one point seven million dollars in the second quarter of two thousand and twenty three

David Huml: Overall, our second quarter results reflect solid execution on our enterprise growth strategy, providing strong momentum for the remainder of 2024 and the years ahead.

Fay West: With that, I will turn the call over to today for a discussion of our financials. Thank you, Dave, and good morning, everyone. In the second quarter of 2024, tenants delivered gas net income of $27.9 million compared to $31.3 million in the prior year period. Net income performance in the quarter was driven by higher net sales from price realization. This was partly obsessed by volume declines in the AMA and APAC regions. Overall, while our volumes remain flat, we are pleased with the net volume growth we are seeing in the Americas.

Fay West: On a constant currency basis, organic sales increased 2.7%, driven primarily by strong price realization across all regions. Additionally, there was a shift in product mix from smaller commercial equipment to larger industrial equipment. Volumes in the current period were negatively impacted by sluggish economic growth in EMEA and difficult business conditions in APAC. As a reminder, we group our net sales into the following categories.

Fay West: On a constant currency basis, organic sales increased 2.7 percent, driven primarily by strong price realization across all regions.

Fay West: Additionally, there was a shift in product mix from smaller commercial equipment to larger industrial equipment.

Fay West: Volumes in the current period were negatively impacted by sluggish economic growth in EMEA and difficult business conditions in APAC.

Fay West: Equipment, Parts, and Consumables, and Service and Other. We experienced growth in both equipment and service product categories in the second quarter as compared to the prior year period. Equipment net sales grew 3.7%, and service grew 8.2%. Parts and consumables declined 3%, driven primarily by distributor consolidation. Tennant also groups its sales into three regions. The Americas includes all of North America and Latin America. EMEA covers Europe, the Middle East, and Africa.

Speaker Change: As a reminder, we group our nest sales into the following categories.

Fay West: Operating expenses were higher in the current year due to the ERP implementation, as well as transaction and integration costs associated with our investment in BrainCorp and the acquisition of PCF. Looking beyond operating income, interest expense in the second quarter was $1.5 million lower than the prior year period. This was driven mostly by lower debt balances as we meaningfully reduced debt during the second half of 2023. Our average interest rate, net of hedging for the second quarter of 2024, was 3.88% compared to 4.35% in the prior year quarter.

Fay West: Equipment, Parts and Consumables, and Service and Other.

Fay West: We experienced growth in both equipment and service product categories in the second quarter as compared to the prior year period. Equipment net sales grew 3.7% and service grew 8.2%.

Speaker Change: Parts and consumables declined 3% driven primarily by a distributor consolidation.

Fay West: And Asia Pacific includes Australia, China, Japan, and other Asian markets. Organic sales in the Americas increased 5.5% compared to the prior year period. The increase was driven primarily by price realization and favorable product and channel mix across the region. However, this was partially offset by unit volume decreases in North America, specifically in our commercial machines, which had a higher backlog benefit in the prior year period. Organic sales declined 0.3% in EMEA due to volume declines in both equipment sales and parts and consumables, partially offset by price realization in all product categories.

Fay West: Tennant also groups its sales into three regions. The Americas includes all of North America and Latin America. EMEA covers Europe , the Middle East, and Africa. And Asia-Pacific includes Australia, China, Japan, and other Asian markets.

Fay West: Income Task Expense in the quarter was $0.4 million higher than the prior year period. Our effective tax rate was 24.4% in the second quarter of 2024 compared to 21.6% in the prior year. The increase was primarily due to an increase in non-deductible executive compensation and unfavorable changes in the mix of forecasted earnings by country. Excluding ERP implementation and other non-gas cost, adjusted net income in the second quarter of 2024 was $35.2 million compared to $34.7 million in the prior year period, a 1.4% increase. Adjusted EPS for the second quarter of 2024 decreased 1.6% to $1.83 per diluted share compared to the prior year period.

Fay West: Organic sales in the Americas increased 5.5% compared to the prior year period.

