July 2015 Investor Presentation
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 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, 2014, 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. 2
TENNANT COMPANY AT-A-GLANCE KEY FACTS Founded: • 69 consecutive years of cash dividends 1870 • 43 consecutive years of increase in annual cash dividend payout • Strong balance sheet 2014 Revenues: AWARDS • 2014 IDEA Award – B5 Battery Burnisher $822M International Design Excellence Awards • 2013 GOOD DESIGN Award – T12 Rider Scrubber 2014 Employees: Industrial Design Excellence 3,087 • 2012 Australian Business Awards – Orbio 5000-Sc Top Honours • 2011 R&D 100 Award Winner – 500ze Manufacturing Sites: R&D Magazine 7 • 2009 Manufacturer of the Year Award ABM Industries, Inc. NYSE Symbol: • 2009 Business Innovation of the Year – ec-H2O TNC European Business Awards • 2008 R&D 100 Award Winner – ec-H2O R&D Magazine • 2007, 2008 & 2014 America’s 200 Best Small Companies Forbes • 2007, 2014 & 2015 America’s Most Trustworthy Companies Forbes 3
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
COMPETITIVE LANDSCAPE Worldwide Market Share 2011 Estimate – $4.6 Billion* 5
UNIQUE CLEANING SOLUTIONS 6
QUALITY PRODUCTS 7
STRONG DIRECT SALES & SERVICE ORGANIZATIONS 900 600 800 500 700 600 400 500 300 400 300 200 200 100 100 0 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Americas EMEA APAC Americas EMEA APAC 8
BROAD RANGE OF GLOBAL CUSTOMERS 9 9
2014 REVENUE OF $822M 10
Organic Growth Objective: Achieve $1 Billion in revenue by 2017. Remain committed to 12% operating profit margin goal. 11
HOW WE WILL REACH $1B $1B GDP Growth $60M (2%) Go-To-Market $70M (up to 3%) $752M New Products $80M (up to 3%) Emerging Markets $40M (up to 2%) 12
1 Reach new customers & new markets 2 Continue delivering what we know works 3 Don’t lose sight of the discipline we’ve established 13
1 Reach new customers & new markets 14
REACH NEW CUSTOMERS & NEW MARKETS Increasing Presence PPH SM Analysis × × = 67% 75% 40% 19% Product Hit Rate Market Share Presence Frank Lynn & Associates Process 15
REACH NEW CUSTOMERS & NEW MARKETS Focus on Key Verticals Industrial Education Healthcare Retail 16
REACH NEW CUSTOMERS & NEW MARKETS New Channels – E-commerce Good Experience Increase Revenue Lower Cost of Sale • • Self-service Empower our • New customers customers • New geographies • Reduce manual • Anticipate their needs • interventions Enhance their • Expand products experience • Repurpose staff • Cost avoidance Your text here 17
2 Continue delivering what we know works 18
RESEARCH AND DEVELOPMENT 19
NEW PRODUCT GROWTH Strongest product pipeline ever! in 2014 36 20 + 17 20 18 In 2016 in 2012 in 2013 in 2015 20
NEW MODULAR PLATFORM T12 Rider Faster Speed to Market Scrubber T17 Rider Scrubber 21
SUSTAINABLE CLEANING 22
ec-H2O NanoClean ™ Launched April 2015 • Next generation ec-H2O FIRST GENERATION EC- H2O™: 2008-2014 • Cleans more soils in $740 million+ more applications cumulative revenue • Nano-scale bubbles 7,500+ customers drive cleaning 29,000 + sites performance 65,000 + machines 23
TENNANT COMPANY T300 SCRUBBER MORE FLEXIBILITY | EASE OF USE | IMPROVED PRODUCTIVITY 24
Split Stream The Orbio 5000-Sc uses Orbio Split Stream Technology to electrically restructure water and salt, so you can create, store and dispense an environmentally friendly multipurpose cleaning solution – right on site! 25
