Tennant (TNC) 31 Oct 232023 Q3 Earnings call transcript

Good morning. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to Tennant Company's 2023 Third Quarter Earnings Conference Call. This call is being recorded. [Operator Instructions]Thank you for participating in Tennant Company's 2023 Third Quarter Earnings Conference Call. Mr. is meeting today's Beginning Lorenzo Bassi, Company. Relations Tennant and President, Finance Investor for Vice Mr. Bassi, you begin. may

Investor and everyone, XXXX Lorenzo Finance Call. morning, to Earnings I'm and President, Vice Good Bassi, welcome Conference Quarter Tennant Relations. Company's Third

statements future documents statements may may that regarding forward-looking uncertainties Such the on in those results.Additionally, Exchange this actual from our encourage uncertainties, our and and differ Joining may on with today's me Dave contain to cover the President risks our expectations are materially open conference or the will Commission. results answers risks strategy, President CEO; Dave our in for enterprise release presentation we An those news the and third provide Vice release certain of risks financials. the provide Investor today our be are These filed and you Fay and After remarks, an remarks include Senior questions contained call update we Securities and a to and that CFO.Today, we slide of on exclude available will Huml, quarter our our performance. our earnings this will the on West, you are call, our we statements. will company's documents, Tennant's Fay and and prepared website.Before described morning subject discuss to the We Safe review on particularly description that statement, call and conference operations please Relations are items. that questions. we and call measures update with non-GAAP Harbor and affect you this our accompanies and to begin, press an will uncertainties performance. advised

non-GAAP over presentations turn earnings Dave. and GAAP to reconciliation and measure a the quarter of to third now the XXXX Our call GAAP measures comparable these our include release results.I'll

hello, everyone. Lorenzo, you, Thank and

I our be of the our transition report we third QX and strategy.I the today, against our the our half and will call outlook delivered our enterprise sales planned our to built discussing year. the growth and from expectations. enterprise current targets, global quarter, On the performance remainder first above am in the of fourth momentum very on for strategy our new highlights generated XXXX, strong was the organic the This consecutive to growth pleased which adjusted strong quarter results, team EBITDA framework net

to teams us to I record-setting worked have performance diligently crisis on enterprise strategy, and not manage supply the who pace a quarter. of customers consecutive deliver execute quarter, we million, around year. of net prouder could third Tennant's sales Our our of backlog the puts be the serve organic Orders meaningfully have reduced the for third sales the remained by resilient, $XXX.X achieved chain growth we and world.In bolstered XX.X%.

plant.We EBITDA expanded We the our that those and Tennant. products continued in from delivered nearly to normal gross product for reduce to lead out Backlog million. of are services exceptional of industrial our have produced customers times to levels and Minneapolis except exclusively $XX.X products and all returned lines, deliver adjusted XX.X% margins expect

Our strong our drove moderating with price along performance. inflation realization efforts, operating a environment,

these company. million. guidance $X.XX billion for full-year dividends and to record and outlook we return to and Both the establish net million increasing focus on over through free flow, to on strategic are us income between $XXX to highs EBITDA repurchases.Based converted $X.XX capital. capital sales of cash to as in during quarter, and XXXX and shareholders continued quarter we XXX% net adjusted working our the Additionally, enables performance billion share to we fourth improvements This between making make guidance the $XXX for of investments our to

our the remain discusses believe regular structural shareholder of will Fay exceptional new and sales Tennant's on announce rates at several advantage; where to results talk in XXXX, and of resilient will strategy. and EBITDA focused for improvements increase to we adjusted XXXX. growth. of we guidance we three, growth key current to complexity net about pillars by We us our in parts strategy are: that detail organic expect deliver X will designed XXXX. on Developed more profitable targeted pillars availability that full-year business winning driving processes; levels, order results, to remain have meet she our we targets deliver financials.Over reducing one, for X% am a I innovating divestitures. margins updates XXXX.We by rate allowing net inflation and anticipated that two, XX% profitability. X% this drive building scalable years, enterprise have will end value into based were competitive happy the These each of financial to to provided our last on annual our Its expanded and as

growth deliver We expect adjusted to to rate of EBITDA organic XX%. approximately X%. X% targeted We rate of growth annual an

