Tennant Co

NYSE:TNC

Earnings Call Transcript 2018-Q3

[Operator]

Good morning. My name is Sheryl and I will be your conference operator today. At this time, I would like to welcome everyone to Tennant Company's Third Quarter 2018 Earnings Conference Call. [Operator Instructions]

Thank you for participating in Tennant Company's third quarter 2018 earnings conference call. Beginning today's meeting is Mr. Tom Paulson, Senior Vice President and Chief Financial Officer for Tennant Company. Mr. Paulson, you may begin.

[Thomas Paulson, SVP and CFO]

Thanks Sheryl. Good morning, everyone and welcome to Tennant Company’s third quarter 2018 earnings conference call. I'm Tom Paulson, Senior Vice President and Chief Financial Officer of Tennant Company.

Joining me today are Chris Killingstad, Tennant's President and CEO; Tom Stueve, Vice President and Treasurer; Andy Cebulla, Vice President of Finance and Corporate Controller; and Kirstin Stokes, Deputy General Counsel.

Today, we will review our ongoing progress against our core strategies, our performance during the 2018 third quarter, and our updated outlook for 2018. Chris will first brief you on our operations and then I'll cover the financials. After that, we'll open up the call for questions.

We are using slides to accompany this conference call. We hope this makes it easier for you to review our results. A replay of this conference call along with these slides will be available on our Investor Relations website and investors.tennantco.com following this call until November 24, 2018.

Now 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 filed with the Securities and Exchange Commission. We encourage you to review those documents particularly our safe harbor statement for a description of 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. For each non-GAAP measure, we also provide the most directly comparable GAAP measure. There were non-GAAP items in both the 2018 and 2017 third quarters. Our 2018 third quarter earnings release includes a reconciliation of these non-GAAP measures to our GAAP results. Our earnings release was issued this morning via BusinessWire and is also posted on our Investor Relations website.

Now, I'll turn the call over to Chris.

[Chris Killingstad, President and CEO]

Thank you, Tom, and thanks to all of you for joining us.

The core strategies we are pursuing at Tennant Company are designed to achieve one thing, build the top to bottom strength throughout our organization necessary to deliver sustained long-term value for our shareholders. These strategies touch every dimension of Tennant from maintaining a robust new product pipeline to driving operational rigor across our footprint, to broadening and diversifying our revenue streams and to preserving the financial strength necessary to invest for future growth.

During the third quarter, we once again made solid progress across these core strategies. While we face some challenges, many of which are shared by those across the U.S. manufacturing sector, I am encouraged by our ability to make persistent progress and move the needle across our entire organization.

For the past several quarters, we have pointed to sales strength across our geographic regions and that continued during our third quarter. On a consolidated basis, net sales grew 4.3%, up 6.1% organically to more than $273 million during the 2018 third quarter. With the exception of sales in the EMEA region, which faced a very challenging year-over-year sales comparison during this period, Tennant again generated broad-based sales growth across our footprint. Notably, we are pleased with our performance in the Americas, as well as our strength in the Asia Pacific region during the quarter.

We also remained pleased by our ability to execute across channels. As you’ll recall, diversifying our go-to-market channels has been a central component of our strategy. Thus far in 2018, we have demonstrated significant progress in all go-to-market channels; direct, distributor and strategic accounts. Our third quarter sales performance reflected particular strength in our strategic account sales channel.

Moving on to IPC and our integration efforts. We continue to be pleased with the underlying performance of IPC. During the quarter, we made substantial progress strategically aligning our operations across the EMEA region. Importantly, we achieved a significant organizational milestone by finalizing the structure of our future leadership team in EMEA which will be effective early next year.

We will maintain a combination of IPC and legacy Tennant leaders to drive the EMEA organization in the future. I am proud of our ability to unify the Tennant and IPC teams while preserving the stability and growth profile of our business in the region. In addition, we continue to make progress on capturing the synergies from the business combination.

Selectively finding ways to capitalize on growth opportunities in key markets remains a focus for Tennant and during the quarter, we announced our agreement to acquire Gaomei Cleaning Equipment Company in China.

Gaomei manufactures a full range of cleaning machines and equipment including single-disk scrubbing machines, vacuum cleaners, carpet extractors, blowers, high-pressure washers, sweepers, and floor scrubbers. Gaomei is also a recognized R&D leader for small- to midsized cleaning solutions for commercial and industrial applications.

