Tennant Company

Good morning. My name is Kenzie and I will be your conference operator today. At this time, I would like to welcome everyone to Tenant Company's 2020 fourth quarter and full year earnings conference call. This call is being recorded. There will be time for Q&A at the end of the call. Please press star one if you would like to ask a question. After the Q&A, please stay on the line for closing remarks from management. If you have joined our call today via telephone and logged into the conference call presentation on your computer, please mute the audio on your computer to avoid potential quality issues during the call. Thank you for participating in Tenant Company's 2020 fourth quarter and full year earnings conference call. Beginning today's meeting is Mr. William Prate, Senior Director of Global Financial Planning and Analysis and Investor Relations for Tenant Company. Mr. Prate, you may begin.

Thank you, Kenzie. Good morning, everyone, and welcome to Tenant Company's fourth quarter 2020 earnings conference call. I'm William Preece, Senior Director of Global Financial Planning and Analysis and Investor Relations. Joining me today are Chris Killingsdad, Tenant's President and CEO, Tom Paulson, our Interim CFO, and Dave Hummel, our Chief Operating Officer. On today's call, we will update you regarding our fourth quarter and full year performance and our guidance for 2021. Chris will brief you on our operations, Dave will provide an update regarding our enterprise strategy, and Tom will cover the financials. After their remarks, we will open the call to questions. Please note a slide presentation accompanies this conference call and is available on our investor relations website at investors.tenantco.com. 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 uncertainty, 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 risks and uncertainties that may affect our results. Additionally, on this conference call, we will discuss non-GAAP measures that include or exclude certain items. Our 2020 fourth quarter earnings release includes the comparable GAAP measures and a reconciliation of the 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 at investors.tenneco.com. I'll now turn the call over to Chris.

Thank you, William, and thank you, everyone, for joining us today. We hope that you and your loved ones are continuing to stay safe. 2020 tested us all, and I'm extremely proud of the way the tenant team rose to the challenge. We did so by remaining true to our guiding principles while continuing to provide the solutions and service that our customers have always expected from tenants. Our full year 2020 results reflect our speed and effectiveness in responding to the pandemic, specifically in how we prioritize the health and safety of our employees, the measures we took to manage costs and ensure liquidity, and above all, the determination and dedication that our employees showed in meeting the needs of our customers. Their hard work helped minimize the overall operational and financial impact of the pandemic. While the business impact of the pandemic was significant across most of our markets, it had little effect on our strategic initiatives within the company. A year ago, I shared with you our enterprise growth strategy, which is based on three pillars, to win where we have competitive advantage, to reduce complexity and build scalable processes, and to innovate for profitable growth. We followed through with our plan in spite of the pandemic. In fact, our strategy was integral to everything we accomplished in 2020. For example, our recent launch of a range of new force groups reflects tenant commitment to innovation and our focus on winning where we have competitive advantage. Thanks to our unsurpassed engineering capabilities, we're able to use customer insights to solve real-world problems. with products that deliver quality, performance, and value. We've also made meaningful improvements to our operating model, as illustrated by our adjusted EBITDA as a percentage of sales, for which full year 2020 was in line with that of 2019, despite the decline in organic sales. As part of the ongoing implementation of our enterprise strategy, which Dave will speak to in greater detail in a moment, we've made the strategic investments needed to allow us to exit the pandemic in a strong position as markets continue to recover. We recognize that now more than ever, our customers are relying on us to help them maintain the safety and appearance of their facilities. while at the same time reducing their overall cost to claims. For more on our strategy, I will turn the call over to Dave.

