Toro Co Q3 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Mike Shlisky - D.A. Davidson - Analyst : Yeah, hi, good morning. Thanks for taking my question. I wanted to start with a Professional segment question and how it relates to the consumer. Has the professional landscape channel, which has some consumers that on the large acreage side have come over to buy from new dealers. Is REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2025 / 3:00PM, TTC.N - Q3 2025 Toro Co Earnings Call that part of your business still putting for that next leg up is the consumer challenges? So I guess i was kind of wondering what you have had organic growth even higher Professional had not been for that small trust of consumer does shop in the Professional channel?

Question: Mike Shlisky - D.A. Davidson - Analyst : Great. And then sticking with Professional. This was a it looks like a record third quarter for Professional from a margin perspective, and this is going back a bunch of years in my model, you noted things like having lower marketing costs and some of your comments in your press release. I guess is that part of the AMP program or are those permanent reductions? Or are those just temporary? Just trying to see if Professional has entered a new and a higher margin range going forward after this great performance here. I also be curious about mix and Professional, whether that was a role on the strong margin as well?

Question: Mike Shlisky - D.A. Davidson - Analyst : Great. And maybe the last one I've got for you. If we see a rate cutter even two, before the end of the year, the calendar year, I guess, would that improve the rest outlook and any kind of decent size way or do you just see a cadence of rate cuts going to 2026 to really see the consumer responds to lower interest rates?

Question: Mike Shlisky - D.A. Davidson - Analyst : Okay, fair enough. I'll pass it along. Thank you.

Question: Samuel Darkatsh - Raymond James & Associates, Inc. - Analyst : Yeah, hey, Rick, Angie, Edric, how are you? Good morning. So a few questions. First off, your Residential business. So I guess I'll just ask it as relates to your market share of sell-in and sell-through. I know two of your big retailers, Lowe's and Tractor Supply, both called out the lawn and garden category as being a positive, favorable category for them. So how are you feeling about your market share? Your floor plan -- your floor space at those retailers and your prospects for growth in the those two customers next year?

Question: Samuel Darkatsh - Raymond James & Associates, Inc. - Analyst : And then my follow-up or segue question to that, Angie, you mentioned, and this is no surprise, obviously, but the Residential margins are expected to be down this year. To what degree are you expecting the margins to be down? What do you peg as, I guess, "normal resi margins" at this point? And what's the likelihood that 2026 is going to look like that sort of normal margin profile in the segment?

Question: Samuel Darkatsh - Raymond James & Associates, Inc. - Analyst : And then my last question, and I apologize if you covered this in your prepared remarks and I missed it. What are your expectations now for year-end backlog and the prospects for Pro growth next year?

Question: Samuel Darkatsh - Raymond James & Associates, Inc. - Analyst : So you're still thinking '26 as a growth year comfortably for Pro?

Question: Samuel Darkatsh - Raymond James & Associates, Inc. - Analyst : Thank you much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2025 / 3:00PM, TTC.N - Q3 2025 Toro Co Earnings Call

Question: David MacGregor - Longbow Research, LLC - Analyst : Yeah, good morning, everyone. Welcome, Hendrick.

Question: David MacGregor - Longbow Research, LLC - Analyst : Right. And I guess you're talking about 2027 at the end of 2027, but you appear to be, at least on a run rate basis, three quarters of the way through this program already. I guess the obvious question is the potential to see this target raised over the remaining two years of the planning horizon?

Question: David MacGregor - Longbow Research, LLC - Analyst : Okay. Sounds good. I look forward to that. Second question is on tariffs. I guess, just talk about your success to date with tariff mitigation and what impacted tariffs -- I guess, net of mitigation actions have on third quarter margins? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2025 / 3:00PM, TTC.N - Q3 2025 Toro Co Earnings Call

Question: David MacGregor - Longbow Research, LLC - Analyst : I know the IEPA or the reciprocal tariffs are sort of a point of debate right now. How much within that $45 million would be the IEPA?

Question: David MacGregor - Longbow Research, LLC - Analyst : Okay. Great. And then how much incremental pricing and mitigation traction should hit the P&L in the fourth quarter?

