Core Viewpoint - Tennant Company is being upgraded to a soft 'buy' after a significant decline in stock performance, despite previous downgrades due to earlier price surges [1] Company Overview - Tennant Company specializes in producing and selling manual and mechanized cleaning equipment, aftermarket parts, and related consumables [3] - The total addressable market for Tennant is approximately $8.6 billion, with a 14% overall market share [3] - In the Americas, Tennant holds a 25% market share in a $3.4 billion market, while it has about 10% in the EMEA region and 5% in the Asia Pacific region [3] Financial Performance - For the first half of 2024, Tennant reported revenue of $642 million, a 2.3% increase from $627.5 million in the previous year [5] - Organic revenue growth was 1.8%, aided by a 3.6% increase from price hikes and a 0.6% contribution from acquisitions [5][6] - Net income rose slightly from $55.6 million to $56.3 million, with gross profit margin improving from 42.2% to 43.6% [7] Profitability Metrics - Adjusted net profits increased from $61.8 million to $69.9 million, while EBITDA grew from $105.5 million to $113.5 million [9] - Operating cash flow decreased from $70.2 million to $21.5 million, but adjusted for working capital changes, it improved from $80.7 million to $88.6 million [9] Guidance and Future Outlook - Management raised revenue guidance for the year to between $1.28 billion and $1.305 billion, with expected organic net sales growth of 2.5% to 4.5% [10] - Adjusted earnings per share are now forecasted to be between $6.15 and $6.55, with EBITDA guidance increased to between $205 million and $215 million [10] Valuation - Tennant's shares are considered to be between slightly undervalued and fairly valued based on forward pricing for 2024 [11] - Compared to similar firms, Tennant is relatively attractive, with a price-to-earnings ratio of 14.7, which is competitive within its peer group [12] Conclusion - Overall, Tennant Company shows positive trends in revenue, profits, and cash flows, justifying the upgrade from a 'hold' to a 'buy' after recent stock performance declines [13]

Market Overview - The global commercial scrubbers and sweepers market is projected to grow at a CAGR of 8.15% from 2023 to 2029, with an estimated market value of $5.47 billion in 2023 and a forecasted value of $8.76 billion by 2029 [1][14]. Market Trends & Drivers - Key growth enablers include the rising demand for green cleaning technologies, availability of robotic cleaning equipment, and a growing inclination towards sustainability [2]. - The construction industry is experiencing consistent growth, which is contributing to the demand for cleaning equipment [2]. - There is an increasing demand for cleanliness in the hospitality industry and stringent regulations to maintain cleanliness and employee safety [2]. Segmentation Insights By Product Type - In 2023, scrubbers held over 50% of the market share, making them the most significant segment in the commercial scrubbers and sweepers market [3]. - Walk-behind scrubbers are essential for various commercial and industrial environments, including healthcare and manufacturing [4]. By Sweepers - The walk-behind segment also holds the largest share in the sweepers category, known for their efficiency and ease of operation [5]. By Other Products - Combination machines, which are used for heavy-duty cleaning, hold the largest share in the other products segment [6]. By Power Source - The battery-powered segment accounted for the largest market share in 2023, growing at a CAGR of around 8% due to the demand for reduced emissions and greater maneuverability [7]. By Technology - The water segment dominated the market in 2023, driven by environmental regulations and cost-effectiveness [8]. By End-Users - Contract cleaning is the largest segment, comprising approximately 14% of the market share, driven by the trend of outsourcing cleaning services [9]. By Distribution Channel - Offline distribution channels accounted for the largest market share in 2023, supported by consumer trust and broader reach [10]. Geographical Analysis - North America held over 30% of the global market share in 2023, driven by economic growth and stringent regulations [11]. - The APAC region is the fastest-growing market, with a CAGR of over 9%, supported by industrial growth and increased hygiene awareness [12]. Vendor Landscape - Key players in the market include Nilfisk, Tennant, and Alfred Karcher, among others [13].

