Tennant (NYSE:TNC) said its fourth quarter and full-year 2025 results were “materially impacted” by the North America go-live of a new ERP system in early November, which management said created severe functionality issues that disrupted order entry, production, shipping, and customer service.
North America ERP go-live drove significant disruption
President and CEO David Huml said that despite a successful ERP launch in APAC in September and extensive preparation in North America, the North America cut-over introduced “severe system functionality issues,” particularly affecting order processing for highly configurable machines. Management expected a short-lived productivity dip similar to APAC, where operations normalized within a week, but said North America instead lost “three full weeks of machine order entry and parts shipping capability.”
By late in the quarter, management said the most critical issues had been resolved. Huml told analysts the company is now stable across core processes—“book orders, build, ship, invoice, and collect”—but is still working through efficiency and user adoption issues. Tennant remains in “Hypercare” and is targeting system stability by the end of the first quarter of 2026, with efficiency improvements continuing into the second quarter.
Given the North America experience, Tennant said it has paused the planned EMEA ERP timeline (which had been expected to begin and complete in the first quarter of 2026) in order to focus organizational resources on North America recovery.
Estimated Q4 sales and profitability impact
Senior Vice President and CFO Fay West said Tennant estimates the ERP disruption reduced fourth-quarter net sales by approximately $30 million, with about one-third of the impact in service and parts/consumables and two-thirds in equipment. West said the company expects roughly half of the $30 million to be unrecoverable, with the remaining portion added to backlog.
Management also quantified the profitability hit. West said the disruption decreased adjusted EBITDA by approximately $22 million, with a corresponding impact on EPS of approximately $0.91. Huml said gross margin pressure included about $13.5 million tied to the sales shortfall and about $8.5 million from operational inefficiencies and higher labor and freight costs, along with deleverage.
Huml said Tennant has invested approximately $98 million in the ERP program since 2023. For 2026, West said ERP-related spending is now expected to exceed the roughly $5 million initially planned and “likely reach more than $20 million” due to remediation, hypercare support, and ongoing program stages.
Fourth-quarter and full-year financial results
For the fourth quarter of 2025, Tennant reported a GAAP net loss of $4.4 million, compared with net income of $6.6 million in the prior-year period. Consolidated net sales were $291.6 million, down 11.3% from $328.9 million a year earlier. On a constant-currency basis, organic sales declined 13.9%.
West said the quarterly sales decline was driven primarily by a 22.3% organic decline in the Americas, largely due to the $30 million ERP-related sales impact, as well as volume declines in Latin America across equipment, parts, and consumables. Tennant also cited softer underlying demand in industrial and aftermarket businesses. In contrast, EMEA posted a 3% organic sales increase in the quarter, and APAC grew 11% organically, supported by volume growth across multiple countries and product categories.
Adjusted EBITDA in the quarter was $25.6 million, down $21.8 million year-over-year, and included the estimated $22 million ERP impact. West said quarterly gross margin pressure also reflected higher material costs due to unmitigated tariff costs and other inflationary pressures (including LIFO reserve impacts), plus roughly $4.5 million in other charges including inventory write-downs, partially offset by price realization and favorable foreign exchange. Adjusted S&A expense was $10.4 million lower in the quarter, primarily due to lower compensation-related costs.
For the full year 2025, Tennant reported GAAP net income of $43.8 million, down from $83.7 million in 2024. Full-year net sales were $1.2035 billion, down 6.5% from $1.2867 billion, with organic sales down 7.3% on a constant-currency basis. West said the decline reflected lower North American volumes, including the lapping of the prior year’s backlog reduction benefit, softer industrial demand in the second half, and the late-year ERP disruption.
By region, net sales in the Americas declined 10.9% (10.5% organically), while EMEA grew 5.1% with modest organic growth and currency benefits. APAC net sales declined 3.5% (2.2% organically), reflecting pricing actions and softer demand in several markets, partially offset by growth in Australia and India. West said service revenue grew 4.7% for the year, parts and consumables were modestly higher, and equipment sales declined 11.6%.
