Tennant Company · NYSE:TNC
Tennant — Investor Day (May 2024)
77 slides from Tennant's investor day presentation, May 13, 2024
Slide 1: Investor Day
Investor Day May 13, 2024 Elevate Growth, Performance & People
Slide 2: Safe Harbor Statement
SAFE HARBOR STATEMENT Certain statements contained in this document are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act. These statements do not relate to strictly historical or current facts and provide current expectations or forecasts of
Slide 3: Agenda
Agenda Introduction Company Accelerating Innovating for Integrated Unlocking Overview and Growth Profitable Sustainability Value Strategy Growth Lorenzo Bassi Dave Huml Rusty Zay Pat Schottler Reilly Goodwin Fay West Vice President, President & Chief Senior Vice Senior Vice President, Senior Directo
Slide 4: Company Overview and Strategy
Company Overview and Strategy Dave Huml President and Chief Executive Officer Investor Day 2024 4
Slide 5: Who We Are
Who We Are Our vision is to create a cleaner, safer, healthier world Our mission is to leverage innovation to reinvent how our customers clean Investor Day 2024 5
Slide 6: Investment Thesis
Global Leader in an Expanding Market Tennant Company’s with a Differentiated Product Portfolio & Service Offering Investment World-Class Service Model provides Strong Competitive Advantage Thesis Compelling Growth Opportunities underpinned by Global Megatrends Innovation that drives the Future of Me
Slide 7: Reliable, Innovative Equipment at Core of Success
Reliable, Innovative Equipment at Core of Success Scrubbers | Sweepers | AMR | Small Space | Vacuums | Pressure Washers | Aftermarket Scrubbers AMR Pressure Washers & Vacuums Sweepers Small Space Aftermarket High-Quality Strong Cleaning Image-Enhancing Equipment Performance Shared Space Investor Day
Slide 8: A Global Leader in the Mechanized Cleaning Space
A Global Leader in the Mechanized Cleaning Space TNC Market Share* Americas ~25% ~$3.4B Leverage brand, ~14% channels and Market Share Market service strength Addressable Global Market* ~$8.6B EMEA ~10% ~$3.4B Expand direct Market Share Market coverage *Ref er to endnotes for definitions of certain
Slide 9: Multi-Channel Strategy Maximizes Growth Opportunities
Multi-Channel Strategy Maximizes Growth Opportunities 2023 Net Sales by Multi-Channel Approach Diverse Core Product Category Vertical Markets $USD 15% #1 Contract Cleaners 23% DIRECT DISTRIBUTOR RENTAL #2 Retail #3 Manufacturing 62% #4 Logistics #5 Healthcare Service & Other SERVICE E-COMMERCE Equip
Slide 10: Tiered Brands & Channel Mix Provide Growth Opportunity
Tiered Brands & Channel Mix Provide Growth Opportunity Americas EMEA APAC PREMIUM MID-TIER PREMIUM MID-TIER PREMIUM MID-TIER 81% 19% 49% 51% 45% 55% Direct Distribution Direct Distribution Direct Distribution Leveraging Brands and Expanding Channels to Drive Growth Investor Day 2024 10
Slide 11: Service as a Competitive Advantage
Service as a Competitive Advantage Differentiated Offering Local Experienced Efficient 900+ 9+ Years Mobile capable and AI-driven virtual Field Service Techs Average Tenure service Attractive Aftermarket Opportunity Upside Potential Recurring 38% Revenue 62% ~80% 70% 2023 Net Sales ($USD) Aftermarke
Slide 12: Executed Structural Change to Position for Growth
Executed Structural Change to Position for Growth 2019-2023 Strategic Pillars Results Targets Actual Win where we have a competitive advantage Revenue* 2-3% ~3% Reduce complexity & build scalable processes EBITDA 6-10% ~9% Innovate for profitable growth EBITDA % 15% 15%+ Years 5 4 *Net sales
Slide 13: Megatrends Driving Enhanced Innovation and Growth Opportunities
Megatrends Driving Enhanced Innovation and Growth Opportunities Labor availability and cost challenges Automation driving automation X4 ROVR Shift to mechanized cleaning in Modernization developing countries Customer-led push for internal combustion Electrification engines to battery-powered mechani
Slide 14: Elevate Growth Strategy
Elevate Growth Strategy Our Strategic Pillars GROWTH PERFORMANCE PEOPLE Pricing Excellence Enterprise Resource Planning Employee Value Proposition Product Innovation Sustainability New Channels & Markets New Business Models Strategic Acquisitions Investor Day 2024 14
Slide 15: Future of Mechanized Cleaning: Autonomous Mobile Robots
