Tennant Company

Good morning. My name is Abby and I will be your conference operator today. At this time, I would like to welcome everyone to Tenant Company's 2026 First 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 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 2026 First Quarter 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 First Quarter 2026 Earnings Conference Call. I'm Lorenzo Bassi, Vice President, Finance and Investor Relations. Joining me on the call today are Dave Hamel, President and CEO, and Faye West, Senior Vice President and CFO. Today, we will review our first quarter performance for 2026. 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 earnings press release and live 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 statement. 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 gap measures that include or exclude certain items. Our 2026 first quarter earnings release and presentation include the comparable gap measures and a reconciliation of these non gap measures to our gap results. And now turn the call over to Dave.

Thank you, Lorenzo, and good morning, everyone. Thank you for joining our Q1 2026 earnings call. This morning, I will begin with an overview of our first quarter performance, highlighting the key takeaways from the quarter. I will also provide an update on our North America ERP recovery, discuss progress in our AMR business and TNC robotics venture, share our outlook for the year, and outline how we think about capital allocation more broadly. Faye will then walk through the quarter's financial results in greater detail. and cover our full year guidance. With that, let me start with our performance in the first quarter of 2026. Orders totaled $327 million, an increase of 10% year over year, demonstrating demand momentum. Growth was broad-based and driven by increased customer demand, execution of our enterprise growth strategies, and continued strength in robotics. Backlog increased approximately $32 million from year end to $109 million. This growth provides clear evidence that our customer relationships remain strong and end market demand is healthy. Overall, our performance underscores the strength of our foundation and reinforces that our portfolio, service model, and growth strategies are resonating as execution has stabilized. Net sales increased almost 3% year over year, with pricing realization and favorable currency largely offsetting North America volume declines. As operations stabilized in North America, customer activity and fulfillment improved meaningfully in February and March, consistent with our expectations following the January inventory shutdown. As anticipated, gross margins were pressured in the first quarter, driven by incremental labor, freight, and expediting costs associated with ERP recovery efforts earlier in the period. Importantly, margins improved sequentially each month as execution and throughput strengthened. The gross margin exit rate on an enterprise level was approximately 40%, and this supports our confidence for continued gross margin recovery as the year progresses. The gross margin improvement flowed through to EBITDA and reflects improving operational momentum. Faye will further walk through the details and outlook in her remarks. Next, let me spend a few minutes on our ERP recovery, which was the central operational focus of the quarter in North America. Our top priority entering 2026 was to stabilize our North America operations, restore reliability for our customers, and reestablish a solid operating foundation following the ERP go-live disruption. The actions we took in the first quarter were deliberate and aligned with that goal and are reflected in the operating performance I just highlighted. By the end of the quarter, core workflows, including order management, production scheduling, and fulfillment, were stable and operating at scale. Stabilization was the first phase, not the end state. With the system operating reliably at scale, our focus has shifted from fixing functionality to driving efficiency and optimization. The work underway today is centered on addressing the friction points identified during the stabilization phase, phasing out remaining manual workarounds, and strengthening end-to-end execution across the business. As we move through the second quarter, the emphasis is on improving throughput, labor productivity, and system-enabled performance. These efforts are already underway and the steady improvement we saw through the first quarter, including a stronger exit rate in March, supports our confidence in continued efficiency gains and gross margin recovery in the second half of the year. The lessons learned from our North America ERP implementation are informing how we approach the remaining phases in EMEA, which were originally scheduled for early 2026. We have intentionally pushed the EMEA implementation beyond 2026. allowing the organization to remain fully focused on recovering North America execution before advancing to the next phase. As our plans continue to evolve, we will keep you updated on timing and expected costs as we gain greater clarity. I want to thank our customers for their continued partnership and patience as we work through this transition. I also want to recognize the extraordinary