Full-year adjusted EBITDA was $167.4 million, down $41.4 million year-over-year, with adjusted EBITDA margin of 13.9% (down 230 basis points). Gross margin was 40.2%, down 250 basis points, driven by lower volume and unfavorable mix. Adjusted EPS was $4.57 per diluted share in 2025, down from $6.57 in 2024; fourth-quarter adjusted EPS was $0.48 versus $1.52 a year earlier.
Other notable items: restructuring, legal contingency, capital deployment
West said Tennant recorded $6.4 million of restructuring charges related to a global workforce reorganization, which the company expects to generate approximately $10 million of annual savings beginning in 2026.
The company also updated a legal contingency related to the OWT intellectual property dispute. West said a September 2025 post-trial ruling increased damages by 30%, raising the total judgment to approximately $20.2 million, and Tennant recorded an incremental accrued expense of $6 million in 2025. West said Tennant has appealed aspects of the ruling and that it does not impact the company’s ability to sell products and is not expected to affect long-term financial performance.
On capital deployment, West said cash flow from operations was $65 million in 2025, down from $89.7 million in 2024, driven by lower operating performance, increased ERP expenditures, and higher working capital consumption. Tennant ended 2025 with $106.4 million in cash and cash equivalents and $374.3 million of unused revolving credit capacity, with a net leverage ratio of 1x adjusted EBITDA. The company returned $110.4 million to shareholders, including $21.9 million in dividends and $88.5 million in share repurchases (about 6% of shares outstanding). Huml also noted the company’s 54th consecutive annual dividend increase.
Robotics momentum and 2026 outlook
Huml said Tennant launched a dedicated “TNC robotics” group to accelerate adoption and scaling of autonomous robotic cleaning solutions. He said the company delivered roughly $85 million in autonomous mobile robotics (AMR) sales in 2025, inclusive of recurring autonomy fees, and set an expectation for AMR revenue to reach approximately $250 million by 2028.
During Q&A, Huml said Tennant is seeing pricing pressure in robotics, particularly from robotics-only competitors, and that one early focus of the new robotics group is ensuring competitive pricing while maintaining a value proposition that can command a premium within limits.
For 2026, Tennant guided to net sales of $1.24 billion to $1.28 billion, reflecting organic growth of 3% to 6.5%. West said that at the midpoint of the range, the company expects sales growth to be driven approximately 25% by pricing actions and 75% by volume increases, with the volume forecast accounting for first-quarter lost sales tied to a two-week shutdown for a comprehensive physical inventory in early January. Management said sales are expected to be weighted toward the second half as system stabilization improves efficiency and throughput.
Tennant guided to 2026 adjusted EBITDA of $175 million to $190 million (14.1% to 14.8% margin) and adjusted EPS of $4.70 to $5.30 per diluted share, excluding ERP project costs and amortization expense. West said the company expects first-quarter gross margin performance to be comparable to the fourth quarter of 2025 due to the physical inventory shutdown and ramp-up costs, followed by sequential improvement through the year and year-over-year gross margin expansion overall. She also noted the guidance reflects the full-year impact of known tariffs at the time, while stating the outlook was formulated prior to “last week’s news” regarding a Supreme Court ruling on tariffs and that the company will need time to assess potential implications.
About Tennant (NYSE:TNC)
Tennant Company is a global provider of solutions that help keep facilities clean, safe and sustainable. The company designs, manufactures and markets a broad range of cleaning machines, chemicals and service programs that address the cleaning needs of customers in diverse industries, including manufacturing, warehousing, food and beverage, healthcare and education. Tennant’s product portfolio encompasses both ride-on and walk-behind floor scrubbers and sweepers, carpet extractors, power brushes, pressure washers and autonomous cleaning machines.
Founded in 1870 and headquartered in Minneapolis, Minnesota, Tennant has grown from a regional manufacturer into a multinational organization with operations in more than 70 countries and sales representation in over 100 markets worldwide.
