Financial Performance & Goals - In fiscal year 2021, The Toro Company (TTC) achieved net sales of $3.96 billion[19] - The company aims to exceed $5 billion in net sales by the end of fiscal year 2024 through organic growth[60] - The company also aims to exceed $750 million in annual adjusted operating earnings by the end of fiscal year 2024[60] - For the second quarter of fiscal year 2022, net sales reached $1.25 billion, an increase of 8.7% compared to the same period in fiscal year 2021[71] - For the first six months of fiscal year 2022, net sales were $2.182 billion, a 7.9% increase year-over-year[72] - The company anticipates net sales growth of 14% to 16% for fiscal year 2022[76] Segment Breakdown (Fiscal Year 2021) - Professional segment accounted for 74% of net sales, totaling $2.93 billion, with segment earnings at 17.3%[20] - Residential segment accounted for 26% of net sales, totaling $1.01 billion, with segment earnings at 12.0%[20] - In terms of geographic market, 79% of sales were from the United States, and 21% were international[20] Capital Allocation & Returns - The company targets a gross debt-to-EBITDA ratio of 1-2x[80] - The company's return on average invested capital for fiscal year 2021 was 20.8%[86] - The company's return on average equity for fiscal year 2021 was 32.7%[86]

Company Overview - Toro (TTC) is headquartered in Bloomington and operates in the Consumer Discretionary sector, experiencing a price change of -7.97% year-to-date [3] - The company currently pays a dividend of $0.76 per share, resulting in a dividend yield of 2.06%, which is slightly below the Tools - Handheld industry's yield of 2.15% and above the S&P 500's yield of 1.54% [3] Dividend Performance - Toro's annualized dividend of $1.52 has increased by 5.6% from the previous year, with a history of five dividend increases over the last five years, averaging an annual increase of 10.22% [4] - The company's current payout ratio is 36%, indicating that it distributes 36% of its trailing 12-month earnings per share as dividends [4] Earnings Outlook - For the fiscal year, Toro is expected to achieve solid earnings growth, with the Zacks Consensus Estimate for 2025 projected at $4.23 per share, reflecting a 1.44% increase from the previous year [5] Investment Considerations - Toro is considered a compelling investment opportunity due to its strong dividend profile and current Zacks Rank of 3 (Hold), appealing to income investors despite the challenges posed by rising interest rates [7]

Company Overview - Toro (TTC) is headquartered in Bloomington and operates in the Consumer Discretionary sector [3] - The stock has experienced a price decline of 15.92% since the beginning of the year [3] - Toro currently pays a dividend of $0.38 per share, resulting in a dividend yield of 2.26%, which is higher than the Tools - Handheld industry's yield of 2.14% and the S&P 500's yield of 1.57% [3] Dividend Performance - The current annualized dividend of Toro is $1.52, reflecting a 5.6% increase from the previous year [4] - Over the past five years, Toro has raised its dividend five times, achieving an average annual increase of 10.22% [4] - The company's payout ratio stands at 36%, indicating that it distributes 36% of its trailing 12-month earnings per share as dividends [4] Earnings Growth - The Zacks Consensus Estimate for Toro's earnings per share for the fiscal year 2025 is $4.23, which signifies a year-over-year growth rate of 1.44% [5] Investment Considerations - Dividends are favored by investors for various reasons, including tax advantages and reduced overall portfolio risk [6] - High-growth firms or tech start-ups typically do not offer dividends, while established companies with stable profits are often preferred for dividend investments [7] - Despite the challenges high-yielding stocks may face during rising interest rates, Toro presents a compelling investment opportunity as a strong dividend play [7]

Core Insights - The Toro Company reported adjusted EPS of $1.42 for fiscal Q2 2025, a $0.02 increase year-over-year, but revenue declined by 2.3% to $1.32 billion, prompting management to revise full-year guidance to flat to down 3% [1] Financial Performance - The professional segment achieved $1.0 billion in net sales, reflecting a 1% year-over-year growth, and earnings of $202 million, up 6% year-over-year, with a margin improvement of 90 basis points to 19.9% [4][5] - The residential segment's net sales fell 11% year-over-year to $297 million, with earnings halved to $16 million and margins dropping to 5.4% from 10.8% [6][7] Cost Management Initiatives - The Accelerated Margin Productivity (AMP) program has generated $70 million in cumulative run-rate savings, with a target of $100 million by 2027, addressing increased material and manufacturing costs [2][3] Market Outlook - Management anticipates total net sales in fiscal Q3 to be flat to slightly up year-over-year, with professional segment sales expected to rise by a mid-single-digit percentage and residential sales projected to decline by a high-teens percentage [9]