Thank you, Chris, and hello, everyone. Before I highlight some of our strategic milestones, I want to echo Chris in thanking our tenant team members around the world for their hard work this past year in the face of remarkable challenges. Also, I cannot overstate how important our strategy has been in channeling those team efforts to ensure the best possible results. I will walk you through some of our key achievements of the past year in that regard and provide a look at where we are headed. As Chris mentioned, our enterprise strategy is based on three pillars in support of our value creation objectives. One, winning where we have competitive advantage. Two, reducing complexity and building scalable processes. And three, innovating for profitable growth. In 2020, the first pillar, winning where we have a competitive advantage, began with a thorough evaluation of all aspects of our business, including products, market geographies, channels, and customers, in order to identify where we have the strongest competitive advantage. The findings of that comprehensive review have led to meaningful changes within tenants. For example, as we announced earlier this month, we completed the sale of our coatings business. Although the business represented approximately 2% of our total sales, it was not central to our core strengths in professional, industrial, and commercial floor cleaning. By divesting it, we can redirect resources toward more strategic and profitable activities. Our strategy implementation has been truly global, extending across our operations worldwide. In Japan, for example, after a thorough review of our direct sales go-to-market strategy in that market, we have made the decision and begun to shift to a distributor-only model, which offers compelling S&A savings while delivering a superior customer experience. On the product side, we've continued to simplify, and in 2020 managed a 35% reduction in our core tenant legacy product portfolio, along with a 20% reduction in product options. These changes have far reaching benefits in terms of manufacturing, supply chain, and sales efficiency. Furthermore, after rigorously assessing our product lines, we have created standard offerings across our legacy tenant products. This helps customers by eliminating guesswork from the buying process. Where customers used to have to pick from literally dozens of options and features, they can now rely on tenants' expertise to identify the solutions and features that best suit their needs. In addition to enhancing our sales funnel, this change improves our manufacturing process as well. We will continue to provide customized solutions when needed, but we will do so while prioritizing manufacturing efficiency. The second pillar of our strategy, reducing complexity and building scalable processes, goes to the level of product design and subsystem architecture. 2020 initiatives in this area targeted cost reductions along with customer-facing quality and performance improvements. A great example of this is an industrial tire project review we completed last year. Through an engineering redesign effort across our large scrubbers and sweepers, we introduced new tires that reduced our cost, improved traction and performance for our customers, and reduced our tire skews by over 50%. Another example of reducing complexity is the plant optimization work we completed in China last year. Our acquisition of Gaomei included a number of benefits, including a skilled workforce based in Hefei, China, where we have now centralized our China manufacturing. These optimization efforts allowed us to close our facility in Qingpu and will enable greater manufacturing flexibility and improved profitability. As Chris noted, the implementation of our enterprise strategy is a continuous process, particularly with respect to our third pillar, innovating for profitable growth. That means using a process of innovation to unlock value for our customers and for tenants. A great example of how we executed against this pillar in 2020 is the advances in our robotic floor cleaning product category. In November of last year, we introduced our T380 AMR robotic floor scrubber. Its smaller size enhances maneuverability and navigation in tight areas, leading to maximum productivity and is ideal for customers with narrow spaces or layouts that may have been too challenging for our other robotic machine. Our customer-centric approach in identifying and solving real-world problems is the reason our customers see us as the market leader. Looking ahead, the continued execution of our enterprise strategy will be central to our success, and is what will enable us to deliver on our annual and longer-term goals. This year, we will be diligent in following through on the projects we started in 2020, and we will selectively activate specific initiatives that will further our ability to improve our operating model. Included in our plans are improvements to our service infrastructure, specifically in North America. By investing in new tools to better leverage our teams of service technicians, we're creating additional capacity within our current workforce, improving the way they work, and also increasing our ability to meet our customers' needs. On the product side, we will continue to innovate across our portfolio, such as with the introduction of our new commercial products and the recent launch of our new T16 AMR. The T16 AMR is an important addition to our product category because it makes our autonomous cleaning technology available to our industrial customers. With this machine, along with the previously introduced T7 AMR and T380 AMR, we believe Sennett has the broadest robotics offering available that covers the widest range of autonomous cleaning applications. Furthermore, the commercial products we introduced at the beginning of February demonstrate how seamlessly the three pillars of our strategy can work together in practice. In addition to leveraging the benefits of our IPC platform from a value engineering perspective, we're offering versions of these products as tenant branded machines with the full compliment of tenant brand sales and support benefits. The result is a superior value proposition for budget-minded customers backed by tenant's reputation for quality and service. On a personal note, I am thrilled with the progress we've made and the plans we have in place to continue executing our enterprise strategy. While we are cautiously optimistic about the pace of a global recovery, I look forward to working with our team to seize the opportunities that lie ahead. With that, I will hand the call over to Tom, who will discuss our financials.

