Tennant Company Earnings Call: ERP Pain, Robotics Gain

Tennant Company ((TNC)) has held its Q4 earnings call. Read on for the main highlights of the call.

Tennant Company’s latest earnings call carried a cautious tone as management detailed serious disruption from a troubled North American ERP rollout that weighed heavily on sales, margins and cash flow. Strategic initiatives in robotics and disciplined capital returns were highlighted as long-term strengths, but the near-term narrative was dominated by operational setbacks and the work needed to restore performance.

Robotics Push Gains Scale Despite Broader Turbulence

Tennant emphasized growing momentum in autonomous and mobile robotics, unveiling a dedicated TNC Robotics organization to speed adoption and scale. The segment generated about $85 million in 2025 sales, and management laid out an ambitious roadmap to reach roughly $250 million in AMR revenue by 2028 with stepped-up product, commercial and deployment investments.

Capital Returns Underscore Commitment to Shareholders

Even amid operational headwinds, Tennant stuck to a disciplined capital allocation playbook, repurchasing around 1.1 million shares for $88.5 million and reducing the share count by roughly 6%. Including $21.9 million in dividends, the company returned $110.4 million to shareholders in 2025 and marked its 54th consecutive annual dividend increase.

Balance Sheet Strength Provides Cushion

Management highlighted a solid financial position as a key buffer against the ERP-related disruption, pointing to $106.4 million in cash and cash equivalents and $374.3 million of unused revolver capacity. Net leverage stood at about 1.0 times adjusted EBITDA, comfortably within the targeted 1–2 times range and giving Tennant flexibility to invest and absorb near-term volatility.

International Regions Offset Some North American Weakness

Outside North America, Tennant delivered resilient execution, with EMEA posting roughly 5.1% year-over-year growth driven by price realization and favorable currency. APAC returned to improved performance as organic sales rose about 11% in Q4 and full-year growth was supported by strength in markets such as Australia and India, while service revenue increased 4.7% for the year.

Cost Controls and Restructuring Aim to Protect Profitability

The company leaned on cost discipline to counter softer revenue, cutting adjusted S&A expenses by $22.1 million versus 2024 thanks to lower compensation and earlier cost measures. Tennant also booked $6.4 million in restructuring charges tied to workforce reorganization, targeting roughly $10 million of annual savings beginning in 2026 as it streamlines operations.

ERP Rollout in North America Triggers Severe Disruption

The core setback of the quarter was the November ERP go-live in North America, which produced major system issues that blocked order entry, shipping and service activity. Tennant lost about three full weeks of order and parts processing, resorted to manual workarounds and remains in an intensive “hypercare” phase, prompting a pause of the planned EMEA ERP rollout.

Sales and Earnings Take a Direct ERP Hit

The ERP disruption materially eroded Q4 financials, reducing net sales by an estimated $30 million, with roughly half of that loss unrecoverable and the remainder pushed into backlog. Fourth-quarter adjusted EBITDA was trimmed by about $22 million and earnings per share took an approximate $0.91 hit, underscoring the magnitude of the operational breakdown.

Q4 and Americas Revenue See Sharp Declines

Consolidated net sales in Q4 fell to $291.6 million, down 11.3% year over year, while organic sales dropped 13.9% as the ERP issues compounded softer demand. The Americas region was particularly weak, with organic sales declining 22.3% in the quarter due mainly to North American system disruption and slower industrial and aftermarket activity.

Full-Year Revenue and Profitability Move Backward

For 2025, Tennant’s net sales slipped to $1,203.5 million from $1,286.7 million in 2024, a 6.5% decline and a 7.3% drop on an organic basis. GAAP net income fell to $43.8 million from $83.7 million, while adjusted EBITDA decreased by $41.4 million to $167.4 million and the adjusted EBITDA margin contracted 230 basis points to 13.9%.

Gross Margins Squeezed by Volume and One-Off Costs

Gross margin pressure was pronounced, with the full-year rate falling 250 basis points to 40.2% as lower volumes and inefficiencies filtered through the P&L. In Q4 alone, Tennant cited an estimated $13.5 million volume impact, about $8.5 million of incremental operating inefficiencies, around $4.5 million of inventory write-downs and higher material and tariff-related costs.

ERP Budget Swells as Remediation Costs Mount

ERP has become a much more expensive undertaking than initially expected, with cumulative investment since 2023 reaching roughly $98 million, including $59.1 million in 2025. Management now anticipates 2026 ERP spending will significantly exceed the prior ~$5 million plan and is likely to surpass $20 million to fund remediation, hypercare and broader modernization work.

Near-Term Operations to Stay Choppy into Q1 2026

The company cautioned that disruption will spill into early 2026 as a comprehensive physical inventory required a two-week shutdown of North American manufacturing and distribution in January. That exercise is expected to materially affect first-quarter sales and costs, with Q1 margins projected to be roughly in line with Q4 before improving through mid-year as systems stabilize.

Legal and Non-Operating Items Add to Earnings Drag

Beyond operations, Tennant’s results were pressured by a higher legal contingency after a post-trial ruling increased intellectual property damages and pushed the total judgment to about $20.2 million. The company also faced higher bad debt expense and elevated interest costs in Q4 as average debt balances climbed, further weighing on bottom-line performance.

Guidance Signals Gradual Recovery and Renewed Growth

For 2026, Tennant guided net sales to a range of $1.24 billion to $1.28 billion, implying organic growth of 3% to 6.5% with most of the increase coming from volume rather than price. The company forecast adjusted EBITDA between $175 million and $190 million, adjusted EPS of $4.70 to $5.30 and an adjusted tax rate of 24% to 29%, while warning that ERP-related spending will exceed $20 million and that results will be weighted to the back half of the year.

Tennant’s earnings call painted a picture of a company wrestling with self-inflicted ERP disruption while still investing in high-potential robotics and maintaining shareholder-friendly capital returns. For investors, the story hinges on management’s ability to execute the ERP remediation, restore margins and convert a strong balance sheet and AMR strategy into sustainable growth beyond 2026.