- Earnings call transcript Q4 2022

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Operator

Good day, ladies and gentlemen, and welcome to The Toro Company’s Fourth Quarter and Full-Year Fiscal 2022 Earnings Conference Call. My name is Josh, and I will be your coordinator for today. At this time, all participants are in a listen-only mode.

We will be facilitating a question-and-answer session towards the end of today’s conference.

As a reminder, this conference is being recorded for replay purposes. Investor to conference, presentation Senior Julie of Tax like host to Managing now Global today’s for Kerekes, and would turn over the your Director I Relations. Treasurer and Please proceed Ms. Kerekes.

Julie Kerekes

morning, you, everyone. Thank good and

can Our earnings this our in issued release of Investor section website, be a Information morning the corporate found and was copy thetorocompany.com.

Chairman today reminder, well Executive which general call Chief updated Renee Finance; both of Rick Vice Financial as are Investor On we on are investor introduced website. our Peterson, quarterly Officer; a Steffan, of with Relations. Jeremy and President customary have a Officer; Chief policy. an President As forward-looking We begin Angie earnings as and Drake, our available presentation and Olson, statement presentation, our Director, Vice

regarding economic, we and factors and market and assumptions other During will plans and customers. the This results statements operating technological, impact that as and may forward-looking make as includes our future. call, well weather, regarding estimates our for business projections acquisition-related this acceptance, financial

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

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

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

Richard Olson

morning, both line everyone. quarter our record products, fourth our benefited close to full-year. and with for we for bottom results actions top demand markets. the the good We innovative our were and in the our and fiscal from by year, supported Julie, Thanks, pleased pricing key professional especially strong XXXX Throughout

chain efficiency we Importantly, a supply very and see what manufacturing in in began to our dynamic remains improvements our environment. in operating

drove support and We improvements channel collaborated of Our partners benefits our our entire well. executed with lasting organization with operational to extremely the needs customers.

quarter, the earnings year, up net For up diluted per last adjusted were XX% XX%. fourth share and over were sales

by Our driven pricing, revenue and improved were productivity. volume gains profit growth and

net first with sales the for For $X.X exceeded year-over-year. billion up $X our the time XX% topline of billion, full-year,

Our share adjusted by results $X.XX, segment. XX%. earnings diluted highlight up full-year per were our I'll now

most notably fiscal years pressures. For basis, Professional segment on fiscal top underground produce results pricing sales substantial XXXX the and up up environment. was to two growth, This were golf of XX% backlog net fiscal by XX% supply order in mitigate construction ability and in We X%. net driven drove net year-over-year continued specialty remained to a We our our demand in closed year what XX%. businesses. in levels, to incredible actions and up close With on segment capitalized sales were constrained this XXXX XXXX. were book, inflationary broad-based our with up heightened Residential on of topline prior grounds and and sales a

key performance reset this positions. have for organization, Across we to markets expand executed this have products, the fundamentally capitalize brand leadership in refresh delivered secular positioned very trends it on where and distribution strong we positive future. have new Our actions on initiatives to introduce and strategic our year. well business We innovative marketing

forward includes innovation This portfolio. with smart-connected First, our leadership strengthened and technology across the product no-compromise expansion we offerings our introduction. battery of electric our

also features businesses. and products with industry-first our in residential autonomous golf introduced We

emission solutions We challenges next-generation and are their to productivity excited help precision. to customers develop while achieve goals reduction their increasing and addressing labor

It history leadership our effective in successful and the acquisitions of zero-turn deployed long-term Intimidator Second, enabled and allocation capital builds Group as growing position we market. and expanded capital and our prudently This investments growth. capital our for as and prioritized This reach large geographic included research rapidly balance acquisition. sheet. our projects mower key acquisition development sustained in by well on strong

outcome Third, the we driving focus best on for stakeholders. all

partners and did earnings flexibility. We growth, capital other and our way. supported business sales delivered shareholders the channel our while Our customers, and and right future net returning in financial record investing in each to team maintaining served communities

as commitment We ESG recent to in to also most continue establish our we sustainability report. live long-standing performance our goals

great enterprise our further to with financial the our will guidance. and call With and Renee. against discuss our excellence the will driving continue priorities outlook momentum growth, starting profitable and are of strategic Renee We results more to and empowering Angie's of productivity we execute review fiscal I'll people. year that, accelerating over following operational I turn new and detailed

Renee Peterson

morning, Rick, and you, Well, good everyone. thank

quarter results what $X.XX fourth professional benefits up was prior by a quarter EPS We and record pricing per across XX% share, as billion. share by full-year. in Rick EPS year. continued for $X.XX sales dynamic grew results and execution year-over-year Reported net the $X.XX As per to diluted adjusted a was record markets $X.XX both environment. driven remains from operating key and as diluted These well said, very especially strong delivered disciplined demand, we were the in

