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

Dave Huml: Yes. It’s really a mixed bag. We talked a lot about on prior calls about circuit boards and electronic components that go into circuit boards. We made a number of targeted investments and took some targeted actions. And some of those actions did read out and contribute to our Q4 performance. On the other hand, we made investments and actions on other constrained components and didn’t see the benefit in the quarter, although we’re still confident that over time, over time, those will build will read out and provide benefit. So it’s kind of a mixed bag from our vantage point, and we’re mapping the improvement that we’re seeing, we’re mapping more to the actions and investments we’ve taken that any kind of a broader recovery in supply chain.

Tim Moore: Great. You mentioned earlier I’m just trying to think about some of the innovation drivers for 2023. You mentioned earlier you took the mid-tier products for IPC and even Gaomei under the Tennant brand, do the IPC extensions recently. Is there anything else for small space cleaning or anything else such as, I don’t know, Equipment as a Service being rolled out into more countries for 2023?

Dave Huml: Yes. We’re really excited about our small space offerings, not only the IMOP products we highlighted in the script, but also we’ve got another product CS5, which we launched, which is a fantastic compact cleaning machine allows us to further penetrate that small space cleaning €“ we’re excited about the upside in AMR, we continue to be excited about the upside in AMR from our three product portfolio and the fact that we can address customers across virtually all of our vertical markets and increasingly on a global basis, so excited about the upside that we can realize from AMR. And you mentioned the rebranding of our IPC and Gaomei branded products into the Tennant brand. That’s a really interesting proposition.

It was not the original intent when we made the acquisitions. It was a secondary benefit that we would harvest over time. And given the situation we found ourselves in from a supply chain perspective, it makes sense to accelerate that strategy. And we’re really pleased with how successfully we’ve positioned those products at a compelling price point in the marketplace where it’s not dilutive to the Tennant brand or dilutive to margins. And I think a large part of the value proposition is that we can take a product that’s designed to a different performance spec, wrap the entire Tennant ecosystem support around it and sell a mixed fleet to our customers. And so customers in North America are familiar with the Tennant brands. They rely on us for our service and aftermarket support.

Now they can buy a product in the Tennant brand that they know and trust with the ecosystem of support they expect at a price point that is warranted for the application and provides them a fantastic alternative. So really excited about the early returns on that strategy and expect to continue to accelerate with that strategy in North America in 2023 and beyond.

Tim Moore: That’s very helpful to hear. My last question is about have you seen any order cancellations over the past few months or customers starting to maybe downgrade to some of the lower tier price models. And then if you can maybe elaborate also on Equipment as a Service. I know you were doing that in some countries. And do you think you’ll continue rolling that out assertively this year?