Future of Mechanized Cleaning: Autonomous Mobile Robots Solve Labor Challenges AMR Employee focus on other higher-value responsibilities and help bridge staffing issues Addresses Proof of Performance Capture real-time data and provide proof of clean customer challenges Enhance Experience Clean floor
Slide 16: Leading the AMR Disruption in the Cleaning Industry
Leading the AMR Disruption in the Cleaning Industry Brain Corp T7AMR T380AMR T16AMR Lithium-Ion Exclusive Technology Partnership introduced introduced introduced Technology Agreement introduced for with Brain Corp's Gen 3 announced longer runtime navigation software and opportunity charging Selling
Slide 17: AMR by the Numbers
AMR by the Numbers *2019-2023 4 Models 6,800+ Units Sold* 700+ Unique Customers* 3X Pricing $200M+ Revenue* ~3 Year Payback Investor Day 2024 17
Slide 18: Our Sustainability Approach
Our Sustainability Approach IMPACT AREAS Employee Success Climate & Energy Social Impact Water & Chemical Use Circular Shared Spaces Products & Waste Sustainability is at the core of Tennant Operations Investor Day 2024 18
Slide 19: Strategic M&A Priorities Aligned to Enterprise Strategy
Strategic M&A Priorities Aligned to Enterprise Strategy 1 2 3 Defend & Grow Drive Value Expand Portfolio into Cleaning Core Through Connected Mobile Equipment Autonomy Adjacencies Sustained Maintain and Enhance Gain Share and Increase Diversify & Grow Strong Margins & Growth Recurring Revenue Models
Slide 20: Attractive Long-Term Model
Attractive Long-Term Model 3-5% 50-100bps 100% Net Sales Expand Adjusted Net Income to Free Organic Growth EBITDA Margin Cash Flow Conversion Profitable Growth from M&A Strategy ~$150 million Net Sales Added Over 3 Years Significant Value Creation Investor Day 2024 20
Slide 21: Key Takeaways
Key Takeaways Drive long-term, above-market growth through premium product and service offerings that deliver strong customer ROI Multi-channels to market drives leading market positions Broad vertical market customers provide growth potential, insulation from cyclical/sector downturns Market-leadin
Slide 22: Dedicated and Experienced Team to Execute Growth Strategy
Dedicated and Experienced Team to Execute Growth Strategy and Drive Shareholder Value Dave Huml Barb Balinski Brock Christianson Kristin Erickson President & CEO SVP, CTO SVP, CHRO SVP, General Counsel & Corporate Secretary Pat Schottler Fay West Richard Zay SVP, CMTO SVP, CFO SVP, CCO Investor Day
Slide 23: Accelerating Growth
Accelerating Growth Richard "Rusty" Zay Senior Vice President & Chief Commercial Officer Investor Day 2024 23
Slide 24: Elevate Growth Strategy
Elevate Growth Strategy Our Strategic Pillars GROWTH PERFORMANCE PEOPLE Pricing Excellence Enterprise Resource Planning Employee Value Proposition Product Innovation Sustainability New Channels & Markets New Business Models Strategic Acquisitions Growth is a key part of elevating our leadership posi
Slide 25: Pricing Excellence Supports Resilient Growth
Pricing Excellence Supports Resilient Growth Discount Discipline Our Pricing Approach Market Driven New Product Development Offsets Inflation Proprietary Value Maximizing market position to capture growth and value we deliver Investor Day 2024 25
Slide 26: Product Innovation Focused on High Growth
Product Innovation Focused on High Growth AMR Small Space Product Line Extensions Lead the adoption Lead the mechanization Leverage acquired of robotic cleaning of small-space cleaning platforms to expand market reach Right to Win Go-to-Market Coverage Channel Strength Brand Portfolio Investments in
Slide 27: Capitalize on Channel & Market Strengths
Capitalize on Channel & Market Strengths N. AMERICA EMEA L. AMERICA APAC Strength Strength Strength Strength Go-to-market coverage Broad coverage Go-to-market coverage Go-to-market coverage leadership across region leadership in Brazil & Mexico leadership in ANZ Solid base in China & India Focus Foc
Slide 28: North America Opportunity
North America Opportunity Drive AMR Adoption Connected Services Invest in customer success Increase field service capacity and teams for increased adoption capability through virtual service, remote Addressable Market diagnostics and predictive AI services ~$3.0B Maximize Distribution Expand E-comme
Slide 29: EMEA Opportunity
