Ladies and gentlemen, good morning. My name is Abby and I will be your conference operator today. At this time, I would like to welcome everyone to Tenant Company's fourth quarter and full year fiscal 2024 earnings conference call. Today's call is being recorded. There will be time for Q&A at the end of the call. Please press star 1 if you would like to ask a question today via telephone. After the question and answer session, please stay on the line for closing remarks from management. If you have joined our call today via telephone and are logged into the conference call presentation on your computer, please mute the audio on your computer to avoid potential quality issues during the call. Thank you for participating in Tenant Company's fourth quarter and full year fiscal 2024 earnings conference call. And beginning today's meeting is Mr. Lorenzo Bassi, Vice President Finance and Investor Relations for Tenant Company. Mr. Bassi, you may begin.

Good morning, everyone, and welcome to Tenant Company's fourth quarter and full year 2024 earnings conference call. I'm Lorenzo Bazzi, Vice President, Finance and Investor Relations. Joining me on the call today are Dave Hummel, President and CEO, and Fay West, Senior Vice President and CEO. Today, we will review our fourth quarter and full year performance, as well as our initial guidance for 2025. 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 live presentation that accompanied 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 statement. 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 full 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 fourth quarter and full year earnings release and presentation include the comparable GAAP measures and the reconciliations 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 today's call, I will be discussing highlights from the fourth quarter and full year 2024, the progress on our enterprise strategy, and our outlook for 2025. I am pleased to report our strong finish to a successful 2024. Our team's commitment to executing our enterprise strategy initiatives drove results aligned with our long-term targets, achieving new highs for the company in net sales, adjusted EBITDA, and EBITDA margins. For the full year, net sales reached $1.287 billion, while our adjusted EBITDA rose to $208.8 million, and our adjusted EBITDA margin expanded to 16.2%. Our full-year organic growth rate of 3.2% was driven primarily by price growth across each of our regions, and the second half of 2024 also showed positive volume trends. In the fourth quarter, our team achieved volume growth of over 5%, concluding the year with robust momentum following three consecutive quarters of nearly double-digit order growth. Looking at the full year, our orders increased 6.4% over 2023, well above our long-term targets. In 2024, teams across the company worked diligently to meet our customers' needs, successfully reducing our backlog by $125 million and closing the year with normalized levels and market competitive lead times. With backlog levels now stabilized going forward, incoming orders will more closely align with revenue. Regional highlights for the year varied. In the Americas, order rates during the year were up high single digits compared to the prior year period. This was driven by our enterprise strategy initiatives, specifically within our new products like the X4 Rover, which contributed to our record $75 million in AMR equipment sales in 2024. In contrast, we experienced lower than anticipated demand for our industrial equipment, specifically in the rental channel driven by extended fleet replacement cycles. This sluggish industrial demand enabled us to draw down backlog, as previously stated. Overcoming currency-related headwinds in Brazil, our strategic investments in the Americas continue to deliver order rates, outpacing market growth, reinforcing our confidence that our strong leadership position is growing. In EMEA, despite strong execution of growth strategies, continued market demand softness during the first three quarters was compounded by lapping a previous year with higher backlog reduction benefits. In the fourth quarter, we saw signs of market rebound, and we drove revenue growth across all product categories within the region, led by double-digit growth in Spain. Additionally, in Eastern Europe, our first quarter acquisition of TCS continues to perform very well. This business drove 2.6% inorganic growth for the region during the year, and we are excited about the opportunity it provides in this attractive region. Turning now to APAC. Continuing the trend from previous quarters, business performance in APAC was impacted by stark demand declines in China and government-induced overproduction, which is creating price and margin pressure in the mid-tier commercial product categories. Australia is also showing signals of slower demand. Customers are either delaying equipment orders or shifting to rental units, reflecting their growing uncertainty in their economic outlook. These macro market-driven challenges more than offset the positive impacts from our growth strategies in the region, and we have pivoted our approach to focus on more favorable areas in this market environment. Looking at 2024 as a whole, our aim in 2024 was to grow top-line revenue and expand bottom-line margins through pricing discipline, launching innovative new products, improving our channel reach and capacity, and reducing backlog to normal levels. Our results give us confidence that we are on the right path to carry this positive momentum into 2025 and beyond. I'd like to point out several key accomplishments the team made on these fronts. First, our 2024 results were primarily driven by price growth across each of our regions. At an enterprise level, we target approximately 50 to 100 basis points of annual price impact. In 2024, we exceeded our target, delivering over 200 basis points. Each region contributed to this performance, and the backlog reduction also contributed materially to price realization in the year. Second, we activated multiple go-to-market initiatives in 2024, aligned with our enterprise growth strategy. In North America, we increased our service capacity, which helped drive an increase in