Tennant Company (TNC) Q1 2018 Earnings Conference Call Transcript
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Tennant Company (NYSE: TNC)
Q1 2018 Earnings Conference Call
April 23, 2018 11:00 a.m. ET
Contents:
Prepared Remarks
Questions and Answers
Call Participants
Prepared Remarks:
Operator
Good morning. My name is Casey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Tennant Company's first-quarter earnings conference call. This call is being recorded.
[Operator instructions] Thank you for participating in Tennant Company's first-quarter 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.
Tom Paulson -- Chief Financial Officer
Thanks, Casey. Good morning, everyone, and welcome to Tennant Company's first-quarter 2018 earnings conference call. I'm Tom Paulson, senior vice president, 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 Jeff Cotter, senior vice president and general counsel.
Today, we will review recent milestones achieved against our core strategy, Tennant's performance during the 2018 first quarter, and our update and outlook for 2018. First, Chris will brief you on our operations, and then I'll cover the financials. After that, we'll open up the call for questions.We're using slides to accompany this conference call. We hope this makes it easier for you to review our results.
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A replay of this conference call, along with these slides, will be available on our Investor Relations website at investors.tennantco.com following this call until May 23, 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, especially 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. 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 first quarters.
Our 2018 first-quarter earnings release includes a reconciliation of these non-GAAP measures to our GAAP results. Earnings release was issued this morning via Business Wire and is also posted on our Investor Relations website. At this point, I'll turn the call over to Chris.
Chris Killingstad -- President and Chief Executive Officer
Thank you, Tom, and thanks to all of you for joining us. For the 2018 first quarter, overall consolidated net sales grew nearly 43% to approximately $273 million, primarily reflecting the contribution from IPC and organic growth across all geographic regions. On an organic basis, sales grew 6.5%. And our adjusted net earnings totaled $0.27 per share.
Overall, we are very pleased with our performance during the period, which exceeded both our guidance and internal expectations. We entered 2018 with an intense focus across all of Tennant on making further progress on each of our strategies to generate growth, operate efficiently, and position the business for long-term success. We are devoted to achieving our previously stated goals, and I am pleased to say that we made progress on several during the first quarter 2018. The first involves our commitment to sales execution.
During the first quarter, Tennant drove expansion across all three geographic regions. This is the second consecutive quarter where all three regions have delivered organic growth. It is also our highest quarterly organic growth since 2015. As indicated last quarter, we anticipated we would begin to realize the benefit of strategic account growth in the early parts of 2018, and we are excited to share that those benefits contributed to our performance this quarter.
In addition, our service, parts, and consumables business experienced good growth in the quarter, particularly in North America. Second is our integration work with IPC. Just over a year ago, we announced the acquisition of IPC, a move that expands and diversifies our revenues in multiple ways, by region, product category, and sales channel. This acquisition also broadens Tennant's growth platform.
Since closing that transaction, we have thoughtfully, but aggressively, pursued our integration plan. To date, we remain on track to capture our forecasted run-rate synergy targets, and we have identified potential areas that may result in additional synergies.This past quarter, we made progress toward these synergies by beginning to capture additional organizational efficiencies and savings through our sourcing efforts. Separately, the IPC business had another quarter of strong results, delivering approximately 5% organic growth. Third is our commitment to operate efficiently.
Last year, we realigned our global workforce to better support our growth initiatives. We also made investments to improve our service capabilities and manufacturing operations, investments that, while impacting prior-year profitability, are strategically important to our longer-term prospects. As we reported last quarter, we made improvements in our service and manufacturing operations by the end of the year. That progress continued into the 2018 first quarter.
Today, our open field service trucks are at normal historical levels. And our investments in robotics and other technologies at the manufacturing level allowed us to stabilize our skilled labor workforce in the plants. These efforts are central to our goal of continuing to achieve profitable growth. Of course, we have more room to improve here, but we are highly encouraged by the progress made so far.
And fourth is ensuring that we continue to drive new-product innovation. So far in 2018, we have boldly moved forward on this front. Specifically, just after the end of the first quarter, we announced our plans to launch our first autonomous floor-care machine, designed to tackle complex real-world environments without direct operated control. This is made possible through our newly forged relationship with Brain Corp., an artificial intelligence company that specializes in technology for autonomous robots.
