TTC - Earnings call transcript Q3 2021

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Operator

Good day and thank you for standing by. Welcome to The Toro Company Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions]. today's being that advised be conference recorded. is Please Instructions]. [Operator hand over Managing to I of would host, conference to now Senior like your the Julie Relations. Investor Director Kerekes, Please go ahead.

Julie Kerekes

morning. And you. good Thank

and our President earnings Chief and a with the Our We Executive forward-looking information our call Officer On of and Renee policy. Officer. website, section issued begin Olson, today was this are investor copy be Rick Chief found statement release Financial can customary in thetorocompany.com. our Vice corporate Peterson, morning Chairman and

this we business operating During call, statements will regarding and results. make our forward-looking and future financial

You all uncertainties the difficulties, in risks are and aware of statements. making predictive inherent

to as Please duty of as factors to cause do risk that differ earnings SEC filings statements. those results we a may well in our materially the release note not from predictions. important update detail some have that forward-looking Our actual our our our

measures that, of call. performance over in to this understand call financial and now should views how our Rick. management business. to ongoing will flows the of earnings measures measures non-GAAP this results our during will and certain in operating financial With these reference Non-GAAP be superior presented website. addition, found We be of can reported cash our for Reconciliations measures. release turn to to GAAP substitute to be comparisons and the our operations believe considered past in call, or In the performing useful release not measures financial may and earnings I present the on financial non-GAAP or GAAP we a measures historical meaningful financial

Rick Olson

results. Company Toro Thanks, Julie and good The delivered record morning. third-quarter

our residential went affected availability. in Professional and robust operations to as and global to both beyond challenges continued segments benefit from chain even execute demand team supply We above our and

with of kept customers. on employees needs Our our the our a channel partners focus serving sharp together

the and Professional both XX%, management worldwide. rental contractor net demand As a track landscape were in sales equipment, of for golf up sales strength year-over-year. quarter and pre-season marking for ice continued for construction specialty shipments second then a this double-digit Higher markets row and and result, a third products. of quarter We XX% segment products, and our growth net saw strong total snow in increased the segment.

all-season demand lineup comparison The in net and products, of respond quarter Growth strong confidence quarter is products XX% was Customers the innovative Our mowers. strengthen zero-turn also actions of which Flex-Force and year. continue and business walk-power introduce XX% refresh strong expand robust our in combined that growth to of results. fueled durability to our top Residential to retail and the were retail favorably marketing with driven innovative for distribution on demand. lineup up sales new segments rate offers a taken third continues last mass recent on brand no drive with compromise performance. to our positive and we've Toro XX-volt power product by

in through escalate pricing faster touch mitigating we now quarter, delivered the XX.X%. Despite a be up fully key term in themes on the these than some growth chain residential the and solid for segments expected challenges, the X.X% and earnings offset could last of and both up at to noted pressures inflationary As rate quarter earnings I'll earnings of professional third quarter. near constraints supply other actions.

environments. on across been worldwide. as investment has well robust continue to see This driven the business markets focused demand broad-based outdoor our by priorities as confidence, consumer and is First, customer and we

teams. We these and continue commitment drivers our with distribution to on talented our in to investing new development, best-in-class capitalize product our

included chain costs supply freight as headwinds. continued and and Second, component inflationary constraints, This global wage-related material challenges. availability well the escalation of as

this in source team and to as steps incredibly dynamic extraordinary took to us enable as operations environment. Our possible produce effectively

persists, We productivity to control. how execute focused managing pricing our these and actions. Regardless also pressures control, disciplined of remain implemented long our market-aligned factors synergy continued within demonstrated initiatives, we and expense on on the

we wage in general some challenging Third, on we pressures to an labor economic availability in We're manufacturing the market, customers. limitations have workforce and including and workforce saw dedicated trends, and of Across a our in right increasingly deliver extremely put locations. resources ourselves talented extend serving environment. having personal teams want line to committed demand position with enterprise, operating our while focused commitment customers products and to our places the serve at their to partners place the and team our meet to my this navigating challenging best unwavering thanks our the to right time. to channel for in I other