service revenue year over year. Additionally, go-to-market initiatives drove growth in the UK, and investments in expanding our distribution network in Italy resulted in strong organic growth. Many of our go-to-market initiatives delivered year-over-year growth, but that impact was overshadowed by the previously communicated declines within the North America rental channel and China. Lastly, we drove successful product innovations in three key areas, AMR, small space, and product line extensions. Within AMR, the X4 rover that we launched mid-2024 has received strong reception and coupled with continued high demand for our existing AMR products reinforces our confidence in our AMR growth strategy. Within small space, we introduced our iMob family of products into new geographic markets, including Brazil, France, Portugal, and Spain. This international expansion drove incremental growth of iMob products in 2024. We are pleased to announce that beginning in 2025, we have further expanded our sales reach by 30 additional countries. We see this expanded footprint as an exciting opportunity to gain share in the rapidly growing small space segment. We expanded our product line extensions portfolio with the release of the T-1581 ride-on scrubber in the first quarter and the T-291 small walk behind scrubber in the third quarter of 2024. Our product line extensions have proven to be an effective growth strategy, positioning our mid and premium tier products to grow share and generate incremental profitable revenue. New product-driven growth in AMR, small space, and product line extensions exceeded our long-term growth target of 150 to 200 basis points per year. Built into our enterprise strategies, our commitment to adjusted EBITDA margin expansion. As we drove pricing and cost-out initiatives across each of our geographies in 2024, we also maintained discipline in our spending to generate operating leverage on the volume increase. This resulted in a 70 basis point improvement in adjusted EBITDA margin in line with our long-term target of 50 to 100 basis points per year. In addition to these accomplishments, we also activated our M&A framework in 2024 through our investments in BrainCorp and our acquisition of TCS, Tenet's long-standing distributor serving countries in Central and Eastern Europe, Africa, and the Middle East. These investments will contribute to our long-term target of adding $150 million of net sales growth from our M&A strategy over three years. We continue to evaluate potential M&A targets, prioritizing opportunities that provide tenant with the right strategic value, operational fit, and financial return. Overall, our first full year of our enterprise strategy is yielding positive results, and we are excited to continue to execute on our initiatives in 2025. Given the importance of AMR to our future, I wanted to spend a few minutes discussing the acceleration of AMR. Sales momentum from our legacy AMR products has been very strong. In 2024, we had AMR equipment sales of $75 million. Customers are choosing tenant AMR machines, supporting our belief that we have a winning product portfolio, differentiated service capability, and strong value proposition in the market. We continue to see AMR as one of the fastest-growing floor care segments, and we believe the investments we are making into AMR through new products put us on the path to increase customer adoption and drive long-term growth. I'm excited to announce the newest model in our AMR product portfolio, the X6 Rover. We designed the X4 Rover as a scalable platform, allowing us to bring new products to market more quickly and cost-effectively. Building on the early success of the X4 rover and our accelerated product roadmap enabled by our strategic partnership with BrainCorp, the larger X6 rover targets customers in retail, education, healthcare, manufacturing, logistics, and warehousing, and large public space vertical markets. The X6 rover features an optional autonomous charging station, eliminating the daily need for an operator to remember to charge the machine. The new X6 rover offers superior cleaning performance, improved maneuverability, and nearly three times the cleaning capacity of the X4 rover. We plan to start shipping our first X6 rover units in the second quarter of 2025. The rapid growth of AMR is driven by the global megatrends of labor shortages and rising labor costs. That is why we continue to focus and invest heavily in automating the floor cleaning process to create and capture value by solving one of our customers' most pressing floor cleaning challenges. We are now targeting AMR revenue to exceed $100 million in annual net sales by 2027. Reaching this goal requires outpacing the market growth and solidifies our position as the industry leader in the robotics market disruption. Looking ahead to 2025, we enter the year with significant momentum in the business. Globally, outside of APAC, we are expecting a stable market environment and are forecasting to grow our order demand in the range of 3.5% to 7%, driven by pricing discipline, go-to-market investments, and new product innovation. However, it is important to note that strong order growth will not directly translate into similar organic sales growth due to the $125 million backlog headwind year over year. As a result, we anticipate negative 1 to negative 4% organic sales decline. We also anticipate significant foreign currency headwinds, which Faye will address later. We remain focused on expanding margins in 2025 and are taking decisive actions to achieve this goal. We anticipate gross margin expansion in 2025 through our proven pricing discipline and cost reduction initiatives. We have proactively optimized our organization through strategic restructuring, enhancing operational efficiency, and prudent cost management. To fund our journey as we have streamlined S&A costs, we have intentionally reinvested these savings into strategic growth initiatives. We are committed to prioritizing investments that align with our strategic objectives and directing resources to drive growth while maintaining discipline in our spending to deliver sustained, profitable growth. With that, I will turn the call over to Faye for a discussion of our financials.

