Tennant Company · NYSE:TNC
Tennant — Sidoti Virtual NDR September 2024
34 slides from Tennant's conference presentation, Sep 18, 2024
Slide 1: Sidoti Virtual NDR
Sidoti Virtual NDR September 18, 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: Unique Value Proposition
Global Leader in an Expanding Market Tennant Company’s with a Differentiated Product Portfolio & Service Offering Unique World-Class Service Model provides Strong Competitive Advantage Value Compelling Growth Opportunities Proposition underpinned by Global Megatrends Innovation that drives the Futur
Slide 4: 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 4
Slide 5: 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 6: 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 $USD 15% #1 Contract Cleaners 23% DIRECT DISTRIBUTOR RENTAL #2 Retail #3 Manufacturing 62% #4 Logistics #5 Healthcare Service & Other SERVICE E-COMMERCE Equip
Slide 7: Tiered Brands & Channel Mix Provide Growth Opportunity
Tiered Brands & Channel Mix Provide Growth Opportunity Americas EMEA APAC PREMIUM MID-TIER PREMIUM MID-TIER PREMIUM MID-TIER 81% 19% 49% 51% 45% 55% Direct Distribution Direct Distribution Direct Distribution Leveraging Brands and Expanding Channels to Drive Growth 7
Slide 8: Service as a Competitive Advantage
Service as a Competitive Advantage Differentiated Offering Local Experienced Efficient 900+ 9+ Years Mobile capable and AI-driven virtual Field Service Techs Average Tenure service Attractive Aftermarket Opportunity Upside Potential Recurring 38% Revenue 62% ~80% 70% 2023 Net Sales ($USD) Aftermarke
Slide 9: 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 10: 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 11: AMR by the Numbers
AMR by the Numbers *2019-2023 4 Models 6,800+ Units Sold* 700+ Unique Customers* 3X Pricing $200M+ Revenue* ~3 Year Payback 11
Slide 12: Executed Structural Change to Position for Growth
Executed Structural Change to Position for Growth 2019-2023 Strategic Pillars Results Targets Actual Win where we have a competitive advantage Revenue* 2-3% ~3% Reduce complexity & build scalable processes EBITDA 6-10% ~9% Innovate for profitable growth EBITDA % 15% 15%+ Years 5 4 *Net sales
Slide 13: Strong Track Record of Financial Performance
Strong Track Record of Financial Performance 4 0 Net Sales ($M)* Adjusted EBITDA ($M) & Margin (%) 1 9 . 0 % 3 5 0 15.5% 16.3% 1 7 . 0 % 3 0 1 5 . 0 % $1,293 12.8% 12.9% $1,244 2 5 0 12.0% 12.2% $1,112 $1,092 $210 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 14: 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 15: 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 15
Slide 16: 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 16
Slide 17: 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 18: 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 19: 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 19
Slide 20: 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 20
Slide 21: Strong FCF Provides Foundation & Flexibility for Growth-Focused 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 22: 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 23: 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 23
Slide 24: 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 24
Slide 25: Appendix
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Slide 26: Second Quarter 2024 Performance
Second Quarter 2024 Performance Second quarter net income of $27.9M, Net Income Adjusted EPS compared to $31.3M in the prior year • Driven by ERP modernization costs and M&A transaction and integration costs • Interest expense decreased $1.5M in Q2 2024 due to lower debt balances $1.86 $1.83 • Effec
Slide 27: Second Quarter 2024 Results
Second Quarter 2024 Results Net Sales Adjusted EBITDA Product Categories Gross Margin decreased 30 bps to 43.1% By Region** • Price realization and cost savings activities materially offset $48 M $51 M inflation +5.5% Americas $69 M $71 M Service Adjusted S&A* as a percent of net sales improved -0.3
Slide 28: Capital Deployment
Capital Deployment YE 2023 Q2 2024 Total Debt $201M $213M Cash Flow Net Leverage* 0.43x 0.61x Revolver Availability: $321.8M Net cash provided by operating Capital expenditures of ~$4M in line Returned capital to activities of ~$19M driven by with full-year guidance expectations shareholders via div
Slide 29: 2024 Full-Year Guidance Raised
2024 Full-Year Guidance Raised Updated 2024 Original 2024 Guidance Guidance Net Sales $1.280B - $1.305B $1.27B - $1.295B Organic Net Sales Growth 2.5% - 4.5% 2% - 4% Adjusted Diluted EPS(1) $6.15 - $6.55 $6.05 - $6.65 Adjusted EBITDA(1) $205M - $215M $198M - $213M Adjusted EBITDA Margin 16.0% - 16.5
Slide 30: 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 31: Non-GAAP Financial Measures
Non-GAAP Financial Measures This presentation and the related conference call include presentation of Non-GAAP measures that include or exclude special items of a nonrecurring and/or nonoperational nature (hereinafter referred to as “special items”). Management believes that the Non-GAAP measures pr
Slide 32: Tennant Company Supplemental Non-GAAP Financial Tables
TENNANT COMPANY SUPPLEMENTAL NON-GAAP FINANCIAL TABLES 32
Slide 33: Tennant Company Supplemental Non-GAAP Financial Tables
TENNANT COMPANY SUPPLEMENTAL NON-GAAP FINANCIAL TABLES 33
Slide 34: Tennant Company Supplemental Non-GAAP Financial Tables
TENNANT COMPANY SUPPLEMENTAL NON-GAAP FINANCIAL TABLES 34