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TC

TENNANT CO (TNC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered net sales of $318.6M (-3.7% YoY; +9.9% QoQ) and adjusted EPS of $1.49, with orders up 4% YoY; management reaffirmed full-year 2025 guidance, citing robust order momentum (5th consecutive quarter ≥ long-term target) and tariff mitigation actions .
  • Results missed S&P Global consensus: revenue $318.6M vs $327.2M estimate and adjusted EPS $1.49 vs $1.63 estimate; two estimates were tracked for each metric (Street likely to reassess near-term run-rate, while FY guide is reiterated)* .
  • Margin pressure reflected mix normalization vs prior-year backlog conversion: gross margin 42.1% (-100 bps YoY), adjusted EBITDA margin 16.0% (-170 bps YoY); deleverage also tied to a bad debt charge in S&A .
  • Strategic catalysts: AMR reached 6% of sales with cumulative units >10,000 and X6 ROVR ramping; entry into outdoor sweeping via Z50 Citadel expands TAM; management highlighted price actions and supply-chain levers to offset tariffs and drive H2 margin expansion .

What Went Well and What Went Wrong

  • What Went Well

    • Orders +4% YoY (5th straight quarter at/above LT targets), book-to-bill >1, underpinning H2 confidence .
    • AMR momentum: AMR 6% of enterprise sales in Q2; cumulative robotic scrubbers sold surpassed 10,000; Clean360 EaaS offering gaining initial traction .
    • Reaffirmed FY25 guide despite macro/tariff uncertainty; price realization contributed 1.8 pts in Q2 and will remain a lever alongside procurement and productivity actions .
    • Quote: “Enterprise level order rates increased by 4%…fifth consecutive quarter of order growth” — CEO Dave Huml .
    • Quote: “AMR sales accelerated to 6% of enterprise net sales in Q2 2025…” — CEO Dave Huml .
    • Quote: “We remain confident in our ability to manage and offset tariff driven cost inflation.” — CFO Fay West .

  • What Went Wrong

    • YoY revenue (-3.7%) and adjusted EPS (-18.6%) declined due to tough backlog comp (lap of ~$26M in Q2’24) and mix (industrial/direct) normalization; gross margin -100 bps YoY .
    • S&A delevered on an adjusted basis to 27.3% of sales (vs 26.4%) primarily due to a bad debt charge tied to an insolvent distributor .
    • International softness: EMEA orders down 7.4% with Germany/Middle East weakness; APAC pressured by China price competition; management expects no APAC growth in 2025 .
    • Analyst concern: Implied H2 margin ramp requires price, mix, and productivity tailwinds; management pointed to backlog lap easing (1H ~$75M vs 2H ~$50M) and cost actions .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($M)$331.0 $290.0 $318.6
Diluted EPS (GAAP)$1.45 $0.69 $1.08
Adjusted Diluted EPS ($)$1.83 $1.12 $1.49
Adjusted EBITDA ($M)$58.6 $41.0 $51.0
Adjusted EBITDA Margin (%)17.7% 14.1% 16.0%
Gross Margin (%)43.1% (derived, see note) 41.4% 42.1%

Note: Q2 2024 gross margin derived as Q2 2025 (42.1%) + 100 bps YoY decline indicated in release .

Q2 2025 vs S&P Global Consensus (Street)

MetricQ2 2025 ActualQ2 2025 ConsensusSurprise
Revenue ($M)$318.6 $327.2*-$8.6M (miss)
Adjusted EPS ($)$1.49 $1.63*-$0.14 (miss)

Values marked with * retrieved from S&P Global.

Geographic Segment Net Sales

RegionQ2 2024 ($M)Q2 2025 ($M)YoY %
Americas$227.8 $213.5 -6.3%
EMEA$81.5 $84.7 +3.9%
APAC$21.7 $20.4 -6.0%
Total$331.0 $318.6 -3.7%

KPIs and Cash/Capital

KPIQ2 2025
Orders YoY growth+4%
Book-to-bill>1
AMR as % of net sales6%
AMR cumulative deployed units>10,000
Free Cash Flow ($M)$18.7
Adjusted FCF incl. ERP add-back ($M)$34.7
Net income to FCF conversion (%)137.2% (ex-ERP)
Cash & Equivalents ($M)$80.1
Unused Revolver ($M)$434.3
Shares repurchased / Buyback ($)179,824 shares; $13.4M
Dividends paid ($)$5.4M
Capex ($M)$3.8
Net leverage (x)0.66x (Adj. EBITDA basis)

Guidance Changes

MetricPeriodPrevious Guidance (Q1 2025)Current Guidance (Q2 2025)Change
Net Sales ($B)FY 2025$1.210–$1.250 $1.210–$1.250 Maintained
Organic Net Sales GrowthFY 2025(1%) – (4%) (1%) – (4%) Maintained
Diluted EPS (GAAP)FY 2025$3.80–$4.30 $3.80–$4.30 Maintained
Adjusted Diluted EPSFY 2025$5.70–$6.20 $5.70–$6.20 Maintained
Adjusted EBITDA ($M)FY 2025$196–$209 $196–$209 Maintained
Adj. EBITDA Margin (%)FY 202516.2%–16.7% 16.2%–16.7% Maintained
Capex ($M)FY 2025~20 ~20 Maintained
Adjusted Effective Tax RateFY 202523%–27% 23%–27% Maintained
Tariff impact estimate on 2025 COGSFY 2025~$40M (as of Q1 call) ~$20M (as of Q2 call) Lowered