Thanks, Dave, and hello, everyone. Please note that in my comments today, any references to earnings per share or EPS, both GAAP and non-GAAP, are on a fully diluted basis. For the fourth quarter of 2020, Tenant reported net sales of $273 million. down 7.4% year-over-year as a result of a pandemic-related slowdown, while our organic sales, which exclude the impact of currency effects, declined 8.9%. Shifting to our fourth quarter results by geography. As a reminder, we grouped sales in the three geographies, the Americas, which includes all North America and Latin America, EMEA, which covers Europe, the Middle East, and Africa, and Asia Pacific, which includes China, Japan, Australia, and other Asian markets. Sales in the Americas declined by 11.6% year-over-year and were down 10.5% organically. Our results in the region were impacted by continued market weakness driven by the pandemic-related slowdown, which impacted both our direct and distribution sales channels. The region is also lapping an unusually large AMR order in the previous year-ago period, which offsets the organic growth we experienced in Brazil in the fourth quarter of 2020. Sales in the EMEA region increased by 3.7% year-over-year due to currency effects, but were down 3.4% organically, primarily due to pandemic-related restrictions in the UK, the Netherlands, and the Iberian Peninsula. Despite the negative organic growth, its worth highlighting in the region did deliver positive organic growth in Italy and Germany in the fourth quarter of 2020, with strong year-over-year growth in the parts and consumables and service businesses. Sales in the Asia-Pacific region declined by 10.4% year-over-year and were down 13.9% organically. The year-over-year decline in fourth quarter sales was primarily due to Korea, which was significantly impacted by the pandemic, along with declines in Australia. These results offset organic growth in China from distribution and strategic accounts, as well as growth in service across the regions. Now on the margins. Adjusted gross margin in the fourth quarter of 2020 was 41.3% compared with 40.5% in the year-ago period, increasing due to the positive effect of pricing actions and cost-out initiatives driven by our enterprise strategy, which more than offset regional mix and strategic investments we made during the quarter related to our employees. Turning to expenses, during the fourth quarter, our adjusted S&A expenses were 33.9% in net sales compared with 30.4% in the year-ago period. As we discussed last quarter, we made a number of strategic investments to enable us to exit the pandemic in a strong position as the markets continue to recover, as well as investments in our employees to recognize our efforts through the pandemic. Our S&A expenses also include additional planned expenses related to our new corporate headquarters. As for profitability, we reported net earnings of $2.5 million, or $0.13 per share, down from $10.9 million, or $0.59 per share, in the prior year. Adjusted EPS, which excludes non-operational items and amortization expense, totaled $0.48 compared to $0.86 in the prior year. In terms of adjusted EBITDA, our results decreased to 25.4 million or 9.3% of sales compared with 34 million or 11% of sales in the year-ago period, driven by our lower year-over-year revenue and the incremental investments in the quarter mentioned a moment ago. As for our tax rate, In the fourth quarter, tenant had an adjusted effective tax rate excluding the amortization expense adjustment of 32.3% compared to 23.3% in the year-ago period. The increase was mainly due to the mix in taxable earnings by country and a decrease in discrete favorable tax items compared to the prior year. Turning to cash flow, capital allocation, and balance sheet items. In the fourth quarter, tenant generated $36.3 million in cash flow from operations, primarily driven by business performance and improved working capital levels. We also reduced outstanding debt by $15.2 million and paid $4.2 million in cash dividends to shareholders. Turning now to our full-year performance. In 2020, net sales totaled $1 billion compared to $1.14 billion in 2019, reflecting a decline of 11.8% on an organic basis, driven by market weakness due to the global pandemic. As Chris mentioned... Our ability to quickly respond to the pandemic and manage costs and ensure liquidity allowed us to deliver an adjusted EBITDA for full year 2020 of 119.4 million, or 11.9% of sales, compared with 136.9 million, or 12% of sales, in 2019. These actions also allow tenants to generate cash flow from operations of $133.8 million, reduce outstanding debt by $3.31.1 million, and pay $16.3 million in cash dividends to shareholders. Turning to guidance. While the macroeconomic outlook remains uncertain, we are ready to ramp up quickly as the anticipated recovery continues to gain pace. In addition to improving market conditions, we expect we'll benefit from our strategic investments and the improvements to our operating model that began last year as part of our enterprise strategy. As included in today's earnings announcement, our guidance for full year 2021 is as follows. Net sales of $1.05 billion to $1.08 billion, with organic sales rising 5% to 8%. Gap earnings of $3.30 to $3.75 per share. Adjusted EPS of $3.50 to $3.95 per share, which excludes certain non-operational items and the amortization expense. Adjusted EBITDA in the range of $130 million to $140 million, capital expenditures of $20 to $25 million, and an effective tax rate of 20%. We are cautiously optimistic about the overall pace of recovery and expect to deliver on our full year guidance, assuming no further pandemic-related issues in 2021. Based on our anticipated pace of recovery in 2021 and our actions to manage costs during the pandemic in 2020, we expect that EBITDA and adjusted EPS will improve sequentially each quarter this year, with Q1 likely being the lowest quarter for EBITDA and adjusted EPS, as Q1 2020 was least impacted by COVID last year. Our guidance also incorporates the divestiture of our coding business, which we estimate having a $20 to $25 million impact to sales. With that, I'll turn the call back over to Chris.