Small, simple, affordable On-Site Generation (OSG) technology • Generates both cleaning and antimicrobial solutions • Fits into most janitorial closets • Flexibility to dispense in remote locations 26
EMERGING MARKETS Anticipating Solid Organic Growth CHINA INCREASE MANUFACTURING EXPERTISE & LATIN EXPAND MARKET AMERICA COVERAGE PROJECTED PROJECTED GROWTH RATE GROWTH RATE +15% +20% next 5 years next 5 years 27
STRATEGIC ACCOUNTS Duplicate Successful Framework China N.A. Europe Brazil 28
Don’t lose sight of 3 the discipline we’ve established 29
PROFITABILITY FRAMEWORK 12%+ Operating Profit Margin Goal 30
STANDARDIZED & SIMPLIFIED GLOBAL PROCESSES Implemented a global standardized process Collections to manage payment & invoice disputes Installed a global invoicing structure Invoicing tailored to the needs of our customers Standardized discount & rebate policies Pricing globally, while maintaining ability to compete regionally Standardized global product structure to Machine simplify quoting, ordering and product Configuration data maintenance 31
LEAN OPERATIONS SUPPORTS GROWTH Quality: Highest & Flexibility: Ability to most consistent configure & customize quality & reliability to customer Speed: requirements Rapid market Cost: More response, short than offset lead-times inflation across the supply chain; driving gross margin improvement 32
STRONG COST CONTROLS Selling & Administrative Expense as a Percent of Sales * *As adjusted 33
FINANCIAL SUMMARY 34
TENNANT COMPANY 2014 FULL YEAR Organic Sales Grew 10.3% 2014 2013 CHANGE +9.3% SALES $822.0 M $752.0 M (40 bps) GROSS MARGIN 42.9% 43.3% (50 bps) R&D EXPENSE (% of sales) 3.6% 4.1% (10 bps) S&A EXPENSE (% of sales) (adjusted*) 30.5% 30.6% +10.2% OPERATING PROFIT (adjusted*) $72.1 M $65.4 M +10 bps OPERATING PROFIT MARGIN (adjusted*) 8.8% 8.7% +19.5% DILUTED EPS (adjusted*) $2.70 $2.26 * 2013 results are adjusted to exclude restructuring charges of $3,017K pre-tax ($2,938K after-tax or $0.15 per diluted share), and a tax benefit related to 2012 R&D tax credit of $582K (or $0.03 per diluted share). February 24, 2015, Earnings Release. 35
TENNANT COMPANY 2015 SECOND QUARTER Organic Sales Growth 3.8% | Strong Growth in North America Q2’15 Q2’14 CHANGE SALES $215.4 M $219.1 M (1.7%) 44.1% 43.5% +60 bps GROSS MARGIN 3.9% 3.5% +40 bps R&D EXPENSE (% of sales) S&A EXPENSE (% of sales) 29.7% 29.4% +30 bps $22.6 M $23.1 M (2.4%) OPERATING PROFIT 10.5% 10.6% (10 bps) OPERATING PROFIT MARGIN DILUTED EPS $0.79 $0.83 (4.8%) 36
TENNANT COMPANY 2015 SECOND QUARTER “CONSTANT CURRENCY” VIEW (excludes estimated foreign exchange impact) AS CONSTANT (1) REPORTED CURRENCY Q2’14 CHANGE Q2’15 Q2’15 $215.4 M $227.4 M $219.1 M +3.8% SALES 44.1% 44.9% 43.5% +140 bps GROSS MARGIN $22.6 M $26.0 M $23.1 M +12.2% OPERATING PROFIT +80 bps OPERATING PROFIT MARGIN 10.5% 11.4% 10.6% $0.79 $0.92 $0.83 +10.8% DILUTED EPS (1) “Constant Currency”: estimated income statement which assumes no change in exchange rates from prior year. 37
TENNANT COMPANY 2015 FIRST HALF Organic Sales Growth 5.0% | Strong Growth in North America 1H’15 1H’14 CHANGE SALES $401.1 M $403.1 M (0.5%) 43.2% 42.7% +50 bps GROSS MARGIN 4.0% 3.8% +20 bps R&D EXPENSE (% of sales) S&A EXPENSE (% of sales) 31.4% 30.9% +50 bps $30.8 M $32.4 M (4.7%) OPERATING PROFIT 7.7% 8.0% (30 bps) OPERATING PROFIT MARGIN DILUTED EPS $1.06 $1.14 (7.0%) 38
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