Needham jan. 2017 presentation

TENNANTCO.COM

REINVENTINGthe future of cleaning.

TENNANT COMPANY – NEEDHAM PRESENTATION

Tom Paulson – Senior VP and CFOJanuary 2017

This presentation contains certain statements that are considered “forward-looking statements”

within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking

statements generally can be identified by the use of forward-looking terminology such as “may,”

“will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “project,” or “continue” or similar words

or the negative thereof. These statements do not relate to strictly historical or current facts and

provide current expectations of forecasts of future events. Any such expectations or forecasts of

future events are subject to a variety of factors. We caution that forward-looking statements must

be considered carefully and that actual results may differ in material ways due to risks and

uncertainties both known and unknown. Information about factors that could materially affect our

results can be found in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the

year ended December 31, 2015, and in Part II, Item 1A Risk Factors in our most recent quarterly

report on Form 10-Q. Shareholders and potential investors are urged to consider these factors in

evaluating forward-looking statements and are cautioned not to place undue reliance on such

forward-looking statements.

We undertake no obligation to update or revise any forward-looking statement, whether as a

result of new information, future events or otherwise. Investors are advised to consult any further

disclosures by us in our filings with the Securities and Exchange Commission and in other written

statements on related subjects. It is not possible to anticipate or foresee all risk factors, and

investors should not consider any list of such factors to be an exhaustive or complete list of all

risks or uncertainties.

Safe HarborStatement

2

AboutTennant Company

Tennant Company, a Minnesota

corporation founded in 1870 and

incorporated in 1909, is a world leader

in designing, manufacturing and

marketing solutions that empower

customers to achieve quality cleaning

performance, significantly reduce

environmental impact and help create

a cleaner, safer, healthier world.

71consecutive years of cash dividends

44consecutive years of increase in annual cash dividend payout

Balance sheet

NYSE Symbol:

TNC

2015 Revenues:

$812M

3

2015 Employees:

3,164

OUR VISION

We will lead our global industry in

sustainable cleaning innovation that

empowers our customers to create a

cleaner, safer and healthier world.

4

Broad Portfolio of Quality ProductsC

OM

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IAL

IND

US

TR

IAL

AF

TE

RM

AR

KE

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ES

SE

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IAL

S

OR

BIO

®

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S

6

STRONG DIRECT SALES& SERVICE ORGANIZATIONS

Strong Direct Sales & Service Organizations

Global Sales Employees Global Direct Service EmployeesGlobal Revenue by Sales Channel

25%

75%

Distribution

Direct

Distribution PartnersMore than 80 countries

around the world

Global Strategic AccountsCross-functional teams &

market specialists

Factory-Service DirectLocally based & factory-trained

service technicians

0

100

200

300

400

500

600

2012 2013 2014 2015

Americas EMEA APAC

0

100

200

300

400

500

600

700

800

900

2012 2013 2014 2015

Americas EMEA APAC

7

8

Broad Range of Global Customers

MARKETS

8

9

2015 Revenue of $812M

73%

17%

10%Americas

EMEA

APACNet Sales by Geography

22%14%

61%

3%

Service & Other

Equipment*

Coatings

Net Sales by Product Group

Parts & Consumables

*Equipment MixCommercial | 52%Industrial | 44%Outdoor | 4%

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We remain committed to organic

Sales goal of $1 Billion and 12% or

above Operating Profit Margin

Growth Strategy

10

• Reach new markets and new customers

• Deliver a strong product & technology pipeline

• Build Tennant’s e-Business capabilities

• Be disciplined about improving margins &

controlling expenses

$1B

$752M

GDP Growth

$60M (2%)

Go-To-Market

$70M (up to 3%)

New Products$80M (up to 3%)

Emerging Markets

$40M (up to 2%)

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Our Journey to $1 Billion

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Strategic Priorities

12

.

CRM & Marketing AutomationPerpetual Lead Generation

Speed-to-Lead• Better lead visibility and new

processes mean we can convert leads faster

• Keep the lead pipeline full with automated marketing capabilities embedded inside CRM

Prospecting• Leverage deep history to

prioritize the known

• Visualize the potential to discover the new

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e-CommerceCleaning solutions made easy online

• Empower our customers

• Anticipate their needs

• Enhance their experience

Good Experience Increase Revenue• New customers

• New geographies

• Expand products

Lower Cost of Sale• Self-service

• Reduce manual interventions

• Cost avoidance

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552012-2014

362015

New Product DevelopmentStrongest Product Pipeline Ever!

102016

15

– Launched M20 & M30 Sweeper-Scrubbers and T20 Heavy-Duty Industrial Rider Scrubber with high-tech features

• Touch-n-GoTM Steering-wheel-mounted control module

• Pro-PanelTM intuitive touch-screen interface

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Tennant CompanyNew Products

• Lithium-Ion, Fuel Cell, etc.

• Improving cost & availability

• ROI for customer

• Reduced weight & footprint size

• Sustainability

• Productivity

• Game-changing solution

– +

Water RecyclingBattery Technologies Robotics (AGV)Asset Management

• Manage cleaning

programs better

• Fleet management

• Lower cost-to-clean

• Addresses labor costs

• Largest potential growth

opportunity

Advanced Product DevelopmentFuture Technologies

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AcquisitionsStrategic Filters

Sales & Service Coverage

Technology Platforms

Complementary Products

Underserved Markets

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FINANCIALSummary

Reinventing the future of cleaning.

