Financial Data and Key Metrics Changes - The company reported total consolidated net sales of $1,130 million, down 2.2% year over year, with half of this decline attributed to prior year strategic divestitures of noncore assets [7][15][19] - Adjusted earnings per share for the quarter were $1.24, exceeding internal expectations and up from the same period last year [7][15] - Reported earnings per share included a non-cash impairment charge of $0.62 per diluted share, resulting in a reported EPS of $0.54 [15][19] - Free cash flow for the third quarter was $292 million, reflecting a year-over-year increase largely due to favorable changes in working capital [20][21] Business Line Data and Key Metrics Changes - Professional segment net sales were $931 million, up approximately 6% year over year, driven by higher shipments of underground construction and golf and grounds products [16][19] - Professional segment earnings for the third quarter were $199 million, up 20% year over year, resulting in an earnings margin of 21.3%, an increase from 18.8% in the prior year [16][19] - Residential segment net sales were $193 million, down 28% year over year, primarily due to lower shipments as homeowners deferred big-ticket purchases [17][19] - Residential segment earnings for the quarter were $4 million, or 1.9% of sales, compared to $33 million, or 12.2% of sales last year [17][19] Market Data and Key Metrics Changes - The company noted that channel inventory is clearing meaningfully, particularly in the residential segment, setting up a cleaner foundation for the 2026 selling season [8][17] - The professional segment continues to capture market share in areas experiencing structural growth, particularly in golf and infrastructure [10][12] Company Strategy and Development Direction - The company is focused on leveraging technology investments and operational excellence to drive significant value for customers and shareholders [5][9] - The AMP productivity program has delivered $75 million in annualized cost savings, with a target of at least $100 million by 2027 [9][27] - The company is strategically investing in value-generating technology and innovation while optimizing global supply chain operations [27][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's trajectory despite persistent headwinds in the residential segment, emphasizing the importance of operational improvements and cost control [5][9] - The company anticipates continued pressure from homeowner demand and channel caution affecting third-quarter results, but expects strong demand in the professional segment [22][24] - Full-year guidance expects total company net sales to be at the low end of the range of flat to down 3%, with professional segment revenue expected to be up slightly year over year [23][24] Other Important Information - The company has maintained its market share despite significant fluctuations in the market over the past few years [47] - The company is focused on returning value to shareholders while maintaining balance sheet flexibility for continued investment in technology innovation and new product development [22][30] Q&A Session Summary Question: How is the professional landscape channel performing amid consumer challenges? - Management noted that the professional landscape contractor business grew in the third quarter, driven by strong demand from contractors despite muted homeowner demand [34][35] Question: Is the strong margin in the professional segment sustainable? - Management confirmed that the strong margin performance was supported by a favorable mix and the AMP program, indicating potential for continued margin improvement [36][38] Question: Will interest rate cuts improve the residential outlook? - Management speculated that interest rate cuts could positively influence consumer confidence, potentially leading to increased big-ticket purchases [40] Question: What is the outlook for residential margins? - Management expects residential margins to be lower year over year, with a typical margin range of 8% to 10% anticipated in the future [51][52] Question: What are the expectations for year-end backlog and professional growth next year? - Management indicated that year-end backlog is expected to be substantially reduced, with continued good prospects for professional growth [54][56] Question: How is the AMP program progressing? - Management reported strong progress with the AMP initiative, tracking ahead of the $75 million savings goal, with discussions of a potential AMP 2.0 in the future [67] Question: What is the impact of tariffs on margins? - Management estimated that tariffs had a significant impact on costs, but they are implementing pricing and productivity measures to maintain margins [69][75] Question: What is the current status of inventory levels? - Management indicated that inventory levels are being managed prudently, with a focus on aligning dealer inventories for the upcoming selling season [104][113]

