Good morning. My name is Karen, and I’ll be your conference operator today. At this time, I would like to welcome everyone to Tennant Company’s Second Quarter 2024 Earnings Conference Call. This call is being recorded. There will be time for Q&A at the end of the call. [Operator Instructions] Thank you for participating in Tennant Company’s second quarter 2024 earnings conference call. Beginning today’s meeting is Mr. Lorenzo Bassi, Vice President, Finance and Investor Relations for Tennant Company. Mr. Bassi, you may begin.

Good morning, everyone and welcome to Tennant Company’s second quarter 2024 earnings conference call. I am Lorenzo Bassi, Vice President, Finance and Investor Relations. Joining me on the call today are Dave Huml, Tennant’s President and CEO and Fay West, Senior Vice President and CFO. Today, we will provide an update on our 2024 second quarter performance. 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 slide presentation that accompanies 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 statements. 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-GAAP measures that include or exclude certain items. Our 2024 second quarter earnings release includes the comparable GAAP measures and a reconciliation of these non-GAAP measures to our GAAP results. I’ll now turn the call over to Dave.

Thank you, Lorenzo, and hello, everyone. On the call today, I will be discussing highlights from the second quarter 2024, our outlook for the remainder of the year, and the progress on our enterprise strategy. I am pleased to report on our strong results in the quarter, lapping a previous record high second quarter in the prior year, we achieved both organic net sales growth and increased adjusted EBITDA. Our performance was driven by generating strong order demand, as well as continued strong backlog benefit. Enabled by the execution of our enterprise strategy initiatives, we expect to drive continued order growth in the second half of 2024. For the second quarter of 2024, net sales increased 2.9% and to $331 million, and adjusted EBITDA rose to $58.6 million, resulting in an adjusted EBITDA margin of 17.7%. We are pacing ahead of our year-to-date backlog reduction expectations, and we are confident in our ability to achieve the $80 million to $100 million of backlog reduction in the full year 2024, as we previously communicated. With this backlog reduction, we now believe we will exit 2024 with a normalized backlog level and market competitive lead times across the entire product portfolio globally. Second quarter order rates were very strong, up double digits compared to both the first quarter of 2024 and second quarter of 2023. This order demand generation is a direct result of the investments we made and the execution of our enterprise growth strategy. Looking ahead to the second half of the year, we are forecasting continued strong order growth, driven by rigorous execution of targeted growth initiatives. We expect increased impact on growth from incoming orders as the backlog reduction benefit moderates in the second half. With our strong first-half performance as a company, we are increasing full-year guidance…

Thank you, Dave and good morning, everyone. In the second quarter of 2024, Tennant delivered GAAP net income of $27.9 million compared to $31.3 million in the prior year period. Net income performance in the quarter was driven by higher net sales from price realization. This was partly offset by volume declines in the EMEA and APAC regions. Overall, while our volumes remained flat, we are pleased with the net volume growth we are seeing in the Americas. Operating expenses were higher in the current year due to the ERP implementation as well as transaction and integration costs associated with our investment in Brain Corp and the acquisition of TCS. Looking beyond operating income, interest expense in the second quarter was $1.5 million lower than the prior year period. This was driven mostly by lower debt balances as we meaningfully reduced debt during the second half of 2023. Our average interest rate, net of hedging for the second quarter of 2024 was 3.88% compared to 4.35% in the prior year quarter. Income tax expense in the quarter was $0.4 million higher than the prior year period. Our effective tax rate was 24.4% in the second quarter of 2024 compared to 21.6% in the prior year. The increase was primarily due to an increase in nondeductible executive compensation and unfavorable changes in the mix of forecasted earnings by country. Excluding ERP implementation and other non-GAAP costs, adjusted net income in the second quarter of 2024 was $35.2 million compared to $34.7 million in the prior year period, a 1.4% increase. Adjusted EPS for the second quarter of 2024 decreased 1.6% to $1.83 per diluted share compared to the prior year period. Looking a little more closely at our quarterly results. For the second quarter of 2024, consolidated net sales totaled $331…

Thank you, Fay. In summary, I am very proud of the global team and our ability to continue our growth trajectory, as we are lapping a record prior year. The investments we are making and innovative products we are delivering to our customers' position us well to deliver on our increased full year guidance. I wanted to thank everyone who joined us for our Investor Day at the New York Stock Exchange in May. It was well attended, and we received positive feedback from those who have attended in person as well as remotely. A recording of the event, along with the presentation is available on our investor website. With that, we will open the call to questions. Operator, please go ahead.

[Operator Instructions] Your first question comes from the line of Steve Ferazani from Company Sidoti. Please go ahead.

Hey, good morning, guys. This is Daniel. I'm actually filling in for Steve today. Given the strength once again of EPS and the good strong orders, can you maybe just provide a little bit of color on why you decided to lower the high range of your EPS guidance?

Yes. I think as we look at tax rate, as we look at interest expense, as we look at kind of the overall expense, I think that's a contributing factor to our overall kind of EPS.

Okay. Perfect. And then you touched on the geographic areas, but and you -- Italy is promising right now. But in general, are you seeing any recovery in any other areas within EMEA?

Thanks for the question, Daniel. We are seeing, I would call it, a still sluggish demand across the region. We highlighted Italy because it's an area that we have made specific investments in, and we're starting to see green shoots of return on those investments. Coming just on quarter, we just positivity in the UK as well as from our acquisition in Central and Eastern Europe, the TCS acquisition. So those will be points I would highlight as points of positivity coming through the quarter from a market demand perspective.

Perfect. And then just one more, if you don't mind. Could you just touch a little bit on the M&A pipeline that you see right now?

Yes, happy to. So we've been very transparent with our strategy around M&A. We're focused on deals that defend and grow our core business that allow us to grow and capture value in the connected autonomy space and then the adjacency of other mobile equipment. We developed a funnel of over 800 target companies aligned with that strategy, and we are actively working that funnel I would point at the brain agreement, although technically not an acquisition and the equity stake we took in brain and the agreement we signed are providing commercial benefits to accelerate our AMR adoption, our AMR sales in the marketplace, and we are realizing benefits from that investment. At TCS, which was our acquisition in Central Eastern Europe, is on track and yielding the incentive benefits. We have 2 proof points of action here early in the year within our M&A funnel. We are actively working that funnel and prioritizing targets. As you know, M&A could be a bit episodic and out of our control as far as pacing, but we are actively engaged working the funnel and when I say we -- this is an enterprise priority. So Fay and I are hands on with some targets, and we have resources within the company that are also identifying high-priority relationships to form and strategic areas within the funnel that we should be focusing for acquisition. The other thing I would highlight, as Fay mentioned in her opening remarks, we've got our debt leverage below 1 time. We've expanded our revolver, and so -- and we're showing strong cash conversion on the year. And so we've got the financial firepower that when the right deal comes along, we're prepared to move quickly. We've got the financial firepower to do it. So we look forward to updating you more on specifics as we move through the second half and into 2025. But I assure you this is an enterprise priority and will be a strong contributor to our value creation strategies in the coming years.

Great. We really appreciate it and best of luck in the second half of the year. Thanks, Daniel.

[Operator Instructions] Since there are no further questions at this time, we would like to turn the call over to management for closing remarks.

Thank you. I want to thank you all for your participation today and for your interest in Tennant Company and a special congratulations and thank you to the entire global Tenant team that may be listening to the call. We were bond of saying that growth is a team supports the tenant company. And so these results are a direct reflection of your efforts and contributions. This concludes our earnings call. Have a great day.

Thank you. Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect.