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].

About three months ago, in early March of this year, one company that I decided to revisit was Tennant Company (NYSE: TNC ), a global leader in the mechanized cleaning industry. At that time, the picture for the companyCrude 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, in-depth cash flow analyses ...

This article has been reviewed according to Science X's editorial process and policies . Editors have highlighted the following attributes while ensuring the content's credibility: Credit: Pixabay/CC0 Public Domain After Tennant figured out how to keep its plants open during the pandemic, it had a second problem to solve. The company's designers aren't all in the same place. Neither are its customers, and sharing pen-and-paper designs isn't easy on a video call.Video game technology gave the company a wa ...

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]

Tennant Company (TNC) Q1 2025 Earnings Call May 01, 2025 10:00 AM ET Company Participants Lorenzo Bassi - VP of Finance & Investor RelationsDavid Huml - President and CEOFay West - Senior VP & CFO Conference Call Participants Steve Ferazani - Senior Equity Analyst - Diversified Industrials & EnergyAaron Reed - Research Analyst Operator Good morning. My name is Greg, and I will be your conference operator today. At this time, I would like to welcome everyone to Tennant Company's First Quarter twenty twenty f ...

Tennant Company (TNC) Q1 2025 Earnings Call May 01, 2025 10:00 AM ET Company Participants Lorenzo Bassi - VP of Finance & Investor RelationsDavid Huml - President and CEOFay West - Senior VP & CFO Conference Call Participants Steve Ferazani - Senior Equity Analyst - Diversified Industrials & EnergyAaron Reed - Research Analyst Operator Good morning. My name is Greg, and I will be your conference operator today. At this time, I would like to welcome everyone to Tennant Company's First Quarter twenty twenty f ...

Financial Data and Key Metrics Changes - In Q1 2025, the company reported net sales of $290 million, reflecting a 6.8% decrease from $311 million in Q1 2024, with an organic decline of 5% [7][25] - GAAP net income for the quarter was $13.1 million, down from $28.4 million in the prior year, impacted by lower net sales and increased costs related to ERP and restructuring [23][24] - Adjusted EBITDA was $41 million, or 14.1% of sales, compared to $54.9 million and 17.7% in the prior year [32] Business Line Data and Key Metrics Changes - Equipment sales declined by 9%, while parts and consumables sales decreased by 4.7%, with service and other categories showing a slight organic growth offset by unfavorable foreign exchange impacts [26][28] - The Americas saw a 6.9% decline in organic net sales, primarily due to lower sales of Industrial Equipment, although order rates increased by 20% [10][29] - EMEA experienced a 2% growth on a constant currency basis, driven by acquisitions and pricing realization, while APAC faced a 7.5% decline due to demand issues in China and Australia [11][12][29] Market Data and Key Metrics Changes - Order rates at the enterprise level increased by 13%, marking the fourth consecutive quarter of near or above double-digit order growth [8] - The company anticipates order growth in the range of 3.5% to 7% for 2025, despite the challenges posed by a $125 million backlog reduction from the previous year [9] Company Strategy and Development Direction - The company is focused on executing its enterprise strategy, which includes pricing discipline, innovative product launches, and targeted market investments [12][15] - The introduction of the Clean360 program aims to enhance AMR adoption by offering a subscription model that reduces upfront costs for customers [18][78] - The company is committed to navigating economic uncertainties and tariff impacts while maintaining strong order growth and market leadership [20][22] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing economic uncertainties due to tariffs and trade wars but expressed confidence in maintaining strong demand and order rates [20][63] - The company is implementing mitigation strategies to offset tariff impacts, including pricing actions and sourcing adjustments [35][57] - Management remains optimistic about achieving 2025 guidance, with net sales projected between $1.21 billion and $1.25 billion [37] Other Important Information - The company reported a gross margin of 41.4%, a decrease of 280 basis points from the prior year, primarily due to shifts in product mix and inflation [30] - Free cash flow for the period was negative $7.4 million, influenced by ERP investments, but the company expects to convert 100% of net income to free cash flow by year-end [33] Q&A Session Summary Question: Concerns about margin guidance and inflationary pressures - Management explained that the margin decline was influenced by a backlog headwind and a mix of strategic customer shipments, but they expect a return to normalized margins as the year progresses [43][46] Question: Insights on the Clean360 program and its potential impact - The Clean360 program was developed in response to customer feedback regarding high upfront costs, aiming to facilitate AMR adoption through a subscription model [76][78] Question: Observations on order influx following price hikes - Management noted that it is too early to assess the impact of announced price hikes on order volumes, as they are also returning to normal seasonal patterns [65][66]

