Q4 2023 The Toro Company Earnings Call

December 20, 2023

Good day, ladies and gentlemen. Welcome to the Toro Company's fourth quarter and full year fiscal 2023 earnings conference call. My name is Valerie and I'll be your conference coordinator for today. At this time, all participants are on listen-only mode. We will facilitate a question and answer session towards the end of today's conference. The schedule of today's call is being recorded for replay purposes.

Good day, ladies and gentlemen, welcome to the Toro company's fourth quarter and full year fiscal 2023 earnings Conference call. My name is Valerie and I'll be your conference coordinator for today.

At this time all participants are in listen only mode. We will facilitate a question and answer session towards the end of todays conference.

Today's call is being recorded for replay purposes.

I would now like to turn the presentation over to today's host.

I would now like to turn the presentation over to you todays host.

Julie Caracus, Treasurer and Senior Manager, Director of Global Tax and Investor Relations, please proceed, Ms. Caracus.

Julie: Julie characters.

Treasurer, and senior managing director of global tax and Investor Relations. Please proceed Ms characters.

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, thetoralcompany.com. We have also posted a fourth quarter earnings presentation to supplement our earnings release along with an updated general investor presentation.

Ms characters: 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, the Toro company Dot com.

Ms characters: Also posted a fourth quarter earnings presentation that supplements our earnings release, along with an updated 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 Stephan, Director, Investor Relations.

Ms characters: On our call today are Rick Olson, Chairman and Chief Executive Officer, Andrew Drink, Vice President and Chief Financial Officer, and Jeremy Stephens Director Investor Relations.

We begin with our customary forward-looking statement policy during this call. We will make forward-looking statements regarding our plans and projections for the future.

Ms characters: We begin with our customary forward looking statement policy. During this call we will make forward looking statements regarding our plans and projections for the future.

This includes estimates and assumptions regarding financial and operating results as well as economic, technological, weather, market acceptance, acquisition related and other factors that may impact our business and customers.

Ms characters: Includes estimates and assumptions regarding financial and operating results as well as economic technological whether market acceptance acquisition related and other factors that may impact our business and customers.

You are all aware of the inherent difficulties, risks, and uncertainties in making predictive statements. Our earnings release, as well as our SEC filings, details some of the important risk factors that may cause our actual results to differ materially from those in our predictions.

Ms characters: You are all aware of the inherent difficulties risks and uncertainties in making predictive statements our earnings release as well as our SEC filings detail. Some of the important risk factors that may cause our actual results to differ materially from those in our predictions. Please note that we do not have a duty to update our forward looking statements.

Please note that we do not have a duty to update our forward-looking statement.

In addition, during this call, we will reference certain non- GAAP financial measures. Reconciliations of historical non- GAAP financial measures to reported gas financial measures can be found in our earnings release and on our website in our investor presentations, as well as in our applicable SEC filings. We believe these measures may be useful in performing meaningful comparisons of past and present operating results and cash flows to understand the performance of our ongoing operations and how management views the business.

Ms characters: In addition, during this call we will reference certain non-GAAP financial measures reconciliations of historical non-GAAP financial measures to reported GAAP financial measures can be found in our earnings release and on our website in our investor presentations as well as in our applicable SEC filings. We believe these measures may be useful in performing meaningful <unk>.

Ms characters: Garrisons of past and present operating results and cash flows to understand the performance of our ongoing operations and how management views the business.

Non-GAF financial measures should not be considered superior to or a substitute for the GAF financial measures presented in our earnings release and discoloration. With that, I will now turn the call over to Vic. Thanks, Julie, and good morning, everyone. We delivered full-year net sales and adjusted diluted earnings per share of growth, and while as an exceptionally dynamic operating environment.

Speaker Change: non-GAAP financial measures should not be considered superior to or a substitute for GAAP financial measures presented in our earnings release and this call with that I will now turn the call over to Vic. Thank.

Vic: Thanks, Julie and good morning, everyone. We delivered full year net sales and adjusted diluted earnings per share growth in what was an exceptionally dynamic operating environment. We.

We saw strong performance across much of our professional segment throughout the year. This includes double-digit, top-line growth for our underground and specialty construction and golf and grounds businesses, driven by robust demand and actions taken to increase production output.

Vic: We saw strong performance across much of our professional segment throughout the year.

Vic: <unk> double digit topline growth for our underground, especially construction and golf and grounds businesses, driven by robust demand and actions taken to increase production output.

The strength offset the combination of weather and macro factors that led to a sharp reduction in homeowner demand and acceleration of channel these backing for residential and professional segment lawn care products during the second half of the fiscal year.

Vic: This strength offset the combination of weather and macro factors that led to a sharp reduction in homeowner demand acceleration on channel Destocking for residential and professional segment lawn care products during the second half of the fiscal year.

Even with these significant factors, our total company net sales of $4.55 billion and adjusted diluted earnings per share of $4.21 both exceeded last year's record results. This is a testament to the benefits and the strengths of our portfolio, as well as the dedication of our extremely talented team of employees and valued channel partners.

Vic: Even with these significant factors our total company net sales of $4 $5 5 billion and adjusted diluted earnings per share of $4 in 'twenty one.

Vic: Both exceeded last year's record results. This is a testament to the benefits and the strength of our portfolio as well as the dedication of our extremely talented team of employees and valued channel partners.

For the fourth quarter, net sales of $983 million were down compared to last year, as expected.

Vic: For the fourth quarter, net sales of $983 million or down compared to last year as expected.

Adjusted, diluted earnings per share of 71 cents, although lower than a year ago, exceeded the outlook we shared on our third quarter call.

Vic: Adjusted diluted earnings per share of <unk>, 71 cents, although lower than a year ago exceeded the outlook, we shared on our third quarter call.

This was the result of our swift actions to align with current conditions in our various markets.

Vic: This was the result of our Swift actions to align with current conditions in our various markets.

We increased output for businesses with elevated order backlog, decreased output for long-care products, and drove productivity gains and prudent expense management across the enterprise.

Vic: Increased output for businesses with elevated order backlog decreased output for lawn care products and drove productivity gains and prudent expense management across the enterprise.

In addition, restructuring actions were taken to adjust headcount for these industry dynamics. I'll now highlight our

Vic: In addition, restructuring actions were taken to adjust headcount for these industry dynamics.

Vic: I'll now highlight our full year results by segment.

For fiscal 2023, on a year over year basis, professional segment net sales were up 7%.

Vic: For fiscal 2023 on a year over year basis professional segment net sales were up 7% with.

We capitalize on continued strength and demand across much of the segment delivering top line growth for all businesses with the exception of contractor grade one care solution.

Vic: We capitalized on continued strength in demand across much of the segments delivering topline growth for all businesses with the exception of contractor grade one carrier solutions.

Importantly, a stabilizing supply chain enabled us to increase manufacturing output for underground and specialty construction and golf and grounds products. As a result, we were able to improve lead times and better serve our customers.

Vic: Importantly, a stabilizing supply chain enabled us to increase manufacturing output for underground in specialty construction and golf and grounds products.

Vic: As a result, we were able to improve lead times and better serve our customers.

Vic: Okay.

residential segment net sales were down 20% in fiscal 2023 as we navigated unfavorable weather patterns along with a number of macro factors.

Residential segment net sales were down 20% in fiscal 2023, as we navigated unfavorable weather patterns, along with a number of macro factors.

These factors included rising interest rates, economic uncertainty, and the continued normalization of demand patterns for products sold to homeowners following a period of exceptional demand during the pandemic.

Vic: These factors included rising interest rates economic uncertainty and the continued normalization of demand patterns for products sold to homeowners following a period of exceptional demand during the pandemic.

To put this in perspective, even with the performance this year, the residential segment has delivered top-line growth at an average annual rate of 7% since 2019.

Vic: To put this in perspective, even with the performance. This year. The residential segment has delivered top line growth at an average annual rate of 7% since 2019.

This is a result of our trusted brand's innovative products and increasingly robust distribution channel. We believe where our well positions have further capitalized on these strengths as this market rebounds.

Vic: This was a result of our trusted brands innovative products and increasingly robust distribution channel. We believe we are well positioned to further capitalize on these strengths as this market rebounds.

On that note, we are excited to have our full line of coral branded products available in low stores nationwide, beginning with the upcoming spring selling season.

Vic: On that note. We're excited to have our full line of <unk> branded products available in Lowe's stores nationwide, beginning with the upcoming spring selling season.

The Toro company has a long track record of strategically managing the business to deliver consistent positive financial results and sustainable value for all stakeholders.

Vic: The total company has a long track record of strategically managing the business to deliver consistent positive financial results and sustainable value for all stakeholders.

Throughout the year, we advanced our three enterprise strategic priorities of accelerating profitable growth, driving productivity and operational excellence, and empowering people. I'll highlight exactly what we're doing.

Vic: Throughout the year, we advanced our three enterprise strategic priorities of accelerating profitable growth driving productivity and operational excellence and empowering people.

Vic: Ill highlight examples of each.

First, we continue to strengthen our innovation leadership, which is the lifeblood of our company and key to driving long-term profitable growth.

Vic: First we continued to strengthen our innovation leadership, which is the lifeblood of our company and key to driving long term profitable growth.

During the year, we prioritize investments in new products aligned with market growth trends, such as the launch of the AT 120, the world's largest all terrain horizontal directional drill.

Vic: During the year, we prioritized investments in new products aligned with market growth trends such as the launch of the AG 120, the world's largest oil train horizontal directional drill.

We continue to bolster our market leadership in the underground construction market with this and other new solutions designed to drive productivity and increased uptime for our customers.

Vic: We continue to bolster our market leadership in the underground construction market with this and other new solutions designed to drive productivity and increased uptime for our customers.

Our strong balance sheet also supported investments in transformational technologies leveraging across our broad portfolio. This includes the developments of alternative energy, smart, connected, and autonomous solutions.

Vic: Our strong balance sheet also supported investments and transformational technologies leveraging across our broad portfolio. This includes the developments of alternative energy smart connected and autonomous solutions piece.

These technologies provide customers with sustainable options and increased productivity, all with no compromise on performance.

Vic: These technologies provide customers with sustainable options and increased productivity all with no compromise on performance.

Recent examples include our expanded line of workman utility vehicles and our new line of VISTA people mover vehicles available in both battery and gas options.

Vic: Some examples include our expanded line of work with utility vehicles, and our new line of Vista people mover vehicles available in both battery and gas options.

both lines are built for versatility and reliability.

Vic: All clients are built for versatility and reliability.

Second, we drove productivity and operational excellence across the organization as we managed production and aligned costs with near-term demand in a quickly changing environment.

Vic: Second we drove productivity and operational excellence across the organization as we manage production and aligning costs with near term demand in a quickly changing environment.

We are carrying this momentum into 2024 with our recent launch of a transformational productivity initiative. We've named this multi year initiative amp, which stands for amplifying maximum productivity.

Vic: We are carrying this momentum into 2024 with our recent launch of a transformational productivity initiative. We've named this multiyear initiative amp, which stands for amplifying maximum productivity.

We are dedicating resources to identify and implement sustainable supply-based design to value and route to market transformation.

We are dedicating our resources to identify and implement sustainable supply base design to value and route to market transformation.

We expect this major initiative to result in more than $100 million of incremental annual cost savings by fiscal 2027.

Vic: We expect this major initiative to result in more than $100 million of incremental annual cost savings by fiscal 2027.

portion of this we intend to reinvest in the business to further accelerate innovation and long-term growth.

Vic: A portion of this we intend to reinvest in the business to further accelerate innovation and long term growth.

And third, we focused on ensuring that our employees and channel partners were aligned and empowered to drive the best possible outcomes for all stakeholders.

Vic: And third we focused on ensuring that our employees and channel partners were aligned and empowered to drive the best possible outcomes for all stakeholders.

In a year that played out much differently than originally expected, our team remained nimble and supported our customers with their unwavering commitment to do business the right way.

Vic: And a year that played out much differently than originally expected our team remains nimble and supported our customers with their unwavering commitment to do business the right way.

