Tennant Company

Good morning. My name is David and I'll be your conference operator today. At this time, I'd like to welcome everyone to Tenet Company's first quarter 2023 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 have joined our call today via telephone and logged into the conference call presentation on your computer, Please mute your audio on your computer to avoid potential quality issues during the call. Thank you for participating in Tenant Company's first quarter 2023 earnings conference call. Beginning today's meeting is Mr. Lorenzo Bassi, Vice President, Finance for Tenant Company. Mr. Bassi, you may begin your conference.

Good morning, everyone, and welcome to Tenant Company's first quarter 2023 earnings conference call. I'm Lorenzo Bassi, Vice President, Finance. Joining me on the call today are Dave Hummel, Tenants President and CEO, and Fay West, Senior Vice President and CFO. Today, we will provide you an update on our 2023 first quarter performance. Dave will provide you an update on our operations and enterprise strategy, and Fay will cover our financials. After our prepared remarks, we will open the call to questions. Please note the slide presentation accompanies this conference call and is available on our investor relations website at investors.tenanco.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 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 2023 first quarter earnings release includes the comparable gap measures and a reconciliation of those non-gap measures to our gap results. Our earnings release was issued this morning by a business wire and is also posted on our investor relations website at investors.tenantco.com. I'll now turn the call over to Dave.

Thanks, Lorenzo, and hello, everyone. Thank you for joining the call today. Tenet had a very strong first quarter with an all-time record for sales and balanced growth across all geographic regions and product categories, along with service and parts and consumables. Overall, we achieved organic year-over-year growth of 21%. Our sales growth was driven by both pricing and volume. 11% of our sales growth was driven by backlog reduction, and the remainder was attributed to growth in our base business. We saw good price realization in Q1, while volume benefited from improved parts availability, which boosted our manufacturing output. The actions we took in 2022 with respect to our supply chain are reading through. We remain cautiously optimistic that supply will continue to stabilize, which would enable increased and more predictable output. Price realization and moderating inflation led to an expansion of our gross margin, which is now back to pre-pandemic levels and demonstrates tenants' ability to perform when we're able to secure the parts we need to operate productively and efficiently. Adjusted EBITDA for Q1 was nearly $48 million, or 15.7% of revenue. Our top line and gross margin expansion allowed us to create strong operating leverage as we continued to be disciplined in managing our costs. And we converted 100% of our Q1 net income to free cash flow. Demand for tenant products continued to be robust in Q1 as total incoming Q1 order demand exceeded our initial expectations and was in line with our full year guidance. Our open order position of $298 million is still significantly above historic levels, and backlog is especially strong in industrial North America. Even so, Q1 was the first quarter of meaningful backlog reduction since Q2 of 2021, and we believe represents an important turning point in our efforts to mitigate persistent supply chain challenges and meet strong customer demand. As Faye will discuss, we are reaffirming our full-year guidance, and although macroeconomic uncertainty remains, Q1 demonstrated that we are ready and able to capitalize on any improvements in the supply chain environment. As such, we are monitoring order patterns closely and reacting accordingly. At the same time, our R&D and product management teams continue to work to enhance our current product portfolio. For example, In our small spaces category, our new iMop Lite delivers the cleaning performance of a mechanized scrubber with the mobility of a flat mop. This makes it ideal for all kinds of small, cluttered, or difficult to navigate spaces like public restrooms, stadium bleachers, and staff break rooms. The iMOP XL Plus includes more advanced features and is designed for slightly larger spaces like dining areas, meeting rooms, locker rooms, lobbies, and other common areas. At the top of the range, the iMOP XXL Plus matches the capabilities of a full-size walk-behind scrubber with enhanced maneuverability to clean around obstacles and irregular layouts. We continue to leverage the product platforms of our Gaume and IPC brands, and we introduced two new additions to our ride-on scrubber portfolio, the T681 and the T981. These models have the right combination of size, features, and maneuverability for budget-minded customers who want a simple but effective machine, but do not want to sacrifice quality or dependability. In addition to executing on our enterprise strategy initiatives, we formalized our commitment to a renewed and refreshed sustainability strategy. Specifically, we have set a goal of achieving net-zero greenhouse gas emissions across scopes 1, 2, and 3 by the year 2040, and have submitted a letter of commitment to the Science-Based Targets Initiative, or SBTI, for validation. To reach net zero, we plan to make deep emissions cuts across our operations and value chain. We will partner with customers to increase the energy efficiency of our portfolio, and we'll seek to source 100% of our electricity from renewable sources globally by 2030. We also are striving to electrify 100% of both our product offerings and our global vehicle fleet by 2040. Furthermore, we will collaborate with technology partners to drive innovation and development to lead the industry toward a cleaner future. Tenant is an industry leader with a reputation for innovation, and I am confident that we can effect change on a global scale. By embedding sustainable thinking into how we work, we will continue to deliver solutions that can help our customers solve their biggest cleaning challenges while addressing their own sustainability targets. Working within our own business and with our stakeholders, we will help people thrive and contribute to a healthier planet. With that, I will turn the call over to Faye for a discussion of our financials.