Our innovative and end deep and customers channel growth. us relationships and product partners portfolio, well apart us for with our set long-term outstanding position team,

have our both advance to the acquisitions organically stakeholders. for of through value alternative autonomous. all financial to and technologies in invest power, We and the year, and allocate to future continue made priority we've to smart in investments strategic connected, capacity drive best key we capital areas fiscal This

Our healthy maintaining us return cash liquidity. shareholders, capital while to allowed flow also to ample has

detailed will results. that, to I growth, of call the will our and driving further our of will our excellence productivity I now we With review against continue profitable Renee. operational ahead, to outlook execute and empowering discuss turn accelerating Looking priorities financial enterprise Renee's over following people. strategic more

Renee Peterson

morning good And everyone. Rick. you, Thank

supply and $X.XX the quarter EPS in delivered $X.XX lower broad-based As to both construction specialty construction snow our and was increasing last supply per net products. and prior of said, rental share, the landscape driven third equipment inflation and And from increase $X.XX million. quarter pressures. labor against per from MedTrak results record by was Both We segments demand chain, our $XXX.X was driven top Professional year. third-quarter bottom XX.X% sales for slightly to EPS sales year. underground our This results. This $X.XX diluted in record the segments robust by backdrop net by share, and were for line, management, up adjusted million. sales XX.X% the by of contractor, of XX.X% up demand Residential up diluted segment were Reported due grew that XX.X% ice was and in and Rick $XXX.X segment Professional $XXX.X largely realization sales, golf, offset a to the disruption by net costs, segments zero-turn and net and a XXX when XX% by sales XX.X%. segment to freight third the were basis X.X% as earnings at net points to in same percent points for net quarter primarily was sales, to improvements. due expressed for walk percent $XX.X the Professional expressed million up power of were driven basis were segment. chain This higher was demand down decrease strong driven as Residential the impacted increase availability. when product partially $XXX.X productivity offset earnings to and to material Residential decrease of to million, price quarter decrease XX%. professional was as third primarily retail This the quarter for factors up and mowers. million. This by XXX for

factors Interest as the of last basis margin for basis rates. expense expense percent The compared was third to for levels primarily lower comparative We percent sales to quarter a our the net This reported quarter, normalized the percent the a of Turning decreased third quarter basis. that gross same increased XX% Operating down in as tax due gross was These to to quarter. Adjusted basis by interest basis rate third XXX XX.X%. earnings the spending period points XX.X%. million, the of was prior for earnings quarter XX.X%, Professional points driven net of points for adjusted XX basis to effective XXX a settlement for results decrease margin million sales tax to reported of driven by the year as a more to earnings. points on sales year. and third XX.X%, increase affected operating and the was legal a down compared the X.X XXX a was in effective largely and XX to were the year. decreases debt points and net $X rate quarter the quarter XX.X%. Residential decreased operating of SG&A XX.X%. this same Adjusted decreased

to channel primarily from year Turning last totaled essentially flat million. to flow. Balance $XXX.X a the million, by was $XXX.X receivable ago, and Inventory cash at Accounts Sheet mix. driven year down X.X%

purchases full payable goods strong while finished by well variability as working lower performance At positive Year-to-date flow available. capital of the billion. $XXX.X demand supply the higher liquidity key to million primarily of of was result by the of million more our the components working This Accounts to reflection ratio under last were a to compared driven This cash cash of was normalized included was earnings significantly cash million conversion with $X.X year year. procure higher retail lower end This and our due increased and to chain of efforts free XX% driven This process a spending of However, facility. levels was and in timing was our largely the when higher. revolving primarily equivalents as availability credit payable. from higher $XXX last quarter, $XXX XXX%. million. at remained $XXX

desire cash has balances impacts. we're ensure the levels, related and along adequate elevated driven the demand cash experiencing our by at the working our liquidity further with by are onset largely to from the of Our pre-pandemic pandemic, accelerated strengthened capital

