Tennant Company

Tennant reported Q1 2026 net sales of $297.9 million, up 2.7% year over year, GAAP net income of $0.2 million versus $13.1 million a year ago, and adjusted diluted EPS of $0.58 versus $1.12. Gross margin was 38.1%, down 330 basis points year over year, while adjusted EBITDA was $29.1 million, or 9.8% of sales, versus $41 million, or 14.1%, in the prior-year period. Orders totaled $327 million, up 10%, and backlog ended at $109 million after increasing about $32 million from year-end. Management reaffirmed full-year 2026 guidance for net sales of $1.24 billion to $1.28 billion, organic sales growth of 3% to 6.5%, adjusted EBITDA of $175 million to $190 million, GAAP diluted EPS of $4.05 to $4.65, adjusted diluted EPS of $4.70 to $5.30, capex of about $25 million, and an adjusted effective tax rate of 24% to 29%.

Dave Huml said the quarter showed meaningful progress on North America ERP stabilization, with core workflows stable by quarter-end and the focus now shifting to efficiency, throughput, and margin recovery. He framed robotics as a major growth engine, pointing to the Brain Corp extension through 2029, the launch of Clean 2.0 and SelfPath AI, and new products like the X16 SWEEP and X2 ROVR as evidence Tennant is broadening its market and accelerating adoption. His tone was confident and upbeat, but anchored in execution rather than hype.

Fay West quantified the ERP hit at about $23 million of net sales and about $17 million of gross margin in Q1, with roughly 2/3 of the sales impact tied to equipment that she said can be recovered within the year. She detailed Q1 gross margin of 38.1%, adjusted S&A of $88.2 million, adjusted EBITDA of $29.1 million, and operating cash outflow of $31.2 million, which she said reflected lower operating performance, receivables timing, and inventory builds. She also noted cash and cash equivalents of $82.6 million, about $289 million of unused revolver capacity, and net leverage of 1.78x trailing 12-month adjusted EBITDA, while reaffirming full-year guidance and saying free cash flow and operating cash flow should improve through the year.

Analysts focused on whether Q1 order strength reflected true demand or catch-up from Q4, and management said little of it was carryover; roughly 1/3 of backlog was tied to customer timing for future Q2/Q3 deliveries, while the rest reflected real demand. Questions also centered on margins and pricing, and management said annual list pricing plus prior tariff-related price actions were helping offset inflation, with Q2 expected to step up sequentially. On capital allocation, management said the $60 million buyback was opportunistic and tied to an event-driven share price dislocation, and that further repurchases, dividends, and M&A all remain on the table within the 1x to 2x leverage target.