Thank you, Tom. Before we start the Q&A, I want to take a moment to discuss our leadership transition. As you know, Dave Hummel will become CEO on March 1st, and I will serve as a strategic advisor until the end of this year. I have been at Tenant for almost 18 years, including 15 years as president and CEO. This has been, without a doubt, the most wonderful and fulfilling experience of my professional career. But this is definitely an opportune time for a change in leadership. One of the most important things a CEO can do is ensure a smooth and seamless transition to new leadership. I am proud to say that we have accomplished that with the succession plan we have in place, which is the culmination of more than two years of work in cooperation with our board of directors. I hired Dave a little over six years ago, and we have a very close working relationship. It's been such a great pleasure to see him grow as a leader and become an important contributor to Tenant's success. Dave loves the company and has a deep understanding of our business. He has led our global marketing group. He has been responsible for Asia Pacific and EMEA. He was the executive sponsor of our IPC integration, and he even had a stint running our global operations group. Dave has exceptional leadership abilities, as well as the vision to take tenants to new levels of success. His industry knowledge, global experience, and foundational understanding of our company have been powerful attributes in working with our senior leadership team to develop and now implement our enterprise strategy. Dave has a keen understanding of where we need to go as an organization to serve all of our stakeholders. And I am excited to see where he takes us. In closing, I would like to say that what has touched my heart most profoundly through all my years with the company are the people, the thousands of wonderful, talented, dedicated, and caring people of the Tannins family. They are the lifeblood of this great organization and the reason it has thrived for 150 years and will continue to flourish for the next 150. With that, we will now open the call to questions. Operator, please go ahead.

At this time, I would like to remind everyone, in order to ask a question, please press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Our first question comes from the line of Michael Schilske with Collier Securities. Please go ahead. Your line is open.

Good morning, guys. And before I start, I don't want to forget to say this, Chris, best of luck. Thanks for everything. Appreciate everything. Thank you so much. So I just want to start off by asking first about the new 216 AMR. I know it was developed probably in conjunction with some customers, so I know it's been only a few weeks since you've been out publicly talking about it with investors. But what's been the early uptake on some of the orders and interest in that product over the last couple of months or so?

Yeah, it's really, it's too early to tell, but Mike, this is Dave talking, by the way. You know, it's too early to tell, but I will tell you, and you're aware of this, we develop our products in close proximity with our customers as we gather requirements. pilots and pre-prototype tests. So we're feeling very confident that T16 has a bright future. I would make the point that we have a very talented industrial sales force globally that is very excited to have a robotics offering in their arsenal as they go out and contact their customers. And there's certainly a lot of conversation amongst that customer base in those industrial verticals about the potential fit for AMR. So it remains to be seen, but I would say there's significant optimism about the fit for T16 AMR in our overall AMR portfolio.