This acquisition extends our ability to serve the mid-tier APAC market specifically in China. We are very impressed with their management team and enthusiastic about our potential together. We now expect to complete this transaction in the second quarter of - sorry, the first quarter of 2019.

Turning now to margin and expense management, which respectively have been areas of challenge and success. Operational efficiency is an area of intense focus within Tennant to better manage both our margin and operating expense profile. It is helpful to break these focus areas into two categories, those directly within our control and those which are a part of the current macroeconomic environment affecting U.S. manufacturers.

Utilization of our field service capabilities and efficiencies within our manufacturing operations are two areas squarely within our control, and the investments we have made in these areas have improved the efficiency and effectiveness of both our service offerings and our manufacturing performance. We continue to execute on these initiatives which we're having a favorable impact on gross margins.

There are, however, several macro factors impacting gross margin. These take the form of higher freight costs, raw material inflation, labor shortages that periodically impact productivity, and tariffs. Given these factors, we are reducing our gross margin expectations by 50 basis points for full year 2018.

While we work to manage these challenges, expense management across our entire enterprise is, of course, a critical focus. And we are pleased with our ability to improve our year-over-year S&A expense ratio during the quarter.

Now, before turning the call over to Tom, some color on our technology and new product uptick. We continue to invest in R&D at levels necessary to propel our clear technology leadership position. Notably, we have taken our first order for our autonomous T7 scrubber, a robotic cleaning machine from Tennant.

We have committed to commercialization of this product offering by the fourth quarter of 2018 and are pleased to be on track with this promising new technology. We are excited by the interest we're receiving from customers related to this new product and are encouraged with the long-term prospects for growth.

As you know, we also track progress of our new product offerings and relevancy of our innovation to customers by our vitality index, which is the percentage of sales from products issued in the last three years. For the third quarter, we were once again well above our target of 30%.

Overall, we're confident in the underlying performance of the business and are pleased with the progress we are making across our various strategies given our continued strong orders and sales performance.

Actions in motion to offset external headwinds affecting our margins, the underlying operational improvements we are seeing in the business, and appropriate spending controls we have in place, we are confident in our ability to drive shareholder value.

Now, I'll ask Tom to take you through Tennant's third quarter financial results. Tom?

[Thomas Paulson, SVP and CFO]

Thanks Chris.

In my comments today, references to earnings per share both GAAP and non-GAAP are on a fully diluted basis. Also, as a reminder, our organic results and regional reporting reflect IPC's results.

As Chris noted, we witnessed broad-based improvement in several areas during the quarter, most notably in revenue performance, expense leverage, cash flow, and EBITDA expansion. These all illustrate our discipline and commitment to executing on our core strategies.

For the third quarter 2018, Tennant reported net sales of $273.3 million, roughly 4.3% higher year-over-year with organic sales improving 6.1%. Organic sales results exclude an unfavorable currency impact of approximately 1.7%.

Looking at the bottom line, third quarter 2018 reported net income was $9.7 million or $0.52 per diluted share. Our reported results in the quarter reflected the impact of non-operational items that reduced earnings by approximately $400,000 or $0.02 per share.

Excluding these items, Tennant reported adjusted net earnings of $10 million or $0.54 per share. By comparison, Tennant reported adjusted net earnings of $5.8 million or $0.32 per share in last year's third quarter.

Now, let's take a closer look at the 2018 third quarter. As a reminder, we group sales into three geographies, the Americas which encompasses all of North America and Latin America; EMEA which covers Europe, the Middle East and Africa; and Asia Pacific which includes China, Japan, Australia and other Asian markets.

In the Americas, 2018 third quarter sales rose 8.9%, up 10.6% organically. We are pleased with the breadth of performance in this region during that period, which reflects a combination of expansion on our strategic accounts, continued sales strength in our service parts in consumable business, higher industrial equipment sales in South America, and continued broad based strength in Brazil.

Turning into EMEA, reported sales were down 5.8% or 4.5% organically. We need to recognize this significant outperformance in this region during last year’s Q3 of 14.6% organic growth which led to the challenging comp in this year’s third quarter. As Chris mentioned, we remain optimistic about the overall growth profile in this region and our recent integration milestones within IPC.

Within the Asia Pacific region, sales are 7.4% or 10.6% organically. Sales of industrial products in China led the way during the period. Our acquisition of Gaomei and our combined product lines are exciting new avenues for further expansion in APAC.