Before I hand the call over to Angie, I'd like to reiterate the high confidence we have in our ability to continue to capitalize on growth opportunities in our attractive end market.

Vic: Before I hand, the call over to energy I'd like to reiterate the high confidence we have in our ability to continue to capitalize on growth opportunities in our attractive end markets.

This includes the sustained strong demand we've seen in our underground and specialty construction and golf and grounds businesses and the eventual rebound of homeowner markets.

Vic: This includes the sustained strong demand we've seen in our underground specialty construction and golf and grounds businesses and the eventual rebound of homeowner markets.

With that, Angie will walk through the details of our fourth quarter performance and our fiscal 2024 guidance.

Vic: With that Andrew will walk through the details of our fourth quarter performance and our fiscal 2020 for guidance.

Thank you Rick and good morning everyone. Our results in the fourth quarter were aligned with our expectations and we saw several businesses continue their strong momentum to close out the year.

Thank you Rick and good morning, everyone. Our results in the fourth quarter were aligned with our expectations and we saw several businesses continue their strong momentum to close out the year.

Consolidated net sales for the quarter were $983.2 million, a decrease of 16.1% compared to last year.

Vic: Holiday did net sales for the quarter were $983 2 million.

Vic: A decrease of 16, 1% compared to last year.

Reported EPS was 67 cents per diluted share and reflects a 4 cent charge related to a restructuring program we initiated in October .

Vic: Reported EPS was <unk> 67 per diluted share and reflects a <unk> <unk> charge related to a restructuring program we initiated in October.

The $0.67 was down from $1.12 in the fourth quarter of last year. Adjusted EPS was $0.71 per diluted share, down from $1.11.

Vic: The 67 was down from $1 12 in the fourth quarter of last year.

Vic: Adjusted EPS was <unk> 71 per diluted share down from $1 11.

For the full year, net sales of $4.55 billion were up about 1% from $4.51 billion last year.

Vic: For the full year net sales of $4 five 5 billion.

Vic: Up about 1% from 451 million last year.

Reported EPS was $3.13 per diluted share. This was inclusive of non-cash impairment and restructuring charges and the tax impact of stock-based compensation.

Vic: Reported EPS was $3 13 per diluted share.

Vic: This was inclusive of noncash impairment and restructuring charges and the tax impact of stock based compensation.

This result compares to $4.20 last year.

Vic: This result compares to $4 in 2000 and since last year.

On an adjusted basis, full-year EPS was $4.21 per diluted share, up from $4.20.

On an adjusted basis full year EPS was $4 21 per diluted share up from $4 in 'twenty.

Vic: Now to the segment results.

Professional segment net sales for the 4th quarter were $828.9 million, down 12.3% year over year.

Vic: Professional segment net sales for the fourth quarter were $828 9 million down 12, 3% year over year.

This decrease was primarily driven by lower shipments of contractor-grade lawn care equipment and snow products and increased floor planning costs.

Vic: This decrease was primarily driven by lower shipments of contractor grade lawn care equipment, and snow products and increased floor planning costs.

This was partially offset by higher shipments of underground and specialty construction products and golf and grounds equipment.

Vic: This was partially offset by higher shipments of underground and specialty construction products and golf and ground equipment.

For the full year, professional segment net sales increased 7.1% to $3.67 billion and comprised 81% of the total company net sales.

Vic: For the full year professional segment net sales increased seven 1% to $3 $6 7 billion and comprised 81% of the total company net sales.

Professional segment earnings for the 4th quarter were $124.5 million on a reported basis, down from $159 million last year.

Vic: Professional segment earnings for the fourth quarter were $124 $5 million on a reported basis down from $159 million last year.

When expressed as a percentage of that sales, earnings for the segment were 15 percent, compared to 16.8 percent last year.

Vic: When expressed as a percentage of net sales earnings for this segment were 15% compared to 16, 8% last year.

The change was primarily due to higher material costs, lower net sales, and increased floor planning costs.

Vic: The change was primarily due to higher material costs, lower net sales and increased floor planning costs.

This was partially offset by productivity improvements and favorable product mix.

For the full year, professional segment earnings were $509 million, compared to $584 million in fiscal 2022.

Vic: For the full year professional segment earnings were $509 million compared to $584 million in fiscal 2022.

The fiscal 23 results include gross non-cash impairment charges of $151.3 million.

Vic: In fiscal 'twenty three results include noncash impairment charges of $151 3 million.

As a percentage of net sales, segment earnings were 13.9% compared to 17% last year.

As a percentage of net sales segment earnings were 13, 9% compared to 17% last year.

Residential segment net sales for the 4th quarter were $148.4 million, down 33.6% compared to last year.

Vic: Residential segment net sales for the fourth quarter were wonderful $48 4 million down 33, 6% compared to last year.

The decrease was primarily driven by lower shipments of products broadly across the segment, partially offset by the benefit of net price realization.

The decrease was primarily driven by lower shipments of products broadly across the segment, partially offset by the benefit of that price realization.

For the full year, residential segment net sales were $854.2 million, compared to $1.1 billion in fiscal 2022, and COVID-19% of the total company net sales.

Vic: For the full year residential segment net sales were $854 2 million.

Vic: Compared to $1 1 billion in fiscal 2022 and COVID-19% of total company net sales.

Residential segment earnings for the quarter were $4.5 million compared to $17.5 million last year.

Vic: Residential segment earnings for the quarter were $4 5 million compared to $17 $5 million last year.

When expressed as a percentage of net sales, earnings for the segment were 3%, compared to 7.8% last year.

Vic: When expressed as a percentage of net sales earnings for this segment were 3% compared to seven 8% last year.

The year-over-year decrease was primarily driven by higher inventory reserves, unfavorable product mix, and lower sales volume.

Vic: The year over year decrease was primarily driven by.

Vic: Higher inventory reserves unfavorable product mix and lower sales volume.

This was partially offset by the benefits of net price realization, productivity improvements, and lower material costs.

Vic: This was partially offset by the benefits of net price realization productivity improvements and lower material costs.

For the full year, residential segment earnings were 68.9M dollars, compared to 112.7M dollars in fiscal 2022.

Vic: For the full year residential segment earnings were $68 9 million compared to $112 $7 million in fiscal 2022.

As a percentage of net sales, segment earnings were 8.1% compared to 10.5% in fiscal 2022.

Vic: As a percentage of net sales segment earnings were eight 1% compared to 10, 5% in fiscal 2022.

Turning to our operating results, our reported and adjusted gross margins were 33.5 and 33.6% respectively for the quarter.

Vic: Turning to our operating results our reported and adjusted gross margin were $33, five and 33, 6% respectively for the quarter.

This compared to 34 and 34.1% respectively in the same period last year.

Vic: This compared to 34 and 34, 1% respectively in the same period last year.

The differences were primarily driven by higher material costs and inventory reserves, partially offset by productivity improvements and favorable product mix.

Vic: The differences were primarily driven by higher material costs and inventory reserves.

Vic: Finally, offset by productivity improvements and favorable product mix.

For the full year, reported and adjusted gross margin grew to 34.6% and 34.7% respectively.

Vic: For the full year reported and adjusted gross margin grew to 34.6 and 34, 7% respectively.

This was up from 33.3% and 33.4% respectively in FY2022.

Vic: This was up from $33, three and 33, 4% respectively in fiscal 2022.

This positive result was primarily driven by net price realization and productivity improvements, partially offset by higher material costs.

Vic: This positive result was primarily driven by net price realization and productivity improvements.

Vic: Chile offset by higher material costs.

SG&A expense as a percentage of net sales for the quarter was 23.9% compared to 21.2% in the same period last year.

Vic: SG&A expense as a percentage of net sales for the quarter was 23, 9% compared to 21, 2% in the same period last year.

This increase was primarily driven by lower net sales and increased investment in research and engineering. This was partially offset by lower warranty costs.

Vic: This increase was primarily driven by lower net sales and increased investment in research and engineering.

Vic: This was partially offset by lower warranty costs.

For the full year, SG&A expense as a percentage of net sales was 21.8% compared to 20.5% last year.

Vic: For the full year SG&A expense as a percentage of net sales was 21, 8% compared to 25% last year.

Operating earnings as a percentage of net sales for the fourth quarter were 9.6 percent and on an adjusted basis were 10.1 percent.

Vic: Operating earnings as a percentage of net sales for the fourth quarter or nine 6% and on an adjusted basis was 10, 1%.

These compare to 12.8% and 12.9% in the same period last year on a reported and adjusted basis.

Vic: These compare to 12, eight and 12, 9% in the same period last year on a reported and adjusted basis.

For the full year, operating earnings as the percentage of net sales were 9.5% and on an adjusted basis were 12.9%.

Vic: For the full year operating earnings as a percentage of net sales were nine 5% and on an adjusted basis were 12, 9%.

These both compare to 12.8% in fiscal 2022.

Vic: These both compared to 12, 8% in fiscal 2022.

Interest expense for the quarter was $14.9 million dollars, up $3.4 million from the same period last year.

Vic: Interest expense for the quarter was $14 9 million up.

Vic: $3 4 million from the same period last year.

Interest expense for the full year was $58.7 million, up $23 million.

Vic: Interest expense for the full year was $58 7 million up.

$23 million.

The year-over-year increases were primarily due to higher average interest rates.

Vic: The year over year increases were primarily due to higher average interest rates.

The reported effective tax rate for the fourth quarter was 19.1%, compared with 17.9% last year.

Vic: The reported effective tax rate for the fourth quarter was 19, 1% compared with 17, 9% last year.

The increase was primarily due to the geographic mix of earnings and higher tax benefits recorded as excess tax deductions for stock compensation in the prior year period.

Vic: The increase was primarily due to the geographic mix of earnings and higher tax benefits recorded as excess tax deductions for stock compensation in the prior year period.

The adjusted effective tax rate for the fourth quarter was 19.3%, compared with 18.5% last year.

The adjusted effective tax rate for the fourth quarter was 19, 3% compared with 18, 5% last year.

The year-over-year difference was primarily driven by the geographic mix of earnings.

Vic: The year over year difference was primarily driven by the geographic mix of earnings.

For the full year, the reported and adjusted effective tax rates were 17.7% and 20.4%, respectively.

Vic: For the full year, the reported and adjusted effective tax rates were 17, 7% and 24% respectively.

This compares to 19.8 percent and 20.2 percent in fiscal 2022.

Vic: This compares to 19, 8% and 22% in fiscal 2022.

Vic: Turning to our balance sheet as of year end.

Accounts receivable were $407 million, up 22 percent from a year ago, primarily driven by payment terms and higher international sales.

Vic: Accounts receivable were $407 million up 22% from a year ago, primarily driven by payment terms and higher international sales.

Inventory was $1.09 billion, up 3% compared to last year.

Vic: Inventory was $1 9 billion.

Vic: Up 3% compared to last year.

This increase was primarily due to higher finished goods largely driven by decreased demand for product sold to hum owners.

Vic: This increase was primarily due to higher finished goods largely driven by decreased demand for products sold to homeowners.

This was partially offset by improvement in working process levels year over year enabled by a stabilizing supply environment.

Vic: This was partially offset by improvement in work in process levels year over year.

Vic: Enabled by a stabilizing supply environment.

Vic: Sequentially inventory was down $25 million from the end of the third quarter with improvement in both working process and finished goods.

Sequentially, inventory was down 25 million from the end of the third quarter with improvement in both working process and finished goods.

Accounts payable were $430 million, down 26 percent compared to a year ago, primarily driven by a reduction in material participation.

Vic: Accounts payable were $430 million down, 26% compared to a year ago, primarily driven by a reduction in material purchases.

Full year free cash flow was $164.4 million, which reflects the conversion ratio of 50% of reported net earnings, as expected.

Vic: Full year free cash flow was $164 4 million, which reflects a conversion ratio of 50% of reported net earnings as expected.

While this was an improvement from fiscal 2022, elevated working capital continued to affect the results.

Vic: While this was an improvement from fiscal 2022 elevated working capital continued to affect the result.

For fiscal 2024, we expect a return to our historical average conversion rate of about 100%.

Vic: For fiscal 2024, we expect a return to our historical average conversion rate of about 100%.

