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In June of this year, I decided to revisit Tennant Company ( TNC ) after seeing the share price of the company underperform compared to my own expectations. You see, in March of this year, I called it a "Buy" candidate. Even though I acknowledged atCrude Value Insights offers you an investing service and community focused on oil and natural gas. We focus on cash flow and the companies that generate it, leading to value and growth prospects with real potential.Subscribers get to use a 50+ stock model account ...

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents Tennant Company's unaudited consolidated financial statements for Q2 2025, including Income, Comprehensive Income, Balance Sheets, Cash Flows, Equity, and detailed Notes [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Q2 2025 net sales decreased to **$318.6 million**, with net income falling to **$20.2 million** and diluted EPS to **$1.08**, reflecting a similar trend for the six-month period Consolidated Statements of Income (Q2 & H1 2025 vs 2024) | (In millions, except per share data) | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :---: | :---: | | | **2025** | **2024** | **2025** | **2024** | | **Net sales** | $318.6 | $331.0 | $608.6 | $642.0 | | **Gross profit** | $134.1 | $142.7 | $254.1 | $280.2 | | **Operating income** | $30.6 | $38.6 | $50.2 | $76.1 | | **Net income** | $20.2 | $27.9 | $33.3 | $56.3 | | **Diluted EPS** | $1.08 | $1.45 | $1.77 | $2.94 | [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased to **$1,241.5 million**, with total liabilities at **$587.8 million** and total equity at **$653.7 million** Consolidated Balance Sheet Highlights | (In millions) | June 30, 2025 | December 31, 2024 | | :--- | :---: | :---: | | **Total current assets** | $574.6 | $576.6 | | **Total assets** | $1,241.5 | $1,190.1 | | **Total current liabilities** | $274.8 | $292.2 | | **Total liabilities** | $587.8 | $568.0 | | **Total equity** | $653.7 | $622.1 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) H1 2025 operating cash flow was **$22.1 million**, investing activities used **$10.6 million**, and financing activities used **$32.8 million**, resulting in a **$19.7 million** net cash decrease Cash Flow Summary (Six Months Ended June 30) | (In millions) | 2025 | 2024 | | :--- | :---: | :---: | | **Net cash provided by operating activities** | $22.1 | $21.5 | | **Net cash used in investing activities** | $(10.6) | $(64.9) | | **Net cash (used in) provided by financing activities** | $(32.8) | $12.4 | | **Net decrease in cash and cash equivalents** | $(19.7) | $(32.5) | | **Cash and cash equivalents at end of period** | $80.1 | $84.6 | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Detailed notes explain accounting policies, financial results, revenue disaggregation, debt, derivatives, and recent segment reporting changes and acquisitions - The company designs, manufactures, and markets cleaning solutions for various environments, reaching customers through direct sales and a distributor network[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk) - Effective December 31, 2024, the company adopted ASU 2023-07, which enhances disclosures about reportable segments, although it had no impact on the consolidated financial statements themselves[33](index=33&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2025 financial results, noting a **3.7%** net sales decrease to **$318.6 million** and a 100 bps gross margin contraction, while managing macroeconomic challenges and maintaining strong liquidity - The company is facing macroeconomic challenges including geopolitical tensions, elevated interest rates, and trade policy uncertainty, particularly U.S. tariffs which could increase input costs[100](index=100&type=chunk)[101](index=101&type=chunk) - Demand trends are mixed globally: China's recovery is slow, uncertainty in Mexico is delaying spending, and Europe faces heightened competition[102](index=102&type=chunk) - To manage challenges, the company is focusing on cost control, operational improvements, proactive pricing, and supply-chain initiatives to mitigate tariff impacts[103](index=103&type=chunk)[106](index=106&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Q2 2025 net sales declined **3.7%** to **$318.6 million** due to lower volumes, gross margin contracted by **100 bps**, and operating income dropped to **$30.6 million** Net Sales Change Components (2025 vs. 2024) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :---: | :---: | | **Price** | 1.8% | 0.9% | | **Volume** | (6.3)% | (5.6)% | | **Organic