TTC - Earnings call transcript Q2 2022

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Operator

Ladies and gentlemen, thank you standing by and welcome to The Toro Company’s Fiscal Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the call over to your host, Julie Kerekes, Treasurer and Senior Managing Director of Global Tax and Investor Relations.

You may begin.

Julie Kerekes

morning good and you everyone. Thank

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

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

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

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

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

Rick Olson

no line this consistently The history with delivering in Toro results, and Company exception. Julie, was has of everyone. and Thanks, our quarter expectations, long morning, financial good a

on And our X.X% sales growth. top XX.X% in XXXX. quarter of we top-line quarter, growth drove that second second the the of For fiscal strong net was

ability environment. price highly driven net what produce products our for innovative continued was and growth a dynamic top-line Our operating demand to strong our in realization, by remains

professional see across to demand broad-based We our businesses. continue

Residential our mowers, segment spring in demand the demand late retail solid a saw impacted although riding for also We products. zero-turn other for

of last our incremental be areas gross indicated Importantly, first our margin improvements we that chain. On our supply to we in quarter. similar saw second quarter would adjusted call,

Our and XX gross basis-point to QX. adjusted compared margin improvement well sequential in team delivered a executed

We in XXX the continue second margin basis-point sequential levels. a also operating historic to earnings reported as adjusted margins improvement quarter, towards for drive we

most couple years, partners of Over have of have has employees what us many that past channel seen. in ever the the been and dynamic our been one operating environments of

to the Our control team one has working optimize been our well taking factors while and in serve within our another. creative, steadfast customers of resilient and care

earnings and for actions and increasingly few into As our for improved the share a a sales our performance, are taken confident to raising fiscal near- will we in more fiscal are both, improve outlook minutes. result of our in the Renee XXXX. our long-term has Therefore, team outlook just our year. guidance provide we per insight

few shares is A celebrated near-term the market Batesville, our the acquisition who serving the reach. land. purpose incredible cited business leadership And long-term become we world-renowned opportunity doing represents so the importantly, allocation doing we’re their importance technology capitalizing a on with and to passionate and results our long-term The mission demonstrate This Jebsen kept since are accelerating of opportunities and this and foundation customers by enrich geographic an distributor, on shares and the leaders empowering right automation caring our continuing world-class which and is also share a balance of to are lean working off and product acquisition In only of In supported environment, sheet. Intimidator mower capacity. we playing integration but is excellence zero-turn way. March, manufacturing community community strategic about to benefits while to invest central Group our our productivity and are productivity carbon-neutral Arkansas. expand state value the priorities to Jessen. in capital call believe and a our at of highlights operational sustainability team Toro of strong commitment our The disciplined drive and relationships, of April, customers, Sentosa our experience. world’s lines its beauty, focus, facility supporting resources In Our Intimidator people. & first last a to With Sentosa our space. values and we with driving also teams Company to profitable not local With our to for growth, quarter, underpinned in and stakeholders. announced partner of start, to of the in the our a purpose. combination with seeing large the and all principles The supports deliver our this the facilities, and golf helping pledge club, by partnership Club XX-year Throughout Singapore’s a dedication Golf focus the will growing delivered we great we the

I financial operations enhanced and call over flexibility for period will Renee now a review of resiliency, our and dynamic for results. this detailed are as an quarter more agility second from even emerge productive to turn our improving prepared We’re to more organization. the

Renee Peterson

you, everyone. Rick, morning, and good Thank

quarter lower by revenue over first the sales year. We constrained was environment. quarter second a quarter, second and net The We increased $XXX.X a offset a lower was our building was in billion, in team expectations. we on segment decrease increase Residential well remains acquisition. and partially sequential of as by higher net profitability As in XXXX. acquisition executed driven The grew the we price manufacturing drove said, quarter quarter growth net initiatives. once increase again in realization margin last second the due product million, year, $X.XX price primarily at sales initial material certain from delivered share shipments freight million, supply $XXX.X XX.X%. our what This first Rick categories, and last average, segment to year for for reported the QX by our productivity This improvement $X.XX last as diluted future price driven to of second last net down the same and up U.S. period percent and for in second were when was by the an year. EPS price quarter by costs, $X.XX the and the to freight productivity was diluted second quarter offset the offset and lower second zero-turn from share, mowers down ago. down record a as for for Adjusted of for of fiscal quarter the was weather XX.X% the primarily product from relative offset products, partially from manufacturing ago. our was as $X.XX costs delayed mowers. higher key of and period year-over-year Residential net addition the was constraints. portable-power year quarter a sales, the expressed from primarily were million, primarily This by per of expressed up per $X.XX sales X.X% net of volume to realization the improvements. X.X% EPS This incremental higher the riding on to driven of percent quarter realization in second Reported compared parts primarily compared spring the due segment decrease sales was same segment XX.X%, patterns and partially XX.X% to year. material $XX.X was and for year. of by segment in quarter when the this a the last XX.X% sales, Professional realization Professional availability earnings $XXX.X were net the many earnings walk-power were The second quarter partially year-over-year growth XX.X% from million, quarter across increased

