Q3 2023 The Toro Company Earnings Call
Speaker 1: Good day ladies and gentlemen and welcome to the Toro Company's third quarter earnings conference call. My name is Gigi and I'll 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 toward the end of today's conference.
Speaker 1: As a reminder, this conference is being recorded for replay purposes.
Speaker 1: I would now like to turn the presentation over to your host for today's conference, Julie Karikas, Treasurer and Senior Managing Director of Global Tax and Investor Relations. Please proceed, Ms. Karikas. Thank you and good morning, everyone. Our earnings release was issued this morning and a copy can be found in the investor information section of our corporate website, thetorocompany.com.
Speaker 1: We have also posted a third quarter earnings presentation to supplement our earnings release and general investor presentation. On our call today are Rick Olson, Chairman and Chief Executive Officer, Angie Drake, Vice President and Chief Financial Officer, and Jeremy Steffen, Director Investor Relations.
Speaker 2: Demand was strong across the rest of our end customer base, and with that, the other businesses in our diverse portfolio delivered excellent growth.
Speaker 2: In a moment, I'll discuss our initial estimates and assumptions for the third quarter and which of those did and did not come to fruition.
Speaker 2: Before I do that, it's important to note that we are encouraged by our continued market leadership and believe we are well positioned to drive long-term profitable growth in each of our attractive end markets.
Speaker 2: We're also excited by today's announcement of our partnership with Lowe's, which we expect will further strengthen our mass retail channel.
Speaker 2: We'll be discussing this development later in the call. But first I'd like to explain what drove our lower than expected results for the quarter.
Speaker 2: On our June call, we shared expectations for total company net sales growth slightly below 7% in the third quarter. Instead, our net sales of $1.08 billion was a decline of 7%.
This supports our strong balance sheet, which in turn provides the financial flexibility to fund investments that drive long term sustainable growth.
Our disciplined approach to capital allocation remains the same.
With priorities that include.
Making strategic investments in our business to drive long term profitable growth, both organically and through acquisitions.
Returning cash to shareholders through dividends and share repurchases and maintaining our leverage goals.
These priorities are highlighted by our recent actions, including our.
Our plan to deploy $130 million in capital expenditures this year to fund new product investments advanced manufacturing technologies and capacity for growth.
Our dividend payout increase of 13% over last year.
And our return of nearly $60 million to shareholders year to date through share repurchases.
As we look ahead to the fourth quarter of the fiscal year. We expect continued strong demand for our innovative products and key professional segment markets. We are also encouraged by the stabilizing supply chain that is enabling increased production for our construction and golf and grounds product.
At the same time, we are entering the fourth quarter with elevated inventory levels for professional and residential segment lawn care solutions as well as residential snow products.
This combined with the macro factors, we've been discussing are expected to dampen demand for these products in the near term.
With this backdrop and based on our current visibility we are revising our full year fiscal 2023, net sales and adjusted diluted earnings per share guidance ranges.
For fiscal 2023, we now expect total company net sales to be similar to slightly higher than last year compared to our previous expectations for 7% to 8% growth.
This reflects anticipated volume production for residential and professional lawn care solutions as previously discussed.
This also reflects expectations for a continuation of improved production rates for construction and golf and grounds products as well as the assumption that we will experience more normal weather patterns for the remainder of the year.
We expect professional segment net sales to grow mid to high single digits on a full year basis.
Looking at profitability, we continue to expect gross margin improvement in fiscal 2023 compared to fiscal 2022, and still expect our gross margin in the second half of the year to be lower than the first half of the year.
We also expect gross margin in the fourth quarter to be lower than the third quarter.
This is primarily driven by anticipated manufacturing inefficiencies as we adjust production volumes to demand for lawn care solutions and work to improve our inventory position as we close out the year.
We expect these manufacturing inefficiencies to be partially offset by productivity gains and net price realization.
In addition for the full year, we now expect total company adjusted operating earnings as a percentage of net sales to be flat to slightly down compared to last year.
We now expect our professional segment earnings margin to be lower than last year, driven by the third quarter impairment charges.
We continue to expect a lower earnings margin for the residential segment for the full year as compared to last year.
This is a reflection of the expected reduction in volume.
