Tennant Company

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'd like to ask a question. After the Q&A, please stay on the line for closing remarks from management. If you've joined our call 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 second quarter 2024 earnings conference call. Beginning today's meeting is Mr. Lorenzo Bassi, Vice President, Finance and Investor Relations for Tenant Company. Mr. Bassi, you may begin.

Good morning, everyone, and welcome to Tenant Company's second quarter 2024 earnings conference call. I'm Lorenzo Bassi, Vice President, Finance and Investor Relations. Joining me on the call today are Dave Hummel, Tenants President and CEO, and Faye West, Senior Vice President and CFO. Today, we will provide an update on our 2024 second quarter performance. Dave will discuss our results and enterprise strategy, and Faye will cover our financials. After our prepared remarks, we will open the call to questions. Our early press release and slide presentation that accompany this conference call are available on our investor relations website. 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 2024 second quarter earnings release includes the comparable gap measures and a reconciliation of non-gap measures to our gap results. I'll now turn the call over to Dave.

Thank you, Lorenzo, and hello, everyone. On the call today, I will be discussing highlights from the second quarter 2024, our outlook for the remainder of the year, and the progress on our enterprise strategy. I am pleased to report on our strong results in the quarter. Lapping a previous record high second quarter in the prior year, we achieved both organic net sales growth and increased adjusted EBITDA. Our performance was driven by generating strong order demand as well as continued strong backlog benefit. Enabled by the execution of our enterprise strategy initiatives, we expect to drive continued order growth in the second half of 2024. For the second quarter of 2024, net sales increased 2.9%, to $331 million, and adjusted EBITDA rose to $58.6 million, resulting in an adjusted EBITDA margin of 17.7%. We are pacing ahead of our year-to-date backlog reduction expectations, and we are confident in our ability to achieve the $80 to $100 million of backlog reduction in the full year 2024, as we previously communicated. With this backlog reduction, we now believe we will exit 2024 with a normalized backlog level and market competitive lead times across the entire product portfolio globally. Second quarter order rates were very strong, up double digits compared to both the first quarter of 2024 and second quarter of 2023. This order demand generation is a direct result of the investments we made and the execution of our enterprise growth strategy. Looking ahead to the second half of the year, we are forecasting continued strong order growth driven by rigorous execution of targeted growth initiatives. We expect increased impact on growth from incoming orders as the backlog reduction benefit moderates in the second half. With our strong first half performance as a company, we are increasing full year guidance for both net sales and adjusted EBITDA. Despite known challenges and reasons for caution in the macroeconomic environment, Demand for tenant products and services remains strong. Tenants enterprise performance during the quarter gives us momentum, and we are forecasting higher net sales in the second half of the year. Circling back to our solid second quarter as a company, our business results varied by geography. In the Americas, order rates during the quarter were up double digits compared to the prior year period, and we continue to reduce the backlog in our industrial machines. Our strategic investments in this region continue to deliver strong order rates, outpacing market growth, giving us reason to believe our strong leadership position is growing. In EMEA, it was a challenging quarter across the region, compounded by lapping a previous quarter with higher backlog reduction benefit. Economic activity in EMEA's manufacturing sector remained sluggish and our sales were flat. Despite this broad-based market softness, we are seeing indicators that give us reasons for optimism in our outlook for the region. In Italy, for example, we are seeing strong order rates as we build out our distribution network with a focus on industrial, BSC, and retail vertical market customers. Also, across the region, we are building a strong pipeline of opportunities leveraging our market-leading AMR product portfolio and value proposition. Overall, order rates in the region are up compared to the prior year quarter, and we expect to see continued improvement during the second half of 2024. In APAC, we faced a difficult quarter driven primarily by stark declines in China, where we are experiencing slowing demand. As has been widely reported, excess manufacturing capacity and government-induced overproduction in China are pressuring market prices in our mid-year product offerings. This is affecting not just the China market, but the broader region as well, and we do not see this dynamic changing for the remainder of the year. In Australia, we are seeing customer caution and a moderating in demand as some customers delay order decisions. As a result of the Q2 slowdown, we are expecting minimal growth in the APAC region for the full year 2024. Last year, we introduced the three pillars of our new enterprise strategy, growth, performance, and people. We continue to resource, invest, and execute targeted