Gotcha. Then I wanted to turn quickly to maybe the very neutral outlook here in Q1. The comps don't seem that horrible. Asia was tough last Q1. The other thing that will be potentially up here over the year in Q1 on the top line, or maybe just close the gap that we saw this past couple of quarters, maybe not being down by as much in the first quarter.

So, Mike, this is William. Great. So I think your question, just to make sure that I heard it kind of cracked up there a little bit, you're talking about our Q1 top line for the enterprise annualizing last year.

i want to make sure i clarify your question yeah i was just curious if you think you might see a small increase in q1 year-over-year from a top-line perspective or at least close the gap uh we've seen some you know some downside good similar to low double digits the last couple quarters will that at least narrow a little bit here in a q1 yeah without providing a specific q1 target i just want to comment on what we're seeing and feeling in q1

We know that the pandemic hit in earnest in the middle of March last year, and so that provides a little bit of upside potential. But it's really just the second half of March 2020 that we're up against. Prior to that, in 2020, we were having a really robust year and running at or above our expectations for the year. The other dynamic is we are lapping significant AMR deployment in the first quarter of 2020. 2020, we're lapping that AMR deployment. So that will make it very challenging to have organic growth in the first quarter, 2021 versus 2020 at the enterprise level.

Okay. And then maybe another one from about the year-over-year. We've seen Asia down two years straight here organically. In Japan, as you just discussed, and some of the reopening in China, do you think you could have a year-over-year increase in Asia? Could that be a participant in the overall organic growth for the year?

Yeah, we do, and we see some positive trends in those geographies. Again, barring any unforeseen downturn from some pandemic-related impact, our full-year guidance for 2021 reflects organic growth across all of our regions, including APEC.

Okay, I'm going to throw one last one in here. Any opinion you'd give us on the opening in the CFO role? I mean, I think some folks don't want to see Tom go, but what is the outlook on getting someone permanent in there at some point soon?

Well, I'm amongst those that don't want to see Tom go, but I'm appreciative that he came back to help us. in this interim basis. We continue to actively recruit candidates for the CFO role as recently as this week. And so I'm really impressed that we're getting a very qualified slate of candidates. I'm hopeful that we can fill that role very soon. What we are not doing is compromising our search criteria just to get the role filled because we're hiring for the long term. So Really no substantive update other than to tell you it's a top priority of mine to get that role filled with top talent as soon as possible.

Okay. Thanks so much. I'm going to pass it along. Appreciate it. Thank you.

Our next question comes from the line of Chris Moore with CJS Securities. Please go ahead. Your line is open.

Hey, good morning, guys. I got cut off for a moment when Tom was going through at the end of his remarks. on the sequential EBITDA expectations quarterly during 21. Could you maybe just repeat that?

William J. Yes. Chris, this is William. I can sit there and take that. So effectively what we're saying is that we expect that Q1, from an EBITDA standpoint, is going to be the lowest of the four quarters. And we expect to see sequential growth each quarter of this. So we'll see Q2 higher than Q1, Q3 higher than Q2. That's not to say that we will see growth year over year each quarter, though. Does that help you? I see that's what you missed there from Tom's section.

That's what I missed. Yeah, thank you.

The other comment that he would have made is just about our codings business. And this kind of goes back to Tom, or I'm sorry, to Mike's previous comment. uh you know in terms of annualization just remember the divestiture of our coding business has about a five seven million dollar quarterly impact as well got it it's helpful um how about figure picture any supply chain or or labor availability issues that at this stage

Yeah, I'll take that. We're always actively monitoring our supply chain. I would say that the dynamics in the supply chain environment globally right now, there's two topics I would raise that have made the news, and so you'll be aware of them from a macro level. One is around transportation-related challenges, and this really affects every mode of transportation, be it container shortages, clogs at ports, which extend lead times, as well as some constraints on air freight and obviously the cost impact of having the air freight, and then domestically around the availability of over-the-road truck capacity, mostly limited by the availability of drivers. We are actively managing those transportation-related issues, and our guidance reflects our ability to mitigate those challenges as we move through the year. The other supply chain related challenge that I'd highlight, not because it's necessarily material to tenant, but because it is in the news, and so you may be wondering, is around the chips shortage. that is making headlines mostly because of the impact on the automotive industry and some other related devices that rely heavily on chips. We are affected at some level by the chip shortage. We are actively managing it, and we've taken mitigation steps, including increasing our safety stocks, both at our inventories as well as with our suppliers for those critical components. We have a bit of a benefit because our components tend to be, we're a lower volume user and they tend to be more off the shelf and less customized. We just don't have the volume to justify a customized component. So it makes it easier for us to source those components either from alternative suppliers or do a spot buy in the primary or secondary marketplace. So we're taking advantage of those opportunities where we see potential risk in supply for chips to shore up our inventory so they are not the reason for a line outage here and later in the year. Again, guidance reflects our ability to wholly mitigate that risk.