For our other activities category, we expect the fourth quarter of fiscal 2023 to be similar to slightly higher than the average quarterly run rate year to date.
In line with our revised net sales expectations and manufacturing adjustments, we are revising our full year adjusted EPS guidance range to $4 and five.
Two $4.10 per diluted share from the previous range of $4 70 to.
<unk> to $4 87.
This adjusted diluted EPS estimate excludes the impact of noncash impairment charges as well as the benefit of the excess tax deduction for share based compensation.
Additionally for the full year, we now expect depreciation and amortization of about $120 million to $125 million.
<unk> expense of about $59 million and free cash flow conversion of approximately 50% to 60% of reported net earnings we.
We continue to expect an adjusted effective tax rate of about 21%.
We believe our organization is positioned to emerge from this challenging time even stronger.
We're prepared to remain nimble as we drive execution on cost reduction and productivity initiatives, while continuing to prudently invest in the future.
We're building our business for long term profitable growth and remain confident in our ability to drive sustained value for all stakeholders.
With that I'll turn the call back to Rick.
Thank you Angie.
Our business fundamentals remain strong supported by our outstanding team of dedicated employees and channel partners.
We have a long and proven track record of managing through economic cycles and seasons with agility and resiliency.
We expect that resiliency will help us navigate through the current rebalancing of homeowner demand.
While consumer rebalancing in this macro environment had a greater impact in the quarter than expected we have a <unk>.
Number of factors that we believe will drive positive results in the coming quarters.
First and foremost we're encouraged by very positive demand trends in other parts of the business. For example, we expect continued demand strength across the majority of our professional customer base, including professional contractors golf courses municipalities sports fields and grounds and our construction customers.
Second we believe our new strategic partnership with Lowe's is an excellent opportunity to complement and strengthen our mass channel and the residential segment.
Third the supply chain, that's been more stable and we expect that we will continue to improve.
This should enable productivity gains across our manufacturing facilities and help us drive incremental production for our backlog businesses.
Okay.
Finally, we are taking decisive actions to adjust our production and cost structure and the current demand environment. We believe these actions will drive near and long term productivity and margin benefits.
I'd now like to provide additional comments on the factors, we're seeing in our end markets, which could impact future results.
We anticipate continued strength in demand for our construction and golf and grounds businesses.
We expect the drivers to be the same as we've noted previously including infrastructure spending and support sustained momentum in new golfers and rounds played and the prioritization of public green spaces.
Our order backlog for these businesses remains significantly elevated and our team is focused on driving incremental output and reducing lead times to support our customers.
Our goal is to return backlog to more normalized levels as soon as possible.
For snow and ice management, we continue to expect more subdued demand heading into the upcoming season, driven by a lack of snowfall earlier this year at.
At the same time early season snowfall events in key regions with typically drive an uptick in orders.
And finally looking at residential and professional lawn care solutions for homeowners were watching consumer confidence spending preferences and weather patterns for.
Our landscape contractors, we expect budgets to remain healthy and we will continue to watch business confidence and other macro factors.
Also keeping an eye on inventory levels in the field and inventory management actions across our channels.
Despite the recent dynamics, we believe these remain excellent long term markets for us and our leadership position is strong.
The solutions, we provide for these markets are essential for turf maintenance and have regular replacement cycles.
We believe we are extremely well positioned to expand share in these attractive markets with our leading brands.
Native products and best in class channels.
Looking longer term, we remain confident in our ability to drive sustained value for all stakeholders guided by our enterprise strategic priorities of accelerating profitable growth driving productivity and operational excellence and empowering people.
We continue to prioritize investments in innovation and transformational technologies <unk>.
<unk> alternative power smart connected and autonomous solutions.
We are leveraging these investments across our broad portfolio of to accelerate new product development and capitalize on growth opportunities great.
A great example of this is our proprietary Hypersound battery management system, which is now powering solutions across our professional segment, including lawn care equipment golf and ground solutions and specialty construction products.
We're excited about our new product pipeline and our ability to help our customers increase productivity, while also addressing their sustainability goals.
We expect our expanding suite of innovative solutions to strengthen our market leadership now and into the future bolstered by our trusted brands and extensive distribution networks.
