Tennant Company

Mute the audio on your computer to avoid potential quality issues during the call. Thank you for participating in Tenant Company's Third Quarter 2025 Earnings Conference Call. Beginning today's meeting is Mr. Lorenzo Bassi, Vice President, Finance and Investor Relations for Tenant Company. Mr. Bassi, you may begin.

Good morning, everyone, and welcome to Tenant Company's Third Quarter 2025 Earnings Conference Call. I'm Lorenzo Bassi, Vice President, Finance and Investor Relations. Joining me on the call today are Dave Hamel, President and CEO, and Faye West, Senior Vice President and CFO. Today, we will review our third quarter performance for 2025. Dave will discuss our 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 slide 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 those 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 third 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. Good morning, everyone. And thank you for joining our Q3 2025 earnings call. I'm pleased to share our third quarter results, strategic progress, and outlook as we navigate an increasingly dynamic operating environment. Our Q3 results demonstrate both the resilience of our business model and our team's ability to execute in a challenging environment. We delivered net sales of $303 million with an organic decline of 5.4%. It is important to note that we're comparing against the prior year quarter that benefited from a $33 million backlog reduction, primarily in our North American industrial business. Our order rates reflect steady underlying demand. We achieved 2% growth compared to Q3 2024, extending our track record of six consecutive quarters with order growth. Let me address the tariff situation head-on because I know it is top of mind for all of us. We are clearly operating in a more complex trade environment with the continuing tariff volatility creating cost challenges and heightened uncertainty. This creates both direct cost pressures for us and indirect effects on customer purchasing behavior. Regarding our input costs, we're confident in our ability to address a significant portion of direct tariff impacts through targeted supply chain adjustments and pricing actions in 2025. What's new this quarter is the customer demand impact where we're seeing some industrial customers in North America specifically citing tariff uncertainty as a reason for delaying planned purchases. We're staying close to these customers, understanding their concerns as they navigate the current economic environment, and we remain committed to serving them when they're ready to move forward. Despite these external pressures, I'm proud of what our team has accomplished this quarter. We expanded gross margins 30 basis points through disciplined pricing that more than offset higher freight and tariff costs. We delivered 120 basis points of adjusted EBITDA margin improvement driven by both margin expansion and disciplined expense management, including the realization of structural actions we implemented earlier this year. We also returned $28 million to shareholders through dividends and share repurchases, demonstrating our commitment to discipline, capital allocation, and value creation. Our regional performance reflects both challenges and opportunities. In the Americas, orders grew 1% in the quarter compared to the prior year. Adjusting for the prior year backlog benefit, net sales would have grown 9% versus Q3 2024, a solid performance in this environment. EMEA shows encouraging momentum from our strategic initiatives, with new product launches gaining traction and go-to-market optimization delivering results in key geographies. Orders increased 8% year-over-year in the region, with accelerating momentum heading into the fourth quarter. APAC remains challenging, particularly in China, where competitive pressures continue on both price and volume. However, Australia and India continue performing well, delivering sales growth in the quarter. Our enterprise strategy continues advancing on multiple fronts. We launched our latest new product innovation, the T360 midsize walk-behind scrubber, which delivers solid performance at an economical price point, perfect for budget-conscious customers and first-time users. We are growing our AMR robotics business year to date with sales increased 9% and unit volumes increased 25% driven by our new X4 and X6 Rover products and key strategic customer wins around the world. We've had a major new product launch in each quarter in 2025 demonstrating our strengthened innovation pipeline. Our pricing initiatives deliver 280 basis points of growth through strong realization of beginning-of-year actions plus additional tariff-related increase. Our go-to-market initiatives are progressing well, with particular strength in expanding industrial sales coverage and acquiring new strategic accounts, especially NMA. One of our key enterprise initiatives is our ERP modernization project. I'm particularly proud to announce the successful Go Live in APAC, the first of three major regional milestones in our global digital transformation. While any transformation of this scale presents complexities, our teams prioritize customer needs, mitigated disruptions, and stabilized operations according to plan. This new digital infrastructure will enable faster decision-making, deliver better customer experiences, enhance cybersecurity, and position us to deploy AI capabilities moving forward. We remain appropriately cautious as our teams continue stabilizing the Americas Q4 deployment and prepare for the EMEA Go Live in Q1, 2026. I'm confident in both our approach and our team's execution capability. Looking ahead, we're seeing mixed market dynamics that require both strategic focus and tactical agility. Industrial sectors show some demand softening in tariff-sensitive industries, but demand remains robust in core commercial and markets, including retail, healthcare, and education. Our aftermarket demand, both service and consumables, remains strong. We're addressing tariff exposure through pricing actions and supply chain adjustments and expect to mitigate most of the impact within the year. Our targeted initiatives, supplier negotiations, dual sourcing, and logistics optimization position us well to navigate these challenges. Our year over year order growth confirms underlying business health. We remain focused on operational efficiency and prudent capital allocation while carefully monitoring customer buying behavior, the tariff landscape, and macroeconomic trends. Based on our year-to-date Q3 performance and current outlook, we remain well-positioned to achieve our overall net sales, EBITDA, and EPS targets. Accounting for the outsized impact of the euro exchange rate on our EMEA results, we now anticipate that organic growth at the enterprise level will be slightly below our initial guidance range of negative 1% to negative 4%. In closing, I'm confident in our strategy, proud of our team's execution, and optimistic about our ability to navigate this environment while continuing to deliver value for all stakeholders. Now I'll turn the call over to Faye for a deeper explanation of the financials.