Tennant Company Reports 2017 Third Quarter Results

1. TENNANT COMPANY
Earnings Release Conference Call
Third Quarter 2017
Thursday, November 2, 2017
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.
Additionally, on this conference call we will discuss non-GAAP measures that include or
exclude special or non-recurring items. For each non-GAAP measure, we also provide the
most directly comparable GAAP measure. There were special non-GAAP items in the 2017
third quarter and first nine months. There were no special non-GAAP items in 2016. Our 2017
third quarter earnings release includes a reconciliation of these non-GAAP measures to our
GAAP results for the 2017 third quarter and first nine months.
3
TENNANT COMPANY
Forward Looking Statements &
Non-GAAP Measures

4. • Maintain strong new product and technology pipeline
• Expand global market coverage
• Leverage cost structure to improve operating efficiency
• Improve financial strength through solid cash flow and debt
reduction
4
TENNANT COMPANY
Core Initiatives

5. • Expand geographic reach through acquisitions
• Align resources for growth and efficiency through restructure
actions
• Focus on innovation to improve our new product offerings
5
TENNANT COMPANY
Core Strategies

6. • Organic growth of 1.3%, but continued gross margin
challenges
• Strong performance of IPC, growing 5% organically in Q3,
while also growing our EMEA region by 14.6% organically
• Synergies across core Tennant and IPC will allow for cross-
selling and reaching more customers
6
TENNANT COMPANY
2017 Third Quarter Overview

7. • Timing of key strategic accounts in the Americas region
resulted in softness in the quarter
• Restructuring charge impacts and manufacturing automation
initiatives contributed to gross margin headwinds
– A continued focus area and priority for our leadership and expect
more normalized gross margins of 42% to 43% by end of Q2 2018
• Exciting our customer base by offering new product launches, which
translate into a strong Vitality Index (47%)
– Examples include our new T350 Stand-On Commercial Scrubber and i-Mop
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TENNANT COMPANY
2017 Third Quarter (Continued)

8. • Remain committed to delivering synergies related to IPC,
which allows us to expand our global market coverage and
product offerings
• Maintain our strong new product and technology pipeline
• Address operational efficiencies to return margins to
normalized rates
• Focus on building our financial strength through solid cash
generation and repayment of debt
8
TENNANT COMPANY
Looking Ahead

9. 9
Q3’17
SALES
Adjusted* GROSS MARGIN
R&D EXPENSE (% of sales)
Adjusted*
S&A EXPENSE (% of sales)
Adjusted*
OPERATING PROFIT
Adjusted*
OPERATING PROFIT MARGIN
Adjusted*
EPS
Q3’16 CHANGE
TENNANT COMPANY
2017 Third Quarter
$261.9 M
40.8%
3.0%
32.4%
$14.2 M
5.4%
$0.32
$200.1 M
42.6%
4.2%
30.3%
$16.3 M
8.1%
$0.64
+30.9%
(180 bps)
(120 bps)
+210 bps
(12.8%)
(270 bps)
(50%)
Organic Sales Increase 1.3% | Organic Sales up 14.6% in EMEA
*Q3’17 results are adjusted to exclude inventory step-up of $2.2M pre-tax ($0.09 per share) in Gross Margin and IPC acquisition costs of
$0.9M pre-tax ($0.03 per share) in S&A Expense. EPS also includes $7.3M pre-tax ($0.29 per share) related to accelerated amortization for
intangible assets for IPC acquisition.

10. 10
• Sales declined 0.2% organically
(excluding approx. 0.4% favorable foreign currency impact and 5.5% impact
from Florock and IPC acquisitions)
• Overall lower sales due to timing related to key
strategic accounts
• Strong sales growth in Mexico
TENNANT COMPANY
2017 Third Quarter by Region
AMERICAS

11. • Sales increased 14.6% organically
(excluding approx. 5.7% favorable foreign currency impact and 148.7%
impact from IPC acquisition)
• Solid sales performance in Western Europe
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EMEA
TENNANT COMPANY
2017 Third Quarter by Region

12. • Sales decreased 8.5% organically
(excluding approx. 0.4% favorable foreign currency impact and 27.0% impact of
IPC acquisition)
• Sales growth in Japan offset by lower sales in China, Korea
and Southeast Asia
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APAC
TENNANT COMPANY
2017 Third Quarter by Region

13. 13
Q3’17
SALES
Adjusted* GROSS MARGIN
Q3’16 CHANGE
TENNANT COMPANY
Adjusted Gross Margin
$261.9 M
40.8%
$200.1 M
42.6%
+30.9%
(180 bps)
• 180 bps decline:
– 68 bps – dilutive impact of IPC acquisition
– 32 bps – impact of mix due to higher EMEA region sales
– 26 bps – due to raw material inflation
– 54 bps – due to field service productivity, challenges related to organizational changes from
restructuring and near-term manufacturing automation challenges
• Full Year guidance of 41% to 42%
*Q3’17 results are adjusted to exclude inventory step-up related to the IPC acquisition of $2.2M pre-tax ($0.09 per share) in Gross Margin.