Left year-to-date, Hand third far including through million paydown. of the in months, acquisitions, the Robotics resumption an million X our so past dividends, increase repurchases, XXX share XXX majority and this The debt funding which the of regular Over we've year. and with generated TURFLYNX out paid deployed XX quarter of in our million the cash

allocation in We capacity remain future key Balance commitment invest also Sheet. fueled ensure technologies the to increased capital strategy, disciplined reflecting by we to expenditure We and our demand. budget, meet strong our capital in our our have

acquisitions, maintaining to have through share support and priorities our not and to goals leverage cash businesses support changed growth, flexibility. dividends in to reinvesting through our repurchases and and sustainable returning both financial include; Our organically long-term shareholders

previously facing would in winning the companies our focused be our markets momentum most headwinds leadership quarter. control. the same we and in we're demand we operational production. pronounced As to We challenges serving enter worldwide the serve. supply to managing that position demand our fiscal and the markets from we quarter indicated At year, not third benefiting customers, and immune the continues outpace remain customer in within the strong factors of our on and We're final time, our

up As production pace a we and in resulted our This a third procuring the focused than of to resources XX%, backdrop, Company demand, pressures. on XX% finished chain, had the remain lower now above We updating fourth growth this materials, components, fulfill inflation, additional residential segment anticipate to growth labor from goods full-year with Professional expect teams previously. result accelerate the to into We our segment we stronger With Company we will XX% the of growth were average and the net of the the rate. in able to exceeding We of deliver be sales guidance. quarter. XXXX work other are fiscal quarter to face anticipated. collective rate the heading supply of similar

performance expect supply and labor above strong by leverage overall compared a to for we operating be adjusted similar to earnings fiscal similar increasing year pressures. last well operational expect segment year, and down full inflation residential chain at margin This but Looking now we as Year-to-date reflects to we Professional net levels. the expect of our be sales historical last XXXX. year margins to volume profitability, still be percent operating and to to offset

these now $X.XX. range of strong of market We our previous $X.XX performance, adjusted reflects counteract to continue we This up in diluted per guidance EPS the EPS year-to-date on shares, to to range $X.XX actions take our full-year the $X.XX Based current higher growth, dynamics. robust expect into from to on demand business we of while continued to All to strategic environment, period and also turn as priorities. Rick. long-term discussed. continue well-positioned execution call I on remain this to our execute will now profitable headwinds we taking the the previously back solid in, account capitalize visibility,

Rick Olson

end just current Renee. our markets, well demand outlook. continuing discussed strong guidance reflects as across Thanks Renee our as operational The

the fiscal levels confidence of global golf along demand drive prioritization continue XXXX, in into key and the at business investments; and of and to next and we investments to improve COVID-XX. funding of momentum for Customer demand remainder developments strong are and consumer drivers year. factors end market infrastructure government outdoor strong should related year fiscal watching into with supports maintain the environments, a continuation fourth in to of quarter these and Looking

component see availability, challenge to ability factors. improvements biggest current key given and in retail remains meet COVID we Our operating We -related will begin to logistic material all demand believe across our our to the as environment. other of constraints produce channels, ease markets, and

inventory meet market everything Our be to low implementing operating production in managing operations pricing in When synergies current from position team focused a and remains appropriate. and begin we better constraints challenging committed productivity to remain historically build our ease, driving field market-based to levels. requirements expenses on environment. actions expect possible to prudently to this share grow We increased and doing as reasonably

three buggy Toro the our the and Z offerings SKXXXX of include; award LTS power the mark choice Tractor the specialty lasers New as Z We recently to Ditch swivel of selection Pros, the sighting, most trusted A In flow, its including time editor's partner. the Azul micro-irrigation And on Toro and this stand examples Rental our full-size and omni The finally, And leadership, the attraction capitalize of X of their sprayer. a received from with awards the and products mud include; year editor's and relationships and the steer, spreader relationships. International are awards products opportunities innovation market From Company, Sustainable highlight Master as Witch XXXX in as maneuverability. the solution Green Supply well-positioned our growth class of from innovation to August, superior partner in the few Expo Magazine, X,XXX on three commitment a row, in cash Aqua-Traxx second two construction Year. with strong innovation that long-term investments which XX-inch skid Irrigation recent rental diesel, -channel factors. offers our year Product recognized spray Industry for utility choice our for the

And July, our In irrigation innovative many awards, Club display maintain team Euro fields turf Larson the at parent Paul St. to In been the conditions solutions Championship equipment Earlier our Cup and Club marquee systems helped keep the events. at addition Country turf Stadium and products their irrigation top showcased our events. in this Japan open irrigation condition Royal Golf have more playing sites. this full his recent summer's at helped of in expert National summer, our supported work at championship. and Georges as was on Kasumigaseki recently, pristine high-profile Tokyo's for

on customer land. mission care strong of few helping in sustainability beauty, to to This longstanding and giving Our deliver superior recent this rooted examples where legacy. are we extends of of our the highlight productivity, A deeply customers our our the innovation enrich legacy purpose sustainability a and focus back. communities have