EMEA Opportunity Drive AMR Adoption Increase Industrial Go-to-Market Coverage Invest in customer success teams for increased adoption Add capacity and capability to Addressable Market increase presence in Western Europe ~$3.4B Market Share Enhance IPC Go-to- Expand Direct Market Coverage Geographic
Slide 30: Latin America Opportunity
Latin America Opportunity Drive Mechanization Expand IPC Go-To Leverage Equipment as a Market Coverage Service to drive adoption of Broaden vertical market Addressable Market mechanized cleaning coverage in Brazil & Mexico ~$400M Market Share Case Study ~15% EaaS in Brazil Majority share 40% of TNC
Slide 31: APAC Opportunity
APAC Opportunity Expand Go-to-Market Coverage Addressable Market ANZ China India ~$1.8B Develop IPC Increase Gaomei Expand IPC channel channel and channel coverage coverage and leverage product and leverage develop Tennant go- Market Share extensions to product extensions to-market presence ~5% expa
Slide 32: New Business Opportunities
New Business Opportunities Equipment as a Service Recurring revenue opportunity Robotics as a Service Increase AMR adoption rates and recurring revenue Connected Services Utilize predictive AI to increase customer value Differentiated service capability enables strong recurring revenue stream with u
Slide 33: Key Takeaways
Key Takeaways Pricing Excellence supports resilient growth Product Innovation focused on high growth Capitalize on Channel & Market Strengths with tailored growth strategy in each region New Business Opportunities driven by differentiated service capability Well-positioned to achieve 3-5% long-term
Slide 34: Break
BREAK 10 Minutes Investor Day 2024 34
Slide 35: Welcome Back
Welcome Back Investor Day 2024 35
Slide 36: Innovating for Profitable Growth
Innovating for Profitable Growth Pat Schottler Senior Vice President, Chief Marketing and Technology Officer Investor Day 2024 36
Slide 37: Our Vision for Reinventing How the World Cleans
Our Vision for Reinventing How the World Cleans A global fleet of connected cleaning robots that operate 100% autonomously 1 Autonomous Robots World’s best cleaning machines operating 100% autonomously Customers with 2 Navigation Software SHARED SPACES Sensing, mapping and navigating new spaces Manu
Slide 38: TNC Is Automating Cleaning to Create and Capture Value
TNC Is Automating Cleaning to Create and Capture Value 2x labor productivity 10x labor productivity 6x labor productivity Manual Mechanized Robotic Fully Autonomous Cleaning Cleaning Cleaning Cleaning Typical Typical Typical Typical Floorcare Costs Floorcare Costs Floorcare Costs Floorcare Costs Lab
Slide 39: Product Innovation
Product Innovation Objective To drive a sustained increase in revenue growth by deploying product innovations in targeted market opportunities where we are competitively advantaged Contribution to Growth Focus Areas 1.5% - 2.0% Annually AMR • Estimated annual segment growth of 16% Lead the adoption
Slide 40: AMR
AMR Our Strategy Fastest-Growing Target existing mechanized Leverage our GTM Floorcare Segment cleaning geographies in NA and Europe Leadership position to drive customer adoption Market Size Target retail, logistics, ~$360M warehousing, manufacturing, education and healthcare verticals Growth Rate
Slide 41: AMR: Brain Corp Partnership
AMR: Brain Corp Partnership The Approach Objective Exclusive technology agreement Optimized go-to-market approach Accelerate the transition Expanded pipeline of new AMR products to robotic cleaning & the growth of Enhanced coordination AMR revenue between TNC & Brain Corp X4 ROVR positioned to win i
Slide 42: X4 ROVR
X4 ROVR Optimized for maneuverability in smaller spaces Drives a step change in customer ROI Automatically reroutes around obstacles with 3D LiDar Expected to yield a dramatic acceleration in New BrainOS® CleanSuite adoption Software exclusive to TNC A key growth engine for TNC New Site Map function
Slide 43: Small Space
Small Space Our Strategy Target new spaces and Capitalize on global GTM Rapidly Growing strengths with strong product Floorcare Segment penetrate new vertical markets portfolio Market Size Leverage brand portfolio with ~$300M new i-mop® solutions and products Growth Rate ~10% Our Opportunity Target
Slide 44: Product Line Extensions
