Tennant Company

Good morning, my name is Jason, and I will be your conference operator today. At this time, I would like to welcome everyone to Tenants Company's 2019 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 1 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... Thank you, Jason.

Good morning, everyone, and welcome to Tenant Company's first quarter 2019 earnings conference call. I am William Prate, Director of Global Financial Planning and Analysis and Investor Relations. Joining me today are Chris Killingstad, Tenant's President and CEO, Keith Woodward, Senior Vice President and CFO, Tom Stueve, Vice President and Treasurer, Andy Sabula, Vice President of Finance and Corporate Controller, and Mary Talbot, Senior Vice President and General Counsel. Today we will review our ongoing progress against our core strategies, our performance during the recent first quarter, and our four-year guidance. Chris will first brief you on our operations, and Keith will cover the financials. After our remarks, we will open the call up for questions. We are using slides to accompany this conference call. These slides, along with a replay of today's call, will be available on our Investor Relations website at investors.tenantco.com until May 30, 2019. 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 subject to risk 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 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-GAAP measures that include or exclude certain items. For each non-GAAP measure, we also provide the most directly comparable GAAP measure. Our 2019 first quarter earnings release include a reconciliation of these non-GAAP measures to our GAAP results. Our earnings release was issued this morning via Business Wire and is also posted on our Investor Relations website. Now, I will turn the call over to Chris.

Thank you, William, and thanks to all of you for joining us. Tenant Company is a business undergoing an important transition. The core strategies we have been pursuing for the past several years have, unquestionably, been focused on growth, expanding and diversifying our geographic reach, broadening our go-to-market channels, strengthening our ability to address the mid-tier market, and building a robust and innovative new product pipeline. We have had a lot of success in each of these areas, but that success has not translated into the EBITDA growth as rapidly as we would have liked. As we move into 2019, our focus is turning much more deliberately toward a balance between reasonable growth and enhancing our EBITDA expansion activities. These efforts are in full swing and are beginning to show progress. They are a central component of our new strategic plan that, as we mentioned on our last call, we intend to share with you in more detail later this year. During our first quarter, Tenant posted mixed results but results that begin to reflect a more intense focus on profitable growth. Looking at sales performance, Tenant posted a decline in net sales during the first quarter, which was a combination of negative organic sales and negative impact due to currency. Our organic results primarily reflect a couple of factors. The first is a challenging sales comparison. due to the large level of strategic account sales in the prior period. Industry market softness was also a contributing factor, specifically in the United Kingdom. Looking at earnings performance. As I previously noted, our focus on EBITDA expansion is playing a more significant role in our decision-making at Tenant. Increasingly, we are focused on prioritizing sales efforts where our value proposition is strongest, optimizing our operations and supply chain and mitigating external factors impacting our margins. Our early efforts positively impacted both our gross margin and EBITDA performance this quarter. Gross margin in the 2019 first quarter jumped 120 basis points year over year. Like many industrial companies, we continue to face macro-driven factors, including tariffs, tight skilled labor markets, material inflation, and higher freight costs. Our gross margin performance in the quarter benefited from tenants' positive impact from pricing actions, favorable channel mix, and our efforts to mitigate those prevailing headwinds. As a result, our gross margin performance along with Disciplined Expense Management, we improved EBITDA by 17% or 200 basis points over last year. All in all, we are pleased with the progress we made this quarter on profitability improvement and fully intend to build on this momentum. As you may know, Tenant has built its reputation on innovation and finding creative ways to bring new compelling solutions to our customers. Earlier this month, Tenant announced an agreement to supply our autonomous T7 AMR solution to Walmart. This is just one example of Tenant's position as a leader, developing innovations that can help all our customers and, in this case, a large strategic customer with sophisticated needs. run their businesses more safely, efficiently, and profitably. The application of robotic cleaning technology is a promising emerging trend, and the advantages for our customers will be substantial. This relationship with Walmart represents an important first step toward broader adoption of autonomous cleaning equipment in the marketplace. We are pleased by how our T7 AMRs are being received, and we are very excited by the promising role robotics will play in our future. We believe we have the first mover advantage at large scale commercialization of this technology, and we intend to fully capitalize on it. During the first quarter, we also announced our decision to relay relocate our corporate headquarters to neighboring Eden Prairie, Minnesota. This move will give tenant several advantages by allowing us to repurpose our current headquarters to optimize our manufacturing operations and drive efficiencies at this location, adding space to accommodate additional growth, helping attract and retain talent. and allowing for better collaboration by bringing together the roughly 500 employees who are currently spread among separate buildings around our current headquarters location. Ultimately, this move underscores our commitment to strengthening Tenant for the future. We intend to complete the move in the first half of 2020. Now, I'll ask Keith to take you through Tenant's first quarter financial results. Keith.