Toro Company (The)

Good day, ladies and gentlemen, and welcome to the Toro Company's second quarter earnings conference call. My name is Josh, 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, Heather Hilley. Vice President, Corporate Affairs and Investor Relations. Please proceed, Ms. Hilly.

Good morning, everyone, and thank you for joining us for the Toro Company's second quarter 2026 earnings conference call. I'm Heather Hilly, Vice President of Corporate Affairs and Investor Relations. On the line with me today are Rick Olson, Chairman and Chief Executive Officer, Edric Funk, President and Chief Operating Officer, and Angie Drake, Vice President and Chief Financial Officer. Rick, Edric, and Angie will provide an overview of our second 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. Before we begin, please note that any forward-looking statements made today are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks are detailed in our earnings release investor presentations, and our most recent filings with the SEC. During our remarks, we will also reference certain non-GAAP financial measures. We believe these metrics provide useful insight into the company's performance. Reconciliations to the most directly comparable GAAP measures can be found in this morning's press release. Both the release and our second quarter supplemental presentation are available in the investor information section of our corporate website. With that, I will now turn the call over to Rick.

Thank you, Heather, and good morning, everyone. The Toro Company continued its strong start to the year, exceeding expectations with second quarter top line growth of 8% and adjusted EPS of $1.60. This is the second consecutive quarter of double digit adjusted earnings growth, driven by strong demand and improving margins. We remain focused on our key strategic priorities, accelerating profitable growth, driving productivity and operational excellence, and empowering people. This disciplined approach is delivering results. Demand was broad based across our portfolio. Residential net sales grew 4% and professional net sales grew by 9%. Within professional, we drove mid single digit sales growth in golf and grounds, high single digit sales growth in landscape contractor, We are particularly excited to have achieved low double-digit organic sales growth in underground and specialty construction. A key highlight in underground construction continues to be the JT120 horizontal directional drill. Designed for maximum uptime, it features advanced capabilities that increase operator efficiency and job site safety. It is built to handle long bores and difficult terrain with ease. and customer response has been strong with a robust and growing order pipeline. At ConExpo in March, we highlighted another example of customer-driven innovation. Orange Intel is a customizable fleet management and job site intelligence system. It provides Ditch Witch customers with the ability to optimize productivity, manage maintenance and uptime, enhance security, and integrate all this information across the full job lifecycle. We are helping our customers leverage job site data as a critical enabler to improve their productivity and profitability. Our integration of Tornado is progressing well. Growth is slightly better than anticipated, contributing over two percentage points to top line sales. We see a long runway of growth for this business as the need for soft excavation is significant and growing. The increasing number of states and countries have requirements around safely uncovering underground utilities. We expect this trend to continue as the ability to mitigate infrastructure damage during excavation gains awareness. Moving on to landscape contractors, after a more normal snow season, they entered Q2 in a healthy position. This helped drive strength across our Toro, Exmark, and Ventrac brands. Spring conditions were more typical this year, which provided a favorable year-over-year comparison to the late spring last year, where some second quarter sales fell into the third quarter due to the delayed timing of spring. In golf, strength continues to come from our core products, greens mowers, fairway mowers, and contour rotary mowers. While we are still in the early stages of growth with our autonomous portfolio, customers continue to recognize how our suite of solutions complements their existing fleets, increases productivity, and unlocks new efficiencies in their labor force. Looking at the results across our portfolio, it was particularly impressive that the team achieved our second quarter performance despite macroeconomic and geopolitical headwinds and increased inflationary pressures. In this dynamic environment, we continue to strengthen our capabilities with a specific focus on productivity and operational excellence. As a result, in Q2, residential margins significantly improved to nearly 10% and pro margins improved to over 20%. At the center of this improvement is our AMP program. Launched in the beginning of fiscal 2024, AMP continues to exceed expectations. reinforcing a productivity mindset across the company. We accomplished all of this while reducing our field inventory, which remains healthy in the professional segment, with underground and golf largely normalized. Inventory levels for landscape contractor and residential are somewhat below our desired levels as we work to meet pockets of elevated demand, particularly for zero-turn mowers. Taking everything into account, healthy demand, improved lead times, normalized field inventories, and expanding margins, we are raising our full year guidance. We now expect full year sales growth in the range of 4% to 6.5% and adjusted EPS in the range of $4.50 to $4.62. Our performance in the first half of 2026 increases our confidence in our ability even in a dynamic external environment. With that, I'll turn the call over to Angie for more details on the quarter and our outlook.