Tennant(TNC) - 2024 Q3 - Quarterly Results

Tennant Company Third Quarter 2024 Financial Results Q3 2024 Financial Performance Overview The company reported a 3.6% net sales increase to $315.8 million, driven by pricing and Americas growth, and reaffirmed its full-year 2024 guidance Q3 & YTD 2024 Financial Summary (in millions, except per share data) | Metric | Q3 2024 | Q3 2023 | % Change | YTD 2024 | YTD 2023 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Sales | $315.8 | $304.7 | 3.6% | $957.8 | $932.2 | 2.7% | | Net Income | $20.8 | $22.9 | (9.2)% | $77.1 | $78.5 | (1.8)% | | Diluted EPS | $1.09 | $1.21 | (9.9)% | $4.03 | $4.19 | (3.8)% | | Adjusted Diluted EPS | $1.39 | $1.34 | 3.7% | $5.05 | $4.65 | 8.6% | | Adjusted EBITDA | $47.9 | $45.9 | 4.4% | $161.4 | $151.4 | 6.6% | | Adjusted EBITDA Margin | 15.2% | 15.1% | +10 bps | 16.9% | 16.2% | +70 bps | - The company announced a 5.4% increase in its quarterly cash dividend to $0.295 per share, marking the 53rd consecutive year of increased annual cash dividend payouts[5] - A new product, the T291 small walk-behind scrubber, was launched, targeting mid-size retail, healthcare, and education environments[5] - CEO Dave Huml highlighted strong pricing realization and order growth across all geographies, expressing confidence in achieving 2024 guidance and executing the enterprise growth strategy[6] Detailed Financial Analysis Net sales growth was driven by pricing realization, with strong performance in the Americas offsetting declines in EMEA and APAC Net Sales Analysis Components of Net Sales Change (Q3 2024 vs Q3 2023) | Component | % Change | | :--- | :--- | | Price | 1.8% | | Volume | 0.9% | | Organic Growth | 2.7% | | Acquisitions | 1.3% | | Foreign Currency | (0.4)% | | Total Growth | 3.6% | - Organic sales growth of 2.7% was driven by effective price realization across all geographies and volume growth in the Americas, partially offset by volume declines in EMEA and APAC[8] Regional Performance Organic Net Sales Growth by Region (Q3 2024) | Region | Organic Growth % | | :--- | :--- | | Americas | 4.6% | | EMEA | (0.8)% | | APAC | (4.3)% | | Total | 2.7% | - Americas: Growth of 4.6% was driven by both price realization and volume increases[9] - EMEA: The 0.8% decline was due to volume decreases in equipment and parts, impacted by weaker market conditions, despite price realization[10] - APAC: The 4.3% decrease was primarily due to volume declines in China (market saturation) and Australia (elevated cost conditions)[11] Operating Results and Profitability - Gross profit margin declined by 90 basis points to 42.4% compared to Q3 2023, attributed to inflationary pressure on materials, elevated freight costs, and unfavorable geographic/customer mix[12][13] - S&A expense increased by $4.5 million to $92.7 million, which included $3.3 million in ERP modernization costs and $0.7 million in acquisition-related costs[14] - Adjusted EBITDA increased to $47.9 million from $45.9 million in the prior-year period, with the margin slightly up at 15.2%[15] - GAAP Net income decreased to $20.8 million from $22.9 million, primarily due to ERP and acquisition costs, while Adjusted net income increased by $1.2 million to $26.6 million[16] Cash Flow, Liquidity and Capital Allocation Operating cash flow decreased due to working capital changes and ERP investments, while liquidity remains strong with a low net leverage ratio of 0.56x - Cash flow from operations was $30.7 million, a decrease of $23.7 million from the prior-year period, mainly due to increases in working capital and $9.4 million in ERP modernization costs[17] - The company maintained a strong liquidity position with $91.3 million in cash and $439.3 million of unused borrowing capacity under its revolving credit facility, which was recently increased to $650.0 million[18] - In Q3, the company invested $4.3 million in capital expenditures and returned $13.3 million to shareholders through dividends and share repurchases[19] - The net leverage ratio was 0.56 times Adjusted EBITDA, which is below the company's targeted range of 1x to 2x[19] 2024 Guidance Tennant Company reaffirmed its full-year 2024 guidance, projecting net sales between $1,280 million and $1,305 million Full-Year 2024 Guidance | Metric | 2024 Guidance Range | | :--- | :--- | | Net Sales | $1,280 - $1,305 million | | Organic Net Sales Growth | 2.5% - 4.5% | | Adjusted Diluted Net Income Per Share* | $6.15 - $6.55 | | Adjusted EBITDA* | $205 - $215 million | | Adjusted EBITDA Margin | 16.0% - 16.5% | | Capital Expenditures | ~$20 million | | Adjusted Effective Tax Rate* | 22% - 27% | Appendix: Financial Statements This section provides unaudited consolidated financial statements and reconciliations of GAAP to non-GAAP financial measures Consolidated Statements of Income Q3 2024 Income Statement Highlights (in millions) | Line Item | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Net Sales | $315.8 | $304.7 | | Gross Profit | $133.8 | $132.0 | | Operating Income | $30.6 | $34.7 | | Income Before Income Taxes | $27.5 | $29.9 | | Net Income | $20.8 | $22.9 | Geographical Net Sales Q3 2024 Net Sales by Region (in millions) | Region | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Americas | $218.7 | $211.2 | 3.6% | | Europe, Middle East and Africa | $76.3 | $72.0 | 6.0% | | Asia Pacific | $20.8 | $21.5 | (3.3)% | | Total | $315.8 | $304.7 | 3.6% | Consolidated Balance Sheets Balance Sheet Highlights (in millions) | Line Item | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and Cash Equivalents | $91.3 | $117.1 | | Total Current Assets | $593.9 | $569.1 | | Total Assets | $1,216.1 | $1,113.4 | | Total Current Liabilities | $273.5 | $273.7 | | Long-term Debt | $208.6 | $194.2 | | Total Liabilities | $567.6 | $535.1 | | Total Equity | $648.5 | $578.3 | Consolidated Statements of Cash Flows YTD 2024 Cash Flow Summary (in millions) | Line Item | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $52.2 | $124.6 | | Net Cash Used in Investing Activities | ($69.1) | ($15.2) | | Net Cash Used in Financing Activities | ($8.1) | ($87.1) | | Net Decrease in Cash | ($25.8) | $19.6 | Non-GAAP Reconciliations - Adjusted Net Income for Q3 2024 was $26.6 million, after adjusting for items such as amortization expense ($2.6M), ERP modernization costs ($2.5M), and transaction/integration costs ($0.7M)[37] - Adjusted EBITDA for Q3 2024 was $47.9 million, with the reconciliation from GAAP Net Income ($20.8M) including add-backs for interest, taxes, D&A, and adjustments for ERP and transaction costs[38]