X%. to margin greater and than EBITDA to XX%. expect deliver we achieving We basis XX margin on average XXX EBITDA expansion per of We year, targeted an points adjusted of annual adjusted XX points, expect adjusted deliver of approximately improvement to EBITDA basis basis points

to unprecedented a enterprise as of year a a is well of of conclude It pandemic global successfully schedule chapter as of prior our the chain global demonstration the we our been our have and compelling organizational agility.As All disruptions. supply team, we the was global strategy, our next ahead this growth. planning amidst pivot achieved company, strength for

and digits X a strategy, pillars above-market pillar is capabilities move intend foundation we provide bright. mid-single for foundation last XXXX, and strategic growth, to leverage this the and sales we very rates. on and long-term that growth-focused The differentiated growth our Company in are will for which performance launch people.Our years, will And enterprise as centered solid changes new new for prospects growth in structural growth target Tennant. execution have built implemented We the forward. Tennant rigor we Over have

profit We prudent will investments operating discipline, efficiency expand through and in and maintain management pricing margins expense productivity.

cost is deliver and business an enterprise our elevate in our structure, strategy. will pillar embed experience optimize making, into to run order our sustainability customer improved ambitions decision performance how accelerate Our

achieve customer by best-in-class to will as change digital solution cloud-based for this and goals other over a to sustainability operating Thriving help organization who next and value and can proposition; and attracts and by: be our progress our will met incremental Tennant this stakeholders.Our the customers, embedding grow, and cost incremental if our Healthy our across retains deliver driving in we Planet informed our for years, We efficiency SAP only our a employees processes performance and our that exceptional services can ERP scale results investing global to to standardizing will customers. deliver consolidate and modernize initiative infrastructure optimizing build existing systems -- X People, framework by savings; people our accelerating products our talented drive enterprise resulting

that thrive.Through reasons map to by: which Company; employee and and environment strategy, Tennant clear, an promise Our can proposition investing deliver will our growth our to so DE&I and our and in in can we people consistent a work prospects inclusive create road all of addressable representation financial pillar employees this growth our employees ambitions attractive value about business we at positioned accelerating achieve compelling extendable value growth position model, market. and on we has share supplement strength, an $X.X growing core well of billion that proposition Tennant compelling cleaning through with will to are winning enhance market, in organic strategic shareholder we believe acquisitions acquisitions. a proactively with an and our solid drive value. XX% Based and to

grow strengths, the expand assets closing geographies.We will Our explore acquisitions, first product to and our unique to area non-cleaning in channel core our leverage attractive be position also to through adjacencies will and capabilities and of mobile strengthening gaps equipment. look into focus bolt-on attractive

and similar similar and primarily equipment We companies opportunities end or with have Tennant legacy chain characteristics, cross-selling footprint. that will focus channels, markets mobile the supply on potential manufacturing

will ideal infrastructure Our to expertise. targets autonomy and and extend opportunities our leverage provide service

services open autonomy acquire source market products stack want will to Lastly, or by the either directly. technology on focus connected internally, identifying the we on develop and we

financial disciplined M&A focus opportunities right will operational process value, Our provide fit those returns. that the and on strategic

accordingly.With are a organization of turn from to for discussion shifting proactive over We are will Fay our the our call to financials. and reactive M&A our approach I that, resourcing

increase margin gross due the year were both associated to with price volume increases.Selling to and and million, improvement an good $XX.X higher In in as sales higher income the in of performance. administrative performance million expenses realization period costs Thank was the prior the increase net margin morning, you, Net everyone. quarter Dave, third the of expansion. net delivered prior of higher fueled from sales Tennant Strong were compared gross by and $X.X operating XXXX, operating driven and variable by quarter higher period. growth year and

XX.X% the net prior sales, As quarter XX.X% increased XXX third of points for percentage XXXX a to in by year from quarter. of the expense S&A basis

As we spending discussed expense income, interest net interest was prior second expense million higher during The strategic QX, tax in up $X.X increased our year increase variable Net employees we in $X.X in the interest expense also period. the on debt. from incremental S&A growth on opportunities.Higher an our line expense focused rate to due anticipated with rates rising increase our interest to impacted investments and and fuel quarter, and income expectations. to in million

mix country. million Income of higher quarter, unfavorable hedges, $X in Our the tax prior in tax comparison was earnings along periods with year. interest changes was rate, than discrete between the by during X.X%. by was of million $X.X recognized The approximately benefits net forecasted decrease a impacted the and expense