Financial Performance - Net sales for Q1 2025 were $290.0 million[11], reflecting a 5.0% organic decline due to lapping a significant backlog reduction from the prior year[8, 11] - Adjusted EBITDA for Q1 2025 was $41.0 million, with a 14.1% adjusted EBITDA margin[11] - Adjusted diluted EPS for Q1 2025 was $1.12 per share, compared to $1.81 per share in Q1 2024[11] - Gross margin decreased by 280 bps to 41.4%, driven by product and customer mix and ongoing inflation[44] - Net income decreased from $28.4 million in Q1 2024 to $13.1 million in Q1 2025[33] Sales Performance by Region - Americas experienced a 6.9% organic net sales decline[39] - EMEA saw a 0.6% organic net sales increase[39] - APAC experienced a 7.5% organic net sales decline[39] Autonomous Mobile Robots (AMR) - Cumulative AMR sales exceeded $297 million[17] - Over 9,800 AMR units have been delivered to over 950 customers since 2018[18] - The X6 ROVR is launching in Q2 2025, offering 250% cleaning capacity per tank compared to the X4 ROVR[20, 24] Guidance and Outlook - Full-year order rates are expected to grow between 3.5% and 7%[13] - The company maintains its 2025 guidance, with an organic net sales decline of 1.0% to 4.0%[25, 27] - Adjusted EBITDA margin expansion is projected to be 0-50 bps for 2025[27]

Company Performance - Tennant reported quarterly earnings of $1.12 per share, missing the Zacks Consensus Estimate of $1.38 per share, and down from $1.81 per share a year ago, indicating a significant decline in profitability [1] - The earnings surprise for this quarter was -18.84%, contrasting with a previous quarter where the company exceeded expectations by 9.35% [2] - Revenues for the quarter were $290 million, surpassing the Zacks Consensus Estimate by 0.52%, but down from $311 million year-over-year [3] Market Position - Tennant shares have declined approximately 10.6% since the beginning of the year, compared to a decline of -5.5% for the S&P 500 [4] - The current Zacks Rank for Tennant is 3 (Hold), suggesting that the stock is expected to perform in line with the market in the near future [7] Future Outlook - The consensus EPS estimate for the upcoming quarter is $1.67 on revenues of $318.3 million, and for the current fiscal year, it is $5.89 on revenues of $1.24 billion [8] - The outlook for the Manufacturing - General Industrial industry, to which Tennant belongs, is currently in the bottom 40% of over 250 Zacks industries, which may negatively impact stock performance [9]

