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TENNANT CO (TNC)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 results were in line with management’s internal expectations but below Street: revenue $290.0M vs consensus $296.6M and adjusted EPS $1.12 vs $1.30; adjusted EBITDA $41.0M vs consensus $48.5M. The company reaffirmed full‑year 2025 guidance despite macro and tariff uncertainty . Values retrieved from S&P Global.*
  • YoY comps were difficult due to a $50M backlog reduction in Q1 2024; net sales declined 6.8%, GAAP EPS fell to $0.69, adjusted EPS to $1.12, with gross margin down 280 bps and adjusted EBITDA margin down 360 bps .
  • Orders remained strong (+13% YoY; book‑to‑bill >1), and management emphasized pricing actions (7–10% mid‑May) and supply‑chain mitigation to offset an expected ~$40M tariff impact in 2025 .
  • Strategic initiatives in AMR and go‑to‑market continued to execute: AMR sales grew ~30% YoY, X6 ROVR launched, and Clean 360 subscription program introduced to accelerate adoption .
  • Capital returns continued: $25.8M returned in Q1 via dividends ($0.295/sh) and repurchases (235,866 shares for $20.2M); liquidity remained strong with $79.5M cash and $434.3M undrawn revolver capacity .

What Went Well and What Went Wrong

  • What Went Well

    • “Fourth consecutive quarter with strong order growth above our long‑term targets” (+13% YoY enterprise orders; book‑to‑bill >1), supporting underlying demand resilience .
    • AMR momentum: “AMR sales grew 30% over the first quarter of 2024,” with Clean 360 subscription model to lower adoption barriers; X6 ROVR launched to expand TAM .
    • Reaffirmed 2025 guidance and detailed tariff mitigation playbook (pricing, sourcing, logistics), aiming to offset most of ~$40M COGS impact .

  • What Went Wrong

    • Lapping a $50M high‑margin backlog benefit from Q1 2024 compressed gross margin (41.4%, −280 bps YoY) and adjusted EBITDA margin (14.1%, −360 bps YoY) .
    • Americas and APAC organic declines; China pricing pressure and Australia demand softness weighed on volumes and price/mix .
    • Elevated ERP and restructuring costs ($7.5M non‑GAAP charges in Q1), deleveraging S&A as % of sales (adj. 28.7%) amid lower sales .

Financial Results

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$311.0 $315.8 $328.9 $290.0
Diluted EPS ($USD)$1.49 $1.09 $0.35 $0.69
Adjusted Diluted EPS ($USD)$1.81 $1.39 $1.52 $1.12
Adjusted EBITDA ($USD Millions)$54.9 $47.9 $47.4 $41.0
Adjusted EBITDA Margin %17.7% 15.2% 14.4% 14.1%
Gross Margin %—42.4% 41.3% 41.4%
S&A (Adjusted) % of Sales—28.1% 27.4% 28.7%

YoY comparison highlights (Q1 2025 vs Q1 2024):

  • Net sales −6.8%; organic sales −5.0% (Price −0.1%, Volume −4.9%) .
  • Gross margin −280 bps; adjusted EBITDA margin −360 bps .
  • Diluted EPS −53.7%; adjusted EPS −38.1% .

Segment/Geography net sales (Q1 2025 vs Q1 2024):

RegionQ1 2024 ($M)Q1 2025 ($M)% Change
Americas$215.6 $197.3 −8.5%
EMEA$76.8 $76.0 −1.0%
APAC$18.6 $16.7 −10.2%
Total$311.0 $290.0 −6.8%

KPIs (Q1 2025):

  • Order growth YoY: +13%
  • Book‑to‑bill: >1
  • AMR sales growth YoY: +30%; AMR ~5% of net sales
  • Share repurchases: 235,866 shares for $20.2M; dividends $5.6M
  • Net leverage: 0.66x adjusted EBITDA
  • Operating cash flow: $(0.4)M; Free cash flow $(7.4)M (includes $12.4M ERP spend)

