Tennant Company · NYSE:TNC
Tennant — Q4 2019 Earnings Presentation
31 slides from Tennant's earnings presentation, Feb 20, 2020
Slide 1: Earnings Release Call Fourth Quarter 2019
Earnings Release Call Fourth Quarter 2019 Thursday, February 20, 2020
Slide 2: On the Call Today
On the Call Today Chris Killingstad Andy Cebulla President and CEO Interim CFO 2
Slide 3: Forward-Looking Statements & Non-GAAP Measures
Forward-Looking Statements & Non-GAAP Measures Our remarks this morning and our answers to questions may contain forward-looking statements regarding the company’s expectations of future performance. Such statements are subject to risks and uncertainties, and our actual results may differ materially
Slide 4: Tennant Company Financial Results Conference Call
Tennant Company Financial Results Conference Call Fourth Quarter and Full Year 2019 Thursday, February 20, 2020 4
Slide 5: Fourth Quarter and Full Year 2019
Fourth Quarter and Full Year 2019 Record level Americas Broad-based Revenue and EBITDA 10 consecutive years macroeconomic of organic growth challenges in EMEA/APAC Demonstrates our ability to manage reasonable growth with improved profitability 5
Slide 6: Enterprise Strategy – Global Positioning Strategy (GPS)
Enterprise Strategy – Global Positioning Strategy (GPS) Win where we have a Reduce complexity & build Innovate for profitable competitive advantage scalable processes growth 6
Slide 7: Win where we have a competitive advantage
Focus investments & resources where we can create the most value Focus Areas Win where 1 2 3 we have a competitive Simplifying the Strengthening Optimizing advantage product portfolio local advantage go-to-market 7
Slide 8: Simplifying our Product Portfolio
1 Simplifying our Product Portfolio Streamline Rationalize Target Category/Product Exits Standard Offerings By 2021 Orbio: Onsite Generation Consistent customer Technology experience Outdoor Category Exits: • Improved lead times Manufacturing predictability 25% Green Machine, Sentinel Target
Slide 9: Strengthening Local Advantage
2 Strengthening Local Advantage Serving Assess Our Market Position vs. Competition +100 markets globally Target Markets for Differentiated Strategies 12 markets targeted Meeting Local Customer Requirements 4 markets selected for 2020 actions Differentiated strategies to drive EBITDA 9
Slide 10: Optimize Go-to-Market
3 Optimize Go-to-Market Applying 80/20 Principles Analyze: Prioritize: Reach: Align Value: Customer Customer Channel Program Segmentation Optimization Optimization Optimization Aligning Customer Experience with our Enterprise Profitability Goals 10
Slide 11: Reduce complexity & build scalable processes
Simplify and standardize to gain efficiency and leverage Focus Areas Reduce 1 2 3 complexity & build scalable Leveraging Our Advancing Our Capturing processes Platform Product Design Supply Chain – Local for Local Operating Model Efficiencies 11
Slide 12: Leveraging Our Platform Product Design
1 Leveraging Our Platform Product Design Currently Underway Upcoming Initiatives Sub-system Commodity Value Engineering Product Architecture Architecture Components 20-Inch Walk-Behind IoT Parts Reuse & Rationalized Scrubber Supplier Leverage Platforms & Scalable Designs Improved GM Board Reduction
Slide 13: Operations: In Region, For Region
2 Operations: In Region, For Region Source Win Manufacture Locally Locally Locally Win locally by delivering superior customer experience: delivery, quality, cost 13
Slide 14: Capturing Operating Model Efficiencies
3 Capturing Operating Model Efficiencies Strategically Scaling from “Big” Small Company to “Small” Big Company Assess Standardize Enable Gaining where processes with Leverage there are that can scale automation inefficiencies & IT with Scale 14
Slide 15: Innovate for profitable growth
Thinking Differently to Maximize Value for Customers and Tennant Innovate for Customer- New Unlocking profitable Driven Insights Innovation Approach Value for Customers growth and Tennant 15
Slide 16: New Innovation Approach
New Innovation Approach Focus Focus on 1 on Customer Customer 2 Open Our Aperture 3 Approach Problems Problems Beyond “Machines” Results • Value for • Labor • Service • Market Based Customers • Productivity • Aftermarket • Value for • MVP/Iterative • Image • New Business Approach Tennant Models • He
