In This Article:
Release Date: May 01, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Tennant Co (NYSE:TNC) reported a 13% increase in order rates, marking the fourth consecutive quarter of near or above double-digit order growth.
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The company successfully launched the Clean 360 program, which aims to make AMR adoption more accessible through a subscription model.
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Tennant Co (NYSE:TNC) achieved 30% growth in AMR sales over the first quarter of 2024, with AMR accounting for approximately 5% of net sales.
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The company maintained a strong liquidity position with approximately $80 million in cash and $434 million of unused borrowing capacity.
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Tennant Co (NYSE:TNC) reaffirmed its 2025 guidance, indicating confidence in achieving its financial targets despite economic uncertainties.
Negative Points
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Net sales declined by 6.8% compared to the first quarter of 2024, primarily due to volume declines across all geographies.
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The company faced a significant impact from tariffs, estimating a $40 million cost for the full year 2025.
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Gross margin decreased by 280 basis points to 41.4%, driven by shifts in product and customer mix and ongoing inflation.
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Adjusted EBITDA margin for the first quarter of 2025 was 14.1%, down 360 basis points from the prior year period.
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Net income decreased to $13.1 million from $28.4 million in the prior year period, impacted by lower net sales and increased costs associated with ERP projects and restructuring.
Q & A Highlights
Q: Dave, the margins have declined sequentially for three straight quarters. Given the inflationary pressures, how do you plan to achieve the margin guidance for this year? A: (Dave Hammel, President and CEO) The margin decline was partly due to the backlog headwind from $50 million worth of industrial equipment shipped in Q1 2024. We planned for this margin hit in our operating plan and full-year guidance. As we move through 2025, we expect the mix to return to a more normalized state, particularly from a customer perspective. Additionally, we are implementing pricing and sourcing actions to offset the $40 million tariff impact, which should help us achieve our full-year margin guidance.
Q: Once you announced the price hikes, did you see an influx in orders and demand? A: (Dave Hammel, President and CEO) It's too early to tell, as we are returning to normal seasonality. Our Q2 is typically larger, and distributors may decide to buy ahead to avoid price increases. However, historically, mid-year price increases have not been a huge driver of buying ahead.