Thank you, Dave, and good morning, everyone. In the fourth quarter of 2024, tenant delivered gap net income of $6.6 million compared to $31 million in the prior year period. Full-year 2024 GAAP net income was $83.7 million, compared to $109.5 million in 2023. Focusing on the full-year performance, net income benefited from a 3.5% increase in net sales and an improvement in gross margin. However, results were impacted by higher R&D costs due to increased investment in new product development, which supports our long-term growth initiatives. Operating expenses also rose year-over-year and included costs associated with our ERP modernization project, transaction and integration-related costs, restructuring-related charges, and legal contingency costs. Let me provide a little color on these costs, which we have classified as non-GAAP. Regarding our ERP project, in 2024, we invested approximately $37 million in the design and build phase of this project and successfully completed our 2024 milestone. Of this amount, $14 million was expensed and reflected in the P&L, and $23 million was capitalized. We are well-positioned for the next phase of this critical project and are excited about the operational efficiencies that this project will unlock. In 2025, we will begin a staggered go-live of the ERP implementation and will make the necessary investments to limit business disruptions throughout the year. Additionally, as part of our enterprise strategy to drive efficiency, manage costs, and increase productivity, we executed a global workforce reorganization, which resulted in an $8.2 million restructuring charge in 2024. We expect to save about $10 million annually from these actions beginning in 2025. Our 2024 results also include a legal contingency expense. In November 2024, we received an adverse jury verdict related to an intellectual property dispute. The dispute involves a plaintiff alleging that tenant infringed a patent through its manufacture and sale of the E.C. water option on commercial floor scrubbers sold between 2015 and 2023. A jury ruled against tenant and awarded $9.8 million in damages, plus pre-judgment interest of $4.7 million to the plaintiff. We strongly disagree with this verdict and are exploring all available options, including seeking to overturn the verdict and the resulting judgment through an appeals process. This ruling does not impact our ability to sell any of our products and is not expected to affect our long-term financial performance. When excluding non-GAAP costs, adjusted EPS for the full year 2024 was $6.57 per diluted share, flat compared to the prior year. Looking beyond operating income, interest expense decreased due to lower interest rates. Our average interest rate net of hedging for the full year 2024 was 4.6% compared to 5.3% in the prior year. Our effective tax rate was 20.1% for the full year compared to 11.6% in 2023. The increase in the effective tax rate was primarily driven by the value of certain non-cash discrete items in each period, which will not reoccur in the future years. Absent these items, the effective tax rate for each period would have been approximately 24%. Looking a little more closely at our quarterly results, for the fourth quarter of 2024, consolidated net sales totaled $328.9 million, a 5.6% increase compared to 311 $11.4 million in the fourth quarter of 2023. On a constant currency basis, organic sales increased 6.3%. Approximately 90% of the year-over-year growth was attributed to volume, while the remaining 10% was driven by pricing. Overall, we delivered 7.2% growth in equipment sales and 6.8% growth in service revenue in the fourth quarter of 2024 as compared to the prior year. Turning to the geographic breakdown. Organic sales in the Americas increased 10% compared to the prior year period. The increase in the Americas was driven by volume and price growth in both North America and Latin America. Volume growth was the primary driver, contributing 9% growth compared to 1% growth from price realization. Organic sales increased 4% in MAIA, primarily driven by growth in all product categories, and organic sales decreased 19% in APAC. Adjusted EBITDA for the fourth quarter of 2024 was $47.4 million, up $5.9 million compared to the prior year period. Adjusted EBITDA margin increased 110 basis points to 14.4% of sales. Adjusted gross margin decreased 90 basis points to 41.3 percent in the fourth quarter due to inflationary pressure on materials as well as elevated freight costs. Adjusted S&A expense decreased 3.1 million dollars in the quarter driven primarily by lower variable compensation. As a percent of net sales, adjusted S&A improved 250 basis points to 27.4 percent compared to 29.9% in the prior year period. Moving on to full year results. For the 12 months ended 2024, consolidated net sales were $1,286,7 million, a 3.5% increase compared to the $1,243,6 million dollars in 2023. On a constant currency basis, organic sales increased 3.2 percent. Approximately 80 percent of the year-over-year growth was attributable to pricing, while the remaining 20 percent was driven by volume. We drove 4.2 percent growth in equipment sales and 8.5 percent growth in service revenue in 2024 compared to 2023. Parts and consumable sales were down 1.9 percent year-over-year, in part due to the unfavorable impact of distributor consolidations during the year. Turning to the geographic breakdown, in 2024, net sales in the Americas increased 5.7 percent over the prior year, or a 6.3 percent increase on an organic basis. The increase in net sales was driven by a relatively even split between volume and price. Volume growth across the region was generated primarily from our commercial equipment sales, while volume growth in our industrial equipment was flat. Net sales in EMEA increased 1.3%, primarily due to the acquisition of TCS, which contributed 2.6% of inorganic net sales growth. Organic net sales declined 1.6% due to lower volumes in