REINVENTING. the future of cleaning. INVESTOR PRESENTATION April 2016 TENNANTCO.COM

Transcription

1 REINVENTING the future of cleaning. INVESTOR PRESENTATION April 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 2011 Global Market Size $4.6 Billion* Tennant Nobles Alfa 17% Nilfisk Clarke Viper Hako Minuteman PowerBoss Karcher Windsor TecServ ProChem Taski 18% 12% 7% 4% 42% of the market consists of others with a market share of 3% or less *Market share data is based on company revenue and estimates for like categories 5 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 Our Progress toward $1 Billion Growth from overdelivery on new products & go-tomarket initiatives partially offset by major foreign currency headwinds 12

13 Strategic Priorities. 13

14 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 14

15 Emerging Markets Focused approach Long-term growth potential despite economic headwinds China Organic Sales Growth % 5.5% 2015 Organic Sales Growth % 3.5% 2015 Brazil 15

16 Operations Efficiency Strategy Deployment to Drive Four Key Initiatives VELOCITY & LEAN SUPPLY CHAIN OPTIMIZATION Be the absolute leader for serving the customer! SERVICE LEVELS QUALITY FOCUS 16

17 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 17

18 e-commerce Cleaning solutions made easy online Good Experience Empower our customers Anticipate their needs Enhance their experience Increase Revenue New customers New geographies Expand products Lower Cost of Sale Self-service Reduce manual interventions Cost avoidance 18

19 Reconditioned Equipment Attracting a New Set of Customers New Commercial Recon Facility New e-commerce Website 19 19

20 Attract & Retain Talent Tennant Employee Value Proposition Talent Management Focus Commitment to Innovation Rewarding work with opportunity for career growth A Focus on Stewardship Strong Legacy Build a world-class talent acquisition function Develop leadership & key talent capabilities Align high-performance culture with business strategy 4 Reward performance that creates value 20

21 Sustainable Enterprise Tennant Corporate Sustainability Report Score 2012 CY ( 13 Report) 2013 CY ( 14 Report) 2014 CY ( 15 Report) Disclosure Performance Band D C C Industry Average 49/C 53/C 60/D 21

22 New Product Development Strongest Product Pipeline Ever!

23 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 23

24 ec-h2o NanoClean The Responsible Way to Clean Next generation ec-h2o Cleans more soils in more applications ec-h2o SCRUBBERS HOW IT WORKS: $896 million+ cumulative revenue 77,000+ machines Record Sales of $157M in ,000+ customers 30,000+ sites 24

25 ORBIO Technologies On-Site Generation Technology Improving health and safety for the environment, employees and people in their care while reducing costs. GENERATES cleaner & disinfectant/sanitizer on-site FOCUS ON 3Cs CAMPUS CHAINS CONTRACTORS 25

26 Customer Insights Reinventing the Way the World Cleans PRODUCTS FEATURES & BENEFITS FUNCTIONAL BENEFITS SOLUTIONS EMOTIONAL BENEFITS Traditional Approach Voice of customer & needs identification to shape new product development NEW Thinking Acknowledge the reality of our customer s business Deploy new tools for better insights Think solutions, not just products Objective research from innovation experts Challenge status quo new lens for opportunities Embrace a holistic view of our customers 26

27 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 27

28 IRIS Asset Management System CUSTOMERS Manage cleaning programs better Fleet management Lower cost-to-clean ON-BOARD MACHINE DIAGNOSTICS Increased Market Differentiation Service Efficiency Customer Intimacy 28

29 Acquisitions Strategic Filters Sales & Service Coverage Underserved Markets Complementary Products Technology Platforms 29