Importantly, our balance sheet remains strong. Our gross debt to EBITOL leverage ratio is well within our target range of one to two times.

Vic: Importantly, our balance sheet remains strong our gross debt to EBITDA leverage ratio is well within our target range of one to two times.

This, along with our investment grade credit rating, provides the financial flexibility to fund investments that drive long-term, sustainable growth.

Vic: This along with our investment grade credit ratings provides the financial flexibility to fund investments that drive long term sustainable growth.

We continue to allocate capital with our disciplined approach and consistent priorities, which include

Vic: We continue to allocate capital with our disciplined approach.

Vic: And consistent priorities, which include <unk>.

Making strategic investments in our business to drive long term profitable growth both organically and through acquisitions.

Vic: 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.

Vic: Returning cash to shareholders through dividends and share repurchases and maintaining our leverage goals.

Our commitment to these priorities is demonstrated by our actions this year, including our deployment of $142 million to fund capital expenditures that support new product investments, advanced manufacturing technologies, and capacity for growth, and the return of $202 million to shareholders through regular dividend payments of $142 million and share repurchases of $60 million.

Vic: Our commitment to these priorities as demonstrated by our actions this year, including.

Vic: Our deployment of $142 million to fund capital expenditures to support new product investments advanced manufacturing technologies and capacity for growth.

Vic: And the return of $202 million to shareholders through regular dividend payments of $142 million and share repurchases of $60 million.

We are pleased that our board recently approved a 6% increase in our regular quarterly dividend for the first quarter of fiscal 2024.

Vic: We are pleased that our board recently approved a 6% increase in our regular quarterly dividend for the first quarter of fiscal 2024.

As we look ahead to fiscal 2024, we continue to be encouraged by our market leadership and believe we are well positioned to drive long-term profitable growth in each of our practice in markets.

Vic: As we look ahead to fiscal 2024, we continue to be encouraged by our market leadership and believe we are well positioned to drive long term profitable growth in each of our attractive end markets.

In the near term, there continues to be a number of factors in play.

Vic: In the near term there continues to be a number of factors in play.

First, we expect incremental growth from our expanded MASH channel. We anticipate this will help offset the headwinds from continued consumer caution and elevated field inventory levels of residential and contractor-grade lawn care products.

Vic: First we expect incremental growth from our expanded mass channel.

Vic: We anticipate this will help offset the headwinds from continued consumer caution and elevated field inventory levels of residential and contractor grade lawn care products.

Of note, there has been some progress in reducing dealer inventories of these products since last quarter's peak.

Vic: Of note there has been some progress in reducing dealer inventories of these products since last quarter's peak.

Second, we ended fiscal 2023 with a $2 billion order backlog, which remains much higher than typical.

Vic: Second we ended fiscal 2023, with a $2 billion order backlog, which remains much higher than typical.

This continues to be driven by the strong demand we are experiencing for our underground and specialty construction solutions and golf and grounds equipment.

Vic: This continues to be driven by the strong demand we are experiencing for our underground and specialty construction solutions and golf and grounds equipment.

With a more stable supply of key components, we are enabling increased flexible production capacity and are leveraging our existing manufacturing footprint to do so.

Vic: With a more stable supply of key components, we are enabling increased flexible production capacity and are leveraging our existing manufacturing footprint to do so.

We expect this will further improve lead times and allow us to better serve our customers.

Vic: We expect this will further improve lead times and allow us to better serve our customers.

And third, as expected, field inventories of snow products were elevated heading into the new fiscal year, driven by the lower than average snowfall totals last year.

Vic: And third as expected field inventories of snow products were elevated heading into the new fiscal year, driven by the lower than average snowfall totals last year.

While the snow season has yet to fully play out, early snowfall activity has been light.

Vic: While the snow season has yet to fully play out early snowfall activity has been light.

With this backdrop, and based on our current disability, we are providing the following guidance for fiscal 2024.

Vic: With this backdrop and based on our current visibility we are providing the following guidance for fiscal 2024.

For the full year, we expect low single digit total company net sales growth with Q2 and Q3 being our larger quarters.

Vic: For the full year, we expect low single digit total company net sales growth with Q2, and Q3 being our larger quarters.

For the professional segment, we expect net sales to grow at a rate lower than the total company average.

Vic: For the professional segment, we expect net sales to grow at a rate lower than the total company average.

For the residential segment, we expect net sales to grow at a rate higher than the total company average.

Vic: For the residential segment, we expect net sales to grow at a rate higher than the total company average.

Looking at profitability, for the full year, we expect overall adjusted operating earnings as a percentage of net sales to be slightly higher than last year.

Vic: Looking at profitability.

Vic: For the full year, we expect overall adjusted operating earnings as a percentage of net sales to be slightly higher than last year.

We expect both the professional and residential segment earnings margins to also be higher than last year.

Vic: We expect both the professional and residential segment earnings margins to also be higher than last year.

We anticipate a return to more normal incentive compensation, and with that, we expect the other activities category to reflect higher expense compared to fiscal 2023. Turning to adjusted gross margin.

Vic: We anticipate a return to more normal incentive compensation and with that we expect the other activities category to reflect higher expense compared to fiscal 2023.

Vic: Turning to adjusted gross margin.

Vic: We expect a slight year over year improvement.

We expect this to be driven by productivity initiatives, partially offset by manufacturing inefficiencies as we continue to rebalance residential and contractor grade lawn care equipment inventory level.

Vic: We expect this to be driven by productivity initiatives, partially offset by manufacturing inefficiencies as we continue to rebalance residential and contractor grade lawn care equipment inventory levels.

With this backdrop, we anticipate full-year adjusted EPS in the range of $4.25 to $4.35 per diluted share.

Vic: With this backdrop, we anticipate full year adjusted EPS in the range of $4 and 25 to $4 35 per diluted share.

Vic: Additionally for the full year, we expect.

capital expenditures of about $125 million.

Vic: Capital expenditures of about $125 million.

depreciation and amortization of about $120 million to $130 million, interest expense of about $50

Vic: Depreciation and amortization of about $120 million to $130 million.

Vic: Interest expense of about $59 million.

and an adjusted effective tax rate of about 21%.

Vic: And an adjusted effective tax rate of about 21%.

Vic: Turning to the first quarter of fiscal 2024.

We anticipate total company net sales to be down low double digits year over year.

As a reminder, our net sales grew 23% in the first quarter of fiscal 2023, so a difficult comparison.

Vic: As a reminder, our net sales grew 23% in the first quarter of fiscal 2023, so a difficult comparison.

We expect professional and residential segment net sales for the first quarter to also be down low double digits compared to the same period last year.

Vic: We expect professional and residential segment net sales for the first quarter to also be down low double digits compared to the same period last year.

Looking at profitability for the first quarter, we expect total company adjusted operating margin to be lower than the same period last year.

We expect the processional segment earnings margin to be slightly lower on a year-over-year basis and the residential segment earnings margin to be meaningfully lower.

Vic: We expect the professional segment earnings margin to be slightly lower on a year over year basis in the residential segment earnings margin to be meaningfully lower.

Overall, we expect our first quarter fiscal 2024 adjusted EPS per diluted share to be modestly lower sequentially from the fourth quarter of fiscal 2023.

Vic: Overall, we expect our first quarter fiscal 2024, adjusted EPS per diluted share to be modestly lower sequentially from the fourth quarter of fiscal 2023.

We are looking forward to fiscal 2024 with confidence and optimism. As executive sponsor for AMP, I am personally excited about the significant benefits and opportunities our team expects to unlock with this initiative.

Speaker Change: We are looking forward to fiscal 2024 with confidence and optimism as executive sponsor for Amp I am personally excited about the significant benefits and opportunities our team expects to unlock with this initiative.

This is made possible with a more stable supply environment and supported by our strong balance sheet.

Speaker Change: This is made possible with a more stable supply environment and supported by our strong balance sheet.

We continue to build our business for long term profitable growth and we remain confident in our ability to drive sustained value for all stakeholders with that.

Speaker Change: We continue to build our business for long term profitable growth and we remain confident in our ability to drive sustained value for all stakeholders.

Speaker Change: Now I'll turn the call back to Rick.

Thank you Angie. Our business fundamentals and market leadership remain strong. Our team has a long and proven track record of managing through a range of seasonal fluctuations and macro situations with agility and resilient feet.

Rick Olson: Thank you Angie our.

Rick Olson: Our business fundamentals and market leadership remains strong.

Rick Olson: <unk> has a long and proven track record of managing through a range of seasonal fluctuations and macro situations with agility and resiliency.

During this period of exceptional demand for underground and specialty construction and golf and grounds equipment, we expect our agility in flexing production with stabilizing supply to help us continue to improve output and lead times.

Rick Olson: During this period of exceptional demand for underground in specialty construction and golf and grounds equipment, we expect our agility and <unk> production with stabilizing supply to help us continue to improve output and lead times.

Additionally, we expect our resiliency will help us navigate through the current rebalancing of homeowner and channel demand for lawn care solutions and position us well as this market recovers.

Rick Olson: Additionally, we expect our resiliency will help us navigate through the current rebalancing of homeowner and channel demand for lawn care solutions and position us well as this market recovers.

We're closely watching business and consumer confidence and spending patterns as well as inflation, monetary policy actions and the geopolitical environment.

Rick Olson: We're closely watching business and consumer confidence and spending patterns as well as inflation monetary policy actions and the geopolitical environment.

While the rebalancing and homeowner markets has created some near-term headwinds, we believe our well-established market leadership positions us to drive positive long-term results.

Rick Olson: While the rebalancing and homeowner markets has created some near term headwinds, we believe our well established market leadership positions us to drive positive long term results.

This leadership is reinforced by our innovative products, trusted brands, and extensive distribution and support networks.

Rick Olson: This leadership is reinforced by our innovative products trusted brands and extensive distribution and support networks.

We also expect continued benefits from the essential nature and regular replacement cycles of our products.

Rick Olson: We also expect continued benefits from the essential nature and regular replacement cycles of our products.

I'll now comment on factors in our end markets that could affect future results.

Rick Olson: I will now comment on factors in our end markets that could affect future results.

For underground and specialty construction, we expect end-user demand to remain robust.

Rick Olson: For underground, especially in construction.

Rick Olson: <unk> end user demand to remain robust.

This is supported by increased private and public spending to address global issues such as aging infrastructure, broadband access, and alternative energy build-up.

Rick Olson: This was supported by increased private and public spending to address global issues, such as aging infrastructure broadband access and alternative energy build outs.

We're focused on helping our customers address these needs with our trusted channel and the most comprehensive equipment lineup in the industry, including innovative solutions for new installations, as well as repair, rehab, and replacement.

Rick Olson: We are focused on helping our customers address these needs with our trusted channel and the most comprehensive equipment lineup in the industry, including innovative solutions for new installations, as well as repair rehab and replacement.

For golf, we expect continued strength and demand driven by sustained momentum in new golfers and rounds played. This momentum is not just a U.S. trend, it's global.

Rick Olson: For golf, we expect continued strength in demand driven by sustaining momentum in new golfers and rounds played.

Rick Olson: This momentum is not just a U S trend it's global.

For example, since 2020, there has been an 18% rise in the number of on-course golfers participating in markets outside North America, and we are uniquely positioned to address this issue.

Rick Olson: For example, since 2020, there has been an 18% rise in the number of encores golfers participating in markets outside North America.

Rick Olson: And we are uniquely positioned in this space.

Rick Olson: We're the only company to offer both equipment and irrigation solutions and we are the global market leader in both.

An example of our leadership is our selection as the official turf maintenance and irrigation provider for the Ryder Cup through 2029. This is

Rick Olson: An example of our leadership as our selection as the official turf maintenance of irrigation provider for the Ryder Cup through 2029.

Rick Olson: This was a tremendous honor.

For municipalities and grounds, we expect continued healthy budgets and the prioritization of public green space.

Rick Olson: For municipalities and ground, we expect continued healthy budgets and the prioritization of public green spaces.

To capitalize on these trends, we remain focused on developing innovative solutions that drive productivity, including zero exhaust emission alternatives with no compromise on performance.