On that note I would like to thank our employees and channel partners for going above and beyond every day to support our customers even in the most challenging of times.
You are the key to the Toro company's long term success I would also like to extend my gratitude to our customers shareholders for your continued support.
With that we will open up the call for questions.
Thank you, ladies and gentlemen, if you wish to ask a question. Please press star followed by one one on your Touchtone telephone. If your question has been answered or you wish to withdraw your question Press Star followed by one one.
<unk> Star one one to begin please standby for your first question.
Yeah.
Your first question comes from the line of Michael Slutsky from D. A Davidson and company.
Yes, Hello. Good morning, Thanks for taking my question last time I ask here.
Morning.
Let's unpack here, maybe I'll start with some questions on the lows.
Agreement I guess first of all I mean, this sounds like a pretty heavy.
And the question will be given them, it's a pretty big sell in or stuck up order for that happening in the spring I would imagine.
Angie was that part of the reason why maybe the free cash may be a little challenged in the near term do you have to build inventory.
And work in process in advance of that shipment and then.
Just some kind of sizing as to how much that first invoice could be I'm trying to think back to what happened with that.
Got supply just some sense of the upside in Q2.
Okay sure Hi, Mike I'll start by answering your question on the free cash flow I would say no that wasn't a big impact impact to our free cash flow for the quarter.
We have been working on our working capital metrics really all year long inventory is higher than we want it to be today, but not necessarily driven by the Lowe's impact or building up inventory for that we do expect to see improvement throughout the year, our free cash flow I know, we guided down now for 50 years.
60% from our previous 90 to 100.
And expect that historically to get back to our conversion rate is about 100%.
And it's really based on all working capital metrics inventory a P N E R.
Rick May want to comment further on the chart as you can imagine we're incredibly excited to have a partnership with Lowe's and it's actually it's a great fit for us given a couple of factors.
First of all the strength of lows, particularly in those return category the location of their.
Their stores matches up well with that demographic our leadership in the area of <unk> and really the combination of the two brands, it's really a powerful opportunity for both.
Opportunity really to to bring our flex force products to more customers was another thing that was important to us.
We value all of our long term channel partners, but we really believe that this is.
The right thing to do for us and for our customers a broader availability of the product and it will be there will be a substantial deal for us right off the bat in the first year.
We're not we're not guidance.
Not specifically guiding for 2004, yet, but it will be a positive impact for 24.
Okay, and just a follow up there.
Because what's happening at Lowe's change, how you work it all with home depot.
Far as I know.
So the exclusive until now obviously does it change the terms or the mix that you might have in that store.
Going forward.
Yes.
With all of our partners. The home depot has been a terrific and continues to be a terrific partner for us. So.
We will continue to look to them and each of our partners to provide a unique value proposition for each of their customers that there are differences.
And we really want to work with each of our partners to help them grow their business as we grow as well. So we continue to view the home depot as a strong partner as we do our other maps.
Certainly our dealer channel as well all important to us bringing our products.
Our offerings to our customers in different ways in the ways that they would like to have access to them.
Okay.
And then turning to the other piece of Big news how the.
The lawn care.
Business was impacted by a dry weather I'd be curious on the other side of things did you have a good quarter good outlook here for the golf irrigation business.
If things are so drive as people are still playing you thought people are getting a lot of usage out of their systems and they are looking to.
Grades or add some new products going forward. That's on the golf course is out there.
Yes. Thanks. Thanks for the question Thats excellent question, we had a fantastic quarter on the golf side of the business and really the non landscape contractor portion of our professional business was it was very strong.
Particularly we called out golf grounds in irrigation, but also the underground specialty construction.
Big piece of this is the steady progress that we're making excuse me and steady progress that we're making with the supply chain as our plants have been able to operate more consistently.
Our supply chain team has done an excellent job in working with our suppliers to get more consistent so.
Apply of components and the plants are gearing up much closer to the pre pandemic level on a consistent basis. So that's been the drivers the demands as can be continued to be there across those businesses and we've been able to meet that more.
Significantly recently.
Okay. Thank you I'll leave it there I appreciate the help.
Okay. Thanks, Mike.
Yes.
Thank you.
One moment for our next question.
