The Toro Company (NYSE:TTC) Q2 2023 Earnings Call Transcript

Samuel Darkatsh: Okay, terrific. And then my other question as it relates to the residential business, I think if my math holds at least, your guidance now suggests maybe, I don’t know, about $150 million or so in lower sales residential than you had previously contemplated, but your guidance at least at the midpoint is only down about a nickel which is much less than the normal residential decrimental margin might suggest. So is the offset better than expected Pro volumes and margins, or is the offset where the lower residential sales that you’re expecting are coming at lower ticket or lower margin type of products?

Rick Olson: The offset is the strength of the Pro business with those higher margins that you that you refer to and the ability to get more product produced to fulfill the demand. So it’s really, that’s really the offset for the lower numbers that we’re projecting for residential.

Samuel Darkatsh: If I could sneak one more in, I apologize, it’s quick. Talk about your resi, talk about your residential market share, Rick. I’m — obviously, virtually everybody is seeing the same sorts of trends, but the sell-through trends and product placement trends at retail. Can you talk about what — to the extent you have visibility, what you’re seeing versus peers?

Rick Olson: We feel very positive about our market share position. It’s really reflecting the work that we’ve done over the last number of years to have a very strong portfolio to have a very relevant technology portfolio. We’ve seen the strength across our channels, so in addition to the mass partners that are very important to us, we’ve also seen the strength in our dealer network. In fact, exceptional strength in the first quarter — or excuse me, second quarter, first half of the year with our dealer business, it’s done very well.

Samuel Darkatsh: Thank you, thank you both.

Rick Olson: Thank you.

Operator: And one moment for our next question. Our next question will come from Tim Wojs of Baird. Your line is open Tim.

Timothy Wojs: Hey good morning everybody.

Rick Olson: Good morning Tim.

Timothy Wojs: Maybe just to start, Rick, could you maybe just give us a little bit of color or context in terms of just how much improved the production rates are in construction and kind of golf and grounds and what’s really driving that? Is that just some of the supply chain kind of easing in some of the bottleneck areas? Is it just better productivity? I mean can you just maybe add a little bit of context of kind of where it is today versus where it was six months ago and kind of what you’re expecting for the back half?

Rick Olson: I think it’s actually one of the big stories for us in this quarter is the amount of growth that’s coming from actual unit volume. I know with inflation and so forth over the last number of years, there’s been a lot of price that’s gone into the revenue line. In this case, it’s significantly driven by volume that reflects the success within our production facilities. Our own production facilities had gotten better some time ago, but it’s really been the supply chain, the suppliers specifically. And we’ve mentioned over the last couple of quarters, it’s narrowed down to some key categories, that’s still true. So the availability of those components is still pacing our production output at this point, but it’s getting steadily better and volume was the driver of our revenue growth this quarter, which is pretty significant relative to the last number of quarters.

Timothy Wojs: Okay. And do you expect incremental improvements in the back half of the year or are you kind of expecting that the back half looks more like the second quarter?

Rick Olson: I mean, all of our — we look at all the factors up and down and all that’s included within our guidance, but we do expect steady improvement in our operations as our suppliers are getting healthier.