Toro Company (The)

Good day, ladies and gentlemen, and welcome to the Toro Company's Second Quarter Earnings Conference Call. My name is Carmen, and I will be your coordinator 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. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's conference, Yuli Caracas. a Senior Managing Director of Global Tax and Investor Relations. Please proceed, Ms. Caracas.

Thank you, and good morning, everyone. Our earnings release was issued this morning, and a copy can be found in the investor information section of our corporate website, thetorocompany.com. We have also posted a second quarter earnings presentation to supplement our earnings release. On our call today are Rick Olson, Chairman and Chief Executive Officer, Angie Drake, Vice President and Chief Financial Officer, and Jeremy Steffen, Director, Investor Relations. During this call, we will make forward-looking statements regarding our plans and projections for the future. Forward-looking statements are based upon our historical performance and current expectations and are subject to risks, uncertainties, and other factors that may cause actual results to differ materially from those contemplated by these statements. Additional information regarding these factors can be found in today's earnings release and in our investor presentations, as well as in our SEC reports. During today's call, we will also refer to non-GAAP financial measures, which we believe are important in evaluating the company's performance. For more details on these measures, the most comparable GAAP measures, and a reconciliation of the two, please refer to this morning's earnings release and our investor presentations. With that, I will now turn the call over to Rick.

Thanks, Julie, and good morning, everyone. Our team continued to execute well as we delivered second quarter results in line with the expectations we shared on last quarter's call. Once again, our team operated with dedication and agility as we adjusted production to align with demand trends, drove productivity benefits across the enterprise, and capitalized on an ever-expanding portfolio of innovative products that satisfy our customers' most pressing needs. We are continuing to advance our key strategic priorities to drive shareholder value by accelerating profitable growth, driving productivity and operational excellence, and empowering our people. For the second quarter, we delivered record net sales of $1.35 billion. This was driven by top-line growth of 26% in our residential segment. And within our professional segment, we saw continued growth in the underground and specialty construction and golf and grounds businesses. For residential, as anticipated, exceptional growth in our mass channel more than offset the expected lower shipments to our dealer channel, given elevated dealer field inventories heading into this year. The residential segment benefited from successful new product introductions and better weather conditions compared to last year. Strong demand has kept order backlog elevated in our underground and specialty construction and golf and grounds businesses. We continue to successfully drive incremental output within our existing manufacturing footprint to increase shipments of those products and better serve our customers. This strength was offset by anticipated lower shipments of contractor-grade zero-turn bulk Notably, we've made significant progress reducing dealer field inventories of lawn care equipment in both the professional and residential segments. This was a result of our reduction in shipments to dealers as expected, coupled with initial spring retail momentum. Moving to the bottom line, we delivered adjusted diluted earnings per share of $1.40. This compares to last year's record $1.58. The change year-over-year was largely a result of segment mix given the significant growth in residential this quarter, as well as product mix within the residential segment. We were pleased to have been able to offset some of this effect with productivity benefits and prudent management of SG&A. Based on our performance in the first half of the year and our current visibility for the remainder of the year, we are reaffirming our full year fiscal 2024 net sales and adjusted diluted earnings per share guidance. Angie will walk through those details shortly. Throughout the quarter, we advanced our enterprise strategic priorities to drive shareholder value for the long term. First, we maintained a sharp focus on accelerating profitable growth. One important component of this strategy is innovation to solve customers' most pressing needs, align with market growth trends, and generate a strong return on investment. To that end, we recently introduced a number of new products that are providing truly unique solutions in our markets. To briefly highlight a few examples, our new generation Toro Time Cutter and Titan Zero Turn mowers have been extremely well received by customers. These new mowers are already driving share gains and enhancing our market leadership position in this space. This is a testament to our customer focus, brand strength and dependability, as well as our extensive distribution network, including mass channel partners and our best-in-class independent dealers. We've also raised the bar with our new TX1000 Turbo Compact Utility Loader. This machine introduces a smart power feature that optimizes engine, auxiliary, and traction torque for an unparalleled operator experience. Another example is our recently introduced Ditch Witch AT120 for the accelerating underground construction market. This industry-leading machine, which leverages 30 existing and pending patents, is the world's most powerful all-terrain horizontal directional drill. The AT120 enables productivity while at the same time reducing job site noise. Our internal team voted the AT120 as our new product of the year. This honor reflects the product's advanced features and its importance to our long-term strategy. Second, we continue to drive productivity and operational excellence across the organization. Our outstanding team delivered strong productivity gains this quarter, while at the same time operating with flexibility as we adjusted production to meet demand dynamics across our portfolio. Importantly, we remain on track in confidence in our ability to deliver at least $100 million of annualized savings by fiscal 2027 from our multi-year productivity initiative named AMP for amplifying maximum productivity. As we've discussed, we intend to prudently reinvest up to 50% of the savings to further accelerate innovation and long-term growth. And third, we continue to foster a culture of empowering people. A great example is our annual TTC Technology Forum, which empowers our internal technology community to connect and collaborate to inspire unique customer and enterprise solutions across the organization. Teams at this year's forum included advanced battery technology, integrated data usage, robotic navigation, and advanced manufacturing technologies. A highlight was sharing developments in predictive and generative AI models to enable new product features, streamline workflows, and unlock powerful data insights for both the Toro company and our customers. We will remain focused on our three strategic priorities going forward. We are building on strong momentum as we enter the second half of the year. With that, I'll turn the call over to Angie to discuss our financial results and guidance before I return to provide commentary on the outlook for our businesses.