Tennant Company ((TNC)) has held its Q1 earnings call. Read on for the main highlights of the call.
In the latest earnings call, Tennant Company presented a mixed sentiment, balancing positive growth in order rates and strategic initiatives against challenges like sales decline and economic uncertainties. The company is actively working to mitigate these issues through pricing and sourcing strategies, but maintains a cautious outlook.
Order Rates Growth
Tennant Company reported a 13% increase in order rates for the first quarter, marking the fourth consecutive quarter of near or above double-digit growth. This consistent performance highlights the company’s ability to drive demand and capture market opportunities.
Launch of Clean 360 Program
The introduction of the Clean 360 program is a significant development for Tennant. This initiative offers customers access to Autonomous Mobile Robot (AMR) solutions through a subscription model, which includes a machine, software, and maintenance, showcasing Tennant’s commitment to innovation and customer-centric solutions.
Strategic Investments and Product Launches
Tennant is on track with its strategic investments in go-to-market initiatives and new product development. The launch of the X4 ROVR and the upcoming X6 ROVR are pivotal to meeting the company’s growth targets, reflecting a strong focus on expanding its product portfolio.
EMEA Growth Despite Challenges
Despite facing challenges, Tennant’s EMEA region grew by 2% on a constant currency basis. This growth was positively influenced by a recent acquisition in Eastern Europe, indicating successful integration and expansion efforts.
AMR Sales Growth
AMR sales saw a significant 30% growth over the first quarter of 2024, now accounting for approximately 5% of net sales. This growth underscores the increasing importance of AMR solutions in Tennant’s sales mix.
Organic Sales Decline
Net sales of $290 million reflected a 5% organic decline, attributed to a challenging comparison due to a previous backlog benefit. This decline highlights the volatility in sales performance and the need for strategic adjustments.
Net Income and Margin Decline
Tennant reported a decrease in GAAP net income to $13.1 million from $28.4 million in the prior year, with adjusted EBITDA margin falling 360 basis points to 14.1%. This decline in profitability is a key concern for stakeholders.
Challenges in APAC
The APAC region faced performance challenges, impacted by a demand decline in China and slower demand signals in Australia. These regional issues contribute to the broader economic uncertainties affecting Tennant.
Impact of Tariffs and Economic Uncertainty
Tariffs and trade wars have added to economic uncertainty, with an estimated $40 million impact on the cost of goods sold for the full year. This external pressure is a significant factor in Tennant’s cautious outlook.
Currency Headwinds
Foreign exchange rates negatively impacted sales, particularly in Brazil and EMEA, adding another layer of complexity to Tennant’s financial performance.
Forward-Looking Guidance
For the remainder of 2025, Tennant Company reaffirmed its guidance for net sales to range between $1.210 billion and $1.250 billion, reflecting an organic sales decline of 1% to 4%. The expected GAAP EPS is between $3.80 and $4.30 per diluted share, while adjusted EPS is projected to be between $5.70 and $6.20 per diluted share. Adjusted EBITDA is anticipated to range from $196 million to $209 million, with an adjusted EBITDA margin between 16.2% and 16.7%. Despite challenges, the company remains confident in achieving its 2025 guidance through strategic pricing and sourcing actions.
In conclusion, Tennant Company’s earnings call highlighted a balanced sentiment with growth in certain areas countered by challenges in others. While order rates and strategic initiatives show promise, economic uncertainties and sales declines present hurdles. The company’s forward-looking guidance reflects cautious optimism, with strategic actions aimed at navigating the complex market environment.