operating addition QX, due and Turning an we last the period decreases reported to gross In primarily XX.X% a year. XX.X% margin The costs, adjusted in manufacturing of were both same to the of and results. freight higher material margin to compared and year-over-year XX.X%, gross our achieved basis-point improvements. and at to compared first margin lower quarter Company initial offset fiscal XX average, to gross first partially a improvement our we when in adjusted of productivity the gross by XXXX. the realization of price margin quarter Sequentially, a acquisition relative increased

are improve We within and our continue productivity making net to term. on price over margins initiatives. control and realization and progress long restore the manage factors intend to the We

across year. as in XX.X% XX.X% The the percent a benefits year XX.X% partially expense, indirect acquisition quarter this XX.X% period tax last earnings sales the will compared productivity and synergy As a of of quarter and earnings percent expense this $X were adjusted $XXX,XXX second and of was respectively, compared higher a for XX.X% the net in operating SG&A to year. compared period was primarily the quarter quarter driven the the improvement million, the of period was were last for from quarter effort, for rates sales first as XX.X% for year. the and Operating our period XX.X% the a fund incentive part to same of driven the the for net Interest This reported was marketing in compared organization. last same year in drive continue to borrowing leverage XX.X%, to net the XX.X% sales ago. and by additional net same same we to to offset a XX.X% second in incremental quarter by were expenses. same effective by as This sales year. Adjusted expense lower period percent up ago.

increase was Accounts from $XXX up ago, Turning $XXX the this finished Inventory a to sales driven driven parts. Group. million, components efforts higher our key higher primarily work Intimidator customers constrained and of supply. million, to last of procure sheet. goods ensure was parts acquisition This our the for and time our up year. to by organic year balance receivable compared availability XX% and XX% were by in in process, reflects This service

the to our from driven purchase in are activity. under outstanding also the borrowings In X to by fiscal of during April, payable increased new borrowed acquisition. a fund XXXX. primarily We incremental Group used quarter, XX% refinance higher $XXX target This million. credit remain debt-to-EBITDA we five-year prioritizing intend $XXX in by to revolver $XXX ratio and debt times. year third first our from quarter Intimidator term of we quarter acquisition. inventory $XXX In refinance was Accounts end million facility addition, includes an within the loan additional to this million X million We to gross paydown the first last the

by We sheet. continue capital disciplined to strong our balance supported follow approach our allocation, to

flexibilities. our support goals by leverage growth, remain: dividends priorities long-term capital our including deploy approximately fund to returning plan productivity and organically capacity, our priorities to and shareholders These strategic are repurchases to million support both through this financial product to to through making highlighted $XXX Our and our acquisitions; and year, investments share business in in actions cash investments. expenditures new maintaining

Our Group $XXX regular our shareholders dividends and return Intimidator $XXX year-to-date million in with in January, $XX to million $XX in repurchases. million acquisition million and share of of

benefit portfolio We businesses. from continue across strong our of diverse demand to

Our global biggest challenge meeting demand the remains operating in current heightened environment. this

XXXX full Rick based fiscal As year mentioned, current our on visibility. we are increasing guidance

will the markets and developments take macro end We to and continue closely appropriate. monitor very in actions our as environments

sales price reflects XX%, by our supported of This full demand. and outlook now net continued net of the range realization strength in For backlogs XX% growth to XX%. our we and order previous range increase production in the to expect expectations XX% from up year,

We between our sales third variation and fourth in quarters. net less expect

acquisition For incremental company quarter assumes run This the sales rate full at the a rate. from net segment, year second above growth sales expect the we Intimidator average. Professional the net

Company Residential the the expect to we year below sales net due a rate late full average, the primarily For segment, growth spring.