First, organization worldwide close partnered to we've to our post-incarceration, headquarters, men environment. of works the that with an support lives Better transform Minnesota's and Futures,

training donations equipment the Our mission. of and resources further organization's help

we national community examples a on Association promoting is improving These a U.S. our In Company also head and by and back initiative closing, of the project. the as are we American as are couple Foundation core customers both employees XXXX, part continuing updated our and acknowledging Rental just We with partnered many finished are sustainability. optimistic level the our face. environment. communities new fiscal green rebuilding culture across dynamic believe into a This of important we we've impact appropriately and we who of risks ways to giving while Supporting guidance reflects the on XXXX the and are Second, as spaces. opportunities an the our communities Company.

on capitalize future across We well-positioned our are growth. momentum and have to and strong businesses fundamentals

With success. continued key partners, As employees you and is and your to your will always, your and Toro that, questions. our Renee for support. channel Company's the resilience our our I shareholders customers extended Thank to long-term team the for and dedication take to

Operator

[Operator you Thank Instructions].

of comes with from David Research. MacGregor Longbow the Our line first question

go Your line Please ahead. open. is

David MacGregor

Price Very also. a it so like of and think this Yes. Good about everyone versus bit was guidance, operate, good I environment difficult to would a I which point then maybe being congratulations considered. the in How much look XX%. talking that volumes? up interested reasonably that quarter, sales guess morning, was little and I at

Renee Peterson

Yeah.

the to business it, fundamentals strong at just to We continue very see look we strong say As we majority would David, -- and very volume. relates demand.

volume. would majority the So be

David MacGregor

protect last quarter you've need adequate golf other but feel inflation I groups this you guess dealers in project made bids do saw to made case the why fourth for quarter. different their quarter on you large good in pretty a you your your cost we pass-through how what maybe product then through look will in passing and versus all into progress that and XQ

Rick Olson

big usually orders. looking just about we're about current, at. have backlog really the situation a very talking don't current we with So pricing our We -- times, talk lead we stay that in normally,

combined now cost have point. and times prices a situation significant out We are pretty to not lead different right in are further is position are remarkable in we increases, this where at with situation those that we a this extended do so a protect

are this with environment. so So discussion the and our that is customers. part special different Obviously, of is there but circumstances forth a

Renee Peterson

market-based would this just taken our in are expect we actions. seeing we that I all pricing the certainly to And the quarter-to-quarter fully environment. have we add but pricing improve, price we David, to continue of that date. do evaluate future. But realized to We'll actions multiple in that realization haven't

David MacGregor

that's since I All increases earnings on was pushing think pronounced were a quarter before you thesis but having increases price the impact were announced there that partial on price last have more and through meaningful call? still impact these XQ additional right. our the XQ. last that I'm a expectation, guessing Because

Renee Peterson

to time pronounced also that by is supply were the where profitable but were business keep increases take chain our from growth serving assess continue the but more to be -- the we on during action well now, were customers as additional affected well. as there and focus need to, the There out to also inflation that from we'll our well, we we're situation Well, period. specified able impact close year. seeing It's very price and business as What

Rick Olson

you just by -- David We the true. you we're can in do to there's nature have the far-out just and just the protecting -- adding variability is And earlier implement comments. What if orders increases also how even business. not quickly price the said in of

Some times from in a still that they're There ramp-up negotiations impact price we curve are still in the or actions so little -- And delayed overnight, realizing a and taken that are more bit others bid part just far. transactional, is we're take you and will can full complicated. financial them the change the our packages on of we've

David MacGregor

Right.