decline** | (4.5)% | (4.7)% | | **Acquisitions** | —% | 0.2% | | **Foreign currency** | 0.8% | (0.7)% | | **Total** | (3.7)% | (5.2)% | Net Sales by Geographic Area (Q2 2025 vs 2024) | (In millions) | Q2 2025 | Q2 2024 | % Change | | :--- | :---: | :---: | :---: | | **Americas** | $213.5 | $227.8 | (6.3)% | | **EMEA** | $84.7 | $81.5 | 3.9% | | **Asia Pacific** | $20.4 | $21.7 | (6.0)% | | **Total** | $318.6 | $331.0 | (3.7)% | - The gross profit margin decrease was primarily attributed to a shift in product/customer mix, inflation, and lower productivity, partially offset by price realization. Prior-year periods benefited from a significant reduction in backlog of higher-margin products[112](index=112&type=chunk) - S&A expense increased in Q2 2025 due to strategic investments (including ERP costs) and a bad debt charge, partly offset by lower variable compensation[113](index=113&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, cash was **$80.1 million**, operating cash flow was **$22.1 million**, and financing activities used **$32.8 million**, with **$434.3 million** unused borrowing capacity - Cash and cash equivalents decreased to **$80.1 million** at June 30, 2025, from **$99.8 million** at December 31, 2024[123](index=123&type=chunk) - Net cash from operating activities for H1 2025 was **$22.1 million**, slightly up from **$21.5 million** in H1 2024, despite a **$28.4 million** spend on an ERP project[125](index=125&type=chunk) - Net cash used in financing activities was **$32.8 million** in H1 2025, a significant shift from **$12.4 million** provided in H1 2024, driven by increased common stock repurchases[127](index=127&type=chunk) - The company had approximately **$434.3 million** of unused borrowing capacity on its revolving facility as of June 30, 2025[124](index=124&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in the company's market risk have occurred since December 31, 2024 - There have been no material changes in the company's market risk since December 31, 2024[136](index=136&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls over financial reporting - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective[137](index=137&type=chunk) - There were no changes in internal controls over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[138](index=138&type=chunk) [PART II - OTHER INFORMATION](index=37&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) No material developments in legal proceedings were reported during the quarter - There have been no material developments in any legal proceedings that require reporting in this Form 10-Q[139](index=139&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors have occurred since the 2024 Form 10-K filing - No material changes to the company's risk factors have occurred since the filing of the 2024 Form 10-K[140](index=140&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **183,749** shares at an average of **$73.85** per share in Q2 2025, with **2,207,371** shares remaining authorized for repurchase Share Repurchases for the Quarter Ended June 30, 2025 | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Purchased as Part of Publicly Announced Programs | | :--- | :---: | :---: | :---: | | April 1-30, 2025 | 58,263 | $72.17 | 58,169 | | May 1-31, 2025 | 66,413 | $73.78 | 62,582 | | June 1-30, 2025 | 59,073 | $75.57 | 59,073 | | **Total** | **183,749** | **$73.85** | **179,824** | - On February 11, 2025, the Board of Directors authorized the repurchase of an additional **2,000,000** shares of common stock[141](index=141&type=chunk) [Item 5. Other Information](index=37&type=section&id=Item%205.%20Other%20Information) No director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement during Q2 2025 - No director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[143](index=143&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and iXBRL financial data - The report includes CEO and CFO certifications (Rule 13a-14(a)/15d-14(a) and Section 1350) and financial statements in iXBRL format as exhibits[144](index=144&type=chunk)