both equipment sales and parts in consumables, partially offset by price realization in all product categories. EMAIL volumes were impacted by weaker-than-expected market conditions and a smaller contribution from backlog reduction in the current period. Net sales in the Asia-Pacific region decreased 10.3%, or 9.5%, on an organic basis. This was driven primarily by volume declines in China and Australia, partially offset by price growth in Australia. Turning to adjusted EBITDA, adjusted EBITDA for the full year 2024 was $208.8 million, an increase of $15.9 million versus the prior year. The improvement in adjusted EBITDA was primarily due to strong sales growth driven by both price and volume specifically in the Americas. Adjusted EBITDA margin was 16.2% in 2024, a 70 basis point increase over the prior year and benefited from operating leverage driven by sales growth. Full year 2024 adjusted gross margin increased to 42.7%, a 20 basis point improvement compared to 2023. Our margin profile for the full year 2024 was impacted by shifts in our geographic, product, and customer mix. Our pricing and cost-out initiatives more than offset the impact of inflation for the full year of 2024. Adjusted S&A expense of $352.1 million increased $3.3 million compared to 2023, primarily due to higher compensation and benefit expense associated with an increase in headcount. This was partially offset by lower variable compensation in 2024. Adjusted SNA expense as a percentage of net sales improved 60 basis points to 27.4 percent in 2024. The SNA leverage benefit was primarily due to improved operating performance throughout the year. Turning now to capital deployment, net cash provided by operating activities was $89.7 million in 2024 compared to $188.4 million in 2023, and we generated free cash flow of $68.8 million for the year. The decrease in cash provided was the result of working capital usage mainly related to inventories and $37.3 million for our ERP project. Excluding amounts related to the ERP project, we converted 113% of net income to free cash flow in 2024. The company continues to deploy cash flow towards operational capital needs and to return capital to shareholders in line with its capital allocation priorities. In 2024, we reinvested in our core business, investing $20.9 million in capital expenditures, returned capital to our shareholders with dividend payments of $21.4 million, deployed $57.8 million to M&A, and repurchased approximately 200,000 shares of our common stock for $19.6 million. As part of our commitment to deliver value to our shareholders, on February 11th, our Board of Directors authorized a new share repurchase program of 2 million shares of the company's common stock, in addition to the approximately 580,000 shares remaining under our current repurchase program. Tenants' liquidity remains strong with a balance of $99.8 million in cash and cash equivalents as of the end of 2024 and $449.3 million of unused borrowing capacity on the company's revolving credit facility. Our net That leverage was 0.48 times adjusted EBITDA, lower than our stated goal of one to two times. Thanks to our strong cash flow generation and disciplined capital allocation strategy, we maintained our leverage and strengthened our balance sheet, paving the way for strategic acquisitions to be a growth opportunity going forward. Moving to guidance, as Dave mentioned, we plan to build on our 2024 momentum to drive order growth in the three and a half to seven percent range accounting for the impact of the 2024 backlog reduction headwind this translates to a negative one to negative four percent organic sales decline in 2025. in addition to this organic sales decline our net sales guidance also includes a foreign exchange impact of a negative two percent given the recent developments in the FX markets, particularly in Europe, Brazil, and China. We anticipate a return to our historical quarterly sales seasonality patterns beginning in 2025, as our business will no longer be impacted by the elevated backlog levels of 2023 and 2024. This shift is expected to align our sales more closely with order demand. Typically, the first quarter and the third quarter of the year exhibit seasonally lower sales volumes. We will also focus on managing our costs both at the gross margin and operating margin level. At the gross margin level, we anticipate favorable pricing actions and cost-saving initiatives to drive expansion and outpace our inflation assumption of approximately two to three percent. Our guidance does not anticipate any unforeseen incremental costs from tariffs, but we are taking all the necessary steps to minimize our exposure. At the S&A level, the strategic restructuring actions will provide approximately $10 million of savings to be used for strategic investments and to also help offset inflation. We will remain disciplined and prudent in our spending, focusing our investments in the areas that position us for future growth, including R&D spending and increased operating efficiencies. We are also targeting 100% conversion of net income to free cash flow on a full year basis, excluding the impact of the ERP modernization costs, which we anticipate will be approximately $50 million in 2025. We will continue our disciplined approach to allocating capital and maintaining a strong balance sheet. For 2025, tenant provides the following guidance. Net sales of $1,210,000 to $1,250,000, reflecting organic sales decline of negative 1 to negative 4%. GAP EPS of $3.80 to $4.30 per diluted share. Adjusted EPS of $5.70 to $6.20 per diluted share, which excludes ERP costs and amortization expense. Adjusted EBITDA in the range of $196 to $209 million, adjusted EBITDA margin in the range of 16.2% to 16.7%, capital expenditures of approximately $20 million, and an adjusted effective tax rate of approximately 23 to 27%, which excludes an adjustment for amortization expense. With that, I will turn the call back to Dave.