Reported from XX% Full-year EPS sales year. $X.XX to a record also last per share, the was year. billion. was share, increased $X.XX For year-over-year XX% EPS net adjusted per from last full-year, up up diluted $X.XX diluted $X.XX $X.XX

acquisition realization, increase Group, Intimidator year-over-year. shipments snow by and primarily management Now to price XX% $XXX.X grounds mowers, net solutions. segment for of and golf were our driven of quarter the This the was higher sales equipment and net segment and results. from revenue zero-turn up Professional the ice million, incremental

billion net of Group from and segment XX.X% initial partially costs, segment segment increased XX% when realization, XX.X% XX% year. material, primarily a sales for Professional company million, full-year, due to margin addition the freight productivity sales by and and the total net relative of and sales. to last expressed of up net This as to improvements, a earnings were increase XX.X%, sales, to percentage higher $XXX average. $X.XX lower net quarter For the and Professional was fourth leverage manufacturing net price Intimidator comprise the up at the offset

full-year, an of increase to compared were fiscal million, earnings XXXX. For $XXX XX.X% Professional segment the

Intimidator zero-turn As in XX%, net sales, a the segment from primarily products, year-over-year. XX.X% power by to for quarter. Residential was down percentage snow higher of products. shipments and realization portable fourth last $XXX.X million, power X% first segment sales net a down lower of mowers as largely of the offset of quarter due about earnings walk the riding year result and sales This were net were acquisition slightly price and

and freight driven net the comprised year-over-year partially X.X% higher was segment for product from and sales, price $X.X quarter of up mix, net increase earnings For billion the The and year. favorable XX% Residential X.X%, by net a increased $XX.X X.X% Residential primarily last of the manufacturing when sales. material, segment offset million, net improvements company were sales realization, by total to as expressed percentage costs. and productivity full-year,

in from Residential were earnings XX% basis, sales full-year, were million, the On decrease down segment year-over-year. a segment For percentage XX.X%, X.X% a fiscal earnings $XXX.X of of net XXXX.

Turning to results. our operating

offset quarter. fourth the reported net were for Our higher average. adjusted and mix. XX.X% was the initial same relative material, and the freight improvements both This from year. of was margin were price and XX% and margins gross Group the addition for This last costs The by at to XX.X%, increases and up period realization, gross due company to a partially respectively, productivity product largely in Intimidator lower manufacturing

the performance full-year, sales XX.X%, the XXXX. This XX.X% XX.X% costs. were was expense last down and adjusted same margins XX.X% the incentive to and by net positive was net year. primarily for sales for slightly was percentage from quarter For in leverage reported a both XX.X%, driven compared and as period This fiscal of SG&A lower gross in respectively.

SG&A the last fourth for XX.X% was XX.X%, Operating percentage a a to XX.X%, year. expense net as were sales year. of slight last improvement full-year, to compared sales of same percentage quarter the X.X% period net earnings the For compared as a in

incremental fourth by operating For were up the for full-year, fiscal Interest increases million, the net were operating percentage reported effective up interest XX.X%, for the expense same the quarter and higher and full-year borrowings $X.X earnings of Group a was fund expense for The Interest ago. XX.X% XX.X%, million, the year-over-year. These the were as down quarter as and earnings driven XX.X% full-year $XX.X percentage of acquisition Intimidator and net $XX.X year $X average rates for tax were to from Adjusted million. sales respectively, respectively. the for XXXX. full-year, and XX.X%, the XX.X%, as rates. adjusted million a in was sales XX.X% the

Turning work parts. organic our flows. Accounts growth to X% our year. driven were and net was billion, receivable goods, from balance sheet up sales was compared higher and increase $X.XX driven $XXX.X cash XX% service process acquisition year-ago, last Inventory Intimidator and finished by Group. by This of primarily to a million, up in

from inventory Intimidator addition, impact acquisition. the our inflation incremental Group and In includes this of

due expect inflation, to $XXX of year XX% on cash supply Intimidator primarily our was improve million. We serve net ourselves due to through payment from customers. in our position which Accounts and composition activity unique turnover flow to service improved and showed current This payable to terms, manage conversion produce this environment. investments equipment during in work ratio fiscal putting and XX% in to $XXX reported acquisition. and expectations, the parts increased largely This focus our we as came the we higher best as and in conversion inventory million, purchase Group XXXX Free a higher earnings. was last under process environment, the of chain with

return process improve more we normalized During intend fiscal to inventory XXXX, to levels work a our composition. in and