Speaker Change: The increase was driven primarily by price realization and favorable product and channel mix across the region.

Fay West: This was partially offset by unit volume decreases in North America, specifically in our commercial machines, which had a higher backlog benefit in the prior year period. Organic sales decreased 11.9% in APAC, primarily due to volume declines in Australia and China, partially offset by price growth in Australia.

Fay West: This was partially offset by unit volume decreases in North America, specifically in our commercial machines, which had a higher backlog benefit in the prior year period.

Fay West: Organic sales declined 0.3% in EMEA due to volume declines in both equipment sales and parts and consumables, partially offset by price realization in all product categories.

Fay West: Amaya volumes were impacted by weaker than expected market conditions and a smaller contribution from backlog reduction in the current period. Organic sales decreased 11.9% in APAC, primarily due to volume declines in Australia and China, partially offset by price growth in Australia.

Fay West: Amaya volumes were impacted by weaker-than-expected market conditions and a smaller contribution from backlog reduction in the current period.

Fay West: Organic sales decreased 11.9% in APAC, primarily due to volume declines in Australia and China, partially offset by price growth in Australia.

Fay West: Looking a little more closely at our quarterly results. For the second quarter of 2024, consolidated net sales totaled $331 million, a 2.9% increase compared to $321.7 million in the second quarter of 2023. On a constant currency basis, organic sales increased 2.7% driven primarily by strong price realization across all regions. Additionally, there was a shift in product mix from smaller commercial equipment to larger industrial equipment. Volumes in the current period were negatively impacted by sluggish economic growth in AMEA and difficult business conditions in APAC.

Fay West: Adjusted EBITDA for the second quarter of 2024 was $58.6 million, up 1.7% compared to the second quarter of 2023. Our overall margin rate is supported by a continued shift to industrial equipment and the direct sales channel. Turning now to capital deployment, moving to 2024 guidance adjusted EBITDA margin in the range of 16% to 16.5% and capital expenditures of approximately $20 million. With that, I will turn the call back to Dave. Thank you, Fay.

Fay West: Adjusted EBITDA for the second quarter of 2024 was $58.6 million, up 1.7% compared to the second quarter of 2023; adjusted EBITDA margin for the second quarter of 2024 was 17.7 percent of sales, essentially flat compared to the second quarter of 2023. Gross margin was 43.1% in the second quarter, a 30 basis point decrease compared to the prior year quarter. The slight margin rate decrease is attributed to higher inflation, while price realization and cost saving activities materially offset inflation during the quarter.

Fay West: Adjusted EBITDA for the second quarter of 2024 was $58.6 million, up 1.7% compared to the second quarter of 2023.

Speaker Change: Adjusted EBITDA margin for the second quarter of 2024 was 17.7% of sales, essentially flat compared to the second quarter of 2023.

Speaker Change: Growth margin was 43.1% in the second quarter, a 30 basis point decrease compared to the prior year quarter.

Speaker Change: The slight margin rate decrease is attributed to higher inflation, while price realization and cost-saving activities materially offset inflation during the quarter.

Fay West: Our overall margin rate is supported by a continued shift to industrial equipment and the direct sales channel. Adjusted selling and administrative expenses in the quarter totaled $87.5 million, a $1.7 million increase compared to the second quarter of 2023. The increase was driven in part by higher compensation and benefit expense related to incremental resources to support the company's enterprise strategy. Adjusted S&A expense as a percent of net sales was 26.4 percent, essentially flat to 26.7 percent in the second quarter of 2020.

Fay West: As a reminder, we grew our net sales into the following categories. Equipment, parts and consumables, and service in other. We experienced growth in both equipment and service product categories in the second quarter as compared to the prior year period. Equipment net sales grew 3.7% and service grew 8.2%. Parts and consumables declined 3% driven primarily by a distributor consolidation.

Fay West: Our overall margin rate is supported by a continued shift to industrial equipment and the direct sales channel.

Speaker Change: Adjusted selling and administrative expenses in the quarter totaled $87.5 million, a $1.7 million increase compared to the second quarter of 2023.

