REINVENTING. the future of cleaning. JEFFERIES PRESENTATION August 2016 TENNANTCO.COM

Transcription

1 REINVENTING the future of cleaning. JEFFERIES PRESENTATION August 2016 TENNANTCO.COM

2 Safe Harbor Statement This presentation contains certain statements that are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 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, 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. 2

3 About Tennant Company 70 consecutive years of cash dividends 44 consecutive years of increase in annual cash dividend payout Balance sheet 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 Revenues: $812M 2015 Employees: 3,164 NYSE Symbol: TNC 3

4 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

5 Competitive Landscape 2015 $5B Global Cleaning Equipment Market* Tennant Nobles Alfa Orbio 18% Nilfisk Advance Clarke Viper Karcher Windsor TecServ ProChem Hako Minuteman PowerBoss Taski 17% 11% 9% 3% 42% of the market consists of others with a market share of 3% or less. * Estimated market size in constant currency U.S. dollars for Tennant-like equipment categories and aftermarket. 5

6 COMMERCIAL INDUSTRIAL ESSENTIALS AFTERMARKET Broad Portfolio of Quality Products ORBIO TECHNOLOGIES COATINGS 6

7 Strong STRONG Direct DIRECT Sales SALES & Service Organizations & SERVICE ORGANIZATIONS Global Revenue by Sales Channel Global Sales Employees Global Direct Service Employees Direct 75% % Distribution Americas EMEA APAC Americas EMEA APAC Distribution Partners More than 80 countries around the world Global Strategic Accounts Cross-functional teams & market specialists Factory-Service Direct Locally based & factory-trained service technicians 7

8 Broad Range of Global Customers MARKETS 8 8

9 2015 Revenue of $812M EMEA 17% 61% Equipment* *Equipment Mix Commercial 52% Industrial 44% Outdoor 4% Americas 73% Net Sales by Geography APAC 10% Service & Other Net Sales by Product Group 14% 22% Parts & Consumables 3% Coatings 9 9

10 Growth Strategy We remain committed to organic Sales goal of $1 Billion and 12% or above Operating Profit Margin 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 10

11 Our Journey to $1 Billion GDP Growth $60M (2%) $1B $752M Go-To-Market $70M (up to 3%) New Products $80M (up to 3%) Emerging Markets $40M (up to 2%) 11 11

12 Strategic Priorities. 12

13 Sales & Service Coverage Increasing our Presence 3 COMPONENTS OF MARKET SHARE ENHANCED GO-TO-MARKET STRATEGY VERTICAL MARKETS & MARKETING ANALYTICS Industrial Retail Product Portfolio Hit Rate Market Coverage (Presence) Education Healthcare 13

14 CRM & Marketing Automation Perpetual Lead Generation Prospecting Leverage deep history to prioritize the known Visualize the potential to discover the new 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 14

15 New Product Development Strongest Product Pipeline Ever!

16 Tennant Company New Products Launched M20 & M30 Sweeper-Scrubbers and T20 Heavy-Duty Industrial Rider Scrubber with hightech features Touch-n-Go TM Steeringwheel-mounted control module Pro-Panel TM intuitive touch-screen interface 16

17 M17 Battery Rider Sweeper/Scrubber VERTICAL MARKETS Logistics & Manufacturing VALUE PROPOSITION Full single-pass cleaning capability (sweeping/scrubbing) & fume-free operation ProPanel provides a high-visibility, operator-centric interface with PerformanceView camera, operator security log-in, safety checklists & onboard training Improved shrinkwrap recover answers significant market need 17

18 Advanced Product Development Future Technologies + Asset Management Battery Technologies Water Recycling Robotics (AGV) Manage cleaning programs better Fleet management Lower cost-to-clean Lithium-Ion, Fuel Cell, etc. Improving cost & availability ROI for customer Reduced weight & footprint size Sustainability Productivity Game-changing solution Addresses labor costs Largest potential growth opportunity 18

19 FINANCIAL Summary Reinventing the future of cleaning. 19

20 2015 Full Year Organic Sales Growth 4.3% Americas Sales up 6.4% Organically CHANGE SALES $811.8 M $822.0 M (1.2%) GROSS MARGIN 43.0% 42.9% +10 bps R&D EXPENSE (% of sales) Adjusted* S&A EXPENSE (% of sales) Adjusted* OPERATING PROFIT Adjusted* OPERATING PROFIT MARGIN Adjusted* DILUTED EPS 4.0% 30.6% $68.1 M 8.4% $ % 30.5% $72.1 M 8.8% $ bps +10 bps (5.5%) (40 bps) (7.8%) *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). 20

21 2016 Second Quarter Organic Sales Growth 2.4% EMEA Sales up 6.3% Organically Q2 16 Q2 15 CHANGE SALES $216.8 M $215.4 M +0.7% GROSS MARGIN 43.9% 44.1% (20 bps) R&D EXPENSE (% of sales) 3.9% 3.9% +0 bps S&A EXPENSE (% of sales) 29.6% 29.7% (10 bps) OPERATING PROFIT $22.6 M $22.6 M 0% OPERATING PROFIT MARGIN 10.4% 10.5% (10 bps) DILUTED EPS $0.85 $ % 21

22 NET SALES (in millions) History of Sales Growth Average Organic Sales Growth of 7% $800 $700 $600 $500 $400 $300 $200 $100 $553 $599 Organic Growth $664 $701 $596 $668 $754 $739 $ Guidance $800M to $822 $812 $820M Anticipated Organic Growth 8% 7% 6% <1.5%> <13%> 12% 10.5% 0% 3% 10.3% 4.3% 1%-3% $

23 Average Invested Capital Improved Profitability & Balance Sheet Leverage Return on Invested Capital Improvement * $000s $240,000 $230,000 $220,000 $210,000 $200,000 $223, % 25.7% $214, % 30.9% $206,954 $212, % $227, % $223, % 30.0% 25.0% 20.0% 15.0% $190, % $194, % $180,000 $170,000 Adj OP $19.5M Adj OP $39.2M Adj OP $55.2M Adj OP $62.7M Adj OP $65.4M *On a Constant Currency basis, 2015 ROIC would have been 33.7%. OP $72.1M Adj OP $68.1M 5.0% 0.0% 23 23

24 2016 EPS & Sales Guidance 2015 ACTUAL As Reported $1.74 EPS $811.8M SALES As Adjusted $2.49 EPS $811.8M SALES 2016 Financial Outlook $2.35 to $2.60/$800M to $820M KEY EXPECTATIONS FOR 2016 Net sales in the range of $800M to $820M versus $811.8M in Slower economic growth in North America, modest improvement in Europe, and growth in emerging markets. Foreign currency impact on sales in the range of an unfavorable 1% to 2%. Sales decline from Green Machines divestiture of approximately 1%. Organic sales growth, excluding foreign currency exchange impact and divestiture, in the range of 1% to 3%. Foreign currency exchange headwinds estimated to negatively impact operating profit in the range of $3M to $4M, or approximately $0.10 to $0.15 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. 24

25 Summary $1B Anticipate foreign currency & global economic volatility remain challenging in coming quarters Tennant has never been positioned better in the market with its innovative product and technology portfolio and go-tomarket strategy We remain committed to our goals of $1 Billion in organic sales & a 12% or above operating profit margin 25