• Net Sales: $1.287 billion for the full year 2024, a 3.5% increase from 2023.
• Adjusted EBITDA: $208.8 million for 2024, with a margin of 16.2%.
• Organic Growth Rate: 3.2% for the full year 2024.
• Fourth Quarter Net Sales: $328.9 million, a 5.6% increase from Q4 2023.
• GAAP Net Income: $83.7 million for 2024, down from $109.5 million in 2023.
• Adjusted EPS: $6.57 per diluted share for 2024, flat compared to the prior year.
• Free Cash Flow: $68.8 million for 2024.
• AMR Equipment Sales: $75 million in 2024.
• Adjusted Gross Margin: 42.7% for the full year 2024, a 20 basis point improvement.
• Net Cash Provided by Operating Activities: $89.7 million in 2024.
• Capital Expenditures: $20.9 million in 2024.
• 2025 Guidance - Net Sales: $1.210 billion to $1.250 billion.
• 2025 Guidance - Adjusted EPS: $5.70 to $6.20 per diluted share.
• 2025 Guidance - Adjusted EBITDA: $196 to $209 million.

• Warning! GuruFocus has detected 4 Warning Signs with GLDD.

Release Date: February 18, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Tennant Co (NYSE:TNC) achieved record highs in net sales, adjusted EBITDA, and EBITDA margins for 2024, with net sales reaching $1.287 billion.
• The company successfully reduced its backlog by $125 million, normalizing levels and aligning incoming orders more closely with revenue.
• Tennant Co (NYSE:TNC) reported strong performance in the Americas, with high single-digit order growth driven by new products like the X4 Rover.
• The company expanded its product line with successful innovations in AMR, small space, and product line extensions, exceeding long-term growth targets.
• Tennant Co (NYSE:TNC) activated its M&A framework with strategic investments, including the acquisition of TCS, contributing to inorganic growth in EMEA.

Negative Points

• Tennant Co (NYSE:TNC) faced lower than anticipated demand for industrial equipment, particularly in the rental channel, due to extended fleet replacement cycles.
• The company experienced significant demand declines in China and Australia, impacting business performance in the APAC region.
• Full year 2024 GAAP net income decreased to $83.7 million from $109.5 million in 2023, impacted by higher R&D costs and other expenses.
• The company faced a legal contingency expense due to an adverse jury verdict related to an intellectual property dispute, resulting in $14.5 million in damages and interest.
• Tennant Co (NYSE:TNC) anticipates a negative 1% to negative 4% organic sales decline in 2025 due to the backlog reduction headwind and foreign currency impacts.

Q & A Highlights

Q: How does Tennant plan to maintain or grow margins in a declining revenue environment for 2025? A: Fay West, CFO, explained that Tennant is taking actions to manage costs both from a COGS and S&A perspective. They anticipate gross margin expansion in line with long-term targets of roughly 30 basis points. Cost-out initiatives and productivity improvements are expected to offset inflation, and pricing realization will drive gross margin expansion.

Q: Can you provide insights into the order rates for Q4 2024 and the start of 2025? A: David Huml, CEO, noted that Tennant achieved close to double-digit order rates in Q2, Q3, and Q4 of 2024. The company expects to drive 5% to 6% order rates in 2025, which is above their long-term commitment of 3% to 5% growth. This momentum gives them confidence in their 2025 guidance.

Q: What is the strategy behind the recent share repurchase announcement? A: Fay West stated that there is no time limit on the share repurchase program, which allows flexibility and runway over the next few years. While the primary focus is to offset dilution, Tennant can be opportunistic. The authorization is part of their capital allocation framework, balancing returning value to shareholders, reinvesting in the business, maintaining leverage, and pursuing M&A.

Q: What are the opportunities for Tennant in the Asia Pacific markets in 2025 after a challenging 2024? A: David Huml acknowledged the challenging environment in APAC, particularly in China. Tennant is not counting on a recovery in China and is focusing on vertical markets and product categories where they have a competitive advantage. They are pivoting their approach to focus on areas with less competition and margin pressure.

Q: Can you provide more details on the X6 Rover rollout and its target markets? A: David Huml highlighted that the X6 Rover is the next evolution in their AMR product line, targeting high-end commercial and mid to low-end industrial markets. It features an autonomous charging dock and is suitable for large retail, educational, healthcare, manufacturing, and logistics sectors. The X6 is expected to be a significant addition to Tennant's AMR offerings.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.