Turning now to gross margin, Tennant’s adjusted gross margin in the 2018 third quarter was 39.6% compared to an adjusted 2017 third quarter of 40.8%. Of course these gross margin levels are not satisfactory and we continue to aggressively tackle the margin drivers within our control and find ways to navigate the macro factors, namely tight labor markets, tariffs and raw material price factors and high freight and logistics costs. These items combine to negatively impact our year-over-year margin rate by approximately 110 basis points.

In addition, as I previously mentioned, we continue to experience robust growth in our strategic account channel, which negatively impacted our margins in the quarter by approximately 70 basis points.

We are pleased with the improvements we are seeing related to field service utilization and the underlying performance of our manufacturing operations both of which partially offset the negative margin pressure we experienced in the quarter. However, given the significant macro factors, we continue to experience we are recalibrating our margin expectations for the full year to reflect the current dynamics.

We are reducing our anticipated full-year gross margin rate to 40.5% from 41%, primarily related to the external factors that I just mentioned. Research and development expense in the 2018 third quarter totaled $7.5 million or 2.7% of sales. We are confident that we are investing at levels that reinforce our technology leadership position and allow us to maintain a robust new product pipeline.

Selling and administrative expense in the 2018 third quarter, adjusting for onetime costs, was $84.3 million or 30.9% of sales compared to the prior-year quarter of $84.8 million or 32.4% of sales. It's worth reminding that our third quarter of 2018 included a noncash amortization expense related to the IPC acquisition of $5.4 million or 2% of sales, compared to $7.3 million or 2.8% of sales in last year's third quarter. Clearly, our expense leverage progress demonstrates our commitment to business efficiency and driving the bottom line in a challenging operating environment.

Moving on to EBITDA, as we discussed previously, earnings before interest, taxes, depreciation and amortization is now an important measure for Tennant given the impact of noncash amortization expense and our increased level of interest expense as a result of the IPC acquisition.

Our 2018 third quarter adjusted EBITDA was $29.3 million or 10.7% of sales, which was flat compared to the prior-year quarter. Overall, we are pleased with our EBITDA performance given the headwinds we're facing related to gross margins.

We continue to focus on the initiatives that can help us improve across every profitability measure. These include driving organic revenue growth across all geographies, continuing to control fixed costs on our manufacturing areas as volume rises, managing inflation of the gross profit line and standardizing and simplifying processes globally to continue to improve the scalability of our business model while minimizing increases in our operating expenses.

Shifting to our tax rate. Our as-adjusted effective tax rate for the 2018 third quarter was 5.6% compared to 21.7% in the year-ago quarter. This illustrates the impact of new tax legislation in the U.S., discrete favorable tax items impact in the quarter, and a favorable geographic mix of profitability we experience. Based on those higher-than-anticipated benefits, we are updating our forecast to tax rate of 15% for the full-year 2018.

Tennant’s cash from operations for the third quarter was $17.5 million, bringing our year-to-date cash flow from operations to $43.5 million compared to $32.1 million in 2017 year-to-date performance, which marks a significant increase. Looking at other aspects of our capital allocation, Tennant also paid cash dividends of $3.8 million in the third quarter of 2018 and reduced debt by $12.1 million.

Now, moving to our outlook for the full-year 2018. As Chris stated, we are pleased with our broad-based progress across our strategies. Our updated guidance takes into consideration several factors: our current sales momentum, macro factors impacting gross margins, progress on our operational efficiency initiatives, continued tight management of controllable expenses, and our updated forecasted tax rate.

Accordingly, we are increasing and narrowing our 2018 full-year guidance range for both the lower and higher end for net sales by $15 million and $5 million respectively. We expect net sales to be in the range of $1.15 billion to $1.25 billion, up 11.2% to 12.2% compared to the prior year and reflecting organic growth of approximately 5%.

At this sales level, taking into consideration the reduced gross margin rate, appropriate spending controls, and the impact of lower-than-expected tax rate, we’re increasing the low and high end of adjusted earnings per share to a range of $2.05 to $2.15. We are also adjusting our 2018 full year reported GAAP earnings to a range of $1.75 to $1.85 per share and increasing our adjusted EBITDA to a range of $119 million to $122 million.