Thank you, Faye. We have a few upcoming events if you wish to learn more about our company and the direction we are heading. In March, we will participate in two virtual investor conferences. The first, on March 19th, is hosted by Sidoti, and the second, on March 20th, is hosted by C.L. King. With that, we will open the call to questions. Operator, please go ahead.

Thank you. And we will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue if you would like to withdraw your question simply press star one a second time if you are called upon to ask your question and are listening via speakerphone on your device please pick up your handset and ensure that your phone is not on mute when asking your question and your first question comes from the line of steve ferrizani with sidoti and company your line is open morning everyone appreciate all the detail on the call covered an awful lot of ground.

So I'll try to try to group my questions here because there's a lot to cover for sure. You talked quite a bit about expectations for 2025 margins. Generally, it's very hard to keep margins flat to even grow them in a declining revenue environment. And we understand completely why the revenue is declining, given the massive backlog conversion last year. That being said, your gross margin sequentially declined the last three quarters but you're saying it could be flat to up in 2025 i'm just trying to figure out how you get there given what have been clearly there's been inflationary pressures there's been you don't have the benefit of price realization from backlog conversion i'm just trying to figure out how you how you're comfortable getting to that Good morning, Steve.

This is Faye. So from a margin perspective, we are taking actions to manage costs both from a COGS perspective as well as from an S&A perspective. When we look at the gross margin line, we're anticipating expansion in line with our long-term targets of roughly 30 basis points. So that's kind of what we're anticipating in 2025. When we look at kind of all of the components of gross margin, we think that cost-out initiatives that have been very successful for us in the past, as well as productivity initiatives that we've implemented, will help offset inflation, more than offset inflation. And we also believe that our pricing, our realization, our pricing realization, which will be net of kind of any mixed impact that we might be anticipating will drive the gross margin expansion. So, those are the components as we're looking at that.

Okay. And then the restructuring that's resulting in $10 million in cost savings, is that all out of SG&A?

Some of it is, most of it is from S&A. There is some component that's coming from COGS as well. And so on a year-over-year basis, S&A is decreasing on an absolute spend. So year-over-year, we're going to be reducing the spend. But we are deleveraging slightly in 2025, just given the top-line performance. So most of the EBITDA expansion will come from our gross margin line.

Excellent. Appreciate that. You may have said it. You covered a lot of numbers. Did you give the 4Q order rates, and after that, if you could talk about trends in the first month and a half of 2025?

The order rates for – go ahead.

Steve, I want to make sure we understand your question. Are you asking about order rates in Q4?

Yes, and then also – and then I asked on top of that, you know, if you can give any kind of color on how the start of 2025 has been.

Yeah, let me dimensionalize 2024 order rates. really proud of what the team accomplished, although the impact was somewhat muted, but the backlog reduction benefit on top of it. But we were providing order rates in 2024 to give you a sense of the momentum we're building in the business. So after a pretty tough start to the year in 2024 and Q1, we delivered almost double-digit order rates coming Q2, Q2, Q4. So in each quarter, Q2, Q3, and Q4, we had about close to double-digit order rates year over year. We didn't specifically call out order rates in Q4, but suffice to say that as a result of executing our enterprise strategy, we've developed significant momentum coming through the second half of the year, and we exit the year with significant momentum in order rates driven by execution of our Elevate strategy. When you look at our guidance, and you know this, Steve, we have to overcome this mathematical headwind of the backlog reduction benefit for 2024, but when you look at the midpoint of our guidance, we're going to drive 5% to 6% order rates in 2025 to deliver on our plan. And so we think the momentum that we generated in the second half of 2024 gives us confidence that we've got the right set of actions in place and we'll continue to execute against our growth strategies to deliver on that 5% to 6% order rate in full year 2025 to deliver on guidance. I think it's worth noting 5% to 6% order rates is above our 3% to 5% long-term commitment for growth. And if you look back at 2024, you know, absent the backlog dynamic, we would have grown at 6% sales. If incoming, you know, without backlog dynamic, we would have been coming to order rates at 6%. I think it's a reason that we have confidence in our 2025 guidance and feel good about the set of actions that we're executing against for growth.

That's great. If I could get one more, Ann, it's just about the share repurchase announcement last week. Typically, you've used the share repurchase just to offset dilution. This was a much bigger number. It's more than 10% of your float. Can you just give us a sense of the strategy here? Is there a time limit on this?

And are you changing the way you think about the share repurchase moving forward? so there's no time limit on the shared purchase and so if we just kind of look over the last few years steve right we've been in the market um every year since you know 2021 and 2021 to 2024 we repurchased roughly 770 000 shares right for roughly 60 million dollars so so over that time period you know we're here 770 000 shares repurchased we continue to repurchase shares in the market. And our primary focus is to offset dilution. But, you know, we can be opportunistic as well. And, you know, the authorization allows us flexibility and gives us runway over the next few years in order to execute against that strategy. Of course, share repurchases are part of our overall capital allocation framework where we're balancing all of our capital priorities, including kind of returning shareholders, returning value to shareholders via dividends, reinvesting in our business, maintaining kind of the right leverage, and also pursuing M&A, right? And so, you know, it's part of our playbook and gives us kind of the right runway.