Our next question comes from the line of Tim Walsh from Baird.
Yeah, Hey, guys good morning.
Alright.
Maybe just the first question on on the lawn care business within pro or maybe just some pro in general I mean could you give us a little bit.
Some flavor or maybe some buckets just in terms of how much the lawn care business declined in the third quarter and the pro business and then maybe how much the other businesses underground in golf and grounds kind of growth just to give us an idea of the moving pieces there.
As I mentioned the demand remained very strong on most other pieces and if you look at it.
There's different ways to look at the reduction in demand from a homeowner standpoint, if you look.
In the third quarter year over year, the split was pretty even between residential and.
The professional side of the Westgate contractor side, we built in a larger portion of that into what we said on the second quarter and are thinking.
What was different than we expected was more.
More reduction on the line.
Escape contractor side so.
Beth.
That was kind of the split it was pretty evenly split between rows and professional portion landscape contractor quite a homeowner but.
The residential portion we had anticipated more and on the landscape contractor side that ended up being a bigger piece.
The other the other factor that was there was.
Just the normal rebalancing that our channel does and as they look at their inventory carrying costs at the time of the season.
They were looking to reduce their stock as well. So that's that's a factor that's kind of in between.
So in the end customers as well that was a factor.
Under the underground specialty construction golf grounds those parts of the business remains strong and the underlying drivers for those infrastructure and the strength of golf continues to be extraordinarily strong.
Okay. Okay. Good.
And then I guess just on the field inventory I mean.
It sounds like Youre going to you expect it to actually exit the season with higher inventory in the field. So I guess what are the conversations that youre, having with distributors and dealers just given.
And I think you do have some pretty tough comps in the first half of the year for 'twenty three and it seems like just given kind of exiting the year with higher inventory than just higher cost to carry in those types of things I mean do you think.
Possible that your distributors and dealers kind of take inventory into next year more on a just in time basis.
Or closer to the season.
Few field inventory for us is really.
Stories.
Different depending on which of the categories.
You do think about those areas of high demand our field inventory is very low for example, the underground specialty construction much much lower than we would like to see if that product is going directly to customers. The same with golf and grounds. The other end of the spectrum is what you're talking about which is for those landscape contractor products.
Specifically in some categories of Roes, we go into a lower part where the off part of the season with higher field inventory.
We do expect that that will take into 2024 to work through that.
Realistically if.
It gets carried through the off season, it's going to be largely the second the second quarter. When the demand is high enough to really believe that off in a significant way and get back to a more normal level, just kind of working through the rebalancing of demands the channel expectations and what are what our production.
It is.
Okay. Okay that makes sense alright, I appreciate the color guys. Good luck on the rest of the year. Thank you.
Thank you.
Yes.
Thank you.
One moment for our next question.
Our next question comes from the line of Eric <unk> from Cleveland Research Company.
Okay. Thank you too.
Two things.
First of all.
If you go back a little bit of time.
The only residential mass customer was home depot. It felt like that was a strategic decision and over the last three years three years ago, you had attracted value at Loews.
So I am curious philosophically.
Philosophically or strategically.
What changed in either the market or you're thinking.
That suggested good idea to do business with all three of these guys versus previously there obviously was a conscious decision to just sell one what what changed.
I don't know that anything has necessarily changed we we make that kind of calculation on a annual basis, we think through our strategy as we look at.
Particular product categories, where we're looking to grow and we value all of our.
Long term and medium term.
Partners.
You've mentioned, we just look at the opportunity that was there with Lowe's to bring our product to more customers.
Look at the entire picture and we believe that it was the right thing to do for Us now.
And that's the.
We have the opportunity to bring our brand to more customers and that ability to leverage at higher.
At higher volumes, it's important for us as we're investing in new technologies, and so forth to the level of investments in new product development.
It comes even greater.
It's to have larger scale and larger volume early as a help for all of our partners.
We're.
We have a relationship with each of our channel partners and we are an incredibly important dealer channel. So.
We think of and every decision and we believe we have the opportunity to grow with each of those channel types of channel partners as we go forward.
Okay.
Secondly, intimidator.
I'm, just curious to understand a little bit better within this I would assume when you.