We are excited to deliver a cleaning solution to our customers designed to maximize productivity, increase efficiency, and optimize safety. We expect the first Tennant autonomous solution to be available in North America later this year, with additional models and expansion into global markets to follow. This is an exciting example of how we are creatively looking to drive innovation in our products that support our reputation as a leader and continue to drive new product sales, which we measure as a vitality index. As a reminder, our vitality index represents the percent of revenue from new products introduced in the past three years.
In Q1 2018, our vitality index was approximately 44%, well above our stated goal of 30%. Our work is far from over, but we are pleased with our progress in the first quarter, and we believe we are well-positioned for additional momentum throughout the rest of 2018. I also believe that we've made substantial progress on our strategies to continue to generate long-term value for our shareholders. We remain steadfastly committed to the following: diversifying our revenue streams by expanding our sales growth drivers across all geographic regions and managing our go-to-market strategy to address new customer segments and products; building on our recognized technology leadership and supporting our robust new-product pipeline; improving operating efficiency and balancing our growth investments; strengthening our financial position and balancing solid cash flow, growth, investments, debt reduction, dividends, and share repurchases; successfully completing the integration of IPC; and focusing on our organic growth plans and being open-minded about the right strategic inorganic growth opportunities with the potential to further enhance shareholder value.
Later this year, we plan to share how these commitments align with a more detailed strategic plan and long-term operating model. Now I'll ask Tom to take you through Tennant's first-quarter financial results. Tom?
Tom Paulson -- Chief Financial Officer
Thanks, Chris. In my comments today, references to earnings per share are on a fully diluted basis except for the 2017 GAAP results, which were calculated with the basic weighted average shares outstanding due to the as-reported net loss. However, non-GAAP 2017 earnings per share are calculated on a fully diluted basis. Note that our financial results in 2017 include the financial performance of IPC Group, which was acquired at the beginning of April 2017.
This is the last quarterly reporting period where IPC will be excluded from our organic performance. As Chris highlighted, our performance during the period is beginning to reflect the outcome of our efforts to improve sales and earnings growth. We're optimistic that we'll continue to benefit from these efforts as we move through the year. For the first quarter 2018, Tennant reported net sales of $273 million, approximately 43% higher year over year, with organic sales improving 6.5%.
Each of our geographic regions contributed to this organic growth for the second consecutive quarter. Our organic sales results exclude a favorable currency impact of about 3.1% and the impact of the IPC acquisition that increased net sales by 33.2%.Turning to the bottom line. First-quarter 2018 net income was $3.3 million, or $0.18 per share. Our reported results in the quarter reflected the impact of two items totaling $2.3 million in pre-tax charges, or $0.09 per share.
Excluding these items, Tennant reported adjusted net earnings of $5 million, or $0.27 per share. By comparison, Tennant's reported adjusted net earnings of $5.4 million, or $0.30 per share, in the year-ago quarter. It's worth clarifying that the first-quarter 2018 results include a pre-tax charge of $5.5 million, or $0.22 per share, in amortization expense of the intangible assets related to the IPC acquisition. Taking a closer look at the 2018 first quarter.
We group sales into three geographic regions, which are the Americas, which encompasses all 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 first-quarter sales expanded 13.9%, up 8.2% organically. Organic growth was driven by expansion in our strategic accounts in North America, improved sales in our service, parts, and consumables business, and continued broad-based strength in the Brazil economy. In EMEA, reported sales improved 166.9% in the 2018 first quarter, up approximately 2.1% organically.
Results here reflect solid sales performance in France, the Netherlands, and Iberia, and build on our Q1 2017 organic growth of 14.3%. Looking at the Asia Pacific region, sales rose 42.5%, or 1% organically, driven by improved performance in Australia business. Turning now to gross margins. Tennant's gross margin in the 2018 first quarter was 40.5%, compared to 41.7% in the prior-year quarter.
A 120-basis-point change mainly reflects an inventory write-off related to our coatings business as well as negative impacts from a higher mix of revenue from strategic account and IPC. We expect further progress on gross-margin improvement as we move through 2018 and still expect to remain within our guided range of 41% to 42%. Research and development expense in the 2018 first quarter totaled $8 million, or 2.9% of sales. That compares to $8.4 million, or 4.4% of sales, in the same period last year.