Core Insights - The Toro Company reported mixed results for Q2 FY2025, with sales declining 2% year-over-year to $1.32 billion, missing the consensus estimate of $1.35 billion, while adjusted EPS of $1.42 increased by 1% year-over-year, surpassing the consensus of $1.40 [1][2] Financial Performance - Q2 FY2025 sales: $1.32 billion, down 2% Y/Y, below consensus of $1.35 billion [1] - Adjusted EPS: $1.42, up 1% Y/Y, above consensus of $1.40 [1] Guidance Update - FY25 adjusted EPS guidance lowered from $4.25-$4.40 to $4.15-$4.30, compared to consensus of $4.31 [2] - FY25 net sales growth outlook revised to flat to -3%, down from 0% to 1% previously [2] Management Commentary - CEO Richard M. Olson emphasized the company's strategic steps to navigate near-term challenges, highlighting confidence in managing controllable factors and mitigating macroeconomic risks [3] Market Reaction - Toro shares fell 6.5% to $68.51 following the earnings announcement [3] Analyst Ratings and Price Targets - Baird analyst Timothy Wojs maintained a Neutral rating, lowering the price target from $85 to $82 [8] - Northland Capital Markets analyst Ted Jackson downgraded Toro from Outperform to Market Perform, reducing the price target from $100 to $80 [8] - Raymond James analyst Sam Darkatsh maintained an Outperform rating, lowering the price target from $95 to $90 [8]

Financial Performance - Consolidated net sales for Q2 fiscal 2025 were $1,317.9 million, down 2.3% from $1,349.0 million in Q2 fiscal 2024[106]. - Professional segment net sales for Q2 fiscal 2025 were $1,014.1 million, an increase of 0.8% compared to $1,005.6 million in Q2 fiscal 2024[107]. - Residential segment net sales for Q2 fiscal 2025 were $297.4 million, a decrease of 11.4% compared to $335.6 million in Q2 fiscal 2024[108]. - Net earnings for Q2 fiscal 2025 were $136.8 million, or $1.37 per diluted share, compared to $144.8 million, or $1.38 per diluted share, in Q2 fiscal 2024[109]. - Adjusted net earnings for Q2 fiscal 2025 were $141.8 million, or $1.42 per diluted share, compared to $147.3 million, or $1.40 per diluted share, in Q2 fiscal 2024[110]. - Total net sales for the first six months of fiscal 2025 decreased by 1.6% to $2,312.9 million compared to $2,350.9 million in the same period of fiscal 2024[125]. - Adjusted net earnings for the six months ended May 2, 2025, were $207.7 million, compared to $213.8 million for the same period in 2024[151]. Profitability Metrics - Gross profit for Q2 fiscal 2025 was $436.7 million, down 3.6% from $453.0 million in Q2 fiscal 2024, with a gross margin of 33.1%[118]. - Professional segment earnings for Q2 fiscal 2025 increased by 6.0% to $202.1 million, with a margin increase to 19.9% from 19.0% in Q2 fiscal 2024[127]. - Residential segment earnings for Q2 fiscal 2025 decreased by 55.4% to $16.1 million, with a margin decrease to 5.4% from 10.8% in Q2 fiscal 2024[129]. - The total gross profit for the six months ended May 2, 2025, was $772.3 million, a decrease from $797.5 million for the same period in 2024[151]. Expenses and Cost Management - SG&A expense decreased by $3.5 million, or 1.3%, for Q2 fiscal 2025 compared to the same period in fiscal 2024[120]. - The AMP initiative has delivered cumulative cost savings of $30.0 million and anticipated annualized cost savings of $70.5 million as of Q2 fiscal 2025[105]. - The company employs productivity initiatives to mitigate unfavorable impacts from commodity cost changes, including collaborating with suppliers and utilizing Lean methods[163]. - The company may increase product prices to offset changes in commodity costs if necessary[163]. Cash Flow and Shareholder Returns - Cash returned to shareholders during the first six months of fiscal 2025 totaled $276.3 million through dividends and stock repurchases[111]. - Free cash flow for the six months ended May 2, 2025, was $84.7 million, with a free cash flow conversion percentage of 44.7%, down from 45.6% in the same period in 2024[152]. - Cash dividend increased by 5.6% to $0.38 per share for Q2 fiscal 2025 compared to $0.36 per share in Q2 fiscal 2024[140]. Liquidity and Debt - As of May 2, 2025, available liquidity was $899.4 million, consisting of cash and cash equivalents of $176.5 million and $722.9 million under the revolving credit facility[136]. - The company has a gross fixed-rate long-term debt of $524.3 million and gross variable rate debt of $400.0 million under term loan credit agreements[160]. - The company has outstanding variable rate revolving credit facility of $175.0 million[160]. Risk Factors - The company is exposed to foreign currency exchange rate risk, particularly with the Euro, Australian dollar, and Mexican peso, which could impact earnings and cash flows[156]. - The company is exposed to commodity cost changes, particularly in steel, aluminum, petroleum, and natural gas-based resins[162]. - Any changes in foreign currency exchange rates will be reflected as a foreign currency translation adjustment, impacting accumulated other comprehensive loss but not net earnings[159]. - The company does not use interest rate swaps to mitigate interest rate fluctuations and has no earnings exposure from fixed-rate long-term debt obligations[160].