Rick Olson

as -- more needed. actions

David MacGregor

second with residential Supply? And and XX% to got Okay. Tractor the now, introductions the is, know much adding question are the My lapped adding how was product listings. But you've regards the you've still think refresh, I but Tractor there's the Supply, growth, you've of there I you're they Flex-Force. stores got

was So initiatives in would the those a that the what to you've I number be of business. residential to there the in trying of isolate legacy got growth that guess growth. against contributing I'm initiatives

Rick Olson

seeing marketing, those merchandising, from. is not the the talked work the branding start parse that's with David. I the stay-at-home partners was with coming really about products, initiative other year, Tractor touched other between with drivers initiative you of kept trying we new of with We that last along the of the it, on channel those and the home growth out Supply, to And with growth, strong broad-based continued things everyone and bulk to as messaging, It's and a we're where to drivers at drivers done win, think some we're unique and strength over stay so with doing. the certainly reminding a of that the that the

David MacGregor

Thank All you Okay. very right. much.

Renee Peterson

you. Thank

Rick Olson

you. Thank

Operator

Tim line And with comes the Baird. from our question next of Wojs

go Your line Please ahead. is open.

Tim Wojs

-- Good morning. everybody. Good Hey

Rick Olson

Good morning.

Renee Peterson

morning. Good

Tim Wojs

back inflation there maybe think what I on might basis? question way inflation a dollar of frame trying cost. on just supply the to first be my Is any annualized and a side. impacts the circling chain percentage Just guess -- as revenue or to

ago, understand if of was snap line maybe to trying Just is versus it terms that X in today magnitude. just months maybe the absolute you where where

Renee Peterson

there that resins we're say and All the dollar on most ensure In to you has From seeing I the we're steel unique also particular, and seeing but would can logistics inflation impact, significant related we and and as have inflation. to specifically things wage the in is an inflation been material inflation transportation. that that is nothing out cover seeing impact more year, many commodity of significant standpoint, But Again, break us. that to you that become companies margins. later seeing across you're our the it are as significant a the inflation Toro. far

are expect QX, expect focusing realization well and market-based we'll about best accelerate that. to in far do to talked and forward. we see to other of fundamental As lot continue as as we a and really that growing we're little and our include short-term, so business mitigate to as try price earlier, taking challenges logistics any We to the continued pricing probably, is on and the situation do -- estimate, in same going bit productivity that, inflation actions, as strong. those we go see a We in freight our try we it's the will But guidance.

Tim Wojs

makes I first about by just you're and year. at this early of do you That -- today relative think sense you pricing Okay. would you think or calendar realization I kind inflation, relative next the quarter think it what point can seeing? to when by the it to How offset about you guess mean, and

Renee Peterson

engaged is balance the do Yeah. mean, certainly and well. probably next future, understanding inflation labor and continued congestion year. eventually very differing of demand little inflation constraints you of fundamentally is many I we part to We know, expect demand as freight more seeing the We I'm some it appropriate to that depends now. moderate logistics, those the normalize. areas, We of the we that think right as commodity actions. supply will the call timing one in will do going how we'll piece cost issues some again, see will a when into think of and and mean, and at is supply long in there's in short-term look and think continue the We'll be we're that. persists, that freight taking in on I normalize. on opinions the difficult to that But

So able look basis market we to those. some again, these continued think take offset we'll pricing we to And actions appropriate as we'll of forward, have challenges. be

Tim Wojs

-- on I Okay. you I'm the one me. maybe can really development have last investments, quarters. new technology thinking Okay over Anything share And next landscape us and on maybe the and just on about more with potential the pipeline any the announcements few And then product maybe golf sides?

Rick Olson

Sure.

with golf. that our vision the for we XX, had track going And going those those introduction a products not categories the really And we're several our and the, you'll that reflects areas. in looks actually, make what labors in not for the the just -- direction We of of That's are have very that as -- And of investments number earlier the technology year have power, and next that's our and of helping products you the on continue years. last areas, us plans, future to exceeded technology golf that show -- over in in-person we focused we products, for concepts were I on nets the working initiatives. was of in have show the internally chance fruits a much see think made like of accelerate expectations far forward those steady see are this autonomous, our the to connected say, acquisitions -- golf years, the which and last key and some and we alternative those smart,

Tim Wojs

Okay.

Rick Olson

things exciting most actually that's now. the on of going right --one

Tim Wojs

you. Good and Okay, to luck meet you guys. great. Thank nice

Renee Peterson

Thank you.

Rick Olson

Thanks.