You will recall that during the last reporting period, we projected higher-than-normal first-quarter R&D expense to support new-product development and launches. Due to project timing, primarily related to our new relationship with Brain, these higher level of spend -- this higher level of spend was deferred to later this year. We remain committed to our guided annual R&D spend of 3% to 3.5% of revenue during 2018. Selling and administrative expense in the 2018 first quarter was $92.3 million, or 33.8% of sales, compared to the prior-year quarter of $74 million, or 38.7% of sales.
The first quarter of 2018 included charges of $2.3 million and the first quarter of 2017 included $10.9 million of charges. Excluding these items, both quarters reflect selling and administrative expense of 33% of sales. As a reminder, 2018 first quarter includes $5.5 million of amortization expense related to IPC, which equals 2 percentage points as a percent of sales. Moving on to EBITDA.
As we discussed previously, earnings before interest, taxes, depreciation, and amortization will be an important measure for Tennant going forward, especially considering the impact of noncash amortization expense and our increased level of interest as a result of the IPC acquisition. Our 2018 first-quarter adjusted EBITDA was $25.2 million, or 9.2% of sales, improving 240 basis points compared to the prior-year quarter of $13 million, or 6.8% of sales. We remain committed to the initiatives that can help us improve across every profitability measure. These include driving organic revenue growth, managing fixed costs in our manufacturing areas as volume rises, striving for zero net inflation at 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 first quarter was 24.6%, compared to 27.7% in the year-ago quarter, reflecting the impact of the new tax legislation in the U.S. Although the first=quarter 2018 rate was slightly above our full-year guidance of 24%, we still believe in our ability to deliver on guidance and anticipate a full-year effective tax rate of 24% in 2018. Capital expenditures totaled $3.5 million in the first quarter of 2018, compared to $4.7 million in the first quarter of 2017.
Current capex continues to reflect planned investments in information technology projects, tooling related to new-product development, and manufacturing equipment. We continue to tightly manage capital spending. Tennant's cash from operations for the first quarter was $5.5 million, compared to cash used for operating activities of $11.1 million in the 2017 first quarter. Looking at other aspects of our capital allocation, Tennant also paid cash dividends of $3.8 million in the first quarter 2018 and reduced our debt by $4 million.
Now moving to our outlook for the full year 2018. As Chris stated, we're optimistic about the momentum we are generating and confident in our strategies to enhance revenue growth and drive operational improvement. Based on the strong results from the first quarter and currency tailwinds, we're increasing our 2018 outlook and guidance. For 2018, we now estimate 2018 full-year net sales to be in the range of $1.08 billion to $1.11 billion, up 7.6% to 10.7%, or 3% to 3.5% organically, compared to the prior year.
And we are increasing our estimated range for adjusted earnings per share by $0.05 per share to a range of $1.85 to $2.05, which excludes $3 million to $4 million, including IPC acquisition costs. We expect the 2018 full-year reported GAAP earnings to remain in the range of $1.70 to $1.90 per share and are increasing the anticipated adjusted EBITDA range by $2 million to a range of $113 million to $118 million. As a reminder, our 2018 annual financial outlook includes the following additional assumptions: reasonable growth in all regions, especially strategic accounts in North America; gross-margin performance in the range of 41% to 42%; R&D expense in the range of 3% to 3.5% of sales; capital expenditures in the range of $25 million to $30 million; and an effective tax rate of approximately 24%. And now we'd like to open up the call to any questions. Casey?
Questions and Answers:
Operator
Thank you.[Operator instructions] And your first question comes from Marco Rodriguez from Stonegate Capital Management. Please go ahead. Your line is open.
Marco Rodriguez -- Stonegate Capital Management -- Analyst
Good morning, guys. Thank you for taking my questions.
Tom Paulson -- Chief Financial Officer
Our pleasure.
Chris Killingstad -- President and Chief Executive Officer
Pleasure.
Marco Rodriguez -- Stonegate Capital Management -- Analyst
I was wondering if you could talk a little bit more in detail in regard to the sales execution, specifically on the strategic accounts here in North America. Were the results that you saw in Q1, did they kind of surpass your internal expectations? And then if maybe you can talk a little bit about what are some of the drivers you saw in this quarter for strategic accounts?
