Tennant (TNC) 1 Nov 24 2024 Q3 Earnings call transcript

In the latest earnings call for Tennant Company, executives provided an update on the company's performance and strategic initiatives for the third quarter of 2024. Led by Vice President, Finance and Investor Relations, Lorenzo Bassi, the call highlighted the company's strong financial results and strategic focus on growth, performance, and people.

Strong Third Quarter Performance

Tennant Company reported a 3.6% increase in net sales to $315.8 million, with adjusted EBITDA rising to $47.9 million, yielding an adjusted EBITDA margin of 15.2%. This performance marks a significant improvement over the previous year, with order rates increasing high single digits compared to the same period in 2023. The company's strategic initiatives, particularly in the areas of pricing and new product development, have contributed to this growth momentum.

Geographical Performance

Tennant Company's performance varied by geography. In the Americas, order rates increased significantly, outperforming the average growth rates seen in the region over the past few years. This success was driven by pricing and volume growth resulting from enterprise strategy initiatives. In EMEA, market demand softness was compounded by lapping a previous quarter with higher backlog reduction benefits. Despite this, there are positive signs in the region, with double-digit growth in the U.K. and strong organic growth in Italy. In APAC, the company has been impacted by slowing market demand, particularly in China, but has managed to maintain growth through strategic focus on vertical markets and product categories.

Strategic Initiatives

Tennant Company's strategic initiatives, introduced under the three pillars of growth, performance, and people, continue to be a key driver of the company's growth. Pricing growth and new product development are critical components of this strategy. The company aims to achieve approximately 50 to 100 basis points of annual price growth and is on track to achieve this in 2024. New product development, including the release of the X4 ROVR earlier this year, is expected to add approximately 150 to 200 basis points of growth. The company is also focusing on small space and product line extensions, with the introduction of the i-mop family of products into new geographic markets.

Looking Ahead

With a strong third quarter performance and a clear strategic focus, Tennant Company is well positioned to achieve its 2024 guidance and continue to execute its enterprise growth strategy effectively. The company's strategic initiatives, particularly in the areas of pricing and new product development, are expected to drive continued growth and differentiate Tennant from its competitors. The company's performance in the face of market challenges, particularly in China, demonstrates its resilience and ability to adapt to changing market conditions.

Conclusion

Tennant Company's third quarter earnings call provided a comprehensive update on the company's financial performance and strategic initiatives. With a clear focus on growth, performance, and people, the company is well positioned to navigate market challenges and continue its growth trajectory. Investors and analysts will be closely watching the company's progress as it executes its strategic initiatives and navigates the dynamic market landscape.