Tennant Company

Good morning. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to Tenant Company's 2021 Third 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 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 2021 Third Quarter Earnings Conference Call. Beginning today's meeting is Mr. William Pryte, Senior Director of Global Financial Planning and Analysis and Investor Relations for Tenant Company. Mr. Pryte, you may begin.

Thank you. Good morning, everyone, and welcome to Tenant Company's Third Quarter 2021 Earnings Conference Call. I'm William Prate, Senior Director of Global Financial Planning and Analysis and Investor Relations. Joining me today are Dave Hummel, Tenant's President and CEO, and Faye West, our Senior Vice President and CFO. On today's call, we will update you regarding our Third Quarter performance and guidance for 2021. Dave will brief you on our operations and enterprise strategy, and Faye will cover our financials. After the 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.tenneco.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 expectation of future performance. Such statements are subject to risk and uncertainties, and our actual results may differ from those contained in those statements. The risk 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, 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. Our 2021 third quarter earnings release includes the comparable GAAP measures and a reconciliation of these non-GAAP measures to our GAAP results. Our earnings release was issued this morning via BusinessWire and is also posted on our investor relations website at investors.tenantco.com. I'll now turn the call over to David.

Thanks, William, and thank you, everyone, for joining us today. Our third quarter results reflect a return to pre-pandemic demand across the majority of our geographic markets and verticals. Our comprehensive and innovative product offerings are resonating with customers during this broad-based market recovery, and we expect this demand environment to continue for the foreseeable future. While we are certainly encouraged by these positive trends, our financial performance continues to be impacted by the unexpected and prolonged global supply disruptions, inflation, and labor constraints that have affected virtually every industry and geographic market. The increased demand for our products combined with the effect of macro-level constraints on our production capabilities contributed to a record order backlog that varies by product category and region and is now three to five times our historical averages. In response, we've taken actions wherever possible to minimize the impact on our operations. Our plans continue to remain open and operate due to the significant efforts by our global teams to maximize output and to safeguard our customers' experience. While we expect that these macro headwinds will continue well into 2022, we remain confident in our ability to drive long-term sustainable growth and improve our operational efficiencies to generate long-term value for our shareholders. We are doing so not only through short-term mitigation actions, but also through the changes we've made and continue to make as part of our enterprise strategy. To minimize the impact of higher freight costs and related supply disruptions, we continue to prioritize local for local and region for region manufacturing and sourcing to allow us to manufacture our products closer to our customers. As an example, we are making the necessary investments to add production of our T16 line to our China plant mid-next year. The T16 is a highly maneuverable battery-operated ride-on scrubber that has proven to be very popular with our customers within the APAC region. By adding production to the local market, we can help minimize freight costs, improve lead times, and better leverage our global production capacity. We have continued to make capital investments to drive greater efficiency and capacity in all of our plants. As just one example, we have invested in a new lathe in our Minneapolis plant that will improve production flow, reduce the amount of labor spent machining parts, and will allow us to insource items that we would have otherwise purchased from vendors. New tooling, specifically tooling related to our rotational molding machines, is another example of how we are investing in our business to support our local for local initiatives. This lets us manufacture key components at the point of assembly, meaning we can avoid situations where we manufacture in one location before shipping to a second location for final assembly. These actions help avoid unnecessary shipping delays, freight costs, added time to manufacture and inventory carrying costs. While our teams are taking every opportunity to find creative solutions to address the current supply chain environment, each day brings new challenges in terms of parts availability. Right now, the lack of availability of hydraulic pumps, chips and other electronic components, which are critical parts within our machines, are main drivers of our increased backlog and are directly affecting our ability to deliver on our full-year potential. However, we will continue to control everything we can control and work diligently to capitalize on the strong demand environment. An important component of our enterprise strategy is the long-term move towards platform design. In the current environment, our engineering teams are taking a balanced approach to this initiative as they weigh the long-term benefits of platform design with the near-term need to adjust our designs to allow for available parts and to increase our sourcing flexibility. Of course, our commitment to quality and safety and meeting the needs of our customers will not waver. Regarding labor shortages, specifically in manufacturing, we are staying competitive with wages and are making every effort to attract new talent by providing a safe, rewarding, and fulfilling work environment. We're also supplementing and strengthening our talent acquisition teams by partnering with third-party vendors to assist with our employment outreach to targeted marketing campaigns and professionally staged hiring events. We are encouraged by these actions, which are having a positive effect on our recruiting and helping to mitigate the ongoing labor challenges. As Faye will discuss, while our revised full-year guidance reflects what continues to be a challenging operating environment, our team remains committed to meeting the needs of our customers and executing against our enterprise strategy to deliver on our long-term financial commitments. In particular, we continue to innovate for profitable growth, which is the third pillar of our enterprise strategy. Over the past year, we've announced the introduction of new products to help address the evolving needs of our customers. Earlier this year, we introduced new mid-tier products, which leverage our IPC product portfolio to meet the needs of a broader segment of customers by offering a wider range of performance and price points. Our mid-tier products have been well-received by our customers and distributors. While they leverage the same IPC platform, these tenant-branded products benefit from the broader customer experience associated with the tenant brand, including the full ecosystem of application expertise, technological innovations, and best-in-class sales and service support. During the past year, we've also introduced two key new products to our AMR portfolio, including the T380 AMR and the T16 AMR. Together with the T7 AMR, these products have created a comprehensive robotic portfolio to meet all of our customers' needs. With the addition of these new products, we have been able to strategically enter new verticals outside of just retail, including manufacturing, logistics and warehousing, and education, among others. Our AMR portfolio continues to be well-received by an expanding number of customers, and we look forward to updating you on a number of other AMR innovations as they materialize. The one strategic pillar I haven't yet touched on is winning where we have a competitive advantage. For example, we recently launched a value realization exercise in Australia, building on our successful North American execution back in 2019, where we assessed all of our strategic accounts and distributive partners. In Australia, this allowed us to realign over 40% of our strategic account customers and 80% of our distributive partnerships, ensuring that we have an optimized channel structure in place to serve this highly competitive market. By adjusting our customer segmentation appropriately, we can better adjust lead times, pricing, and sales support across our customer base. In doing so, we are aligning the customer experience with our profitability goals. Moreover, we are relentlessly focused on providing our customers with high-quality products and exceptional service as we execute on our enterprise strategy. With that goal in mind, we will continue to take decisive and appropriate actions to maintain our customer experience while remaining focused on our business objectives. With that, I will turn the call over to Faye for a discussion of our financials.