Rick Olson: To capitalize on these trends we remain focused on developing innovative solutions that drive productivity.

Rick Olson: <unk> zero exhaust emission alternatives with no compromise on performance.

An example is our new Vista line of people mover vehicles with battery and gas powered options available in multiple configurations.

Rick Olson: An example is our new Vista line of people mover vehicles with batteries and gas powered options available in multiple configurations.

This is a growth opportunity for us and a new product category built on our foundation of more than three decades of proven success and reliability in the work utility vehicle space.

Rick Olson: This is a growth opportunity for us and a new product category built on our foundation of more than three decades of proven success and a reliability and the work utility vehicle space.

For snow and ice management, we continue to expect more subdued contractor demand following last year's below average snowfall that resulted in elevated field inventories.

Rick Olson: For snow Unexposed meant we continue to expect more subdued contractor demand following last year's below average snowfall resulted in elevated field inventories.

We are keeping an eye on storm activity as they return to more normal snowfall would be positive.

Rick Olson: We're keeping an eye on storm activity as they return to more normal snowfall it would be positive.

A steady cadence of new product launches continues to enhance our leadership position in this market, including our new 8-foot stainless steel Boss V-Blade plow and our 72-inch Ventrac box plow attachment.

Rick Olson: A steady cadence of new product launches continues to enhance our leadership position in this market, including our new eight foot stainless steel <unk> file and our 72 inch been tracked box power attachment.

Both plows are designed to quickly and effectively clear large amounts of snow.

Rick Olson: Both towers are designed to quickly and effectively clear large amounts of snow.

For residential and commercial irrigation and lighting, we expect uneven demand from contractors and continue to watch consumer spending, weather patterns, and housing market trends. The drought conditions across many geographies over the last year highlight the importance of water conservation.

Rick Olson: For residential and commercial irrigation and lighting, we expect uneven demand from contractors and continue to watch consumer spending weather patterns and housing market trends.

Rick Olson: The drought conditions across many geographies over the last year, highlighting the importance of water conservation.

We are committed to designing solutions that address this need.

Rick Olson: We are committed to designing solutions that address this need.

We were honored to receive our ninth consecutive EPA WaterSense Award in October for our efforts in promoting the efficient use of water through our products, education, and outreach.

Rick Olson: We were honored to receive our ninth consecutive EPA water sense Award in October for our efforts in promoting the efficient use of water through our products education and outreach.

Rick Olson: For agricultural micro irrigation, we expect stable demand from growers and are monitoring key indicators, such as specialty crop prices weather patterns and interest rates, we continue to enhance our market position by expanding our offerings, including our developments of end to end automated.

For agricultural micro-irrigation, we expect stable demand from growers and are monitoring key indicators, such as specialty crop prices, weather patterns, and interest rates. We continue to enhance our market position by expanding our offerings, including our development of end-to-end automated solutions that drive increased productivity and efficiency.

Rick Olson: <unk> that drive increased productivity and efficiency.

For landscape contractors, we expect steady retail demand with some price sensitivity.

Rick Olson: For landscape contractors, we expect steady retail demand with some price sensitivity.

We expect continued interest in our high productivity, high capacity solutions that allow more work to be done with less labor resources.

Rick Olson: We expect continued interest in our high productivity high capacity solutions that allow more work to be done with less labor resources.

Equally important to contractors is our best-in-class service and support network.

Rick Olson: Equally important to contractors as our best in class service and support network.

For homeowners, we expect continued caution driven by the same macro factors we have discussed.

Rick Olson: For homeowners, we expect continued caution driven by the same macro factors we have discussed.

For both landscape contractors and homeowners, we are watching weather patterns. A return to more normal average temperatures and precipitation levels would be favorable, as would an early spring.

Rick Olson: For both landscape contractors and homeowners, we are watching weather patterns, a return to more normal average temperatures and precipitation levels would be favorable as with an early spring.

Despite the recent dynamics, we believe these remain excellent markets for us given our leadership position along with the regular replacement cycles and essential nature of these products.

Rick Olson: Despite the recent dynamics, we believe these remain excellent markets for us given our leadership position along with the regular replacement cycles and essential nature of these products.

We have high confidence, our ability to drive sustained value for all stakeholders over the long term.

Rick Olson: We have high confidence in our ability to drive sustained value for all stakeholders over the long term.

We're taking decisive actions to adjust our production and cost structure in the current demand environment, and we are focused on prudent and disciplined capital allocation that delivers excellent returns. This includes our investments in amps.

Rick Olson: We're taking decisive actions to adjust our production and cost structure and the current demand environment.

Rick Olson: And we are focused on prudent and disciplined capital allocation that delivers excellent returns. This.

Rick Olson: This includes our investments in hand.

we believe will drive near and long-term productivity and margin benefit.

Rick Olson: We believe will drive near and long term productivity and margin benefits.

As always, our actions are guided by our enterprise strategic priorities, like accelerating profitable growth, driving productivity and operational excellence, and empowering people.

Rick Olson: As always our actions are guided by our enterprise strategic priorities, we're accelerating profitable growth driving productivity and operational excellence and empowering people.

On that note, I would like to thank our employees and channel partners for going above and beyond every day to help our customers enhance the beauty, productivity, and sustainability of the land.

Rick Olson: On that note I would like to thank our employees and channel partners for going above and beyond every day to help our customers enhanced beauty productivity and sustainability of the land.

I would also like to extend my gratitude to our customers and shareholders for your continued support. I wish everyone a safe and happy holiday season. With that, we will open up the column for questions.

Rick Olson: I would also like to extend my gratitude to our customers and shareholders for your continued support.

Rick Olson: I wish everyone, a safe and happy holiday season.

Rick Olson: With that we will open up the call up for questions.

Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star 11 on your telephone.

Speaker Change: Thank you, ladies and gentlemen, if you'd like to ask a question. Please press star one on your telephone.

If your question hasn't been answered, you wish to withdraw your question, please follow by pressing 111, star 11.

Speaker Change: If your question has been answered what you wish to withdraw your question. Please followed by pressing 111.

Speaker Change: One one.

Speaker Change: One moment for our first question.

Our first question comes from the line of Sam Darkass of Raymond James, your line is open.

Speaker Change: Our first question comes from the line of Sam <unk> of Raymond James Your line is open.

Sam: Good morning, Rick Good morning, Angie how are you.

Good morning, Sam. Doing well. How are you? I'm well as well. Thank you. Three topics, if I could, to explore this morning. First, regarding the Resi market.

Speaker Change: Doing well how are you.

Speaker Change: I'm well as well thank you.

Speaker Change: Three topics if I could.

Speaker Change: Florida. This morning first regarding the resi market.

Speaker Change: Within the <unk>.

First quarter guide, how much, if at all, does the Lowe's load-in help the quarter? Or is that more so an April quarter dynamic? And then related to that,

Speaker Change: First quarter guide how much if at all does the Lowe's load in and helped the quarter or is that more so in April quarter dynamic and then related to that.

If you exclude the effects of the net effects of the Lowe's win, what are you incorporating within your guidance for the residential market for the year?

Speaker Change: If you exclude the.

Speaker Change: The effects of the net effects of the Lowe's win.

Speaker Change: What do you what are you incorporating within your guidance for the residential market for the for the year.

Okay, I will answer the first question first with regard to loads. Most of the loads impact will be in the second quarter. There is the start of the process should be in the first quarter, but it will have more significant, most of these effects will be in the second quarter.

Speaker Change: Okay.

Speaker Change: <unk> answer the first question first with regard to lows most of the Lowe's impact will be in the second quarter. There is the start of the process shipping in the first quarter, but will have more significant losses.

Speaker Change: That's right.

Speaker Change: In the second quarter.

And it's hopefully it's clear that it will be a net benefit to residential overall.

Okay.

Speaker Change: <unk>.

Speaker Change: Hopefully it was clear that it will be a net benefit to residential overall.

Speaker Change: Right. So then if you back out the net benefit of the Lowe's win what are you anticipating with within your guidance for the the base residential market for 24 again.

Right, so that if you back out the net benefit of the Lowe's win, what are you anticipating with within your guidance for the base residential market for 24 again?

Yeah, that would be all all included within within our guidance because of field inventory and so forth. Those are the adjustments that are kind of the net on the on the opposite side, but we do feel that, you know, residential will go through the recovery period in 2024.

Speaker Change: Yes that would be all included within within our guidance because of field inventory and so forth. Those are the adjustments that are kind of the net.

Speaker Change: On the opposite side, but we do feel that.

Speaker Change: Residential.

Speaker Change: We will go through the recovery period in 2024.

And, you know, we've seen some positive signs from a retail standpoint at this point. So it's really a matter of excluding lows of what's in the channel between us and them.

Speaker Change: We've seen some positive signs from a retail standpoint at this point so it's really a matter excluding lowe's of what's what's in the channel between us and them.

Gosh, I hear field inventory, Sam, we'll we'll kind of start the year with that and then continue to align our manufacturing to our demand so that we can rebalance that inventory. But we are certainly poised to grow our share and.

Speaker Change: Gotcha.

Speaker Change: Higher field inventory, Sam will kind of start the year with that and then continue to align our manufacturing to our demand. So that we can rebalance that inventory, but we are certainly poised to grow our share and residents.

Gotcha. Second topic, the backlog. You mentioned $2 billion. What is that sequentially versus last quarter? And then if you could give some color around the orders growth that you're seeing on a year-on-year basis and then related to that order cancellation experience of late.

Speaker Change: Got you a second topic.

Speaker Change: The backlog you mentioned $2 billion.

Speaker Change: What is that sequentially versus last quarter, and then if you could give some color around.

Speaker Change: The borders.

The growth that youre seeing on a year on year basis, and then related to that order cancellation experience of late.

Starting with backlog year-over-year, per our information, is down about $300 million year-over-year.

Just starting with the backlog year over year per the per our <unk>.

Speaker Change: <unk> is down about $300 million.

Speaker Change: Year over year and your questions sequentially is down.

And your question sequentially is down from the third quarter.

The third quarter slight.

slightly from the third quarter, so stepping down really in the second half of 2023. Actually bumped up slightly in the first and second quarters of 2023 and then has stepped down.

Speaker Change: Slightly from the third quarter, so stepping down early in the second half of 2023, especially bumped up slightly in the first and second quarters of 2023 step down so we have made.

So we have made, you know, probably the first significant net bite out of that backlog in the last couple of years.

Speaker Change: Finally, the first significant nets bites out of that backlog in the last couple of years, that's something that we're working hard on it mainly reflects the additional output from our plants in the healthier supply chain.

That's something we've been working hard on. It mainly reflects the additional output from our plants and the healthier supply chain. So that's the situation.

Speaker Change: So that's the situation with the backlog.

and orders and order cancellations. What trends are you seeing there, Rick?

Speaker Change: And orders and order cancellations, what trends Youre seeing there Rick.

minimal, very minimal order cancellations and continue to have a very strong order flow at this point.

Speaker Change: Minimal very minimal order cancellations and continue to have a very strong order flow at this point.

You're seeing the net impact of the backlog, but it's actually, I think we talked about last quarter, the aging of those orders is actually improving. So we're fulfilling some of the long-term orders that are being replaced by new orders, and that's really the net that you see. But our goal is to reduce the open order situation just because most important for us is our promise to our customers, make sure we serve them in their expected time.

Speaker Change: Youre seeing the net impact of the backlog, but it's actually I think we talked about last quarter. The ageing of those orders is actually improving.

So we're fulfilling some of the long term.

Speaker Change: Orders they are being replaced by new orders and that's really the net that you see but our goal is to reduce.

Speaker Change: The.

Speaker Change: Open order situation, just because most important for us is our promise to our customers to make sure we serve them.

Speaker Change: At a time.

Speaker Change: Yes.

Gotcha. My final topic, and then I'll defer to others. Apologies. Steel prices have obviously been going batty over the past couple of months or so. As it stands right now, what is your raw material or your input cost stack for fiscal 24? And then related to that, do you anticipate pricing up, down, the same, accordingly as things stand?