rate the were attributed per with Slide a the from XX.X% by strong quarter performance.Turning share, reduction ended earnings XX.X% year approximately period, which basis. of Approximately amortization, quarter. quarter XX% our the third $XX XX.X% volume. increased $XXX for diluted net share of The year-over-year $X.XX tax XX% to on million, year $X.XX We is line share driven period, adjusted operating to per a increase organic to compared second driven the effective per the quarter of from was million or X, while the an $XXX.X expectations.Third was quarter's by prior end in excludes million remaining growth prior the the sales of with of in year pricing, to backlog, full

on approximately realization year conditions.Net was by Australia were X.X%. realization XX.X% driven and America other impacted sales growth this mix net decline substantially, reminder, in production. North and organic growth. service primarily This China, regions. growth equal decline deliver year-over-year was impact America.Net of backlog.As consumables, volumes backlog quarter FX organic regions the Net while to offset prior the volume availability in Africa. XX.X% Pacific us sales a environment stable in Asian North and in supply region organic to equipment region Asia and was prior us declines a of sales impact our allowed an to quarter its categories. Europe, America. or Pacific equipment It well growth million A customer increased X% achieved of relatively partly Net in in quick parts in parts approximately Latin our sales $XXX.X X approximately million, markets. primarily price XX.X% of an to year by due include X.X% by East expectations. outstanding of orders. Each by Continued both Tennant groups or sales Americas sales the favorable organic driven X.X%. in by Americas price helped price Japan chain million. into product by by in third basis. was increases, all X.X% The reduction offset was strong partly and above Australia, $XX.X of the $XX.X million, over sales Asia increase by in And in EMEA volume the This a year-over-year led to sales driven EMEA volume covers in and $XX market This EMEA an an grew and and includes China. favorable weaker-than-expected of our was realization and the all basis, had increased FX on Middle over significant the largest sales The

following was currency as a compared growth of exchange prior all and approximately the by and the it XXXX experienced equipment, of However, into in third other. from categories partly the net unfavorable parts X.X%.We versus in consumables, expectations.Turning to offset quarter the improvement our also margin most adjusted and impact We group foreign which sales categories: an period, prior our versus points Adjusted equipment basis notably to XX.X% above million, year was QX EBITDA sales, XX.X%, an prior of grew XXX of in $XX.X increase well $XX.X EBITDA EBITDA, adjusted million year. year was year-over-year, for period. service the

volume growth.Gross of Gross margins, $XX.X of to expanded of improved third price, along the the Our higher with compared XXXX $XXX EBITDA last million sales quarter significant gross and of in quarter adjusted third of points both drivers was the most were growth, than XX.X% by XXX driven the million year. year. margin basis prior profit

returned to payments in of ] The million the expense with $X provided incremental of approximately to performance, priorities, stock shares sales third now comparable year-ago spending net expense $XX.X of and on year we operating Capital and by a line of capital XX,XXX as significant to with successfully expenditures were the to on pre-pandemic net dividend activities increased inventory quarter meet million of $X.X approximately returned operating capital with of result based the in margin to capital repurchased year realization, associated of was quarter a in strong activities and approximately S&A on a pace costs variable the period. increased inflation.S&A our which prior basis approximately to have higher strategic used year.Turning spend. operating We was strategic year will in investments. shareholders price guidance.In compared are operating We $XX full rates, alignment offset percentage $XX to anticipate in of [ million due expectations for multi-year our the impact million coupled the common million deployment, on prior $XX.X performance our cash allocation improved cash increase compared gross to with million reduction $X million. our full our with be

full dividend strong equivalents in balance and cash goal of XXnd increase borrowing million company our the $XX midpoint end to its has was range, We also at the At approximately third million and marking net EBITDA, a leverage announced per year on of remained than of consecutive with increased year the the liquidity a quarter X.X% in stated cash $XXX.X the lower company's to unused dividend $X.XX our annual of share, facility. credit our cash of the capacity payout.Tennant's revolving adjusted X.Xx X.Xx guidance X.Xx.

strong maintaining focused remained have balance a We on sheet.

the in It expectations. Given direct ever. guidance, above effectively cash in debt environment, current our robust flow our has reduce in manage have supply been the chain quarter.Moving emerge to $XX.X our of rate interest global by to strong third generation to cash and million result performance XXXX directed a crisis we our ability and the than is stronger

disruptions, we As chain our Dave navigated on while schedule. delivering enterprise made past mentioned, year and a X have a changes the we still over pandemic strategy years The of global we supply guidance. on pleased digits our are demonstrate trends, goal our results. growth is year mid-single the continuing with above-market of third our sustainable.We and that And based ahead rates are quarter XXXX increasing full