[First Quarter 2025 Results Overview](index=1&type=section&id=First%20Quarter%202025%20Results%20Overview) This section summarizes Tennant Company's first-quarter 2025 financial performance, including sales, profit, and shareholder returns [Financial Highlights](index=1&type=section&id=Financial%20Highlights) Tennant Company reported first-quarter 2025 net sales of $290.0 million, a 6.8% decrease from the prior year, primarily due to lapping a significant $50 million backlog reduction in Q1 2024. Despite the decline in reported sales and profits, the company highlighted strong underlying business performance with a 13% increase in order rates. The company returned $25.8 million to shareholders and reaffirmed its full-year 2025 guidance, expressing confidence in its ability to manage macroeconomic challenges Q1 2025 Financial Summary | (In millions, except per share data) | 2025 | 2024 | Incr / (Decr) | | :--- | :--- | :--- | :--- | | **Net sales** | $290.0 | $311.0 | (6.8)% | | **Net income** | $13.1 | $28.4 | (53.9)% | | **Diluted EPS** | $0.69 | $1.49 | (53.7)% | | **Adjusted diluted EPS** | $1.12 | $1.81 | (38.1)% | | **Adjusted EBITDA** | $41.0 | $54.9 | (25.3)% | | **Adjusted EBITDA margin %** | 14.1 % | 17.7 % | (360 bps) | - **Net sales decreased 6.8%** (**5.0% organic decline**) **primarily due to volume declines**, as the prior-year period benefited from a **$50 million backlog reduction**[6](index=6&type=chunk) - Despite the **sales decline**, the underlying base business remains **strong**, with **order rates increasing 13%** compared to **Q1 2024**[6](index=6&type=chunk) - The company **returned $25.8 million** to shareholders, consisting of **$5.6 million** in **dividends** and **$20.2 million** in **share repurchases**[6](index=6&type=chunk) - Tennant **reaffirmed its 2025 guidance** and is actively implementing **mitigation strategies**, including **supply-chain actions** and **pricing**, to address known **tariffs**[6](index=6&type=chunk)[7](index=7&type=chunk) [Detailed Financial Performance](index=3&type=section&id=Detailed%20Financial%20Performance) This section details Q1 2025 financial performance, including sales analysis, regional results, operating profitability, and cash flow [Net Sales Analysis](index=3&type=section&id=Net%20Sales%20Analysis) Consolidated net sales for Q1 2025 were $290.0 million, a 6.8% decrease from Q1 2024. The decline was driven by a 4.9% drop in volume and a 2.1% negative impact from foreign currency, resulting in a 5.0% organic sales decline. A minor 0.3% contribution from acquisitions was not enough to offset these factors Components of Consolidated Net Sales Change (Q1 2025 vs. Q1 2024) | Component | Change | | :--- | :--- | | Price | (0.1)% | | Volume | (4.9)% | | **Organic decline** | **(5.0)%** | | Acquisitions | 0.3% | | Foreign currency | (2.1)% | | **Total decline** | **(6.8)%** | - The **5.0% organic sales decline** was **primarily driven by lower volumes** across all geographic regions, especially in North America, which was compared against a period with a **significant backlog-reduction benefit**[8](index=8&type=chunk) [Regional Sales Performance](index=3&type=section&id=Regional%20Sales%20Performance) Organic sales performance varied significantly by region. The Americas saw a 6.9% decline, heavily impacted by lapping a $50 million backlog reduction in North America. EMEA posted a slight 0.6% organic growth due to price realization. APAC experienced the steepest decline at 7.5%, driven by market saturation and pricing pressure in China and slowing demand in Australia Organic Net Sales Growth by Region (Q1 2025) | Region | Organic Net Sales (Decline) Growth | | :--- | :--- | | Americas | (6.9)% | | EMEA | 0.6% | | APAC | (7.5)% | | **Total** | **(5.0)%** | - Americas: The **6.9% organic decline** was **mainly due to lower equipment volume** in North America, which was lapping a **$50 million backlog-reduction benefit** from the prior year[9](index=9&type=chunk) - EMEA: The **0.6% organic growth** was **driven by price realization** in parts, consumables, and service, which **offset volume declines** in equipment. **Growth** in the UK and Spain was partially **offset by declines** in France[10](index=10&type=chunk) - APAC: The **7.5% organic decline** was caused by **volume** and **price decreases** in China and Australia. China faces **market saturation** and **pricing pressure**, while Australia shows signs of **slowing demand** with customers delaying orders[11](index=11&type=chunk) [Operating Results and Profitability](index=4&type=section&id=Operating%20Results%20and%20Profitability) Profitability was significantly impacted by lower sales volumes and an unfavorable product mix compared to the prior year. Gross profit margin fell 280 basis points to 41.4%. Adjusted EBITDA decreased to $41.0 million from $54.9 million, with the margin contracting by 360 basis points to 14.1%. Net income fell to $13.1 million, or $21.2 million on an adjusted basis - **Gross profit margin declined by 280 basis points** to **41.4%**, **driven by unfavorable product/customer mix** and **inflation**. The prior-year quarter had benefited from a **backlog reduction** of higher-margin products[13](index=13&type=chunk) - **Adjusted S&A** as a percentage of **net sales increased** to **28.7%** from **27.6%** in the prior year, **driven by lower operating performance** despite diligent cost management[14](index=14&type=chunk) - **Adjusted EBITDA decreased** to **$41.0 million**, and the **Adjusted EBITDA margin fell 360 basis points** to **14.1%**, **primarily due to sales volume declines** and the **unfavorable gross margin impact**[14](index=14&type=chunk) - **Adjusted net income** was **$21.2 million**, a **decrease of $13.5 million** from **Q1 2024**, **mainly due to lower operating performance**, which was partly **offset by lower income taxes**[14](index=14&type=chunk) [Cash Flow, Liquidity and Capital Allocation](index=4&type=section&id=Cash%20Flow%2C%20Liquidity%20and%20Capital%20Allocation) The company experienced a net cash usage of $0.4 million from operating activities in Q1 2025, a decrease from the prior year, influenced