Operator

James. our question from And Sam with of comes line next the Raymond Darkatsh

open. ahead go Your line is Please

Sam Darkatsh

morning, you? Good how are Rick. morning, Good Renee,

Rick Olson

Sam. morning Good

Renee Peterson

thank well, Doing you.

Rick Olson

you? are how well, are We

Sam Darkatsh

X you. topics. -- well, I'm Got thank X, a couple

what asked. just One on of them is Tim piggyback

stands channel? right 'XX sales on in to fiscal it already is now, announced what a what the you've year-on-year expected basis benefit the price As based on

Renee Peterson

Yes. our that. talk to significant a at price points more about is range. point realization. certainly From normal we price our X price of normally Certainly, not to It's X standpoint,

this actions, is focused as of we've promotions well as as well some taken well. programming our down fact pricing -- Given that which we're in the and Sam, multiple as on environment,

to further well. of cost As we'll environment take in level continue and it's magnitude the price our an greater we normal of this certainly order look other forward, but as assess actions, type than

Sam Darkatsh

order talking sense you -- what have Can give already been has price about of increases sort a on means of side been we of what X%, announced? what least magnitude XX%? announced. of at based Are What

Rick Olson

I are talking about, see levels that think cost of of a impact. we're Sam, ranges that across those the it's businesses different lot different

than have return businesses our pricing acquisition past. we margins. is the the of margins up the It's is Machine been we're to Works to set to The would've absolutely has other on triggered that driven one the seen. done offsetting that tool usually talking hard in productivity. focused say to offset of that to by also or it's are us way number So but That increases, we the well needing we about to the X%. in we use through -- in in we that in to, every talk the midst to Charles relative our it X we year work our did can past. has the whole summary, of leading this that as every committed those remind build but that historic those are a numbers possible we as able costs to on we're be with increases And price and improve, synergy want everyone And really about to And bigger and always to the a continue pandemic. bundle

Sam Darkatsh

XX% think than -- if lower pricing conceivably So actions your prices normal year, demand next cost normal -- pricing general today, price-cost get margins in be or the actions warrant would do your to that commodity year? those and from margins if designed neutrality next the XX% therefore, and, might you more inflationary pressures stabilized are incremental market incremental the

Renee Peterson

a we'll same expect year. do beginning we we unfold, competitors price related And that and have to evaluate into Yeah, there as well. inflationary going market we'll information you continue and the that, of price better the least to very our We the always what that next market. be are an to inflation environment at rational operate as will environment also rational know

be as of some are to these going I And there. mentioned, other headwinds,

continue growing our in So the doing on that will as market to focus, With we evaluate certainly Rick customers, ensuring and also so the we're a price manner. profitable appropriate and share take we're serving said but actions.

Sam Darkatsh

could. timing the specifically what me the view? you your I much if shipments versus with Remind with third quarter quickies specifically or fourth of what the fourth better obviously, other Two fourth quarter quarter implied was the quarter, happened third prior into than quarter, trimmed, guidance The happened was it the although was expected.

Renee Peterson

No, we predict cadence -- by job. stronger this definitely did our they it's did team, environment just really in fantastic a with quarter, demand we a execution as did and operations third the higher Yes. hard see see exceptional to

a it So quarters timing of looking inflation and environment. also piece at is the the just the between

to better come well. at are I As do this the and down. that and point inflation that challenges number we accelerate continuing we we supply greater to mentioned That will a time, in or earlier, as chain think see equilibrium including reach price with fourth we'll realization quarter start anticipating in that of do normalize remain

Sam Darkatsh

I'm talk Ditch specific What the potential of last to broadband exposure and thinking Rick, replacement areas. infrastructure is like rule My water about of these question spills, -- effects Witch. Ditch exposure pipe drinking Witch's things lead specifically stimulus on promise. about potential improvements. I and the

Rick Olson

extraordinarily The we're components great -- that's now a are work long-term and we operations a a that also is challenges those one the fully construction, because -- like we issues make The some shares incredible and particularly This we call is key have on increase can concentrated -- that are an demand other etc. reach. to We in area. agriculture, it's seeing right with expect through have that areas that strong of those the for the demand to sure industries that challenged it business work extremely that fundamentals great because for through side effort question.