Financial Data and Key Metrics Changes - Adjusted earnings per share (EPS) for the second quarter increased to $1.42, exceeding expectations, while reported EPS was $1.37 compared to $1.38 in the same quarter last year [5][14] - Revenue for the quarter declined 2.3% year over year to $1.3 billion, attributed to weak consumer confidence and unfavorable weather conditions [6][14] - Free cash flow for the second quarter was $84.7 million, a slight decrease year over year, with $100 million allocated for share repurchases [21] Business Line Data and Key Metrics Changes - Professional segment net sales were just over $1 billion, up about 1% year over year, driven by higher shipments of golf and grounds products [15] - Residential segment net sales decreased by 11% year over year to $297 million, primarily due to lower shipments of walk power mowers and zero-turn mowers [17] - Professional segment earnings margin improved to 19.9%, up from 19%, while residential segment earnings margin fell to 5.4% from 10.8% [16][18] Market Data and Key Metrics Changes - The golf and grounds market continues to show strong demand, while underground construction is benefiting from infrastructure projects [10][22] - The residential segment is facing challenges due to high interest rates and cautious consumer behavior, impacting sales [22][23] Company Strategy and Development Direction - The company is focused on operational excellence, product innovation, and mitigating tariff impacts through strategic actions [5][9] - Plans to continue implementing price increases while ensuring competitiveness and protecting profit margins [9][24] - The company aims to leverage its U.S.-based manufacturing capabilities to maintain a competitive edge in the current macroeconomic environment [22][27] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of macroeconomic factors on consumer confidence and spending, particularly in the residential segment [22][24] - The outlook for the Professional segment remains positive, with expected growth in golf and grounds and underground construction [22][23] - Adjusted guidance for fiscal 2025 reflects anticipated revenue declines in the residential segment due to ongoing economic headwinds [24][26] Other Important Information - The company has reduced its global salaried workforce by an additional 10% and rationalized its operational footprint in the residential segment [8] - The AMP program has generated $70 million in run rate savings and is on track to deliver $100 million by 2027 [7] Q&A Session Summary Question: What is the current status of inventory in the landscape business? - Management indicated that inventory levels have largely returned to desired levels, although a slower start to spring has resulted in slightly higher inventory in some areas [31][32] Question: What factors contributed to the revised guidance for the residential business? - The primary drivers for the guidance revision are macroeconomic conditions affecting consumer confidence and the delayed start of spring [35][36] Question: Can you explain the decline in the underground business despite good demand metrics? - The decline was attributed to the sale of two dealers and SKU rationalization, with management remaining optimistic about long-term demand [39][40] Question: How are tariffs impacting the company's cost structure? - Tariffs are estimated to be approximately 3% of annual cost of goods sold, with management confident in mitigating these costs through various strategies [48][49] Question: What is the company's approach to promotions in the current environment? - Promotions have been slightly lower in the residential segment compared to last year, but the company continues to use them to drive sales [82] Question: How does the company view its competitive position in light of tariffs? - Management believes the company is in a solid competitive position due to its U.S. manufacturing base and strategies implemented since 2018 [126]

