TENNANT CO Q2 FY2025 earnings call

• Enterprise-level order rates increased by 4% compared to the prior year quarter, marking the fifth consecutive quarter of order growth. Year-to-date orders grew 8%.
• Book-to-bill ratio remained above 1 as order patterns returned to normalized seasonality.
• In the Americas, orders increased by 9% compared to the prior year, led by North America with double-digit order growth.
• EMEA organic sales declined 1.4% with orders down 7.4%, but foreign exchange provided a positive 5.3% benefit.
• APAC organic sales declined 5% with orders down 3.5%, with Australia showing volume growth offset by demand softness in China.
• 16% EBITDA margin was in line with expectations.
• Pricing initiatives contributed 1.8% impact at the enterprise level.
• New products like the X4 ROVR and Z50 Citadel Outdoor Sweeper were highlighted.
• AMR sales accelerated to 6% of enterprise net sales with cumulative deployed units exceeding 10,000.
• Actively pursuing M&A opportunities to complement long-term objectives.

Tennant Company achieved net sales of $319 million in the second quarter of 2025, with an organic sales decline of 4.5%. By region: Americas had organic sales decline of 5.5%, EMEA saw an organic sales decline of 1.4%, and APAC had an organic sales decline of 5%. In terms of product categories, overall equipment net sales decreased 6.5%, while service sales increased 1.4% and parts and consumables grew by 1%. Equipment net sales were primarily impacted by a decline in industrial equipment sales, but service and parts and consumables showed growth.

• Reaffirmed full year 2025 guidance: net sales of $1.210 billion to $1.250 billion (organic sales decline of negative 1% to negative 4%), GAAP EPS of $3.80 per share to $4.30 per diluted share, adjusted EPS of $5.70 per share to $6.20 per diluted share, adjusted EBITDA in the range of $196 million to $209 million, adjusted EBITDA margin in the range of 16.2% to 16.7%.
• Anticipate managing tariff-driven cost inflation through pricing actions, procurement, and supply chain initiatives.

• Macroeconomic uncertainty and ongoing trade tensions.
• Pockets of weakness in international markets, particularly challenges in APAC due to competitive pricing.
• Currency fluctuations impacting financial performance.
• Tariff-related pressures affecting cost of goods sold.

Q: Steve Ferazani asked about global uncertainty around tariffs and confidence in a stronger second half.

A: David W. Huml responded discussing ongoing uncertainty but noting robust opportunity pipeline, strong first half orders in regions like Americas, EMEA with transformational journeys, and APAC mixed bag but some geographies showing strength.

Q: Steve Ferazani asked about margin lift drivers.

A: David W. Huml said drivers include gross margin expansion from pricing ramp, volume absorption in second half, and cost-out initiatives.

Q: Steve Ferazani asked about backlog conversion left in the second half.

A: David W. Huml said roughly $75 million lapped in first half and $50 million in second half, lower than first half.

Q: Steve Ferazani asked about the outdoor sweeper.

A: David W. Huml explained it was a strategic move into an attractive $200 million TAM industrial outdoor sweeping market, complementary to existing sales and service capabilities.

Q: Aaron Reed asked about AMR leasing program.

A: David W. Huml said Clean360 Equipment as a Service program launched, early orders booked, year-to-date AMR sales up almost 20%, strong pipeline.

Q: Aaron Reed asked about industrial pipeline.

A: David W. Huml said industrial had backlog lapping but strong order pipeline and bullish outlook from sales team.

Q: Aaron Reed asked about lead time on orders.

A: David W. Huml said varies by product, from days/weeks for commercial to 8-10 weeks for industrial and over 4 months for Z50 outdoor sweeper.

Q: Aaron Reed asked about additional price increases and semiconductor tariffs.

A: David W. Huml said open-minded on pricing to offset tariff impact, monitoring semiconductor tariff situation comprehensively.