Got it. Very helpful. Thanks, Steve. In terms of rising commodity prices, steel and aluminum, any impact there? Any kind of thoughts in terms of what you're seeing and what you would expect the next quarter or two?

Yeah, we are seeing and feeling commodity inflation, especially across the core commodities, steel, resin, lead, et cetera. Again, we've taken actions to control those within the supply chain and also mitigate the impact financially on our overall operations. It really hits us in two regards, where we source primary commodities, and then secondarily, when our suppliers source those same commodities in the production of their components and try to pass that cost through to us. So supply team has done a fantastic job to pivot and respond to the commodity inflation we see and foresee for the year. And again, we bake that into our guidance for the year that we'll be able to manage and mitigate the impact on us financially, as well as keep our manufacturing operations running so we can support our customers.

Got it. Helpful. Last one for me. Just longer term, the autonomous trajectory. You know, five years from now, could it be 25% of revenue? Is that high? Is that low? I'm just trying to get a sense in terms of that, you know, kind of long-term place that autonomous has within tenants.

Yeah, it's a great question. I'm not in a position to quantify what the potential could be. I would just note that we are very optimistic about the technology. We've obviously placed a significant bet on having the broadest product range available, as well as, and importantly, the support ecosystem to make sure that our customers have a fantastic experience with these products. You know, nothing kills a new innovation faster than a customer having a bad experience. And so we're being very planful and intentional about who we launch to, how we partner with them so that they have a successful deployment and then are able to reap the benefits from the deployment as time goes on. you know i would just say it remains to be seen if this is going to be a material part of our business or significantly disrupt this marketplace but we feel like we are well positioned that if a disruption is available that we're going to be the ones to drive it got it that's helpful and with the last one i'm sorry with respect to the autonomous margins i mean my understanding i don't know if it's correct is that the margins were relatively similar to to

core equipment, but the concept is, you know, you generate more consumable revenue. Is that accurate, or are the margins much different?

Yeah, without splitting it out between equipment and P&C, aftermarket We believe that this will be an accretive part of our enterprise and in our offering. To date, our offering is EBITDA accretive, both on a dollar and a rate basis. So we feel like we're well positioned from a profitability perspective with this innovation. And our strategy, candidly, is to deliver the customer a fantastic experience and a positive ROI on their investment while we maintain our margins and decrease our profitability on the product and be accretive to the enterprise overall. So, you know, the time to get price is when you launch a new disruptive innovation. And so we've taken full advantage of that.

Thank you very much. We'll jump back in line. Thank you.

Our next question comes from the line of Marco Rodriguez with StoneGate. Please go ahead. Your line is open.

Good morning. Thank you for taking my questions. I was wondering if we could talk a little bit more about the Americas. I'm just trying to get a little bit better of a handle on the Q4 performance. I know that there's a tough comp year over year with the large AMR sale in the prior year quarter. But if maybe you could talk a little bit about what that, if you can, normalize, what would that growth rate would have looked like? And then Sequentially, the Americas were down, whereas I understand, obviously, seasonality, normally kind of a flattish quarter. So any sort of drivers that you can talk about there as well would be helpful.

Yeah, let me make a few comments on the Americas. And we're not going to quantify a normalized rate for the geography, but let me give you some color around the Q4 experience and what we're seeing in the businesses. As you noted, we are lapping large AMR deployment in prior year, which optically makes achieving growth a challenge. We saw softness in the core business across both our direct and our distribution channels in the quarter. And so it's fairly widespread, which gives us the indication it's more of a macro market phenomenon rather than anything specific to our industry or our business. We did see positive growth in Brazil, which was really a great indicator, and we're thinking a sign of trends to come, we're hoping. And significantly, our aftermarket was down less than our equipment. And so as markets open up, customers are bringing their machines back online and are requiring service and aftermarket parts and consumables to get the machines operational again. Again, this could be a leading indicator of an improving trajectory, which was baked into our 2021 guidance.

