Toro Company (The)

Good day, ladies and gentlemen, and welcome to the Toro Company second quarter earnings conference call. My name is Jonathan, and I will be your coordinator facilitator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of today's conference. If at any time during the call you require assistance, please press star followed by zero, and a coordinator will be happy to assist you. As a reminder, this conference is being recorded for replay purposes only. I would now like to turn the presentation over to your host for today's conference, Julie Karikas, Treasurer and Senior Managing Director of Best Relations for the Toro Company. Please go ahead, Ms. Karikas.

Thank you, and good morning. Our earnings release was issued this morning, and a copy can be found in the investor information section of our corporate website, thetorocompany.com. On our call today are Rick Olson, Chairman and Chief Executive Officer, and Renee Peterson, Vice President and Chief Financial Officer. We begin with our customary forward-looking statement policy. During this call, we will make forward-looking statements regarding our business and future financial and operating results. You all are aware of the inherent difficulties, risks, and uncertainties in making predictive statements. Our earnings release, as well as our SEC filings, detail some of the important risk factors that may cause our actual results to differ materially from those in our predictions. Please note that we do not have a duty to update our forward-looking statements. In addition, during this call we will reference certain non-GAAP financial measures. Reconciliations of historical non-GAAP financial measures to reported GAAP financial measures can be found in our earnings release or on our website. We believe these measures may be useful in performing meaningful comparisons of past and present operating results to understand the performance of our ongoing operations and how management views the business. Non-GAAP financial measures should not be considered superior to or a substitute for the GAAP financial measures presented in our earnings release and this call. With that, I will now turn the call over to Rick.

Thanks, Julie, and good morning. The Toro Company delivered very strong results for the second quarter of fiscal 2021, driven by robust, broad-based demand across our professional and residential segments. Our team continued to execute well in this dynamic environment, managing the supply chain challenges affecting our industry and the global economy, and working together with our channel partners to serve customers and fulfill retail demand. As a result, net sales for the second quarter were up 24% year over year. Professional segment net sales increased 25%, continuing the growth trend for this segment and setting a new record. The increase was primarily driven by a strong demand for golf, landscape contractor, irrigation, and rental and specialty construction products. Our lineup of innovative products combined with increasing business confidence in the economic recovery helped fuel exceptional demand. Residential segment net sales for the second quarter were up 20% year-over-year, setting another record. This growth was led by a strong demand for zero-turn riding mowers and our all-season FlexForce 60-volt home solutions products. In addition, enhanced retail placement boosted sales of our snow equipment, and late-season snowstorms helped clear the channel. The introduction of innovative new residential products coupled with the refreshed marketing and expanded mass retail distribution continue to strengthen our brand and drive growth for this segment. We also set records for earnings in both segments this quarter as we drove productivity and operational synergies enterprise-wide. Professional earnings were up 57% and residential earnings grew 24%. Reflecting on the outstanding results this quarter, we note three prevailing themes. First, demand has been exceptionally strong. We see this continuing for the foreseeable future, albeit with year-over-year growth rate comparisons that will ultimately stabilize off a higher base. This demand is driven by improving consumer and business confidence coupled with public and private investment priorities and current lifestyle trends. We expect to capitalize on these drivers with our commitment to new product development, best-in-class distribution channels, and a strong balance sheet that provides the financial flexibility to invest in the future. Second, along with the exceptionally strong demand, we've seen escalating supply chain and inflation challenges. These challenges are not unique to the Toro Company and are having a global impact. Our teams have worked effectively to keep up with increased demand while navigating the current supply chain environment. We've also focused on mitigating material, freight, and wage inflationary pressures through productivity and synergy initiatives, disciplined expense control, and market-aligned pricing actions. We'll continue to prioritize important investments to support growth. Third, we're leveraging our strong balance sheet to position the company for future growth. As we continue to generate strong free cash flow, we are allocating capital to best drive value for all stakeholders. This year, we've made strategic investments in technology accelerators through the acquisitions of Turflinks and Left Hand Robotics. These teams have immediately helped us advance our innovation roadmap. At the same time, we've continued to invest organically in key technologies, including alternative power, smart connected, and autonomous. As an example, our expanding line of FlexForce 60-volt products will soon include a battery-powered two-stage snow thrower, which is ready to launch and is generating a lot of excitement in the field. Our healthy cash flow also allows us to return capital to shareholders while maintaining ample liquidity. Year to date, we've paid down $100 million of debt, invested $107 million in share repurchases, and paid out $57 million in dividends. While we work to capitalize on this period of great growth, we remain committed to our employees and channel partners and continue to diligently manage and mitigate COVID-related risks. We're keeping the health and safety of our team in the forefront while executing operationally to get the right products to the right places at the right time. Through the So We Can campaign, we're incenting our employees to get vaccinated. We extend sincere thanks to both our team and our channel partners for their continued commitment to keeping each other safe while also going above and beyond to meet the needs of our customers. Looking ahead, we remain focused on our enterprise strategic priorities of accelerating profitable growth, driving productivity and operational excellence, and empowering people. We will continue to execute against these priorities to position the company for long-term sustainable growth. I'll discuss our outlook further following Renee's more detailed review of our financial results. With that, I will turn the call over to Renee.