14. 14
Q3’17
SALES
Adjusted* GROSS MARGIN
R&D EXPENSE (% of sales)
Adjusted*
S&A EXPENSE (% of sales)
Adjusted*
OPERATING PROFIT
Adjusted*
OPERATING PROFIT MARGIN
Adjusted*
EPS
Q3’16 CHANGE
TENNANT COMPANY
2017 Third Quarter
$261.9 M
40.8%
3.0%
32.4%
$14.2 M
5.4%
$0.32
$200.1 M
42.6%
4.2%
30.3%
$16.3 M
8.1%
$0.64
+30.9%
(180 bps)
(120 bps)
+210 bps
(12.8%)
(270 bps)
(50%)
Organic Sales Increase 1.3% | Organic Sales up 14.6% in EMEA
*Q3’17 results are adjusted to exclude inventory step-up of $2.2M pre-tax ($0.09 per share) in Gross Margin and IPC acquisition costs of
$0.9M pre-tax ($0.03 per share) in S&A Expense. EPS also includes $7.3M pre-tax ($0.29 per share) related to accelerated amortization for
intangible assets for IPC acquisition.

15. 15
Q3’17
SALES
Adjusted* GROSS MARGIN
R&D EXPENSE (% of sales)
Adjusted*
S&A EXPENSE (% of sales)
Q3’16 CHANGE
TENNANT COMPANY
2017 Third Quarter
$261.9 M
40.8%
3.0%
32.4%
$200.1 M
42.6%
4.2%
30.3%
+30.9%
(180 bps)
(120 bps)
+210 bps
Organic Sales Increase 1.3% | Organic Sales up 14.6% in EMEA
*Q3’17 results are adjusted to exclude IPC acquisition costs of $0.9M pre-tax ($0.03 per share) in S&A Expense.
• Q3 IPC-Related S&A Expenses = $23.4M
– $0.9M of IPC acquisition pre-tax costs (excluded in Adj. S&A expense already)
– $7.3M of non-cash amortization for intangible assets for IPC acquisition
• $2.0M associated with a Q2 catch-up and $5.3M expense in Q3
– $15.2M of S&A related to IPC business operations

16. 16
Q3’17
SALES
Adjusted* GROSS MARGIN
R&D EXPENSE (% of sales)
Adjusted*
S&A EXPENSE (% of sales)
Adjusted*
OPERATING PROFIT
Adjusted*
OPERATING PROFIT MARGIN
Adjusted*
EPS
Q3’16 CHANGE
TENNANT COMPANY
2017 Third Quarter
$261.9 M
40.8%
3.0%
32.4%
$14.2 M
5.4%
$0.32
$200.1 M
42.6%
4.2%
30.3%
$16.3 M
8.1%
$0.64
+30.9%
(180 bps)
(120 bps)
+210 bps
(12.8%)
(270 bps)
(50%)
Organic Sales Increase 1.3% | Organic Sales up 14.6% in EMEA
*Q3’17 results are adjusted to exclude inventory step-up of $2.2M pre-tax ($0.09 per share) in Gross Margin and IPC acquisition costs of
$0.9M pre-tax ($0.03 per share) in S&A Expense. EPS also includes $7.3M pre-tax ($0.29 per share) related to accelerated amortization for
intangible assets for IPC acquisition.

17. EBITDA is a better measure of our performance, especially in light of non-cash amortization
impact of IPC acquisition
Tennant still remains committed to expanding operating profit margins by:
• Driving organic revenue growth in mid- to high-single digits
• Holding fixed costs essentially flat in manufacturing as volume rises
• Striving for zero net inflation at gross profit line
• Standardizing and simplifying processes to improve scalability of business model
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TENNANT COMPANY
EBITDA and Operating Profit
Q3’17
EBITDA
EBITDA %
Q3’16 CHANGE
$28.0M
10.7%
$20.7 M
10.3%
+35.2%
+40 bps

18. 18
TENNANT COMPANY
Cash Flow
Commitment to deliver strong cash flow, reduce debt and drive
shareholder return
3M’16 3M’17

19. TENNANT COMPANY
Guidance
Key Assumptions:
• Net sales in the range of $960M to $990M versus $808.6M
in 2016.
• Unfavorable foreign currency impact on sales of
approximately 0% to 1%.
• Organic sales growth, excluding foreign currency exchange
impact and acquisitions, in the range of 1% to 2%.
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Key Assumptions (continued):
• Adjustments of $32.5M pre-tax, or $1.40 per share,
non-recurring special items (see non-GAAP schedule).
• Gross margin performance in the range of 41% to 42%.
• R&D expense in the range of 3% to 4% of sales.
• Effective tax rate of approximately 29%.
• Capital expenditures in the range of $20M to $25M.

20. QUESTIONS?
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