see supply to allowed and overall chain. The our from backlog. greatly to continue to in believe results availability fulfill we will a parts, in us have reduce significant improvement parts increase benefited orders the improvement year-to-date in production and open Our availability we of meaningfully increase our

end and be $XXX Given quarter resilient. million expect and the we XXXX.Overall, we $XX and between guidance backlog that backlog EBITDA our this and to million has normalized million net reduce below trend, return to $XXX demand more be fourth million. to of between by levels of Implied sales expectation is be our early $XXX in or will will to able been adjusted $XX million XXXX

softening we realizations. are price see order very as continued anticipate in global some monitoring we Further, especially EMEA. rates market We closely, strong

in quarters Based remain the the higher of outlook quarter be on be spend, will and will quarter, as growth these of some the growth and see in expense However, S&A in we see and profitable the seasonal But that mix variability first as anticipate employees our in strategic We the for we R&D full strong X we year, may changes. XXXX. are spending. in the quarter. revenue fourth opportunities.Given raising fourth the our expected, higher our factors year timing geographical of fourth will invest gross the in margins some prudent cautious as

Specifically, to growth in we of the sales $XXX range range range EBITDA billion, reflecting to $X.XX be be I of to billion Dave. XX.X%; in XX.X% that, XX%.With and XX.X% to net sales to now turn adjusted adjusted to million back EBITDA margin of the $X.XX $XXX to expect to organic be the in million; of it will

Fay. you, Thank

New I I'd for Company, take on this teams have will up York soon.With not we'll be XXXX pace ahead. we XXXX. record and be are having of to Day everyone We prouder open Tennant spring details to go More achieved. be for the a that, Investor our please in invite to will like call in Operator, published opportunity work an the to of could questions. high-performance

trouble having and moderate ourselves. We'll don't locating ahead Why our We're operator. question? Difficulty] [Technical you go ask your

All All right. This Moore Chris right. is CJS. from

First a a interesting, of It great ] [ lot here. year-to-date. great is all, congratulations, quarter, looks

resilient. So, about you being orders talked

I had QX. QX QX? Is much where that flat think been ended they pretty and year-over-year, you about

were all first XXXX. Well, backlog as order chain foremost, you. results supply the slightly et versus X crisis our quarter. Appreciate quarters growing order an for same the proud really up of of the and of perspective, over we've potential We're the and we resilient, recognition describing record thank cetera. given delivered. been quarter disruption last inflation, QX the From orders in of pattern yes, and the

If us QX would as us, was and quarter we left what a flattish, you hold. for described QX order questioning it recall, tougher which

note, It quarter. a average business. business on at more basis, seasonality, month which line And from year-to-date. shaping use QX we're of that quarter-over-quarter excuse dig expectations. get an us about the in September to how one actually appears was allows within also were highest -- up as average to us metrics me, segments of fact quarter, [ how daily rate the in be predictable signal forecast our confidence an ] our with rate. demand some enterprise order we order basis quarter level, fourth we gave you is our if I'll towards on look our some a QX order the to returning is And toward normal up the So daily we an the was orders highest that

one a important year a on area us QX Orders year.The the the is the X not quarter EMEA or we in been gives we point year-to-date. quarter. that data down We understand So, month perspective. slightly another we're a some but very ], and optimism, have that's not is is EMEA. [ make think monitoring what's underneath that, closely fact strong from finished for quarter but macroeconomic in the that driven only They softening were

our So, and and as upside Having signals share we softening to we're far pattern given the business, want responding for we're to make keep we're EMEA that, the appropriately close rightsizing position significant said appropriate taking how But the our provides as plan we're monitoring closely actions marketplace. that getting. order we in to EMEA. business tabs, in sure the us

And so, up and because macroeconomic some are just little bit home headwinds. going and we're tents not are soft, a folding there orders

which that in front? volume seeing on it it. out calling like kind was Very of companies are Got challenges helpful. lots Anything up you're a there. of China, Conversely, looks bit

Markets comparable. out operate easier quarter in Obviously, XX% out product and the China. our the over we're in of Yes, in channels But is a and an that open, up reopened. the the customers. to get fact market able front it into was great freely was We're it region.

