Tennant NYSE: TNC reported second-quarter 2026 sales growth and stronger order activity, but profitability fell below management’s expectations as the company faced ERP-related operating inefficiencies, North American parts shortages, inflationary costs and competitive pricing pressure in Europe.
Net sales rose 1.7% year over year to $324 million, while orders increased 6.6% to $339 million. The company said order momentum strengthened during the quarter, with June orders up 11% from a year earlier. Backlog reached $127 million at quarter-end, up $18 million from the first quarter and $50 million since year-end.
“Demand for our products and solutions remained strong throughout the quarter,” President and CEO Dave Huml said. “Parts shortages in North America limited our ability to fully ramp production output and convert demand into shipments,” which he characterized as a fulfillment issue rather than a demand issue.
Profitability Pressured by Costs and ERP Challenges
GAAP net income declined to $7.6 million from $20.2 million in the prior-year period. Adjusted diluted earnings per share fell to $0.83 from $1.49 a year earlier, while adjusted EBITDA declined to $35.3 million, or 10.9% of sales, from $51 million, or 16% of sales.
Gross margin was 39.5%, down 260 basis points year over year but up 140 basis points sequentially from the first quarter. Chief Financial Officer Fay West said the annual decline reflected different pressures in North America and EMEA.
In North America, Tennant continued to experience ERP-related inefficiencies, including elevated overtime, labor inefficiencies, overhead deleverage and premium freight. Master-data and planning issues also contributed to material and component shortages, production disruptions, rework and expedited freight costs.
Huml said the company identified a systemic issue in which its system was not providing correct demand signals to suppliers. Tennant has implemented manual oversight and purchase orders while it works on a permanent solution. Higher-than-forecast demand for North American industrial equipment and stronger demand for the company’s X6 ROVR robotic platform added pressure to the supply chain.
Management expects parts availability to begin improving during the middle of the third quarter, though shortages will continue to affect results during the period. West said third-quarter gross margin is expected to be roughly comparable to the second quarter’s 39.5%, with improvement anticipated in the fourth quarter.
In EMEA, lower volumes, higher freight and material costs associated with the Middle East conflict, unfavorable product mix and negative net pricing weighed on margins. Huml said Tennant is implementing pricing actions, strengthening discount discipline and reducing costs in the region. He noted that the company faces low-end competition from Chinese and Asian manufacturers, particularly in commercial walk-behind products, alongside competition in higher-end commercial and industrial equipment.
Robotics Revenue Climbs 37%
Tennant’s autonomous mobile robot, or AMR, business remained a major growth contributor. Robotics revenue, including equipment and autonomy service fees, totaled about $31 million in the second quarter, up 37% year over year. First-half robotics revenue rose 56% to $58 million.
Pat Schottler, senior vice president of Tennant Robotics, said the company’s X4 ROVR and X6 ROVR robotic scrubbers were the primary contributors to first-half growth. The company expects revenue to accelerate in the second half as it ships newly launched products, including the X2 ROVR robotic scrubber and X16 SWEEP industrial robotic sweeper.
Tennant expects full-year robotics revenue of $130 million to $145 million. The company has set an objective of expanding robotics revenue from about $85 million in 2025 to $250 million in 2028, which would require roughly 50% annual growth.
Schottler said TNC Robotics has about 120 dedicated employees across product development, sales, marketing, customer success, operations and support. The company has committed to launch 10 robotic products over a two-year period and has more than 40 commercial employees focused specifically on selling, deploying and supporting robotic solutions.
The company also cited a recent agreement to deploy 250 cleaning robots across Savers and Value Village retail locations in North America. Schottler said the deployment expanded from a smaller pilot after Tennant demonstrated autonomous performance, adoption and operational support across locations with varying store layouts.
Regional Results and Cash Flow
On an organic basis, Americas sales grew 1.4%. North American sales were nearly flat, declining 0.2% against a strong prior-year comparison as pricing was offset by shipment constraints. Latin American organic sales increased 21%, supported by strategic accounts, equipment-as-a-service momentum, and commercial execution in Brazil and Mexico.
EMEA organic sales declined 2.8%, while APAC organic sales fell 10.6%. Tennant attributed APAC’s decline to reduced equipment volumes, cautious capital-spending decisions, slower growth in several markets and elevated distributor inventory in certain countries.
Service and other sales rose 19.2%, aided by price realization and recurring revenue. Autonomy subscription revenue more than doubled year over year, partly due to changed revenue recognition under Tennant’s enterprise license agreement with Brain Corp.
Operating cash flow returned to positive territory at about $5 million in the second quarter after a $31 million use of cash in the first quarter. For the first half, operating activities used $26.2 million, compared with $22.1 million of cash generated a year earlier. The company expects cash flow to improve in the second half as receivables convert, inventory rebalances and operating performance improves.
Guidance Updated; CFO Retirement Announced
Tennant raised its full-year sales outlook while reducing its profitability expectations. The company now expects:
- Net sales of $1.27 billion to $1.31 billion, representing growth of 5.5% to 9%.
- Organic sales growth of 3.5% to 7%.
- Adjusted EBITDA of $155 million to $170 million, with a margin of 12.2% to 13%.
- GAAP diluted EPS of $2.15 to $2.80.
- Adjusted diluted EPS of $3.80 to $4.45.
The prior outlook called for sales of $1.24 billion to $1.28 billion, adjusted EBITDA of $175 million to $190 million, and adjusted EPS of $4.70 to $5.30.
Management said the higher sales outlook reflects order momentum, backlog, robotics growth, pricing, favorable foreign currency and incremental revenue associated with the Brain Corp agreement. The lower earnings outlook reflects second-quarter cost pressures, continued volume weakness in EMEA and APAC, Middle East conflict-related costs, delayed ERP savings and higher robotics R&D investment.
Huml also announced that West plans to retire as CFO. He said the decision was personal and unrelated to concerns about Tennant’s business or financial performance. The company has started a search and expects to appoint a successor by the first quarter of 2027.
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.
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