continue. we our margin profitability, gross expect at positive to momentum Looking

second higher the expect half the to compared half. the We year in of gross first margins

full a margin the year, current addition margins we average. the gross macro Company be at lower than of For fiscal Group given to below factors expect slightly gross initial the Intimidator XXXX, and

Moving to operating earnings.

full the we $X.XX. year chain we margin this second as earnings $X the our first the continue full continued sales adjusted For backdrop, investments. segment also more range along realizing, our fiscal we raising and supply now slightly expect expect operating directly acquisition. slightly of with of to continued in normalized last and This last expect quarter margin improvements year, a with with our guidance year and to the compared are also we to full net inflationary segment as XXXX. year, takes along above customers, operational below We account the engage With impacts more strategic the spending be pressures diluted into of considers similar percent year. of Professional the research half to a be prioritization This development are to Residential to EPS adjusted to

EPS our fourth We higher to the quarter. expect third quarter adjusted slightly diluted be than

our adjusted excludes as compensation the of costs. stock reminder, for a onetime diluted As guidance acquisition-related deduction benefit the EPS well tax excess as

Additionally, for year, million. the be to now interest expect $XX full we expense about

the XX%. about now long-term we strategic amortization We of of the flow reported of range for invest $XXX continue in about and We turn the and to as our continue back I will to prudently depreciation business conversion well-positioned to be on remain to free in priorities XX% future. expect and tax Rick. net our an adjusted effective rate cash XX% earnings, execute to call million,

Rick Olson

Renee. Thanks,

remains the well we and second As half of very demand in we enter positioned strong, the each market fiscal markets year, are end we serve. the of

and are discretionary source replacement addition, products provide In of a reliable our not demand.

our Residential on partners segment, demand. channel our retail For positive remain

prioritized seasonably see across the broad-based preseason strong the We market stronger demand we continue our even market are also segment, momentum and weather, quarter. In move ever. grow underground our to around third to demand healthy as public addition, we as infrastructure private Professional coupled bookings golf arrival of businesses. anticipate as should markets The In as and is the in the snow world. warmer with into provide construction investments

the two past faster new Woods in era. up picking the of seen peak years, at than the sport an Tiger even we’ve the Over rate golfers

golf travel of return to destinations. the seeing We’re

exclusive and them historic irrigation July. will Open partner support site the to Andrews, St to as XXXth in they be who host As equipment the on Championship

level in the uncertainty environment. Of inflationary heightened course, and of given pressures geopolitical chain the events, macro remains supply challenges,

We sentiment on well consumer and are business spending. keeping an as eye as overall confidence

innovation excellence, channel be momentum well. and all network Our on this stakeholders operational forward. customers autonomous distribution to to and enterprise-wide serve and going with connected extensive state-of-the-art sales future drivers. We capabilities smart Strategic growth our partners key teams believe will and alternative commitment, and remain coupled investments in focus with focused collaborating drive value continue our sharply our for power, solutions

broad technology our bringing portfolio. We’re advancements and innovation market to leveraging our across

in announced mower autonomous We’re residential wire-free introductions. our smart as our excited we innovation about the transformations This launch technology our by connected the tech-forward mower of industry’s localization even product happening care. Last and that features week, battery-powered, navigation. leadership breakthrough industry, about excited evidenced are yard we the more first for are robotic, next-generation vision-based our with designed system

homeowners homeowners. or patented easy traditional Our of for the of solutions system. costly our headaches for and system wire enables joins robotic mower installation full maintenance sustainable setup This suite quick the no-compromise without boundary

way sustainability to support is actions. the Our is extends we in deliver and drive Sustainability and that our and continue our will products report focus and our expect change customers launched serve for way. priorities metrics further we on in highlight accelerate sustainability purpose meaningful In stakeholders Endures goals people, measurable all our a our and invest fundamental we upcoming resources addition to beyond communities. of our Sustainability results. strategic XXXX, to in will our and we commit platform, ingrained change to The

part As recently our called Initiative inclusive Women’s an to a Network. ongoing commitment welcoming workplace, create group launched of employee the and resource we

into girls full This and of April, Women a areas signatory women to enabling our the in a announced this potential R&A becoming game. realize inclusive culture and more corporate Charter of Our support more aims Golf to initiative. industry-wide inclusion charter their we golf of the by our communities. our create and all commitment beyond walls equity diversity, by reaches to In in

all and provide industry. the value in we annual will First the such the involvement, to delivering consistently Company [ph] The our partnerships This diversity our to builds Toro of promote and initiative to a apprenticeships closing, introduce on with part In of access Foundation Onica organizations existing As as Tee expand legacy has game. stakeholders. to

manufacturing long-term near- capture investing We’re and progress making growth on opportunities. efficiency steady to prudently while

remain we success. forward, to well-positioned for Going expect further

end position deep in strengthen service We expertise distribution to networks attractive and industry expect our markets. our best-in-class and

emerge agile. prepared from are period and We to even more more stronger, efficient this