the a reopening the marketplace. outlook. harvesting are It's We within positive

continuing outlook trend for a in similar positivity order in have demand a China of year-over-year. We QX,

that to broad opportunity invested be our in portfolio. in continue the our Gaomei in acquisition to fact continue We've China. an and product we bullish very -- on made invested we have in go-to-market multichannel China, we brand, So, we've in And a China. investments invest

well we market as the really reopening to and here capitalize positioned we're the XXXX. China the and set up marketplace think we year on demand so, exit the for in And

a higher about And just equation. longer, of talk Fed lots it. Got

Historically, you're normal maybe Just curious or X% beyond looking how was at 'XX. X%. pricing

picture 'XX? like in pricing big of thoughts terms look any will Just what beyond

the inflation our a XXXX. customer imagining and Having to more response 'XX, our also value Yes. for price couple economics We're marketplace, et of we're that not working pulling annual pricing with we're cetera, we're our proposition structure moves market so that on massive to the said midyear In offer sure now increases only an from obviously that strong a offering inflation data will the price from compelling traditional in increase to many last competitiveness. marketplace we over price XXXX. positioning and been kind but make layering There's products as projections, continue with of very going had the to kind we was into internal the in business. that, we of to into move XXXX, move do that years,

expect into move price of we more annualized to kind So, increase. of a normal

is published I the if multiyear for coming you cover we've on the XXXX increases basis. digits a what through price at in look the and reasonable, And inflation date is. think to low-single us inflation outlook importantly,

was So, muscle that categories, we're and XXXX, we trued can be there those to enhanced a a where other to the aggressive opportunities, make Where opportunity, we'll well.The our relative through strategy. get across more board. gain we it's price that where a and We're for harvesting [ to that our other increase that up prior take a to type pull lever we want go piecing going advantage, have we opportunities enterprise got Within and to we of as company, pricing in look discipline average we'll coming around discounting. more we've we competitive and the share. and strategic where is more enter we like kind low-single whole maintain as that digit are That sure competitive, we're ] feel aggressive. have across more we

it's managing give place where process targeting discounting sure operating gain. that and incremental our geographies And business so, have in our very specifically to or for discount, share and we a discipline rigorous of volume units make all

the Maybe it. Got just looks for interesting. to really me. one The last pivot growth

side, is the at much just in -- Or renewed at getting the there time? there the is On point? point this in it's really M&A this current pipeline,

speak. Yes. we We're the populating pipeline as

to leg this players from the in these M&A marketplace. our know strategy Given grow that the operating first core, of of is we many

with the populating at funnel, so, relatively least our potential is known And targets, simple.

taking them and are available funnel filtering we're funnel of opportunistic. to the becomes pillars comprehensive within very and the entire We the monitoring to that's a through X to our put say of just something for and to pursue as potential well, the probably we reach-outs we've action look to a back is most then want core while that the strategy populate But have the more if be the we'll but we'll with category activating because the here. populated closest the we of each populate candidates, decide and which I begun ones proactively, would rest be adjacency, funnel grow

quarters. continue the coming and have we'll into we here We reach-outs as started move the

from next Your Steve comes line of question Sidoti. the Ferazani from

Appreciate your call. little EPS guidance of how -- the bit QX? primarily guidance on the the though step-down you're high even related, in be gross sales end a on the the was range, And the of to margins, guess adjustment moved the to change margin have gross really a healthy you the you that is said you to side, still might continued, given obviously, surprise the me conversion. the in that I reduced was backlog strong quarter going to detail it given

business drop-through X to your that's tried prior expanded are margin has as here the our we've first, quarters. on Answering weather And the been guidance. hard-fought increased second layered reflected the margins battle question X expansion gross in to the really the inflation yes, the into over a

We inflation. have blush, offset we on pull every form push we to increases possible. in of a levers back number At first

those cost-out rack and operate SIOP that expect allows so our annual a also our fund strategy We part also we stack productively. and We're process cross-functional to we and better we of we enterprise outlook and improving of better business, as comprehensive operate back just opportunities out very sell what drive as muscle of that greatest through forecast cost to and with we the chain have use can to our productivity resource to the a plan. so more concluded built capability a sort to supply greater plan having manufacturing have our for we

resort, As of increases. move we strategic price kind of last with our option

that margin you in so, the inflation. really cover And price of prices the quarter strong a realization and result is a publishing saw expansion multiyear to

this in inflation the business, hold. already we prior making in is or this really in year So, and years, ourselves incurred either

more this have the you -- than you have one did increase Did price year?

is This price the didn't. we No, on the realization formerly published increases.

Fair.

Okay.

to products your success You've see of availability the base, whether announced products? a months. the about future with XX with qualitatively Can new new greater last least or lot not and given also at released you're potential starting greater sales of products these talk a and current if over you, quantify, reaching customer audience wider of some

offerings and markets, are one small about categories. Yes. We're through pipeline. they've One And we've introduced, we space the every the virtually really area excited sell small you fallen small really served every about one can And because our products vertical talked if into segment in there applications I've our broad product being look back as attractive of new of at in these space products space. our a is X channels. of

so, a component attractive really and And it's space.

