The Toro Company (NYSE:TTC) Q1 2025 Earnings Conference Call March 6, 2025 11:00 AM ET Company Participants Julie Kerekes - Senior MD of Global Tax and IR Rick Olson - Chairman and CEO Angie Drake - VP and CFO Conference Call Participants David MacGregor - Longbow Research Tim Wojs - Baird Ted Jackson - Northland Capital Markets Operator Good day, ladies and gentlemen, and welcome to The Toro Company's First Quarter Earnings Conference Call. My name is Kevin, and I'll be your coordinator today. At this time ...

Financial Performance - Consolidated net sales for Q1 fiscal 2025 were $995.0 million, a decrease of 0.7% from $1,001.9 million in Q1 fiscal 2024 [107]. - Net earnings for Q1 fiscal 2025 were $52.8 million, or $0.52 per diluted share, down from $64.9 million, or $0.62 per diluted share in Q1 fiscal 2024 [108]. - Adjusted net earnings for Q1 fiscal 2025 were $65.9 million, or $0.65 per diluted share, compared to $66.5 million, or $0.64 per diluted share in Q1 fiscal 2024 [120]. - Gross profit for Q1 fiscal 2025 was $335.6 million, down 2.6% from $344.5 million in Q1 fiscal 2024, with a gross margin of 33.7% compared to 34.4% [115]. - Professional segment net sales increased by 1.6% to $768.8 million, while Residential segment net sales decreased by 8.0% to $221.0 million [107]. - Professional segment earnings increased by 12.8% to $127.2 million, with an earnings margin of 16.5% compared to 14.9% in Q1 fiscal 2024 [123]. - Residential segment earnings decreased by 26.8% to $17.2 million, with an earnings margin of 7.8% compared to 9.8% in Q1 fiscal 2024 [125]. Cash Flow and Liquidity - Net cash used in operating activities was $48.6 million in Q1 fiscal 2025, a decrease from $92.2 million in Q1 fiscal 2024, mainly due to favorable fluctuations in working capital [129]. - Free cash flow for the three months ended January 31, 2025, was $(67.7) million, compared to $(111.3) million for the same period in 2024, indicating an improvement [147]. - Free cash flow conversion percentage was (128.2)% for the three months ended January 31, 2025, compared to (171.5)% for the same period in 2024 [147]. - As of January 31, 2025, available liquidity was $884.1 million, consisting of cash and cash equivalents of $171.3 million and $712.8 million under the revolving credit facility [132]. - Net cash provided by financing activities was $44.6 million in Q1 fiscal 2025, down from $114.1 million in Q1 fiscal 2024, attributed to higher common stock repurchases [131]. Cost Management and Savings Initiatives - The AMP initiative is expected to deliver annualized cost savings of over $100 million by fiscal 2027, with cumulative savings of $10.7 million achieved by Q1 fiscal 2025 [106]. - SG&A expense increased by $1.9 million, or 0.7%, as a percentage of net sales increased by 30 basis points compared to Q1 fiscal 2024 [116]. - The company employs productivity initiatives to mitigate the impact of commodity cost changes, including collaborating with suppliers and reviewing alternative sourcing options [156]. Inventory and Receivables - Accounts receivable increased by $5.2 million, or 1.1%, in Q1 fiscal 2025 compared to Q1 fiscal 2024, driven by increased international shipments [128]. - Inventory levels decreased by $34.0 million, or 2.9%, in Q1 fiscal 2025 compared to Q1 fiscal 2024, primarily due to lower lawn care product balances [128]. Debt and Interest Rate Exposure - The company has $524.2 million in gross fixed-rate long-term debt and $400.0 million in gross variable rate debt as of January 31, 2025 [153]. - The company has no earnings or cash flow exposure due to interest rate risks on its fixed-rate long-term debt obligations [153]. Foreign Currency and Commodity Risks - The company is exposed to foreign currency exchange rate risks primarily with the Euro, Australian dollar, Canadian dollar, British pound, and Mexican peso [150]. - The company has entered into various derivative instruments to hedge against foreign currency exchange rate risks, with gains and losses highly correlated to underlying exposures [151]. - The primary commodity cost exposures include steel, aluminum, petroleum, and natural gas-based resins, which are critical to the manufacturing process [155]. - As of January 31, 2025, the average contracted rate for foreign currency exchange contracts includes 0.6558 for AUD, 1.3583 for CAD, and 1.1006 for EUR [152]. Shareholder Returns - The Board approved a cash dividend of $0.38 per share for Q1 fiscal 2025, a 5.6% increase from $0.36 per share in Q1 fiscal 2024 [135]. - During Q1 fiscal 2025, the company repurchased 1,240,496 shares of common stock, with 6,931,461 shares remaining available for repurchase [136].

