DEF: Tennant Co. Navigates ERP Hurdles, Sets 2026 Strategic Course

Sentiment:

Proxy Statement 18 March 2026 4:08 PM

Tennant Company's latest proxy statement details 2025 operational challenges from an ERP implementation, executive compensation adjustments, and key governance updates ahead of its 2026 Annual Meeting.

Delay expectedThe North America ERP implementation in Q4 2025 caused "operational disruption" and "temporarily constrained shipment capacity."Actions taken in early 2026 to reestablish inventory accuracy "limited outbound activity for approximately two weeks and contributed to additional inefficiencies."

Worse than expectedFull-year 2025 net sales decreased by 6.5% to approximately $1.2 billion compared to 2024.Adjusted EBITDA for 2025 was $167.4 million, a significant decrease from $208.8 million in 2024.Adjusted EBITDA margin decreased by 230 basis points for the year.The Cash Incentive Plan (CIP) payout for most Named Executives was only 18.96% of target, and Ms. Balinski's payout was reduced to zero, directly reflecting the underperformance.The company explicitly stated that 2025 "represented a year of both meaningful strategic progress and unexpected operational challenges" and that "Full-year results reflected lower revenue and profitability compared to 2024, primarily due to fourth-quarter operational disruption associated with the North America ERP implementation."

Summary

The 2026 Annual Meeting of Shareholders will be held virtually on April 29, 2026, at 10:30 a.m. Central Time.
Shareholders will vote on the election of three Class I directors, the ratification of Deloitte & Touche LLP as the independent auditor for 2026, and an advisory approval of executive compensation.
The company experienced "unexpected operational challenges" in 2025, primarily due to a North America ERP implementation in Q4, leading to lower revenue and profitability compared to 2024.
Net sales for 2025 were approximately $1.2 billion, a 6.5% decrease from the prior year.
Adjusted EBITDA for 2025 was $167.4 million, down from $208.8 million in 2024, with Adjusted EBITDA margin decreasing by 230 basis points.
Despite challenges, the company reported "solid underlying performance across EMEA and APAC" and continued price realization and cost management.
Executive Cash Incentive Plan (CIP) payouts for 2025 were 18.96% of target for most Named Executives, but Ms. Balinski's payout was reduced to zero due to the ERP disruption.
Long-Term Incentive Plan (LTIP) awards for the 2023-2025 period paid out at 189.53% of target, reflecting strong performance against Incentive ROIC and Incentive Cumulative Earnings Per Share metrics.
Two new independent directors, Patrick E. Allen and James T. Glerum, Jr., were appointed to the Board on February 12, 2026.
Director compensation was increased for the 2025-2026 Board Year, including an annual board cash retainer to $80,000, annual restricted stock unit grant value to $130,000, and Chair of the Board cash retainer to $100,000.
The company is committed to proposing a phased-in declassification of the Board for shareholder approval in 2027.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this filing with a cautious sentiment due to the significant operational disruptions and resulting financial underperformance in 2025, particularly the decline in net sales and Adjusted EBITDA. While strategic investments and strong long-term incentive payouts offer some positives, the immediate challenges and their impact on executive compensation payouts warrant a lower score.

Positives

Strong payout of 189.53% of target for the 2023-2025 Long-Term Incentive Plan (LTIP) awards, indicating successful achievement of multi-year financial objectives.
Solid underlying performance in EMEA and APAC regions, demonstrating regional strength despite overall operational challenges.
Continued price realization and disciplined cost management efforts.
Strategic investments in innovation, automation, and foundational systems, positioning the company for renewed growth and margin expansion in 2026.
Appointment of two new independent directors, Patrick E. Allen and James T. Glerum, Jr., enhancing financial and investment banking expertise on the Board.
Commitment to propose a phased-in declassification of the Board for shareholder approval in 2027, aligning with best corporate governance practices.
High shareholder support for executive compensation in 2025, with approximately 97% of votes cast in favor.

Negatives

Full-year 2025 results showed lower revenue and profitability compared to 2024.
Net sales decreased by 6.5% to approximately $1.2 billion in 2025.
Adjusted EBITDA for 2025 was $167.4 million, a decrease from $208.8 million in 2024.
Adjusted EBITDA margin decreased by 230 basis points in 2025.
Significant operational disruption in Q4 2025 due to the North America ERP implementation, which temporarily constrained shipment capacity and led to volume deleverage and margin pressure.
Further inefficiencies and limited outbound activity for approximately two weeks in early 2026 due to actions taken to reestablish inventory accuracy.
Ms. Barbara A. Balinski's 2025 Cash Incentive Plan (CIP) payout was reduced to zero due to the ERP disruption.
No profit-sharing contribution was made to the Retirement Savings Plan for 2025 based on Adjusted EBITDA$ achieved.