Speaker Change: Got you and my final topic, and then I'll defer to others apologies.

Speaker Change: Steel prices have obviously been going batty over the past couple of months or so as it stands right now.

Speaker Change: What is your raw material or your input cost stack for fiscal 'twenty, four and then related to that do you.

Speaker Change: We anticipate pricing.

Speaker Change: Up down the same.

Speaker Change: Accordingly, as things stand.

Yeah, so our commodities have been stabilizing, but we are certainly watching the steel prices and have considered that in our guidance.

Speaker Change: Yes, so our commodities have been stabilizing but we are certainly watching steel prices and have considered that in our guidance.

When it comes to price cost, we are, for F-24, we are returning to kind of our 1% to 2% normal average pricing. We do expect to see some productivity benefits throughout the year, although we are continuing to work on really aligning our production to our demand, and so we're seeing some manufacturing inefficiencies and variances continue.

Speaker Change: When it comes to price cost.

<unk> 24, we are returning to kind of our 1% to 2% normal average pricing, we do expect to see some productivity benefits throughout the year. Although we are continuing to work on really aligning our production our production to our demand and so we're seeing some manufacturing inefficiencies and variances continue.

Very helpful. Happy holidays to your entire team. Thank you.

Speaker Change: Very helpful Happy holidays to your entire team. Thank you.

I'll do it too, Sam. Thank you. Thank you. Thank you. One moment, please.

Speaker Change: The holiday season. Thank you. Thank you.

Speaker Change: Thank you one moment please.

Our next question comes from the line of Tim Woese of Bayard. Your line is open.

Speaker Change: Our next question comes from the line of Tim lows.

Tim Lows: Baird Your line is open.

Tim Lows: Hey, everybody good morning.

Speaker Change: Good morning.

Morning, maybe just to start off in the professional business. I guess just to confirm, do you expect that business to grow?

Speaker Change: Good morning, maybe just to start off in the in the professional business I guess just to confirm.

Do you expect that business to grow our Pos.

positively in fiscal 24. And I know it's gonna be kind of lower than the total company, but I just wanna confirm that there's growth there. And then is there a way within the professional business to maybe give us some color, how you're thinking of some of the subcomponents, whether it's kind of underground and golf where you've got the backlog visibility and maybe what's kind of embedded in the guide for landscape.

Speaker Change: Positively in fiscal 'twenty, four and I know, it's going to be kind of lower than that.

The total company, but I just want to confirm that there's growth there and then.

Speaker Change: Is there a way within the professional business to maybe give us some color how you're thinking of some of the sub components, whether it's kind of underground and golf, where you've got the backlog visibility and maybe what's kind of embedded in the guide for landscape there.

Yeah.

Sure. Well, first of all, back to the first part of the question, we do expect the professional business to grow slightly year over year.

Speaker Change: Sure well first of all back to the first part of the question. We do expect the professional business to grow slightly year over year.

And the, the second part of your question is the important piece to understand it's a, it's a range within the professional segments of expected outcomes. So, on the areas that coincide with where we have a high back order at this point. So golf grounds, underground construction. We do expect continued growth mainly driven by improved output in our plans. And that's something that.

And the second part of your question is the important piece to understand it.

Speaker Change: Let's say a range within the professional segments of expected outcomes on the areas that coincide with where we have high back orders at this point, so golf grounds underground construction.

Speaker Change: We do expect continued growth mainly driven by improved output.

Speaker Change: Our plants, so thats something that.

steadily increased or improved throughout this last year. So we enter into this new year at a much better place with the supply chain and with our plants.

Speaker Change: Steadily increased or improved throughout this last year, so we enter into those.

Speaker Change: This new year had a much better place with supply chain and with our plants.

And if you go to the other end of the spectrum, we do expect continued rebalancing within the channel on the landscape contractor side, especially the homeowner customers related to landscape contractors. So the more commercial ease portion would be.

Speaker Change: And if you go to the other end of the spectrum, we do expect continued rebalancing with them within the channel.

The landscape contractor side, especially the homeowner customers related so Wednesday contractors so the.

Speaker Change: More commercial fees portion would be.

part that we're talking about there. So that's going to go through the rebalancing, probably acting more similar to residential.

Speaker Change: The part that we're talking about there so thats kind of go through the rebalancing probably acting more similar to the residential market.

Okay. Okay. So, I mean, is there a pretty, it sounds like there's a pretty meaningful gap between the two, at least what's

Speaker Change: Okay.

Speaker Change: Okay. So I mean is there a pretty it sounds like there's a pretty meaningful gap between the two at least with what kind of factored into guidance.

It's a meaningful range of expected growth between the two spectrums, the two ends that I talked about.

It's a meaningful range of expected growth between the two the.

Speaker Change: Two spectrum.

Speaker Change: So I talked about.

Okay. Okay. Good. And then just on, just on amp, I guess how different is this program than what you'd kind of normally be doing around things like the supply chain and product design and things like that on an annualized space is just to improve productivity. I'm just, I guess I'm trying to.

Speaker Change: Okay. Okay. Good and then just on just on Amp.

Speaker Change: I guess, how different is this program than what you would kind of normally be doing around things like the supply chain and product design and things like that on an annualized basis, just to improve productivity I'm, just I guess I'm trying to.

Just make sure I understand, like, is this something that would be. You know, purely incremental to what you'd kind of expect from a normal incremental margin perspective, or is this something that that does more to kind of support the normalized incremental margins? And I guess, how do we save that?

Speaker Change: Just to make sure I understand I guess this is something that would be purely incremental to what you'd kind of expect from a normal incremental margin perspective or is this something that does more to kind of support.

Speaker Change: The normalized incremental margins and I guess, how do we phase that in.

Speaker Change: Yeah.

Yeah, so I think what I'd start with is, so it is different than our than our drive for five initiative, which is an employee initiative that will remain intact. AMP is really a transformational productivity initiative and the largest that we've ever done in PTC history. It really, we've been able to do this because our supply chain has really

Speaker Change: Yes, so I think what I'd start with just so it is different than our than our drive for five <unk>.

Speaker Change: Initiative, which is an employee initiative that will remain intact.

Speaker Change: <unk> is really a transformational productivity initiatives and the largest that we've ever done in PTC history. It really we have been able to do this because our supply chain has really.

you know, improved over time and allow us to focus more on productivity, it will be incremental. So, our goal is to get $100 million in annual run rate cost savings by 2027, which will be incremental to our normal gross margin and productivity improvements. And we do expect that savings to accelerate over time, probably seeing the majority of those savings come in years two and three.

Speaker Change: Improved over time and allow us to focus more on productivity it will be incremental so our goal is to get $100 million.

Speaker Change: The annual run rate cost savings by 2027, which will be incremental.

Speaker Change: Two to our normal gross margin and productivity improvements and we do expect that savings to accelerate overtime, probably seeing the majority of those savings come in years, two and three.

Speaker Change: Okay. Okay. That's helpful and then just the last one.

Okay, that's helpful. And then just the last 1, you gave us a little bit of color on on the fiscal Q. 1 kind of expectations. Anything else to kind of think about in terms of the cadence as we think about the rest of fiscal 24, either from a revenue or an EPS perspective.

Speaker Change: You gave us a little bit of color on that.

Speaker Change: Fiscal Q1 kind of expectation.

Speaker Change: Anything else to kind of think about in terms of the cadence as we think about the rest of fiscal 'twenty for either from a revenue and EPS perspective.

Sure, yes, as we said in our prepared remarks, typically Q2 and Q3 are our largest quarters, but if we think about kind of the cadence for our adjusted EPS, it is typically higher in the second half than it is in the first half. And we expect it to be. Okay, sounds good. Thanks a lot. Appreciate the color. You bet.

Sure, Yes, so as we said in our prepared remarks, typically Q2, and Q3 are our largest quarters, but if we think about kind of the cadence for our adjusted EPS. It is typically higher in the second half than it is in the first half.

Speaker Change: And we expect it to be.

Speaker Change: Okay sounds good thanks, a lot I appreciate the color.

Speaker Change: You bet.

Speaker Change: Thank you one moment please.

Speaker Change: Our next question comes from the line of.

Speaker Change: Tom Hayes of C. L. King your line is open.

I agree. Good morning. Thanks for taking my call. Rick, maybe just a little bit. I think you may have mentioned in your prepared remarks, but I just want to go back because we've heard some some weakness in the channel. Maybe it's your thoughts on where the rental channel is right now.

Tom Hayes: Great. Good morning, Thanks for taking my call from Rick maybe just a little bit.

Speaker Change: Thank you you may have mentioned in your prepared remarks, but I just wanted to go back up because we've heard some weakness.

Speaker Change: The channel maybe just your thoughts on where the rental channel is right now.

From our perspective, the rental channel continues to be very healthy. It was a strong driver for us in 2023 and order positions continue to be very strong. Obviously, there are adjustments taking place by category and by individual customer, but we still see that as a healthy business for us.

Speaker Change: From our perspective, the rental channel continues to be very healthy. It's been it was a strong driver for us in 2023 and order positions continue to be very strong.

Speaker Change: Leave their adjustments taking place by category.

Speaker Change: By an individual customer, but we still see that.

Speaker Change: Healthy business for us.

Okay, and then maybe it's come up in a few other questions, but maybe it's on the

Speaker Change: Okay, and then maybe just.

Speaker Change: I know it's come up in a few other questions, but maybe just on the <unk>.

field-level inventories on the residential and your professional lawn care. Do you think we're closer to the end of the de-stocking than...

Speaker Change: Field level inventories on the residential and your professional lawn care do you think we're closer to the end of the destocking than.

Speaker Change: Then.

then kind of the midpoint or just kind of some additional color on kind of where you feel you are as far as the field inventory levels right now.

Speaker Change: Then kind of the midpoint or just kind of some additional color on kind of where you feel you are as far as the field inventory levels right now.

Field inventories are still meaningfully elevated from where we would like to see them at this time of year. Especially given for spring products, it's really the off-season at this point, so that we're not going to see, you know, major retail flow through until we get into the spring in North America. We'll start to see the momentum, so still higher.

Speaker Change: Our field inventories are still meaningfully elevated from where we'd like to see them at this time of year, especially given for spring products. So it's really the off season at this point so that we're not going to see major retail flow through until we get into the spring in North America.

Start to see the momentum so still higher.

Uh snow is uh is uh higher we had you know relatively poor snow season last year Not off to a great start so far this year, but that's all built into our guidance as we

Speaker Change: Snow is.

Speaker Change: Higher we had relatively poor snow season last year got off to a great start so far this year, but thats all built into our guidance as we provided it.

Okay, maybe just one last thing regarding on the pro side of things, field inventory is still very low, historically low for underground specialty construction and the golf and grounds businesses. So that's still a channel that needs to be refilled once the balance is found with demand and supply.

Speaker Change: Okay, maybe just.

Speaker Change: Tom just one last thing regarding on the pro side of things.

Speaker Change: Field inventory is still very low historically low for underground specialty construction and the golf and grounds businesses. So that's still the channel that needs to be refilled once the once the balance is found with demand and supply.

Okay, I guess similar along the lines of that last point, I think last time you and I talked, you indicated that you felt the municipal budgets remain pretty solid and that would be a good

Speaker Change: Okay.

Speaker Change: Similar along the lines of that last point I think last time, you and I talk you indicated that you felt that municipal budgets remain pretty solid and that would be a good good.

indicator for your grounds and golf-related revenue opportunities. Is that still the case? Sounds like it is.

Speaker Change: Indicator for your ground and golf related revenue opportunity is that still the case it sounds like it is.

That's still the case. I'm just looking at some golf information just this morning and the strongest growth and participation has actually been in municipal access.

That's still the case, so I was just looking at some golf.

Speaker Change: Information just this morning, and the strongest growth and participation has actually been in municipal access golf courses. So.

golf courses, so open access golf courses, so that's strong from a golfing standpoint. Budgets continue to be strong and really prioritized to green spaces for municipalities. I guess the last piece would be the investments that we've made to have zero emission products.

Speaker Change: Open access golf courses.