Product Line Our Strategy Extensions Leverage acquired brands and Expand our ability to cover platforms and selling a larger segment through existing channels of the floorcare market and offer value to new customers Market Size Increase share of wallet ~$2.8B with current customers and distributors
Slide 45: Our Innovation Process
Our Innovation Process Curate & Cultivate Highly Experienced Innovation Team Customer empathy-based idea generation R&D Product & Industrial Employees Program Mgrs. Designers 220 25 7 Product Roadmaps Innovation Vectors Differentiated Portfolio of Technologies Sweepers Robotics Scrubbers Sustainabil
Slide 46: Innovating for Profitable Revenue Growth
Innovating for Profitable Revenue Growth Investment 3-4% 50% $32M R&D Increase in of Sales allocation of R&D Investment in Brain Corp to accelerate Partnerships and acquired platforms to investment into AMR adoption create R&D leverage AMR in 2024 Returns Creating Recurring 1.5% to 2% +20% Revenue S
Slide 47: Key Takeaways
Key Takeaways We are leading the Cleaning Market Evolution toward autonomous cleaning Our Innovation Is Focused on solving our customers’ largest problems We are driving an acceleration in Robotic Cleaning Growth Our innovation investments yield compelling returns of over 20% IRR Product innovation
Slide 48: Integrated Sustainability
Integrated Sustainability Reilly Goodwin Senior Director of Sustainability and ESG & Vice President, Tennant Foundation Investor Day 2024 48
Slide 49: Our Sustainability Vision
Our Sustainability Vision At Tennant, sustainability is inspired by our vision to create a cleaner, safer, healthier world We recognize our unique opportunity, and our responsibility, to drive positive change creating sustainable value for our business, our customers, and society. Investor Day 2024
Slide 50: Our Approach: Thriving People, Healthy Planet
Our Approach: Thriving People, Healthy Planet IMPACT AREAS Employee Success Climate & Energy Social Impact Water & Chemical Use Circular Shared Spaces Products & Waste Investor Day 2024 50
Slide 51: Our Roadmap to Net-zero
Our Roadmap to Net-zero Establishing Leadership 2018 Embedding Net-Zero SBTi approved 2030 GHG* Set new SBTi-approved goals to be net zero by 2040 emissions Accelerating Progress reduction targets Reduce emissions Source 100% of Reduce 45% reduction Reduce emissions from 2020 from the use of our our
Slide 52: Activating Sustainability
Activating Sustainability Shifting the Traditional Operating Model Siloed Embedded Teams sustainability across the Sustainability Innovation Integrated business, from operations to Operations Teams products Enabling a Culture of Sustainability Investor Day 2024 52
Slide 53: Delivering Against Our Customers' Sustainability Challenges
Delivering Against Our Customers’ Sustainability Challenges Customer Concerns Efficient Solutions Energy Usage Electrified Equipment Emissions Water Water Management Chemical-Reducing Technology Plastic Waste End of Life Ease-of-Use Innovations AMR Operator Experience Compliance Requirements Design
Slide 54: Incorporating Net Zero Goals into Product Strategies
Incorporating Net Zero Goals into Product Strategies Bringing forward a Embedded net-zero more electric goals and emissions product portfolio reduction into product To help our customers strategies reach their own climate Electrification and sustainability goals Lower emission technologies Other eff
Slide 55: Platform in Action
Platform in Action Holistic Approach to Sustainability Across the ESG Spectrum Industry-Leading Embedding Sustainability Meaningful DEI Climate Goals into Products Ambitions Commitment to 5 key sustainability Increase Women in net-zero by 2040 dimensions Leadership 50% by Embedded across our product
Slide 56: Key Takeaways
Key Takeaways We will continue our leadership setting goals, solving our customers’ challenges, and moving the industry forward with sustainable cleaning innovations We are committed to transparency, compliance, and strong corporate governance share our annual progress and ESG scorecard Tracking eme
Slide 57: Unlocking Value
Unlocking Value Fay West Senior Vice President and Chief Financial Officer Investor Day 2024 57
Slide 58: Well-Positioned to Create Significant Long-Term Value
Well-Positioned to Create Significant Long-Term Value Organic Net Margin SALES GROWTH EXPANSION Strong Growth Through FREE CASH FLOW ACQUISITIONS 58 Investor Day 2024 58
