Delivered Net Sales of $290 Million on Strong Order Growth While

Lapping $50 Million Backlog-Reduction Benefit in the Prior Year

Returned $25.8 Million to Shareholders

Reaffirms Guidance

MINNEAPOLIS--(BUSINESS WIRE)--Apr. 30, 2025-- Tennant Company ("Tennant" or the "Company") (NYSE: TNC) today reported its financial results for the quarter ended March 31, 2025.

Highlights

• Delivered net sales of $290.0 million for the first quarter of 2025, reflecting a 6.8% decrease from the first quarter of 2024, or a 5.0% organic decline, driven by volume declines across all geographies, particularly in North America, which was lapping a $50 million backlog-reduction benefit in the prior-year period.

• Base business remains strong as order rates increased 13% compared to the first quarter of 2024.

• Achieved Adjusted EBITDA^(a) of $41.0 million, a decrease of $13.9 million compared to the first quarter of 2024. Adjusted EBITDA margin^(a) of 14.1% decreased 360 basis points, primarily due to volume declines in net sales and unfavorable impact to gross margin as a result of the significant backlog-reduction benefit in the prior year.

• The Company continues to return capital to shareholders in line with its capital allocation priorities. During the quarter, the Company issued dividends totaling $5.6 million and repurchased 235,866 shares for $20.2 million.

• The Company reaffirms its 2025 guidance despite macroeconomic uncertainties, focused on mitigating the impact of current tariffs through supply-chain actions and pricing.

“We are pleased to report Tennant's first quarter results in line with our expectations. Lapping a previous record-high first quarter in the prior year, which benefited from a significant backlog reduction concentrated in higher-margin products and customers, our first quarter results reflect a return to typical seasonal patterns and product mix," said Dave Huml, Tennant President and Chief Executive Officer. "Despite the challenging comparison, underlying business performance remains strong. This quarter represents the fourth consecutive quarter with strong order growth above our long-term targets. We are closely monitoring the macroeconomic uncertainties, particularly those surrounding tariffs, demand, and broader economic conditions. We are focused on implementing mitigation strategies to address known tariffs through supply-chain actions and pricing initiatives. Despite the dynamic nature of the current environment, and the challenges in predicting future developments, our current belief is that we remain on track to deliver full-year results within our 2025 guidance range."

Net Sales

Consolidated net sales for the first quarter of 2025 totaled $290.0 million, a 6.8% decrease compared to consolidated net sales of $311.0 million in the first quarter of 2024. The components of the consolidated net sales change were as follows:

Organic Sales

Organic sales, which exclude the effects of foreign currency and acquisitions, decreased 5.0% compared to the prior year. This decline was driven by volume declines across all geographies, particularly in North America, which was lapping a significant backlog-reduction benefit in the prior-year period.

Americas: The 6.9% decrease in the Americas, which includes all of North America and Latin America, was primarily driven by volume declines in equipment, particularly in North America, which was lapping a $50 million backlog-reduction benefit in the prior-year period. This was partially offset by price growth across all product categories in Latin America.

EMEA: The 0.6% increase in EMEA, which includes Europe, the Middle East and Africa, was primarily due to price realization in parts and consumables and service, partly offset by volume declines in equipment. Results varied by geography, with organic growth in the UK and Spain being partially offset by organic declines in France.

APAC: The 7.5% decrease in APAC, which includes China, Australia, Japan and other Asian markets, was primarily due to both volume and price declines in China and Australia. In China, market saturation continues to cause pricing pressure and margin compression amidst declining demand for mid-tier products. In Australia, there are signals of slowing demand due to market uncertainty, with some specific instances of customers delaying equipment orders or opting for rental units instead.

Operating Results

The gross profit margin of 41.4% declined 280 basis points compared to the first quarter of 2024. This decrease was driven by unfavorable product and customer mix as well as ongoing inflation. The prior-year quarter benefited from a significant backlog reduction concentrated in higher-margin industrial products sold through direct channels.

Selling and Administrative ("S&A") expense totaled $90.7 million in the first quarter of 2025, a $0.8 million increase compared to the first quarter of 2024. The increase was primarily driven by the Enterprise Resource Planning ("ERP") modernization project and restructuring-related charges, partially offset by lower compensation and benefit expense and discretionary spending. When excluding non-GAAP costs, Adjusted S&A^(a) as a percentage of net sales increased to 28.7% in the first quarter of 2025, compared to 27.6% in the first quarter of 2024. This increase was primarily driven by lower operating performance, partially offset by diligent cost management.

Adjusted EBITDA^(a) was $41.0 million in the first quarter of 2025, compared to $54.9 million in the prior-year period. The decrease in Adjusted EBITDA was primarily due to volume declines in net sales and unfavorable impact to gross margin. Adjusted EBITDA margin^(a) for the first quarter of 2025 was 14.1%, down 360 basis points compared to 17.7% in the prior-year period.

Net income was $13.1 million in the first quarter of 2025 compared to $28.4 million in the first quarter of 2024. Adjusted net income^(a) was $21.2 million in the first quarter of 2025, a decrease of $13.5 million compared to the first quarter of 2024. The decrease was primarily due to lower operating performance mentioned above, partly offset by lower income taxes.

Cash Flow, Liquidity and Capital Allocation

Tennant used $0.4 million of cash flow for operating activities during the first quarter of 2025, a $3.3 million decrease compared to the prior-year period. Operating cash flow in the first quarter of 2025 was impacted by investments in our ERP modernization project as well as working capital investments and lower operating performance. Tennant generated free cash flow^(a) of $(7.4) million in the first quarter of 2025, which included investments in ERP modernization of $12.4 million. When excluding ERP modernization cash flows, the Company converted 28.4% of net income to free cash flow in the first quarter of 2025, which is typically the lightest free cash flow period.