Your guidance for 2025, is that assuming you're just offsetting dilution, so any kind of strategic purchases could lift that EPS number?

So, you know, when we think about from a cash flow perspective, from a free cash flow perspective, kind of, you know, how to utilize that cash, right, you know, we're contemplating kind of right now, I mean, right now just offset dilution has been kind of our playbook, but we have the opportunity to pull that lever a little bit stronger if needed.

Okay, great. Thanks, everyone.

Thanks, Dave.

And your next question comes from the line of Tom Hayes with CL King. Your line is open.

Good morning, Dave. I appreciate the color and congrats on a nice finish of the year. Thanks, Tom. Hey, Dave, I was just wondering, you know, you provide a lot of color on geographic markets. Maybe just your thoughts on the opportunities for you guys in the Asia-Pacific markets in 25 after kind of a challenging 24?

Yeah, thanks for the question. Happy to comment. It's certainly been a rough ride for us in AIPAC coming through 2024, and I want to pause and acknowledge the significant efforts of the team on the ground in those geographies in that region operating in a really challenging environment, a rapidly changing marketplace in China specifically that has required a significant amount of grit and agility to manage Our planning assumption heading into 2025 is not for recovery in China specifically. We're sort of acknowledging the reality on the ground that it will take governmental action, governmental level action at a country level to right the ship in the China from a macro market perspective. So that's not something the tenant is likely going to be able to influence. And instead, we kind of, you know, acknowledge the operating environment within China and the halo effect of that operating environment throughout Asia Pacific. We noted some of the market uncertainty that we're getting signals from Australia. We've acknowledged that reality and taken steps to pivot our approach. And for us, what that means is focusing on vertical market areas and customers, candidly, where we think there's less competition, less price and margin pressure, and we are advantaged to compete, whether that advantage is in product performance, our service capability, or just, frankly, our reach with our channel. So, you know, we've taken a step back and said, listen, assuming that the market does not afford us the opportunity to – the market doesn't improve, then what are we going to do to win in that environment? So, I'm really proud of the team demonstrating significant agility to take those – the market reality and adjust the course heading into 2025 specifically in APEC. But, again, we're not counting in any recovery underneath our guidance for APEC. So if we get any, that'll be a positive development for us. We're going to pivot a bit and go drive success in the market as it exists.

I appreciate that. Maybe on the fantastic news on the X6 rover rollout, I think you said you could start taking orders in Q2. You went through it a little bit quickly, but maybe you could just kind of go over again the target markets for the product.

Yeah, glad you asked. We continue to be very, very bullish on our AMR opportunities. We kind of dimensionalize the entire AMR space and put X6 in context because I think it's important to always refer to a product in terms of the broader market opportunity. You know, AMR solves for our customers major challenge in the space of labor availability and labor costs. That's a global dynamic that will provide us a tailwind well into the future. Our products provide a solid customer ROI and solve that labor challenge. I'm very proud of the results we've delivered in AMR here in our first five years of availability. Cumulatively, we've shipped over 9,000 units to about 900 customers in 25 countries. And when you look at the sales we've generated in AMR, it's about $250 million in profitable sales cumulatively over that period. So if you just straight line the $250 million over five years at about a $50 million per year run rate. Although, as we've talked about in prior calls, our AMR sales have been anything but linear as we've launched new products and had large wins and have been lapping large wins with customers. But let's use 50 million as kind of our run rate coming through 2023. You know, I think 2024 was really a breakout year for us. We delivered 75 million in sales in our AMR portfolio in 2024. That was a combination of the fantastic reception to our X4 rover, as well as some significant fleet repurchase on our existing legacy product. We continue to scale our T16 AMR industrial products. As you know, we're benefiting from our brain exclusivity agreement, participating in ARR from navigation software subscriptions as well. So when you think about X6, this is really the next evolution in market disruption of robotics. We mentioned in the in the script, that it's really benefiting from the platform design of the X4. We designed the X4 so that we could easily scale it up and launch the next model. So I think it's worth noting that the X6 is coming to market about one year after the X4. That's a very rapid product development for any machine, let alone a robotic machine. And we're excited about having the X6 as kind of a big brother uh to the x4 uh you know here in 2025 in case you missed it the x6 also features a charging dock which allows the robot to charge itself return to its own charging dock and doesn't require human interaction to to charge itself recharge the batteries the x6 you asked about vertical market coverage and kind of use case applications you can think about it as kind of a high-end commercial product and a mid-to-low-end industrial product. So when you think about larger retail store formats, large-scale educational institutions, large hospitals and healthcare institutions, that's a great fit for the X6. On the sort of low-to-mid end of manufacturing, warehousing, and logistics, that's a great fit for the X6. So another reason to be excited about this X6 is we can sell it across a very broad range of our vertical markets, our core vertical markets we serve, and we can activate our entire selling organization to take the X6 to market. I think it's going to be another addition to the game-changing X platform for us at AMR.