When you bought the business or value of the business of pro forma the business the revenue growth and mid teen revenue growth last year was probably better than you had budgeted I guess im just surprised 18 months later to have a write off of this magnitude.
Especially considering the first of all about the performance was again, probably better than the pro forma whats.
Is this inventory being written off as this goodwill being written off is there like something over the medium term that or whats the whats different in the medium term that changes that.
The arc of this business that the accounting wise Guy you to having to make such a.
A move today.
Yes, Youre right, we saw really nice growth in the first year of Intesa intergroup, it's about 16, 5%. So very strong growth what we saw impact that group in that business. This year with the same thing that we saw in our other residential and homeowner businesses, our Q3 results for <unk>.
Significantly lower than expected.
Really the summer seasonality trends that they normally see did not come to fruition, mainly due to the weather June ended up being a really hot month and it impacted them in the in kind of a southern regions and that they play and they are also largely based on customers that are homeowners.
<unk>, who prefer to buy a professional product.
So.
With the macro factors that Rick discussed earlier and he had in his prepared remarks really affected that business.
So it's really goodwill and trade names that were impaired it's not a write down of their assets.
Okay.
And admittedly I don't totally understand the accounting piece of it but what I guess I don't understand is like the June was the hot months.
And the summer seasonality.
And which seems very near term so then impact.
Are you carrying the asset on the balance sheet. It just seems like a.
A big change if it's just indeed hot weather in June and some unique seasonality is theres not something different on a sustained go forward basis. It's just as narrow as is what happened here. This summer.
It's largely Europe for us was largely.
A math exercise and really the impact in near term on our model is more significant so the actual results in the current quarter. For example, and then projecting just as we've talked about with the other businesses through.
Into next year really has a more significant impact on the overall model for the business interest rates were also significantly higher so you put that altogether.
I indicated it was appropriate for us to.
To have the impairment related to goodwill and trade name, though he Kerry Yeah. I would just also add to that theyre going into next year as well with a lot of field a lot of channel inventory. So just like our <unk> business that will take into 2024, and so we'll get through that I will say just not to get lost in that.
Discussion, we still feel incredibly positive about the Intimidator group.
The Spartan business, we have no regrets about that.
Becoming part of the total company and have very strong expectations for that business going forward.
Okay. Thank you.
Thank you one moment far next question.
Our next question comes from the line of Tom Hayes from C. L. King.
Hey, good morning, everyone I appreciate the time today.
Hey, Rick you mentioned a couple of times in your prepared remarks, it sounds like the supply chain is getting better.
Could you just maybe elaborate a little bit on that and kind of where do you think.
Is there.
Further improvement, we could see going forward.
Yeah. Thanks. Thanks for the question, we have seen a really significant improvement and supply chain, especially if youre looking at a year over year basis, it's been a steady improvement.
The categories, we've talked about over the last several quarters wiring harnesses hydraulic components chips et cetera, there is still over subtle having a periodic issues with those but the frequency and the duration of those issues impacting our plants is much less.
Yes.
So we're back closer to production levels before the pandemic in many cases, we've also been able to shift production.
Our products two plants that have lesser demand for some of the reasons, we just talked about.
And in fact, some of those some of those <unk>.
<unk> were really develops during the pandemic, so we'd become a little bit more flexible flexible that way.
And I would just say having been out to a number of our plants within the last 30 days there is a different sense, but we have just a short time ago.
Products are running down Hawaiians consistently plants are.
Busy.
Producing products very consistently just physically noticeable that we're back in a much better position, we still have a ways to go in some areas and especially some particular facilities and lines, but in general a much different situation that we're in 12 months ago.
Okay, and then maybe as a follow up on the residential side.
Just wondering if youre seeing the broad based decline in activity in the quarter was that spread across both the traditional gas powered engines and the battery products or is there was maybe one a little bit better than the other.
It was it was spread across both pretty.
Pretty similar resource.
Okay I appreciate the color. Thank you.
Okay. Thank you.
Thank you one moment for our next question.
Our next question comes from the line of David Macgregor from Longbow Research.
Yes, good morning, everyone and thanks for taking my questions.
Good morning, Rick can we just start by for context sake.
Percentage of this.
