Tom Hayes

Tom Hayes inquired about the current stability of Tennant Company's new ERP system in North America, the recoverability of the $30 million sales impact from the Q4 2025 ERP disruption, and the strategic objectives for the newly launched TNC robotics group in FY 2026. He also asked about the expected progression of gross margins throughout 2026, particularly for Q1.

Answer

President and CEO Dave Huml confirmed that the ERP system is stable for core processes (booking, building, shipping, invoicing, collecting), though efficiency improvements are ongoing. He detailed the strategic acceleration of the TNC robotics group, aiming for $250 million in AMR sales by 2028, focusing on NPD roadmap acceleration, adoption efficiency, ROI demonstration, and demand generation. SVP and CFO Fay West clarified that approximately half of the $30 million sales impact is considered unrecoverable, primarily from parts, consumables, and service, with the other half added to backlog. She also stated that Q1 2026 gross margins are expected to be comparable to Q4 2025 due to inventory shutdown, with sequential improvement and year-over-year expansion anticipated throughout 2026.

Tom Hayes inquired about the current stability of Tennant's new ERP system as of late February/early March, the recoverability of the $30 million sales impact from the Q4 2025 ERP disruption, and the strategic objectives for the newly formed TNC Robotics group in FY 2026, including gross margin progression.

Answer

President and CEO Dave Huml confirmed the ERP system is stable for core manufacturing processes (booking, building, shipping, invoicing, collecting), noting significant improvement compared to November's issues. SVP and CFO Fay West clarified that approximately $15 million of the $30 million sales impact is considered unrecoverable, primarily from parts, consumables, and service. Dave Huml detailed that the TNC Robotics group aims to accelerate the NPD roadmap, improve adoption and demonstration efficiency, prove ROI, and boost demand generation, targeting $250 million in AMR sales by 2028. Fay West added that Q1 2026 gross margins are expected to be comparable to Q4 2025 due to inventory shutdown, with sequential improvement and year-over-year expansion anticipated.

Tom Hayes asked for a reminder about Enerpac Tool Group's Cortland business, which is part of the "other" segment, and the factors driving its continued strong growth.

Answer

Paul Sternlieb, CEO of Enerpac Tool Group, expressed satisfaction with Cortland Biomedical, describing it as a roughly $20 million annual revenue business that is high-growth, high-margin, and operates relatively independently. He explained that it designs and manufactures custom biomedical textile fibers for specific medical devices for OEM customers, making it a long-cycle, sticky business with strong growth opportunities and a robust funnel.

Tom Hayes inquired about the scope of recent pricing actions, the expected gross margin flow for the remainder of the fiscal year, APAC product sales, and the drivers behind Cortland Biomedical's strong growth.

Answer

CFO Darren Kozikowski clarified that recent low single-digit pricing actions were for products in the Americas and Europe. He projected Q2 margins to be similar to Q1, with improvement in the second half as higher tariff costs dissipate. CEO Paul Sternlieb noted that APAC saw growth in standard products but a sharp decline in the lumpy HLT business. He also highlighted Cortland Biomedical's strong performance, driven by its long-cycle, sticky business model of designing and manufacturing custom biomedical textile fibers for medical devices, securing new commercial opportunities.

Tom Hayes inquired about the weakening EMEA market performance, specifically asking if the decline was primarily driven by Europe and for management's outlook on market conditions as the new fiscal year begins. He also asked about the global rollout and performance of the e-commerce business, and sought insights into the strong Q4 performance of the DTA integration, including specific geographical or market traction and future cross-selling opportunities.

Answer

Paul Sternlieb, President and CEO, confirmed Europe was the primary driver of EMEA's weakness, citing persistent challenges in Central and Southern Europe and a tough year-over-year service business comparison. He clarified that the e-commerce platform is global, having expanded from the U.S. to 18-20 European countries and Australia, with ongoing investment. Regarding DTA, Mr. Sternlieb expressed satisfaction with its integration and commercial synergies, highlighting robust orders, expanded backlog, and significant growth opportunities in the U.S. market, attributing success to efficient manufacturing and supply chain expertise.

Tom Hayes from Roth Capital Partners asked for clarification on the implementation and impact timing of recent pricing actions. He also sought more detail on the specific segments driving the high single-digit growth in North America, the outlook for the wind energy business, and whether the current economic environment has altered the company's appetite for M&A.

Answer

CFO Darren Kozik stated that pricing actions occurred in March and May, with the full financial impact expected in Q4. CEO Paul Sternlieb highlighted aerospace and infrastructure as strong performers in North America, noting the benefit of diversified end markets. He expressed a continued positive outlook for wind projects, particularly in EMEA, and affirmed that the M&A strategy remains active and unchanged, though the company will maintain strict discipline on valuation.

Tom Hayes from Roth Capital Partners asked about the timing and impact of recent pricing actions, the specific segments driving North American growth, the outlook for the wind business amid potential policy changes, and whether the M&A appetite has shifted in the current environment.

Answer

CFO Darren Kozik clarified that pricing actions were implemented in March and May, with the full impact expected in Q4. CEO Paul Sternlieb attributed North American strength to a diverse set of end markets, which is a key competitive advantage. He expressed a continued positive outlook for the wind market, especially in EMEA, and affirmed that the company's M&A strategy remains active and disciplined, with no change in appetite from either buyers or potential sellers.

Tom Hayes from Roth Capital Partners asked about the timing and impact of recent pricing actions, the specific segments driving North American growth, the outlook for the wind energy business, and whether the M&A environment has changed due to tariffs and a sluggish industrial market.

Answer

CFO Darren Kozik clarified that pricing actions taken in March and May will see their full impact in Q4. CEO Paul Sternlieb attributed North American strength to diversified end markets and expressed a continued positive outlook on wind projects, particularly in EMEA. He also affirmed that the company's M&A strategy remains unchanged, with an active but disciplined approach to opportunities.

Tom Hayes from Roth Capital Partners asked about the implementation timing and impact of recent pricing actions. He also sought more detail on the specific segments driving the strong North American performance, the outlook for the wind energy business, and whether the current economic climate has altered the company's appetite for M&A.

Answer

CFO Darren Kozik clarified that pricing actions occurred in March and May, with the full impact expected in Q4. CEO Paul Sternlieb attributed strong performance to a diversified end-market strategy, highlighting aerospace, infrastructure, and nuclear services in the Americas. He expressed a continued positive outlook for the wind market, especially in EMEA, and affirmed that the company's M&A strategy remains unchanged, emphasizing a disciplined approach to acquisitions.

Tom Hayes from Roth Capital Partners asked about the implementation and impact of recent pricing actions, the specific drivers of North American growth, the outlook for the wind energy market, and any changes in the M&A environment.

Answer

CFO Darren Kozik clarified that the full impact of pricing actions will be seen in Q4. CEO Paul Sternlieb highlighted the strength of diversified end markets in North America, expressed a continued positive outlook for the wind sector, and affirmed that the company's M&A strategy remains active and disciplined despite market conditions.