Tennant Company Earnings Call: Growth Amid Challenges

Tennant Company ((TNC)) has held its Q2 earnings call. Read on for the main highlights of the call.

The latest earnings call from Tennant Company was marked by a generally positive sentiment, reflecting strong order growth, successful new product launches, and effective pricing strategies. These positive developments are helping to counterbalance challenges such as a decline in organic sales, reduced net income, and pressures from tariffs. Despite these hurdles, the company remains optimistic about achieving its full-year guidance amid macroeconomic uncertainties.

Strong Order Rates and Market Demand

Enterprise-level order rates for Tennant Company increased by 4% compared to the previous year, with year-to-date orders growing by 8%. This growth was particularly strong in the Americas, where orders rose by 9%, driven by double-digit growth in North America.

Successful Product Launches

Tennant Company successfully launched the X6 ROVR midsized robotic scrubber and the Z50 Citadel Outdoor Sweeper. These new products have allowed the company to expand into new markets and have received positive feedback from the market.

AMR Sales Growth

Sales of Autonomous Mobile Robots (AMR) have accelerated, now representing 6% of enterprise net sales. The company has deployed over 10,000 units, with AMR sales up nearly 20% year-to-date compared to the previous year.

Pricing Initiatives Impact

The company’s pricing initiatives have had a 1.8% impact at the enterprise level. Tennant expects to continue aligning its pricing actions with long-term targets to maintain this positive impact.

Strong Cash Flow and Financial Position

Tennant reported a free cash flow of $18.7 million in the second quarter, with a net leverage of 0.66x adjusted EBITDA. This strong financial position provides the company with flexibility for growth through mergers and acquisitions.

Organic Sales Decline

The company experienced a 4.5% decline in organic sales, with net sales totaling $319 million. This decline is attributed to a $26 million backlog reduction from the previous year.

Gross Margin Decline

Tennant’s gross margin decreased by 100 basis points to 42.1%, impacted by shifts in product mix and ongoing inflationary pressures.

Regional Sales Challenges

Organic sales declined in several regions, with a 5.5% drop in the Americas, a 1.4% decline in EMEA, and a 5% decrease in APAC. The company continues to face demand softness in international markets, particularly in China.

Decreased Net Income and EPS

GAAP net income fell to $20.2 million from $27.9 million in the previous year, and adjusted EPS decreased to $1.49 from $1.83 per diluted share.

Tariff-Related Pressures

Tennant is facing ongoing global tariff discussions and economic uncertainties, with an estimated full-year 2025 tariff impact of approximately $20 million.

Forward-Looking Guidance

Despite macroeconomic uncertainties and tariff-related pressures, Tennant Company reaffirmed its full-year guidance. The company projects net sales between $1.210 billion and $1.250 billion, GAAP EPS of $3.80 to $4.30 per share, adjusted EPS of $5.70 to $6.20 per share, and an adjusted EBITDA margin range of 16.2% to 16.7%. The company continues to maintain a strong balance sheet and expects sustained order growth.

In conclusion, Tennant Company’s earnings call presented a mixed but generally positive outlook. While facing challenges such as organic sales decline and tariff pressures, the company is buoyed by strong order growth, successful product launches, and effective pricing strategies. Tennant remains confident in its ability to meet its full-year guidance, supported by a robust financial position and strategic initiatives.