TENNANT CO Q3 FY2025 earnings call

• Net sales were $303 million with an organic decline of 5.4%, comparing against a prior year quarter that benefited from a $33 million backlog reduction. Order rates showed 2% growth compared to Q3 2024, extending 6 consecutive quarters of order growth.
• Addressed tariff situation, noting complex trade environment with tariff volatility creating cost challenges and affecting customer purchasing behavior. Confident in addressing direct tariff impacts through supply chain adjustments and pricing actions, but some North American industrial customers delaying purchases due to tariff uncertainty.
• Expanded gross margin 30 basis points through disciplined pricing. Delivered 120 basis points of adjusted EBITDA margin improvement via margin expansion and expense management. Returned $28 million to shareholders through dividends and share repurchases.
• Regional performance: Americas orders grew 1% with net sales up 9% adjusting for prior year backlog benefit; EMEA showed 8% order growth with new product launches and go-to-market optimization; APAC challenging, but Australia and India performing well.
• Enterprise strategy: Launched T360 midsized walk-behind scrubber; AMR robotics sales up 9% and unit volumes up 25% year-to-date; ERP modernization project with APAC go-live completed, EMEA to go live in Q1 2026.

In the third quarter of 2025, overall equipment net sales decreased 8.7%. Service sales increased 5.9%, and parts and consumables grew by 2.5% compared to the prior year period. Regionally, in the Americas, organic sales were down 7% compared to the same period last year, driven by lower sales of industrial equipment. Outside the Americas, organic sales in EMEA were down 0.4%, primarily reflecting lower volumes across most of the region, while organic sales in APAC decreased 6.4%, mainly due to lower commercial equipment volumes in China and reduced industrial equipment volumes in South Korea.

• Originally anticipated organic growth at enterprise level to be negative 1% to negative 4%, now slightly below that.
• Expect net sales to be within $1.21 billion to $1.25 billion through strong fourth quarter performance.
• Adjusted EBITDA expected within $196 million to $209 million, landing near the lower end of that range.

• Tariff volatility creating cost challenges and uncertainty, affecting customer purchasing behavior.
• Legal contingency costs related to an intellectual property dispute, with $5.3 million additional expense recorded, though ruling not impacting product sales or long-term financial performance.
• Complexities in ERP modernization project deployment in different regions.

Q: Steve Ferazani asked about order growth slowing and if it would turn around, with Dave Huml responding about Q4 needs and order momentum year-to-date.

A: Dave Huml mentioned Q4 needs for sales and orders, noting $318 million needed for midpoint guidance and confidence in delivering order growth.

Q: Thomas Hayes asked about ERP timeline and Z50 Citadel unit.

A: David Huml said APAC ERP went live in Q3, North America in Q4, EMEA in Q1 2026; Z50 Citadel is a new outdoor sweeping product with positive early returns and global deployment.

Q: Iva Prcela asked about AMR business traction and tariffs.

A: David Huml said AMR sales up 9% and units up 25% year-to-date, driven by X4 and X6 ROVR, strategic accounts, and Clean 360 offering; no material shift in competitive pressure from tariffs yet.