TENNANT COMPANY Small-Cap Virtual Conference

Dave? Thank you, Steve. Really appreciate the introduction and for everyone on the call, I appreciate you taking the time out of your day to attend the presentation.

We've got about a half hour earmarked and given the technical challenges, we're starting a bit late. I'm going to deliver a few prepared remarks, kind of overviewing the business and the company for people that are new to the story. I'll weave in, to the extent I can, some more current color around the business, and then leave ample time for question and answer within our allotted time. Let me start with an overview of kind of the investment thesis around Tennant Company. If you're not familiar with the company, we are a global leader in manufacturing floor care equipment, mechanized floor cleaning equipment. This is about a $9 billion TAM.

We have a differentiated product portfolio, a broad range of products, machines to fit a broad range of vertical market applications, as well as a differentiated service offering, aftermarket service, and these machines have a decent aftermarket tail to them. A significant part of the value proposition is that aftermarket service and capability to keep the machines running for our customers. We think our business is underpinned by some really significant tailwinds, mega trends in the marketplace that provide us growth opportunities. I'll articulate kind of what those are and how we think they translate to growth for our industry and growth for our company, and how we're positioning ourselves to take advantage of those tailwinds.

I'll do a little bit of a double-click on our world-class service model because it's unique, differentiated within our industry and marketplace and provides a significant competitive advantage and a bit of a competitive moat as we think about traditional competitors as well as new entrants into the space. We've been known as an innovative company across floor care equipment, a number of firsts and a broad set of IP around our equipment. More recently, we are driving robotics into our industry and using robotics as a lever to gain share and grow our business at the same time. I want to talk a little bit about disruptive innovation and how we're driving the future of robotic cleaning, how that business has evolved, where we're at today, and where we see it going in the future.

We have been, we think, really good stewards of our balance sheet, making sure that we are growing profitably and that we have got the firepower and the ammunition, financial firepower to fund our own journey, but then also insulate ourselves from any cyclical downturns to take advantage of unique and interesting ways to create value for shareholders, whether that be through share buyback or strategic acquisitions. I will touch on acquisitions strategy as well. I mentioned the $9 billion TAM, the way that breaks out geographically, and we run our business and report our business by geography, about a $4 billion TAM in the Americas, North, South America, about a $3 billion TAM in EMEA, and the remainder spread throughout Asia Pacific. Our largest share as a business has been in North America and Latin America, specifically Brazil, U.S., and Canada.

There are still geographies of growth, and with a 25% share position in those geographies, still upside opportunity within our core legacy region of Americas. Lesser share position, about 10% share in EMEA. I think it is worth noting that the competitive makeup of the industry, there are three major global players, ourselves, Nilfisk, and Kärcher. Nilfisk and Kärcher are both privately owned businesses based out of Germany. You can kind of think of it as Tennant Company is the big horse in the Americas, and Nilfisk and Kärcher, based in Europe, playing on their home turf, are kind of the big players within Europe. Then we battle each other in each other's backyard. Asia Pacific, we have a single-digit share position. I would say Asia Pacific is largely kind of up for grabs from a competitive standpoint. I talked a little bit about competition with the Big Three.

Big Three comprise less than half of the market, less than 50% share. The rest of that market is really broadly distributed, diversified amongst a number of competitors that compete either in kind of a single product set or a geography or a channel. There is still opportunity to grow through acquisition and roll up some of these smaller players as well. On a combined basis, about a 14% share for Tennant Company. We think we are kind of holding share coming through the last year or two, holding, serving in EMEA, gaining in Americas, and giving back some share position in Asia Pacific, primarily in China and a halo effect around China. We can talk about that a little bit more in Q&A if you are interested.

I talked about the mega trends that provide fuel for our growth, tailwinds for our growth, and I want to just touch on what those trends are. The major one is automation. If you step back and just think about the business we are in, we make mechanized equipment that improves productivity of labor, and so it is much more efficient and productive to use a machine to clean than it is to do it manually with a mop and broom or a bucket and broom or a broom. Increasingly with robotics now, we are growing because of the pressures being put on the labor market. It is not just labor cost, but clearly across the globe, but especially in more mature markets, the cost of labor is increasing, which provides an opportunity and an impetus for customers to move into productivity-enhancing technologies, inclusive of robotics.

But there's also a topic of labor availability, and it's not just the cost, and labor variability. Cleaning is, in most parts of the country, a professional last resort. There's high turnover in cleaning, and there's a cost of that friction. Lower reliance on labor for cleaning is a driver across all of our vertical markets that we serve. I would say it's acute in retail environments. It's acute amongst building service contractors, hospitals, education, K through 12, higher education. But also in industrial settings, trying to find labor and/or allocate labor to floor cleaning, pushing a machine around, it's a high need but a low priority. We can offer solutions to improve productivity of labor and reduce or eliminate the need for labor in the cleaning operation in those vertical markets. It's a compelling trend. We think that the labor scarcity is here to stay.

This has always been an entry-level, high-turnover type proposition, broadly speaking. We think that this tailwind of labor challenges driving the need amongst our customers for automation is here to stay over the long term. There is a shift towards modernization, away from mop and bucket, especially in developing countries, as they seek to raise the standard of clean and present cleaner, safer shared spaces in their societies. That's a longer-range trend that we expect to continue. As standards of living increase, people have a higher expectation for clean. Electrification is also a tailwind, and you've seen this ebb and flow, but clearly, the world is on a path towards less reliance on internal combustion engine technology. We think electrification is one of the key power sources to move customers off of gasoline-powered equipment.

We've got, primarily in our industrial range of product, we still have machines that are internal combustion driven. We've converted from gasoline to LP powered, but the next evolution is to go pure battery powered. Sustainability, not just electrification, but sustainability specifically across water usage, chemical usage, and circular economy of our products. Where do our products go at end of life is a topic that is on the mind of many of our customers that varies across vertical market and varies across geographies. We think that the drive for sustainability, thoughtful sustainability, is going to be a tailwind for us and opportunity for us, given that we make equipment that's used in a variety of shared spaces, that uses water, that uses electricity. We think some of our customers have shown they're going to be interested in.

I think these four major mega trends are durable. We think they'll continue at some pace, ebb and flow, for the next 10 plus years. We think we're uniquely positioned to take advantage of these as tailwinds to our industry and also for our business. Our long-term growth model, we're committed to an LRP of 3%-5% top line growth on an organic basis, 50 to 100 basis points of EBITDA margin expansion, and we get there through a combination of gross margin expansion and S&A leverage. 100% free cash flow conversion, and I'll talk a little bit about that when we talk about capital allocation. We put a placeholder out there for $150 million in inorganic and in acquisitions. The nature of acquisitions is you can't predict when they'll happen.

We have a funnel of opportunity that we are cultivating, and we thought $150 million would be a good mile mark as we looked at out three years, what we hope to add in terms of inorganic growth. Having a strong financial position, managing our balance sheet well, delivering on our commitments allows us to fund our journey and deliver on a significant value creation opportunity for our shareholders. Let me double click into product innovation and talk about where we're innovating and how. I talked a little bit about robotics earlier. We intend to lead the disruption of robotic cleaning, moving robots into a space that has largely been a manual effort, a manual plus machine. Heavy human involvement in cleaning. We've been in the robotics business commercially for the last 7 or 8 years.