Financial Data and Key Metrics Changes - The company achieved net sales of $319 million, representing an organic sales decline of 4.5% compared to the prior year [7][19] - GAAP net income for the quarter was $20.2 million, down from $27.9 million in the prior year [17] - Adjusted EPS was $1.49 per diluted share, compared to $1.83 per diluted share in the prior year [18] - Adjusted EBITDA was $51 million, with an adjusted EBITDA margin of 16%, down from 17.7% in the prior year [24] Performance by Business Line - Overall equipment net sales decreased by 6.5%, primarily due to a decline in industrial equipment sales [20] - Service sales increased by 1.4%, and parts and consumables grew by 1% compared to the prior year [20] - The decline in net sales was primarily driven by lower sales of industrial equipment, while commercial equipment saw volume growth [21] Performance by Market - In The Americas, orders increased by 9%, with North America experiencing double-digit order growth [9] - Organic sales in EMEA declined by 1.4%, with significant declines in Germany and the Middle East, partially offset by strong performance in the U.K. and Iberia [10][21] - In APAC, organic sales declined by 5%, primarily due to lower volumes in China, although Australia showed resilient demand [11][22] Company Strategy and Industry Competition - The company is focused on driving performance through strategic pricing initiatives and new product launches, including the X4 Rover and the Z50 Citadel Outdoor Sweeper [12][14] - The outdoor sweeping market is a new segment for the company, expanding its total addressable market [14][56] - The company is actively pursuing M&A opportunities to complement its long-term objectives while maintaining a strong balance sheet [15][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategic plans for the second half of 2025, despite ongoing macroeconomic uncertainties and tariff-related pressures [16][29] - The company anticipates a full-year impact of approximately $20 million from tariffs, representing around 3% of total cost of goods sold [28] - Management reaffirmed full-year guidance, expecting net sales between $1.21 billion and $1.25 billion, reflecting an organic sales decline of 1% to 4% [29] Other Important Information - The company generated free cash flow of $18.7 million in the second quarter, converting 137.2% of net income into free cash flow [25] - The liquidity position remains strong, with cash and cash equivalents of $80.1 million and approximately $434 million of unused borrowing capacity [26] Q&A Session Summary Question: Concerns about global economic growth and potential slowdown - Management acknowledged economic uncertainty but noted that customer demand has not shown signs of paralysis, with a robust opportunity pipeline [33][34] Question: Margin lift expectations - Management indicated that margin growth is expected to come from gross margin expansion, increased volume absorption, and cost management initiatives [48][49] Question: Backlog conversion in the second half - Management confirmed that backlog conversion will be lower in the second half, with approximately $50 million remaining to lap [50] Question: Outdoor sweeper market entry - Management explained that the decision to enter the outdoor sweeping market was based on market evaluation and the potential for profitable competition [56] Question: AMR sales and leasing program - Management reported that AMR sales are up nearly 20% year-to-date and highlighted the positive reception of the Clean 360 leasing program [66][69] Question: Pricing strategy and semiconductor tariff considerations - Management stated that they are open to additional price increases if necessary to offset tariff impacts, while monitoring the potential semiconductor tariff situation [79][80]

Certain statements contained in this document are considered "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act. These statements do not relate to strictly historical or current facts and provide current expectations or forecasts of future events. Any such expectations or forecasts of future events are subject to a variety of factors. These include factors that affect all businesses operating in a global market as well as matters specific to us and the markets th ...

```markdown [Financial & Operational Highlights](index=1&type=section&id=Financial%20%26%20Operational%20Highlights) Q2 2025 net sales of $318.6 million declined 3.7% due to prior-year backlog, offset by 4.0% underlying order growth Q2 & H1 2025 Key Financial Metrics | (In millions, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $318.6 | $331.0 | (3.7)% | $608.6 | $642.0 | (5.2)% | | **Net income** | $20.2 | $27.9 | (27.6)% | $33.3 | $56.3 | (40.9)% | | **Diluted EPS** | $1.08 | $1.45 | (25.5)% | $1.77 | $2.94 | (39.8)% | | **Adjusted diluted EPS** | $1.49 | $1.83 | (18.6)% | $2.60 | $3.65 | (28.8)% | | **Adjusted EBITDA** | $51.0 | $58.6 | (13.0)% | $92.0 | $113.5 | (18.9)% | | **Adjusted EBITDA margin %** | 16.0% | 17.7% | (170 bps) | 15.1% | 17.7% | (260 bps) | - The organic sales decline of **4.5%** was driven by