The Toro pany(TTC)2021-09-02 19:18Financial Data and Key Metrics Changes - The Toro Company reported total net sales for Q3 2021 of $976.8 million, a 16.2% increase year-over-year [21] - Reported EPS was $0.89 per diluted share, up from $0.82 last year, while adjusted EPS was $0.92, reflecting a 12.2% increase [21][22] - Gross margin decreased to 33.9%, down 110 basis points compared to the same period last year [25] - Year-to-date free cash flow was $429 million with a conversion ratio of 123% [29] Business Line Data and Key Metrics Changes - Professional segment net sales increased by 15.2% to $718.5 million, driven by demand in landscape contractor, golf, and snow management markets [22][23] - Residential segment net sales rose by 23% to $252.1 million, primarily due to strong retail demand for zero-turn and walk power mowers [24] - Professional segment earnings increased by 7.6% to $122.3 million, while residential segment earnings rose by 10.5% to $31.5 million [23][24] Market Data and Key Metrics Changes - The company experienced robust demand across global markets, particularly in landscape contracting and golf [10][14] - Supply chain constraints and inflationary pressures were noted as significant challenges affecting product availability and costs [15][17] Company Strategy and Development Direction - The Toro Company is focused on investing in new product development, enhancing distribution, and maintaining strong relationships with channel partners [14][18] - Strategic investments are being made in alternative power, smart connected, and autonomous technologies [19][20] - The company aims to accelerate profitable growth while managing operational challenges and inflationary pressures [20][33] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing supply chain and inflation challenges but expressed confidence in the company's ability to manage these factors [15][41] - The company updated its full-year fiscal 2021 guidance, expecting net sales growth above 17% and adjusted EPS in the range of $3.53 to $3.57 per diluted share [37][39] - Management remains optimistic about long-term growth opportunities despite current operational headwinds [51][52] Other Important Information - The company has maintained a strong liquidity position with $1.1 billion available, including cash and cash equivalents of $535 million [30] - Recent acquisitions and increased capital expenditures reflect the company's commitment to innovation and capacity expansion [31][32] Q&A Session Summary Question: Sales guidance increase to 17% - how much is price vs. volume? - Management indicated that the majority of the sales guidance increase relates to volume, driven by strong business fundamentals [54] Question: Progress on passing through cost inflation? - Management noted that while they have taken multiple pricing actions, they have not fully realized all pricing impacts yet [59][60] Question: Residential growth contribution from Tractor Supply? - Management stated that the growth was broad-based and not solely dependent on Tractor Supply, with multiple initiatives contributing [66][68] Question: Annualized inflation and supply chain impacts? - Management highlighted significant material and commodity inflation, particularly in steel and resins, and noted ongoing logistics challenges [77][80] Question: Expected price benefit to fiscal '22 sales? - Management indicated that price increases are expected to be more significant than normal due to multiple pricing actions taken [93][94] Question: Fourth quarter guidance and timing of shipments? - Management explained that the stronger third quarter impacted fourth quarter expectations, with ongoing inflation and supply chain challenges anticipated [100][101] Question: Infrastructure stimulus effects on Ditch Witch? - Management expressed strong fundamentals for the Ditch Witch business, with significant demand expected from infrastructure investments [102][104] Question: Backlog situation and visibility on meeting it? - Management confirmed that the backlog is continuing to grow, reflecting strong demand relative to supply constraints [144]