Tennant Company (TNC) Q4 2023 earnings summary

Executive summary

• FY23 net sales reached a record $1,243.6M, up 13.9% YoY; organic sales grew 13.6%, and adjusted EBITDA rose 44.3% to $192.9M with margin up 330 bps to 15.5%.

• Q4 net sales were $311.4M, up 7.0% reported and 5.4% organically; adjusted EBITDA was $41.5M at a 13.3% margin, down 100 bps YoY.

• Price realization, volume growth and gross-margin expansion supported FY results; operating cash flow was $188.4M and net leverage fell to 0.43x adjusted EBITDA.

Financial highlights

• FY23 net income was $109.5M, up 65.2% YoY; diluted EPS was $5.83 versus $3.55, and adjusted diluted EPS was $6.57 versus $4.10.

• Q4 net income was $31.0M versus $23.8M; diluted EPS was $1.64 versus $1.27, and adjusted diluted EPS was $1.92 versus $1.46.

• FY23 reported operating income was $138.6M versus $87.2M; adjusted operating income was $143.1M versus $85.6M.

• FY organic growth was 13.6%, driven by price realization across regions and equipment-volume growth, particularly in the Americas; Q4 organic growth was 5.4%.

Outlook and guidance

• FY24 net sales guidance is $1,270M–$1,295M, with organic growth of 2%–4%, split equally between price and volume growth.

• FY24 adjusted diluted EPS guidance is $6.05–$6.65; adjusted EBITDA is $198M–$213M and adjusted margin is 15.6%–16.4%.

• FY24 capex guidance is $20M–$25M; adjusted effective tax rate guidance is 22%–27%. Guidance excludes ERP modernization costs, certain nonoperational items and amortization expense.

• FY24 backlog reduction is expected at $80M–$100M versus $140M in FY23; priorities include executing the growth strategy, disciplined capital allocation and accretive acquisitions.