The LTE business today do you think is just the residential customer buying up versus what percentage is the professional landscape contractor I'm just trying to get some context for what's going on here.
Yes.
Scape contractor category in general across the three brands.
The residential what we would call at the <unk> residential where we would say a homeowner because it's typically a homeowner that has acreage that would justify a machine like that from a capacity standpoint, or just the desire to get a professional product, but it is an appreciable portion of those businesses in that range.
<unk>.
A little bit differently across the brands the X Mark is.
A higher percentage of pure professionals and larger contractors, but still has an element of of homeowners on the other end of the spectrum of higher percentage of homeowners on the Spartan brand and then <unk> is kind of in between we don't breakout the specific numbers.
Because most of our competitors are private companies in these areas and we know that they.
What for information when we when we talk about it publicly but it's.
Appreciable portion.
Okay.
I guess is there any way to just talk about where you are seeing some strength here in golf and in construction equipment.
You've got a very substantial backlog that you continue to ship against that could you speak to what youre seeing in order patterns in terms of incoming orders.
Are you seeing any inflection or slowing or cancellation in orders.
Specifically, maybe smaller courses are smaller dealers.
Yes, the order flow continues to be very strong across those back quarter categories, again golf and grounds underground construction.
And just as a.
Thinking of the same kinds of questions. We just recently went through a kind of aging of review and our back orders and.
The majority by far of the back quarters or actually in the current year. So thats something thats changed so it really speaks to the idea although the overall back order number has already come down slightly.
<unk> refreshed shows we've been able to fulfill orders new orders have been coming in lead times have been improving so those kind of <unk>.
Multi year orders that we're trying to fulfill our much smaller than they were a couple of years ago.
So when you say that the back orders the majority of those back orders during the current year or Youre, saying <unk> we're gonna.
We're going to work down a very large portion of your current backlog and <unk>.
I would just say is the composition of what we referred to as back orders. Our open orders were generated this year as opposed to last year or the year before.
You mean, the incoming order as opposed to when you expect to ship.
When exactly when the order was placed.
So it speaks to the age of those orders right as we still work out kind of the Covid era.
It still takes some time to do that so we're still working through orders that had come in in 'twenty, one and 'twenty two.
Okay got it thank you for that distinction.
And then is there any way to isolate within the margins.
The impact of manufacturing curtailments versus everything else that's going on.
No we are seeing manufacturing variances affect us, but we don't break it out specifically.
And to that point, obviously, when we see a decline in demand. The first thing we do is make adjustments within our plants to make sure. We're not producing product that we don't need and making any expense adjustments that we need to make sure we're right sized relative to the market opportunity.
But in Q3 and Q4 manufacturing variance.
As a factor definitely as you can imagine what sort of with a reduction of volume.
Sure sure that makes sense last question from me.
During the quarter, you had kind of a short two week period, where you did not have any retail promotions and it was kind of a gap between one sales event to the other.
What did you see in the way of elasticity is during that period I'm, just trying to get a sense of.
How impactful incentives might ultimately be in terms of helping you kind of elevate demand here to clear inventory or whether the.
Market has just become maybe a little more insensitive to.
Two incentives, but just maybe what did you see during that period that would inform that thought.
Q4, returning to a more normal situation than I would say is the programs that we'd run do you have an impact so they it is hopeful and demand generation et cetera.
And it's really returning to more normal kind of pre pandemic type of response, we just hadn't been running those kind of promotions during the pandemic due to lack of availability of product.
So we're back to a more normal situation, where we use those throughout the season to help drive further stimulate demand just on a model basis.
And then they have thanks very much.
And they have been working.
Thank you.
Thank you one moment for our next question.
Yeah.
Yeah.
Our next question comes from the line of Joshua Wilson from Raymond James.
Good morning, and thanks for fitting me in.
Good morning, Josh.
Just one clarification on the backlog before I get to some other questions you said it was.
Down slightly versus three months ago is that right.
That's correct, yes, we're down slightly from year end.
Okay, and then as it relates to the.
The new relationship with Lowe's are there going to be any product exclusives or any thing like that in the in the relationship and then separately do you have a sense of who youre displacing at Lowe's.
Yes.
With regard to specific skus.
