Tennant(US:TNC)2025-08-06 20:39markdown [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)