Financial Performance - Second quarter net sales reached $331 million, with organic net sales growth of 2.7% driven by price increases across all regions[3] - Adjusted EBITDA for the second quarter increased by 1.7% to a record $58.6 million, resulting in an Adjusted EBITDA Margin of 17.7%[3] - Second quarter net income was $27.9 million, compared to $31.3 million in the prior year[10] - Adjusted EPS for the second quarter was $1.83 per diluted share, a decrease of (1.6)% compared to Q2 2023[3] Guidance and Outlook - The company is raising its full-year 2024 guidance for net sales to $1.28 billion - $1.305 billion and Adjusted EBITDA to $205 million - $215 million[3] - Organic net sales growth for the full year is now expected to be between 2.5% and 4.5%[16] - Adjusted EBITDA margin for the full year is projected to be between 16.0% and 16.5%[16] Regional Performance - Americas region experienced net sales growth of 5.5%[12] - EMEA region saw a slight decrease in net sales of -0.3%[12] - APAC region experienced a decrease in net sales of -11.9%[12] Capital Allocation - Total debt increased to $213 million in Q2 2024 from $201 million at the end of 2023[14] - Net leverage ratio increased to 0.61x in Q2 2024 from 0.43x at the end of 2023[14] - Revolver availability remains strong at $321.8 million[14]

Core Insights - Tennant (TNC) reported quarterly earnings of $1.83 per share, exceeding the Zacks Consensus Estimate of $1.78 per share, but down from $1.86 per share a year ago [1] - The company achieved a revenue of $331 million for the quarter ended June 2024, surpassing the Zacks Consensus Estimate by 1.44% and up from $321.7 million year-over-year [3] Earnings Performance - The earnings surprise for the quarter was 2.81%, following a previous quarter where the company had a surprise of 24.83% by reporting $1.81 per share against an expectation of $1.45 [2] - Over the last four quarters, Tennant has exceeded consensus EPS estimates three times [2] Revenue Insights - The company has topped consensus revenue estimates two times over the last four quarters [3] - Current consensus EPS estimate for the upcoming quarter is $1.53 on revenues of $313.1 million, and for the current fiscal year, it is $6.56 on revenues of $1.27 billion [8] Market Performance - Tennant shares have increased by approximately 3.6% since the beginning of the year, compared to a 9% gain in the S&P 500 [4] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [7] Industry Context - Tennant operates within the Zacks Manufacturing - General Industrial industry, which is currently ranked in the bottom 33% of over 250 Zacks industries [9] - Research indicates that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than a factor of 2 to 1 [9]

Core Viewpoint - The recent upgrade of Tennant to a Zacks Rank 1 (Strong Buy) indicates a positive outlook on its earnings, which is expected to influence its stock price favorably [2][5][14] Earnings Estimates and Stock Price Movement - The Zacks rating system is based on changes in earnings estimates, which have shown a strong correlation with near-term stock price movements [3][9] - Institutional investors often adjust their valuations based on earnings estimates, leading to significant stock price changes when estimates are revised [3] Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [4] - Tennant's upgrade to Zacks Rank 1 places it in the top 5% of Zacks-covered stocks, indicating strong potential for price appreciation [14] Recent Earnings Estimates for Tennant - For the fiscal year ending December 2024, Tennant is expected to earn $6.56 per share, reflecting a slight decrease of -0.2% from the previous year [10] - Over the past three months, the Zacks Consensus Estimate for Tennant has increased by 1.9%, indicating a positive trend in earnings expectations [12]

Core Viewpoint - The stock price of Tennant (TNC) has been on a bearish trend, losing 11.3% over the past four weeks, but the formation of a hammer chart pattern suggests a potential trend reversal as buying interest may be emerging [1][2]. Technical Analysis - The hammer chart pattern indicates a possible bottoming out, with reduced selling pressure, suggesting that bulls may be gaining control [2][4]. - A hammer pattern forms when there is a small candle body with a long lower wick, indicating that despite a downtrend, buying interest has emerged to push the stock price up towards the opening price [3][4]. - This pattern can occur across various timeframes and is utilized by both short-term and long-term investors [4]. Fundamental Analysis - There has been a positive trend in earnings estimate revisions for TNC, with a 1.9% increase in the consensus EPS estimate over the last 30 days, indicating that analysts expect better earnings than previously predicted [6][7]. - TNC currently holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks, which typically outperform the market [8]. - The Zacks Rank serves as a timing indicator, suggesting that TNC's prospects are beginning to improve, reinforcing the bullish case for the stock [8].

