TENNANT CO Q4 FY2024 earnings call

• Strong finish to 2024 with net sales, adjusted EBITDA, and EBITDA margin reaching new highs.
• Full year organic growth rate 3.2% driven by price growth and second half volume trends. Fourth quarter volume growth over 5%.
• Orders in 2024 increased 6.4% over 2023, backlog reduced by $125 million.
• Regional highlights: Americas had high single-digit order rate growth with AMR product success; EMEA saw market rebound in fourth quarter; APAC faced demand challenges.
• Key accomplishments: Price growth exceeded targets, multiple go-to-market initiatives, successful product innovations in AMR, small space, and product line extensions; adjusted EBITDA margin expanded 70 basis points.
• AMR growth: 2024 AMR equipment sales $75M, targeting $100M annual net sales by 2027, new X6 ROVR to start shipping in Q2 2025.

For the full year 2024, net sales reached $1.287 billion. In the Americas, net sales increased 5.7% over the prior year with an organic basis of 6.3% growth, driven by commercial equipment sales. Orders in the Americas were up high single digits. EMEA net sales increased 1.3% primarily due to the acquisition of TCS, which contributed 2.6% of inorganic net sales growth, but organic net sales declined 1.6%. APAC net sales decreased 10.3% on an organic basis, impacted by demand declines in China and Australia. AMR equipment sales in the Americas reached a record $75 million in 2024.

• 2025 order demand forecasted to grow 3.5%-7% globally outside APAC, but organic sales expected to decline -1% to -4% due to backlog headwind.
• Foreign exchange impact expected to be negative 2%.
• 2025 net sales guidance: $1,210 million to $1,250 million.
• Adjusted EBITDA range: $196 million to $209 million; adjusted EBITDA margin: 16.2%-16.7%.
• Capital expenditures approximately $20 million; adjusted EPS: $5.70 to $6.20 per diluted share.

• Currency related headwinds in various regions.
• Market demand softness in some regions like EMEA in earlier quarters and APAC overall.
• Legal contingency: Adverse jury verdict related to intellectual property dispute, although it doesn't impact product sales or long-term financial performance directly.

Q: Steve Ferazani asked about 2025 margins, restructuring cost savings, 4Q order rates, and share repurchase.

A: Fay West and David Huml responded, discussing margin expansion through cost out and pricing initiatives, restructuring savings in S&A and COGS, order rate momentum in 2024 and 2025 guidance, and share repurchase strategy for offsetting dilution and flexibility.

Q: Thomas Hayes asked about APAC opportunities, X6 ROVR target markets, and ERP charges.

A: David Huml and Fay West answered, discussing APAC market pivot, X6 ROVR vertical market applications, and ERP project timeline and cost breakdown.

Q: Aaron Reed asked about AMR product deployment, manufacturing facility, and ERP project milestones.

A: David Huml and Fay West replied, discussing AMR product deployment across vertical markets, manufacturing evaluation, and ERP project progress towards go-lives and expected savings.

Q: Iva Prcela asked about exposure to parts manufactured in China and trade war concerns.

A: David Huml responded, discussing exposure to China in COGS (~$50M), mitigation strategies like local sourcing and price passing, and efforts to manage tariff impact.