<unk> from a golfing standpoint budgets continue to be strong and really prioritized to green spaces for municipalities and I guess, the last piece would be invested.

Speaker Change: The investments that we've made to have zero emission.

Speaker Change: Products has really positioned us well with municipalities.

has relate positions as well with municipalities that tend to be the early adopters in making those investments. So it puts us in a really good position from a municipal standpoint.

Tend to be the early adopters and making those investments so it puts us in a really good position from a municipal standpoint.

Speaker Change: Okay. Appreciate the color. Thank you.

Appreciate the color. Thank you. Thank you. Thank you. One moment, please.

Speaker Change: Thank you. Thank you one moment please.

Speaker Change: Our next question comes from a lot of David Macgregor.

David Macgregor: Of Longbow Research your line is open.

Yes, good morning everyone. Thanks for taking my question.

David Macgregor: Yes, good morning, everyone and thanks for taking my question good morning, Rick.

Rick Olson: Hey, good morning, everyone.

I mean arguably the most important event for 2024 for you is the addition of the Lowe's business, which is just tremendous.

Rick Olson: Addition to that to the enterprise.

But if I could just maybe come back to Sam's question and ask it maybe a little bit differently, you know, within the low single digit 2024 revenue growth guide.

Speaker Change: If I could just maybe come back to Sam's question and ask it maybe a little bit differently within the low single digit 2020 for revenue growth guidance whats the expected incremental contribution from the lowest business net of likely reductions to your other big box retail partners will this incremental business to be accretive or dilutive to margins.

What's the expected incremental contribution from the lowest business net of likely reductions to your other big box retail partners and will this incremental.

You know, nets, we don't break down to the specifics of mix, we also just, if you think about the major portion that goes through our dealer network as well, so there are other elements that we're not even kind of bringing into the equation here that are really key.

Speaker Change: Net.

Speaker Change: Breakdown to the specifics of the mix. We also just if you think about the major portion of it goes through our dealer network as well. So there are other elements that were not even kind of bring into the equation here Theyre really key.

Our dealer business has been very healthy, it's continued to grow for some time, but the net with Lowe's will be a benefit overall for the residential business.

Speaker Change: Our dealer business has been very healthy has continued to grow for some time.

But the nuts.

Speaker Change: With Lowe's will be a benefit overall for the residential business.

You know, we, our desire is to continue to grow with all of our partners, so we will continue to work on that with every, every all of our masks and dealer partners, look for differentiated products, mixes for them, and work to continue to grow that, but the net, the net effect with laws will be a positive for us.

Speaker Change: We are desirous to continue to grow with all of our partners. So we will continue to work on that with every every Oliver mass and dealer partners look for differentiated product mixes for them and work to continue to grow that but the net net effect with laws would be a positive for residential.

And Rick, can you speak to whether the incremental business is accretive or dilutive to margins?

Speaker Change: And can you speak to whether the incremental business is accretive or dilutive to margins.

Speaker Change: Sure.

It should be consistent. It should be consistent. It's not a big swing in either direction.

Speaker Change: It should be it should.

Speaker Change: It should be consistent.

Speaker Change: And a big swing in either direction.

Yeah, and our best estimates for that, David, are included in our guidance.

Speaker Change: Yes.

Speaker Change: Best estimates for that David are included in our guidance.

Okay, because on the surface, it looks like if you exclude the lowest business, your EPS forecast is down in 2024 versus 2023. I just want to make sure I'm reading that properly.

Speaker Change: Okay, because on the surface it looks like if you exclude the Lowe's business. Your EPS forecast is down in 2024 versus 2023, I just want to make sure I'm reading that profile.

The lunch business.

Yes, we are, I mean, we're still working to get through some of our manufacturing variances and rebalancing that inventory. So I think if you look at our overall EPS, we've got this homeowner demand that we're continuing to work through and and offsetting that, of course, with what we're seeing in our in our professional business and the the backlog businesses that are doing that are doing well and improving output and volume.

Speaker Change: Yes, we are I mean, we're still working to get through some of our manufacturing variances and rebalancing that inventory. So I think if you look at our overall EPS. We've got this homeowner demands that we're continuing to work through it.

Speaker Change: And offsetting that of course with what we're seeing in our in our professional business Sandy.

Speaker Change: The backlog businesses that are doing that.

Speaker Change: That are doing well and improving output in volume.

And then my follow up question is on free cash flow conversion, and I'm just wondering if you could walk us through the drivers behind the recovery to 100% free cash flow from 50% this year. It looks if you back into the math. It looks like you're anticipating inventory down approximately

Speaker Change: Okay.

Speaker Change: Then my follow up question is on free cash flow conversion and I'm. Just wondering if you could walk us through the drivers behind the recovery to 100% free cash flow.

Speaker Change: From 50% this year.

Speaker Change: It looks if you back into the math it looks like Youre anticipating inventories down approximately $300 million.

working capital down maybe 275, somewhere in that order of magnitude. So I'm just wondering if you can help us. Is it all just working capital reduction? Are there other things going on in there? Any help there?

Speaker Change: Working capital down maybe $2 75 somewhere in that order of magnitude. So I'm. Just wondering if you could help us is it all just working capital reduction are there other things going on in there any help there would be appreciated. Thanks.

Sure, yes, the majority of that opportunity is going to be working capital reduction. So, as you know, we've had a focused effort on working capital, really the last, the last year and we will continue to have a shark focus on that. We want to convert that to 100% and typically we generate the majority of that free cash flow in the second half.

Speaker Change: Sure, Yes, the majority of that opportunity is going to be working capital reductions. So as you know we've had a focused effort on working capital really the last the last year and we will continue to have a sharp focus on that.

Speaker Change: We want to.

Speaker Change: To convert that to a 100% and typically we generate the majority of that free cash flow in the second half.

And that $300 million of that number I just offered you, that's a close approximation of how you're thinking about it.

Speaker Change: And the $300 million number I just offered you that's it.

Speaker Change: Is that a close approximation of how you're thinking about it.

I don't know that we've said exactly what that would be, but inventory is the sharp focus. And if you look at our inventory, we did see with decline both year over year and sequentially from Q3. So we are making some improvements. Good. All right. Thanks very much. Thank you.

Speaker Change: I don't know that we said exactly what that would be the inventory is the sharp focus and if you look at our inventory we did see lift decline both year over year and sequentially from Q3, So we are making some improvements.

Speaker Change: Good alright, thanks very much.

Speaker Change: I was wondering if you can look forward to catching up with you in Phoenix.

Speaker Change: Thank you one moment please.

Speaker Change: Our next question comes from the line of Eric Bosshardt of Cleveland Research. Your line is open.

Our next question comes from the line of Eric Boshard of Cleveland Research, your line is

Hi, there are a couple of things if I could. First of all, you've had historically these three year programs that are generally focused on on revenue growth. And I think you still got that one going.

Eric Bosshardt: Hi, there a couple of things if I could first of all.

You have had historically these three year programs that are generally focused on revenue growth I think you've still got that one going on.

What I'm curious about is the AMP program is notably different. And I think there was a comment made that the supply chain enables the.

Eric Bosshardt: What I'm curious about is the Amp program as is notably different I think there was a comment made that the supply chain enables this.

At this point in time, I guess, taking a half step back, I'm just curious, like, why the need for this? There hasn't been one like this historically. Is there something different?

Eric Bosshardt: At this point in time, I guess, taking a half step back I'm just curious like why the need for this there hasnt been one like this historically is there something different.

with the business, with the market, with competition, I'm just curious what's different that created a need for the business.

Eric Bosshardt: With the business with the market with competition I'm, just curious what's what's different that.

Eric Bosshardt: Created a need for this relative to the history of the business.

Yeah, Eric, I'll take this one. So if you think relative to our employee initiatives, this is different. This is really laser focused on productivity and cost improvement.

Speaker Change: Yes, Eric I'll take this one so if you think relative to our employee initiatives. This is different this is really laser focused on productivity and cost improvement.

And if there is something that's unique and why now is the right time, we're coming out of a period of the pandemic where it's been difficult to do some of that work, particularly with our supply base.

Speaker Change: And if there is something Thats unique and why now is the right time, we're coming out of a period out of the pandemic, where it's been difficult to do some of that work, particularly with our supply base.

Efficiency within our manufacturing plants, and we are now back at a point where we can go back to our focus on improving productivity within the plants working with our supply base to improve pricing.

Speaker Change: <unk> see within our manufacturing plants and we are now back at a point, where we can go back to our focus on improving productivity within the plants working with our supply base to improve pricing.

The whole go-to-market portion that Angie mentioned in her prepared remarks of, you know, taking costs out of that and, you know, the scale to be able to leverage some of our costs. So now is the perfect time, something that cuts across everything else we do, and it helps us and enables the other things that we're doing.

Speaker Change: The whole go to market portion, but Angie mentioned in her prepared remarks.

Speaker Change: Taking taking cost out of that.

Speaker Change: Yes.

Scale to be able to leverage some of our cost. So now is the perfect time, it's something that cuts across everything else, we do and it helps us.

Speaker Change: The other things that we're doing.

Is there anything from a market standpoint that is different in terms of price point?

Speaker Change: Is there anything from a market standpoint that is different in terms of <unk>.

Speaker Change: Price points product and.

end market that is different that relates to this, or is this, as you characterized it, kind of catch up for things that you weren't able to do during pandemic and supply chain? I'm just curious if the end market is changing in a way that also

Speaker Change: End market that is different that relates to this or is this as you characterized it kind of catch up for things that you weren't able to do during the pandemic and supply chain I'm. Just curious if the end market is changing in a way that also amplifies the need for us.

It's not driven by any particular external factor with it's always obviously a key to being competitive to be able to have options for pricing standpoints, but it's not driven or triggered by a particular external factor that helps us be more competitive is one thing we can solve.

Speaker Change: It's not driven by any particular external factor that's always obviously.

Speaker Change: Key to being competitive to be able to have options from our pricing standpoint, but it's not driven are triggered by any particular external factor that helps us be more competitive that's one thing we can say.

And I just would clarify, you know, we have one year left of our employee initiative drive for five We've left those stretch goals out there for 2024. That's an internal employee Number we'll launch a new employee initiative that we'll announce in December of next year. So next year at this time

Speaker Change: And I just would clarify we have one year left of our employee initiative drive for five we've left those stretch goals out there for 2020 forward Thats, an internal employee number and will launch a new employee initiative that we'll announce in December of next year. So I'm not sure at this time.

Speaker Change: Yeah.

Then the second thing, there was a comment also made, a lot of moving parts within residential, but the comment made on positive retail signs. I just wonder if we could dig into that a little bit. What are the, what are the positive retail signs that you're saying that provide encouragement and support?

Speaker Change: Then the second thing there was a comment also made it a lot of moving parts within residential but the comment made on positive retail signs I just wonder if we could dig into that a little bit what are the what are the positive retail science that youre, saying that provide encouragement in that business.

I wouldn't I wouldn't read too much into at this point, we just had the first, you know, housing starts, for example, has some correlation to residential business, we see a little bit of retail activity that's more positive.

Speaker Change: I wouldn't I wouldn't read too much into that at this point, we just had the first.

Speaker Change: Housing starts for example has some correlation to the residential business, we see a little bit of retail activity that's more positive.

But this is a very low portion of the year for the bulk of our residential products. We're just giving, you know, there's a few tiny signs of improvement there. And the biggest factor for us is not going to be even so much the retail, but it's what's between the retail and us.

Speaker Change: But this is a very low portion of the year for the bulk of our residential products were just giving a few tiny signs of improvement there and the biggest factor for us those actually be even so much the retail, but it's what's between the retail and OSM for that case.

Speaker Change: Just.

Speaker Change: Yes, just early early signs, which I would not draw too many conclusions from that.

Speaker Change: Slightly positive.

Speaker Change: And then the last comment I wanted clarity on there was.

Speaker Change: A comment about returning to more normal price mix realization within the business and I was just trying to square that with there was also a comment made about landscape contract are more price sensitive than in the past.

I was just trying to square that with there was also comment made about landscape contractor more price sensitive than in the.

