Tnc q2 2016_earnings_presentation_final

1. TENNANT COMPANY
Earnings Release Conference Call
Second Quarter 2016
Tuesday, July 26, 2016
1

2. Chris Killingstad
President and CEO
Tom Paulson
Senior VP, CFO
2
TENNANT COMPANY
On the Call Today

3. Our remarks this morning and our answers to questions may contain forward-looking
statements regarding the company’s expectations of future performance. Such statements are
subject to risks and uncertainties, and our actual results may differ materially from those
contained in the statements. These risks and uncertainties are described in today’s news
release and the documents we file with the Securities and Exchange Commission. We
encourage you to review those documents, particularly our Safe Harbor statement, for a
description of the risks and uncertainties that may affect our results.
3
TENNANT COMPANY
FORWARD LOOKING
STATEMENTS

4. • 2016 second quarter consolidated net sales of
$216.8M
– Organic net sales increased 2.4%
– Increased sales to strategic accounts
– Record second quarter sales in Americas; EMEA
strong organic sales growth
– Net earnings of $0.89 per diluted share on a
“Constant Currency” basis – up 12.7% versus prior-
year quarter
• Narrowed sales guidance and raising earnings
guidance for 2016 full year
4
TENNANT COMPANY
2016 Second Quarter Overview

5. We remain committed to organic Sales goal of $1 Billion
and 12% or above Operating Profit Margin
5
TENNANT COMPANY
Growth Strategy
• Strong new product and technology pipeline
• Sales gains in emerging markets
• Return to growth in Europe
• Ongoing focus on strategic accounts
• Expansion of global market coverage
• Building Tennant’s e-Business capabilities
• Application of lean principles

6. 6
• New products and technologies
– Sales of new products introduced in last
three years was 35% of equipment sales in
2016 first half
• Plan to launch 14 new products
in 2016
– Several significant industrial machine
launches
– Launched M20 & M30 Sweeper-Scrubbers
and T20 Heavy-Duty Industrial Rider
Scrubber with high tech features
TENNANT COMPANY
New Products

7. ec-H2O NanoClean®
The Responsible Way to Clean
Next generation ec-H2O | Cleans more soils in more applications
HOW IT WORKS:EC-H2O™ SCRUBBERS | 2008-2015
$896 million+
cumulative revenue
8,000+
customers
30,000+
sites
77,000+
machines
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Record Sales of $157M in 2015

8. ORBIO® Technologies
On-Site Generation Technology
FOCUS ON “3Cs”
CAMPUS | CHAINS | CONTRACTORS
Improving health and safety for the environment, employees
and people in their care while reducing costs.
GENERATES
cleaner & disinfectant/sanitizer on-site
8

9. – +
Water
Recycling
Battery
Technologies
Robotics
(AGV)
Asset
Management
Advanced Product Development
Future Technologies
9

10. ON-BOARD
MACHINE
DIAGNOSTICS
CUSTOMERS
• Manage cleaning
programs better
• Fleet management
• Lower cost-to-clean
• Increased Market
Differentiation
• Service Efficiency
• Customer Intimacy
10
TENNANT COMPANY
IRIS® Asset Management System

11. • Improving cost & availability
• ROI for customer
• Reduced weight & footprint size
• Sustainability
• Productivity
• Game-changing solution
– +
Water RecyclingBattery Technologies Robotics (AGV)
• Addresses labor costs
• Largest potential growth
opportunity
Advanced Product Development
Future Technologies
11

12. DIGITAL
TRANSFORMATION
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IRIS®
e-Business
e-Commerce
Platform
CRM

13. • Diverse portfolio of initiatives to create value
• Introductions of new products and technologies
• Expanding global sales and marketing to increase
global market share
• Building Tennant’s e-Business capabilities
• Concurrently running a more efficient business to
raise productivity
13
TENNANT COMPANY
Growth & Profitability

14. 14
SALES
GROSS MARGIN
R&D EXPENSE (% of sales)
S&A EXPENSE (% of sales)
OPERATING PROFIT
OPERATING PROFIT MARGIN
DILUTED EPS
Q2’16 Q2’15 CHANGE
$216.8 M
43.9%
3.9%
29.6%
$22.6 M
10.4%
$0.85
$215.4 M
44.1%
3.9%
29.7%
$22.6 M
10.5%
$0.79
+0.7%
(20 bps)
+0 bps
(10 bps)
0%
(10 bps)
+7.6%
TENNANT COMPANY
2016 Second Quarter
Organic Sales Growth 2.4% | EMEA Sales up 6.3% organically