initiatives across each of these pillars, and I'd like to take the opportunity to provide you with several key updates from the quarter. Within the growth pillar, pricing is a critical piece to driving growth. Our pricing strategy is about maximizing our market position to realize growth and capture the value we deliver to our customers. During the second quarter and throughout the first half of 2024, we saw price growth across each of our key geographies. At an enterprise level, we are targeting approximately 50 to 100 basis points of annual price growth as part of our long-term goals. We are well positioned to achieve that in 2024 as we continue to monitor market dynamics to capture both long-term price and volume growth. New product development is another important focus in our growth pillar. During the second quarter of 2024, we started shipping our first X4 Rover orders to customers. As previously discussed, the X4 Rover is our first purpose-built autonomous floor cleaning machine and our fourth robotic scrubber. The new X4 Rover is the first machine to be powered by the Gen3 BrainOS robotics platform available exclusively to Tenet. Last quarter, we evaluated increasing production due to strong initial customer interest and opportunity pipeline. As orders and customer interest for the X4 Rover continue to increase throughout the second quarter, we decided to increase our manufacturing capacity to support the anticipated order demand. In addition to the strong market reception for our new X4 Rover, we also continue to see high demand in each of our existing AMR products as customers are replacing and expanding their existing AMR fleet with new units. These reorders demonstrate the continued market preference for the tenant AMR value proposition and the potential for continued growth across each of our AMR product lines. The T16 AMR, our first industrial robotic floor scrubber targeting manufacturing, warehousing, and logistics verticals, has seen some of the strongest adoption rates. Customers in those verticals are already familiar with the benefits of robotics and are excited to take advantage of the T16 AMR capabilities. AMR unit sales, including the X4 Rover for the first half of 2024, are trending well ahead of both the prior year and previous multi-year averages. This trend supports our belief that we have a winning product portfolio and strong value proposition in the market. Also within our growth pillar is our M&A strategy, which prioritizes opportunities that provide tenant with the right strategic value, operational fit, and financial return. Our focus is on three areas, one, growing the core, two, driving value through connected autonomy, and three, expanding into select adjacencies. Our previously mentioned investment in BrainCorp aligns with our second focus area, driving value through connected autonomy, and has been a key driver in our AMR success this year. Our investment in BrainCorp provides us exclusive access to Gen 3 technology, increased selling efficiency, and the opportunity to benefit from annual recurring revenue. We are realizing the intended benefits of our strengthened relationship with Raincorp and are excited to continue to lead the robotics disruption of the global mechanized cleaning equipment industry. Our previously announced acquisition of TCS, Tenet's longstanding distributor based in Austria, aligns with the first focus area within our M&A strategy, growing the core. Our TCS integration is on track to date and the business is performing in line with expectations. We are impressed by the teams in these geographies and are developing aggressive growth plans for the business in this attractive region. Our successful execution on our M&A strategy is due to our financial strength and disciplined capital allocation strategy. As we continue to generate strong cash flow and maintain a strong balance sheet, We are well positioned to act on those target opportunities aligned with our M&A strategy. Now, turning to our performance pillar and sustainability. In June, Tennant published our 2024 Sustainability Report. This year's report marks the first year of reporting aligned to our new sustainability framework, Thriving People, Healthy Planet. We are proud of the work we are doing to embed sustainability in how we think, plan, and operate our business. We believe that by setting ambitious goals, we will drive progress for our customers, our business, our people, our communities, and the planet. The report details the significant progress we made, including integrating our net zero goals into our product line strategies, continuing progress toward our validated net zero targets by reducing our scope one and two greenhouse gas emissions 13%, sourcing 92% of our global electricity from renewable energy sources, and reducing our scope three emissions by 8%. Our ERP modernization journey is the second piece of our performance pillar. The project is on track and our focus in 2024 continues to be on the design and build phase of the implementation. Our significant investment in this ERP consolidation project will provide a strong and secure digital infrastructure to enable globally standardized processes and systems for scalable growth by better serving more customers and unlocking operational efficiencies. Overall, our second quarter results reflect solid execution on our enterprise growth strategy, providing strong momentum for the remainder of 2024 and the years ahead. With that, I will turn the call over to Faye for a discussion of our financials.