Risks

Operational disruptions, such as those experienced with the North America ERP implementation, can significantly impact revenue, profitability, and shipment capacity.
Challenges in reestablishing inventory accuracy and stabilizing core workflows can lead to additional inefficiencies and limit outbound activity.
The ability to achieve targeted levels of performance for Long-Term Incentive Plan (LTIP) grants is challenging and not guaranteed, as targets are set to be difficult to achieve.
The company's compensation plans are annually reviewed for risks that could have a material adverse effect, though management assessed that current plans do not encourage excessive risk-taking.
Potential for non-compliance with financial reporting requirements could trigger clawback policies for incentive-based compensation.
Executive officers are subject to non-competition, confidentiality, and non-solicitation covenants post-employment, which could be challenged or breached.
Changes in tax laws, such as Section 162(m) of the Code, can limit the deductibility of executive compensation, impacting the company's tax efficiency.

Future Outlook

The company anticipates a gradual return to normalized operating performance through the first half of 2026, following strategic investments in innovation, automation, and foundational systems, alongside targeted commercial and operational initiatives. These efforts are expected to position the company for renewed growth, improved productivity, and margin expansion.

Management Comments

"We believe that providing our proxy materials over the Internet reduces the environmental impact of our meeting without limiting our shareholders access to important information about Tennant."
"We appreciate your continued confidence in Tennant and look forward to you joining the virtual meeting."
"2025 represented a year of both meaningful strategic progress and unexpected operational challenges as we advanced to the next phase of our long-term growth strategy."
"We delivered solid underlying performance across EMEA and APAC, achieved continued price realization, and remained discipline in cost management."
"The ERP transition temporarily constrained shipment capacity and contributed to volume deleverage and margin pressure but, by the end of 2025, we made substantial progress toward stabilizing core workflows, enabling performance to return to expected levels toward the end of the year, subject to certain actions we took in early 2026 to reestablish inventory accuracy that limited outbound activity for approximately two weeks and contributed to additional inefficiencies."
"Throughout 2025, we continued to invest in innovation, automation, and foundational systems, alongside targeted commercial and operational initiatives that position us for renewed growth, improved productivity, and margin expansion as we enter 2026 and gradually return to normalized operating performance through the first half of 2026."

Industry Context

StockSavvy.ai notes that the operational challenges faced by Tennant Company due to its North America ERP implementation are not uncommon in the industrial sector, where complex system upgrades can temporarily disrupt supply chains and financial performance. However, the company's continued investment in innovation, automation, and sustainable cleaning technologies aligns with broader industry trends towards efficiency, digitalization, and ESG integration, which are critical for long-term competitiveness. The appointment of directors with expertise in global manufacturing, M&A, and disruptive technologies reflects a strategic focus on inorganic growth and technological advancement, mirroring moves by peers seeking to enhance market position and operational resilience.