Q1 2025 EARNINGS RELEASE March 6, 2025 THE TORO COMPANY 2 Q1 2025 EARNINGS RELEASE THE TORO COMPANY Safe Harbor 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," "forward," "future," "goal," "guidance," "improve," "may," ...

Financial Performance - First-quarter net sales were $995 million, down 1% from $1,002 million in the same period of fiscal 2024[5] - Reported diluted EPS for the first quarter was $0.52, a decrease of 16% compared to $0.62 in the same period of fiscal 2024[5] - Adjusted diluted EPS for the first quarter was $0.65, up 2% from $0.64 in the same period of fiscal 2024[5] - Operating earnings decreased to $77.8 million, compared to $88.6 million in the previous year, reflecting a decline of 12.0%[28] - Net earnings for the three months ended January 31, 2025, were $52.8 million, down 18.6% from $64.9 million in the same period of 2024[28] - Adjusted net earnings for the three months ended January 31, 2025, were $65.9 million, slightly down from $66.5 million in the prior year, with adjusted net earnings per diluted share at $0.65, compared to $0.64[36] Segment Performance - Professional segment net sales increased by 1.6% to $768.8 million, driven by higher shipments of golf and grounds products[17] - Professional segment earnings rose to $127.2 million, with a margin of 16.5%, up from 14.9% in the prior-year period[17] - Residential segment net sales decreased by 8% to $221 million, primarily due to lower shipments of snow products and the prior year Pope Products divestiture[17] - The Professional segment net sales increased to $768.8 million, up 1.9% from $756.5 million in the prior year, while the Residential segment net sales decreased to $221.0 million, down 7.9%[30] Cash Flow and Shareholder Returns - The company returned $100 million to shareholders through share repurchases, reflecting improved cash flow[2] - The company reported a net cash used in operating activities of $48.6 million for the three months ended January 31, 2025, compared to $92.2 million in the same period of 2024[34] - Free cash flow for the three months ended January 31, 2025, was $(67.7) million, an improvement from $(111.3) million in the same period of 2024, resulting in a free cash flow conversion percentage of (128.2)% compared to (171.5)%[38] - Net cash used in operating activities for the three months ended January 31, 2025, was $(48.6) million, an improvement from $(92.2) million in the prior year[38] Guidance and Future Initiatives - The company maintains full-year fiscal 2025 net sales growth guidance of 0% to 1% and adjusted diluted EPS guidance of $4.25 to $4.40[7] - The AMP initiative has delivered $64 million in run-rate cost savings to date, with a target of $100 million by fiscal 2027[6] - The company anticipates continued demand trends and has provided fiscal 2025 financial guidance, although specific figures were not disclosed in the provided content[25] Cost and Margin Analysis - Gross margin for the first quarter was 33.7%, down from 34.4% in the same prior-year period due to higher material and manufacturing costs[12] - Gross profit for the same period was $335.6 million, resulting in a gross margin of 33.7%, down from 34.4% in the prior year[28] - Operating earnings for the three months ended January 31, 2025, were $77.8 million, down from $88.6 million in the prior year, with an operating earnings margin of 7.8% compared to 8.8%[36] - Adjusted operating earnings for the three months ended January 31, 2025, were $94.0 million, compared to $92.5 million in the same period of 2024, with an adjusted operating earnings margin of 9.4%[36] Taxation - The effective tax rate for the three months ended January 31, 2025, was 20.1%, an increase from 19.0% in the same period of 2024[36] - Income tax provision for the three months ended January 31, 2025, was $13.3 million, down from $15.2 million in the prior year[36] - The company recorded a tax impact of share-based compensation of $0.1 million for the three months ended January 31, 2025, compared to $1.5 million in the same period of 2024[36]

The Toro Company (NYSE:TTC) Q4 2024 Earnings Conference Call December 18, 2024 11:00 AM ET Company Participants Julie Kerekes - Treasurer and Senior Managing Director of Global Tax and Investor Relations Richard Olson - Chairman and Chief Executive Officer Angela Drake - Vice President and Chief Financial Officer Conference Call Participants Eric Bosshard - Cleveland Research Company Mike Shlisky - D.A. Davidson & Company David MacGregor - Longbow Research Tim Wojs - Baird Joshua Wilson - Raymond James Ted ...

