Release Date: November 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tennant Co (TNC, Financial) reported a 3.6% increase in net sales for the third quarter of 2024, reaching $315.8 million.
- Adjusted EBITDA rose to $47.9 million, with an adjusted EBITDA margin of 15.2%.
- Order rates increased significantly, with high single-digit growth compared to the same period in 2023.
- The company successfully reduced its backlog by $130 million, exceeding initial expectations.
- Tennant Co (TNC) continues to see strong performance from its AMR products, with over 2,200 units deployed in the first nine months of 2024.
Negative Points
- Net income decreased to $20.8 million from $22.9 million in the prior year period.
- Volume declines were noted in EMEA and APAC regions, impacting overall performance.
- Operating expenses increased due to ERP implementation and integration costs related to the TCS acquisition.
- The company faced inflationary pressures on materials and elevated freight costs, impacting gross margins.
- There is ongoing market softness in China and Australia, affecting sales in the APAC region.
Q & A Highlights
Q: Can you clarify the impact of the X4 ROVR on AMR sales and its future potential?
A: The X4 ROVR is a significant driver for our AMR sales, but its impact is not fully reflected yet as it was launched mid-year in North America and later in EMEA. We expect its contribution to grow as it continues to ramp up, supported by a strong pipeline of orders.
Q: How is the backlog reduction progressing, and what are the implications for future sales?
A: We have reduced our backlog by $109 million and expect to reach $130 million by year-end. This reduction is partly due to slower industrial orders, which may pose challenges for sales comps next year, but we are confident in our strategic initiatives to drive future growth.
Q: What strategic actions are being taken in response to market softness in China?
A: We are focusing on higher-end industrial products where we have a competitive advantage, rather than competing in the price-sensitive commercial segment. This strategy aims to maintain profitability and leverage our strong market position.
Q: Can you provide an update on the ERP modernization project and its expected benefits?
A: The ERP project is on track, with staggered go-lives planned for 2025. We anticipate efficiency savings of $10 million to $15 million, along with improved decision-making and customer service capabilities.
Q: How is the recent acquisition in EMEA performing, and what are the growth prospects?
A: The acquisition is performing well, with strong growth driven by enhanced go-to-market strategies and product offerings. We are optimistic about its potential to drive incremental value and growth in the region.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
