Tennant Company (TNC) Income Statement

The company's revenue declined on a year-over-year basis in every quarter from 2025Q1 through 2025Q4, a sharp reversal from the positive low-single-digit growth seen throughout 2024. The 1.7% growth in 2026Q2 represents a potential stabilization, but it remains well below the company's historical run rate. This pattern indicates a cyclical or operational downturn that may now be bottoming out, though durability is unproven.

Gross margins have trended downward from a peak of 44.2% in 2024Q1, indicating that cost inflation or competitive pricing pressures are not being fully offset. This decline has directly compressed operating profitability, as seen in the operating margin falling from 12.1% to 4.9% over the same period. Compared to peers like Nordson (55.2%) and Kadant (45.2%), Tennant's current margin profile suggests a weaker competitive position or less favorable product mix.

The company's operating leverage appears negative in the current cycle. For example, in 2026Q1, revenue declined only 6.8% year-over-year, yet operating income plummeted by approximately 75%. This indicates that the cost structure, particularly SG&A and overhead, is not flexible enough to maintain profitability during revenue softness. The minimal operating income in recent quarters suggests a need for significant restructuring to align expenses with the current revenue base.

SG&A is the primary cost lever, typically representing 30-35% of revenue. In quarters like 2024Q4, where SG&A surged to $116.4M (35.4% of revenue), it directly drove operating losses. The slight improvement in the SG&A ratio in recent quarters suggests some cost control, but it remains elevated relative to peers. Until the company achieves a more variable cost structure, profitability will remain highly sensitive to volume fluctuations.