Understood. And then in sticking with the Americas and your guidance for fiscal 21, I know that you provided some good information here in terms of obviously your expectations on a sequential basis from an aggregate EBITDA perspective. But just kind of also wondering that organic growth in the Americas, I know that the full year you're expecting organic growth across all regions, but just how should we be thinking about the organic growth rates in the Americas as the year unfolds by quarter?

Yeah, we're not going to provide specific detail by region forward-looking, but again, we have baked in organic growth across all regions on a full year 2021 basis with sequential quarter-by-quarter growth. I will tell you, since we reached the bottom in Q2 of 2020, the recovery has been choppy by month, choppy by geography, and choppy by vertical market, and we expect that kind of choppiness to continue as we recover throughout the year.

And last one for me, just circling back on the strategic objective of reducing complexity in your operations, some very helpful data and information in the prepared remarks in the slide presentation. I was wondering if maybe you can sort of frame where we are on that process, like maybe what sort of inning we're in in terms of reaching that objective. And while I obviously understand that operational efficiencies is always going to be an ongoing objective. Just kind of like how far along are we with kind of grabbing the low-hanging fruit, if you will, from that objective?

Great question. So our enterprise journey is a five-year journey. We started in 2020, and it takes us through 2024. I think the simplification you're referring to is our product portfolio optimization, the 35% reduction in tenant models. So let me just give you a little flavor on that. and where we're at on that journey. I think that's really the substance of your question. You know, we did a robust analysis of our offering, and when we talk about a 35% reduction in tenant models, that includes product exits. So we've announced that we exited the Sentinel outdoor product line as well as our ATLV product line. It also includes pruning existing lines down to only those products that we really need to serve the essential components of someone's application. And so where we thought we had allowed product lines to proliferate, we went in and tuned up the line to get down to the critical few products that our customers really value and serve the application requirements. The third component, we talked about standard offerings. So within a model, we've identified and we're promoting our standard offerings versus allowing or forcing customers to customize and pick from options to select the product that's right for them. So those are kind of the three components within that simplification from an operations perspective. Where are we at in the journey? We did a lot of heavy lifting in 19 and 20 to get us to the point of the reductions we've announced. We moved early on this because we believed that it was important to our business. And then now we have time to go back and capture the savings through manufacturing efficiency, productivity, supply chain efficiency, and importantly, selling efficiency. And so while I don't envision 35% reductions year over year, continuing to analyze our product portfolio to optimize it both for our customers and for the company is an important component of how we'll operate going forward. One other point I'll make is this is not just about cutting products. Importantly, what we're trying to do is streamline and optimize our operation and our offering. This also allows us to free up space and capacity to bring online the important innovations you've seen. And so where we move product out of our plant because we've streamlined a product or we've exited, that space to support bringing in innovations like producing AMR, for example, within our existing footprint. So it's not just a reduction exercise. It's a reallocation of our resources and our footprint to accommodate the innovation.

Is that helpful? Honestly, yeah, very, very helpful. I appreciate your time, guys. Thanks. Thank you.

As a reminder, if you would like to ask a question, please press star and the number one on your telephone keypad. Our next question comes from the line of Michael Schilske with Collier Securities. Please go ahead. Your line is open.

Yes. Hey, guys. Just one quick follow-up question on the coding business that was sold. Could you tell us whether there is a major EBITDA impact? Was it running at a loss or a below-average margin prior to selling it?

Yeah, my good question. So, yeah. You know, to your point, it was even a rate dilutive. So by divesting, we will see a slight hiccup. It's not overly material that we're going to bring out the exact amount, but it was dilutive to the overall enterprise.

Okay. Appreciate it, guys. Thank you so much.

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

Thank you again for joining us. This concludes our earnings call and you may all now disconnect. We hope you have a great day. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.