Speaker Change: the increase was driven in part by higher compensation and benefit expense related to incremental resources to support the company's enterprise strategy

Fay West: Penet also groups it sales into 3 regions. The Americas includes all of North America and Latin America. Emeas covers Europe, the Middle East and Africa. And Asia Pacific includes Australia, China, Japan, and other Asian markets. Organic sales in the Americas increased 5.5% compared to the prior year period. The increase was driven primarily by price realization and favorable product and channel mix across the region. This was partially offset by unit volume decreases in North America, specifically in our commercial machines, which had a higher backlog benefit in the prior year period.

Speaker Change: Adjusted S&A expense as a percent of net sales was 26.4%, essentially flat to the 26.7% in the second quarter of 2023.

Fay West: Turning now to capital deployment, net cash provided by operating activities was $18.6 million during the second quarter compared to $39.1 million in the year-ago period. The decrease in operating cash flow was primarily driven by increases in working capital due to the timing of sales during the quarter as well as investments in ERP modernization costs totaling $9 million, resulting in free cash flow of $14.4 million for the quarter. Excluding these non-operating items, free cash flow was $23.4 million for the second quarter of 2024.

Speaker Change: Turning now to Capital Deployment.

Speaker Change: Net cash provided by operating activities was $18.6 million during the second quarter compared to $39.1 million in the year-ago period.

Speaker Change: The decrease in operating cash flow was primarily driven by increases in working capital due to the timing of sales during the quarter, as well as investments in ERP modernization costs totaling $9 million.

Speaker Change: resulting in free cash flow of $14.4 million for the quarter.

Fay West: Organic sales declined 0.3% in AMEA due to volume declines in both equipment sales and parts and consumables. Parts were offset by price realization in all product categories. Emea volumes were impacted by weaker than expected market conditions and a smaller contribution from backlog reduction in the current period. Organic sales decreased 11.9% in Apex, primarily due to volume declines in Australia and China. Parts were offset by price growth in Australia. Ajusted EBITDA for the second quarter of 2024 was $58.6 million, up 1.7% compared to the second quarter of 2023.

Speaker Change: Excluding these non-operating items, free cash flow was $23.4 million for the second quarter of 2024.

Fay West: The company continues to deploy cash towards operational capital needs and to return capital to shareholders in line with its capital allocation priorities. During the second quarter, the company invested $4.2 million in capital expenditures and returned $13.3 million to shareholders through dividends and share repurchase. Tennant's liquidity remains strong, with a balance of $84.6 million in cash and cash equivalents at the end of the second quarter and approximately $321.8 million of unused borrowing capacity on the company's revolving credit facility.

Speaker Change: the company continues to deploy cash towards operational capital needs and to return capital to shareholders in line with its capital allocation priorities

Speaker Change: during the second quarter the company invested four point two million dollars in capital expenditures and returns thirteen point three million dollars to shareholders through dividends and share repurchases

Speaker Change: Tennant's liquidity remained strong, with a balance of $84.6 million in cash and cash equivalents at the end of the second quarter, and approximately $321.8 million of unused borrowing capacity on the company's revolving credit facility.

Fay West: On August 7th, the company refinanced its existing debt agreement, increasing its revolving credit facility limit to $650 million. This gives the company more flexibility and capability for growth through M&A and offers significant potential for driving expansion and creating value for our shareholders. The company continues to effectively manage debt and maintain a strong balance. Our net leverage was 0.61 times adjusted EBITDA below our targeted range of 1 to 2 times adjusted EBITDA, moving to 2024 guidance. Overall, based on the strong order growth rates and demand for our products and services, we are now forecasting slightly higher net sales for the full year 2024.

Fay West: Adjusted EBITDA margin for the second quarter of 2024 was 17.7% of sales essentially flat compared to the second quarter of 2023. Gross margin was 43.1% in the second quarter, a 30 basis point decrease compared to the prior year quarter. The slight margin rate decrease is attributed to higher inflation while price realization and cost saving activities materially offset inflation during the quarter. Our overall margin rate is supported by continued shifts to industrial equipment and the direct sales channel.