Financial Data and Key Metrics Changes - The Toro Company reported total consolidated net sales of $1.13 billion for Q3 2025, a decrease of 2.2% year over year, with half of this decline attributed to prior year strategic divestitures of noncore assets [6][13][14] - Adjusted earnings per share (EPS) for the quarter were $1.24, exceeding internal expectations and up from $0.60 in the same period last year [5][13] - Reported EPS was $0.54, which included a non-cash impairment charge of $0.62 per diluted share, totaling $81 million pretax [13][14] - The company's gross margins were reported at 33.7% and adjusted gross margins at 34.4%, compared to 34.8% and 35.4% respectively in the same period last year [17] Business Line Data and Key Metrics Changes - Professional segment net sales were $931 million, up 6% year over year, driven by higher shipments in underground construction and golf and grounds products [14][15] - Professional segment earnings increased by 20% year over year to $199 million, resulting in an earnings margin of 21.3%, up from 18.8% in the prior year [14][15] - Residential segment net sales were $193 million, down 28% year over year, primarily due to lower shipments as homeowners deferred big-ticket purchases [15][16] - Residential segment earnings for the quarter were $4 million, or 1.9% of sales, compared to $33 million, or 12.2% of sales last year [16] Market Data and Key Metrics Changes - The company noted that channel inventory is clearing meaningfully, particularly in the residential segment, setting up a cleaner foundation for the 2026 selling season [7][15] - The professional segment continues to capture market share in areas experiencing structural growth, particularly in golf and infrastructure [9][22] Company Strategy and Development Direction - The Toro Company is focused on leveraging technology investments and operational excellence to drive value for customers and shareholders [5][6] - The company is intensifying operational improvements to control costs and identify additional efficiency opportunities, with a goal of delivering at least $100 million in annualized cost savings by 2027 [8][20] - The company is strategically investing in value-generating technology and innovation while optimizing global supply chain operations [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's trajectory despite headwinds in the residential segment, citing strong positioning in the professional segment and ongoing demand for innovative products [5][6] - The company anticipates continued pressure from homeowner demand and channel caution affecting residential results, but expects professional segment revenue to be up slightly year over year [19][20] - Full year guidance indicates total company net sales expected to be at the low end of the range of flat to down 3%, with adjusted diluted EPS projected at about $4.15 [20][21] Other Important Information - The company has invested $90 million in share repurchases year to date, reflecting confidence in cash generation and commitment to returning value to shareholders [19] - The AMP productivity program has delivered $75 million in annualized cost savings to date, with expectations to exceed the initial target of $100 million by 2027 [8][64] Q&A Session Summary Question: Impact of consumer challenges on professional segment - Management noted that the professional landscape contractor business grew in Q3, driven by strong demand from contractors despite muted homeowner demand [30][31] Question: Sustainability of professional segment margins - Management confirmed that the strong margins in the professional segment were supported by a favorable mix and the AMP program, which contributed to cost savings [32][34][35] Question: Residential market outlook with potential interest rate cuts - Management speculated that interest rate cuts could positively influence consumer confidence and spending on big-ticket items, but emphasized the need for sustained improvements [36] Question: Market share and growth prospects with major retailers - Management stated that the company has maintained market share despite market volatility and is optimistic about growth prospects with key retailers like Lowe's and Tractor Supply [42][43] Question: Expectations for residential margins - Management expects residential margins to be lower year over year, with a typical range of 8% to 10%, but does not anticipate reaching that range in fiscal 2025 [48] Question: Year-end backlog and professional growth prospects - Management indicated that year-end backlog is expected to be reduced as the company normalizes order cycles, with continued good prospects for professional growth [51][53] Question: Tariff impacts and mitigation strategies - Management discussed successful tariff mitigation efforts and the expectation to maintain margins through productivity measures and careful pricing [65][72] Question: Inventory levels and alignment with demand - Management acknowledged that while progress has been made in aligning inventory levels with demand, there is still work to be done, particularly in the underground segment [102][110]