ERP Recovery Paves the Way for a Robotics-Driven Tennant Turnaround

After a bruising ERP go-live, Tennant's Q1 order momentum and robotics acceleration point to a second-half recovery.

TNC · Earnings Call · 2026-05-05

A Quarter of Two Halves

Tennant Company’s first-quarter 2026 call was dominated by the aftermath of the North America ERP recovery, but the tone shifted from triage to momentum. Orders jumped 10% year-over-year to $327 million, and backlog swelled to $109 million. While the ERP disruption still cost the company about $23 million in sales and $17 million in gross margin, management highlighted a steady monthly improvement. “By the end of the quarter, core workflows, including order management, production scheduling and fulfillment, were stable and operating at scale.” — David Huml, President and CEO · 2026-05-05 The gross margin exit rate reached roughly 40%, supporting confidence in a sequential recovery. Gross margin fell 3.2pp year-over-year to 38.1%, yet was up 350bp sequentially from Q4 2025. Fay West explained the composition of the impact: “we estimate that the ERP disruption reduced first quarter net sales by approximately $23 million and gross margin by approximately $17 million.” — Fay West, Senior Vice President and CFO · 2026-05-05

Robotics Accelerates Into the Inflection Point

The most exciting news came from the autonomous floor-care business. AMR sales, including autonomy subscriptions, reached $27 million, up 85% year-over-year and representing 9% of total net sales. Dave Huml pointed to the pipeline: “Robotics did contribute materially to our order demand. And I think it's worth noting that our robotics demand in Q1 is in large part due to the efforts of the entire company over the last 6 months to a year as we've been developing a very robust funnel of opportunity for robotics.” — David Huml, President and CEO · 2026-05-05 Two new products—the X16 SWEEP, a robotic sweeper, and the X2 ROVR, a small-format scrubber—expand the addressable market into adjacent industrial and small-space applications. The company also extended its exclusivity arrangement with Brain Corp through 2029 with an evergreen notice period. The introduction of BrainOS Clean 2.0 with SelfPath AI is a defining step: it allows machines to build and adapt cleaning routes without manual training, cutting deployment time by more than half. This pairs with a wider push into building service contractors and distributors.

Our first quarter results reflect meaningful progress on the issues we discussed on our last call.
David Huml, President and CEO · 2026-05-05

Capital Allocation and Balance Sheet Flexibility

The company accelerated share repurchases, deploying $60 million to buy back ~950,000 shares (about 5% of outstanding) at an average $63 per share, a "high conviction decision" following the ERP-driven dislocation. This brought net leverage to 1.78x trailing twelve-month adjusted EBITDA, within the 1-2x target. The board authorized an additional 2 million-share repurchase program, bringing total capacity to approximately 15% of basic shares. Management expects a $0.15 net positive EPS impact from the buybacks in 2026. This continues a pattern from earlier calls, where management emphasized opportunistic buybacks. “We exercised our authorization quite aggressively last year. We took down 1.1 million shares for $88 million, 6% of shares outstanding at the time.” — David Huml, President and CEO · 2026-02-24

Outlook: Rebuilding Confidence With a Weighted H2

Management reaffirmed full-year guidance: $1.24–$1.28B net sales (3–6.5% organic growth), adjusted EBITDA $175–$190M (14.1–14.8% margin), and adjusted diluted EPS $4.70–$5.30. The plan implies meaningful acceleration in the second half, with gross margin expected to expand sequentially as ERP optimization completes and pricing benefits carry through. The prior call had already set the stage: “We're stable in terms of our big 5 processes. ... What we are working through now is, I would call, the remnants of stability and efficiency.” — David Huml, President and CEO · 2026-02-24 And a year earlier, management framed the ERP project’s ambition: “This ERP consolidation is on a very aggressive timeline as a project. We plan to complete this whole thing in three years.” — David Huml, President and CEO · 2025-02-18 The difference now is that the system is operating at scale and the focus has shifted to optimization. The tape, however, remains cautious: the stock is down over 11% in the last 90 days and sits 44% below its 2024 peak. The market will need to see evidence that the second-half ramp is real, especially as tariff and Middle East cost pressures linger. But with a stronger robotics portfolio, a stabilized ERP, and a clear capital return plan, Tennant appears positioned to convert operational recovery into shareholder value.