Speaker Change: On August 7th, the company refinanced its existing debt agreement, increasing its revolving credit facility limit to $650 million.

Dave: This gives the company more flexibility and capability for growth through M&A and offers significant potential for driving expansion and creating value for our stakeholders.

Dave: the company continues to effectively manage debt and maintain a strong balance sheet our net leverage was zo one times adjusted ebitda below our targeted range of one to two times of adjusted ebitda

Fay West: Adjusted selling and administrative expenses in the quarter totaled $87.5 million, a $1.7 million increase compared to the second quarter of 2023. The increase was driven in part by higher compensation and benefit expense related to incremental resources to support the company's enterprise strategy. Adjusted S&A expense as 8% of net sales was 26.4%. Essentially flat to the 26.7% in the second quarter of 2023.

Dave: Moving to 2024 guidance.

Dave: overall based on the strong order growth rates and demand for our products and services we are now forecasting slightly higher net sales for the full year two thousand and twenty-four

Fay West: As backlog returns to normal, removing the higher pricing within, we anticipate a shift back to a typical product mix between industrial and commercial machines and the return to a more normal growth margin. We anticipate higher operating expenses in the second half of 2024 compared to the first half with a targeted focus on new product development within R&D. We will remain disciplined and prudent in our spending, focusing our investments in areas that position us for future growth and increased operating efficiency.

Speaker Change: as that log returns to normal removing the higher pricing within we anticipate a shift back to a difficult product mix between industrial and commercial machines and the return to a more normal growth margins

Speaker Change: we anticipate higher operating expenses in the second half of two thousand and twenty-four compared to the first half with targeted focus on new product development within rnd

Fay West: Turning now to capital deployment, net cash provided by operating activities was $18.6 million during the second quarter compared to $39.1 million in the year go period. The decrease in operating cashflow was primarily driven by increases in working capital due to the timing of sales during the quarter, as well as investments in ERP modernization cost totaling $9 million, resulting in free cashflow of $14.4 million for the quarter. Excluding these non operating items, free cashflow was $23.4 million for the second quarter of 2024.

Dave: we will remain disciplined and prudent in our spending focusing our investments in areas that position us for future growth and increased operating efficiencies

Fay West: Given these factors and the strong profitable growth in the first half of the year, we are raising our outlook for the full year 2024. Specifically, we now expect net sales to be in the range of $1,280,000,000 to $1,305,000,000, reflecting organic sales growth between 2.5% and 4.5%. Adjusted EPS of $6.15 to $6.55 per diluted share, which excludes certain non-operating items and amortization expenses, adjusted EBITDA in the range of $205 to $215 million, adjusted EBITDA margin in the range of 16% to 16.5%, and capital expenditures of approximately $20 million. With that, I will turn the call back to Dave. Thank you, Fay.

Dave: Given these factors and the strong profitable growth in the first half of the year, we are raising our outlook for the full year 2024. Specifically, we now expect net sales to be in the range of $1,280,000,000

Speaker Change: to one billion three hundred and five million dollars reflecting organic sales growth between two and a half percent and four and a half percent

Fay West: The company continues to deploy cash towards operational capital needs and to return capital to shareholders in line with its capital allocation priorities. During the second quarter, the company invested $4.2 million in capital expenditures and returned $13.3 million to shareholders through dividends and share repurchases. Tenants liquidity remained strong with a balance of $84.6 million in cash and cash equivalence at the end of the second quarter and approximately $321.8 million of unused borrowing capacity on the company's revolving credit facility.

Speaker Change: Adjusted EPS of $6.15 to $6.55 per diluted share, which excludes certain non-operational items and amortization expense.

Fay West: Adjusted EBITDA in the range of $205 to $215 million. Adjusted EBITDA margin in the range of 16% to 16.5% and capital expenditures of approximately $20 million. With that I will turn the call back to Dave.

