• Total Company Net Sales: $995 million, slightly down from Q1 last year.
• Adjusted Diluted EPS: $0.65, up from $0.64 last year.
• Professional Segment Net Sales: $768.8 million, up 1.6% year over year.
• Professional Segment Earnings: $127.2 million, up 13% from last year.
• Professional Segment Earnings Margin: 16.5%, up from 14.9% last year.
• Residential Segment Net Sales: $221 million, down from $240 million last year.
• Residential Segment Earnings: $17.2 million, down from $23.5 million last year.
• Residential Segment Earnings Margin: 7.8%, down from 9.8% last year.
• Reported Gross Margin: 33.7%, down from 34.4% last year.
• Adjusted Gross Margin: 34.1%, down from 34.4% last year.
• SG&A Expense as a Percentage of Net Sales: 25.9%, up from 25.6% last year.
• Operating Earnings Margin: 7.8%, down from 8.8% last year.
• Adjusted Operating Earnings Margin: 9.4%, up from 9.2% last year.
• Interest Expense: $15 million, down from $16.2 million last year.
• Reported Effective Tax Rate: 20.1%, up from 19% last year.
• Adjusted Effective Tax Rate: 20.2%, down from 20.8% last year.
• Inventory: $1.14 billion, down about 3% compared to last year.
• Free Cash Flow: $67.7 million use of cash, an improvement over last year.
• Share Repurchases: $100 million during the quarter.

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

Release Date: March 06, 2025

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

Positive Points

• The Toro Co (NYSE:TTC) reported first-quarter bottom line results that exceeded expectations despite below-average snowfall in key markets.
• Professional segment net sales increased by 1.6% year over year, driven by higher shipments of golf and grounds products and zero turn mowers.
• The company achieved $64 million in run rate savings to date from its AMP initiative, with $50 million realized in the first quarter.
• The Toro Co (NYSE:TTC) introduced several innovative products, including the Toro Turf Pro autonomous mower and the Exmark Turf Tracer with XiQ, enhancing its market leadership.
• The company maintained its full-year fiscal 2025 net sales and adjusted diluted earnings per share guidance, reflecting confidence in its strategic initiatives and market position.

Negative Points

• Consolidated net sales for the quarter were slightly down from the previous year, impacted by the divestiture of Pope Products and lower shipments in the residential segment.
• Residential segment net sales decreased due to elevated field inventories of snow products and lower shipments of portable power products.
• Reported EPS was $0.52 per diluted share, down from $0.62 last year, indicating a decline in profitability.
• Higher material, manufacturing, and freight costs negatively impacted gross margins, which were slightly lower than the previous year.
• The uncertain and rapidly changing tariff environment poses a risk to future financial performance, with potential impacts not fully included in the current guidance.

Q & A Highlights

Q: Can you provide clarity on the AMP initiative's cost savings and its impact on the first quarter's bottom line? A: Richard Olson, Chairman and CEO, explained that the AMP initiative achieved $64 million in run rate savings to date, with $50 million occurring in the first quarter. Angie Drake, CFO, noted that $7 million in gross realized savings were seen in Q1, with some reinvested. The full year outlook includes these savings, and the company is confident in achieving $100 million in run rate savings by fiscal 2027.

Q: How did the professional snow product segment perform, and what are the expectations for the landscape contractor market? A: Richard Olson, CEO, stated that despite some headline snow events, overall snowfall was below average, impacting residential sales more than professional. Contractor budgets are in good shape due to manageable snow events, which should positively impact the landscape contractor market in the spring.

Q: What are the expectations for price/cost dynamics for the rest of the year? A: Angie Drake, CFO, mentioned that Q1 saw higher costs due to manufacturing and freight expenses, but productivity improvements helped offset some of these. For the full year, a return to a normal 1% to 2% price increase is expected, excluding tariffs.

Q: Can you elaborate on the impact of tariffs and the company's exposure to international manufacturing? A: Richard Olson, CEO, explained that most products are made in the US, with minimal exposure to China. The February China tariffs are included in guidance. The company is exploring options to mitigate tariff impacts, including negotiations and potential price adjustments.

Q: What is the current status of field channel inventory in the professional grounds and landscape contractor business? A: Richard Olson, CEO, noted that inventory levels are higher than desired but improved from last year. The company is positioned for the spring season, with new product introductions expected to drive demand and help manage inventory levels.

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