Importantly, strong, debt-to-EBITDA of gross sheet remains target range our Xx. is our to well Xx leverage ratio our and balance within

product through through include with and leverage are We business of our technologies shareholders our goals our long-term priorities, same to fund making support $XXX repurchases new maintaining continue capital growth. dividends returning priorities and share strategic year this and to to in highlighted expenditures financial organically manufacturing cash million both to flexibility. and investments for in actions allocate support disciplined growth, profitable capital to by and approach the our which acquisitions, advanced our including capacity investments, deployment These

debt. in the the share $XXX long-term. and of actions, $XXX of with payments acquisition million on paydown dividend execution the regular of through to $XXX $XXX return $XXX million million position operational million shareholders continue Intimidator Group, of for to us These of Our and million repurchases along focus our the well

a pleased to I'll to are call recently to XX% With X in guidance. for of share quarter We million a first to our Board that over regular the dividend quarterly fiscal turn approved shares XXXX our authorization. discuss and added the Angie repurchase our that, increase

Angela Drake

Thank everyone. you, and Renee, hello,

I'd order ahead our to some billion start on XXXX, backlog. Looking to like $X.X with commentary

the Our is for by demand efficiencies. supply environment. This production driven where started specialty backlog to our highest of grounds fiscal level underground XXXX, backlog had remained to continue has a supply disruption. and chain current the challenging with and supply experienced golf improvements of chain elevated operations chain some and consists In and we've the our see in we've coupled our construction two we for years, past equipment. orders adjust and of strong Most

following fiscal at for to visibility base current provides is and dynamic this take continue we We XXXX. time background to this along a XXXX. the pricing order for evolving in providing our measures the are current and mind, environment, strong fulfillment, With of with that in ensure guidance

quarters. and we the X% sales being return cadence a For larger growth more range expect with the in we of to our net QX typical the QX to and anticipate sales XX%, full-year, quarterly

For expect a we than company higher average. the growth Professional sales the net rate segment,

flat. expect net we be segment, sales For to the Residential relatively

profitability. at Looking

earnings of percentage sales a higher by For overall earnings improvement to compared the full-year, driven adjusted we as operating in expect margins in both last net year, segments.

productivity adjusted fiscal of second improvements we EPS backdrop, the half. compared range improvement and We margin gross per the net compensation. the first the a in anticipate realization price higher gross benefit tax adjusted in year-over-year in deduction and drive year to This diluted $X.XX this half margin to EPS the for to $X.XX excludes stock With excess the share. of full-year estimate of expect

is that a anticipate total first growth higher expectations. meaningfully sales We net Turning company quarter. to QX than the rate full-year our

our driven which of expect to revenue include incremental Group. from our impact the segment, the We Intimidator acquisition by of this be XXXX Professional will

sales relatively flat. Residential segment to expect net We be

Looking and expect we at SG&A margin year. profitability, similar rate, quarter, compared gross the a for to improvement modest first last in both

We higher interest in year-over-year, quarter also expense higher incremental rates. and Group interest debt given acquisition fund the the to expect the Intimidator

Looking result expect to With to at methodology the we timing of quarter, the expect segment valuation higher a profitability professional we this, for about year-over-year. and incremental quarter still of the expense of XXXX, sequentially but reflect professional to margin first an as $X down inventory inflation. million of fiscal our the compared fourth be the margin

of but adjusted quarter sequentially Overall, XXXX. per our earnings be diluted similar We expect fiscal EPS higher quarter last down we be year, to residential the year-over-year. first the to margin from fiscal quarter share fourth expect XXXX first than

improving As Renee inventory are our on mentioned position. focused earlier, we

result, conversion of cash normalized XXX% adjusted a fiscal expect earnings to we return of in flow to free approximately net As a XXXX.

full-year, the was of about tax to our rate million, range expect XXXX year $XXX depreciation $XX The Toro capital record-setting Company of adjusted million interest a agility the $XXX an for about in teams. resiliency and million, expenditures for and Fiscal about and of we the of expense $XXX amortization Additionally, effective reinforced of million XX%. and

on operational strategies remain on to and incremental Rick. momentum turn we back now on continue build to in our focused our building I'll forward chain the positive to are We excellence, improvements. We XXXX. confident call look will fiscal and in long-term supply