Dave Huml: Thank you, Fay. In summary, I am very proud of the global team and our ability to continue our growth trajectory as we are lapping a record previous year. The investments we are making and the innovative products we are delivering to our customers position us well to deliver on our increased full-year guidance. I wanted to thank everyone who joined us for our Investor Day at the New York Stock Exchange in May. It was well attended, and we received positive feedback from those who attended in person as well as remotely. A recording of the event, along with the presentation, is available on our investor website. With that, we will open the call to questions. Operator, please go ahead.

David Huml: Thank you, Fay. In summary, I am very proud of the global team and our ability to continue our growth trajectory as we are lapping a record previous year. The investments we are making and innovative products we are delivering to our customers position us well to deliver on our increased full-year guidance. With that, we will open the call to questions. Operator, please go ahead.

David Huml: Thank you, Fay. In summary, I am very proud of the global team and our ability to continue our growth trajectory as we are lapping a record prior year.

Fay West: On August 7th, the company recently announced its existing debt agreement, increasing its revolving credit facility limit to $650 million. This gives the company more flexibility and capabilities for growth through M&A and offers significant potential for driving expansion and creating value for our stakeholders. The company continues to effectively manage debt and maintain a strong balance sheet. Our net leverage was 0.61 times adjusted EBITDA, below our targeted range of 1 to 2 times adjusted EBITDA.

David Huml: The investments we are making and innovative products we are delivering to our customers position us well to deliver on our increased full-year guidance.

David Huml: I wanted to thank everyone who joined us for our investor day at the New York Stock Exchange in May. It was well attended and we received positive feedback from those who attended in person as well as remotely.

Speaker Change: A recording of the event along with the presentation is available on our investor website.

David Huml: with that we will open the call to questions operator please go ahead

Operator: At this time, I'd like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Steve there for, Feranzi from company Sudoti. Please go ahead.

Fay West: Moving to 2024 guidance. Overall, based on the strong order growth rates and demand for our products and services, we are now forecasting slightly higher net sales for the full year 2024. As backlog returns to normal, removing the higher pricing within, we anticipate a shift back to a typical product mix between industrial and commercial machines and the return to a more normal growth margin. We anticipate higher operating expenses in the second half of 2024, compared to the first task with targeted focus, a new product development within R&D.

Speaker Change: At this time, I'd like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster.

Operator: Feranzi from the company Sudoti. Please go ahead.

Speaker Change: Your first question comes from the line of Steve Feranzi from Company Sidoti. Please go ahead.

Daniel (Analyst): Hey, good morning, guys. This is Daniel. I'm actually filling in for Steve today. Given the strength once again of EPS and the good strong orders, can you maybe just provide a little bit of color on why you decided to lower the high range of your EPS guidance?

Daniel: Hey, good morning, guys. This is Daniel. I'm actually filling in for Steve today. Given the strength, once again, of EPS and the good, strong orders, can you maybe just provide a little bit of color on why you decided to lower the high range of your EPS guidance?

Fay West: We will remain disciplined and prudent in our spending, focusing our investments in areas that position us for future growth and increase operating efficiency. Given these factors and the strong profitable growth in the first half of the year, we are raising our outlook for the full year 2024. Specifically, we now expect net sales to be in the range of $1,280 million to $1,305 million, reflecting organic sales growth between 2.5% and 4.5%. But just an EPS of $6.15 to $6.55 per due-looted year, which excludes certain non-operational items and amortization expense. Adjusted EBITDA in the range of $205 to $215 million, adjusted EBITDA margin in the range of 16% to 16.5%, and capital expenditures of approximately $20 million.

Dave Huml: Yeah, I think as we look at the tax rate, as we look at the interest expense, as we look at kind of the overall expense, I think, I think that's a contributing factor to our overall kind of EPS.

Unknown Executive: Yeah, I think as we look at the tax rate, as we look at the interest expense, as we look at kind of the overall expense, I think, I think that's a contributing factor to our overall kind of EPS.