Earnings Call Themes & Trends

TopicQ4 2024 (prev-2)Q1 2025 (prev-1)Q2 2025 (current)Trend
AMR/AI & techX6 ROVR announced for 2Q25 availability AMR 5% of sales; X4 ROVR momentum; Clean360 introduced AMR 6% of sales; >10k units; X6 ROVR launched Improving adoption
Supply chain/tariffsNot a focal point in PR (inflation noted) ~$40M tariff headwind with pricing/sourcing offsets Headwind revised to ~$20M; pricing/supply actions to offset Easing impact via mitigation
Product portfolioRecord adj. EBITDA; X6 ROVR on deck X4 ROVR drove growth; roadmap acceleration Z50 Citadel outdoor sweeper launched; TAM expansion Expanding portfolio/TAM
Regional dynamicsAmericas +10%; APAC -19% in 4Q Americas orders +20%; APAC challenged (China) Americas orders +9%; EMEA orders -7.4%; APAC softness (China) Americas strong; EMEA mixed; APAC weak
ERP modernizationElevated S&A from ERP/legal ERP costs pressured S&A $16M ERP cash spend in Q2; ongoing Ongoing investment

Management Commentary

  • “We achieved net sales of $319 million…organic sales decline of 4.5% [as] we are lapping the prior year quarter that benefited from a $26 million backlog reduction…Our underlying order demand grew 4%…fifth consecutive quarter of order growth.” — CEO Dave Huml .
  • “AMR sales accelerated to 6% of enterprise net sales in Q2 2025 with cumulative deployed units exceeding 10,000…a key driver of our long-term growth.” — CEO Dave Huml .
  • “Adjusted EBITDA margin for the [quarter] was 16%…down 170 basis points…Gross margin was impacted by product mix…partly offset by price realization.” — CFO Fay West .
  • “Based on current tariffs in place, we estimate a full-year 2025 impact of approximately $20 million…we remain confident in our ability to manage and offset tariff driven cost inflation.” — CFO Fay West .
  • “We are reaffirming our full year 2025 guidance.” — CEO Dave Huml .

Q&A Highlights

  • H2 ramp/margin drivers: Management expects gross margin expansion from pricing ramp, higher volume absorption, and cost-out; S&A/R&D can flex to support EBITDA expansion within guide .
  • Backlog lap optics: ~$75M backlog conversion lapped in 1H; ~$50M to lap in 2H—optical YoY pressure remains but easing in 2H .
  • Tariffs: Revised 2025 COGS impact to ~$20M from ~$40M in Q1; offset by targeted supply-chain actions and price increases (NA mid-May) .
  • Outdoor sweeper strategy: Z50 targets ~$200M industrial outdoor sweeping TAM; leverages existing sales/service infrastructure with strategic partnership to ensure cost competitiveness .
  • AMR financing: Clean360 EaaS early wins; expands addressable customer set by lowering upfront capex; AMR sales up ~20% YTD through 1H .

Estimates Context

  • Q2 2025 performance vs S&P Global consensus: Revenue $318.6M vs $327.2M estimate (miss); adjusted EPS $1.49 vs $1.63 estimate (miss). Only two estimates were recorded for each metric, which may amplify volatility around consensus in a macro-sensitive quarter*. Management reaffirmed FY guidance, implying Street models may migrate mix toward a stronger H2 on margin recovery, tariff mitigation, and positive order book .
    Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Mixed print but intact FY outlook: Q2 missed revenue and EPS consensus amid backlog/mix headwinds; robust orders and reaffirmed guide support a stronger H2 setup .
  • Margin recovery path: Pricing (1.8 pts in Q2), productivity, and volume absorption are expected to lift H2 margins; watch gross margin cadence and S&A leverage .
  • AMR flywheel turning: AMR now 6% of sales with >10k units deployed; X6 ROVR and Clean360 EaaS broaden use cases and adoption vectors .
  • New TAM unlocked: Z50 Citadel entry into outdoor sweeping adds an industrial adjacency with minimal channel buildout required; early orders and pipeline are potential stock catalysts .
  • Tariff risk manageable (for now): 2025 COGS impact revised to ~$20M, with active mitigation (pricing/sourcing); monitor policy shifts and realization timing .
  • Regional watchlist: Americas strength vs EMEA competitive intensity and APAC (China) price pressure—execution on European growth playbook and China competition response are key .
  • Capital deployment: Ongoing buybacks and dividend support TSR; balance sheet flexibility (0.66x net leverage, ample revolver) preserves M&A option value .

Citations:

  • Q2 2025 8-K/press release:
  • Q2 2025 earnings call transcript:
  • Q1 2025 press release and call:
  • Q4 2024 press release:
  • Additional press releases (AMR and Z50):