Just one new follow-up on that. Would you imagine that there's some customers that would have or order the X4 and the X6, or are they pretty separate?

I think it's possible. Probably won't be the norm. I would envision that more people would have – when you think about the cleaning capacity of an X4, it's around – on kind of one tank of water and one charge, it's around 20,000 square foot, where the X6 is about 75,000 square feet. And so, you know, I doubt that somebody would want to go with a combination fleet of X6 and X4. They're probably going to look at the majority of their cleaning application and size the appropriate piece of equipment for that site. and then buy multiples, either for that site or if they operate multiple sites, you know, across a region or across the country.

Okay, appreciate it. Maybe just one last question for Fay on the ERP charges. I think you said in your prepared remarks about $50 million in charges in 25, I guess two parts. One, is there any view you could provide as far as how those charges progressed during 25 and any split between SQ&A and capital between that $50 million?

So the $50 million is really kind of a very comprehensive and inclusive view of the total project cost, which includes things like internal resources and that support the project, as well as other things like license costs, you know, before go live. And so, the $50 million, I think the, I mean, you know, the calendarization of that throughout the year is going to be, I think, evenly split. There's nothing that we're anticipating going to be large in one month or one quarter versus another. And then from a, yeah, from, and I think we're likely going to see more expense in 2025 versus 2024. Most of, you know, when you're in the design phase, you're able to capitalize more than you are. And then as you go live, you know, certain components of those costs will be more likely to be capital or expense versus capital.

All right. So you can think about it. Flipping compared to, you know, 2024 where we had a more of a 40-60 split and here you're going more or expand the expenses to capital. So you can think about it that way.

Thanks, Tom.

And as a reminder, it is star one if you would like to ask a question. And your next question comes from the line of Aaron Reed with North Coast Research. Your line is open.

Thanks for the opportunity. And great quarter, David. So one thing I want to follow up on Tom's question, and I just want to make sure I have this correct here. So after the deployment of the X6, you're going to be up to five AMR products available, correct? So can you tell me a little about where those are deployed? I know a lot of those are starting in the U.S. You know, how much of those have made their way across the pond? And kind of what does that look like in terms of the footprint for those different AMR products?

Yeah, great question. So I mentioned earlier we've got product deployed in 25 different countries. You know, I think it's important to note our global selling and service organization is fully capable of selling, Demonstrating selling in and deploying AMR across the geographies that we serve, our cumulative units deployed to date, roughly follow our geographic mix as an enterprise. Having said that, we really just launched X4 Rover in Q2 in the U.S. and later in the second half in EMEA, so we haven't really had a full year experience with X4 Rover in any geography. And as 2024 showed us, the customer response to that product has been very positive. So I think that we have an opportunity with DX4 to drive accelerated adoption, not only in mature markets, but in some of our ancillary markets as well, just given the performance and price points, et cetera, on the ground. So we've got a five-product portfolio. You know, our strategy, when we fleshed out our portfolio, we were trying to make sure that we had a robotics offering to serve all of the core vertical markets we serve across the geography that we compete. And we tend to have a fairly consistent set of core vertical markets we serve. And the reason we did that was, A, the labor challenges are consistent across vertical markets, regardless of whether it's education, healthcare, retail, BSC, manufacturing. So the need is real, and we weren't sure where the uptake would be fastest across the vertical market customers. So we wanted to have an offering that we could talk to virtually any customer that was interested about robotics. And that's where the T7, T380, and T16 AMR were born out of, you know, with this desire to have full vertical market coverage across our serve vertical markets. Now X4, launching product on the Generation 3 navigation software platform, removing the seat so we get a smaller form factor, better maneuverability, improved performance. It really gives us a chance to go back in and build out an even more advanced set of products on the X platform. So although it's five models across the range, I really view the X platform as a step change in terms of the improvement in maneuverability, performance, et cetera. So we will continue to, as the X6 demonstrates, we're going to continue to upgrade our capabilities and performance, come to market with exciting new products, and expand our reach as we determine where the uptake is going to be accelerated across the vertical markets and perhaps flexed into future. But for now, you know, the strategy is make sure we have a robotic offering across the entire range of vertical markets we serve and make sure that we're bringing the latest and greatest technology to bear on this robotics disruption for our customers. And today that's represented by that.

Okay, great. That's super helpful. And then kind of piggybacking off of that, I can kind of, and I almost view the, looks like you had a new manufacturing facility come online for the T16 AMR. Is that fully up and running? And can you tell me a little bit more about that?

Can you clarify your question, but I'm not sure what you're referring to with the manufacturing facility.

Yeah, maybe I misread this here. I thought there was a new manufacturing facility in the Netherlands, or is that not correct?