Liquidity remained strong with a balance of $79.5 million in cash and cash equivalents as of the end of the first quarter. Additionally, the Company had $434.3 million of unused borrowing capacity under its revolving credit facility.

The Company continues to strategically deploy cash flow to meet operational capital requirements and to return capital to shareholders in alignment with its capital allocation priorities. During the first quarter, the Company invested $7.0 million in capital expenditures and returned $25.8 million to shareholders through dividends and share repurchases. The Company remains diligent in managing its debt and maintaining a strong balance sheet. The Company's net leverage ratio was 0.66 times Adjusted EBITDA^(a), which is below its targeted range of 1x to 2x Adjusted EBITDA^(a).

2025 Guidance

For 2025, Tennant reaffirms the following guidance ranges:

**Excludes ERP modernization costs, other certain nonoperational items and amortization expense.

Conference Call

Tennant will host a conference call to discuss its 2025 first quarter results on May 1, 2025, at 9 a.m. Central Time (10 a.m. Eastern Time). The conference call and accompanying slides will be available via webcast on Tennant's investor website. To listen to the call live and view the slide presentation, go to investors.tennantco.com and click on the link at the bottom of the overview page. A replay of the conference call, with slides, will be available at investors.tennantco.com.

Company Profile

Founded in 1870, Tennant Company (TNC), headquartered in Eden Prairie, Minnesota, is a world leader in the design, manufacture and marketing of solutions that help create a cleaner, safer and healthier world. Its products include equipment for maintaining surfaces in industrial, commercial and outdoor environments; detergent-free and other sustainable cleaning technologies; and cleaning tools and supplies. Tennant's global field service network is the most extensive in the industry. Tennant Company had sales of $1.29 billion in 2024 and has approximately 4,500 employees. Tennant has manufacturing operations throughout the world and sells products directly in more than 21 countries and through distributors in more than 100 countries. For more information, visit www.tennantco.com and www.ipcworldwide.com. The Tennant Company logo and other trademarks designated with the symbol “®” are trademarks of Tennant Company registered in the United States and/or other countries.

Forward-Looking Statements

Certain statements contained in this document are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act. These statements do not relate to strictly historical or current facts and provide current expectations or forecasts of future events. Any such expectations or forecasts of future events are subject to a variety of factors. These include factors that affect all businesses operating in a global market as well as matters specific to us and the markets the Company serves. Particular risks and uncertainties presently facing it include: : geopolitical and economic uncertainty throughout the world; our ability to comply with global laws and regulations; changes in foreign currency exchange rates; our ability to adapt to customer pricing sensitivities; the competition in our business; fluctuations in the cost, quality or availability of raw materials and purchased components; our ability to adjust pricing to respond to cost pressures; unforeseen product liability claims or product quality issues; our ability to attract, retain and develop key personnel and create effective succession planning strategies; our ability to effectively develop and manage strategic planning and growth processes and the related operational plans; our ability to successfully upgrade and evolve our information technology systems; our ability to successfully protect our information technology systems from cybersecurity risks; complications with our new ERP system; the occurrence of a significant business interruption; our ability to maintain the health and safety of our workers; our ability to integrate acquisitions; our ability to develop and commercialize new innovative products and services; and risks related to our business transformation and strategic initiatives.

The Company cautions that forward-looking statements must be considered carefully and that actual results may differ in material ways due to risks and uncertainties both known and unknown. Information about factors that could materially affect the Company's results can be found in its 2024 Form 10-K. Shareholders, potential investors and other readers are urged to consider these factors in evaluating forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements.

The Company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. Investors are advised to consult any further disclosures by the Company in its filings with the Securities and Exchange Commission and in other written statements on related subjects. It is not possible to anticipate or foresee all risk factors, and investors should not consider any list of such factors to be an exhaustive or complete list of all risks or uncertainties.

Non-GAAP Financial Measures

This news release and the related conference call include presentation of Non-GAAP measures that include or exclude special items of a nonrecurring and/or nonoperational nature (hereinafter referred to as “special items”). Management believes that the Non-GAAP measures provide useful information to investors regarding the Company’s results of operations and financial condition because they permit a more meaningful comparison and understanding of Tennant Company’s operating performance for the current, past or future periods. Management uses these Non-GAAP measures to monitor and evaluate ongoing operating results and trends and to gain an understanding of the comparative operating performance of the Company.

The Company believes that disclosing selling and administrative (“S&A”) expense – as adjusted, S&A expense as a percent of net sales – as adjusted, operating income – as adjusted, operating margin – as adjusted, income before income taxes – as adjusted, income tax expense – as adjusted, net income – as adjusted, net income per diluted share – as adjusted, EBITDA – as adjusted, and EBITDA margin – as adjusted (collectively, the “Non-GAAP measures”), excluding the impacts from special items, is useful to investors as a measure of operating performance. The Company uses these measures to monitor and evaluate operating performance. The Non-GAAP measures are financial measures that do not reflect United States Generally Accepted Accounting Principles (GAAP). The Company calculates the Non-GAAP measures by adjusting for ERP modernization costs, restructuring-related costs, transaction-related costs and amortization expense. The Company calculates income tax expense – as adjusted by adjusting for the tax effect of these Non-GAAP measures. The Company calculates net income per diluted share – as adjusted by adjusting for the after-tax effect of these Non-GAAP measures and dividing the result by the diluted weighted average shares outstanding. The Company calculates EBITDA margin – as adjusted by dividing EBITDA – as adjusted by net sales.

FINANCIAL TABLES FOLLOW

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INVESTOR RELATIONS CONTACT:

Lorenzo Bassi
Vice President, Finance and Investor Relations
investors@tennantco.com
763-540-1242

Source: Tennant Company