Chris Killingstad -- President and Chief Executive Officer
Yeah. Well, you've got to remember that we talked about strategic accounts throughout 2017 and that we were working on a number of large deals. We anticipated that some of them would come to fruition earlier than they did, but we're happy to report that they are starting to hit and they're impacting our results. We'd say that in the first quarter, they probably did exceed our expectations.
We've indicated that in our remarks. And the good news is that if you look through the rest of the year, we should continue to have pretty solid strategic accounts growth momentum.
Marco Rodriguez -- Stonegate Capital Management -- Analyst
Gotcha. Excuse me -- and in regard to the strategic accounts, I mean, I do recall the conversations we had through '17 that it kind of had the feeling that the strategic accounts, a lot of the deals you're working on were kind of delayed and being pushed to the right, if you will. Maybe you can give us a little bit of a sense as far as that, for lack of a better word, that backlog of accounts, strategic accounts, that may have gotten delayed somewhat. Are we through all of those yet? Or are we halfway through? Just any sort of color there to give us an idea.
Tom Paulson -- Chief Financial Officer
Yeah, I can provide a little bit of insight there. I mean, we knew that -- last year that we felt that the renewal business that was coming forth would start to give us some benefits in the back half of the year. That didn't really happen, and we didn't ship what we hoped to in Q3. We then began to see some wins in Q4.
That accelerated in Q1 and we believe will continue into Q2 and in the back half of the year. We still haven't won all the business. I mean, we do have a fair amount of business that's coming up for renewal in the current year and even into next year. So we still have to get some more wins.
We certainly anticipate that we will. We're off to a great start, but you've still gotta win them one at a time and -- but we do anticipate that we'll see further success in the year. It's, frankly, one of the things we're really good at, is winning back the business that we already have and ensuring that we get it again.
Marco Rodriguez -- Stonegate Capital Management -- Analyst
Gotcha. And then with regard to the actual execution of sales for strategic accounts, have you changed any of the methods or processes that you're taking to win those accounts? And maybe if you can talk a little bit if whether or not you started to add in the IPC part as well?
Chris Killingstad -- President and Chief Executive Officer
No, no, no. I don't think we've made any substantial changes to our processes. Over the last four or five years, we spent a lot of time and effort on building what I think is the best strategic account organization in the industry. And that's paying dividends for us here going forward.
I mean, the thing is, the process was the same. We can't always control how long the bid process goes. I mean, that is -- the customer decides that. They took longer than normal in 2017, which is why we're getting to see the benefits accrue only now in the first quarter of 2018.
And really we have not yet seen any material impact from our work with IPC on this front. That's all in the future still.
Marco Rodriguez -- Stonegate Capital Management -- Analyst
Gotcha. Then in regard to the IPC integration, I'm not sure if I caught this correctly in your prepared remarks. I thought I heard that you said that you identified some potential additional synergies above what you had already communicated? Did I get that correctly?
Tom Paulson -- Chief Financial Officer
That's correct. I mean, we've identified $10 million worth of cost synergies. We've exceeded that total number by a modest amount, but we have -- we do have identified savings in excess of $10 million. We're not ready to commit that we're going to deliver in excess of $10 million, but it gives us more confidence that we, in fact, will deliver that amount.
And we hope there is upside. As we commented before, it's going a little bit slower than we like, but we still -- we have not decommitted from this level of savings this year or next year. But if anything, it might come in a little bit slower, but we also have the opportunity to overdeliver.
Marco Rodriguez -- Stonegate Capital Management -- Analyst
Got it. That's helpful. And last quick question. Just on the new-product side.
The autonomous machine you're making here with the launch in late '18 with Brain. Can you maybe talk a little bit about the -- how you're looking at the launch in terms of the marketing efforts you'll undergo? And then how you're thinking about the roll-out to the rest of the geographic -- geographs?
Tom Paulson -- Chief Financial Officer
We'll be very targeted. We're not going to do a great, big splashy roll-out. We're going to really stay focused on ensuring we're the first to perform. We wouldn't be going to market or announce that if we weren't confident that we could roll out, but we'll be measured about the pace with which we do it.