Speaker Change: And so I'm curious if if there is a return to normal or if there is something different.

Within price mix from an end market standpoint, or within your your opportunity in that area just a clarity on that if he would.

Yeah, so we talked about returning to a more typical average one to two percent price for the year, but the businesses that have high field inventory, we expect to see less realized price than the others.

Speaker Change: Yeah. So we talked about returning to a more typical averaged 1% to 2% price.

Speaker Change: For the year, but the businesses that have high field inventory, we expect to see less realized price than the others.

Speaker Change: Does that answer your question.

Half of it, some get more than normal because some are getting less than normal to get you back to normal, I guess.

Speaker Change: Half of it that the.

Speaker Change: Some get more than normal because some are getting less than normal to get you back to normal I guess, that's what I'm trying to figure out.

I think it relates to something we probably haven't mentioned as often, but we really have a market-based approach to pricing. So we get the price in the market that's relative to features, innovation, customer value. And this is the, in our guidance, reflects the total of that across all of our markets. Yeah, so it would be put in as you hear what you're saying, but thank you. Thank you very much.

Speaker Change: I think it relates to something we probably Havent mentioned is off of but we really have a market based approach to pricing. So we get the price in the market that's relative to features innovation and customer value.

Speaker Change: This is the in our guidance reflects.

Speaker Change: The total of that.

Speaker Change: Across all of our markets.

Speaker Change: Yes, so that would be put temperature.

Speaker Change: Okay, I hear what you're saying thank you. Thank you very much.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: One moment please.

Speaker Change: Our next question comes from a lot of Michael Slutsky.

D.A. Davidson and Company, your line is open.

Michael Slutsky: M D a Davidson and company your line is open.

Speaker Change: Good morning, and thanks for taking my question.

I wanted to, I wanted to first touch on.

One I.

Speaker Change: I wanted to first touch on them on.

the Amplify program, do you have any sense of, I guess it's a two-part question, one is, do you have any sense of where you'll see a large cash outlay at the outset of the program to get some of these costs reductions done kind of on a on a one-time basis? Maybe secondly, have you figured out how much of the hundred million you want to reinvest? You said it was going to be a portion, but was it just a small piece of it or almost all of it will go back to R&D or other kinds of growth?

Speaker Change: The amplify program.

Speaker Change: Do you have any sense as to I guess, it's a two part question. One is do you have any because of the way.

Speaker Change: You'll see a large cash outlay at the outset of the program to get some of these cost reductions done kind of on a onetime basis, maybe secondly have you figured out.

Speaker Change: How much of a 100 million you want to reinvest you said it was going to be a portion, but I wasn't sure because it's just a small piece of it.

Speaker Change: Most all of it will go back to R&D or other kinds of growth initiatives.

Yes, so we will see some one time and restructuring charges that would be reflected in our gap earnings. We'll ramp those up over time as we implement and we'll communicate those as we evolve. We have set up our transformational productivity office this quarter and are really beginning to get into all of those details.

Speaker Change: Yes, so we will see some one time and restructuring charges that will be reflected in our GAAP earnings will ramp those up over time as we implement and we'll communicate those as we evolved we have set up our transformational productivity office this quarter and are really beginning to get into all of those details.

Your question on reinvestment. Yes, we do intend to reinvest as much as maybe 50% of this in our back in our business. We want to invest in innovation and technology and in areas where we can see accelerating our profitable growth.

Speaker Change: Your question on reinvestment, yes, we do intend to reinvest as much as maybe 50% of desk and are back in our business, we want to invest in innovation and technology and in areas, where we can see accelerating our profitable products.

Speaker Change: Okay got it.

And then I wanted to just follow up with the comments you made about ramping up in the professional business in the last quarter so to get production rates moving.

And then I wanted to just follow up with some comments you made about ramping up in the professional business in the last quarter or so to get production rates moving I'm kind of curious was there anything done there that was the.

I'm kind of curious, was there anything down there that was out of the ordinary for Toros history or is it just typically Toro doing what it does best and kind of being flexible when they have to?

Speaker Change: The ordinary for tourists history or was it just typically doing with it.

Speaker Change: And kind of being acceptable when when they have to.

And I guess, given the backlogs you've got and some of the trends you're seeing, do you think we need to permanently grow the capacity of our infrastructure and golfing grounds and the other businesses?

Speaker Change: Just given the backlog you've got in some of the trends you're seeing do you think need to permanently.

Speaker Change: Grow the capacity of that construction.

Speaker Change: Construction in golf and grounds in any other businesses.

with some additional permanent square footage there, or is this all just very temporary to kind of meet the current.

Speaker Change: With some additional.

Speaker Change: Permanent square footage there or is this all just very temporary to kind of meet the current market conditions.

So the first part of your question, the results are really the effect of doing what we do, so it's a combination of many disciplines within the Toro company, really focused on our integrated supply chain team and incredible work that was done in our plants to get additional work output.

Speaker Change: So the first part of your question the results are really the.

Speaker Change: The effect of doing what we do so as the combination of many disciplines within the Toro company.

We focused on our integrated supply chain team incredible work that was done in our plants to get additional work.

Speaker Change: Output.

That was based on a healthier supply base and more consistent supply of components that really enabled that.

Speaker Change: That was based on a healthier.

Apply base and more consistent supply of components without really enabled that.

If you break down the capacity question, that's really a split answer. So, in areas where we see an inflection and growth rate going forward, underground construction.

Speaker Change: If you break down the capacity question, that's really a split answer so in areas, where we see an inflection in growth rate going forward.

Underground construction et cetera.

We are adding structural capacity to be able to support that into into the future to be a different growth rate than probably a historical growth rate in those areas.

Speaker Change: We're adding structural capacity to be able to support them into into the future. We see a different growth rates on par with historical growth rate in those areas.

In areas that we know that we're going to return to a more Typical glide path, let's say gulf and ground We're working not to add structural capacity that we would regret and instead using our existing capacity in a flexible way So shifting production

Speaker Change: In areas that we know that we're going to return to more typical glide path, let's say golf and grounds, we're working not to add structural capacity that we would regret and instead using our existing capacity in a flexible way so shifting production.

between facilities, working more extended hours, et cetera, that's really the solutions that we're looking for for those businesses that we expect to return to more traditional growth rates. Okay, thanks.

Speaker Change: Between facilities working more extended hours et cetera, that's really the solutions that we're looking for for those businesses, but we expect to return to more.

Speaker Change: Additional growth rates.

Speaker Change: Okay. Thanks, I appreciate the discussion and happy holidays.

Speaker Change: Okay. Thank you Mike.

Thank you. I'm showing no further questions at this time. I'd like to turn the call back over to Ms. Karikos for any closing remarks.

Speaker Change: Thank you I'm showing no further questions at this time I'd like to turn the call back over to MS. Karen <unk> for any closing remarks.

Thank you, everyone, for your questions and interest in this oral company. We wish you all a joyful holiday season, and we look forward to talking with you again in March to discuss our fiscal 2024 first quarter results.

Karen: Thank you everyone for your questions and interest in the Toro company and wish you all a joyful holiday season, and we look forward to talking with you again in March to discuss our fiscal 2024, our first quarter results.

Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may now disconnect. Have a great day.

Speaker Change: Thank you ladies and gentlemen, this does conclude today's conference. Thank you all for participating you may now disconnect have a great day.

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Good day, ladies and gentlemen. Welcome to the Terrell Company's fourth quarter and full year fiscal 2023 earnings conference call. My name is Valerie and I'll be your conference coordinator for today. At this time, all participants are listening mode. We will facilitate a question and answer session towards the end of today's conference. As a reminder, today's call is being recorded for replay purposes.

Speaker Change: Good day, ladies and gentlemen, welcome to the Toro company's fourth quarter and full year fiscal 2023 earnings Conference call. My name is Valerie and I'll be your conference coordinator for today.

Speaker Change: At this time all participants are in listen only mode. We will facilitate a question and answer session towards the end of todays conference.

Speaker Change: As a reminder, today's call is being recorded for replay purposes.

I would now like to turn the presentation over to today's host.

Speaker Change: I would now like to turn the presentation over to you todays host.

Julie Karikos, Treasurer and Senior Manager, Director of Global Tax and Investor Relations. Please proceed, Ms. Karikos.

Speaker Change: Julien characters Treasurer, and senior managing director of global tax and Investor Relations. Please proceed Ms characters.

Thank you and good morning everyone. Our earnings release was issued this morning and the copy can be found in the investor information section of our corporate website, thetorocompany.com. We have also posted a fourth quarter earnings presentation to supplement our earnings release along with an updated general investor presentation.

Julien: 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. The Toro company Dot Com. We have also posted a fourth quarter earnings presentation to supplement our earnings release, along with an <unk>.

Julien: Dated 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.

On our call today are Rick Olson, Chairman and Chief Executive Officer, Andrew Drink, Vice President and Chief Financial Officer, and Jeremy Stephan Director Investor Relations.

We begin with our customary forward-looking statement policy. During this call, we will make forward-looking statements regarding our plans and projections for the future.

Julien: We begin with our customary forward looking statement policy. During this call we will make forward looking statements regarding our plans and projections for the future.

Julien: <unk> estimates and assumptions regarding financial and operating results as well as economic technological whether market acceptance acquisition related and other factors that may impact our business and customers.

You are all aware of the inherent difficulties, risks, and uncertainties in making predictive statements. Our earnings release, as well as our SEC filings, detail some of the important risk factors that may cause our actual results to differ materially from those in our prediction.

Julien: We're all aware of the inherent difficulties risks and uncertainties in making predictive statements.

Julien: Earnings release, as well as our SEC filings detail some of the important risk factors that may cause our actual results to differ materially from those in our predictions. Please note that we do not have a duty to update our forward looking statements.

Please note that we do not have a duty to update our forward-looking statement.

Julien: In addition, during this call we will reference certain non-GAAP financial measures reconciliations of historical non-GAAP financial measures to reported GAAP financial measures can be found in our earnings release and on our website in our investor presentation as well as in our applicable SEC filings. We believe these measures may be useful in performing meaningful comparisons.

Julien: Past and present operating results and cash flows to understand the performance of our ongoing operations and how management views the business.

non-GAAP financial measures should not be considered superior to or a substitute for the GAAP financial measures presented in our earnings release and this call. With that, I will now turn the call over to Rick. Thanks, Julie, and good morning, everyone. We delivered full-year net sales and adjusted diluted earnings per share growth in what was an exceptionally dynamic operating environment.

Speaker Change: non-GAAP financial measures should not be considered superior to are a substitute for GAAP financial measures presented in our earnings release and this call with that I will now turn the call over to Rick. Thank.

Rick Olson: Thanks, Julie and good morning, everyone. We delivered full year net sales and adjusted diluted earnings per share growth and while as an exceptionally dynamic operating environment. We.

Rick Olson: We saw strong performance across much of our professional segment throughout the year. This includes double digit topline growth for our underground and especially construction and golf and grounds businesses driven by robust demand and actions taken to increase production output.

Rick Olson: This strength offset the combination of weather and macro factors that led to a sharp reduction in homeowner demand and an acceleration of channel Destocking for residential and professional segment lawn care products during the second half of the fiscal year.

Rick Olson: Even with these significant factors our total company net sales of $4 $5 5 billion and adjusted diluted earnings per share of $4 21.

Rick Olson: Both exceeded last year's record results. This is a testament to the benefits and the strength of our portfolio as well as the dedication of our extremely talented team of employees and valued channel partners.

For the fourth quarter, net sales of $983 million were down compared to last year, as expected.

Rick Olson: For the fourth quarter, net sales of $983 million or down compared to last year as expected.

Adjusted diluted earnings per share of 71 cents, although lower than a year ago, exceeded the outlook we shared on our third quarter column.

Rick Olson: Adjusted diluted earnings per share of <unk>, 71 cents, although lower than a year ago exceeded the outlook, we shared on our third quarter call.

This was the result of our SWIFT actions to align with current conditions in our various markets.

Rick Olson: This was the result of our Swift actions to align with current conditions in our various markets. We increased output for businesses with elevated order backlog decreased output for lawn care products and drove productivity gains and prudent expense management across the enterprise.