Lite Our XL, i-mop i-mop have launches. i-mop product, and been very product significant i-mop

but industrial a to owning we'll have an to iterate lot to smaller the component of you entire so We to of more those space of machine, also CSX category. launch to customer. the and with ticket continue space the revenue success and of and products, add unit, per within into our small products in an sell them space be pleased our they're our category. value really We're important for the small had up example, These tend

can comprehensive and so into bucket we of ultimately, supports bucket, mop mop obtain. get It solution. being convert supplier. a out the and the leverage the channel to our move and have is mechanized brand as and We cleaning And goal

date. to progress the with pleased really we're So,

branded see and more premium Gaomei You'll category.We've acquired example. product our can would price into small we existing continue maintaining geographies has customers Tennant price compete the It in pricing toe-to-toe of taking those and also but margin to product and been brand, more to new very, points mid-tier maintain legacy premium points customers maintain going to IPC for competitive new extending lines discount we allows past, where rebranding from very That the our compete. in on them at at our the and have also terms on serving position, by more that space our so been platforms them in successful to new premium competitors, and products legacy margins. competitively the with had us and side, bring our

a aftermarket we Now, that deliver profitably been that's products for we designed product products and in can we sell ecosystem fantastic and the service application premium that experience. mid-tier and all can And customer a mid-tier of have the Tennant wrap the support.

a about a not we So, currently because we're mid-tier those new compete on with every and in doing mid-tier a really it's we basis market but our exist And participate.And least, existing both last that virtually we AMR. compelling global customers lot offer and as talk offerings. opportunities that approach

the AMR space. multiple in We have products introduced

been TXXAMR. And so, applications, and manufacturing We're vertical we those about have a a portfolio. warehousing in traditional the sell for company That our today, and us to really markets. calls. talked robot Tennant about former in it has excited gives strength logistics. industrial broadest believe, we the into on We've It

we a in for a those asking were we believe robotic differentiated customers markets. solution offering. have Our And

those environments having those believe walking because We the also through adoption public it's largely environments. with deal added customers at on ] making the -- return quicker in those be capital delivering investments And within are facility. have over a believe X don't [ that of within could those because more types done complexity investments the of to and of we adept operating their -- you walls

can be from that earlier think other actually than could entered markets we vertical And that a the larger we be potential so, And think some over our in quicker. that a of served opportunity time, journey. we robotics adoption market

as well, we've in through in We're heading product really as we excited -- the we of new products forward. should go we forward.You investing and investment the years. opportunity where we've the AMR pipeline. see about see X as excited new categories expect our here space So, to new with new those as that labors maintained move R&D We'll years. as product our about come future fruits in prior we're launch the I'm those products in

talk in, Great. term, really know also, go into to the bit And deck, have it's you a but historically new you that Can do I the run most that? tried other opportunities you companies, wouldn't that not What ERP. the topic, can little you think about really, avoid have on near get are where it was modernization can for well. are challenges. present last your ERP? obviously, If one in how in of companies and I problems it exciting implement

-- never not provide to have and this. ultimately critical and migration enable tell business a ERP you our I Company a will our to high necessary experience to of felt to top that appropriate of and was to compliance better you contemplate, appreciate not our make Tennant it the and exciting. to fun for not question. to it's it's is It's particularly I mind, enhance it's without growth, out improve level to doing that is infrastructure we But it, I deliver plan move as particularly it's Obviously, it do forward, risk. build signal we're customer conviction digital said our work we easier scale that leverage with. cybersecurity, and to

the have operate. XX-year-old We're have or X we operating instances different system I it company. enterprise, today. extremely which conviction our on it's makes level cumbersome ERPs, direction So, of across a And for the ERPs to of a that right global high

So, it's this of kind at nonnegotiable in mind my point.

