Tennant Company Unveils Q4 and Full-Year 2025 Financial Highlights

Tennant Company Reports Fourth Quarter and Full-Year 2025 Results, Navigates ERP Implementation Challenges

MINNEAPOLIS – Tennant Company (NYSE: TNC), a global leader in floor-care equipment and cleaning solutions, today announced its financial results for the fourth quarter and full year ended December 31, 2025. The company also provided an operational update following the North America go-live of its new enterprise resource planning (ERP) system in the fourth quarter.

The ERP implementation, which went live in North America during the first week of November 2025, presented significant, unexpected operational hurdles that impacted production and order fulfillment. These challenges included disruptions in order management, manufacturing scheduling complexities, reduced inventory visibility, and slower transaction processing, leading to customer delays.

“Our fourth-quarter performance fell short of expectations due to production disruptions during the North America ERP transition,” said Dave Huml, Tennant President and Chief Executive Officer. “We have taken targeted and decisive actions to stabilize operations, and we are seeing steady improvement across our core processes. As we continue to strengthen system performance and support our customers, we expect to return to a more normalized operating rhythm and predictable performance through the first half of 2026.”

Huml emphasized that despite the near-term impact, the company remains committed to realizing the long-term benefits of its ERP modernization, which is expected to enhance operational efficiency, scalability, data consistency, and customer service. Alongside this digital transformation, Tennant has continued to invest in its growth strategies, including expanding its robotics portfolio, executing go-to-market initiatives, and implementing strategic pricing actions.

**Financial Performance Snapshot:**

**Fourth Quarter 2025:**
* Net sales were $291.6 million, an organic decrease of 13.9%. This was attributed to shipment constraints following the ERP transition, the lapping of prior-year backlog reductions, and softer demand in the North America industrial business.
* Adjusted EBITDA was $25.6 million, a year-over-year decrease of 46.0%, impacted by lower volume, operating deleverage, and incremental ERP stabilization costs.
* The company estimates the ERP implementation disruption negatively affected net sales by approximately $30 million and adjusted EBITDA by approximately $22 million.

**Full Year 2025:**
* Net sales totaled $1,203.5 million, a 6.5% decrease compared to $1,286.7 million in 2024. This was below the company’s initial guidance range, primarily due to the fourth-quarter results. The decline was driven by a 7.3% organic decrease, partially offset by a 0.7% foreign currency tailwind.
* Adjusted EBITDA was $167.4 million, a 19.8% decline from 2024, and also fell short of guidance. This was due to lower volumes, operating deleverage, and the ERP operational disruption.
* Orders grew by approximately 4%, and backlog increased by roughly $15 million.

**Operational and Strategic Outlook:**

The company’s gross profit margin in the fourth quarter of 2025 declined to 34.6% from 41.3% in the prior year. This was largely due to the ERP transition’s impact on volume, incremental costs, and deleverage, estimated at $13.5 million for volume and $8.5 million for costs. Additional pressures included increased tariff-related material costs and inventory write-downs.

Selling and Administrative (S&A) expenses decreased to $93.8 million in the fourth quarter, primarily due to lower legal and compensation costs. For the full year, S&A expenses were $374.8 million, down from 2024, attributed to reduced compensation costs and other expense reductions, partly offset by higher ERP spending and bad debt expenses.

Looking ahead to 2026, Tennant anticipates a macroeconomic environment similar to 2025. The company expects ERP-related operational challenges to persist into early 2026, including a planned two-week manufacturing shutdown in January to facilitate a comprehensive physical inventory count. This will significantly impact first-quarter sales and costs, with elevated costs and compressed margins expected to continue through the first half of the year as the new system stabilizes. A return to normalized operations is projected by mid-year.

Despite these challenges, Tennant reaffirmed its commitment to its long-term strategic priorities, focusing on operational efficiency, margin expansion, and shareholder returns.

**2026 Guidance:**

Tennant provided the following guidance ranges for fiscal year 2026:
* Net sales: $1,240 million – $1,280 million
* Organic net sales growth: 3.0% – 6.5%
* Diluted net income per share: $4.05 – $4.65
* Adjusted diluted net income per share: $4.70 – $5.30
* Adjusted EBITDA: $175 million – $190 million
* Adjusted EBITDA margin: 14.1% – 14.8%
* Capital expenditures: Approximately $25 million
* Adjusted effective tax rate: 24% – 29%

The company will host a conference call on February 24, 2026, to discuss these results and provide further insights into its strategic direction.