Feranzi: Yeah, I think as we look at tax rate, as we look at interest expense, as we look at kind of the overall expense, I think that's a contributing factor to our overall kind of EPS.

David Huml: Okay, perfect. And then you touched on the geographic areas, but and you, Italy is promising right now. But in general, are you seeing any recovery in any other areas within EMEA?

Dave Huml: Okay, perfect. And then you touched on the geographic areas, but and you, Italy is promising right now. But in general, are you seeing any recovery in any other areas within EMEA?

Speaker Change: Okay, perfect. And then you touched on the geographic areas, but, and you, you know, Italy is promising right now, but in general, are you seeing any recovery in any other areas within EMEA?

David Huml: Thanks for the question, Daniel. We are seeing, you know, what I would call still sluggish demand across the region. We highlighted Italy because it's an area that we have made specific investments in, and we're starting to see green shoots of return on those investments. Coming just in the quarter, we saw positivity in the UK as well as from our acquisition in Central and Eastern Europe, the TCS acquisition. So those would be points I would highlight as points of positivity coming through from a market demand perspective.

Dave Huml: Thanks for the question, Daniel. We are seeing, you know, what I would call still sluggish demand across the region. We highlighted Italy because it's an area that we have made specific investments in, and we're starting to see green shoots of return on those investments. Coming from coming just on the quarter, we saw positivity in the UK, as well as from our acquisition in Central and Eastern Europe, the TCS acquisition. So those would be points I would highlight as points of positivity coming through from a market demand perspective.

David Huml: ok

David Huml: Thanks for the question, Daniel. We are seeing, you know, I would call it still sluggish demand across the region.

David Huml: We highlighted Italy because it's an area that we have made specific investments in, and we're starting to see green shoots of return on those investments.

David Huml: If you're commenting just on the quarter, we saw positivity in the UK as well as from our acquisition in Central and Eastern Europe , the TCS acquisition. So those would be points I would highlight as points of positivity coming through the quarter from a market demand perspective.

David Huml: With that, I will turn the call back to Dave. Thank you, Faith.

David Huml: In summary, I am very proud of the global team and our ability to continue our growth trajectory as we are lapping a record prior year. The investments we are making and innovative products we are delivering to our customers position us well to deliver on our increased full-year guidance.

Speaker Change: Perfect, and then just one more if you don't mind. Could you just touch a little bit on the MNA pipeline that you see right now?

David Huml: Yeah, happy to. So we've been very transparent with our strategy around M&A. We're focused on deals that defend and grow our core business, allow us to grow and capture value in the connected autonomy space, and then the adjacency of other mobile equipment. We have developed a funnel of over 800 target companies aligned with that strategy, and we are actively, actively working that funnel. I would point to the BRAIN agreement, although technically not an acquisition.

Dave Huml: Yeah, happy to. So we've been very transparent with our strategy around M&A. We're focused on deals that defend and grow our core business, that allow us to grow and capture value in the connected autonomy space and then the adjacency of other mobile equipment. We have developed a funnel of over 800 target companies aligned with that strategy, and we are actively working that funnel. I would point to the BRAIN agreement, although technically not an acquisition.

David Huml: Yeah, happy to. So we've been very transparent with our strategy around M&A. We're focused on deals in that defend and grow our core business.

David Huml: I wanted to thank everyone who joined us for our investor day at the New York Stock Exchange in May. It was well-appended and we received positive feedback from those who attended in person as well as remotely. A recording of the event, along with the presentation, is available on our investor website.

David Huml: Allows us to grow and capture value in the connected autonomy space.

David Huml: and then the adjacency of other mobile equipment

David Huml: We developed a funnel of over 800 target companies aligned with that strategy, and we are actively working that funnel. I would point at the BRAIN agreement, although technically not an acquisition. The equity stake we took in BRAIN and the agreement we signed are providing commercial benefits to accelerate our AMR adopts and our AMR sales in the marketplace, and we are realizing benefits from that investment. And TCS, which was our acquisition in Central Eastern Europe , is on track and yielding the intended benefits. We have two proof points of action here early in the year.