effort of our employees across the entire organization. This was truly a company-wide effort with teams working together every day to support our customers and restore reliable execution. The dedication of our people and the strength of our customer relationships are two of the reasons I remain confident in the path ahead. I now want to provide an update on the exciting progress we are driving in our robotics business. Since 2018, we have earned the trust of the largest, most forward-looking flagship customers globally. We have shipped over 11,500 robots cumulatively. We have built a growing and profitable US-based robotics business and established ourselves as a world leader driving the robotic cleaning disruption. I'm proud of what we've built, but I also believe we're just getting started. The signals from the market today are clear. We are seeing double digit market growth rates and increasing demand from customers across vertical markets around the world who are serious about adopting robotics. In Q1, our AMR sales, inclusive of equipment and autonomy service fees, We're approximately $27 million, representing 9% of total net sales in the quarter and 85% year-over-year robotics growth. We see the inflection point in customer interest, and we are acting decisively to capture near-term growth and drive this market toward the tipping point in adoption. More specifically, I would like to highlight five key activities this quarter. First, we are ramping our TMC robotics venture by hiring and onboarding new roles and activating our growth strategies. We're operating with the speed and urgency of an entrepreneurial startup to accelerate AMR growth by leveraging the full power of our $1.2 billion global core business. Our proven product portfolio, preferred brands, extensive channel reach, 4,000 plus employees, including 1,000 field service technicians, position us to drive a winning disruption of our own core industry over the long term. Second, we delivered another defining milestone by extending our exclusivity arrangement with BrainCorp until 2029 with an evergreen notice period. This preserves tenants' exclusive access to the BrainOS autonomy platform in our category, strengthens our partnership alignment, and reinforces our clear division of responsibilities. Leveraging the strengths of each partner, tenant owns the customer relationship, equipment design, direct sales, service, and lifecycle support, while BrainCorp advances the foundational AI spatial intelligence, and software that power our portfolio. With exclusivity secured, we have the conviction to invest aggressively, and we plan to bring 10 new AMR products to market over the next 24 months. This is the power of two global leaders joining forces to aggressively drive tangible results. Third, the strength of this partnership was demonstrated with the launch of BrainOS Clean 2.0 and SelfPath AI. SelfPath enables advanced autonomous navigation, allowing machines to independently generate and continuously adapt cleaning routes in real time, eliminating the need for manual route training and retraining. This increases customer adoption, improves deployment efficiency, and optimizes performance in real-world applications. Together, these capabilities represent platform-level innovation and a compelling example of physical AI delivering measurable value in dynamic commercial environments. Fourth, we significantly expanded our addressable market with two strategic product launches. The X16 Sweep, our first robotic sweeper, is an industrial-grade machine built for rugged, reliable performance in demanding warehousing, logistics, and manufacturing environments. This launch is another growth catalyst. Sweeping is a broad-based need across nearly every industrial vertical. And because pre-sweeping is required before scrubbing in most cases, The X16 expands our robotics portfolio from best-in-class scrubbing to adjacent sweeping use cases. Our customers made an industrial robotic sweeper a clear priority. The X16 sweep meets their needs and early demand signals are very strong. We also introduced the X2 Rover, our small format scrubber that brings superior cleaning performance, ease of use, competitive value proposition, and unmatched maneuverability to robotic cleaning of small shared spaces in retail, groceries, schools, convenience stores, and the tight spaces inside larger facilities that bigger machines simply cannot reach. This positions us to further expand our addressable market and capture share in this high growth segment. Together, the X16 Sweep and X2 Rover extend our robotic cleaning benefits to more customers, more verticals, and more applications, accelerating our growth trajectory and reinforcing our leadership position in robotics. The fifth, we are aggressively expanding our channels to market for tenant robotics. We are launching new products, programs, and compelling offerings specifically designed to accelerate adoption with building service contractors and grow with our distributor partners worldwide, making it simpler and more rewarding for them to promote our robotic solutions. Our new X2 rover is tailor-made for these channels and their end customers in vertical markets like retail, grocery, schools, and convenience stores. customers they already support every day. And