The Toro pany(US:TTC)2021-06-03 20:34Financial Data and Key Metrics Changes - The Toro Company reported net sales for Q2 2021 of $1.15 billion, a 23.6% increase year-over-year [20] - Reported EPS was $1.31 per diluted share, up from $0.91 last year, while adjusted EPS was $1.29, up from $0.92 [20] - Gross margin increased to 35.1%, up 210 basis points from the prior year [25] - Year-to-date free cash flow was $292.4 million with a conversion ratio of 115% [28] Business Segment Data and Key Metrics Changes - Professional segment net sales increased by 25.3% to $828.4 million, driven by strong demand for golf, landscape contractor, irrigation, and rental products [21] - Residential segment net sales rose by 20.2% to $315 million, led by demand for zero-turn riding mowers and Flex-Force battery electric products [23] - Professional segment earnings were up 57.3% to $167.1 million, while residential segment earnings increased by 23.9% to $46 million [21][24] Market Data and Key Metrics Changes - The company noted strong demand across both professional and residential segments, with expectations for continued robust demand driven by consumer and business confidence [12][29] - The company is experiencing supply chain challenges and inflationary pressures, impacting production and costs [13][29] Company Strategy and Development Direction - The Toro Company is focused on accelerating profitable growth, driving productivity, and empowering people as part of its strategic priorities [18] - The company is investing in technology accelerators and innovative product development, including acquisitions to enhance its innovation roadmap [14][30] - The company aims to capitalize on electrification trends and sustainability initiatives, with a commitment to developing electric products [37][39] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about strong demand trends continuing, despite near-term supply chain and inflationary pressures [29][40] - The company updated its full-year fiscal 2021 guidance, expecting net sales growth in the range of 12% to 15% [30] - Management acknowledged that operating margins may be pressured in the second half of the fiscal year due to escalating supply chain challenges [29] Other Important Information - The company has maintained liquidity of $1.1 billion, including $500 million in cash and cash equivalents [27] - The Toro Company has paid down $100 million of debt and invested $107 million in share repurchases year-to-date [16] Q&A Session Summary Question: Production constraints and inflation outlook - Management acknowledged ongoing inflation pressures, particularly in steel and resin, and indicated that inflation may continue into next year [46] Question: Volume growth versus price growth - The majority of sales growth in Q2 was volume-based rather than price-based, with expectations for continued strong demand [48][49] Question: Residential business growth compared to competitors - Management noted strong growth in the residential segment, although specific comparisons to competitors were not addressed [50] Question: Production speeds relative to pre-COVID levels - Manufacturing operations have improved but are still operating under COVID-related constraints, impacting efficiency [56][57] Question: Demand trends in residential spending - Management has not seen a decline in demand for residential products and noted that field inventory levels are lower than desired [60] Question: Supply chain constraints and component availability - Key components like steel and resin are experiencing significant inflation, impacting production capabilities [69][70] Question: Golf business trends - Management indicated that the golf business is experiencing strong demand, with a focus on maintaining market share [84]