Richard Olson

Angie. Thanks,

fiscal into positioned extensive brands well networks. and and innovative are head As with service we trusted XXXX, products, we distribution

we to expect majority products. perspective, the and as consumer an year are benefit grounds. essential entering of our specialty the from an and market are products sentiment along keeping From of with billion, our with in We well-established $X and that, we the replacement on patterns. backlog well order spending confidence and regular top and leadership, of nature golf of of On which broader overall areas business underground eye for is the construction a as over

inflation, I'll we monitoring end factors of on this are policy starting macro the also with monetary prepared We macro and we our are Professional heightened now believe navigate our future seeing which well markets, We comment results, level actions geopolitical the are to could environment. impact uncertainty. segment. in

signs the with investments, expect and support the specialty power robust multi-year current to currently along public infrastructure no tailwind. by and the and infrastructure. a and markets of and underground driven private we demand construction continue rental slowing For construction, with providing alternative need aging down Utility, show for broadband build-outs,

the of For day treated two lost X in alone. are every minutes. there Engineers estimates that breaks gallons example, Society each And water U.S. of main American Civil a billion water the

and installations, most we addressing equipment repair, solutions replacement, the comprehensive serious With lineup the and including rehab in for are new industry, actively environmental issue. the economic

track the to the first to year well as is course on are participant played pre-pandemic million to for rounds And exceed For XXXX golf, the again overall are we in once strong base levels. than above continue demand budgets expected U.S., $XX the time healthier In history. in ever. expect end

and both As irrigation we in the are and build both, long-standing extremely on equipment offer only well our is positioned momentum market the company relationships. and to to solutions leader

were We Asian were support network named and exclusive of example, trusted equipment recently of world-class our high-quality tour golfing and service of For selected the irrigation for exemplary partner destinations, legacy relationships. venues. products, an we official and because

interest products. to grounds, budgets with in spaces, municipalities zero-exhaust the of continue and For along to see and we healthy emission prioritization green expect increasing

compromise of professionals. positioned offerings customers growing well geared to solutions, our with sustainable seeking For no we suite are

record good contractor start activity with healthy season snow ice the revenue. storm is For bookings and driving off to management, preseason a and

our have the new includes required. system solutions liquid operator of launches a This we shovelers salt This of steady new product the addition, work this cadence of snow deicing versatile to In new a reduced enhance our and in allows site Mag. do the on to significantly leadership space. eight job amount one raider

of attractive. a extremely contractors, remains cadence seasonal we weather normalized with This growing to market landscape patterns. expect large see influence some For more from degree

emissions. plus and this solutions mowers our and Exmark, and are Our our channel to space. powered Customers sacrifice includes single in exhaust that us productivity These brands, and extensive is growing there reduce commercial-grade seeking zero-turn last Spartan well stand-on the increase in options Exmark efficiency that workday interest battery no This mowers. leadership position three on drive a Toro with and in performance. entire Toro charge

a credits for of these Inflation U.S. the of considering If certain demand and battery electric period total included tax a hybrid the cost Act. in ownership. expect offerings customers also from drive could applicable, for Reduction We faster when to our credits get qualifying boost payback

are residential, were our trends. Sustainability shifts is irrigation October eighth commercial, this EPA For receive approach watching Award as for outreach housing in consecutive honored for and ingrained as consumer education lighting, efficient use. in and spending around our our in any well market we to WaterSense water We patterns to business.

micro normalized patterns irrigation, key and we drought are regions. agricultural expect for in a For purchasing year conditions monitoring

focused and grow that water. customers precision to food drive with solutions remain efficiency on Our more less

Moving Residential to segment. the

continue watching patterns, will more We the broadly, With to watching drought of timing seasonal consumer conditions. this any return normalization, spring typical extent and including confidence. of we snow we demand the see weather be will activity, be trends. More to

Importantly for we regular replacement benefit us, from cycle.

space demand In market also expanded built with higher for and is the attachments addition, an normalization are to be Flex-Force and we believe the momentum. lineup, connected homeowners and and have battery of addressable on our was our channel in autonomous the our year. years XX-volt continue ever-increasing grown solutions. We we top tools this the partners. announced base on across we our channel power, leadership entering number smart broad market of technology We've positioned in over the to well employees our few with of current We've the past with strong and robotic outstanding autonomous prioritize we investments new team that with portfolio build entered earlier our year mower alternative as partners will

our market leverage every relationships. and network like across innovation we our going would thank and channel our competitive On for results. drive to by excellence day of capital believe support plan allocation, to these investments to that have deep advantage, Importantly, operational beyond deliver prudent unique we for and businesses to and note, employees We and driven our a value great valued partners stakeholders. I above enterprise-wide all customers leadership,

key fantastic I Toro success. extend that, and are we the customers our the You and I questions. your wish continued Company's a to call holiday season. With The open gratitude to for everyone my also will would support, like shareholders to for up

Operator

[Operator question Hayes comes you. Thank Instructions] Our Northcoast with Tom Research. from first

You may proceed.

Thomas Hayes

the Thanks morning. taking question. good Hey, for

Richard Olson

Good morning, Tom.

Thomas Hayes

Good can price in shape you expectations I your the you you, your up that same guys be guess lot prepared then – would And morning. are less remarks provide for is realization of but it more realization how can detail, and it your XXXX. for out in color or Renee, out you anyway anything of on the expectations great? a – called XXXX, I anyway maybe kind you I'll there price much provide about the through on know don't throw

Renee Peterson

Yes.

