Tennant Company

Good morning, my name is Pam and I will be your conference operator today. At this time, I would like to welcome everyone to Tenant Company's second quarter 2025 earnings conference call. This call is being recorded. There will be time for Q&A at the end of the call. Please press star one if you would like to ask a question. After the Q&A, please stay on the line for closing remarks from management. If you have joined our call today via telephone and logged into the conference call presentation on your computer, please mute the audio on your computer to avoid potential quality issues during the call. Thank you for participating in Tenant's Company's second quarter 2025 earnings conference call. Beginning today's meeting is Mr. Lorenzo Bossi, Vice President, Finance and Investor Relations for Tenant Company. Mr. Bossi, you may begin.

Good morning, everyone, and welcome to Tenant Company's second quarter 2025 earnings conference call. I'm Lorenzo Bossi, Vice President, Finance and Investor Relations. Joining me on the call today are Dave Hummel, President and CEO, and Faye West, Senior Vice President and CFO. Today, we will review our second quarter performance for 2025. Dave will discuss the results and enterprise strategy and Faye will cover our financials. After our prepared remarks, we will open the call to questions. Our earnings press release and live presentation that accompany this conference call are available on our Investor Relations website. Before we begin, please be advised that 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 from those contained in the statements. These risks and uncertainties are described in today's news release and the documents we filed with the Securities and Exchange Commission. We encourage you to review these documents, particularly our safe harbor statement for a description of the risks and uncertainties that may affect our results. Additionally, on this conference call, we will discuss non-GAAP measures that include or exclude certain items. Our 2025 second quarter earnings release and presentation include the comparable GAAP measures and a reconciliation of these non-GAAP measures to our GAAP results. I will now turn the call over to Dave.

Thank you, Lorenzo, and good morning, everyone. Thank you for joining our Q2 2025 earnings call. Today, I'm excited to share our second quarter highlights, progress on our enterprise strategy, and our outlook for the remainder of 2025. Our Q2 results aligned with expectations, keeping us on track to deliver full-year guidance as we continue to return to normalize seasonal product and channel mix patterns. We achieved net sales of 319 million dollars representing an organic sales decline of 4.5%. It's important to note that we are lapping the prior year quarter that benefited from a 26 million dollar backlog reduction, concentrated in North America and comprised of higher margin industrial machines. As evidenced by order rates, our underlying business performance remains robust. Primarily driven by demand strength in North America. Enterprise level order rates increased by 4% compared to the prior year quarter, marking our fifth consecutive quarter of order growth. -to-date orders grew 8%, positioning us above the growth rate needed to deliver our full-year guidance. Additionally, our -to-bill ratio remained above one as order patterns returned to normalized seasonality. While demand has been generally resilient, we continue to see pockets of weakness in our international markets. Turning to our performance by region, in the Americas, orders increased by a strong 9% compared to the prior year led by North America where we saw a double-digit order growth. This sustained momentum from Q1 reflects the impact of our strategic investments in sales and service, new product introductions like the X4 Rover, and the strength of customer preference for our industrial product portfolio. Strong order activity reinforces our confidence in sustained demand and further strengthens our leadership position across the region. Organic net sales declined 5.5%, primarily due to lapping last year's significant backlog reduction in North America and ongoing demand softness in the Mexico market. In EMEA, organic sales declined 1.4%, with orders down 7.4%, reflecting varied results by country and a highly competitive environment in the region. Revenue declines were primarily isolated to Germany and the Middle East region, partly offset by strong performance in the UK and Iberia. Foreign exchange provided a positive .3% benefit as the euro strengthened against the dollar. Looking ahead, we remain confident in our strategic plans to drive performance in the second half. In APAC, organic sales declined 5%, with orders down 3.5%. In Australia, we saw volume growth driven primarily by equipment, reflecting resilient customer demand despite growing economic uncertainty. However, this strength was more than offset by ongoing demand softness in China, where elevated competitive pricing continues to weigh on performance. Challenging market dynamics in APAC are expected to persist with no growth anticipated for the full year. At the enterprise level, our 16% EBITDA margin was in line with expectations. Growth margin was impacted by product mix, reflecting a return to normal seasonality, as well as ongoing cost pressures. However, pricing actions and disciplined cost management reported EBITDA performance consistent with our guidance range. Turning to a brief update on our enterprise growth strategy. Our pricing initiatives delivered results in both the Americas and EMEA, contributing .8% impact at the enterprise level in Q2. This primarily reflects price increases implemented early in the year, as Q2 North American tariff-related increases only began reading through in June. We anticipate price growth for the remainder of 2025 to align with our long-term target of 50 to 100 basis points annually. New products continue to be a key driver of enterprise growth, with both our product line extensions and our AMR products delivering in line with our expectations. We maintain a strong opportunity pipeline for the Rover platform. The successful early quarter launch of the X6 Rover mid-sized robotic scrubber received positive market feedback, strengthening our presence in large retail and small to mid-sized industrial sectors. AMR sales accelerated to 6% of enterprise net sales in Q2 2025, with cumulative deployed units exceeding 10,000, highlighting AMR as a key driver of our long-term growth. In June, we announced the launch of our new outdoor sweeping machine, the Z50 Citadel outdoor sweeper, a market-leading solution purpose-built for industrial and municipal outdoor environments. The Z50 marks tennis entry into the outdoor sweeping market, expanding our total addressable market and introducing us to a new set of customers. With advanced dust and debris control, intuitive operator features, and robust performance, the Z50 is designed to meet the needs of demanding outdoor applications. With a strong pipeline of innovations, we remain on track to achieve our long-term goal of driving 150 to 200 basis points of annual growth for new products. With our robust organic growth strategy reading out, we continue to actively pursue M&A opportunities that complement our long-term objectives. In line with our capital allocation priorities, we are supporting near-term business needs while returning capital to shareholders through dividends and share repurchases. Now shifting to guidance for the remainder of the year. As we enter the second half of 2025, we expect many of the same challenges to persist, including macroeconomic uncertainty and tariff-related pressures. We are closely monitoring market demand and taking proactive steps to limit potential trade war impacts on our P&L. Our pricing actions, along with procurement and supply chain initiatives, are currently positioned to effectively manage tariff-driven cost inflation in the full year, contributing to our financial resilience. I remain confident in our growth strategies and in our team's agility to navigate the current environment of uncertainty. Based on our Q2 performance and current outlook, we are reaffirming our full year 2025 guidance. And now I'll turn the call over to Faye for a deeper explanation of the financials.