You partnership in the predictable importantly, taking may a well, supply Board now? -- disruptions to including years, ask, fashion relative it largely that supply more of Directors, and we're our demonstrated strategy. X-year of about the in operating new we're as disruption. meaningfully we're close kind why a backlog through and through we've And launching chain. And of chain the prior We've with down talked

that next viewing entrusted our investment to a pulled of to manage.Where be of this to introduce most we've it. the the devoted around years investment been really fantastic and We it decisions. us will as the an this We've to exercise. I'm trade-offs the really the consolidation XXXX business for ERP grow that to the XX large business make forward the appropriately, a XX we're core be, And at? appropriate scoping planning ERP in to context for strategy continue growth plan to resource so, we to allows to able of consolidation while

ERP integration. our support work, that have of as negotiating We final our our our as and selected will well partners statements

appropriate We plans what And for we understand investment can return the the we're to make amount external our the resourcing supplied what expect have and be that case are on required working to the working internal resources project. of will business to and investment. our we through sure

we've largely and planning forward avoid business ahead solidify of Appropriate appropriately we as on one time can best the investment project and we as to as best the and before identified want scope program what scope were forward. But talked aware we we pulling of work, studied it's and the inherent So, planning. that and will are, areas XXXX program, that been who thinking out significant that the well we counseled in money journey. in creep return delays be more picking and the well as us went were had on heading as the share devoted direction. as And later expect this risk This of like benchmarked practices make resourcing we to in forward. gone crisp very go time, has so as are case, you the a that to move you areas others that and being We'll in partners decision-making details we mitigate expectations a our could done big the decisions for this. we're get the and investment some around to

Moore the comes Tim next from Your line question Instructions] of [Operator from EF Hutton.

commentary Congratulations the margin to But Fay, clearly, operational some the adjusted about year? about possible see quarter on nice magnitude, the Is gross EPS range should the was of X% really very gave maybe impressive gross to hike already the this It margin midpoint and, efficiencies. you year. expansion your of the margin. after for realizations lap gross price of next this how XX% more maybe the think we you year? heavier realistic fourth maybe

Yes.

we'll to So, additional -- quarter after working able next in on of we're actively provide and year. be really guidance the some first XXXX,

could sustainable going gross operating think are in achievable that we be forward. and ranges are We margin

on specifics tuned anticipate we landed on basis think in of year is proxy. to I more as think I stay So, full just a kind what where we But XXXX. a good

normalized out XX% are parse think I line avoiding as on my inevitable maybe, I call. to Great. to sector. that versus head, pricing earnings That's the just about chain you wondering gross component good in And an made helpful February backlog. operational forward normalized had in catch-up look more on margin your from kind chain. down backlogs companies, their and supply lot really of the the expansion efficiencies maybe All from know industrial the try I'm with the It chain, are disruptions? a I like question utilization the color, more a better that. a close I to realization? decrease, drag you the how and was there was to progress are I of way Dave, just that supply supply coming trying and just you

that the a say, put challenges because Yes. And as like I a were not always our resources for supply we're and on we those circuit and me where still year we lot last were it's would that It's we're supply at investments broadly time say, pumps through about to X in, parts commodities percentage those we challenges. hard managing while level you to try to major spent and in chain time I we production, manage energy would X those this commodities. for spending boards. and of the it talking we say, experienced. overcome heightened quarters crisis actively chain speaking, specific

think So, normalized of approaching chain environment. supply more yes, a kind I we're

We've investments there. improve have some We capabilities to our made supply capability chain enhanced management. around our

capability we've to would a $XX We the be backlog quarter. supply enterprise off million. $XX led the $XX systems ahead chain the and support we've we quarter, as million the $XXX recently business rate, in invested we for backlog the going our range, and $XXX And back to we've for yesterday's by to think $XX going we've with As muscles, would forward. some normalized forward want saying, have We're backlog ourselves backlog. off In investments the now, enable more level looking sure million. the that's to time, built the service, adjusted question made some our productively and to improve enterprise our down quarter, million, but paid buying most going problems. to forward.I not operate in of inflation new and preparing survived, seasonality. how support million really make to from capabilities. of have Obviously, and this in we took your at varying kind think million At people be reduction about we growth that level over have We're to both and to

to chain we're manufactured down supply that plant. strength $XXX and Having on from those the the that quarter, that, is built the chain. consolidated in plant are think increasingly still supply strengthening product the backlog gap only said one the products the can And you in make industrial expect that rate. becoming globe. in we progress to So, built exiting one Minneapolis. They're only that in for quarters And in normalized is about to against million this of the the close more continuing

an or reduce backlogs. basis you elevated it when difficult becomes think move lines, concentrated we about needle a X having to those X in as so, the quarterly or assembly X backlog, And on more

to we need laser product. Every a reduce a make backlog the us allows investments that's adjustments waiting the Tennant customer represents to a it So, and on backlog. focus of on dollar

products on we'll update a of because single within we to progress the So, forward the the to that Minneapolis able door. on we out reduce be rate the the motivated consolidation I are product get expect we highly we'll backlog make, decreasing plant. as move at but And

explaining things I of have retail now. the there question some schools the logistics and X-part That's and behind seems you've kind end vastly are to any you and and -- markets. the great We industrial can growth, Dave, drivers a driving Great. a side color. the done helpful that other job just get outpacing industrial be of warehouses And compact. and hospitals? market is which Maybe