Question: David MacGregor - Longbow Research, LLC - Analyst : Margin neutral by the year-end. Okay. Good. Last question for me. I guess I just want to go back to Sam's question on Residential and exploring the margin potential there. and have that conversation around the Professional segment margins. And I'm just thinking back prior to April 2019, Charles acquisition, and Toro was, I guess, generating consistent 20% margins in the Professional segment, as I recall. Charles Machine work is obviously dilutive and margins dropped to mid-teens levels, but you've been making pretty steady progress on rebuilding those margins to -- now despite sort of the headwinds in the landscape contractor, the Professional segment margins are running at a kind of a 19% annual trajectory. So I guess the question is how much upside is realistically achievable in Pro segment margins given the remaining recovery opportunities that may still exist at Charles Machine Works and Underground Construction. And I guess on top of that, a recovery in the larger landscape contractor business?

Question: David MacGregor - Longbow Research, LLC - Analyst : So within the progress this quarter on Professional margins, that 250 basis points of improvement, how much of that was productivity benefit versus price cost and volume leverage and cost cuts?

Question: David MacGregor - Longbow Research, LLC - Analyst : Got it. Thanks very much. Good luck. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2025 / 3:00PM, TTC.N - Q3 2025 Toro Co Earnings Call

Question: Thomas Mahoney - Cleveland Research Company - Analyst : Hello, good morning. I want to look through the moving pieces in the 4Q revenue guidance. I wonder if you look through the moving pieces in the 4Q revenue guidance. I guess, first, is there a way -- it does look like the Pro segment could be implied down year-over-year. Is there a way to size the divestiture impact inside that and just speak through if there's in the remaining business, if there's any instance where maybe some has been pulled into the third quarter that comes out of the fourth quarter, anything along those lines?

Question: Thomas Mahoney - Cleveland Research Company - Analyst : And American Augers remains in the future, not a part of the fourth quarter guidance?

Question: Thomas Mahoney - Cleveland Research Company - Analyst : Understood. And then from a from a cost basket perspective, is there anything outside of tariffs to be sure to consider as we move through the second half of the year and into '26? Or do you view the incrementals as you frame them up here, pretty complete in terms of the cost and the cadence that you're thinking about looking into next year?

Question: Thomas Mahoney - Cleveland Research Company - Analyst : Okay, makes sense. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2025 / 3:00PM, TTC.N - Q3 2025 Toro Co Earnings Call

Question: Joshua Chan - - Analyst : Got it. And then on Spartan Mower, I think when you guys acquired Intimidator, its annual sales were about $200 million. Any high-level way to frame what the Intimidater group sales are today relative to that $200 million?

Question: Ted Jackson - Northland Capital - Analyst : Thank you very much. I've got a couple of questions around inventories, both on your balance sheet and the dealer itself. And so just starting with the Toro inventory levels, would you view your current inventory levels as being kind of balanced to demand or still work being done there? And then when you think about your inventory levels what would be kind of your target when that could be either like days inventory turns? Now my sense is that you still may be little heavy there would like to get a sense in terms of where that stands and kind of what the target is? And maybe some color in terms of how you expect to get there? And on the dealer side, you're positioning yourself the set up for a solid season in 2026. And you made a reference to efforts that we're going to allow you to bring the dealer inventory further to ensure that you are positioned. So maybe some discussion with regards to kind of dealer inventories. Where they are now? What your are going to be put them to where it sounds like you want them to be when we get to spring and then maybe just because we're coming up to winter, some discussion with regards to I don't know, mix is with regards to snow products and such as well?

Question: Ted Jackson - Northland Capital - Analyst : Just a little more clarity in there. So when you talk about the lining and being the Residential making good progress and being aligned. Making sure it's aligned for the spring selling season. I mean, that would imply that you feel -- I mean, do you feel like it's still a little heavy and then you have some things to do? I mean how is that going to be aligned for the spring selling season, given where we are in the we're at the end of the season now, because we're getting at with that is like -- is there any actions that Toro is doing to bring those into alignment? Is it kind of where you want it to be given your view for '26 and there's really nothing else to do. I mean I guess that's kind of -- I'm just a little lost on that one. That's all.

Question: Ted Jackson - Northland Capital - Analyst : So in your target, then it would be around three turns. Obviously, just on average over, lets say, the course of the year. That's kind of where you're trying to get yourself to?

Question: Ted Jackson - Northland Capital - Analyst : That's a great answer. So, okay, I'll get out of line in case there's anyone else thank you.