As I our success. call would would resilience. the gratitude Company’s for extend to and to extended On Renee like key your the I continued to With that, for The channel team partners, is dedication note, I to questions. support. always, like open thank our employees our Toro my up also for customers shareholders and that your will and

Operator

Wojs Tim comes Baird. Our first question [Operator Instructions] from with

Tim Wojs

exactly Hey, what where a Good at back updated going relative morning. the prior maybe outline could guess, a does is maybe midpoint, but question, year, And the look X% raise, meaningful the you to ramp guidance with job -- when maybe Maybe revenue imply -- everybody. pretty to the in Nice the from if guidance? two-part on on driving you results. it just start of the the I the half. exactly half then, the contribution first I’m

in XX% it’s I year guide. kind midpoint think new the the the half back of probably to of to I something like get think, So, growth, the of

So, half? maybe through bridge walk kind to the could just the of the first drivers you from what changing or of second the half is

Rick Olson

the Sure, and numbers specifically Tim. on themselves. comment can drivers the on of comment guidance Renee I’ll some

perspective. seeing the prepared remarks, it’s and The very then, a continues we future. looks demand And be to combination. in For solid we mentioned chain integrated really an us, improvement from strong as into some very are our supply

signs improvement So, as we’re advancements our of with suppliers making both, plus that internally some that’s well.

So, actually our that earnings and in similar the was the happened at combination previous release quite had What time comments. Ukraine. to two the really invasion of really

that digested of kind aspect having were we where to back as of kind we’re well. So,

Renee Peterson

of just continued realization improvement in the we Intimidator, reasons included as it, sequentially, has price year if we see as as for in and the well Rick about about half guidance, do slightly timing, some mentioned. you far volume a you growth versus at year-over-year Tim, starting the higher with that looking if the rate, second certainly, think the the QX revenue And as Yes. maybe think seasonality.

higher would than a would than QX down So in normally a ramp of see. be but bit little less QX, and we

more So, demand. of have of a it’s lot fact we the that because muted do

really as and we We of second when really accelerate field as well. impact replenish also as challenges in supply Last well backlog the half have the to the is chain year of the year, saw inflation. inventory

So, it’s strong. year-over-year. demand But, a little easier bit our really remains comparison

as said, have inventory. we backlog. field strong We have a I order the And

So, better second we feel we have the into visibility half.

Tim Wojs

maybe really That’s then, back margins maybe year, the from income perspective. helpful. And Okay. of on half the in an the operating

year like the I be difference kind guess, growth how is margin and rates. of of QX said think in kind of would the there the, of wouldn’t mean, back accretion I of a you year-over-year you much kind of versus QX? QX, implied I think big the contribution? QX the in How half margin

Renee Peterson

margin margins half. regarding in pro really of again, including We be expect just margin and fiscal margin we QX. Yes. perspective level. standpoint fiscal at an will EPS an slightly residential operating expect We below split hard slightly ‘XX above ‘XX. expect acquisition, and greater a higher standpoint, time, QX operating that this the the pro to similar that to that margins impact from year that we difficult QX And year-over-year, From It’s QX margin Intimidator a be slightly overall we point standpoint. between will total both, than be about second some gross there’s margins to from res we the gave than from talked -- gross and expected to first half it’s gross estimate just do information

Tim Wojs

then last And just Good. question for maybe the Okay. me.

from whether a of new feedback kind to like introductions, or and update products, kind just you’ve of what I those you’re frame that to received new trying are green any way the or products on quantitative of some your provide battery-powered some there. on autonomous mean, of in customers kind Series mowers it’s seeing of Just the residential? in Just Revolution performing initial how product the

