• Full Year Net Sales: $4.58 billion, up 1% year-over-year.
• Fourth Quarter Net Sales: $1.08 billion, up 9.4% year-over-year.
• Full Year Adjusted Diluted EPS: $4.17, slightly down from $4.21 last year.
• Fourth Quarter Adjusted Diluted EPS: $0.95, up 34% from $0.71 last year.
• Free Cash Flow: Increased by more than $300 million for the year.
• Professional Segment Full Year Net Sales: $3.56 billion, down 3.2% year-over-year.
• Residential Segment Full Year Net Sales: $998.3 million, up 16.9% year-over-year.
• Full Year Gross Margin: 33.8% reported, 33.9% adjusted.
• Fourth Quarter Gross Margin: 32.4% reported, 32.3% adjusted.
• SG&A Expense as a Percentage of Net Sales: 22.3% for the quarter, 22.2% for the full year.
• Order Backlog: Approximately $1.2 billion at year-end.
• Inventory: $1.04 billion at the end of Q4, down 4.5% year-over-year.
• Dividend Increase: 6% for fiscal 2024, with another 6% increase approved for fiscal 2025.
• Share Repurchases: Nearly $250 million in fiscal 2024.

• Warning! GuruFocus has detected 2 Warning Sign with TTC.

Release Date: December 18, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• The Toro Co (NYSE:TTC) reported net sales growth for the 15th consecutive year, reaching $4.58 billion, demonstrating the strength of its balanced portfolio.
• The company delivered exceptional net sales growth in its underground construction products and golf and grounds solutions segments.
• The strategic partnership with Lowe's has been successful, contributing to strong performance in the Residential segment.
• The Toro Co (NYSE:TTC) achieved an increase of over $300 million in free cash flow, enabling significant shareholder returns through share repurchases and dividend increases.
• The company is on track with its AMP initiative, achieving $14.5 million in annualized run rate cost savings, slightly ahead of expectations.

Negative Points

• Margins were affected by product mix, with outsized growth in the Residential segment and reduced shipments of higher-margin snow products.
• The Residential segment reported a loss of $13.8 million in the fourth quarter, attributed to higher material and freight costs, and increased warranty and marketing expenses.
• Field inventory levels remain higher than ideal for lawn care and snow businesses, indicating ongoing challenges in inventory management.
• The Professional segment experienced a decrease in net sales for the full year, primarily due to lower shipments of compact utility loaders and snow products.
• The company anticipates a cautious outlook for homeowner markets in fiscal 2025, impacting demand for lawn care solutions.

Q & A Highlights

Q: The Residential profit contraction in the quarter was different from previous fourth quarters. Can you explain the Residential profit performance in the quarter? A: Angie Drake, CFO, explained that the fourth quarter was anticipated to be tougher for the Residential segment due to less volume and a mix that included more entry-level zero-turn mowers and snow products. The focus on being a good supplier led to increased freight and manufacturing inefficiencies. Overall, the full-year Residential margin was about 8%.

Q: With tailwinds intact, why did the Professional segment's growth outlook change from 5% to 0-1% for 2025? A: Richard Olson, CEO, noted that the outlook reflects caution, particularly from homeowners buying professional products. Factors include macroeconomic caution and snow product performance. However, there is continued strength in underground construction and golf and grounds, which remain healthy.

Q: Can you provide more details on the AMP It Up initiative? A: Richard Olson, CEO, and Angie Drake, CFO, explained that AMP It Up is an extension of the AMP initiative, focusing on amplifying maximum productivity. It is a two-year employee initiative aimed at improving profitability through productivity, cost improvements, and efficiency.

Q: What is the expected penetration of autonomous products after the first year? A: Richard Olson, CEO, stated that penetration would be higher in golf and commercial applications compared to residential, where the market is more competitive. The timing is favorable due to customer concerns about labor availability, which increases interest in autonomous solutions.

Q: How does the 2025 guidance reflect the normalization of dealer inventory and potential sales pickup? A: Richard Olson, CEO, indicated that if markets like golf and underground remain healthy and landscape contractor businesses recover, it could lead to positive sales. The company is positioned to manage inventory normalization without significant disruptions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.