A maker of manual and autonomous floor cleaning equipment, Tennant designs, manufactures, and services machines for industrial and commercial spaces like warehouses, hospitals, and schools, selling under brands including Tennant, Nobles, IPC, Gaomei, and Rongen. The company also offers detergent-free cleaning technologies and aftermarket parts, reaching tens of thousands of customers through its own sales and service network plus distributors in more than 100 countries.
Operating income fell 48% to $15.9M as ERP recovery costs and freight pressure drove gross margin down 2.6 points to 39.5%.
The ERP disruption that began in late 2025 is still weighing on results. rose 1.7% to $324.0 million, but fell 48% to $15.9 million as contracted 2.6 points to 39.5%, pressured by North American ERP recovery costs, elevated freight, and tariff-related material inflation. The company is generating profit, but the path back to pre-disruption margins remains slow.
Key takeaways
fell 48% to $15.9 million, as the decline combined with a $5.8 million increase in selling and administrative expense for higher people and technology costs.
contracted 2.6 points to 39.5%, driven by incremental labor, freight, and expediting costs tied to the ongoing recovery from the November 2025 ERP system implementation in North America, as well as supply constraints and tariff-related material inflation.
rose 1.7% to $324.0 million, with 3.0% from price realization and a 1.6% foreign currency partly offsetting a 3.5% volume decline.
Section summaries
Management's Discussion and Analysis
Q2 2026 net sales rose 1.7% to $324.0M, but operating income fell 48% to $15.9M on ERP costs, freight/tariff pressure, and EMEA margin deleverage.
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Consolidated Q2 grew 1.7% to $324.0M, driven by 3.0% price realization and 1.6% FX , partly offset by a 3.5% volume decline.
contracted 260 to 39.5%, pressured by North America ERP recovery costs, supply constraints, elevated freight and tariff-related material costs, and EMEA competitive price concessions and unfavorable mix.
swung to a $26.2 million use of cash in the first half of 2026 from a $22.1 million source a year ago, driven by lower earnings and higher tied to ERP inefficiencies.
EMEA declined 2.8%, with competitive price concessions and unfavorable mix contributing to margin deleverage in the region, while APAC fell 7.8% on lower equipment volumes and distributor overstock.
fell 62.4% to $7.6 million, or $0.44 per diluted share, as the decline flowed through to the bottom line.
What changed
The Q1 2026 watch item on recovery showed a sequential improvement to 39.5% from 38.1%, but the decline of 2.6 points indicates ERP-related costs and tariff pressure are persisting longer than the planned Q1 manufacturing shutdown alone would explain.
Organic declined 3.5% in Q2 2026 after a 1.9% decline in Q1, showing that end-customer demand has not yet returned to growth even though the comparison has fully lapped — a concern flagged since Q1 2025.
deteriorated further, with the first half swinging to a $26.2 million use of cash from a $22.1 million source a year ago, as the investment flagged in Q1 2026 continued into Q2.
The patent dispute appeal outcome flagged in prior filings remains unresolved, with no material developments reported in this quarter's legal proceedings disclosure.
What to watch
Whether continues to recover from 39.5% in Q3 2026 as ERP operations stabilize and expediting costs fade, or whether tariff-related material inflation and EMEA competitive pricing create a new, lower baseline.
Whether organic volume returns to growth in the second half of 2026, or whether the 3.5% Q2 decline signals that price-driven gains are masking weakening end-customer demand.
Whether turns positive in Q3 2026 as needs moderate, or whether the first-half cash use of $26.2 million extends into a full-year drain.
The outcome of the patent dispute appeal and whether the $20.2 million accrued liability is revised or paid, creating a cash outflow beyond normal operations.
dropped 48% to $15.9M as S&A expense rose $5.8M on higher people and technology costs, and R&D expense increased 80 to 3.9% of sales on robotics and autonomous investments.
Americas Q2 sales rose 2.4% on price and Latin America strength, while EMEA grew 2.1% on FX and acquisitions but saw organic decline of 2.8%, and APAC fell 7.8% on lower equipment volumes and distributor overstock.
swung to a $26.2M use in H1 2026 from a $22.1M source a year ago, driven by lower earnings and higher tied to ERP inefficiencies.
The Company cites ongoing macroeconomic, tariff, and geopolitical uncertainty, with no tariff refunds recognized, and expects fiscal 2026 to remain a transition period with continued margin pressure.
Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in our market risk since December 31, 2025. For additional information, refer to Item 7A of our annual report on Form 10-K for the year ended December 31, 2025. 34 Table of Contents
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There have been no material changes in our market risk since December 31, 2025. For additional information, refer to Item 7A of our annual report on Form 10-K for the year ended December 31, 2025.
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Refer to Note 17, Commitments and Contingencies, to the Consolidated Financial Statements in the Company’s Form 10-K for information regarding the Company’s legal proceedings. There have been no material developments in any legal proceedings that require reporting in this Form 1…
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Refer to Note 17, Commitments and Contingencies, to the Consolidated Financial Statements in the Company’s Form 10-K for information regarding the Company’s legal proceedings. There have been no material developments in any legal proceedings that require reporting in this Form 10-Q.
We documented our risk factors in Item 1A of Part I of our annual report on Form 10-K for the year ended December 31, 2025. There have been no material changes to our risk factors since the filing of that report.
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We documented our risk factors in Item 1A of Part I of our annual report on Form 10-K for the year ended December 31, 2025. There have been no material changes to our risk factors since the filing of that report.