Tennant Company

Good morning. My name is Cheryl and I will be your conference operator today. At this time, I would like to welcome everyone to the tenant companies 2021 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 any potential quality issues during the call. Thank you for participating in Tenants Company's 2021 Fourth Quarter and Full Year Earnings Conference Call. Beginning today's meeting is Ms. Faye West, Senior Vice President and Chief Financial Officer for Tenant Company. Ms. West, you may begin.

Good morning, everyone, and welcome to Tenant Company's fourth quarter and full year 2021 earnings conference call. I am Faye West, Senior Vice President and CFO. Joining me on the call today is Dave Hummel, Tenant's President and CEO. Today, we will update you regarding our fourth quarter and full year performance and our guidance for 2022. Dave will brief you on our operations and enterprise strategy, and I will cover the financials. After our prepared 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 risks and uncertainties, and our actual results may differ materially from those contained in the statements. These risks and uncertainties are described in today's news release and the documents we file with the Securities and Exchange Commission. We encourage you to review those documents, particularly our St. Harbor Statement, for a description of the risks and uncertainties that may affect our Additionally, on this conference call, we will discuss non-GAAP measures that include or exclude certain items. Our 2021 fourth 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.tenantcode.com. I'll now turn the call over to Dave.

Thanks, Faye, and thank you, everyone, for joining us today. As we look back on 2021, the way in which global teams responded to an extremely challenging operating environment, which included unexpected and prolonged global supply disruptions, inflation, and labor constraints, allowed tenants to deliver record earnings performance. While we expect macroeconomic headwinds to persist throughout the year, our 2021 performance demonstrates our ability to execute in this environment and positions us to deliver on our full-year target for 2022. We are encouraged by current demand trends. Tenant's strong full-year performance was driven by pre-pandemic levels of order rates across our global markets. In 2021, our sales grew by 9.1% on an organic basis, which excludes the effects of foreign currency exchange and divestitures. Our comprehensive and innovative product and solution-oriented offerings are resonating with customers, and we expect this demand environment to continue for the foreseeable future. While we face ongoing industry-wide supply chain disruptions and inflation, Our 2021 results were in line with our revised guidance, and we delivered adjusted EBITDA of $140.2 million and a 100 basis point improvement in adjusted EBITDA margin. Moreover, our record open order position and strength in 2021 have provided momentum into 2022. Supported by current demand trends, our commitment to innovation, and our discipline focused on cost reductions and manufacturing efficiencies, We remain confident in our ability to drive long-term sustainable growth and operational efficiency to generate value for our shareholders. We generated cash flow from operations of close to $70 million, and after investing $19 million in capital expenditures, we returned over 60% of net cash flows to our shareholders in 2021 through dividends and share repurchases. In 2021, we increased our quarterly dividend by 9%, marking the 50th consecutive year the tenant has increased its annual cash dividend. For full year 2022, we anticipate organic net sales growth between 4.5% to 8.5%, and adjusted EBITDA between $145 million and $160 million, although we expect some margin compression in 2022. Faye will go into more detail later in the call. We continue to take steps to maximize our output worldwide and to safeguard the customer experience. As discussed on previous calls to minimize the impact of higher freight costs and supply disruptions, we are prioritizing local for local and region for region manufacturing and sourcing in order to manufacture our product closer to our customers. Also, our supply chain team has undertaken significant countermeasures to mitigate interruptions and expand capacity in the future. Some of these actions include increased supplier purchase commitments and safety stock inventory, extended visibility of production forecasts, expanded dual sourcing supply options, and deeper integration into our supplier's supply chain design. Our efforts extend beyond short-term mitigation and include the lasting improvements we continue to make as part of our enterprise growth strategy. Much of our success in 2021 would not have been possible without the foundational improvements made in prior periods and the focus this strategy creates for our organization. As you may recall, this strategy 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. The first pillar, win where we have a competitive advantage, began in 2020 with critically important foundational work. In 2021, it led to the profitable sale of our coatings business, as well as the expansion of successful value capture programs in specific geographies, resulting in targeted areas of margin expansion. Turning to the second pillar, reduce complexity and build scalable processes, the pandemic-related challenges of the last two years have compelled us to accelerate this initiative, particularly for our Local for Local programs. Our localization efforts align to our long-term strategy and help us to mitigate the current transportation challenges. At the same time, it has led to new supplier relationships and enabled dual-source opportunities that minimize production bottlenecks. Additionally, we have multiple line move and production capacity shift projects underway to optimize our operations. Our engineering teams have launched new value engineering projects that yield tactical and strategic benefits, ranging from cost mitigation to reduction in SKUs. The implementation of our enterprise strategy is a continuous process, particularly with respect to the third pillar, innovate for profitable growth. More specifically, this means leveraging innovation to unlock value for our customers and for tenants. A great example is Tenant's new inventory scan, the first add-on for our robotic floor scrubbers that provides multi-purpose autonomous solutions specifically for retailers. InventoryScan is an integrated solution that enables tenant forest drivers to autonomously scan on-shelf inventory and to collect data in real time to enhance inventory management and operations. In addition to the near-term opportunity and partnering with a valued customer, InventoryScan also represents an exciting move for tenant company into an attractive adjacency. We remain laser focused on winning new customers and serving our existing customers as they grow and expand. For instance, we have recently expanded our partnership with Sunbelt Rentals, the premier rental equipment company in North America. Sunbelt Rentals offers a highly diversified product mix, including general construction equipment, industrial tools, power generation, and of course, floor scrubbers and sweepers, which we have provided to Sunbelt for more than 15 years. Tenant has been Sunbelt Rental's exclusive strategic provider of floor care equipment, and we will now support their network of dedicated floor care centers, which will serve as one-stop shops for their customers in need of cleaning solutions. Sunbelt Rentals is a valued strategic partner, and the relationship has been mutually beneficial, particularly with respect to lead generations. In short, we remain committed to providing our customers with high-quality products and exceptional service as we execute on our enterprise strategy, and we will continue to take decisive and appropriate actions to maintain our customer experience while pursuing our growth objectives. With that, I will turn the call over to Faye for a discussion of our financials.