Comparison to Industry Standards

The company's CEO pay ratio of 84:1 is within the typical range for large industrial manufacturing companies, though specific comparisons would require detailed peer data.
The strong payout of 189.53% for the 2023-2025 LTIP awards suggests that the company's performance metrics (Incentive ROIC and Incentive Cumulative Earnings Per Share) were effectively met or exceeded, indicating strong execution relative to internal targets, which is a positive signal compared to industry peers who may struggle to meet such targets.
The shift to double-trigger acceleration for equity awards commencing in 2026 aligns with evolving corporate governance best practices, moving away from single-trigger provisions that are often viewed unfavorably by institutional investors and proxy advisors. This brings the company's practices closer to global benchmarks for executive compensation and change-in-control provisions.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Class II Director	NA	Patrick E. Allen	February 12, 2026	Appointment pursuant to a cooperation agreement with Vision One Fund, LP.
Class III Director	NA	James T. Glerum, Jr.	February 12, 2026	Appointment following identification by a search firm retained by the Governance Committee.
Senior Vice President, Chief Human Resources Officer	Interim (Kristin A. Erickson)	Kristin A. Erickson (full-time)	February 1, 2026 (additional position), full-time transition during 2026	Appointment to additional position and expected full-time transition.
Senior Vice President, Chief Transformation Officer	Barbara A. Balinski	NA	September 3, 2026	Intention to retire.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Board Declassification Proposal	Commitment to propose a phased-in declassification of the Board for approval by shareholders.	2027	Enhances shareholder influence over board composition and aligns with modern governance best practices.
Director Age Limit Policy	No re-election of a director after reaching retirement age of 75 years, unless an exception is approved by the Board.	Ongoing	Promotes board refreshment and ensures directors maintain active engagement and contemporary perspectives.
Director Public Company Board Limits	Directors limited to serving on a total of four public company boards (or two if serving as a CEO of a public company other than Tennant).	Ongoing	Ensures directors have sufficient time and focus to dedicate to their responsibilities at Tennant Company.
Equity Award Acceleration Provisions	Commencing in 2026, all equity awards will provide for acceleration of vesting only upon a double trigger event following a change in control, replacing prior single trigger acceleration provisions.	2026 (for new awards)	Aligns executive compensation with shareholder interests by requiring both a change in control and a qualifying termination for accelerated vesting, a common best practice.
Stock Ownership Guideline Calculation	As of February 1, 2024, stock options or unearned performance shares are no longer included in the calculation of stock ownership for non-employee directors and executive officers. Only direct shares owned, vested restricted stock/units, and after-tax value of unvested restricted stock/units are included.	February 1, 2024	Provides a more conservative and transparent measure of actual equity ownership, strengthening alignment with shareholder interests.
Retirement Plan Redesign	For 2026, the retirement plan was redesigned to eliminate the profit-sharing plan and reallocate funds into an employer match of 100% up to 6.0% of eligible compensation.	2026	Aims to be market competitive and potentially simplify the retirement benefits structure, impacting employee retention and satisfaction.

Related Party Transactions

A cooperation agreement was entered into with Vision One Fund, LP and certain of its affiliates on February 12, 2026, governing matters such as Board size and committee composition, related to the appointment of Patrick E. Allen.
Ordinary course of business commercial transactions exist between the company and companies that employ certain directors, involving the purchase of products and product maintenance services or the company's purchase of products and services from those companies. These were considered by the Board in determining director independence.

Stakeholder Impact

Shareholders are directly impacted by the operational challenges and financial performance, as reflected in lower revenue and EBITDA. The strong payout of long-term incentives (189.53% of target) for 2023-2025 indicates value creation over that period. The commitment to propose board declassification and the shift to double-trigger equity acceleration are positive for corporate governance and shareholder rights.
Employees are affected by the ERP implementation disruption and associated inefficiencies. Executive compensation decisions, including base salary increases and incentive payouts, directly impact Named Executives. The redesign of the retirement plan for 2026 (eliminating profit-sharing, increasing employer match) will affect all eligible employees.
Customers are potentially impacted by constrained shipment capacity and limited outbound activity due to ERP implementation and inventory accuracy issues, which could affect product availability and service levels.

Next Steps

Shareholders to vote on the election of three Class I directors at the Annual Meeting.
Shareholders to vote on the ratification of Deloitte & Touche LLP as the independent registered public accounting firm for 2026.
Shareholders to provide advisory approval of executive compensation.
Company to continue efforts to stabilize core workflows and return to normalized operating performance through the first half of 2026.
Company to propose a phased-in declassification of the Board for shareholder approval in 2027.
Ms. Barbara A. Balinski is expected to retire on September 3, 2026.
Ms. Kristin A. Erickson is expected to transition full-time to the Chief Human Resources Officer role during 2026.
The Compensation Committee will implement redesigned retirement plan for 2026, eliminating profit-sharing and reallocating funds to employer match.
Equity awards granted commencing in 2026 will provide for double trigger acceleration upon a change in control.