Our revised 2018 financial outlook includes the following additional assumptions: strong growth in most regions especially strategic accounts in North America, gross margin performance of approximately 40.5%, R&D expense of approximately 3% of sales, capital expenditures of approximately $20 million, and an effective tax rate of approximately 15%.

Before we open the line for Q&A, I want to briefly discuss our approach to strategic planning and what you can expect from Tennant as we move forward. Earlier this year, we committed to providing our revised long-term financial targets by the end of fiscal 2018. We are now deeply involved in our strategic planning exercise, and we'll share the results of our findings in early 2019.

Sheryl, please now open the line for Q&A.

[Operator]

[Operator Instructions] Our first question comes from Marco Rodriguez from Stonegate Capital. Your line is open.

[Marco Rodriguez, Stonegate Capital]

I was wondering if you guys can maybe talk a little bit more in detail where you can on some of the drivers of some of the growth rates that you saw in the Americas, if you can kind of maybe parse it between your different channels, direct, distribution, and then strategic accounts.

[Thomas Paulson, SVP and CFO]

Well, I mean, basically - I mean, the nice thing about North America was obviously strategic accounts was the key driver as it has been for most of the year, but we also had success in direct and in distribution. So, it’s very balanced, which is what we like to see.

With 11.1% organic growth in America, that’s - we may hit a higher number than that once or twice in our history but that, I think, is one of the highest numbers we've ever seen, and you can only get there with strength across the entire portfolio.

[Marco Rodriguez, Stonegate Capital]

And the strategic accounts, obviously, you've called that out throughout the year-to-date period as far as it’s finally reaccelerating some of your organic growth rates there. Are there any particular strategic accounts that maybe closed a little bit earlier than you are anticipating? I know that a lot of them got push from 2017 into 2018 or are this just kind of like normalized growth rates you think that you might be able to sustain perhaps at some similar level in 2019?

[Thomas Paulson, SVP and CFO]

Well, I mean, the thing is, every year, we see strength in strategic accounts. Over the last seven or eight years, it's been the fastest-growing part of our business because we've focused more intently on it. We continue to focus intently on it. We have great relationships with many global players. Some of those piece of the business tend to hit every year and they go in cycle.

So we had I think an exceptionally strong year with strategic accounts this year. I think because we had to push some business from 2017 to 2018, I don't think we've accelerated any of the deals. I think everything else is pretty much growing out according to plan. And our opportunity and challenges to do the same in 2019.

[Marco Rodriguez, Stonegate Capital]

And then maybe if you could talk a bit more about the drivers you saw in Brazil. They gave you the growth there. And then also talk a little bit about China with their industrial product groups there. Wouldn't have thought that you'd have such strength there just given their macro situation.

[Thomas Paulson, SVP and CFO]

Yes. I can make a couple of comments on that. We really have two brands in importance in Brazil. We have the Tennant brand that we've had for many, many years and we also bought Alfa in 2008. We're seeing broad-based strength across our entire portfolio in Brazil and continue to have a really strong number one market position in that market. So it just continues to consistently outperform in the Latin American market in Brazil.

In the case of China, I would say, it's been a long time coming. We haven't performed as well in China. We've made some people changes. We made some strategy changes. And I think we're finally starting to get on the right side of where we're headed. And we're obviously extremely excited about the acquisition that we announced in that key market and sure hope we get it close as early as possible in Q1 next year.

[Chris Killingstad, President and CEO]

Yes. And just to build on what Tom is saying in Brazil. The other thing we did this year is we expanded our mid-tier product portfolio to bringing in some IPC products and basically branding them Alfa to fill out that line. And those products have done extremely well. So that's helping driving sales.

The other thing in China as one of the things we’ve said before that we’ve been working on and it’s a tough slug or has been a tough slug where we start to make good progress now is to build out our direct sales organization in key metro areas. And I think what you're beginning to see is the benefit of that.

[Marco Rodriguez, Stonegate Capital]

And then in terms of the acquisition that you announced for Gaomei in China, can you maybe kind of walk through - I think you said you're expecting to close in Q1 2019. Are there any sort of regulatory hurdles you need to surpass? And I'm assuming just when you made the announcement I didn't see much in terms of financial information, so is it safe to assume that from a material standpoint, from a revenue standpoint it's not exceptionally material?