lapping a **$26 million** backlog-reduction benefit from the prior-year period, but underlying order demand grew **4.0%**, marking the **fifth consecutive quarter** of order growth at or above long-term targets[5](index=5&type=chunk)[6](index=6&type=chunk) - The company returned a total of **$18.8 million** to shareholders in Q2 2025, consisting of **$5.4 million** in dividends and **$13.4 million** in share repurchases[5](index=5&type=chunk)[13](index=13&type=chunk) - Tennant announced its entry into the outdoor sweeping market with the launch of the Z50 Citadel™ Outdoor Sweeper, aiming to unlock new growth opportunities[5](index=5&type=chunk) [Detailed Financial Performance](index=3&type=section&id=Detailed%20Financial%20Performance) Q2 2025 organic sales declined 4.5%, gross margin contracted 100 bps to 42.1%, impacting Adjusted EBITDA [Net Sales Analysis](index=3&type=section&id=Net%20Sales%20Analysis) Q2 2025 net sales decreased 3.7% to $318.6 million, with a 4.5% organic decline, notably in Americas Consolidated Net Sales Change Components (Q2 2025 vs. Q2 2024) | Component | Three Months Ended June 30, 2025 vs. 2024 | | :--- | :--- | | Price | 1.8% | | Volume | (6.3)% | | **Organic decline** | **(4.5)%** | | Acquisitions | —% | | Foreign currency | 0.8% | | **Total** | **(3.7)%** | Organic Sales Decline by Region (Q2 2025) | Region | Organic Sales Decline | | :--- | :--- | | Americas | (5.5)% | | EMEA | (1.4)% | | APAC | (5.0)% | | **Total** | **(4.5)%** | - The **5.5%** organic sales decrease in the Americas was primarily driven by volume declines in North America, which was lapping a **$26 million** backlog-reduction benefit from the prior-year period[9](index=9&type=chunk) [Operating Results](index=4&type=section&id=Operating%20Results) Q2 2025 gross margin declined 100 bps to 42.1%, impacting Adjusted EBITDA of $51.0 million - The gross profit margin of **42.1%** declined by **100 basis points** year-over-year, driven by product/customer mix, inflation, and lower productivity[10](index=10&type=chunk) - S&A expense increased by **$0.8 million** to **$93.7 million**, primarily due to strategic investments like the ERP project and a bad debt charge, partially offset by lower variable compensation[11](index=11&type=chunk) - Adjusted EBITDA decreased to **$51.0 million** from **$58.6 million** in Q2 2024, with the margin declining **170 basis points** to **16.0%**, mainly due to volume declines and a lower gross margin rate[11](index=11&type=chunk) [Cash Flow and Capital Allocation](index=4&type=section&id=Cash%20Flow%20and%20Capital%20Allocation) Q2 2025 operating cash flow was $22.5 million, with strong liquidity and $18.8 million returned to shareholders - Generated **$22.5 million** of cash flow from operating activities during Q2 2025, a **$3.9 million** increase compared to the prior-year period[12](index=12&type=chunk) - Liquidity remained strong with **$80.1 million** in cash and cash equivalents and **$434.3 million** of unused borrowing capacity on its revolving credit facility[12](index=12&type=chunk) - In Q2 2025, the company invested **$3.8 million** in capital expenditures and returned **$18.8 million** to shareholders through dividends and share repurchases[13](index=13&type=chunk) - The company maintained a strong balance sheet with a net leverage ratio of **0.66 times** Adjusted EBITDA[13](index=13&type=chunk) [2025 Full-Year Guidance](index=5&type=section&id=2025%20Full-Year%20Guidance) Tennant reaffirmed 2025 full-year guidance for net sales ($1,210-$1,250 million) and Adjusted EBITDA ($196-$209 million) 2025 Full-Year Guidance | Metric | 2025 Guidance Ranges | | :--- | :--- | | Net sales | $1,210 - $1,250 million | | Organic net sales decline | (1.0)% - (4.0)% | | Diluted net income per share | $3.80 - $4.30 | | Adjusted diluted net income per share | $5.70 - $6.20 | | Adjusted EBITDA | $196 - $209 million | | Adjusted EBITDA margin | 16.2% - 16.7% | | Capital expenditures | ~$20 million | | Adjusted effective tax rate | 23% - 27% | [Financial Statements (Unaudited)](index=7&type=section&id=Financial%20Statements%20(Unaudited)) This section presents unaudited consolidated financial statements for Q2 2025, detailing financial position and performance [Consolidated Statements of Income](index=7&type=section&id=Consolidated%20Statements%20of%20Income) The Statements of Income detail revenues and expenses, showing Q2 2025 net income of $20.2 million Q2 2025 Statement of Income Highlights (in millions) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net sales | $318.6 | $331.0 | | Gross profit | $134.1 | $142.7 | | Operating