XXXX, Looking to that at one? you cover want Angie, for price maybe do

Angela Drake

Yes.

with to expect to for products. as continue we We're X% our the going the for have we expect continue be see year do our XX% solid to guidance. market sales to growth We And typically pricing our to to done. see full-year in demand

of like where think feel a but and price will will agile we going continue, see volume. I price to be more just productivity than to adjust really we're focus And and to. on probably be need volume, we both We mix and it Tom,

Thomas Hayes

you maybe little then And a talked a Rick, getting about as supply better. Thanks. bit Okay. follow-up, just chain

how better. you it to – of issue I maybe chain get a think through XX% that continues sounds items upwards I year? the just better. do of last said little time supply at It we like the maybe worst progressing you of bit spoke, getting see this that the

Richard Olson

You're right.

supply the improvement, seeing chain. improvement in steady are We

We've are so why I of know look an we issues if down line if picture. us We're a and had more in back probably called would that many especially a plants, you that discrete at are everything year running at to was of give discrete Today, say, notes, supply are from group was, hear different think a last electronic. I can't we our you group benchmark to and they components still categories where Those suppliers the don't asked that my time, dates. got I this start. that and not as one assembly more others, suppliers that that's challenged much challenging. of

to a harnesses, steady few wiring time chips, was much a show but engines, So and and definable year-ago improvement. group than at more it it's it some components hydraulic a this continues

Thomas Hayes

Okay. back Appreciate the the color. get in queue. I will

Richard Olson

you. Thank

Operator

[Operator Instructions] question Sam James. next Thank you. with from comes Darkatsh Our Raymond

may You proceed.

Samuel Darkatsh

morning, morning. Renee, Good Angie. Rick. Good How you? are

Richard Olson

Good Happy holidays. morning.

Samuel Darkatsh

you well. three them to holidays two quick. Happy as questions. or I real make and got try I'll like

inventories or are how progresses. heard are lower color think to quantification I you I the So of as a what's you you Can that be realistic that sales goal then your question, that perspective billion backlog you're say work a XX% you guidance by worked terms in that looking your get would growth the And of X% in a here? billion year $X.X or lower? much bit to dollar – of you from including versus $X little that fiscal looking of can add year-end within inventories same

Renee Peterson

for very two the fiscal XXXX, in flow maybe which years, to at talk looking in was XXX% than historical conversion the come driver we Important off you at conversion I flow XXXX Rick, and free lower did our cash within XXX% fiscal strong I'll want free rate that note take of average. XXXX. the cash – inventory our backlog. generation, if about question first to guess was

all specific free about talked of more to level we a as but cash feel we have for we a flow because conversion. of will the guidance our same that return we about, Angie the As And that variables to flow, be XXX% impact we expect we'll look normal don't number related do forward, manage cash to that inventory year.

So that guidance. that's embedded in

Richard Olson

From – throughout short-term the going we forward, working that capacity grounds a capacity been and we're looking in growth the beyond the year. to needs portions standpoint, construction, in long-term of short-term And has conversations As will have areas consistent we look bulk Sam, specialty we're largest at more double areas to the and that are adding capacity a the are coming issue, that from golf down previously. to of and backlog, our some backlog. can other out managing be existing whether will really that the be the more or down the That's chain bring going because the Others cases, done point. quickly know opportunity resolved quickly. the of constraints we components throughout still at supply of In be on and so backlog using year, shifts we're you the this underground, extend to subject has the forth. will our to we're backlog products some add availability operations, the to make facilities more but

as supply healthier, bring our sure look So priority our our chain this channel we gets working to as the support possible. quickly And to is customers the customers, down our continue partners environment. and to which make backlog for options with we'll we're in top as

Renee Peterson

of key ability, our that have And the to, to the made at inventory to decisions we'll demand that, normalizes. given we some inventory to the adding back think best serve talking going as that in looked trying they're well, supply really we've related customers but our about, components. served some just to to bring strategic continue question, just chain Rick was to manage the that us And as we

Samuel Darkatsh

based it worked seeing that declines? a backlog sequential – in is supply thing the infer existing see be is quarter? as you've to been perhaps should when more of on be be lower and I next as the months backlog infer then so, going springtime improvements or in So could or to this that would as few we Or that could chain soon season one fact the the going starting

Richard Olson

think at it course of I year. we're over the looking the

for But into flow our on the guidance. really the again, bigger down. demand opportunity the best side Professional and this for most side. on certainly, come our natural backlog with our is in built case So Residential a the of push spring is estimate to is And that is spring really

Samuel Darkatsh

Which lends me to I'm sorry...