Key Dates

Date	Description
1979	Carol S. Eicher began various management positions with E.I. DuPont de Nemours and Company, Inc.
1981	Maria C. Green began as an Attorney at Continental Illinois National Bank & Trust Co.
1986	Maria C. Green began as an Associate at Akin, Gump, Strauss, Hauer & Feld.
1987	Maria C. Green began as Senior Associate at Hazel, Thomas Fiske, Beckhorn & Hanes, P.C.
1987	Donal L. Mulligan began various international positions with PepsiCo Inc. and YUM! Brands, Inc.
1989	Maria C. Green began as Associate General Counsel Corporate Affairs of Amtrak.
1991	Timothy R. Morse began various roles at General Electric Plastics division and Altera Corporation.
1992	Carol S. Eicher held various senior management positions with Ashland Chemical Company.
1992	David W. Huml held various sales and marketing positions at Graco Inc.
1994	Maria C. Green began as General Counsel and Director of Commercial Development of Amtrak.
1996	Maria C. Green began as Vice President Real Estate Development of Chicago Transit Authority.
1996	Azita Arvani held various senior technical and business positions, including Director, Corporate Business Strategy for Xerox Corporation.
1997	Maria C. Green began as Associate General Counsel and Assistant Secretary at Illinois Tool Works Inc.
1999	Donal L. Mulligan served as Chief Financial Officer, International, for The Pillsbury Company.
2000	Azita Arvani began as Vice President, Business Development and Strategy, for ActiveSky.
2000	Andrew P. Hider held various finance and other management positions with General Electric Company.
2001	Azita Arvani began as Business Director, Organic Specialties for Rohm and Haas.
2001	Donal L. Mulligan held various executive positions with General Mills.
2001	Patrick E. Allen held various finance leadership positions at Rockwell Collins and its subsidiaries.
2001	David Windley held various positions with Silicon Graphics, Inc., culminating in Vice President, Human Resources.
2002	Azita Arvani founded Arvani Group Inc.
2003	Carol S. Eicher began as Vice President/Global Business Director, Primary Materials and Process Chemicals, Rohm and Haas Company.
2003	David Windley began as Vice President Human Resources, Business Units, for Intuit Inc.
2005	Patrick E. Allen became Senior Vice President and Chief Financial Officer, Rockwell Collins, Inc.
2005	Mark W. Sheahan became Chief Administrative Officer at Graco Inc.
2006	David W. Huml held various sales and marketing positions at Hoffman.
2006	David Windley became Executive Vice President, Chief Human Resources Officer, at Yahoo! Inc.
2007	Donal L. Mulligan became Executive Vice President and Chief Financial Officer for General Mills, Inc.
2008	Carol S. Eicher became a Director of Tennant Company.
2008	Maria C. Green became Deputy General Counsel and Assistant Secretary at Illinois Tool Works Inc.
2008	Mark W. Sheahan became Vice President and General Manager, Applied Fluid Technologies Division, at Graco Inc.
2009	Carol S. Eicher became Business Director, Performance Monomers, for Dow Chemical.
2009	Donal L. Mulligan became a Director of Tennant Company.
2009	David W. Huml became Vice President, Marketing at Pentair plc.
2009	Timothy R. Morse became Chief Financial Officer at Yahoo! Inc.
2010	Carol S. Eicher became Business Group Vice President for Building and Construction for Dow Chemical.
2011	Patrick E. Allen became a Board member of Alliant Energy Corporation.
2011	James T. Glerum, Jr. joined Citigroup as Vice Chairman, Investment Banking.
2011	David W. Huml became Vice President, Global Agriculture at Pentair.
2011	Timothy R. Morse became Interim Chief Executive Officer at Yahoo! Inc.
2012	Azita Arvani became a Director of Tennant Company.
2012	Maria C. Green became Senior Vice President, General Counsel and Secretary of Illinois Tool Works Inc.
2014	Carol S. Eicher became Chief Executive Officer of Innocor, Inc.
2014	David W. Huml became Senior Vice President of Global Marketing for Tennant.
2014	Timothy R. Morse became Chief Financial Officer at Ten-X.
2014	David Windley became CEO and President of IQTalent Partners.
2015	Maria C. Green became Senior Vice President and General Counsel of Ingersoll Rand plc.
2015	Timothy R. Morse became Chief Executive Officer at Ten-X.
2016	David W. Huml became Senior Vice President of APAC and Global Marketing for Tennant.
2016	David Windley became a Director of Tennant Company.
2017	David W. Huml became Senior Vice President, EMEA, APAC and Global Marketing for Tennant.
2017	Andrew P. Hider became Chief Executive Officer of ATS Automation.
2018	Patrick E. Allen became Chief Financial Officer, Collins Aerospace.
2018	Timothy R. Morse became a board member and advisor to earlyto mid-stage start-up companies.
2018	Compensation Committee adopted the Executive Officer Severance Plan.
