Tennant Company Reports Q4 2025 Earnings: Analyzing Challenges and Future Prospects

Tennant Company faced significant challenges in the fourth quarter of 2025, primarily due to the implementation of a new ERP system. Despite these hurdles, the company demonstrated resilience in its strategic initiatives and expressed optimism for the future. This article delves into the key takeaways from the earnings call, focusing on financial performance, strategic initiatives, and the future outlook.

Financial Performance

Tennant Company's fourth quarter results were heavily impacted by operational disruptions caused by the ERP system's North America Go Live. The company reported a GAAP net loss of $4.4 million, compared to a net income of $6.6 million in the same quarter of the previous year.

Key financial metrics include:

• Fourth Quarter Net Sales: $291.6 million, an 11.3% decrease compared to $328.9 million in Q4 2024.
• Full Year Net Sales: $1,203.5 million, down 6.5% from $1,286.7 million in 2024.
• Adjusted EBITDA for Q4: $25.6 million, a decrease of $21.8 million year-over-year, largely due to the ERP transition.

The primary financial issues stemmed from the inability to process orders effectively during a critical operational period, resulting in an estimated $30 million impact on net sales. Approximately $15 million of this shortfall was attributed to reduced order intake, with the remainder moving into backlog. These operational disruptions also pressured gross margins, leading to a $22 million reduction in adjusted EBITDA for the quarter.

Strategic Initiatives

Despite the operational challenges, Tennant Company made significant strides in strategic initiatives throughout 2025. The company launched four major new products and established a dedicated TNC Robotics Group to accelerate the adoption of its autonomous robotic cleaning solutions. This group aims to enhance the product roadmap and improve customer engagement, which aligns with the company’s overarching growth strategy.

Significant highlights include:

• Robotics Portfolio Sales: Approximately $85 million in annual revenue from autonomous mobile robots (AMR), demonstrating increasing customer adoption.
• Capital Allocation: The company repurchased 1.1 million shares for $88 million, reflecting a strong commitment to returning capital to shareholders while maintaining a robust balance sheet.
• ERP Modernization Investment: Tennant has invested around $98 million since 2023 in its ERP modernization program, with additional costs anticipated in 2026 to ensure system stability and recovery.

The formation of the TNC Robotics Group is a pivotal step in capturing the growing AMR market, which continues to expand due to labor shortages and technological advancements. The company aims for its AMR revenue to reach approximately $250 million by 2028, underlining its confidence in future growth potential.

Future Outlook

Looking ahead, management expressed optimism about the company's trajectory despite the recent setbacks. For 2026, Tennant Company projects net sales to be in the range of $1.24 billion to $1.28 billion, indicating organic sales growth of 3% to 6.5%. This growth is expected to be driven by approximately 25% pricing actions and 75% volume increases.

Management provided the following guidance for 2026:

• Adjusted EBITDA: Projected in the range of $175 million to $190 million, with an adjusted EBITDA margin between 14.1% and 14.8%.
• Adjusted EPS: Expected to be between $4.70 and $5.30 per diluted share, excluding ERP project costs and amortization expenses.
• Operational Stability: The company anticipates returning to a more normalized operating rhythm by mid-2026, with gradual improvements in efficiency and reliability.

Despite the challenges faced in Q4 2025, management emphasized that the underlying fundamentals of the business remain strong. The international markets, especially EMEA and APAC, showed promising growth, reinforcing the strength of Tennant's global portfolio.

Conclusion

In summary, while the fourth quarter of 2025 presented substantial challenges for Tennant Company due to ERP implementation issues, the company's strategic initiatives and future outlook remain promising. With significant investments in its robotics division and a strong commitment to capital allocation strategies, Tennant is positioning itself for recovery and growth in 2026. The management's focus on operational recovery and customer engagement will be critical in regaining lost momentum and driving shareholder value in the coming years. Investors should monitor the company's progress closely as it navigates these transitional challenges and capitalizes on new growth opportunities in the marketplace.