Financial Risks and Compliance - The company faces potential increases in funding costs and liquidity issues if credit ratings fall below investment grade or leverage ratios exceed 1.50[121]. - Future changes in accounting or tax standards could impact the preparation and reporting of the company's financial statements, potentially affecting financial condition and operating results[121]. - The company is subject to extensive laws and regulations that may increase compliance costs and affect product demand, including climate change legislation that could impose stricter emissions requirements[125]. - The company cannot predict the ultimate impact of future laws on its operations, which may lead to increased compliance burdens and costs[125]. - The company faces financial and operating restrictions due to credit arrangements, including covenants that require maintaining a maximum leverage ratio[118]. - A downgrade in credit ratings could increase the cost of funding and adversely affect access to capital markets[121]. - The company is exposed to risks associated with compliance with international anti-corruption laws, which could result in significant fines and penalties[128]. - The uncertainty in regulatory processes may lead to increased compliance burdens and costs, adversely affecting business operations[125]. Operational Efficiency and Cost Management - The company aims for annualized cost savings of over $100 million by fiscal 2027 through its "Amplifying Maximum Productivity" initiative, focusing on operational efficiency and sustainable supply chains[130]. - The company actively monitors commodity costs and supply chain health to mitigate risks associated with procurement disruptions[39]. - Increased costs of commodities and components have negatively impacted profit margins, highlighting the need for effective cost management strategies[79]. - The company employs Lean methods to continuously improve manufacturing processes, aiming to streamline operations and eliminate waste[36]. - The company is dependent on efficient operations of its facilities and those of suppliers, with potential disruptions from supply chain challenges and labor shortages[95]. Environmental and Sustainability Initiatives - The company is involved in environmental remediation efforts and may incur future costs related to compliance with environmental laws, which could adversely affect financial condition[128]. - The company has taken actions to enhance its ESG practices, including hiring a new executive officer for sustainability and releasing a sustainability report for fiscal 2022[112]. - The sustainability report outlines goals to increase battery and hybrid product sales and reduce GHG emissions over time[112]. - California's AB 1346 mandates that most new sales of small off-road engines must be zero-emission starting January 1, 2024, potentially impacting product demand[126]. - The company is involved in evaluating and cleaning up environmental liabilities, although these matters are not expected to materially affect financial results[75]. Market and Sales Dynamics - International net sales accounted for 20.1%, 20.8%, and 19.5% of total consolidated net sales for fiscal years 2024, 2023, and 2022 respectively[33]. - The company’s Residential segment products are more seasonal, with lawn and garden products shipped primarily between February and June[43]. - The Professional segment's net sales are influenced by factors such as reduced revenue for golf courses, decreased consumer spending on property maintenance, and reduced investment in golf course renovations[88]. - The Residential segment's net sales depend on product placement, consumer confidence, and buying patterns, with potential adverse effects from changes in shelf space at mass retailers[90]. - Weather conditions, exacerbated by climate change, have impacted demand for products, particularly in the Residential and Professional segments, affecting sales patterns[87]. Product Development and Innovation - The company focuses on innovation and quality, investing in new product development and improvements to existing products, utilizing "Voice of the Customer" tools[35]. - New products introduced in the current and previous two fiscal years have represented a significant portion of net sales, indicating the importance of product innovation for future revenue growth[85]. - Changes in product mix can negatively impact financial performance, as Professional segment products generally have higher profit margins than Residential segment products[91]. - The company has set goals to increase battery and hybrid product sales and reduce greenhouse gas emissions over time[130]. Human Resources and Employee Management - The company is dependent on attracting and retaining key executives and employees to achieve strategic objectives, with competition for talent being intense[131]. - Approximately 10.5% of the company's employees are represented by a union under collective bargaining agreements, with agreements expiring between October 