If we -- we know there will be -- it's not simple. And we know the business model is very different than our typical business model. It's going to need more support, both on an equipment side and the software side. But we will -- we'll roll out on a controlled basis.
But we will begin -- and it'll be a couple of years before we're going to get the revenue that's really meaningful, but we believe we will get started at the end of this year.
Chris Killingstad -- President and Chief Executive Officer
And another important thing to note is that we have been working with a handful of large, early adopter customers on the whole autonomous-guided vehicle strategy from the beginning and continue to do so with the second-generation product with Brain. And that's where we're going to focus a lot of our initial sales efforts because that's where we have the connections. They're really interested, and they also can generate strong volumes for us in the short term and going forward.
Marco Rodriguez -- Stonegate Capital Management -- Analyst
Gotcha. Thanks a lot, guys. I really appreciate your time.
Tom Paulson -- Chief Financial Officer
You're welcome. Thanks.
Chris Killingstad -- President and Chief Executive Officer
Thank you.
Operator
[Operator instructions] Your next question comes from Jon Fisher with Dougherty & Company. Please go ahead.
Jon Fisher -- Dougherty & Company -- Analyst
Thank you. Good morning. Very good quarter. Just kind of focusing still on the revenue line.
The Americas organic growth rate of over 8%. The year-ago quarter was a little over 4%. And obviously, the rest of the year gets easier since you'll comp a negative organic growth rate. And you've spoken very positively about the outlook for the rest of the year for strategic accounts and renewal momentum and renewal pace.
And so I guess, I'm trying to figure out why the increase in revenue guidance was less -- for the year was less than be it in this quarter, given what to me would seem to be a pretty attractive Americas' in and of itself organic growth outlook for the rest of this year?
Tom Paulson -- Chief Financial Officer
Fair question, Jon. I mean, I -- we hope we're being conservative. And we did -- I hate to remind us, but we did only grow 1.4% organically last year. We did finish the year stronger, and that trend has continued and increased through Q1.
But we don't want to be overly ambitious in taking our numbers up on the basis of the first quarter. And I'd remind also folks that it is our least important quarter of the year. It's not -- and not that every one isn't important, but it is typically the lower point of the year with Q3 being the next low point. Q2 and Q4 is where you really make and break the year.
We -- again, I hope we're being conservative, but I think that's prudent at the current time.
Jon Fisher -- Dougherty & Company -- Analyst
OK. Fair enough. And then just -- because we have had now two quarters in a row where all three major geographies have put up positive organic growth, is that a trend that you think is sustainable for the rest of this year and into next year? Or would you expect that to change in one of the non-North American geographies over the course of this year?
Tom Paulson -- Chief Financial Officer
We actually are confident that we're going to continue to see growth in all of our geographies, not only in the geographies but also in the IPC acquisition. We do feel that we'll see accelerating growth in Asia Pacific. We did have organic growth. We do think we'll see a bit of acceleration in that area.
We think we'll continue to see the trend in Europe. And I think it's very notable that we grew a couple percent in Q1 on top of 14% in the prior year. So we're seeing momentum across the world. And we hope it continues to get a bit better.
Chris Killingstad -- President and Chief Executive Officer
And I remember last year, we said we did the restructuring partly to right-size our cost structure, but maybe more importantly was to realign resources against the biggest opportunities in our geographies. And what I'm proud to say is I think we probably have the best management teams in the key countries, both in EMEA and in APAC that we've ever had. And they're digging in and getting traction. And so while nothing's guaranteed, we are extremely hopeful that this is a trend that's going to continue for some time to come.
Jon Fisher -- Dougherty & Company -- Analyst
Good to hear. Good to hear. Moving on down to the gross-margin line. And with the significant [Inaudible], I know kind of the math is a little bit different.
But you did kind of come in under my gross-margin target for the quarter. You mentioned strategic accounts and IPC, and you've mentioned before that both of those categories of revenues are at lower gross margin. I just -- I guess I want to explore beyond that mix drag, just price cost with -- it sounds like you kind of didn't raise prices as much as you could have or should have last year, and then obviously, with input costs on raw materials increasing this year again year over year. Just want to get a comfort level that from a price-cost standpoint, there is no -- there was no kind of drag in Q1 because you're underpricing or costs are worse than maybe anticipated for this year?
