The Toro Company Q1 FY2026 earnings call

Throughout 2026, teams remained focused on executing strategic priorities, capitalizing on market opportunities and customer demand, driving operational excellence, and leveraging portfolio of leading brands. Beat expectations in both segments, consolidated net sales increased by more than 4%. Strong execution in Professional and Residential segments, capitalized on incremental demand for snow and ice products and growth in underground and specialty construction. Expanded hydrovac excavation solutions via acquisition of Tornado Infrastructure Equipment. Implemented multiyear AMP program, contributed $95 million in cost savings toward $125 million goal. Repurchased approximately $95 million of common stock. Prepared for snow and ice products during winter storms, BOSS plows with Cold Front Technology well received. Invested in underground and specialty construction, horizontal directional drills like JT21 contributed to sales. Pursuing strategies through AMP to preserve margins, manage inventory, working capital improved.

Consolidated net sales for the first quarter were $1.04 billion, up 4.2% from prior year. Professional segment net sales in the first quarter were $824 million, while Residential segment net sales were $216 million. Both segments benefited from higher shipments of snow and ice products and net price realization. We reported better-than-expected adjusted earnings per share of $0.74, up from $0.65 a year ago. Professional segment earnings were $137.6 million and Residential segment earnings were $13.2 million. Our free cash flow for the quarter was $14.6 million, a year-over-year increase of more than $80 million, resulting in a free cash flow conversion rate of 22%. Our inventory turnover improved to 2.8 times in the quarter.

Raised sales and earnings outlook for fiscal 2026. Total company net sales growth expected 3% to 6.5%, Professional mid-single digits growth, Residential flat to down 3% (increased from prior guidance). Full-year 2026 adjusted earnings per share guidance $4.40 to $4.60. Expect improved free cash flow conversion rate of at least 120%. Q2 2026 net sales mid-single digits increase, Professional earnings margin similar to prior year, Residential earnings margin approaching double digits, mid-single-digit adjusted EPS growth in Q2.

External factors like economy, geopolitical environment, weather are ongoing considerations. Softness in international markets. High valuations in M&A activity.

Q: Pro sales up 7% in quarter, organic excluding Tornado?

A: Likely 1%-2% organic, Tornado contributing ~2%.

Q: Snow and ice growth?

A: Largest portion of segment increases, Residential had field inventory, Professional shipments above ten-year average.

Q: Annual guide 6.5% high end, how?

A: Driven by net realized price, organic growth in Professional segments and second-half snow sell-in.

Q: Residential guide raised, Pro not, why?

A: Pro had more international softness, Resi had higher snow upside in Q1.

Q: Overlap between snow and lawn-garden contractors?

A: Much overlap, contractors strong, new products boosting landscape contractors.

Q: Autonomous in Golf?

A: Interest high, investing in category, cover various autonomous solutions.

Q: Ditch Witch margins and improvement?

A: Steady growth, leveraging scale, investments helping profitability.

Q: International business weakness?

A: Broadly across Europe and Asia, general economic environment.

Q: M&A valuations and organic growth opportunities?

A: Focus on existing business adjacencies, valuations high but moderating.

Q: Field inventory and leverage strategy?

A: Healthy field inventory, capital allocation strategy includes R&D, M&A, dividends, stock buyback.

Q: Heavy snow impact on spring?

A: Snowfall leads to early spring moisture, but regional differences in snowfall.

Q: CONEXPO Orange Intel system and digital offerings?

A: Teams working together, common infrastructure development, subscription tailwind possible.

Q: Golf vs Grounds growth and global vs domestic?

A: More optimistic, Grounds showing benefits, international Golf has more softness due to macroeconomic factors.