Toro Company (The)

Good day, ladies and gentlemen, and welcome to the Toro Company's first quarter earnings conference call. My name is Daniel, and I will be your coordinator for today. At this time, all participants are in 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 conference Over to your host for today's call, Heather Hilley, Vice President, Corporate Affairs and Investor Relations. Please proceed, Ms. Hilley. Heather Hilley, Vice President, Corporate Affairs and Investor Relations. Please proceed, Ms. Hilley. Heather Hilley, Vice President, Corporate Affairs and Investor Relations. Please proceed, Ms. Hilley.

Heather Hilley, Vice President, Corporate Affairs and Investor Relations. Please proceed, Ms. Hilley. Heather Hilley, Vice President, Corporate Affairs and Investor Relations. Please proceed, Ms. Hilley. Heather Hilley, Vice President, Corporate Affairs and Investor Relations. Please proceed, Ms. Hilley. Heather Hilley, Vice President, Corporate Affairs and Investor Relations. Please proceed, Ms. Hilley. Heather Hilley, Vice President, Corporate Affairs and Investor Relations. Please proceed, Ms. Hilley. Heather Hilley, Vice President, Corporate Affairs and Investor Relations. Please proceed, Ms. Hilley. Heather Hilley, Vice President, Corpor and Angie Drake, Vice President and Chief Financial Officer. Rick, Edrick, and Angie will provide an overview of our first quarter results, which were released earlier this morning, and discuss our priorities and outlook for the remainder of fiscal 2026. 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, and 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. which along with a first 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, Heather, and good morning, everyone. Throughout the first quarter of 2026, our teams remained diligently focused on executing our strategic priorities. We capitalized on market opportunities and customer demand, drove operational excellence, and leveraged our portfolio of leading brands for profitable growth and competitive advantage. At the same time, we invested in value-creating technology and innovation. As a result, we beat expectations in both segments and increased consolidated net sales by more than 4% to $1.04 billion. Our outperformance was driven by strong execution in both our professional and residential segments, which allowed us to capitalize on incremental demand for snow and ice products and continued growth in underground and specialty construction. We reported better than expected adjusted earnings per share of 74 cents, up from 65 cents a year ago, due to higher earnings in our professional segment, which represents about 80% of our portfolio. We expanded our HydroVac excavation solutions through our acquisition of tornado infrastructure equipment, further strengthening our capabilities. We continue to implement our multi-year AMP program, which is fueling sustainable productivity improvements and has contributed $95 million in cost savings toward our aggregate goal of $125 million. We generated free cash flow of $14.6 million, resulting in an impressive free cash flow conversion rate of 22% in a quarter where our seasonal preparations typically result in a net use of cash. And we repurchased approximately $95 million of common stock, reflecting our commitment to return value to shareholders. In summary, through strong execution of our strategic priorities throughout the first quarter, we drove favorable sales and earnings growth and further strengthened our financial position. During the first quarter, our teams were prepared to deliver snow and ice products and capitalize on incremental demand as a series of winter storms hit in major population areas. This operational agility and strong execution not only contributed to excellent Q1 top-line growth, but also positions us well for robust performance in these categories in the back half of this year. Adding to this optimism is our fresh lineup of boss plows with new cold front technology, or CFT, which has been well received by customers. The innovative CFT system integrates plow and spreader functionality and is engineered for effortless connections, smart performance, and maximum efficiency. We also continue to invest in underground and specialty construction, reflecting our expectations of multi-year growth in these businesses. Our efforts underscore our focus on broadening our offering to drive both near and long-term results. During the first quarter, horizontal directional drills, like the innovative JT21, which launched last year, contributed to our sales upside. We expect customer demand to remain strong. We were very excited to welcome Tornado to the Toro Company during the quarter. As a natural adjacency to our existing businesses, its complimentary offering enables us to expand our growth opportunities in this market. And this spring, we look forward to showcasing our recently launched Ditchwich SK1000, a compact, stand-on skid steer with increased lifting capacity and reduced maintenance, making it ideal for utility work as well as landscaping. To preserve our profit margins and remain price competitive, we continue to pursue deliberate strategies through our AMP program to drive sustainable productivity improvements, cost savings, and net price realization. Through the AMP improvements, we are working to moderate the effect of higher material and manufacturing costs and fully offset the effect of tariffs. We're also carefully managing inventory at all stages of production, as evidenced by our healthy net inventory position at the end of the first quarter. This was a key driver of working capital improvement. While external factors like the economy, geopolitical environment, and weather are ongoing considerations, We are committed to maintaining our discipline and aligning our inventories with expected demand as the year unfolds. These actions are strengthening our operations and driving improved financial results, and our teams and channel partners are highly motivated to build on this momentum. I want to thank them for their ongoing commitment to advancing our product and technology innovations, as well as our cost savings and productivity initiatives. Now Angie will share additional insights on our first quarter results and provide our outlook for the year.