Tennant Company (TNC) Q3 2024 earnings summary

Executive summary

• Q3 2024 net sales grew 3.6% year-over-year to $315.8M, with organic growth of 2.7% driven by strong pricing, Americas volume gains, and the TCS acquisition, partially offset by currency impacts.

• Adjusted EBITDA rose 4.4% to $47.9M (15.2% margin), and adjusted diluted EPS increased 3.7% to $1.39 per share.

• Order rates increased high single digits year-over-year, with double-digit growth in EMEA and robust Americas performance; APAC faced declines due to China and Australia.

• Strategic initiatives in pricing, new product launches (including the T291 scrubber), and go-to-market investments are driving growth, with AMR products now 5% of YTD net sales.

• Backlog reduction accelerated to $130M for 2024, normalizing lead times but creating a headwind for 2025 top-line growth.

Financial highlights

• Q3 2024 net income was $20.8M, down from $22.9M YoY, mainly due to ERP and acquisition costs; adjusted net income rose 4.7% to $26.6M.

• Gross margin declined 90 bps YoY to 42.4% due to inflation and freight costs, partially offset by price realization.

• Free cash flow was $26.4M in Q3, with conversion exceeding 100% of net income.

• Adjusted S&A as a percent of net sales improved to 28.1% from 28.9% YoY.

• Liquidity strong: $91.3M cash, $439.3M unused credit; revolving facility increased to $650M.

Outlook and guidance

• 2024 guidance reaffirmed: net sales $1.28B–$1.305B (2.5%–4.5% organic growth), adjusted EPS $6.15–$6.55, adjusted EBITDA $205M–$215M (16%–16.5% margin), capex ~$20M.

• Expect strong Q4 order growth and normalized backlog by year-end; 2025 top-line growth to be muted due to backlog reduction and industrial softness.

• Adjusted effective tax rate projected at 22%–27%.