[Thomas Paulson, SVP and CFO]

That would be a fair assumption. I mean for competitive reasons, we really - we're unlikely to disclose the revenue side. We don't - it still is a little complicated to get things done in China. But we don't feel there's any major hurdles to get ourselves through and we believe of significant strategic importance for us going forward as it is a large market and might be the market that will have the most growth over the next 10 to 15 years. And we think the acquisition of this brand and businesses are going to be one of the key things that gives us the ability to capitalize on that growth in the future.

[Chris Killingstad, President and CEO]

The other thing is remember we've been working with Gaomei now for four plus years. So, we know them and the business pretty well in a very thoughtful systematic process. And the beauty with the Gaomei acquisition, we think it can do for us what the Alfa acquisition did for us in Brazil. But this is clearly from nowhere to being by far the leading player.

It will do for us what IPC is starting to help us within in Europe in terms of taking us into the mid-tier market. Now the mid-tier market in China is big, by far, the biggest segment of the market today and the fastest growing which makes sense because they're just starting to transition from a labor cleaning to mechanized cleaning because of wage rate growth, and they don't tend to go right to the premium products right away. They tend to go to more cost-effective products and the Gaomei product portfolio that fits that need to a tee.

So, we are extremely excited by our ability to continue to grow, hopefully, aggressively in China for years to come.

[Marco Rodriguez, Stonegate Capital]

And can you help us understand what is the size of that market in China for the mid-tier and then what are the growth rates kind of look like?

[Thomas Paulson, SVP and CFO]

Well, we haven't commented publicly around the specificity around the mid-tier, so I'm hesitant to do that. But the market itself from a mechanized cleaning and aftermarket support is somewhere between $350 million and $400 million. I mean the numbers in China are a bit imprecise and the mid-tier side of that is not only the largest but also the fastest growing.

So, I would leave it at that. The quality of the data is not that great anywhere in the world in China. It's a little bit tougher. But it is a very large market that we think is going to - we do believe be larger than the North American market and the European market.

[Chris Killingstad, President and CEO]

And what we can say is, by far, larger than the premium market which is where we play now.

[Thomas Paulson, SVP and CFO]

Yes. Good point.

[Marco Rodriguez, Stonegate Capital]

And last question, just kind of circling back on the gross margin guidance, obviously, you pointed out the headwinds that are affecting that that line item for you guys starting last quarter. Obviously, it seems as if - some perhaps some of those headwinds may have accelerated a bit or perhaps are a little bit stronger than you're anticipating. Was that even or broad against all those headwinds or are there one, in particular, that might have been a little bit stronger than you're anticipating?

[Thomas Paulson, SVP and CFO]

It really - I would say that the two things that did affect us the most were tariffs and a higher freight and logistics costs if I was to look at the pieces that affected us by about 110 basis points. The labor and raw material shortage were less. So, we'd like to believe we're making some progress in those areas, but in frankly, particularly the freight and logistics costs were a bit higher than we had anticipated.

[Chris Killingstad, President and CEO]

And that did accelerate.

[Thomas Paulson, SVP and CFO]

Of all of them, that’s the one that accelerated probably the most in the third quarter.

[Marco Rodriguez, Stonegate Capital]

The freight and logistics costs?

[Thomas Paulson, SVP and CFO]

Yes.

[Marco Rodriguez, Stonegate Capital]

Or both? Okay.

[Thomas Paulson, SVP and CFO]

Both.

[Operator]

[Operator Instructions] Our next question comes from Brett Kearney, Gabelli & Company. Your line is open.

[Brett Kearney, Gabelli & Company]

Just wanted to ask, it look like there is, perhaps, a smaller business sale during the quarter. I just want to ask about that. And then, with Gaomei coming into the organization, if you could just talk about future capital allocation priorities from here?

[Thomas Paulson, SVP and CFO]

Yes. We will continue to keep our pipeline open. We will continue to pay down debt. I mean it's a much smaller acquisition. We haven't noted the price for that, but we'll keep our pipeline alive. But we won't really change much in our capital allocation strategy currently as we go forward.

And commenting on the divestiture, I mean it's a small non-core assets that it's immaterial to our results. So I would call it inconsequential. But we did have a modest gain from it, and we did call it out.

[Operator]

Our next question comes from Chris Moore from CJS Securities. Your line is open.

[Chris Moore, CJS Securities]

Maybe go back to the gross margin just for a second. So, those kind of the four discrete areas that you talked about, can you’ve kind of compare and contrast the impact in Americas versus EMEA on those pieces. I mean, for example, are freight costs really just an issue in North America or is it something you're seeing all over the place geographically?