income | $30.6 | $38.6 | | Net income | $20.2 | $27.9 | [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) The Balance Sheets as of June 30, 2025, show total assets of $1,241.5 million and total equity of $653.7 million Balance Sheet Highlights (in millions) | Line Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $80.1 | $99.8 | | Total current assets | $574.6 | $576.6 | | Total assets | $1,241.5 | $1,190.1 | | Total liabilities | $587.8 | $568.0 | | Total equity | $653.7 | $622.1 | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For H1 2025, operating cash flow was $22.1 million, resulting in a $19.7 million net cash decrease Six Months Ended June 30, 2025 Cash Flow Summary (in millions) | Activity | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $22.1 | $21.5 | | Net cash used in investing activities | $(10.6) | $(64.9) | | Net cash (used in) provided by financing activities | $(32.8) | $12.4 | | **Net decrease in cash and cash equivalents** | **$(19.7)** | **$(32.5)** | [Non-GAAP Reconciliations](index=10&type=section&id=Non-GAAP%20Reconciliations) This section reconciles GAAP to non-GAAP financial measures for clearer operational performance insights - Management believes non-GAAP measures provide useful information by permitting a more meaningful comparison of operating performance across periods, excluding special items of a nonrecurring or non-operational nature[21](index=21&type=chunk) - Adjustments to GAAP figures include ERP modernization costs, restructuring-related charges, transaction-related costs, and amortization expense[22](index=22&type=chunk) ```

Tennant Company (TNC) Conference Summary Company Overview - Tennant Company is a global leader in the mechanized cleaning equipment industry, with a total addressable market (TAM) of approximately $9 billion and a market share of about 14% globally [4][8]. - The company has a strong presence in various regions: 25% market share in the Americas (approximately $3.5 billion market), 10% in EMEA, and 5% in the Asia Pacific region (approximately $1 billion market) [9][10]. Growth Strategy - Tennant Company aims for long-term organic revenue growth of 3% to 5% CAGR, supported by global megatrends such as automation, labor challenges, and modernization of cleaning practices [5][14]. - The company is committed to expanding its service aftermarket, which is a growing and profitable segment [6]. - Tennant is focusing on innovation, particularly in robotics and automation, to enhance productivity and address labor shortages in the cleaning industry [7][11]. Market Trends and Challenges - Labor availability and cost have become significant challenges post-pandemic, with turnover rates in cleaning services reaching up to 70% [11][12]. - There is a shift towards mechanized cleaning solutions in emerging markets as living standards rise, increasing demand for efficient cleaning technologies [13]. - The need for electrified products is growing, with advancements in battery technology allowing for the replacement of internal combustion engines in cleaning equipment [14]. Financial Performance and Projections - The company has a solid balance sheet and is focused on maintaining margins while expanding EBITDA by 50 to 100 basis points annually [15][19]. - Tennant has a target of adding $150 million in revenue through M&A over the next three years [18]. - The AMR (Autonomous Mobile Robots) segment has generated over $250 million in cumulative revenue, with a goal to exceed $100 million by 2027 [36][37]. Product Innovation - Tennant is investing heavily in robotics, with recent launches including the X4 and X6 Rover models, designed for high maneuverability and efficiency [21][25]. - The company has developed a "Clean 360" program, offering a subscription model for robotics that includes maintenance and software, making it easier for customers to adopt [41][43]. - The AMR products are positioned to provide significant cost savings for customers by reducing labor needs, with a payback period of less than three years [25]. Capital Allocation Strategy - Tennant prioritizes funding its business, paying dividends, and pursuing M&A opportunities, with a disciplined approach to capital allocation [56][59]. - The company has authorized a share buyback program of 2 million shares, representing over 10% of its float, to enhance shareholder value [55][60]. Conclusion - Tennant Company is well-positioned for future growth, leveraging its strong market position, innovative product offerings, and disciplined financial management to capitalize on emerging trends in the cleaning industry [63][64].