by ERP modernization project investments and lower operating performance. Liquidity remains strong with $79.5 million in cash and $434.3 million in unused borrowing capacity. The company maintained a low net leverage ratio of 0.66x Adjusted EBITDA - **Cash used for operating activities** was **$0.4 million**, **impacted by ERP modernization investments**, **working capital changes**, and **lower operating performance**[15](index=15&type=chunk) - **Liquidity remained strong** with **$79.5 million** in **cash and cash equivalents** and **$434.3 million** of **unused borrowing capacity** on its revolving credit facility[15](index=15&type=chunk) - During the quarter, the company invested **$7.0 million** in **capital expenditures** and **returned $25.8 million** to shareholders via **dividends** and **share repurchases**[16](index=16&type=chunk) - The company's **net leverage ratio** was **0.66 times Adjusted EBITDA**, which is below its **target range of 1.0x to 2.0x**[16](index=16&type=chunk) [2025 Guidance](index=5&type=section&id=2025%20Guidance) This section reaffirms Tennant Company's full-year 2025 financial outlook, including projected sales, adjusted EPS, and Adjusted EBITDA [Reaffirmed 2025 Full-Year Outlook](index=5&type=section&id=Reaffirmed%202025%20Full-Year%20Outlook) Tennant Company reaffirmed its full-year 2025 guidance, signaling confidence in its operational plans despite macroeconomic uncertainties. The company expects net sales to be between $1,210 million and $1,250 million, with an adjusted diluted EPS in the range of $5.70 to $6.20. Adjusted EBITDA is projected to be between $196 million and $209 million 2025 Full-Year Guidance | (In millions, except per share data) | 2025 Guidance Ranges | | :--- | :--- | | Net sales | $1,210 - $1,250 | | 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 | | Adjusted EBITDA margin | 16.2% - 16.7% | | Capital expenditures | ~$20 | | Adjusted effective tax rate | 23% - 27% | [Company Information and Disclosures](index=5&type=section&id=Company%20Information%20and%20Disclosures) This section outlines Tennant Company's profile, forward-looking statements, and the use of non-GAAP financial measures [Company Profile](index=5&type=section&id=Company%20Profile) Founded in 1870 and headquartered in Minnesota, Tennant Company is a global leader in designing and manufacturing cleaning solutions. With sales of $1.29 billion in 2024 and approximately 4,500 employees, the company sells its products in over 100 countries through direct sales and distributor networks - Tennant is a **world leader** in **cleaning solutions**, founded in **1870**, with products including equipment, sustainable cleaning technologies, and supplies[19](index=19&type=chunk) - The company achieved **sales of $1.29 billion** in **2024**, has around **4,500 employees**, and sells products in over **100 countries**[19](index=19&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This report contains forward-looking statements subject to various risks and uncertainties. Key risks highlighted include geopolitical and economic uncertainty, foreign currency exchange rate changes, competition, raw material costs, supply chain issues, cybersecurity risks, and potential complications with its new ERP system - The company identifies several **risks** that could affect future performance, including **geopolitical uncertainty**, **currency fluctuations**, **cost pressures**, **competition**, and **supply chain availability**[20](index=20&type=chunk) - Internal **risks** include the ability to manage **strategic growth**, successfully upgrade **IT systems** (including the new **ERP**), protect against **cybersecurity threats**, and **integrate acquisitions**[20](index=20&type=chunk) [Non-GAAP Financial Measures](index=6&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP financial measures to provide investors with a clearer understanding of its ongoing operating performance by excluding special, non-recurring, or non-operational items. These adjustments include costs related to its ERP modernization, restructuring charges, transaction costs, and amortization expense - Management believes **non-GAAP measures** allow for a more meaningful comparison of **operating performance** across periods by excluding **special items**[24](index=24&type=chunk) - Key **non-GAAP adjustments** include **ERP modernization costs**, **restructuring-related charges**, **transaction-related costs**, and **amortization expense**[25](index=25&type=chunk) [Financial Tables](index=7&type=section&id=Financial%20Tables) This section presents unaudited consolidated financial statements, including income, balance sheets, cash flows, and non-GAAP reconciliations [Consolidated Statements of Income (Unaudited)](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME%20(Unaudited)) This section provides the unaudited consolidated income statement for the three months ended March 31, 2025, compared to the same period in 2024, detailing net sales, costs, expenses, and net income [Geographical Net Sales (Unaudited)](index=7&type=section&id=GEOGRAPHICAL%20NET%20SALES%20(Unaudited)) This table breaks down net sales by geographic region (Americas, EMEA, Asia Pacific) for the three months ended March 31, 2025, and 2024 [Consolidated Balance Sheets (Unaudited)](index=8&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS%20(Unaudited)) This section presents the unaudited consolidated balance sheet as of March 31, 2025, compared to December 31, 2024, showing assets, liabilities, and equity [Consolidated Statements of Cash Flows (Unaudited)](index=9&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS%20(Unaudited)) This table details the cash flows from operating, investing, and financing activities for the three months ended March 31, 2025, and 2024 [Supplemental Non-GAAP Financial Tables](index=10&type=section&id=SUPPLEMENTAL%20NON-GAAP%20FINANCIAL%20TABLES) This section provides detailed reconciliations of reported GAAP financial measures to adjusted non-GAAP measures, including net income, EPS, EBITDA, operating income, and free cash flow, for the three months ended March 31, 2025 and 2024