2025 and October 2026[59]. - The average number of employees during fiscal 2024 was 11,464, with a total of 11,108 employees as of October 31, 2024[59]. - The company emphasizes employee safety through mandatory monthly training and safety management courses for supervisors[60]. - The company provides a variety of health and wellness programs, including 24/7 access to licensed physicians and on-site nurses[64]. - The company conducts regular compensation market benchmarking to ensure competitive pay and offers a range of benefits including stock-based compensation and flexible work schedules[66]. - The company is committed to upholding human rights and prohibits all forms of child and forced labor in its operations[70]. Financial Performance and Challenges - The Toro Company has faced adverse impacts on net sales and earnings due to economic conditions, including business closures and reduced consumer spending levels[79]. - Disruptions in the availability of commodities and components have adversely affected operations, with some items sourced from single suppliers limiting production capabilities[87]. - The company recorded non-cash impairment charges of $18.0 million related to the Spartan® trade name and $133.3 million related to Intimidator goodwill during Q3 fiscal 2023[110]. - The company may incur additional impairment charges in the future, which could adversely affect operating results[113]. - Foreign currency exchange rate fluctuations have adversely affected operating results and could continue to do so in the future[117]. - The company relies on floor plan financing arrangements for inventory financing, with changes in credit availability potentially affecting sales and operating results[101]. - Inventory management decisions of channel customers can negatively impact net sales and working capital, leading to potential manufacturing inefficiencies[99]. Strategic Partnerships and Acquisitions - The company announced a strategic partnership with Lowe's in September 2023 to drive growth through acquisitions and alliances[108]. - The company’s strategy includes pursuing acquisitions and partnerships, which carry inherent risks that could affect future performance[80]. - The company may face challenges in managing and integrating acquired businesses, which could impact financial performance and operational efficiency[110]. - Divestitures and restructuring activities carry risks that may negatively affect the company's operations and financial condition[111].

Financial Performance - Full-year net sales of $4.58 billion, up from $4.55 billion in fiscal 2023[1] - Fourth-quarter net sales of $1.08 billion, up from $0.98 billion in the same period of fiscal 2023[1] - Gross margin for the fourth quarter was 32.4%, compared with 33.5% for the same prior-year period[22] - Operating earnings as a percentage of net sales for the fourth quarter were 10.1%, compared with 9.6% in the same prior-year period[25] - Gross profit for the twelve months ended October 31, 2024, was $1,549.3 million, with a gross margin of 33.8%[40] - Net earnings for the twelve months ended October 31, 2024, were $418.9 million, with diluted net earnings per share of $4.01[40] - Gross profit for the three months ended October 31, 2024 was $349.0 million, compared to $329.6 million in the same period last year[52] - Adjusted gross margin for the twelve months ended October 31, 2024 was 33.9%, down from 34.7% in the prior year[52] - Operating earnings for the three months ended October 31, 2024 were $109.0 million, up from $94.5 million in the same period last year[52] - Adjusted operating earnings margin for the twelve months ended October 31, 2024 was 12.2%, compared to 12.9% in the prior year[52] - Net earnings for the twelve months ended October 31, 2024 were $418.9 million, up from $329.7 million in the prior year[52] - Adjusted diluted EPS for the twelve months ended October 31, 2024 was $4.17, compared to $4.21 in the prior year[52] Segment Performance - Professional segment net sales for the fourth quarter were $913.9 million, up 10.3% from $828.9 million in the same period last year[13] - Residential segment net sales for the fourth quarter were $155.1 million, up 4.5% from $148.4 million in the same period last year[17] - Professional segment net sales for the twelve months ended October 31, 2024, were $3,556.9 million, contributing significantly to total net sales[42] - Residential segment net sales for the twelve months ended October 31, 2024, were $998.3 million, showing growth compared to the previous year[42] - International net sales for the twelve months ended October 31, 2024, were $923.0 million[42] Cash Flow and Liquidity - Free cash flow increased to just over $470 million in fiscal 2024, with a conversion rate of 112.4%[5] - Cash and cash equivalents increased to $199.5 million in 2024 from $193.1 million in 2023[45] - Net cash provided by operating activities rose to $569.9 million in 2024 compared to $306.8 million in 2023[48] - Free cash flow for the twelve months ended