Company Overview - Tennant Company (NYSE: TNC) is recognized as a global leader in the mechanized cleaning industry [1]. Industry Insights - The focus of Crude Value Insights is on cash flow and companies that generate it, particularly in the oil and natural gas sector, highlighting value and growth prospects [1].

Company Overview - Tennant, founded in 1870, has evolved from a woodworking business to a leading manufacturer of commercial and industrial floor cleaning equipment, now headquartered in Eden Prairie, Minnesota [4] - In 2024, Tennant reported sales of $1.3 billion, a 3.5% increase, and a net income of $83.7 million [4] Research and Development - Over the past five years, Tennant has invested an average of 3% of its total revenue in research and development, with a record $43.8 million spent in 2024, representing 3.5% of total revenue [5] - The company aims to maintain a higher level of R&D spending as it is central to its growth strategy, targeting annual revenue growth of 3% to 5% [6][8] Product Innovation - Tennant has been a leader in the floor maintenance industry since 2018, launching its first robotic floor cleaner, the T7AMR Scrubber, and subsequently introducing the X4 ROVR and the latest X6 ROVR [3][9] - The X6 ROVR, designed for larger retail environments, was developed in just one year, showcasing the company's ability to accelerate product development through new digital design tools [10][12] Technological Advancements - The adoption of virtual reality headsets and electronic whiteboards has transformed Tennant's design process, allowing for faster prototyping and collaboration among geographically dispersed teams [2][15] - The use of these technologies has enabled the design team to create virtual prototypes quickly, enhancing communication and speeding up the design process [15][14] Market Strategy - Tennant's strategy focuses on automating cleaning processes to address labor shortages, with the X6 ROVR and XC1 docking station designed to improve operational efficiency [16][17] - The X6 ROVR features automatic navigation to its charging station, ensuring consistent availability and performance, which is crucial for maintaining cleaning operations [18][19]

Financial Performance - Consolidated net sales for Q1 2025 totaled $290.0 million, a 6.8% decrease from $311.0 million in Q1 2024[99] - Organic sales declined by 5.0%, primarily due to volume declines across all geographies, especially in North America[99] - Gross profit margin for Q1 2025 was 41.4%, down 280 basis points from 44.2% in Q1 2024, attributed to product mix shifts and inflation[101] - Net income for Q1 2025 was $13.1 million, a decrease from $28.4 million in Q1 2024, with diluted net income per share dropping to $0.69 from $1.49[98] Expenses - Selling and administrative expenses increased to $90.7 million, representing 31.3% of net sales, up from 28.9% in Q1 2024[102] - Research and development expenses were $9.7 million, or 3.3% of net sales, reflecting continued investment in innovative products[104] Cash Flow and Liquidity - Cash and cash equivalents decreased to $79.5 million as of March 31, 2025, down from $99.8 million at the end of 2024[109] - Net cash used in operating activities was $0.4 million in Q1 2025, compared to $2.9 million provided in Q1 2024, driven by ERP modernization costs[111] Tax and Debt - The effective tax rate increased to 23.8% in Q1 2025 from 19.1% in Q1 2024, primarily due to reduced discrete tax benefits[107] - The debt-to-capital ratio was 25.5% as of March 31, 2025, compared to 24.3% at the end of 2024[109] Accounting Standards - The FASB issued ASU 2023-09, effective for fiscal years beginning after December 15, 2024, aimed at enhancing income tax disclosures, particularly rate reconciliation and income taxes paid information[116] - ASU 2024-03 requires disaggregation of certain income statement expense captions, effective for annual periods beginning after December 15, 2026, with prospective or retrospective application options[117] - No new accounting pronouncements are expected to materially impact the company's results of operations or financial position[118] Risks and Uncertainties - The company faces various risks including geopolitical and economic uncertainty, competition, and the ability to develop innovative products and services[120] - The company cautions that actual results may differ materially from forward-looking statements due to known and unknown risks[121] - There have been no material changes in market risk since December 31, 2024[123]