Tom Paulson -- Chief Financial Officer
Yeah, we remain confident in our ability to get adequate pricing. We've executed pricing. We do -- we feel we're being successful in the market. We need to get it due to -- there is inflation and we're seeing that, particularly in steel and resins and lead.
But we remain confident in our planning assumptions that we'll get adequate pricing to not have that be a drain to the gross margins. The only additional piece, we commented on strategic accounts, putting a little bit of pressure on our margins. That's OK. I mean, we'll take the revenue.
We do feel that it will be additive to the profitability for the full year, obviously. The one surprise that we did have in the quarter is we did have an inventory write-off. That was one-time in nature. We think we had adequate controls in place.
We don't see any future issues, but it did affect gross margins by 40 basis points. All of our other underlying assumptions are holding true. We're improving our two factories where we struggled last year. We're seeing our sourcing organization get stronger.
And we're seeing our service organization performing right on expectations relative to plan. So we feel all of our other assumptions are holding true so far in -- as the year has gotten started.
Jon Fisher -- Dougherty & Company -- Analyst
OK, great. And then, just touching on the interest expense. That was less than I had modeled. You mentioned you'd paid down $4 million of debt in the quarter.
Just wondering from a fixed, variable standpoint, again with interest rates increasing here, are -- is your entire interest cost base fixed? Or what's the fixed,-variable mix on interest expense?
Tom Paulson -- Chief Financial Officer
It's not completely fixed. I mean, in the credit facility, is a LIBOR-plus, but the vast majority of our debt is fixed. It is fixed in nature. So we don't feel that we'll suffer the vagaries of -- if we continue to see inflation on the interest rate side of things, we feel we're very well-positioned to have -- not have our interest expense move much.
Jon Fisher -- Dougherty & Company -- Analyst
OK, great. And then last question from me is share count. I -- is that a function of what the stock price had done during the quarter? Or I guess how much should we assume going forward, 18-plus million for a fully diluted share count based on where the stock, obviously, has been today?
Tom Paulson -- Chief Financial Officer
There will be modest movement in our share count, so we don't see any significant movement for any reason as we go forward. We're not at all buying back shares at the current time. We -- even though we do have an authorization. But we don't see a significant move in our share count as we're going forward through the year.
Jon Fisher -- Dougherty & Company -- Analyst
OK. All right. Thank you very much.
Tom Paulson -- Chief Financial Officer
You're welcome, Jon. Thanks.
Operator
And since there are no further questions at this time, I would like to turn the call over to management for closing remarks.
Chris Killingstad -- President and Chief Executive Officer
All right. Thank you, Casey. So before we leave you, it's worth reemphasizing that over the past year, we committed we would work toward improving revenue diversity and growth. In Q1, we demonstrated encouraging organic growth across every global region and believe we have significant momentum as we head further into 2018.
We also committed that we would refocus our resources toward growth opportunities and for enhanced efficiency. Not only did we post solid organic growth in Q1 in all regions, we captured significant revenue growth with strategic accounts and expanded our after-market revenue, while still keeping S&A in line with internal expectations. We also committed that we would maintain our investment in new-product innovation. Over the past year, we've kept our vitality index far above our 30% target and developed new relationships that will help Tennant meet the growing needs of our customers.
And lastly, we committed we would accomplish all of these items with a capital-allocation strategy that continues to balance important investments and deliver shareholder value. Tennant Company has maintained its commitment to its dividend, debt reduction, and ongoing investments to pursue organic growth and the flexibility to consider nonorganic opportunities. Overall, we are excited with the momentum we've created and believe we'll experience throughout the remainder of the year. Finally, I wish to thank our team members across Tennant, whose efforts have and will continue to be central to our success.
And also thanks to all of you for your time today and for your questions. Take care, everybody.
Operator
[Operator signoff]
Duration: 48 minutes
Call Participants:
Tom Paulson -- Chief Financial Officer
Chris Killingstad -- President and Chief Executive Officer
Marco Rodriguez -- Stonegate Capital Management -- Analyst
Jon Fisher -- Dougherty & Company -- Analyst
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