Renee Peterson

really cadence our was kind just a normal FXXXX. going of of more return Sorry, to quarter that we'll larger sales I seeing in and per be add to to QX quarters say and Sam, of to QX

Samuel Darkatsh

And sales to thought some resi channel there's to it as here with pieces my moving and weather normalization lot and channel a inventories of push final the in demand do the and respect maybe relates ahead resi informs How this for from expectations clearly prior Thanks. growth? that standpoint coming volume periods. both from pricing you a categorize sell-through flat your expectations year

Richard Olson

Yes.

I think, Sam, we situation. described it as normalized a more

in And that a summer. spring, a we're years field product still had be last very XXXX of in perspective timing few residential. categories the patterns great drought then spring the forth. a it not subject We're to residential in, sell the a in with better we've looking And a short couple got field. we've and the in year than inventory for weather will So positions the normal, of the to and external so late from is key

we've So been we that did in XXXX, seen than superstar somewhat circumstance. already of to return growing XXXX XXXX patterns X% in kind more XX%. of normal by residential And the absolute business an more through grow and a and has

additional a the positioning, marketing the partners, and based new that on of of et business normalizing So reboot on we're merchandise about talking plateau line, product channel really cetera.

So few years it's a different business it was ago. a than

Samuel Darkatsh

all. you Thank you. Thank

Richard Olson

Sam. you, Thank

Renee Peterson

you. Thank

Operator

Our Instructions] Wojs Thank from comes next question Baird. you. [Operator Tim with

You may proceed.

Timothy Wojs

the the comps guidance holidays. half less the it in sounds actually the happy even have first half of I just though on the half. half easier like second year, were the Maybe morning, that mean, Good in everybody. first you'll Hey, year than margins. around the the than think expansion of I second

in So the maybe thought would I given that? price would of us cost? Just have just of been it specifically through first bit the is kind could what better have a you walk driving just timing half little

Renee Peterson

Yes.

help Pro is it had higher I think in in sequentially to that and years, inventory be this there this do we just we do. that expect of Part and the and did process do the of from just be quarter, really higher But of expect will kind you'll res is But bit, part Pro year-over-year. but that to kind call we is margin really what of modeling, that our – a a bit as We was year-over-year, affect to a prior but inflationary we higher into you we that we out do that than go inventory make will significantly QX, normal to QX related adjustment down that will normalize the had increased your to guys see QX. similar environment. that to in QX. which

at Although to it interest going higher higher and total of be higher XX% year-over-year. when that, will expense to year, EPS, yes. is year-over-year is also And range a XX% adjusted our for look be our then we the piece finally, too. it's And year-over-year,

Timothy Wojs

For the year. total

more different for price I XXXX. incrementals normal kind kind And your guess kind of being mean, would maybe kind different a mid-XX% I than productivity are guess think And I asked of I better have of and don't you'd tailwind. as implied that's yes. think much Okay, incrementals. I way, cost your of like

net for kind on XXXX? cost price kind guess of you kind of baking – in So of I I what the side the are for guess margin just tailwind

Renee Peterson

what We're to in we're Yes. seeing. positive environment, inflationary Tim, still an realization. We're price see continuing though,

certainly It's is We which just impact you're wouldn't QX gross trends not in as some the P&L when have are QX average. in be year. last we did looking to initial would important QX, Intimidator thing that talked as But consider commodity standpoint. all acquisition, And the segment That Group about we mention. our at than would seeing only just of that, have in I today. a from we the a an we're of also had favorable that other seeing lower margin at

Timothy Wojs

in more that the to a normalized business? kind return contractor perspective, in sounds floor patterns guess of I expecting is Good. And that planning a imply like and does from XXXX mean perspective kind I kind an from that kind then Okay. demand inventory normal? landscape fiscal of channel it you're of of

Richard Olson

categories little the I said the We returning do think on key products end higher a I product bit categories. as still are horsepower We is to it in the especially have for those normal higher and more short before. products. in of more professional LCE, on what field general, expanding more

for some place demand of certainly inventory good goes residential. business professional so even the to more that's those, still another aligned more also that acreage, for would in from flow-through just to homeowners with the So portion that's closely field I contractors with a bit much say right but put little factor

Timothy Wojs

one. last just then And Okay.

than generate and the what probably is those guess, I think effectively I on backlog to And underground On looking from a the or businesses, trying are those you I perspective. and XXXX? are fiscal businesses how the out guess big bigger And two I'm annualized year backlog golf an sold businesses think this basis. for the revenue about at

I look So today? times the those XXXX kind curious and you're what golf and already just of and like out I'm lead businesses to fiscal underground kind booking if guess of

Richard Olson

It's yes, were some not that true categories, those the categories, key but year. true in booked it's universally through out across

Timothy Wojs

Okay.

good. Sounds

Richard Olson

Thanks working regrettable we'll to capacity in become how we the components of adding deal without in that have available can our on areas, earlier those to some we're overdrive with future. production the comments, those

Timothy Wojs

a about basis? on go-forward to CapEx, really Okay. I And mean, those when is devoted businesses you it think two

Richard Olson

here overweighted as Not drivers secular construction the side of especially to the going those areas to has universally, and and forward spending infrastructure it's underground that investment. trends opportunities specialty relative long the

long-term So investment, perspective. that capital have more would

Timothy Wojs

and guys. XXXX. Thanks, on luck holidays, Happy Great. good Okay.