Rick Olson

what But absolutely to the fantastic it’s think project across can I accurately. board. has been able to say still the that we is early be response

about that far has that or robot, the contribute and continued. Series Revolution up we will honestly, the later interest the terms way picked of the introduction in social So And the expectations. just other launch the to exceeded of robot and help talked the media of our That outlets this exceeded quarter, expectations number interest our that last of year.

ton there’s That we So, previous the a in what gives the investments that as be are products us seeing well. really general, future technology, excitement. of a also in kind your really just really we’re going should steady exciting confidence question just some then of in flow of forward. And to contributes and making

Operator

next James. Our Darkatsh comes from Raymond with Sam question

Sam Darkatsh

A could. couple of quick questions, if I

and And realization remind you realization the pricing First rollover could respect off, prices, ‘XX? opposed asking us this about of you’re for the talking guess, fiscal magnitude with then, to price, to fiscal us remind actions? as I’m timing year? but price expecting I much how

Renee Peterson

are in -- quarter We’ve previous realizing we the been more within than quarter. Yes. we price the had

number that also see productivity to continuing we’re actions. very focused on our increase. And So, we’re

Sam, you through to to we standpoint. We’ve from everything do the that try cost multiple can know, we year. increases as increases, the mitigate as taken overall price we went an actions price As well always

realization we’re build. that So, price to that’s continuing see why

point of into time. we’re pricing that into season, look in we normally because have that point rollover see in at the would but time. evaluate we actions we’ll some -- that there But be potentially light to the fiscal in then As also of be that, we’ll would at in other price all ‘XX, that environment of consider going that we’ll competitive

the over long continuing those term. committed term, averages are as improve and to we to our our to the margins longer to historical return well Over

Sam Darkatsh

normal about just be year’s excluding low from to digit, year actions? actions whether rollover just it of prospective otherwise, it, So, would the that get is excluding of or actions, sense trying think a kind pricing to mid-single to this any way the come, or pricing next right

Renee Peterson

would say to multiple has X our over normally, rolls taken It And say than higher because points that year. we’ve would of will I Yes. that X price pricing a it we And mean there is that’s some been next that. estimate. be reasonable actions, -- price. element is I into

Sam Darkatsh

Okay. interested my QX, Renee, think up was were in, guess, unusual you mentioning, I’m has inventories. all. was for I periods. question sequentially second I to XX% that’s with Inventories, sequentially over and -- year-on-year. in seasonally it Intimidator QX I that’s And And then do know more because really both you

So, I inventories around are guidance, guess, what are as you at production you what year versus that for getting you what within this projecting half I’m are shipments your what -- the thoughts is year-end back inventory year-end -- and/or of in manage fiscal level? your

Renee Peterson

Okay. it, It’s you inventory, those if me do correct if Intimidator of a was at sequentially, do with me as accurate. that. periods both answer look Well, look miss I and in time. at question But that piece help of please it let I -- please you’re that of

us and managing help the at standpoint. WIP So, look from continuing really WIP It plant run more that is to not to that’s to a driver. efficiently

to on in are what short to to be We at looking we but long to are that we’re particular time help manage. supply and lead continue able disciplined items be items us taking in,

would continues our WIP carry. normally is be higher to than So, -- we

of more Looking and to we plan at it in a by year-end. a to work that have year-end, we revert down, process normal level expect bring to would

the the of environment. late that Sam, impact or We normal -- have either We to And a the we’re for quarter and more our QX timing prepare were QX. primarily the of residential, higher finished spring. of within as related also have not sometimes can -- you because, know, you impact between spring split that’s prepared about concerned some goods, to

we WIP the goods pick see sell we’ll the to that finished we’re finished related following little year environment that our about think, goods we’re by expect end based of I some QX, that We’ll concerned two are, to build would in. But make to We and different in year bring sequentially. fair from just normally and that. seasonality are the we year-end. need And We’ll a operating go that assessment through. those so, down to not on a perspective. And amount as up start the a into an components

point been to at to that that able We be in a while. haven’t do

So, we’ll through as of go the year. make assessment that rest the we

Sam Darkatsh

Okay.

let I me So, if could. paraphrase,

by dollars second I to is there I year-end are then, than some shipments your the going seasonally, on in sorry, fiscal your year. case, inventories And more year-on-year mean, less shipments. of pronounced So, expected shipments, But guess, that. effect the your That’s this quarter. Renee. production to be lower more but -- the be kind differences. me versus normally versus production I’m a -- than basis, understand is Help or maybe