Group 1 - Tennant (TNC) has experienced significant selling pressure, resulting in an 11.5% decline in stock price over the past four weeks, but it is now considered oversold with potential for better earnings than previously predicted [1] - The Relative Strength Index (RSI) is a key technical indicator used to determine if a stock is oversold, with a reading below 30 typically indicating oversold conditions [2][3] - TNC's current RSI reading is 22.54, suggesting that the heavy selling may be exhausting itself and a trend reversal could occur soon [5] Group 2 - Analysts have raised earnings estimates for TNC, with a 1.9% increase in the consensus EPS estimate over the last 30 days, indicating potential price appreciation in the near term [6] - TNC holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises, further supporting the potential for a turnaround [7]

Earnings Release Call First Quarter 2024 Results May 3, 2024 SAFE HARBOR STATEMENT 2 In millions of USD, except adjusted diluted EPS Executive Summary First quarter gross margin increased 320 bps to 44.2% Reaffirm 2024 full-year guidance *Non-GAAP Measures: refer to the Appendix of this presentation for additional information and reconciliation 3 GROWTH Channel expansion and new goto-market opportunities M&A Strategy Modernize existing ERP systems and create a scalable digital infrastructure PEOPLE Above-ma ...

Financial Data and Key Metrics Changes - For Q1 2024, consolidated net sales totaled $311 million, a 1.7% increase compared to $305.8 million in Q1 2023 [15] - Adjusted EBITDA for Q1 2024 was $54.9 million, or 17.7% of sales, up from $47.9 million, or 15.7% of sales in Q1 2023 [16] - Adjusted EPS for Q1 2024 increased 24.8% to $1.81 per diluted share compared to the prior year period [14] - Gross margin increased to 44.2% in Q1 2024, a 320 basis point improvement from the prior year [16] Business Line Data and Key Metrics Changes - Equipment net sales grew 1.8% and service grew 10% in Q1 2024 compared to the prior year [38] - Parts and consumables declined 3.8%, primarily driven by volume decreases in North America and EMEA [56] - Organic sales in the Americas increased 5.1%, driven by price realization and favorable product mix [56] - Organic sales declined 9.2% in EMEA due to volume declines, partially offset by price realization [39] Market Data and Key Metrics Changes - In EMEA, the company faced a challenging first quarter with declining macroeconomic conditions [28] - APAC performance was impacted by customer order timing, but demand is expected to remain strong [29] - The Americas region showed strong order rates, particularly in industrial machines [5] Company Strategy and Development Direction - The company is focused on three pillars of its enterprise strategy: growth, performance, and people [7] - New product innovations, such as the X4 ROVR autonomous floor cleaning machine, are central to driving revenue growth [8] - The acquisition of TCS is expected to enhance market share and strengthen the company's position in high-growth regions [11][33] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's performance and reaffirmed full-year guidance despite varying results by geography [4][45] - The company anticipates stronger results in EMEA in the latter half of the year through new product launches [6] - Management highlighted the importance of maintaining a strong balance sheet and disciplined capital allocation for future growth [34] Other Important Information - The average interest rate net of hedging for Q1 2024 was 3.94%, down from 4.29% in the prior year [14] - The company plans to invest in ERP implementation, with an expected spend of about $37 million in 2024 [66] - The company ended Q1 2024 with $88.8 million in cash and cash equivalents and $321.8 million of unused borrowing capacity [58] Q&A Session Summary Question: What is the outlook for sales growth and margin expectations? - Management shared optimism about early demand signs and the potential for robotics adoption, indicating a strong start to the year [45][48] Question: Can you provide details on the i-mop international expansion? - Management confirmed the expansion of the i-mop family of products into Brazil, France, Portugal, and Spain, highlighting its significance in the small space cleaning market [9][65] Question: What is the status of the ERP modernization plan? - The company is on track with its ERP implementation, spending about $7.5 million in Q1 and anticipating a total spend of $37 million for the year [66]

OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to __________ Commission File Number 1-16191 __________________________________________ TENNANT COMPANY Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 (Exact name of registrant as specif ...