30 FINANCIAL Summary Reinventing the future of cleaning. 30

31 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). 31

32 2015 Full Year Constant Currency View (excludes estimated foreign exchange impact) SALES GROSS MARGIN Adjusted* OPERATING PROFIT Adjusted* OPERATING PROFIT MARGIN Adjusted* DILUTED EPS AS REPORTED 2015 $811.8 M 43.0% $68.1 M 8.4% $2.49 CONSTANT (1) CURRENCY CHANGE $857.1 M 43.8% $81.4 M 9.5% $3.00 $822.0 M 42.9% $72.1 M 8.8% $ % +90 bps +12.9% +70 bps +11.1% (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). 32

33 4.3% Organic Sales Growth in 2015 Full Year Americas 2015 Organic Sales 6.4% EMEA 2015 Organic Sales (2.1%) APAC 2015 Organic Sales 1.3% 33

34 TENNANT COMPANY 2016 First Quarter Organic Sales Growth 0% Americas Sales up 1.7% organically Q1 16 Q1 15 CHANGE SALES $179.9 M $185.7 M (3.2%) GROSS MARGIN 43.1% 42.0% +110 bps R&D EXPENSE (% of sales) 4.4% 4.2% +20 bps S&A EXPENSE (% of sales) 34.7% 33.4% +130 bps OPERATING PROFIT $7.1 M $8.3 M (14.0%) OPERATING PROFIT MARGIN 3.9% 4.4% (50 bps) DILUTED EPS $0.25 $0.27 (7.4%) 34

35 TENNANT COMPANY 2016 First Quarter CONSTANT CURRENCY VIEW (excludes estimated foreign exchange impact) SALES GROSS MARGIN OPERATING PROFIT OPERATING PROFIT MARGIN DILUTED EPS AS REPORTED Q1 16 $179.9 M 43.1% $7.1 M 3.9% $0.25 CONSTANT (1) CURRENCY Q1 16 Q1 15 CHANGE $183.5 M 43.5% $8.2 M 4.5% $0.29 $185.7 M 42.0% $8.3 M 4.4% $0.27 (1.2%)* +150 bps (0.8%) +10 bps +7.4% (1) Constant Currency : estimated income statement which assumes no change in exchange rates from prior year. *Organic Sales Growth, excluding approximately 2.0% unfavorable foreign currency exchange impact and the impact from the divestiture of the Green Machines outdoor city cleaning line of 1.2%, was 0%. 35

36 NET SALES (in millions) History of Sales Growth Average Organic Sales Growth of 7% $800 $700 $600 $500 $400 $300 $200 $100 $553 $599 $664 $701 $596 $668 $754 $739 $ Guidance $795M to $822 $812 $825M Anticipated Organic Growth Organic Growth 8% 7% 6% <1.5%> <13%> 12% 10.5% 0% 3% 10.3% 4.3% 0%-4% $

37 TENNANT COMPANY Strong Balance Sheet FY 15 1Q 15 1Q 16 Commitment To Shareholder Return 37

38 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% 38 38

39 Operating Profit Margin Goal Remain committed to at least 12% OP Margin Sales Growth 5-9% Gross Margins 43-44% R&D 3-4% S, G & A Expense 27-28% Drive organic revenue growth in mid- to highsingle digits Hold fixed costs essentially flat in manufacturing as volume rises Strive for zero net inflation at gross profit line Continue to invest in innovative new products & technologies Standardize & simplify processes to improve scalability of business model 39

40 2016 EPS & Sales Guidance As Reported $1.74 EPS $811.8M SALES 2015 ACTUAL As Adjusted $2.49 EPS $811.8M SALES 2016 Financial Outlook $2.25 to $2.55 $795M to $825M Net sales in the range of $795M to $825M 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 divestiture of approximately 1%. Organic sales growth, excluding foreign currency exchange impact and divestiture, in the range of 0% to 4%. Foreign currency exchange headwinds estimated to negatively impact operating profit in the range of $3M to $6M, or approximately $0.10 to $0.20 EPS. Gross margin of approximately 43%. R&D expense of approximately 4% of sales. Effective tax rate of approximately 31% (negatively impacting 2016 by approximately $0.05 EPS). Capital expenditures in the range of $25M to $30M

41 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 41