Renee Peterson

at I I in this finished that would residential don’t estimate. equal other -- that say than more point. don’t have be mean, I much would what our to goods inventory is than have or much production shipments slightly will we that We the we inventory mentioned,

Rick Olson

that key is of really to list, more will, success in have would you risk we those produce that’s bring able in. we on opportunity components part been to The significant consistently the about really WIP, being the prudent making if sure being and the are if our that in factor a as bring

As this we but is supply gain back an in not chain, you them. obviously will confidence we our down need in manage want again, environment before that X you things minutes where coming

So, factor WIP a the from that’s standpoint. really

on. we stopping on and disruptiveness our the that little assembly average in the working starting Let’s and a higher the But the other is before core we’ve line bit been WIP say, particular in really a thing we have itself. sure start of one model, of results is components making just that the building issues

Sam Darkatsh

prepared the from can more it, mentioned this you on one sneak in And and if apologize. I And you. I question, I Intimidator? Acquired missed if and quarter Got remarks in the I sales apologize. -- the

Renee Peterson

will million, a second in as it million. -- It’s but $XX.X mention year by the half would be the $XX didn’t of well, well, million. $XX.X call; rate for in And expect we the Sam. the the Q as about quarter We run it similar for

Operator

comes with question David next MacGregor Longbow Our from Research.

David MacGregor

wanted to as working I ask what about through maybe I backlog on to supply volume And and margin the second expectations. the channels better priced is how -- improvement realizations first of half improvements question, legacy wanted to versus that just shipping getting up? open you’re to price much begin the

Renee Peterson

would component is of realization it. price I say Yes. continued a

earlier, on we rate quarter. margin important versus We those second the then our is all as half half gross an the quarters Intimidator first But at from all-in-all, it of year to half. standpoint. in As the two it initial do I at do factors, somewhat that But of does work gross when but expect first the inflation we of also see those of look lower improve productivity look continuing, is really inflation the at half, Intimidator an we factors, moderating and all include second one including to of margin. over mentioned

those So, of offsetting other actions that we’re with some well. as

David MacGregor

about Renee, the follow-up. acquisition? just how half in a year I thinking on second that able got But on you’re number, margins excluding or or that question question, acquisition before, about gross the the the talk just what are to full because you quarter, were excluding the

Renee Peterson

Yes.

revenue from From the seeing from acquisition we from at but that say it, They well. do the from we haven’t talked a as it when specifically that well. is look overall way meaningful we’re doing accretive, really and purely standpoint, that standpoint, as expect -- total acquisition we the it standpoint. just be whether dilutive, in a other to we a gross it’s within And a modestly about, out contribute year margin talked standpoint. quarter is is broken or about We than to did an

David MacGregor

guess, maybe And rollover volume demand delayed thinking discretionary. products the same normally backlog regard. I Rick, now pricing Sam being But about as satisfying about you it XXXX, the was not the you think just much And on into availability, how have about in product you talked then in XXXX? in occur given also, just likely been Do to XXXX? would it’s asking

Rick Olson

grow believe the demand order the year. about continuing do or the backlog throughout continued this although And is improvement strongly. bank particularly chain, We first supply has in the of talked to we half

next year in into order our we’ve continue bank some So, we -- demand categories into of in that expect would the highlighted. to well that

golf areas So, next well. are business definitely construction the into of roll golf and underground those examples as would grounds, some business, will the be that year the and

David MacGregor

that? Is there context previously of way around any quantitative

Rick Olson

have The the order year billion. at point. We into of down position broken end year in that of at terms last $X.X next this was roll back not anticipated

David MacGregor

This normally XXX. Yes. is

Rick Olson

Right.

Renee Peterson

Correct.

Rick Olson

Approximately.

