Tennant Company, recognized as a leader in the design, manufacture, and marketing of cleaning solutions, reported a 3.6% rise in net sales, reaching $315.8 million for Q3 2024. The company’s adjusted EBITDA climbed to $47.9 million, with an indicated margin of 15.2%, and adjusted net income saw a 4.7% increase to $26.6 million.
Despite experiencing a decline in GAAP net income compared to the previous year, Tennant’s future prospects look promising due to strategic initiatives such as new product launches and ongoing ERP modernization. Additionally, the company declared a 5.4% dividend raise and reaffirmed its full-year guidance for 2024.
Key Highlights:
- Year-over-year net sales rose by 3.6% to $315.8 million.
- Adjusted EBITDA reached $47.9 million, demonstrating a 15.2% margin.
- Adjusted net income increased by 4.7% to $26.6 million, with adjusted EPS at $1.39.
- Order rates surged in the high single digits, driven by strong performance in the Americas.
- The company aims to lower its backlog by $130 million by year-end.
- Strategic initiatives are focused on ERP modernization and new product launches.
- The company announced a 5.4% dividend increase, marking the 53rd consecutive year of dividend growth.
- An Investor Day is scheduled for November 13 to discuss the company’s strategic direction.
Outlook:
- Tennant reaffirmed its 2024 guidance for net sales, projecting a range between $1.28 billion to $1.305 billion.
- Adjusted EPS projections range from $6.15 to $6.55.
- Adjusted EBITDA is expected to be between $205 million and $215 million.
- Continued order growth is anticipated for 2025, although backlog challenges may affect performance.
Challenges:
- The GAAP net income for Q3 decreased to $20.8 million from $22.9 million last year.
- Backlog issues may impact top-line performance in 2025.
- Lower-than-expected industrial equipment orders have contributed to a notable backlog reduction.
- The APAC region encounters overcapacity and pricing pressures, notably in China.
Prospects:
- Strong order performance in the Americas with effective pricing and volume growth.
- EMEA exhibited double-digit order growth despite some market slack.
- The company’s solid cash position includes $91.3 million in cash and $439.3 million in unused credit capacity.
- The Autonomous Mobile Robots (AMR) segment, featuring the X4 Rover, is set to drive substantial growth.
Concerns:
- Softness in industrial orders is primarily impacting a narrow range of products in the rental sector.
- Market overcapacity and reduced demand in China are exerting price pressures.
Company Performance:
- The X4 Rover AMR product has seen a doubling in production capacity in response to strong demand.
- ERP modernization costs are forecasted at $37 million for the entire year, with anticipated efficiency improvements post-implementation.
- EMEA’s acquisition is performing well, showing successful integration and growth initiatives.
- Management remains optimistic about growth across various sectors despite challenges in the rental industry and high freight costs.
Tennant Company demonstrated resilience and strategic foresight in its third quarter of 2024. With innovation at the forefront, such as the T291 scrubber and X4 Rover, coupled with disciplined spending and a robust cash position, Tennant is well-positioned for continued success in the cleaning solutions sector. As they approach Investor Day in Chicago, stakeholders and investors will be keen to understand Tennant’s strategic direction and future growth plans amidst ongoing market challenges.
