Tennant Company ((TNC)) has held its Q4 earnings call. Read on for the main highlights of the call.
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In the recent earnings call, Tennant Company presented a largely positive outlook driven by strategic initiatives that have led to record net sales and robust order growth. However, challenges in certain regions, legal expenses, and modernization costs were also notable points of discussion. Despite these hurdles, the company remains on a positive trajectory with strategic investments and expansion plans.
Record Net Sales and EBITDA
Tennant Company reported a remarkable financial year with net sales reaching $1.287 billion and adjusted EBITDA climbing to $208.8 million. The adjusted EBITDA margin also expanded to 16.2%, highlighting the company’s efficient cost management and operational execution.
Strong Order Growth
The company achieved a 6.4% increase in orders over the previous year, surpassing long-term targets. This growth was consistent across the last three quarters, with volume growth exceeding 5% in the fourth quarter, underscoring the effectiveness of Tennant’s sales strategies.
Successful AMR Product Expansion
Tennant has made significant strides in its Autonomous Mobile Robots (AMR) product line, with sales reaching $75 million in 2024. The upcoming launch of the X6 ROVR model is part of their plan to exceed $100 million in AMR revenue by 2027, reflecting their commitment to innovation and market leadership.
Strategic M&A and Investments
The company’s strategic M&A activities included investments in Brain Corp and the acquisition of TCS, which are expected to contribute $150 million in net sales growth over the next three years. These actions demonstrate Tennant’s proactive approach to expanding its market footprint.
Decline in APAC Performance
Challenges in the Asia-Pacific region were apparent, with a 19% decline in organic sales driven by reduced demand in China and government-induced overproduction. These factors highlight the volatility and risk associated with operating in international markets.
Legal Contingency Expense
Tennant faced a legal setback with a jury ruling against the company, resulting in $9.8 million in damages and $4.7 million in prejudgment interest. This legal expense impacts the financial outlook but is being managed within the broader financial strategy.
ERP Modernization Costs
In 2024, Tennant invested $37 million in ERP modernization, with $14 million expensed and $23 million capitalized. While this project has affected financial results, it is a critical investment for future operational efficiency.
Anticipated 2025 Organic Sales Decline
Looking forward, Tennant anticipates an organic sales decline of 1% to 4% in 2025, primarily due to a $125 million backlog headwind and currency impacts. The company plans to counter these challenges through order growth and strategic investments.
Forward-Looking Guidance
For fiscal 2025, Tennant sets its net sales guidance between $1,210 million and $1,250 million, with adjusted EBITDA expected to range from $196 million to $209 million. The company is focused on managing inflation and expanding its gross margin by 30 basis points. Strategic initiatives include a $50 million ERP modernization project and restructuring efforts projected to save $10 million annually. Tennant is also targeting AMR revenue to exceed $100 million by 2027.
In conclusion, Tennant Company’s earnings call reflected a generally positive sentiment, with record sales and strategic expansions driving growth. Despite challenges in specific regions and legal expenses, the company’s forward-looking guidance and strategic initiatives suggest a strong commitment to maintaining its positive trajectory.
