Tennant(US:TNC)2022-04-30 20:27Financial Data and Key Metrics Changes - First quarter net income was $10.3 million, down from $25.7 million in the prior year, primarily due to gross margin compression from inflationary pressures [16] - Adjusted EPS for Q1 was $0.73 per diluted share, compared to $1.17 per diluted share in the prior year [17] - Net sales for Q1 were $258.1 million, a 2% decline year-over-year, impacted by unfavorable foreign exchange and the divestiture of the Coatings business [17][18] - Adjusted EBITDA for Q1 was $27.9 million, or 10.8% of sales, down from $40.7 million, or 15.5% of sales in 2021 [23] Business Line Data and Key Metrics Changes - The Americas net sales were $160.3 million, an increase of 1.6% from the prior year, driven by higher selling prices and strong sales in commercial and parts categories [19] - EMEA net sales were $78.7 million, a decrease of 2.7%, negatively impacted by foreign currency exchange [20] - APAC net sales were $19.1 million, a decrease of 22.4%, primarily due to government-mandated shutdowns in China [21][22] Market Data and Key Metrics Changes - Organic sales growth in the Americas was approximately 2.3%, while EMEA saw a favorable organic sales growth of approximately 4.2% [19][20] - APAC experienced an organic sales decline of approximately 20.2% due to COVID-19 related shutdowns [22] Company Strategy and Development Direction - The company is committed to maximizing output and safeguarding customer experience through dual sourcing and local sourcing strategies [11] - The enterprise strategy includes a focus on profitable innovation, with the introduction of lithium-ion technology in autonomous mobile robots [13][14] - The company is adjusting its full-year guidance for adjusted EBITDA to a range of $140 million to $155 million due to evolving market conditions [10][28] Management's Comments on Operating Environment and Future Outlook - Management noted that macro environment risks have not moderated as quickly as expected, impacting parts availability and inflation [9] - The company expects gross margins to improve throughout the year, driven by price realization and effective cost management [27] - Management remains optimistic about demand and is encouraged by the strong customer response despite challenges [55] Other Important Information - Cash flow used in operations was approximately $10.1 million, reflecting investments in working capital [24] - The company ended Q1 with a cash balance of approximately $110.4 million and strong liquidity of approximately $374.5 million [25] - Updated guidance for 2022 includes net sales of $1.125 billion to $1.17 billion and adjusted EPS of $4.15 to $4.75 per diluted share [28] Q&A Session Summary Question: Can you provide more detail on the pricing strategy for 2022? - Management indicated that a price increase was enacted in October 2021 and another in April 2022, expecting these to offset inflation, though backlog may mute their impact [34][35] Question: How has the China slowdown impacted revenue? - Management stated that top-line performance is largely influenced by production volume, which has been affected by supply chain shortages and the China impact [40][41] Question: What is the current status of backlog? - Backlog is currently at approximately five times the normal rate, reflecting strong customer demand despite extended lead times [43][44] Question: Is there a shift in CapEx priorities? - Management confirmed that CapEx composition remains unchanged, with some acceleration in strategic investments to mitigate short-term constraints [45][47] Question: Are there any shifts in acceptance of AMRs due to COVID restrictions easing? - Management noted that markets have opened up, allowing for more demonstrations of AMRs, which is expected to enhance customer acceptance [48][50]