We do have manufacturing in mainland Europe, and we're evaluating where we build our AMR products for each of the regions, but we haven't launched a new T16 manufacturing line in Netherlands.

Okay, then my mistake. Okay, and then just a second follow-up question. This is more on the ERP side, so I'm excited to see the progress on the implementation. Can you provide us an update on the status or any milestones you've achieved so far, And really, how does the timetable look for completing the rollout? And lastly, you know, how can we expect those benefits to be deployed throughout 25 and going forward?

Yeah, let me dimensionalize it, and Fay, if you want to jump in as we go. This ERP consolidation is on a very aggressive timeline as a project. We plan to complete this whole thing in three years. The first year was largely devoted to planning, lining up our resourcing, picking our partners, negotiating contracts. That was 23. 24 was largely focused on designing the system and building the system, so gathering and scoping requirements, and then physically designing the system to perform the way that we want our ERP to on a global basis, harmonizing our processes as we go. So in 2025, we're now moving into data loads and user testing to make sure that as we design and build the system, it's performing as we expected it to before we flip go-live. That's kind of the first half of 2025. Heading into the second half, we'll have a series of staged go-lives by reason around the world. And our plan is to complete those go-lives within calendar year 2025. This is a very aggressive timeline. And so, you know, we're doing that because we want to keep the pressure on ourselves to make progress. You asked about milestones. I think the fact that we find ourselves here in kind of two years of a three-year program, and we are in user testing as we speak, preparing for business readiness and go live as we enter in, you know, move through the first half and enter into the second half of 2025. I think we're in a very enviable position. There's been a lot of heavy lifting to get us to this point. and I'm really proud of what we've accomplished from a milestone perspective. So we're sitting in a really good position. We have a lot of work yet to go to get through the user testing and to make sure that we're prepared for the go-lives in the second half of 2025. Our overarching strategy and our investments reflect our desire to minimize the potential risks of go-live and reduce or eliminate any impact on the customer as we migrate to new ERPs. So we are spending a lot of time and effort to make sure that we feel really solid about the system capability, our performance, and our people's ability to work in the new way and the new system before we switch live. And we're spending time, effort, energy, investment to mitigate the risk to the enterprise and insulate our customer. We'll keep you posted since 2025 is kind of the third year of this program and really a pivotal year as we head into go live. We'll keep you posted on how the testing is going as we approach go-lives by region as we move through the quarters. Faye, anything you would add?

Just the second part of your question. At completion of the project, we anticipate that we'll see a savings roughly between $10 and $15 million, kind of on an annual run rate basis. And so that's going to come from a lot of the efficiencies that will be unlocked by the, you know, by harmonizing kind of our ERP platform into one platform. So run rate, 10 to 15.

Thank you for the caller.

And your final question comes from the line of Iva Purcello with North Coast Research. Your line is open.

Hey, good morning, guys.

Good morning.

So you did talk a little bit about it on the call, but I was just wondering, how much exposure do you have to parts manufactured in China? And then what is your level of concern regarding potential trade wars?

Yeah, thank you for the question. Tariffs are kind of top of mind for all of us, but especially for our operations and supply chain folks, our commercial teams. Specifically related to China and the 10% tariff, I think it's important first to just dimensionalize, like you asked, what's our exposure to China as a source, as a country? You know, China is less than 10% of our COGS. It's around a $50 million exposure for the company. About $20 million of that is direct import by tenant company, where we would have to be exposed to the tariffs directly. And the remainder of it is exposure through our suppliers, where we know that they are sourcing subcomponents on our behalf or adding value to subcomponents from China that we expect to impact us. So that kind of dimensionalizes the size of the exposure. Are we worried about it? You know, absolutely. But we take a decisive action to attempt to mitigate the impact. We have a range of alternatives available to us in terms of offsetting the impact of tariffs. We obviously, we can negotiate to eliminate and reduce tariffs with our existing partner suppliers. We have improved our local for local sourcing. So we now have a network of suppliers that allow us to flex and dual-source components to avoid tariffs. Over the longer term, we can design around products that are tariff-challenged. And, you know, we also always have the alternative of passing on tariffs in price to our customers. Our preference would be at these levels of impact, our preference would be to mitigate it ourselves, You know, using the muscles we've built over the last several years, you know, versus having to go out and reissue a new price change when, candidly, we just put out our 2025 pricing in early January, and we're working to realize that impact.

All right. Yeah, thank you. That was super helpful. Pardon me. And since there are no further questions at this time, I would like to turn the call over to management for closing remarks.

Thank you. I could not be more proud of the results that our high-performing teams have achieved in 2024. and I'm really looking forward to our plans for 2025. I'm confident that we have the investments, initiatives, and talents in place to achieve our strategic objectives and deliver on our financial commitments. I want to thank you all for your participation today and your interest in tenant company. This concludes our earnings call.

Ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.