[Thomas Paulson, SVP and CFO]

It's definitely far tougher in North America than we're seeing anywhere else in the world.

[Chris Moore, CJS Securities]

And how about on the tariff side, if you look at kind of the potential impact on the IPC and the EMEA business versus some of the unknowns in the U.S., how do you guys view that?

[Thomas Paulson, SVP and CFO]

Given the amount of business that we certainly see opportunities with IPC as we move around the world, but it is still a business that's manufactured in Europe and predominantly sold in Europe. At the time of the acquisition that was 80% of the product line.

So, we don't feel that there’ll be a material effect there. And the bulk of the effect on tariffs was going to be squarely in our North American business we believe. There’s a lot of uncertainty too. We want to make that really clear.

[Chris Moore, CJS Securities]

Maybe just in terms of the strength that you're seeing on the Americas sales, is that kind of from a competitive standpoint, do you get the feeling that you're taking share? I mean, I’m looking - Nilfisk talked about challenges in Q3 with their strategic accounts and some delayed orders being canceled. Just kind of trying to get a feel for what the landscape looks like specifically in North America.

[Chris Killingstad, President and CEO]

I can’t remember Nilfisk’s exact growth rate, but I think it was basically zero in North America in the third quarter while we grew by 11.1%. So, if we grew by 11.1%, we’re definitely taking share.

And remember, our advantage in North America is we had, by far, the largest and most experienced sales and service footprint, right? And I think that's our secret sauce. It's a huge competitive advantage, and we're leveraging it to the fullest right now. And competition is struggling to catch up with that.

[Chris Moore, CJS Securities]

And is the flipside in EMEA, is that fair to kind of talk about Nilfisk having - they seem to do a little better Q3. Is that kind of a similar situation to kind of that core strength you have here?

[Chris Killingstad, President and CEO]

Obviously, they are a European player, and they are stronger in Europe. So, historically, I would say yes, but the IPC acquisition for us finally gives us the scale to get on the kind of the platform - the awards platform with the key players and have a chance to compete on a much more level playing field.

So, that advantage for them and others is diminishing although it's still there. But remember, we've said that our European business continues to perform strongly. The only reason you're seeing a decline is because we grew by 14.6% organically last third quarter.

[Chris Moore, CJS Securities]

Understood. If you look at that kind of the rough revenue split, 60%-plus America, 30% EMEA, a little less than 10% APAC. You’d think that two to three years from now, that split stays roughly the same or you expect much change there?

[Chris Killingstad, President and CEO]

No. I think we have - internally, we are shooting to get closer to a 50/50 split. We realized that having a balanced geographic portfolio cost of the business to be much more stable over time because not all geographies hit on all cylinders at the same time.

So, that is our goal is to get to a much more 50/50 split. And with the acquisition of IPC in Europe and now Gaomei in Asia Pacific and the strength of our Alfa business in Brazil I think we’re well on our way.

[Chris Moore, CJS Securities]

And last question, just in terms of the strategic plan to be out early next year from a kind of fiscal 2019 tax rate expectation is in that 20% range, is that probably a better place to start at this point in time?

[Thomas Paulson, SVP and CFO]

Yes. I mean, we’re certainly not ready to give guidance. There's so much uncertainty on how the tax regulations are finding their way. Definitely, you can't count on it another tax year of our rate being around 15% and certainly will be somewhere north of 20%, but we’re not ready to be more specific than that at the current time.

[Operator]

And there are no further questions in the queue at this time. I’ll turn the call back to management.

[Chris Killingstad, President and CEO]

All right. Thank you. So, before we conclude, I again want to thank the team members of Tennant who are central to creating the broad-based momentum we are experiencing and our leadership position in our industry.

We remain committed to enhancing long-term shareholder by diversifying our revenue streams by expanding our sales growth drivers across all geographic regions, channels, and product categories; reinforcing our technology leadership and supporting our robust new product pipeline; driving for a global operating effectiveness; strengthening our financial position and cash flow characteristics, as well as balancing our capital allocation strategy across growth investments, debt reduction, dividends, and share repurchases; successfully completing the integration of IPC; and looking holistically at our growth plans both organic and strategically targeted inorganic growth opportunities.

Thank you for your time today and for your questions. Take care, everybody.

[Operator]

Thank you very much. Ladies and gentlemen this concludes today's call. You may now disconnect.