Tennant Company (NYSE:TNC) Q4 2022 Earnings Call Transcript

Steve Ferazani: Great. Perfect. Thank you. Last one for me, if I could squeeze it in. Just your thoughts on China, obviously, the expectation is we will see more of a reopening as this year moves on? And how much that can impact here? Are you seeing anything yet?

Dave Huml: Yes. We’re watching it closely. We were off dramatically in 2022 in China from a demand perspective. Obviously, the news that the government decided to lift the COVID restrictions as well as the requirements for testing and allow freedom of movement around the country was welcome news to us as we look at our business in China. Really, the restrictions were lifted and then the country went on holiday. And so while we talk to our team and our channel partners as well as customers, there is some optimism about the reopening of the market I would say we’re all waiting to see it materialize into orders. And it’s just too early to tell whether the promise of an opening and an increase in our business will fully be realized.

The other thing we’re looking at we’re really positioning ourselves to be ready to satisfy the demand if it when it comes. So from a plant staffing perspective, from a parts availability perspective, we’re staying close to our channel partners and our customers so that we’re ready to react as the demand materializes.

Steve Ferazani: Great. Thanks everyone.

Dave Huml: Thanks, Steve.

Operator: Our final question comes from Tim Moore with EF Hutton.

Tim Moore: Thanks, and nice job with the 10% organic sales growth in the quarter and the sequential improvement from the September quarter on that front. Just getting back to your 2023 guidance, just regarding the higher end of the range, what factor or two factors might be the main swing factors to achieve more at the high end of the range? Is it really the supply chain or does it also depend on something else like more AMR orders?

Dave Huml: Yes. Listen, we have upside in our new products. There is no question, specifically AMR. But if you think about the big lever that could €“ is a big thing that could be a change from our planning assumption and allow us to achieve the high end of the revenue range, it would be a loosening in supply chain so that we could get the parts and react and fill the €“ not only incoming orders, but meaningfully reduce our backlog. We’re working hard. We talk a lot about the actions we took in 2022 to position ourselves to overcome some of the most persistent challenges. And while some of them started to read out in 2022, some of them have not yet begun to read out. And so we really need that improvement in the environment as well as full traction from the actions and investments we took in 2022 to deliver at the high end of the range.

And that’s the reason for such a broad range on the revenue line really is where we’re taking actions, controlling what we can control, but much of that supply chain recovery is out of our hands.

Tim Moore: That’s helpful. And I know you’ve already elaborated and mentioned about the component shortages, and you’ve been very good about giving detail on that every quarter. I guess I’m just wondering, have you seen a good improvement in the last few months on specifically on your dual sourcing and your direct procuring for some difficult to source components. Is that much better than it was maybe in September, October?