The Toro pany(TTC) - 2025 Q2 - Earnings Call Transcript

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$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$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]