Yes.

past, a least, space, company. at my at dynamic maybe think it's the over tenure been more I really it's here dynamic than this

are contemplating reporting around border there closer some on we hear some depending you in how and square are and to of along is where future market home. on aperture, in to reshoring, Primarily benefit expanding reshoring. a serve the out companies footage more the of open from businesses your Mexico got kind conversations So, our wide -- we've -- closer domestic

warehousing is they're I because logistics labor you got a in component X.X of investing inflation, shortages environment rising they've think that kind and Industry labor manufacturing a labor of whether labor more scarce the becoming cost more their see -- or companies and environment, expensive. a of and

across And markets. the going extent to reliance be that's on they vertical a so, labor our labor, is the across all tailwind vertical reduce of And to the markets. can positive invest consistent automation in to

to see, blowing in -- logistics. virtually it then trends so, on you specifically warehouse mentioned favor.You easier hire are to in the largely the we do our operate vertical I every skilled and think macro make trying work. to labor automate to reduce labor is So, market And lower and reliance the manufacturing and/or

there -- some obviously, higher other are within segments segments. those that growing has I a think are at been there rate categories than

about the primarily EV growth and then, supply e-commerce. footage new EV service decade-long think trend one batteries, cetera, the a been in has for that has And chain those to the and are more et been of If categories. you in those last lithium-ion square the growth

both square there end back as support distribution well footage, a As in back e-commerce has grown, as e-commerce. has retail addition differing in centers to the in been

e-commerce after continues significant portion that -- grow What for be year tailwinds through equipment is a the as for opportunity -- Tennant, you the e-commerce this as translate that trends creates holiday Tennant outlook mean will a into of the us. come so, is And we new built. season macro is, to and foot tell QX in all could to I tends of would late the square stage what it

more it, then, into they'll you you'll do you'll construction, about basis. have longer they Dodge because get hear construction being take they about the and the if the even would markets the square they new [indiscernible] be on So, vertical over keys is clean owner then labor. and benefit we like maintenance thing added. to move footage And see the reports the a last operational space, the the read than find them project number of to we serve they of in will they can't before cleaning. that's and But incremental And we when a macro think the tailwinds turn

XXXX excited we're and really about beyond. So,

update Can Is the That was give Gaomei. low-cost -- about very update and on cost low-cost helpful. being China. more that that us for countries you maybe And some too? My rebranded question other in you still ride-on if for can progress Brazil? next like opportunity maybe Dave. affordable it there platform is that's compact us a Great,

when new around those question, markets competitively answering about been -- we've I leveraging the platforms world. leveraging been acquired and the products, We've more Yes. mid-tier talked earlier ourselves in compete our position to

bringing China-produced we as have a platforms. America well Gaomei that's also Really and the early we're legacy as Latin so, rebranded within platform, Gaomei world, Gaomei success, And moved taking it's as into because elsewhere success, legacy brands as local both the legacy the with specifically, And so Southeast some occurrence. -- recent that pretty me, excuse China, product But Asia. yes. We've within Gaomei, it both into it. well product, our legacy product. those the Italian-manufactured throughout excited Italian about been IPC our We've

you can other brands. bring So, imagine, that into and we'll

sense. it excuse and legacy into there's do where We're So, from upside me, it taking move other geographies, -- makes platform other into a brands. Gaomei brand we'll that contemplating still Gaomei

need and majority good, legacy, to legacy. Zealand, better, probably different developed IPC we meaning assessing in of we're we're points and legacy meaning our North example, America It's Europe for markets, New price Gaomei Australia, whether For compete in. a Tennant markets for the and to X the best; marketplace, overkill have

offering X-tiered the our a and the makes sense channels positioning and customers at as strategy. and the So, more we look applications

the product So, fit Gaomei IPC a fit is a better is geographies. the decision those whether the product better for the or is within mid-tier

closing are this no over would Since remarks. management time, call further to the to questions there like at turn I for

great your This for you thank Have concludes in Tennant call. And interest our a you. Thank earnings Company. day.