Financial Data and Key Metrics Changes - Adjusted earnings per share (EPS) for Q2 2025 increased to $1.42, exceeding expectations, compared to $1.40 in the same period last year [6][13] - Revenue for the quarter declined 2.3% year over year to $1.3 billion, impacted by weak consumer confidence and unfavorable weather conditions [6][13] - Reported EPS was $1.37, down from $1.38 in Q2 last year [13][18] - Free cash flow for the quarter was $84.7 million, a slight decrease year over year [19] Business Line Data and Key Metrics Changes - Professional segment net sales were just over $1 billion, up about 1% year over year, driven by higher shipments of golf and grounds products [14] - Residential segment net sales decreased by 11% year over year to $297 million, primarily due to lower shipments of walk power mowers and zero-turn mowers [15] - Professional segment earnings increased by 6% year over year to $200 million, with a margin of 19.9% [14] - Residential segment earnings fell to $16 million, with a margin of 5.4%, down from 10.8% last year [15] Market Data and Key Metrics Changes - The golf market continues to show strong participation levels, driving equipment investment [9] - Demand for underground construction is supported by ongoing infrastructure projects [9] - The residential segment is facing challenges due to high interest rates and low consumer confidence, impacting sales [20] Company Strategy and Development Direction - The company is focused on operational excellence and mitigating tariff impacts through strategic actions, including workforce adjustments and manufacturing footprint rationalization [5][7] - Continued investment in product innovation and technology is a priority, with new product launches aimed at enhancing customer productivity [10][11] - The company aims to maintain competitive pricing while protecting profit margins and investing in future growth [8][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the dynamic macroeconomic environment and its impact on consumer confidence, particularly in the residential segment [20][21] - The outlook for the Professional segment remains positive, with expected growth in golf and underground construction [21] - Adjusted guidance for fiscal 2025 reflects anticipated revenue declines of flat to down 3% year over year, primarily due to residential segment challenges [22][23] Other Important Information - The company has implemented an AMP program that has generated $70 million in run rate savings, with a target of $100 million by 2027 [6][19] - The company has returned $200 million to shareholders through share repurchases year to date, reflecting confidence in cash generation [19][25] Q&A Session Summary Question: Inventory levels in the landscape business - Management indicated that inventory levels have largely returned to desired levels, although a slower start to spring has resulted in slightly higher inventory [29][30] Question: Guidance revision for the residential business - The primary drivers for guidance revision are macroeconomic factors affecting consumer confidence and the delayed start of spring [32][34] Question: Demand metrics in the underground business - Management noted that the underground business is experiencing strong demand, despite a year-over-year decline due to dealer sales and SKU rationalization [36][38] Question: Tariff impacts and mitigation strategies - The company expects to mitigate tariff impacts through pricing actions and productivity initiatives, with a focus on maintaining margins [44][49] Question: Capital allocation and share repurchases - The company remains committed to disciplined capital allocation, prioritizing investments in R&D and returning capital to shareholders through share repurchases [78][79]

Company Performance - Toro reported quarterly earnings of $1.42 per share, exceeding the Zacks Consensus Estimate of $1.38 per share, and showing a slight increase from $1.40 per share a year ago, representing an earnings surprise of 2.90% [1] - The company posted revenues of $1.32 billion for the quarter ended April 2025, which was below the Zacks Consensus Estimate by 1.94%, and a decrease from $1.35 billion in the same quarter last year [2] - Over the last four quarters, Toro has surpassed consensus EPS estimates two times but has not beaten revenue estimates during this period [2] Stock Outlook - Toro shares have declined approximately 5.6% since the beginning of the year, contrasting with the S&P 500's gain of 1.5% [3] - The company's earnings outlook is mixed, with the current consensus EPS estimate for the upcoming quarter at $1.23 on revenues of $1.15 billion, and for the current fiscal year at $4.30 on revenues of $4.62 billion [7] - The Zacks Rank for Toro is currently 3 (Hold), indicating that the shares are expected to perform in line with the market in the near future [6] Industry Context - The Tools - Handheld industry, to which Toro belongs, is currently ranked in the bottom 10% of over 250 Zacks industries, suggesting potential challenges for stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Toro's stock performance [5]

Q2 2025 EARNINGS RELEASE June 5, 2025 THE TORO COMPANY Cautionary Note This presentation contains forward-looking statements, which are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward- looking statements are based on management's current assumptions and expectations of future events and often can be identified by words such as "believe," "expect," "intend," "forward," "future," "goal," "guidance," "improve," "may," "outlook," "should," ...