15. 15
• Sales up 2.5% organically
(excluding 1.0% unfavorable foreign currency impact)
• Record sales for a second quarter
• Increased sales to strategic accounts
• Latin America achieved 15% organic sales
growth despite economic headwinds
TENNANT COMPANY
2016 Second Quarter by Region
AMERICAS

16. • Sales increased 6.3% organically
(excluding approx. 0% unfavorable foreign currency impact and 4.4%
impact from divestiture of Green MachinesTM outdoor city cleaning line)
• Strong sales to strategic accounts with positive
growth in each country
• Strong sales of scrubbers equipped with ec-H2OTM
16
EMEA
TENNANT COMPANY
2016 Second Quarter by Region

17. • Sales declined 7.2% organically
(excluding 1.0% unfavorable foreign currency impact)
• Organic sales growth in Southeast Asia and
Japan was more than offset by lower organic
sales in the other Asia Pacific countries due to
sluggish economy
17
APAC
TENNANT COMPANY
2016 Second Quarter by Region

18. 18
SALES
GROSS MARGIN
R&D EXPENSE (% of sales)
S&A EXPENSE (% of sales)
OPERATING PROFIT
OPERATING PROFIT MARGIN
DILUTED EPS
Q2’16 Q2’15 CHANGE
$216.8 M
43.9%
3.9%
29.6%
$22.6 M
10.4%
$0.85
$215.4 M
44.1%
3.9%
29.7%
$22.6 M
10.5%
$0.79
+0.7%
(20 bps)
+0 bps
(10 bps)
0%
(10 bps)
+7.6%
TENNANT COMPANY
2016 Second Quarter
Organic Sales Growth 2.4% | EMEA Sales up 6.3% organically

19. 19
SALES
GROSS MARGIN
OPERATING PROFIT
OPERATING PROFIT MARGIN
DILUTED EPS
Q2’16 CHANGE
$219.0 M
44.1%
$23.7 M
10.8%
$0.89
$215.4 M
44.1%
$22.6 M
10.5%
$0.79
+1.7%*
+0 bps
+5.0%
+30 bps
+12.7%
TENNANT COMPANY
2016 Second Quarter
“CONSTANT CURRENCY” VIEW (excludes estimated foreign exchange impact)
CONSTANT(1)
CURRENCY
Q2’16
AS
REPORTED
$216.8 M
43.9%
$22.6 M
10.4%
$0.85
(1)“Constant Currency”: estimated income statement which assumes
no change in exchange rates from prior year.
*Organic Sales Growth was approximately 2.4%, excluding approximately 1.0 percent
unfavorable foreign currency exchange impact and the impact from the divestiture of the
Green Machines outdoor city cleaning line of 0.7%.
Q2’15

20. Remain committed to at least 12% OP Margin
• Drive organic revenue growth in mid- to high-single digits
• Hold fixed costs essentially flat in manufacturing as volume
rises
• Strive for zero net inflation at gross profit line
• Standardize and simplify processes to improve scalability of
business model
20
TENNANT COMPANY
Operating Profit Margin Goal

21. • Overall effective tax rate for 2016 first half
of 32.1%
• Base tax rate of 31.4%
(excluding routine discrete items)
• Federal R&D tax credit – was re-enacted for 2016;
favorable benefit included in 2016 tax rate
21
TENNANT COMPANY
Successful Tax Strategies

22. 22
TENNANT COMPANY
Strong Balance Sheet
Commitment To Shareholder Return
1H’15FY’15 1H’16

23. 23
TENNANT COMPANY
2016 EPS & Sales Guidance
2015
ACTUAL
As Reported
$1.74EPS
$811.8MSALES
AsAdjusted
$2.49EPS
$811.8MSALES
2016 Financial Outlook
$2.35 to $2.60/$800M to $820M
KEY EXPECTATIONS FOR 2016
• Net sales in the range of $800M to $820M versus $811.8M in 2015.
• 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 Green Machines divestiture of approximately 1%.
• Organic sales growth, excluding foreign currency exchange impact and
divestiture, in the range of 1% to 3%.
• Foreign currency exchange headwinds estimated to negatively impact operating
profit in the range of $3M to $4M, or approximately $0.10 to $0.15 EPS.
• Gross margin performance in the range of 43% to 44%.
• R&D expense of approximately 4% of sales.
• Effective tax rate of approximately 31% (negatively impacting 2016 by
approximately $0.05).
• Capital expenditures in the range of $25M to $30M.

24. QUESTIONS?
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25. Tennant is Well Positioned!
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Competitively
advantaged in the market
with our innovative
product and technology
portfolio and go-to-
market strategy
Well positioned to
leverage our
operational efficiency