Slide 59: Strong Track Record of Financial Performance
Strong Track Record of Financial Performance 4 0 Net Sales ($M)* Adjusted EBITDA ($M) & Margin (%) 1 9 . 0 % 3 5 0 15.5% 16.0% 1 7 . 0 % 3 0 1 5 . 0 % $1,283 12.8% 12.9% $1,244 2 5 0 12.0% 12.2% $1,112 $1,092 $206 1 3 . 0 % $1,089 $193 $978 2 0 1 1 . 0 % $137 $140 $134 $119 1 5 0 9 .0 % 1 0 7 .0 % 2
Slide 60: Strategic Focus on Driving Organic Net Sales Growth
Strategic Focus on Driving Organic Net Sales Growth Net Sales $M Drivers 3-5% CAGR ~1.5%-2.0% Favorable Megatrends ~1% ~1% Pricing Excellence ~1% New Channels & Markets New Business Models Product Innovation Investor Day 2024 60
Slide 61: Operational Excellence Powering Margin Expansion
Operational Excellence Powering Margin Expansion Adjusted EBITDA Margin Drivers +50-100 bps Focused Supply-Chain per year Strengthening ~45 bps ~30 bps Efficient Operations and Manufacturing Integrated Innovation Process Enterprise Resource Planning S&A Leverage and Ongoing Cost Initiatives Investor
Slide 62: Strong FCF Provides Foundation & Flexibility for Capital Allocation
Strong FCF Provides Foundation & Flexibility for Growth-Focused Capital Allocation Capital Allocation Strategy FCF and Net Leverage Invest in the business and organic growth $150 $140 • New product innovation 2.25 $104 $110 • Manufacturing optimization 1.67x $100 1.5x 1.75 • Capex $20-$25m per year
Slide 63: Well-Positioned for Growth from M&A
Well-Positioned for Growth from M&A Compelling Value Winning Business Financially Strong Proposition Model Streamlined business, Leading cleaning brand High-quality, low-volume scalable & poised for growth equipment manufacturing Strong customer relationships Multi-channel presence Significant cash
Slide 64: Strategic M&A Priorities Aligned to Enterprise Strategy
Strategic M&A Priorities Aligned to Enterprise Strategy 1 2 3 Defend & Grow Drive Value Expand Portfolio into Cleaning Core Through Connected Mobile Equipment Autonomy Adjacencies Sustained Maintain and Enhance Gain Share and Increase Diversify & Grow Strong Margins & Growth Recurring Revenue Models
Slide 65: Enhancing Value Creation Through Disciplined M&A
Enhancing Value Creation Through Disciplined M&A Strategic Financial Integration Discipline Discipline Discipline Strengthens Accelerates Growth Acquirer of Choice Leadership Position Geographic Accretive to Margins Cultural Fit Expansion/Penetration Expands into Attractive IRR > Cost of Capital Pot
Slide 66: Attractive Long-Term Model
Attractive Long-Term Model 3-5% 50-100bps 100% Net Sales Expand Adjusted Net Income to Free Organic Growth EBITDA Margin Cash Flow Conversion Profitable Growth from M&A Strategy ~$150 million Net Sales Added Over 3 Years Significant Value Creation Investor Day 2024 66
Slide 67: Key Takeaways
Key Takeaways Proven Track Record of Strong Financial Performance Visible Pathway to Sales Growth and Margin Expansion Robust FCF to Fund Growth-focused Capital Allocation Strategy Strategic M&A Strategy to Complement and Enhance Growth Attractive Long-term Goals Investor Day 2024 67
Slide 68: Break
BREAK 5 Minutes Investor Day 2024 68
Slide 69: Q&A
COMPANY — z @) LISTED NYSE
Slide 70: Closing Remarks
Closing Remarks Dave Huml President and Chief Executive Officer 70 Investor Day 2024 70
Slide 71: Takeaways From The Day
Takeaways From The Day Drive long-term, above-market growth through premium product offerings, trusted brands & aftermarket services that deliver strong customer ROI Multi-channels to market drives leading market positions Broad vertical market customers provides growth potential, insulation from cy
Slide 72: Thank You
Thank You Investor Day 2024 72
Slide 73: Appendix: Endnotes
Appendix Endnotes TNC's estimated market share and the estimated total addressable market include mechanized cleaning equipment and other adjacencies (scrubbers, sweepers, AMR, vacuums & extractors, floor machines & burnishers, specialty equipment, industrial vacs, high-pressure washers, tools, outd
Slide 74: Appendix: Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Investor Day 2024 74
Slide 75: Appendix: Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Investor Day 2024 75
Slide 76: Appendix: Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Investor Day 2024 76
Slide 77: Appendix: Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations Investor Day 2024 77