we're not building this from scratch. Tenant already has deep established relationships with BSCs and distributors across the globe. One thing that truly differentiates us and is highly valued by billing service contractors is our unmatched support ecosystem. Over 1,000 factory direct service technicians worldwide who can service and support our robots like no competitor can. That is a significant competitive advantage that gives our partners and their customers total confidence to adopt and scale with tenant robotic cleaning. The global robotic cleaning market is dynamic and we remain closely attuned to the competitive landscape. Our focus is on what we can control, the proven strength of our business, the entrepreneurial agility of our TNC venture, and a robotic product portfolio that continues to expand. Our market coverage is broadening, our partnership with BrainCorp is stronger than ever, and the demand trajectory we are seeing reinforces our conviction. Taken together, these advantages give me real confidence and genuine excitement in delivering our target of $250 million in AMR revenue by 2028. Turning to the remainder of 2026, our first quarter performance, strong order momentum, and continued ERP progress support our confidence in the full-year plan, and we are reaffirming our 2026 guidance. Before I turn the call over to Fay, I want to briefly frame how we think about capital allocation more broadly because it is a core part of how we create long-term value. Our capital allocation framework is straightforward. We invest first in the business to drive durable, profitable growth. We maintain a strong balance sheet and ample liquidity. We pursue strategic M&A opportunities that enhance our portfolio. and we return excess capital to shareholders. Strong execution and disciplined working capital management have supported solid free cash flow and the flexibility to advance our priorities. While operating cash flow has been temporarily impacted by the ERP disruption, we expect that impact to be transitory, and our overall free cash flow profile continues to support both growth and shareholder returns. We prioritize organic growth investments, particularly in R&D and operational improvements, that strengthen our competitive position and enhance long-term returns. On average, we invest around 3% to 3.5% of sales in R&D and spend between $20 and $25 million annually on CapEx, and we expect these levels to continue in the near term. We also manage liquidity and leverage with discipline so we can navigate market conditions and act decisively when opportunities arise. We remain within our stated leverage target of one to two times adjusted EBITDA and we intend to keep our balance sheet position to support both shareholder returns and strategic growth, including M&A. Returning capital to shareholders remains central to our capital allocation strategy. We intend to continue our long record of disciplined, competitive dividend growth, and we also repurchase shares opportunistically when we believe the return profile is compelling. In the first quarter of 2026, we accelerated buybacks amid an event-driven dislocation in our share price that we believe was tied to the ERP implementation and not reflective of our core performance. We deployed $60 million to repurchase approximately 950,000 shares, or 5% of beginning of year shares outstanding, at an average price of $63 per share, an intentional high conviction decision we believe represents an attractive return for shareholders and is fully aligned with our stated capital allocation priorities. To execute this opportunity, we utilized a portion of our borrowing capacity, which increased leverage, but we remain within our targeted leverage range of one to two times adjusted EBITDA. Importantly, we expect leverage to trend back toward the lower end of that range by the end of 2026, and this action does not preclude us from continuing to invest in organic growth or pursuing other strategic initiatives, including M&A. as opportunities arise. As a result of our share repurchasing activities, we expect an approximately $0.15 net positive impact on EPS on a full year basis. Reflecting our continued confidence in tenants' strategic direction and commitment to disciplined capital return, our board recently authorized a new $2 million share repurchase program. Together with shares remaining under our existing authorization, this brings total repurchase capacity to approximately 2.56 million shares, or roughly 15% of basic shares outstanding, providing meaningful flexibility to continue returning capital opportunistically. M&A remains an important lever within our framework. Recent tuck-in acquisitions of distributors in EMEA have strengthened our portfolio and expanded capabilities, and we continue to evaluate opportunities that meet our strategic and financial criteria. Taken together, these actions reflect a disciplined and balanced approach to capital allocation, investing to drive long-term growth, maintaining financial resilience, pursuing strategic opportunities, and returning capital when we see an attractive risk-adjusted return. We believe this approach positions us well to create long-term value for shareholders. With that, I will turn the call over to Faye for a deeper discussion of the financials.