2019	Maria C. Green became a Director of Tennant Company.
2020	David W. Huml became Chief Operating Officer for Tennant.
2020	Donal L. Mulligan became Senior Advisor to Chief Executive Officer, General Mills.
2021	David W. Huml became President and Chief Executive Officer for Tennant Company.
2021	Timothy R. Morse became a Director of Tennant Company.
2021	Mark W. Sheahan became President and Chief Executive Officer of Graco Inc.
2022	Azita Arvani became CEO of Rakuten Symphony, North America.
2022	Andrew P. Hider became a Director of Tennant Company.
2023	Donal L. Mulligan became Chair of the Board.
February 2023	Compensation Committee approved reimbursement of reasonable commuting expenses for Ms. West up to an annual limit of $60,000.
February 2023	Committee approved the 2023-2025 LTIP for Named Executives.
February 1, 2024	Revised certain aspects of the stock ownership guideline calculation for non-employee directors and executive officers.
April 2024	Compensation Committee, working with Pearl Meyer, conducted its regular review of the comparator group for 2024-2025.
April 1, 2025	Base salary rates for CEO and Named Executives became effective.
April 14, 2025	Mr. Huml gifted shares to a trust (reported March 2, 2026).
April 29, 2025	Increases to director compensation (annual board cash retainer, RSU grant value, Chair retainer) became effective.
December 2025	Management presented an analysis of compensation plans and potential risks to the Compensation Committee.
December 31, 2025	Fiscal year-end for which financial statements and reports are provided.
February 1, 2026	Ms. Erickson appointed to the additional position of Chief Human Resources Officer.
February 12, 2026	Patrick E. Allen and James T. Glerum, Jr. appointed to the Board.
February 2026	Compensation Committee determined not to make any changes to director compensation for the 2026-2027 Board Year.
February 2026	Committee retained the addition of Incentive Cumulative Total Revenue and removed Incentive Cumulative Earnings Per Share as a metric for PRSUs for the 2026-2028 performance period.
February 26, 2026	Ms. Balinski gave notice of her intention to retire.
March 2, 2026	Form 4 for Mr. Huml reporting a gift of shares on April 14, 2025, was filed.
March 5, 2026	Record date for shareholders entitled to vote at the Annual Meeting.
March 18, 2026	Notice of Internet Availability of Proxy Materials first mailed to shareholders on or about this date.
April 24, 2026	Voting instructions for shares held in the Tennant Company Retirement Savings Plan must be received by this date.
April 28, 2026	Voting deadline for shares held directly (11:59 p.m. ET).
April 29, 2026	Date of the 2026 Annual Meeting of Shareholders.
August 2026	Committee re-assessed the peer group for benchmarking compensation for fiscal 2026.
September 3, 2026	Ms. Barbara A. Balinski's intended retirement date.
November 18, 2026	Deadline for shareholder proposals to be included in the 2027 Annual Meeting Proxy Statement.
January 29, 2027	Deadline for shareholder proposals not intended for inclusion in the 2027 Annual Meeting Proxy Statement.
March 1, 2027	Deadline for shareholders to provide notice for director nominees under universal proxy rules for the 2027 Annual Meeting.
2027	Company committed to propose a phased-in declassification of the Board for shareholder approval.
December 31, 2027	Vesting date for 2025-2027 LTIP PRSU grants.
2029	Term expiration for Class I directors if elected at the 2026 Annual Meeting.

Recommendation

hold

The filing presents a mixed picture. While the company achieved strong long-term incentive payouts for the 2023-2025 period and is making strategic investments for future growth, the significant operational disruptions and resulting decline in 2025 net sales and Adjusted EBITDA are concerning. The ERP implementation issues and subsequent inventory accuracy challenges indicate ongoing short-term headwinds. The commitment to improved corporate governance (board declassification, double-trigger equity) is positive for long-term investor confidence. However, the immediate financial underperformance and the need for a "gradual return to normalized operating performance through the first half of 2026" suggest that a "hold" recommendation is appropriate. Investors should monitor the company's progress in resolving operational issues and achieving its stated growth and margin expansion targets before considering a stronger position.

Keywords

Tennant Company, Proxy Statement, SEC Filing, Corporate Governance, Executive Compensation, ERP Implementation, Financial Performance, Board of Directors, Shareholder Meeting, Risk Management, Sustainability, Audit Committee, Compensation Committee, Net Sales, Adjusted EBITDA, Stock Ownership Guidelines, Director Nominations, Deloitte & Touche LLP

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