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SALES

GROSS MARGINAdjusted*OPERATING PROFITAdjusted*

OPERATING PROFIT MARGINAdjusted*

DILUTED EPS

2015 2014 CHANGE

CONSTANT(1)

CURRENCY

2015

AS REPORTED

(1)“Constant Currency”: estimated income statement which assumes no change in exchange rates from prior year.

*2015 results are adjusted to exclude restructuring charge in S&A of $3.7M pre-tax ($0.17 per diluted share) and non-cash long-lived asset impairment of $11.2M pre-tax ($0.58 per diluted share).

$857.1 M

43.8%

$81.4 M

9.5%

$3.00

$822.0 M

42.9%

$72.1 M

8.8%

$2.70

+4.3%

+90 bps

+12.9%

+70 bps

+11.1%

$811.8 M

43.0%

$68.1 M

8.4%

$2.49

2015 Full Year “Constant Currency” View(excludes estimated foreign exchange impact)

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SALES



DILUTED EPS

Q3’16 Q3’15 CHANGE

CONSTANT(1)

CURRENCY

Q3’16

AS REPORTED


*Q3’15 results are adjusted to exclude restructuring charge in S&A of $1.8M pre-tax ($0.09 per diluted share) and non-cash long-lived asset impairment of $11.2M pre-tax ($0.64 per diluted share).

$200.1 M

42.4%

$15.8 M

7.9%

$0.62

$204.8 M

43.3%

$17.5 M

8.6%

$0.68

(2.3%)

(90 bps)

(10.2%)

(70 bps)

(8.8%)

$200.1 M

42.6%

$16.3 M

8.1%

$0.64

2016 Third Quarter“Constant Currency” View (excludes estimated foreign exchange impact)

Organic Sales Growth was approximately (2.2%), foreign currency exchange impact was neutral and excluded the net unfavorable impact from the divestiture of Green Machines and the acquisition of Florock of 0.1%.

SALES



DILUTED EPS

YTD‘16 YTD‘15 CHANGE

CONSTANT(1)

CURRENCY

YTD‘16

AS REPORTED


*YTD‘15 results are adjusted to exclude Q3‘15 restructuring charge in S&A of $1.8M pre-tax ($0.09 per diluted share) and non-cash long-lived asset impairment of $11.2M pre-tax ($0.64 per diluted share).

$602.7 M

43.4%

$47.5 M

7.9%

$1.80

$605.9 M

43.2%

$48.4 M

8.0%

$1.71

(0.5%)

+20 bps

(1.8%)

(10 bps)

+5.3%

$596.8 M

43.2%

$45.9 M

7.7%

$1.74

2016 First Nine Months“Constant Currency” View (excludes estimated foreign exchange impact)

Organic Sales Growth was approximately 0.1%, excluding approximately 1.0% unfavorable foreign currency exchange impact and the net unfavorable impact from the divestiture of Green Machines and the acquisition of Florock of 0.6%.

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History of Sales Growth2010-2015 Average Organic Sales Growth of 7%

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$553$599

$664$701

$596

$668

$754 $739 $752

$822 $812

$0

$100

$200

$300

$400

$500

$600

$700

$800

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

‘16 Guidance

$805M to

$815M

NE

T S

AL

ES

(in

mill

ions

)

Organic Growth

8% 7% 6% 0.2%-1.4%<1.5%> <13%> 12% 10.5% 0% 3% 10.3% 4.3%

Anticipated Organic Growth

$223,102

$194,299

$214,423

$206,954

$212,016

$227,543 $223,940

8.8%

20.2%

25.7%

30.3% 30.9% 31.7%30.3%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

$170,000

$180,000

$190,000

$200,000

$210,000

$220,000

$230,000

$240,000

$000s

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Improved Profitability & Balance Sheet LeverageReturn on Invested Capital Improvement 2009 – 2015*

*On a “Constant Currency” basis, 2015 ROIC would have been 33.7%.

‘09 ‘10 ‘15‘11 ‘12 ‘13 ‘14

Ave

rag

e In

vest

ed C

apit

al

Adj OP

$19.5M

Adj OP

$39.2M

Adj OP

$55.2M

Adj OP

$62.7M

Adj OP

$65.4M

OP

$72.1M

Adj OP

$68.1M

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2016 EPS & Sales Guidance

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2015ACTUAL

As Reported$1.74 EPS

$811.8M SALES

As Adjusted

$2.49 EPS$811.8M SALES

2016 Financial Outlook$2.40 to $2.60/$805M to $815M

KEY EXPECTATIONS FOR 2016• Net sales in the range of $805M to $815M versus $811.8M in 2015.• Continued slow economic growth in North America, modest improvement in

Europe, and growth in emerging markets.• Unfavorable foreign currency impact on sales of approximately 1%.• Sales decline from Green Machines divestiture of approximately 1%.• Sales increase from Florock acquisition of approximately 1%.• Organic sales growth, excluding foreign currency exchange impact, divestiture and

acquisition in the range of 0.2% to 1.4%.• Foreign currency exchange headwinds estimated to negatively impact operating

profit in the range of $2M to $3M, or approximately $0.08 to $0.12 EPS.• Gross margin performance in the range of 43% to 44%. • R&D expense of approximately 4% of sales.• Effective tax rate of approximately 31% (negatively impacting 2016 by

approximately $0.05).• Capital expenditures in the range of $25M to $30M.

Summary

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Anticipate foreign currency & global economic volatility remain challenging

Tennant has never been positioned better in the market with its innovative product and technology portfolio and go-to-market strategy

We remain committed to our goals of $1 Billion in organic sales & a 12% or above operating profit margin

$1B

Needham jan. 2017 presentation

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Transcript of Needham jan. 2017 presentation