David MacGregor

So, increased.

for me share repurchase last So, million question activity. is quarter. you just the in on first did And $XX

in activity You your you this how I of respect about to realize with some inventory financing off the thinking But on and going XQ. the acquisitions, of for are repurchase other things year? you had level levels. that held

Renee Peterson

increase We internal growth as capital dividends. Yes. continuing the so our to priority and talked focus is always in we’ve order strategic top allocation well our as on about, our really M&A profitable

bit We the a focused little debt Intimidator acquisition. have more on just given paydown

would debt that fact about from goal So, the we a is talked year, expect million for the we about current our standpoint. around down $XXX paying

this out conversion. also flow, year. share the think to and next we as year the generates cash to about going very and Part we offset good XX% as expecting of inventory talked look Company we well The close XX% love for year. that always we depends with we’re into earlier, this need we on, as For repurchases, dilution that at we’ll then

certainly well. can with year, starting So, out makes share would cash using close offsetting so or year that of from standpoint certainly we that goal do excess then as the we dilution when and consider repurchases that an sense it again, next with as

Operator

with next Our Eric from Research. comes question Cleveland Bosshard

Eric Bosshard

couple Good morning. A of things.

spring a talked about residential, things that. you First a us just context of to can some you give of couple about on -- talk to all, late

of is residential the in conviction in all, from in or secondly, was regaining this And season? then what of into thought coming lost quarter of expected the updated recapturing you the year? what quarters guide your still sales First terms the remaining

Rick Olson

continues the has the factor Residential factor -- that the late primary That be we’re talking very spring. about And factor it historically in is Sure. is strong as looking business. to much We primary that a as been XX the at. late we’re -- days. a Midwest,

important XX% quarter. in and last business in years more that for I grew two context XX% to than think the grown it’s the has keep the residential first

health strongly So we spring the is and the the that the business forward. feel going primary positively of and effects factor, about of really very

play. product that about All talked The refreshed. we’ve years in of the line over the are of last factors couple is

There expect and new the back helping new get technology that We the that quarter. those getting that. just business may drive quarter. of sales have exciting a in sustain But XXX% that a be to hard North of sales level second sales back, customers. channel regard we the right get the they’re interest and lot America third then, a from the to of period. to helping a pick of in that incredibly the in It partners do back with to third those growth, help specifically, to weather those introductions now in are was not loss But favorable that are working more lot we really with quarter, it’s our up -- current, it’s

Eric Bosshard

was grow that? you I all in -- than of of for terms Residential Pro the guide would the increased X original more the the in changed clarify Resi. within within said by within from in and was to of increase or expectation, terms Residential In faster know full sales than this, just Pro? points, year Pro Pro of But -- all increase what your

Rick Olson

Yes.

taken on obviously more factors If you -- be all those of driver Pro the into the consideration we’ve would side.

Eric Bosshard

the that, And produce? price is within on the side, ability Okay. volume, your to Pro driver or

Rick Olson

It’s really all factors. those

have incredibly to produce, with a -- way. our collaborative an regard in teams have worked example Just we together ability hard to

to some months, six we’ve designs that alternative us So, maybe and design constraints a flexibility. ago year identified give helped more

with year, and lot to the do a So, that’s the rest products. our that of of confidence has some what’s professional in of driving

Renee Peterson

the look add, Yes. well sequentially. still more at I and feel seeing perspective. executed with just when growth good a when at look the And is significant you second revenue a We rates QX pattern is from it. QX sales a are we’re and seasonal having half associated There would similar more that really dollar although QX, we in

well. also being field production produce largest and capability. backlog well we be quarter. But we and really given inventory the also able product, It’s So, that QX to have continuing will to as don’t replenishment our need to execute like double

So, good that. feel about we

Eric Bosshard

then comment on. clarity made, And some you just another Okay. love

with more perspective you Can through go you as back is? the and context customers the that a what about spending half year. normalized us talked of just for You give

Renee Peterson

I’ll you of Yes. give example one that.

to our enriching get and -- developing very with We’re our salespeople especially customers, relationships. those anxious out making those contacts

the mean more at has some we full shows, years, be, attending will a but those think everyone few probably -- attendance Over been few making more level. of although cautious haven’t been trade last our continue have and careful our on-site they and visits. we’ll conferences have few I I people a of trade shows, returned, to a people some

of think standpoint. we’re this we that but we customer-facing internal as it’s the more customer-facing as into increase as throughout rest not year So, that will well, the -- of of the and from more go much an It’s context. interaction future

Operator

the showing And like I’m time. any remarks. Julie further at this I’d not call any closing questions to to turn for back

Julie Kerekes

to quarter September Toro We XXXX forward talking interest in to Thank again you thank fiscal with all look and you, results. our The Company. third your and questions everyone in Kevin, discuss for

Operator

gentlemen, today’s and this presentation. Ladies does conclude

have and wonderful disconnect, a day. now may You

The Toro Company (TTC) 2 Jun 222022 Q2 Earnings call transcript