Toro Reports Results for the First Quarter of Fiscal 2024

—(BUSINESS WIRE) — March 7, 2024—The Toro Company (NYSE: TTC), a leading global provider of solutions for the outdoor environment, today reported results for its fiscal first quarter ended February 2, 2024.

“The first quarter aligned with our expectations, as we drove exceptional top-line growth for our underground and specialty construction, and golf and grounds businesses,” said Richard M. Olson, chairman and chief executive officer.

“This performance was the result of continued strong demand for these products and the strategic actions we’ve taken to increase output with more stable supply. The strength in these areas was offset by lower shipments of zero-turn mowers, as expected, given elevated field inventories heading into the fiscal year, and lower shipments of snow and ice management products due to below-average snowfall activity. At the same time, our team drove productivity gains that offset higher material costs, operating with resiliency and agility as we continued to align costs and production to demand trends.
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OUTLOOK
“Our innovation leadership in attractive end markets, strong business fundamentals, and proven ability to drive positive results through economic cycles and seasonal variability give us confidence in our ability to deliver growth in fiscal 2024, ” continued Olson.”We anticipate homeowner markets will begin stabilizing this spring, following last year’s combination of macro factors and weather patterns that resulted in elevated field inventories of lawn care products. We expect incremental growth from our expanded mass retailer channel will help offset this dynamic. We also expect benefits from the sustained demand in our underground and specialty construction, and golf and grounds businesses. With this demand, order backlog for these businesses remains elevated, and we intend to continue flexing production within our existing facilities to improve lead times and better serve our customers.“Our commitment to delivering superior innovation and customer care continues to drive our market leadership, supported by our strong balance sheet, disciplined capital allocation, and outstanding team of employees and channel partners. We are prioritizing investments in advanced technologies and solutions that we expect will drive long-term profitable growth and value for all stakeholders. For example, we are leveraging our proprietary Hypercell™ smart battery system to accelerate the development of high-powered sustainable solutions for professional segment markets, such as our new Groundsmaster® e3200
out-front rotary mower. We also continue to drive productivity and operational excellence across the enterprise, including the more than $100 million of annualized cost savings we expect to realize by fiscal 2027 with AMP, the multi-year initiative we announced last quarter,” concluded Olson.

For fiscal 2024, the company continues to expect low-single-digit total company net sales growth and *adjusted diluted EPS in the range of $4.25 to $4.35. This guidance is based on current visibility, and assumes continued strong demand and more stable supply for businesses with elevated order backlog, a continuation of macro factors that have driven increased consumer and
channel caution, and manufacturing inefficiencies as production and inventory levels continue to be adjusted to market conditions. This guidance also considers the below-average snowfall activity year-to-date, assumes weather patterns aligned with historical averages for the remainder of the year, and includes the expected incremental impact of an expanded residential
segment mass channel.

FIRST-QUARTER FISCAL 2024 SEGMENT RESULTS
Professional Segment

• Professional segment net sales for the first quarter were $756.5 million, down 14.1% from $880.7 million in the same period last year. The decrease was primarily driven by lower shipments of zero-turn mowers, and snow and ice management products, partially offset by higher shipments of underground and specialty construction products, and golf and grounds equipment.
• Professional segment earnings for the first quarter were $112.8 million, down 21.7% from $144.1 million in the same period last year, and when expressed as a percentage of net sales, 14.9%, down from 16.4% in the prior-year period. The decrease was primarily due to lower net sales volume, partially offset by favorable product mix.

Residential Segment

• Residential segment net sales for the first quarter were $240.1 million, down 9.3% from $264.6 million in the same period last year. The decrease was primarily driven by lower shipments of snow products and zero-turn mowers, partially offset by higher shipments of walk-power mowers and portable power products.
• Residential segment earnings for the first quarter were $23.5 million, down 37.8% from $37.8 million in the same period last year, and when expressed as a percentage of net sales, 9.8%, down from 14.3% in the prior-year period. The year-over-year decrease was largely driven by product mix.

OPERATING RESULTS
Gross margin and *adjusted gross margin for the first quarter were both 34.4%, down slightly from 34.5% for both in the same prior-year period. The slight decrease was primarily due to unfavorable product mix within the residential segment, mostly offset by favorable product mix within the professional segment. SG&A expense as a percentage of net sales for the first quarter was 25.6%, compared with 22.6% in the prior-year period. The increase was primarily driven by lower net sales volume. Operating earnings as a percentage of net sales were 8.8% for the first quarter, compared with 11.9% in the same prior-year period.

*Adjusted operating earnings as a percentage of net sales for the first quarter were 9.2%, compared with 11.9% in thesame prior-year period.

Interest expense was $16.2 million for the first quarter, up $2.1 million from the same prior-year period. This increase was primarily driven by higher average interest rates and higher average outstanding borrowings. The reported effective tax rate for the first quarter was 19.0%, compared with 18.6% in the same prior year period. The increase was primarily due to lower tax benefits recorded as excess tax deductions for stock-based compensation in the current-year period, partially offset by a more favorable geographic mix of earnings. The *adjusted effective tax rate for the first quarter was 20.8% compared with 21.4% in the same prior year period. The year-over-year difference was primarily driven by the geographic mix of earnings.