October 31, 2024 was $470.7 million, up from $164.4 million in the prior year[60] - Free cash flow conversion percentage for the twelve months ended October 31, 2024 was 112.4%, compared to 49.9% in the prior year[60] - Net cash used in financing activities increased to $505.1 million in 2024 from $147.5 million in 2023[48] Debt and Equity - Long-term debt reduced to $911.8 million in 2024 from $1,031.5 million in 2023[45] - Stockholders' equity grew to $1,551.9 million in 2024 from $1,510.9 million in 2023[45] Expenses and Investments - Interest expense was down $0.4 million for the fourth quarter to $14.5 million[26] - Purchases of property, plant, and equipment decreased to $103.5 million in 2024 from $149.5 million in 2023[48] - Dividends paid on TTC common stock increased to $149.5 million in 2024 from $141.9 million in 2023[48] - Depreciation of property, plant, and equipment rose to $93.7 million in 2024 from $83.5 million in 2023[48] Tax and Earnings Guidance - Reported effective tax rate for fiscal 2024 was 18.3%, compared with 17.7% in fiscal 2023[28] - Full-year fiscal 2025 guidance of adjusted diluted EPS in the range of $4.25 to $4.40[1] - The company provided adjusted diluted EPS guidance for fiscal 2025, excluding certain unpredictable items[37] Strategic Initiatives and Forward-Looking Statements - The company's forward-looking statements include expectations regarding demand trends, supply chain stabilization, and the success of new products[38] - The company's fiscal 2025 financial guidance anticipates incremental growth from strategic partnerships and new product success[38] - The company uses non-GAAP financial measures to assess liquidity and operational performance, including free cash flow and free cash flow conversion percentage[34] - The company completed the acquisition of Intimidator Group on January 13, 2022, with acquisition-related costs of $0.2 million for the fiscal year ended October 31, 2023[54] - The company launched a significant productivity initiative named AMP in the first quarter of fiscal 2024, with charges of $5.7 million for the twelve months ended October 31, 2024[56] Inventory and Global Presence - Inventories decreased to $1,038.9 million in 2024 from $1,087.8 million in 2023[45] - The Toro Company reported net sales of $4.6 billion in fiscal 2024, with a global presence in over 125 countries[32]

Core Insights - The Toro Company has a strong market position with significant total returns of 4,930% since 2000, outperforming the S&P 500's 560% [1] - Recent sales have declined by 1% and net income by 10% over the last two years, leading to a 30% drop in stock price, resulting in a favorable valuation and a 10-year high dividend yield of 1.7% [2][12] - The company is well-positioned for future growth due to its essential products and diverse market segments [4] Market Segments - **Landscape and Grounds (37% of sales)**: This segment is currently under pressure due to economic conditions, but is nearing a rebound with inventory levels returning to normal [6] - **Underground and Specialty Construction (23% of sales)**: This segment is experiencing growth driven by megatrends such as broadband expansion and infrastructure upgrades, with a book-to-bill ratio over 1 indicating strong demand [8][9] - **Golf (17% of sales)**: Toro holds a 50% market share in this segment, providing steady revenue through leasing agreements and serving prestigious golf courses [10] - **Residential (19% of sales)**: Growth in this segment is accelerating due to a partnership with Lowe's, although it remains sensitive to economic conditions [11] Financial Performance - Toro has maintained strong profitability with net profit and free cash flow margins averaging 9% over the last decade, allowing for funding of acquisitions and dividends [12] - The current dividend yield of 1.7% is sustainable with a payout ratio of only 37%, and has grown at a 16% annual rate since 2014 [14] - The price-to-sales (P/S) ratio of 1.9 is approximately 20% below its 10-year average, indicating a favorable valuation [14] Future Outlook - Management aims to achieve $100 million in annual cost savings by 2027, positioning the company as a strong rebound candidate for investors [15]

The Toro Company (NYSE:TTC) Q3 2024 Results Conference Call September 5, 2024 11:00 AM ET Company Participants Julie Kerekes - Treasurer and Senior Managing Director of Global Tax and Investor Relations Rick Olson - Chairman and Chief Executive Officer Angie Drake - Vice President and Chief Financial Officer Jeremy Steffan - Director of Investor Relations Conference Call Participants Tim Wojs - Baird Samuel Darkatsh - Raymond James Michael Shlisky - D.A. Davidson & Company David MacGregor - Longbow Research ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended August 2, 2024 ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period from to Commission File Number: 1-8649 THE TORO COMPANY (Exact name of registrant as specified in its charter) Delaware 41-0580470 State or Other Jurisdiction ...