Renee Peterson

you. Thank

Richard Olson

you. Thank

Operator

next [Operator with Eric Our Bosshard Instructions] you. Research. Cleveland from comes question Thank

may You proceed.

Eric Bosshard

morning. Thank you. Good

Richard Olson

morning. Good

Eric Bosshard

a backlog, Is that $X.X points of the that On couple correct? number of But clarification. a billion. $X.X year-ago was number, billion

Richard Olson

Roughly, Correct. $X.X billion. yes,

Eric Bosshard

that And that go we in the to period number what? normal normalized, and more back roughly if is – XXXX,

Richard Olson

before, and look was you number years including XXX% of the prior If more over range, XXx to time. this it's at in at the year a last XXXX roughly average it's or

Eric Bosshard

Okay.

supply. in the the sounds out But to number this chain of it improved growth supply growth I I'm XXXX, that the – growth or trying like understand back-end year. And between million help figure year. a within sense metrics? mean, you backlog in And can and that to But year I number. Is the loaded, demand further give what this so us grew or just the the can guess is you what – us those just obviously, difference contributed sum your XX% is $XXX this

Richard Olson

chain of better. And there backlog to were even fulfill. what demand Yes. narrative We got than could was fulfill that is the for lot we our when able was the XXXX It's the backlog started. we on the really more supply that

demand golf answer grounds areas the basically, underground the and So in construction incredibly specialty those is strong and market.

faster better to got the were in better, we've the at able ship supply and chain demand rate. we more a came So got

Renee Peterson

strong healthy customers and end end very really as well. Yes, markets

Eric Bosshard

Okay. supply, the historic XXXX as – guess secondly, backlog year million. And of last the feels look the Or relative that, context, to $XX with like am to related of to not guide thinking incremental limiting number is this backlog wrong? revenue I it relative multiples? about it's for $X million demand to then is I at up by I factor supply

Richard Olson

been Generally, that for – have last a as the demand. is constraint plus. can of the lot a year Yes, our supply-driven And see, have rather really we we throughout last you theme that's true. – it's

Eric Bosshard

the then to last have I And relates Okay. inventory. question

of rates, are and that of – inventory, Or more? a this get we door. I the complete impact you incremental operating inventory – to then believe is question, to the out have you Like any can supply there's Or that neighborhood comment by don't utilization inventory more in product a is rates shipping directional Your they'll the in less. in on Or rates on – it your margins? inventory it of solve or function or you there's idle terms too do – have your just have companies alternative? make there progress Is my it XXXX is other operating would capacity? improvement lot enough and do much have is in producing

Renee Peterson

don't be to work-in some try facility. get weighted, service we'll think No, brought of and efficiency out those because, Yes. parts Eric, It's really more in producing we components to less. of production towards again, intentionally more I our process

of at be light So producing finished areas. a actually We goods high rate. are little in we'll on I think a number a

As very finished we can demand, make we're have a talking goods. soon of lot Rick We're strong about, shipping was where not we holding that as as it. out

we work-in as percentage, mix, total finished when inventory normalizing So it's up the about really normalizing, goods and process down. a bringing talk down

Angela Drake

are that, add a company. today, to – just are larger we would I we And

we've inventory. also so our inflationary inventory in obsolete, a got seeing the do of we it's not And good lot bit rates is and inventory, but believe We're a good. excess

Eric Bosshard

very Okay. Great. That’s you much. Thank helpful.

Richard Olson

Thank you.

Operator

Thank you. Research. question next Longbow Instructions] comes [Operator from with MacGregor David Our

You may proceed.

