Toro Company (The)

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, Jeremy Steffen, Director of Investor Relations. Please proceed, Mr. Steffen.

Good morning, everyone, and thank you for joining us for the Toro Company's second quarter 2025 earnings conference call. On the line with me today are Rick Olson, Chairman and Chief Executive Officer, and Angie Drake, Vice President and Chief Financial Officer. During this call, Rick and Angie will provide their insights on our second quarter results, which were released earlier this morning, along with our outlook and priorities for the remainder of the year. Following their remarks, we'll open the phone lines for a question and answer session. As a reminder, any forward-looking statements that we make this morning are subject to risks and uncertainties, including those described in today's earnings release, investor presentation, and most recent SEC filings. It may cause actual results to differ materially from those contemplated by these statements. Also in our remarks, we'll refer to certain non-GAAP financial measures, which we believe are important in evaluating the company's performance. Reconciliations of all non-GAAP numbers to the most directly comparable GAAP number are included in this morning's press release Along with the second quarter presentation containing supplemental information is posted in the investor information section of our corporate website. With that, I will now turn the call over to Rick.

Thanks, Jeremy, and good morning, everyone. Our team has remained focused on leveraging the strength of our diverse portfolio of leading brands, controlling what we can control in a dynamic environment, and driving operational excellence across the organization. In doing so, we exceeded our adjusted earnings per share expectation for the quarter, took decisive actions to overcome near-term headwinds, executed on our playbook to mitigate tariffs, and we continue to introduce new, innovative products and solutions that enhance customer productivity at a time when it's needed most. These priorities remain at the forefront of our efforts as we navigate the current environment. For the second quarter, we grew adjusted earnings per share to $1.42, exceeding our expectations. At the same time, we continued to return cash to shareholders through dividends and share purchases. These results reflect our team's commitment to operational excellence, despite a dynamic macroeconomic environment and unfavorable regional weather that pressured top-line growth in some businesses. Revenue in the quarter declined 2.3% year-over-year to $1.3 billion as weak consumer confidence coupled with a late spring in many regions created near-term headwinds for products sold to homeowners. This was partially offset by continued strength in our golf and grounds businesses where demand for our innovative products remains robust. We continue to see positive results from our AMP program, which now has generated $70 million of run rate savings and remains on track to deliver $100 million by 2027. As a reminder, in fiscal 2024, we made adjustments to our workforce, manufacturing footprint, and portfolio. And in the current fiscal year, we have reduced our global salaried workforce by an additional 10%. Also in Q2, we took actions to rationalize our operational footprint in the residential segment, by winding down production in one of our plants in Mexico and transitioning that production to existing facilities in the United States. This move will improve fixed cost absorption and efficiency while ensuring we continue to deliver exceptional products and service to our customers. This action also underscores the strength of our supply chain strategies we have in place to mitigate tariff headwinds, which in this dynamic environment we estimate in fiscal 2025 to be approximately 3% of our annual cost of goods sold. Many of these strategies were implemented beginning in 2018 and give us a competitive advantage today. The vast majority of our professional products are manufactured in the United States, and while we do manufacture primarily residential and irrigation products in Mexico, virtually all are USMCA qualified, now making them exempt from Mexico-specific tariffs Our sourcing team has been working with our suppliers to optimize our supply chain to remain agile in any environment. In addition, we will continue to thoughtfully implement price increases, ensuring our products remain competitive while protecting our profit margins and fueling investments in our future. Finally, I'll share some highlights from the quarter that showcase our continued product innovation, leadership in technology-driven solutions, and customer-focused strategies. all of which reinforce our confidence in the Toro Company's future. Market trends across our professional businesses remain robust. Golf continues its sustained momentum with strong participation levels driving equipment investments, while underground construction is benefiting from the compelling runway of infrastructure projects we've been discussing. Our innovation in alternative power, smart connected products, and autonomous solutions continues to drive significant customer value and differentiates our offerings. During the quarter, our boss business introduced several new products, including our new cold front technology electrical system with smart four headlights. This system seamlessly enables smart integration of the plow and our new EVX Plus smart spreader through a common truck harness. These advancements are aligned with our long-term strategy of helping customers be more productive through technology and innovation. Earlier this year, we expanded our electric construction portfolio to include new E2500 Ultra Buggies with high lift and swivel capabilities and our new E-Dingo TX750 in both narrow and wide track formats. These products leverage our hypercell power system, allowing customers to get eight hours of runtime. They're designed to work together on a job site to maximize efficiency and productivity. Additionally, because they are quiet and do not produce exhaust emissions, they provide exceptional value for customers working indoors. In our residential segment, we were awarded the 2024 ACE Hardware Vendor of the Year. This prestigious award recognizes select corporate-wide vendor partners that delivered substantial sales growth, differentiated innovative products, and excellent customer service. The award is a tremendous honor and served as a significant milestone in our corporate partnership with ACE Hardware that began back in 2015. Throughout the 110-year history of the Toro Company, we have consistently found ways to successfully navigate the most difficult environments. With our proven track record of resilience and agility and our team's commitment to execute with discipline, I am confident that our deliberate actions will advance our strategic priorities and position us for sustainable, profitable growth. With that, I will turn the call over to Angie.