Dave Huml: The equity stake we took in BRAIN and the agreement we signed are providing commercial benefits to accelerate our AMR adoption and our AMR sales in the marketplace, and we are realizing benefits from that investment. And TCS, which was our acquisition in Central and Eastern Europe, is on track and yielding the intended benefits. We have two proof points of action here early in the year within our M&A funnel. We are actively working that funnel and prioritizing targets.

Unknown Executive: With that, we will open the call to questions. Operator, please go ahead. At this time, I'd like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line up.

David Huml: The equity stake we took in BRAIN and the agreement we signed are providing commercial benefits to accelerate our AMR adoption and our AMR sales in the marketplace, and we are realizing benefits from that investment. And TCS, which was our acquisition in Central and Eastern Europe, is on track and yielding the intended benefits. We have two proof points of action here early in the year within our M&A funnel. We are actively working that funnel and prioritizing targets.

David Huml: Steve, they're for for on Z from company CIDODE. Please go ahead. Hey, good morning guys. This is Daniel. I'm actually still on end for Steve today. Given the strength once again of EPS and the good strong orders, can you maybe just provide a bit of color on why you decided to lower the high range of your EPS guidance? Yeah, I think as we look at tax rate, as we look at interest expense, as we look at the overall expense, I think that's a contributing factor to our overall EPS.

David Huml: within our M&A funnel. We are actively working that funnel and prioritizing targets. As you know, M&A can be a bit episodic and out of our control as far as pacing.

David Huml: As you know, M&A can be a bit episodic and out of our control as far as pacing, but we are actively engaged in working the funnel. And when I say we, this is an enterprise priority. So Fay and I are hands-on with some targets, and we have resources within the company that are also identifying high-priority relationships to form and strategic areas within the funnel that we should be focusing on for acquisition. The other thing I would highlight, and Fay mentioned in her opening remarks, we got our debt leverage below one time.

Dave Huml: As you know, M&A can be a bit episodic and out of our control as far as pacing, but we are actively engaged in working the funnel. And when I say we, this is an enterprise priority. So Fay and I are hands-on with some targets, and we have resources within the company that are also identifying high-priority relationships to form and strategic areas within the funnel that we should be focusing on for acquisition. The other thing I would highlight, and Fay mentioned in her opening remarks, we've got our debt leverage below one time. We've expanded our

David Huml: But we are actively engaged working the funnel. And when I say we, this is an enterprise priority. So Fay and I are hands-on with some targets and we have resources within the company that are also identifying high priority relationships to form and strategic areas within the funnel that we should be focusing for acquisition.

David Huml: We expanded our revolver, and we are showing strong cash conversion this year. And so we have got the financial firepower that when the right deal comes along, we are prepared to move quickly. We have got the financial firepower to do it. So we look forward to updating you more on specifics as we move.

David Huml: The other thing I would highlight, and Fay mentioned in her opening remarks,

David Huml: Okay, perfect. And then you touched on the geographic areas, but and you, you know, Italy is promising right now, but in general, are you seeing any recovery in any other areas within EMEA? Yeah, thanks for the question, Daniel. We are seeing, you know, I would call it still sluggish demand across the region. We highlighted Italy because it's an area that we have made specific investments in and we're starting to see green shoots of return on those investments.

David Huml: We've got our debt leverage below one time.

David Huml: We expanded our revolver and so and we're showing strong cash conversion on the year. And so we've got the financial firepower that when the right deal comes along, we're prepared to move quickly, we've got the financial firepower to do it. So we look forward to updating you more on specifics as we move to the second half and it's 2025. But I assure you this is an enterprise priority and will be a strong contributor to our value creation.

Dave Huml: to do it. So we look forward to updating you more on the specifics of it as we move through the session.

Daniel (Analyst): Great, we really appreciate it, and best of luck in the second half of the year. Thanks, Daniel.

David Huml: strategies in the coming years.

David Huml: Thanks, Daniel.