David MacGregor

of I the that questions. the Yes. for quarterly provide guess, Good think guidance would all, were that going first a were morning. the first a around basis Thanks on huge going taking – quarter that you I additional to for consistent forward, to thanks by guidance help. if be

thanks Rick, or with margins? play that. understand, in the with for where trying we greatest P&L right? case, rather if likely be but in guess in opportunities base to case, flex a up doesn't your to in accordance comes just So XXXX protect the to in But it to a end demand than it's I'm and that. So lighter slowdown I are base out

Richard Olson

Toro think are know We of cycles and that businesses some businesses. just that Company I is this and something affected done so forth. by nature has our weather markets The by of our our

very we in the do So the budgeting. we for planning year that our and our stay way agile

play in we year. leave to way see the We'll through that in some we how budget the held flexibility starting out. to year of So investments those until investments are significant tend we a can is go as

as with our opportunities flex well. have forth We suppliers and so

to that's for change we current plan – the year we way build stay flex that conditions our should demand. level be of able we to the the the and So with

how do that's So our business. we

Renee Peterson

Yes. a they professional been professional And get want. lot of not say that I need from they our just customers products a the to would able standpoint, there's and have

supply fact that bit but So demand constrained that we product. to get professional do side. also kind have wanting on Certainly, people of the of of just been have some pent-up chain, a by the it

Richard Olson

of key discretionary. the probably are that's point most our tasks. is for They're And not used products essential

the a our are of have in and behind. delayed context part consumed when purchases the professional they're And many especially our the of So of already are they're customers through early products pandemic, business, used. –

as – they're being the start that on to snow, being we've emergency product start to affected and a also be areas are used the off up, with they're replaced. to you be residential our the both and really imagine, been then just consumed need if But activated we're by We've so then coming side. can we're they So response channel-to-ship to professional the good say with system this well. as a to year off storms and far going the good

from product our it's that's the So to start well way a in business, standpoint. year residential as even really a nice out

David MacGregor

something When you is else? follow-up really are answer. about on it your And investments, just development Or investments? you product new referencing talk so to

Richard Olson

New could high an key are. investments, to of it who product affect. because those Product don't – it's that to development be extremely investments things so are honest, innovation usually the priority systems, last to is types more go, be we is

up give we easily, those – that So ever. don't if

David MacGregor

reference just to landscape guess to I earlier back gave with to secondly, answer regard you Right. an contractor.

of quantify that portion residential? to does give is to that to us obviously Some into for that residential Are how or sense sell likely markets. some you us able of segment correlate

Richard Olson

but quantified I professional are products have justify don't the that properties past, that or having think we've looking customers for that products. it's professional in they level essentially

it that may of could products. could be be types things So farms, estates, be it those acreages, buying professional large

other to landscape category those to that want by are economic types So conditions. I affected didn't go and they're differently all contractors. just customer imply in that There

David MacGregor

a around the keeps single-digit coming curious sort of Okay. discussion it high thoughts your And the dynamics on and the then of finally, I I'm a Intimidator. just Pro but up small, profitability I relatively of just segment, it's standpoint, guess, percentage around from realize margins. the but And

Pro to how it expect there to is to is profitability? you So any be there plan long of the terms what us way dilutive the segment? just understand of help And sort much do progression in

Renee Peterson

in And base year, more called year-over-year. versus the when of the out financial impact we've performance has of it it Yes. first on because the it's an comparing

with has upon getting acquisition It the anticipated time point within broader mower realizing this technology especially we over related leverage, and it that line the in models some As great we with the in synergies zero-churn had We're that is expectations now the the market. far brands have a been that we our to itself, performing of areas as at and had acquisition. the acquisition. three

acquisition. good about really So the we feel

supply that brand Initially, We improvement we the in are really, a we and year, to definitely over in one strong all improve work to with had want happen seeing we'll their momentum we got to of that make start to the profitability. maintained sure to didn't time challenges. given their all off profitability. chain But especially expect the they and

Angela Drake

that just I And to QX. in add would

We expect increase the in as million them to about in sales sales Pro net $XX part add that of net segment.

David MacGregor

much? If well? sounds hasn't million your backlog like in Is $XX as grown business that it

Richard Olson

similar point. at be LCE would this Backlog to other

key So categories that than talked we Pro field other product the but of position categories, the some in there on on be is it would inventory better about.

Renee Peterson

with consistent a in rate has standpoint we've is quarters well. prior more of from been seeing It run million a the to a as what cadence $XX the think seasonal little I And Yes. it.

quoting is number the Angie So for QX.

Angela Drake

Right.

Renee Peterson

Yes. FXXXX. they our were weren't million. that in And QX about think And I $XXX they pre-acquisition,

are growing. they So

David MacGregor

Yes.

everyone. happy holidays Okay. Thanks and much very

Richard Olson

Okay. and Thank you, happy holidays.

Operator

the concludes to question-and-answer please closing proceed remarks. Kerekes, session. Ms. This you. Thank

Julie Kerekes

questions you, interest fiscal XXXX to March everyone forward our and Happy We for Company. you again to with first Toro thank your Josh, in holidays. Thank all talking and discuss in results. quarter The look

Operator

participation presentation. your conference. for you This Thank the in today's concludes

You day. disconnect. Good may now

The Toro Company (TTC) 21 Dec 222022 Q4 Earnings call transcript