Slide 17: Monetizing Innovation
Monetizing Innovation Bringing the T7AMR Robotic Floor Scrubber Quickly to Market First unit shipped November Officially launched 2018 the product Announced agreement with October Brain Corp 2018 April 2018 April 2019 Walmart agreement announced 17
Slide 18: The Journey Has Begun
The Journey Has Begun 1 2 3 We have a team dedicated We are focusing our We are operating from a to our three-pillar strategy resources on the position of strength and to unlock our full growth rigorous execution of focused on driving potential that strategy shareholder value 18
Slide 19: Capitalizing on the Strategy: 2024 Growth Targets
Capitalizing on the Strategy: 2024 Growth Targets 2-3% 6-10% 50-100 BPS Organic EBITDA EBITDA Sales Growth Leverage Annually Annually Annually Consistent and predictable results to drive total shareholder return Note: See the Supplemental Non-GAAP Financial Table within Q4'19 Earnings Release for de
Slide 20: Tennant Company Financial Results Conference Call
Tennant Company Financial Results Conference Call Fourth Quarter and Full Year 2019 Thursday, February 20, 2020 20
Slide 21: Fourth Quarter 2019 – Sales | Adjusted EPS
Fourth Quarter 2019 – Sales | Adjusted EPS Q4 ‘19 Organic Growth of +2.8% Q4 '19 Q4 '18 CHANGE SALES $294.8 M $285.2 M +3.4% EPS Adjusted* $0.64 $0.54 +18.5% Full Year Meaningful progress throughout 2019 Record-level revenue and EBITDA * See the Supplemental Non-GAAP Financial Table within Q4'19
Slide 22: Fourth Quarter 2019 – Geographies
Fourth Quarter 2019 – Geographies Americas Sales increased 6.7%, or +7.2% organically: 9th consecutive quarter of organic growth North America Autonomous T7 demand in North America Continued strength in Service, Parts and Consumables in North America Latin America Broad-based strength,
Slide 23: Fourth Quarter 2019 – Geographies
Fourth Quarter 2019 – Geographies EMEA Sales decreased 7.2%, or -4.2% organically: Continued market uncertainty across the region APAC Sales increased 15.5%, or -4.1% organically: Primarily driven by China 23
Slide 24: Fourth Quarter 2019 – Sales | Adjusted Gross Margin
Fourth Quarter 2019 – Sales | Adjusted Gross Margin Q4 '19 Q4 '18 CHANGE Sales $294.8 M $285.2 M +3.4% Gross Margin (% of sales) Adjusted* 40.5% 39.3% +120 bps Adjusted results Positive pricing actions Cost-reduction efforts to offset macro headwinds * See the Supplemental Non-GAAP Financial Tab
Slide 25: Fourth Quarter 2019 – Sales | Adjusted S&A Expense
Fourth Quarter 2019 – Sales | Adjusted S&A Expense Q4 '19 Q4 '18 CHANGE Sales $294.8 M $285.2 M +3.4% S&A Expense (% of sales) Adjusted* 30.4% 30.7% -30 bps Adjusted results Reflects cost-containment efforts and higher revenue * See the Supplemental Non-GAAP Financial Table within Q4'19 Earnings R
Slide 26: Fourth Quarter 2019 – Adjusted EBITDA | Other Financial Metrics
Fourth Quarter 2019 – Adjusted EBITDA | Other Financial Metrics Q4 '19 Q4 '18 CHANGE Adjusted EBITDA* $34.0 M $30.3 M +12.2% Adjusted EBITDA Margin* 11.5% 10.6% +90 bps Other results Adjusted Effective Tax rate of 23.2% Cash from operations generation of $25.7 million Cash dividends of $4.0 mi
Slide 27: Full Year 2019 – Performance
Full Year 2019 – Performance FY ‘19 Organic Growth of +2.2% FY '19 FY '18 CHANGE Sales $ 1.14 B $1.12 B +1.3% EPS Adjusted* $2.90 $2.18 +33.0% Adjusted EBITDA* $136.9 M $120.8 M +13.3% Adjusted EBITDA Margin* 12.0% 10.8% +120 bps Other results Cash from operations generation of $71.9 million Cas
Slide 28: Adjusted EPS
Adjusted EPS Adj EPS After-tax Updated Adj Amortization Impact EPS 2019 Full Year Results $2.90 $0.88 $3.78 Comments Adjusted EPS now excludes certain non-operational items and also excludes after-tax amortization expense Better reflection of the operational performance of our business given the
Slide 29: 2020 Guidance
2020 Guidance Full Year Sales of $1.15 billion to $1.16 billion (1.5% to 2.5% organic) (includes approximately $10 to $15 million of impact within the year due to product exits completed in 2019) GAAP earnings of $3.05 to $3.20 per diluted share Adjusted EPS of $4.00 to $4.15 Adjusted EBITDA
Slide 30: Questions?
Questions? COMPANY TENNANT | ase)
Slide 31: Tennant Company Financial Results Conference Call
Tennant Company Financial Results Conference Call Fourth Quarter and Full Year 2019 Thursday, February 20, 2020 31