The Toro Company (NYSE:TTC) Q1 2023 Earnings Call Transcript

Rick Olson: Just from a context standpoint, Residential has just been extraordinarily strong throughout the pandemic and through last year, I think roughly up 60% up from 2019. So, it’s been a real performer. We have a lot of momentum with the things that we’ve done, with the product line, with the addition of key channel partners, et cetera, the things that we talked about before. So, there’s really solid momentum. We’ve talked about coming into what we would call a more normal type of cycle. And for that, we really mean subject to the start of spring, some of those factors that are normally factors that we talk about, come back into the equation to a greater degree. Specifically this year, with regard to our expectations, snow was not as strong as we had planned, due to the lighter snowfall, especially in populated areas of the U.S. on the East €“ specifically the .

But we had strong shipments of , a nice incremental shipments of back power mowers. So, across the board, the net was very positive for Residential. And it’s going to be subject to, again, the normal year factors that are out there, but we’re in good shape as we enter the spring season, especially with much better inventory position that we’ve had for the last several years. So that business is in good shape at this point.

Sam Darkatsh: Thank you much. I’ll get back in line.

Angie Drake: Sorry Sam, I would just add to that on the profitability side that the past few years, we’ve seen both volume increases and margin increases that have helped our Residential profitability. And Q1 is historically higher from a profitability standpoint for Res, but we did have a really nice mix, as Rick talked about. We are seeing also some improvements year-over-year in the quarter due to price and productivity improvement. So, for the full-year, we expect to continue to see Residential profitability improve.

Sam Darkatsh: Very helpful. Thank you.

Operator: Thank you. One moment for our next question. And our next question comes from the line of Tim Wojs from RW Baird. Your question please.

Tim Wojs: Hey, everybody. Good morning. And I’d like to also echo the same sentiment to Renee. It’s been great working with you, and we appreciate all the help and congrats on your roles. Maybe just put a finer point on one of Sam’s questions. Just on the lead times by business, I mean, I guess, generally, over the last 3 months to 6 months, how have lead times trended maybe specifically in the underground and the golf business? Have they been pretty consistent or are you actually starting to see some of those lead times actually, kind of get better?

Rick Olson: Yes. I would say, if you look across the spectrum of products, obviously, the Residential into the landscape contractor area, those lead times have gotten better substantially over the last probably 18 months. As you get into the larger areas of backlog, which are underground, especially construction and golf and grounds, we’re seeing some improvements, but still substantially greater lead time than we would normally like to quote to our customers. And that’s €“ fundamentally, that’s our primary concern. Just making sure that we can serve our customers, which is a commitment that we have to them.

Tim Wojs: Okay. Okay. And then I guess from a cost perspective, I mean, it’s one input, but I mean, steel has kind of perked up here recently. How do you €“ just given the industry has taken a lot of price, I mean what type of, I guess, level of inflation or reinflation would you need to see to maybe, kind of consider additional price increases?