is miles ten in antenna the goes an five talked and looking we've and Before the need more XG to to infrastructure those therefore, that been in bring of all of we small opportunity, another nots significant and year. to lot need talking adjustment of put needs wind because down. which was just And that's There's importance to about XXX It of to a conversion of broadband repairs offshore, the the plus infrastructure. trenching need equipment equalizing economic from alternative not are we that work down everywhere -- we ad about undergrounds of recently, put we generation feet main haves locations reduction the and into were repair to downside the petroleum deficit pandemic, is a broadband and there for to of antennas directional be together. field that to was the for taken to every are. drills XG went Every side going the recognition, that's at investment. needs have solar getting - onshore, gaps The and energy. last installed that system that install all into the the pandemic that infrastructure The and as to back connected the that the the density then be

not an are Machine and could So the more we drivers offset there acquisition excited and Charles future be the about that with there. is the Works

Sam Darkatsh

you color. terrific Thank both. that for you Thank

Rick Olson

Thank you.

Operator

-- of you line Ross next question you. Gilardi our with Thank comes from the And of America. thank Bank

is open. line Your ahead. Please go

Ross Gilardi

everybody? morning Good Okay.

Renee Peterson

Good morning.

Rick Olson

morning. Good

Ross Gilardi

that you're the quantify can it mean, answer. Witch that on business setting Ditch declines you that the having now? you in business with of I easy basis the Rick, really bit comps a seeing backlog that turns like expand big disruption six the next and business much for before spike seeing magnitude in is just just year-on-year little Can last a revenue you're you've a How are seen positive up months? right you -- sounds on longer maybe setting potentially over year.

Rick Olson

As in of answer in case, a but the lot the standing do we've we backlog equipment. We in track said people is line a see usually significant of products this before, for for don't backlogs, yes. area

solid but of have of to number aren't key getting that's -- suppliers of relatively be on supplies of part any focused reductions why and are is able that But that the our possibly operations can. in organization. not the the being the We Works our substitutes. part The we're of to scheme It's has components part in talking and on many focus some extraordinarily situation. exact believe demand don't that been equation. the bigger really, long-term by help professional as that at same work with we get front as ways competitors it's build larger in are the there me, benefited the extreme too as much We've and a able reduction. Charles there Machine to small we're business actually about now, our of enough not therefore solves. things, I right that's So

Ross Gilardi

strong actually low-to-mid a year-on-year underground about that we to up fair Are happening characterize declines double-digit is construction? orders what's with talking on in basis single-digit that are production way the

Rick Olson

Orders strong in I in are that the double-digits. don't in of that to shipments. me terms front product right probably up, true. decline specific is have of business This

Renee Peterson

a single would say up would digit, be the level. I Toro level Toro getting Yeah, that's and low

Ross Gilardi

Okay.

Rick Olson

Yeah.

Ross Gilardi

than specifically How shortages? raise How Are to with engines? seems capacity Can the -- some severe you prices living the talk a living you you just filing are little business. what's hand-to-mouth? rationalization clip Are are to I do a doing other Briggs exiting some equipment bit on you're having feel corporate at been mean, sustain happening on on and gas with engines? like greater there's a you more average margins? gas-powered you gas gas players it

Rick Olson

a single key key standpoint. and constraints every gas today from one you or product one product line our cut would components are engines power component the of is of of Most that expect, so diesel across the as that's

that for factors. is possible, the us constraint that to believe and inflationary case, us also answer as are disruptions the taking are all a for engines factors, produce mentioned, including of key price and as all but that yes, contributing some impact bring in supply of both is our to those in I the extraordinary measures suppliers you them So, to quickly

Ross Gilardi

for know the it of all going in to don't supply does mean, a I And headwind, do I you if are future? more like Rick? the at months? longer-term shortage, or just we as XX power point? this the If at acute, you a the transitory structural market more worry adding priced that do to does, end the that So feel some next a up as six gas issue lot of engine itself out truly gas of equipment in be people view

Rick Olson

that view issue will it We with the transitory the balance its as the primarily demand. supply find

Ross Gilardi

How that capacity adding or market? is will that anybody Is is actually in just because slow, demand this though?