David Huml: Coming to becoming just on the quarter, and we saw positivity in the UK, as well as from our acquisition in central and Eastern Europe, the TCS acquisition. So those would be points I would highlight as points of positivity coming to the quarter from a market demand perspective.

Speaker Change: Great, we really appreciate it and best of luck in the second half of the year.

Daniel: Thanks, Daniel.

Operator: To ask a question, please press star followed by the number one. Since there are no further questions at this time, I would like to turn the call over to management for closing remarks.

David Huml: what

David Huml: As a reminder to

Speaker Change: To ask a question, please press star followed by the number one.

Operator: Since there are no further questions at this time,

David Huml: Perfect. And then just one more if you don't mind. Could you just touch a little bit on the MNA pipeline that you see right now? Yeah, happy to. So we've been very transparent with our strategy around MNA. We're focused on deals in the dependent, grow our core business that allows to grow and capture value in the connected autonomy space. And then the adjacency of other mobile equipment, we developed a funnel of over 800 target companies with aligned with that strategy and we are actively actively working that funnel.

Speaker Change: Since there are no further questions at this time.

Dave Huml: Thank you. I want to thank you all for your participation today and for your interest in tenant companies, and a special congratulations and thank you to the entire global tenant team that may be listening to the call. We're fond of saying that growth is a team sport at tenant companies, so these results are a direct reflection of your efforts in This concludes our earnings call. Have a great day.

Speaker Change: We'll like to turn the call over to management for closing remarks.

Speaker Change: Thank you. I want to thank you all for your participation today and for your interest in Tennant Company, and a special congratulations and thank you to the entire global Tennant team that may be listening to the call. We're fond of saying that growth is a team sport at Tennant Company, and so these results are a direct reflection of your efforts and contributions.

David Huml: I would point at the brain agreement, although technically not an acquisition, the equity stake we took in brain and the agreement we signed are providing commercial benefits to accelerate our AMR adopts and our AMR sales in the marketplace and we are realizing benefits from that investment. And TCS, which was our acquisition in central Eastern Europe, is on track and yielding the incentive benefits. We have two proof points of action here early in the year within our MNA funnel.

Operator: Thank you, ladies and gentlemen. This concludes today's call. Thank you for joining us. You may now disconnect.

Operator: Thank you, ladies and gentlemen. This concludes today's call. Thank you for joining us. You may now disconnect.

Speaker Change: This concludes our earnings call. Have a great day.

Operator: Thank you, ladies and gentlemen. This concludes today's call. Thank you for joining. You may now disconnect.

David Huml: We are actively working that funnel and prioritizing targets as you know, MNA can be a bit episodic and out of our control as far as pacing, but we are actively engaged working the funnel. And when I say we, this is an enterprise priority. So Bay and I are hands-on with some targets and we have resources within the company that are also identifying high priority relationships to form and strategic areas within the funnel that we should be focusing for acquisition.

David Huml: The other thing I would highlight and Bay mentioned in our opening remarks, we got our debt leverage below one time. We expanded our revolver and we are showing strong cash conversion on the year. And so we have got the financial fire power that when the right deal comes along, we are prepared to move quickly. We have got the financial fire power to do it. So we look forward to updating you more on specifics as we move to the second half and in its 2025, but I sure this is an enterprise priority and will be a strong contributor to our valuation strategies in the coming years.

David Huml: Great, we really appreciate it and best of luck in the second half of the year. Thank you, Daniel. As a reminder to ask a question, please press star followed by the number one. Since there are no further questions at this time. We'll like to turn the call over to management for closing remarks. Thank you. I want to thank you all for your participation today and for your interest in tenant company and a special congratulations and thank you to the entire global tenant team that maybe listened to the call. We're fine to say that growth is a team sport, the tenant company and so these results are a direct reflection of your efforts and contributions.

Unknown Executive: This concludes our underneath call. Have a great day. Thank you, ladies and gentlemen. This concludes today's call. Thank you for joining. You may now disconnect.