Guidance Changes

MetricPeriodPrevious Guidance (2/17/25)Current Guidance (4/30/25)Change
Net Sales ($USD Billions)FY 2025$1.210 – $1.250 $1.210 – $1.250 Maintained
Organic Net Sales GrowthFY 2025−1% to −4% −1% to −4% Maintained
GAAP Diluted EPS ($)FY 2025$3.80 – $4.30 $3.80 – $4.30 Maintained
Adjusted Diluted EPS ($)FY 2025$5.70 – $6.20 $5.70 – $6.20 Maintained
Adjusted EBITDA ($USD Millions)FY 2025$196 – $209 $196 – $209 Maintained
Adjusted EBITDA Margin %FY 202516.2% – 16.7% 16.2% – 16.7% Maintained
Capex ($USD Millions)FY 2025~ $20 ~ $20 Maintained
Adjusted Effective Tax Rate %FY 202523% – 27% 23% – 27% Maintained
Dividend per Share ($)Q2 2025 Payable Jun 16$0.295 declared (4/29) $0.295 Maintained

Additional management context: estimated ~$40M tariff headwind in FY 2025 (~5% of COGS) with mitigation via pricing (7–10% North America mid‑May) and sourcing/logistics actions .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Orders & BacklogStrong orders; backlog reduction ahead of plan; normalization by YE 2024 Double‑digit orders in Q2–Q4; backlog normalized; expect YoY organic down on backlog headwind Orders +13% YoY; book‑to‑bill >1; seasonal normalization Positive/stable
Pricing DisciplinePrice realization offset inflation; aiming 50–100 bps annual price Expect gross margin expansion via pricing/costs 7–10% NA price increase mid‑May; 50–100 bps annual target Strengthening
Tariffs/MacroElevated freight/inflation but seen as temporary FX headwind (−2%); no unforeseen tariff costs assumed in guidance ~$40M tariff impact; mitigation actions, agility, guidance reaffirmed Headwind with plan
AMR / TechnologyX4 ROVR launch; pipeline strong; platform strategy AMR revenue target $100M by 2027; X6 ROVR planned Q2 ‘25 AMR +30% YoY; Clean 360 subscription; X6 ROVR launched Accelerating
ERP ModernizationDesign/build on track; staggered 2025 go‑live $37M 2024 spend; ~$50M 2025; expected $10–$15M annual savings post‑rollout Q1 costs drove S&A; go‑live preparations; evenly spread costs in 2025 Execution phase
Regional DynamicsAPAC: China price war; Australia demand soft; EMEA mixed APAC softness; EMEA improving; Americas strong Americas −6.9% organic; EMEA +0.6% organic; APAC −7.5% organic Mixed

Management Commentary

  • CEO: “This quarter represents the fourth consecutive quarter with strong order growth above our long‑term targets… our current belief is that we remain on track to deliver full‑year results within our 2025 guidance range.”
  • CEO on tariffs: “We model out a full‑year 2025 impact of about $40 million on the COGS line… mitigation… roughly half pricing, half sourcing.”
  • CEO on pricing: “We’re putting out between 7% and 10% price increases effective mid‑May in our North America business.”
  • CFO: “Gross margin was 41.4%… a 280 basis point decrease… customer mix skewed to strategic customers with more favorable pricing terms.”
  • CFO: “Adjusted EBITDA for the first quarter… was $41 million… adjusted S&A as a percent of net sales increased to 28.7%.”
  • CEO on AMR & Clean 360: “AMR sales grew 30%… Clean 360 offers customers… a monthly price with a 90% uptime guarantee… designed to make AMR adoption more accessible.”

Q&A Highlights

  • Margin trajectory: Analysts probed how EBITDA margins can reach guidance range despite three sequential declines; management cited lapping the $50M Q1’24 backlog, normalization of customer mix, tariff mitigation and S&A discipline .
  • Tariff impact and mitigation: ~$40M 2025 impact; pricing (7–10%) and sourcing/logistics to offset most costs; competitive pricing moves seen as similar, reducing demand risks .
  • Pre‑price‑increase demand: Too early to tell; distributors may buy ahead modestly; mid‑year 7–10% hikes are new for TNC .
  • Seasonality: Return to historical pattern with Q2/Q4 larger and Q1/Q3 lighter; Q1 mix had concentration of strategic retail shipments (lower margin) .
  • Capital allocation: Continued repurchases primarily to offset dilution with flexibility to be opportunistic; dividend maintained .