Rick Olson

capacity manufacturers number opportunities are there and add are a alternatives. to engine There of also and

Ross Gilardi

implying quarter, XX% first headwind, Okay. last just And math just if the in wondering, specifically? negative the fourth I'm increase. you're All on decline to a into cost on you're revenue XX% the then more earnings fourth my And right. that back on I next quarter, with terms quantify Can year my little -- earnings based a year comps one specifically think is like a the implied dollar correct, you the go of just do now? in what half in seeing is you

Renee Peterson

into continuing to least year first see be the That it's market-based and all half will we can to the being of issues situation. do are internal inflationary fourth will that the that of take some -- be continue supply that on chain 'XX, issues we of unique and expect tour with what as did We year. the fact this efforts our accelerating productivity continue but We we going pricing consistent us those with through focus in and to we to look we'll will in not at some I on we focus mean, do that our what mention quarter. control decisions certainly in the said, and also

see it and across So seen have we're going industry our to it across our industry.

take be as well. that and expect will would So rational price appropriate we everyone

the solid, and And share, of properly our demand really team. year-to-date and all the our improving again, our business strong. from is the stay we've sure also We excited our we're making but on very execution of are our proud growing about long-term, very are we'll the focused fundamentals business, margins. it growing strength had operations market And

Ross Gilardi

Thanks much. very

Renee Peterson

Thank you.

Rick Olson

Thank you.

Operator

comes question Research. Eric line Cleveland Thank the Bosshard of our And you. from last with

line please go ahead. Your is open,

Eric Bosshard

Thanks. Two things cover. to

are and inflation first supply challenges to clarity. little All on. the just a totally of First there are you're down of what in bit different Can place you relative talking of last going -- a going so XQ profits The quarter. think, be made year? it bit? from the does of and what's in grew. in and place me clarify XQ next next happened in current profits earnings, this in in XQ be are to half those in year all, All and the XQ challenges challenges comment XH. profits mean were understand just chain, little challenges What's half about And those in sounds going year-over-year, just the in all your that down like through to first

Renee Peterson

and from I QX was would standpoint. just QX strong difficult sorry. us us, think are last of that part is so a I so comparisons is -- was year, the strong it just I'm for very, say for year two quarter very more One quarter a QX as things. very last well

strong we that half of half second started think and you see experienced was about the really, the through by COVID, first If to the rebound impacted COVID year. that in then rebound the we more

So do cadence a little inflation you just disruption smaller more QX. at accelerate. it part well a we look supply quarter, and of relatively more the to then expect will those It's particular We issues quarter see and for the is as in do of us expect if bit a but some comparison. chain

with -- determined believe those actions year. on take as what price next than go price in saw in realization to going based that to As year also we'll continue we we expect the economy that to That into appropriate of QX. QX happens we we moderate we will talked see but earlier, as some be timing is we'll And about greater we next well. into expect

Eric Bosshard

down? bit of that that meet visibility is, backlog then can Ricky be the backlog work when it's in terms reflecting to that Do terms what obviously you of in a it the secondly, demand is. backlog where to And commented unusual and strength supply of relative for you situation have Okay.

Rick Olson

we it be Witch talked with Ditch that the to the have of careers so Charles just to components, a extend those turn still around lead pretty there's when because more tends we areas are those varies more of our as of time Works an the very would -- the of nature Machine business, estimates ongoing in longer about can have it's lead quickly. We matter -- commodities machines, and you have we Others about with available, that be when build lot imagine of The content will by become for would example, a dramatically. businesses when time. you

to So from minimal term. longer much it's widely pretty ranging

Eric Bosshard

would, guess, peaked function grow the real-time, continuing in you days, backlog or backlog a now is XX now and the is last the working just if to I And of it down? Okay. it's

Rick Olson

backlog to grow. continuing The is

Eric Bosshard

Okay.

Rick Olson

Yeah.

Eric Bosshard

Thank you.

Rick Olson

you. Thank

Operator

the questions showing would back I'm any and time, turn to Kerekes to no you further for at I Julie further conference like Thank over this and remarks?

Julie Kerekes

again fourth in XXXX. We you, look forward Thank our to questions to and for your talking full-year Company. quarter The Toro Michelle, thank and all and discuss with results you in you interest fiscal for December

Operator

This concludes you today's for call. participating. conference Thank

great now have day. You a disconnect. Everyone, may

The Toro Company (TTC) 2 Sep 212021 Q3 Earnings call transcript