That becomes part of the discussions with each of our channel partners. So you would expect there would be some at any of our partners.
Including Lowe's.
So with regard to displacement, we really can't speak to that Thats really.
Within the with the discussion of.
The lowest with Lowe's with their other suppliers, but we are extraordinarily excited about the opportunities that Lowe's presents for US here as we go forward.
And do you have any sense of the net gain or loss in like shelf space between Lowe's and home depot.
We don't at.
At this point as you can imagine we're pretty early in the relationship and those all of those details are being worked out right now.
Sure.
Not really guiding to what's going to happen.
24 will be.
Much more specific in December .
Got it.
Thank you very much.
Thank you.
Thank you one moment for our next question.
Okay.
Our next question comes from the line of Ted Jackson from Northland Securities.
Okay.
Thanks down to the wire for me.
Got it.
How are you.
Couple of follow up questions on the bank My God wanted had been asked so first just quickly on load is it fair to assume I know, you're not giving guidance, but we would see the impact of flows in the second quarter of the next fiscal year just in terms of there how it would impact your business and Theyre getting stock in place with.
Regards to the season et cetera.
Yes, I think that you'll begin to see that in the spring 2020 for selling season.
Mhm again and that given that your second quarter in April .
Quarters, where we would be looking for that impact to start showing up.
Yeah.
Not really we don't really know what the guidance it will be at this point, but that's a good assumption.
Yeah, I'm just talking about timing.
And then.
The other question on inventory you made a commentary that inventories are higher because of the weakness on the.
The home owner side of lawn care and that you felt that that would be normalized by the time you got.
I think you basically kind of said second quarter.
Okay.
<unk> also can you give a little definition of what the term normal meetings is that like a.
Current spaces that days of inventory basis is it on a dollar basis is kind of whats the bogey there.
Yes, I think it would be it would be really on all of those basis, but we mentioned in the second quarter.
Just in general we believe it will take time into fiscal 2020 for normalized to use that term again.
And the biggest opportunity is in the second quarter, just because of the traditional scale of sales as a percentage of the year for those types of products. So that's when the real volume.
Becomes large enough to really impact the field.
Meantime, we're working with our channel partners to make sure that we've got the right stock levels.
They are making decisions based on their own.
Based on their own business metrics.
So.
So thats really what we referred to but normal to us would be back to more historical days inventory on hand, those kinds of metrics that we typically look at.
And those were just hit on the book.
And you hit on the block, which is nice it doesn't have the history with the company like what's you know what.
What is the historical norm in terms of like days of inventory.
Yes.
Brendan.
Yes, it depends on both the channel and the specific brand.
The flow of the product so I can't say that specifically in general.
Mhm.
I went back a year ago could you give me a year I can calculate out like what you would say would be a typical year that I would want to go look at for a reference point.
Yeah, we might be able to cover some of that a little bit later I think that we are still trying to figure out what some of that normal means up post COVID-19 as well.
But just to give you some comfort we are seeing something good for making good progress on the web and we have seen the inventory come down to two quarters in a row. So we do believe to be in a better position in F. 'twenty four.
And I was referring to that field inventory. There. So there are probably two different tiers or matter of scale.
Yes that would be able to see that one it's much I'm sure.
And then my last thing and I will step aside it's apoptosis.
No, we're not getting into guidance with Lowe's or anything else because.
I don't recall, if you ever provided any kind of color. It's a percentage of your top line that it comes from mass market.
And if so well.
We have not given specific numbers.
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A number of years ago when we.
We're a smaller company we reported the numbers based on the need to do so because it was more than 10% of our business, but that's we don't we don't do that since we've become larger.
But they are they are.
It's a significant piece of our business, that's a significant part of the residential business specifically.
So if you look at the total of residential it's going to be.
A good portion of that.
Yes.
Okay, I guess, that's all I can ask one alright, thanks very much.
Okay. Thank you. Thank you.
This concludes the question answer session Mischaracterize. Please proceed to closing remarks.
Thank you all for your questions and interest in the Toro company, we look forward to talking with everyone again in December to discuss our fiscal 2023 fourth quarter and full year results.
Thank you for your participation in today's conference. This concludes the presentation you may now disconnect good day.
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