Estimates Context

MetricConsensus (Q1 2025)Actual (Q1 2025)Surprise
Revenue ($USD Millions)296.6290.0 −6.6 (−2.2%)
Adjusted/Primary EPS ($)1.301.12 −0.18 (−13.8%)
EBITDA ($USD Millions)48.4541.0 (Adjusted) −7.45 (−15.4%)

Values retrieved from S&P Global.*

Implications: Street likely revises near‑term margins lower given gross margin mix headwinds and tariff costs in Q2/Q3, while maintaining FY ranges if mitigation actions execute and order strength persists .

Key Takeaways for Investors

  • Near‑term margins pressured by lapping high‑margin backlog and strategic retail mix; expect sequential mix normalization and pricing realization to aid H2 margins if tariff mitigation delivers .
  • Structural demand intact: four quarters of double‑digit order growth and book‑to‑bill >1 signal underlying strength; watch for order conversion amid price increases .
  • Tariff execution is pivotal: monitor realization of 7–10% price hikes and sourcing/logistics offsets against the ~$40M COGS headwind; potential catalyst if offsets exceed plan .
  • AMR is a multi‑year growth vector: X6 ROVR launch and Clean 360 subscription lower adoption friction; management targets $100M AMR revenue by 2027 .
  • ERP modernization is a 2025 cost overhang but supports medium‑term efficiencies ($10–$15M run‑rate savings post‑implementation); staged go‑lives planned in H2 2025 .
  • Reaffirmed FY 2025 guidance provides downside guardrails; FX and APAC (China/Australia) remain watch‑outs; EMEA pricing/service and Americas commercial strength are offsets .
  • Trading setup: post‑miss reset with clear catalysts (pricing realization, tariff offsets, AMR ramp, H2 margin trajectory); risk skew tied to execution on mitigation and mix normalization .
Sources:
Press release and 8‑K Exhibit 99 (Q1 2025): **[97134_8116306e312d400e8e631faf2d73054b_0]** **[97134_8116306e312d400e8e631faf2d73054b_1]** **[97134_8116306e312d400e8e631faf2d73054b_2]** **[97134_8116306e312d400e8e631faf2d73054b_3]** **[97134_8116306e312d400e8e631faf2d73054b_7]** **[97134_8116306e312d400e8e631faf2d73054b_8]** **[97134_8116306e312d400e8e631faf2d73054b_10]** **[97134_0000097134-25-000011_tnc-20250501xexx991.htm:0]** **[97134_0000097134-25-000011_tnc-20250501xexx991.htm:2]**
Earnings call transcript (Q1 2025): **[97134_TNC_3424708_1]** **[97134_TNC_3424708_2]** **[97134_TNC_3424708_3]** **[97134_TNC_3424708_4]** **[97134_TNC_3424708_5]** **[97134_TNC_3424708_6]** **[97134_TNC_3424708_8]** **[97134_TNC_3424708_9]** **[97134_TNC_3424708_10]** **[97134_TNC_3424708_11]** **[97134_TNC_3424708_12]**
Prior quarters (Q3/Q4 2024): press releases and 8‑Ks **[97134_c48cb7ab1b9546889bc9b2aada5ca410_0]** **[97134_c48cb7ab1b9546889bc9b2aada5ca410_2]** **[97134_c48cb7ab1b9546889bc9b2aada5ca410_9]** **[97134_ddef0dfc8acd4c0bac945548a99ddc46_0]** **[97134_ddef0dfc8acd4c0bac945548a99ddc46_2]** **[97134_ddef0dfc8acd4c0bac945548a99ddc46_12]** **[97134_TNC_3416511_1]** **[97134_TNC_3416511_4]** **[97134_TNC_3416511_5]** **[97134_TNC_3416511_6]** **[97134_TNC_3416511_7]**
Product/dividend PRs: **[97134_084902e4f74a4685b0be486fec94c379_0]** **[97134_084902e4f74a4685b0be486fec94c379_1]** **[97134_6966e285076a41569918e0624cd41b94_0]**

Estimates:
S&P Global consensus for Q1 2025 (Primary EPS, Revenue, EBITDA). Values retrieved from S&P Global.*