We increased output for businesses with elevated order backlog, decreased output for long-care products, and drove productivity gains and prudent expense management across the enterprise.

In addition, restructuring actions were taken to adjust headcount for these industry dynamics. I'll now highlight our

Rick Olson: In addition, restructuring actions were taken to adjust headcount for these industry dynamics.

Rick Olson: I'll now highlight our full year results by segment.

For fiscal 2023, on a year-over-year basis, professional segment net sales were up 7%.

Rick Olson: For fiscal 2023 on a year over year basis professional segment net sales were up 7%.

We capitalize on continued strength and demand across much of the segment, delivering top-line growth for all businesses, with the exception of contractor-grade long-care solutions.

Rick Olson: We capitalized on continued strength in demand across much of the segments delivering topline growth for all businesses with the exception of contractor grade one carrier solutions.

Rick Olson: Importantly, a stabilizing supply chain enabled us to increase manufacturing output for underground in specialty construction and golf and grounds products. As a result, we were able to improve lead times and better serve our customers.

Residential segment net sales were down 20% in fiscal 2023 as we navigated unfavorable weather patterns along with a number of macro factors.

Rick Olson: Residential segment net sales were down 20% in fiscal 2023, as we navigated unfavorable weather patterns, along with a number of macro factors.

Rick Olson: These factors included rising interest rates economic uncertainty and the continued normalization of demand patterns for products sold to homeowners following a period of exceptional demand during the pandemic.

To put this in perspective, even with the performance this year, the residential segment has delivered top-line growth at an average annual rate of 7% since 2019.

Rick Olson: To put this in perspective, even with the performance. This year. The residential segment has delivered top line growth at an average annual rate of 7% since 2019.

This is a result of our trusted brand's innovative products and increasingly robust distribution channel. We believe we are well positioned to further capitalize on these strengths as this market rebounds.

Rick Olson: This is a result of our trusted brands innovative products and increasingly robust distribution channel. We believe we are well positioned to further capitalize on these strengths as this market rebounds.

On that note, we are excited to have our full line of coral branded products available in Lowe's stores nationwide, beginning with the upcoming spring selling season.

Rick Olson: On that note. We're excited to have our full line of <unk> branded products available in Lowe's stores nationwide, beginning with the upcoming spring selling season.

The Toro Company has a long track record of strategically managing the business to deliver consistent, positive financial results and sustainable value for all stakeholders.

Rick Olson: The total company has a long track record of strategically managing the business to deliver consistent positive financial results and sustainable value for all stakeholders.

Throughout the year, we advanced our three enterprise strategic priorities of accelerating profitable growth, driving productivity and operational excellence and empowering people. I'll highlight.

Rick Olson: Throughout the year, we advanced our three enterprise strategic priorities of accelerating profitable growth driving productivity and operational excellence and empowering people.

Rick Olson: I'll highlight examples of each.

First, we continue to strengthen our innovation leadership, which is the lifeblood of our company and key to driving long-term profitable growth.

Rick Olson: First we continued to strengthen our innovation leadership, which is the lifeblood of our company and key to driving long term profitable growth.

During the year, we prioritize investments in new products aligned with market growth trends, such as the launch of the AT120, the world's largest all-terrain horizontal directional drill.

Rick Olson: During the year, we prioritized investments in new products aligned with market growth trends such as the launch of the AG 120, the world's largest all terrain horizontal directional drill.

We continue to bolster our market leadership in the underground construction market with this and other new solutions designed to drive productivity and increase uptime for our customers.

Rick Olson: We continue to bolster our market leadership in the underground construction market with this and other new solutions designed to drive productivity and increased uptime for our customers.

Our strong balance sheet also supported investments in transformational technologies for leveraging across our broad portfolio. This includes the development of alternative energy, smart, connected, and autonomous solutions.

Rick Olson: Our strong balance sheet also supported investments and transformational technologies leveraging across our broad portfolio. This includes the development of alternative energy smart connected and autonomous solutions.

These technologies provide customers with sustainable options and increased productivity, all with no compromise on performance.

Rick Olson: These technologies provide customers with sustainable options and increased productivity all with no compromise on performance.

Recent examples include our expanded line of workman utility vehicles and our new line of VISTA people mover vehicles available in both battery and gas options.

Rick Olson: Examples include our expanded line of work, but in utility vehicles, and our new line of Vista people mover vehicles available in both battery and gas options.

both lines are built for versatility and reliability.

Rick Olson: Both lines are built for versatility and reliability.

Second, we drove productivity and operational excellence across the organization as we manage production and align costs with near term demand in a quickly changing environment.

Rick Olson: Second we drove productivity and operational excellence across the organization as we manage production and aligning costs with near term demand in a quickly changing environment.

We are carrying this momentum into 2024 with our recent launch of a transformational productivity initiative. We've named this multi-year initiative AMP, which stands for Amplifying Maximum Productivity.

Rick Olson: We are carrying this momentum into 2024 with our recent launch of a transformational productivity initiative. We've named this multiyear initiative amp, which stands for amplifying maximum productivity.

We are dedicating resources to identify and implement sustainable, supply-based, design-to-value, and route-to-market transformation.

Rick Olson: We are dedicating our resources to identify and implement sustainable supply base design to value and route to market transformation.

We expect this major initiative to result in more than $100 million of incremental annual cost savings by fiscal 2027.

Rick Olson: We expect this major initiative to result in more than $100 million of incremental annual cost savings by fiscal 2027.

A portion of this we intend to reinvest in the business to further accelerate innovation and long-term growth.

Rick Olson: A portion of this we intend to reinvest in the business to further accelerate innovation and long term growth.

And third, we focused on ensuring that our employees and channel partners were aligned and empowered to drive the best possible outcomes for all stakeholders.

Rick Olson: And third we focused on ensuring that our employees and channel partners were aligned and empowered to drive the best possible outcomes for all stakeholders.

In a year that played out much differently than originally expected, our team remained nimble and supported our customers with their unwavering commitment to do business the right way.

Rick Olson: And a year that played out much differently than originally expected our team remains nimble and supported our customers with their unwavering commitment to do business the right way.

Before I hand the call over to Angie, I'd like to reiterate the high confidence we have in our ability to continue to capitalize on growth opportunities in our attractive end markets.

Speaker Change: Before I hand, the call over to Angie I'd like to reiterate the high confidence we have in our ability to continue to capitalize on growth opportunities in our attractive end markets.

This includes the sustained strong demand we've seen in our underground and specialty construction and golf and grounds businesses and the eventual rebound of homeowner markets.

Angie: This includes the sustained strong demand we've seen in our underground specialty construction and golf and grounds businesses.

Angie: And the eventual rebound of homeowner markets.

With that, Angie will walk through the details of our fourth quarter performance in our fiscal 2024 guidance.

With that Andrew will walk through the details of our fourth quarter performance and our fiscal 2020 for guidance.

Thank you Rick and good morning everyone. Our results in the fourth quarter were aligned with our expectations and we saw several businesses continue their strong momentum to close out the year.

Andrew Drink: Thank you Rick and good morning, everyone. Our results in the fourth quarter were aligned with our expectations and we saw several businesses continue their strong momentum to close out the year.

Consolidated net sales for the quarter were $983.2 million, a decrease of 16.1% compared to last year.

Andrew Drink: Consolidated net sales for the quarter were $983 2 million a decrease of 16, 1% compared to last year.

Reported EPS was 67 cents per diluted share and reflects a 4 cent charge related to a restructuring program we initiated in October .

Andrew Drink: Reported EPS was <unk> 67 per diluted share and reflects a <unk> <unk> charge related to a restructuring program we initiated in October.

The $0.67 was down from $1.12 in the fourth quarter of last year. Adjusted EPS was $0.71 per diluted share, down from $1.11.

Andrew Drink: The 67 was down from $1 12 in the fourth quarter of last year.

Andrew Drink: And EPS was <unk> 71 per diluted share down from $1 11.

For the full year, net sales of $4.55 billion were up about 1% from $4.51 billion last year.

Andrew Drink: For the full year net sales of $4 five $5 billion were up about 1% from $4 five 1 million last year.

Reported EPS was $3.13 per deleted share. This was inclusive of non-cash impairment and restructuring charges and the tax impact of stock-based compensation.

Andrew Drink: Reported EPS was $3 13 per diluted share this.

Andrew Drink: And this was inclusive of noncash impairment and restructuring charges and the tax impact of stock based compensation.

This result compares to $4.20 last year.

Andrew Drink: This result compares to $4 in 2000 and since last year.

On an adjusted basis, full-year EPS was $4.21 per diluted share, up from $4.20.

Andrew Drink: On an adjusted basis full year EPS was $4 21 per diluted share up from $4 in 'twenty.

Andrew Drink: Now to the segment results.

Professional segment net sales for the fourth quarter were $828.9 million, down 12.3% year-over-year.

Andrew Drink: Professional segment net sales for the fourth quarter were $828 $9 million down.

Andrew Drink: Down 12, 3% year over year.

This decrease was primarily driven by lower shipments of contractor grade lawn care equipment and snow products and increased floor planning costs.

Andrew Drink: This decrease was primarily driven by lower shipments of contractor grade lawn care equipment, and snow products and increased floor planning costs.

This was partially offset by higher shipments of underground and specialty construction products and golf and grounds equipment.

Andrew Drink: This was partially offset by higher shipments of underground and specialty construction products and golf and ground equipment.

Andrew Drink: For the full year professional segment net sales increased seven 1% to $3 $6 7 billion.

Andrew Drink: And comprised 81% of the total company net sales.

Professional segment earnings for the fourth quarter were $124.5 million on a reported basis, down from $159 million last year.

Andrew Drink: Professional segment earnings for the fourth quarter were $124 5 million on a reported basis.

Andrew Drink: Down from $159 million last year.

When expressed as a percentage of that sales, earnings for the segment were 15 percent, compared to 16.8 percent last year.

Andrew Drink: When expressed as a percentage of net sales earnings for this segment were 15% compared to 16, 8% last year.

The change was primarily due to higher material costs, lower net sales, and increased floor planning costs.

Andrew Drink: The change was primarily due to higher material costs.

Andrew Drink: Lower net sales and increased floor planning cost.

This was partially offset by productivity improvements and favorable product mix.

Andrew Drink: This was partially offset by productivity improvements and favorable product mix.

For the full year, professional segment earnings were $509 million, compared to $584 million in fiscal 2022.

Andrew Drink: For the full year professional segment earnings were $509 million compared to $584 million in fiscal 2022.

The fiscal 23 results include gross non-cash impairment charges of $151.3 million.

Andrew Drink: In fiscal 'twenty three results include gross noncash impairment charges of $151 3 million.

As a percentage of net sales, segment earnings were 13.9% compared to 17% last year.

Andrew Drink: As a percentage of net sales segment earnings were 13, 9% compared to 17% last year.

Residential segment net sales for the fourth quarter were $148.4 million, down 33.6% compared to last year.

Andrew Drink: Residential segment net sales for the fourth quarter were $148 4 million down 33, 6% compared to last year.

The decrease was primarily driven by lower shipments of products broadly across the segment, partially offset by the benefit of net price realization.

Andrew Drink: Decrease was primarily driven by lower shipments of products broadly across the segment, partially offset by the benefit of net price realization.

For the full year, residential segment net sales were $854.2 million, compared to $1.1 billion in fiscal 2022, and COVID-19% of the total company net sales.

Andrew Drink: For the full year residential segment net sales were $854 2 million.

Andrew Drink: Compared to $1 $1 billion in fiscal 2022 and COVID-19% of the total company net sales.

Residential segment earnings for the quarter were $4.5 million compared to $17.5 million last year.

Andrew Drink: Residential segment earnings for the quarter were $4 5 million compared to $17 $5 million last year.

When expressed as a percentage of net sales, earnings for the segment were 3% compared to 7.8% last year.

Andrew Drink: When expressed as a percentage of net sales earnings for this segment were 3% compared to seven 8% last year.

The year-over-year decrease was primarily driven by higher inventory reserves, unfavorable product mix, and lower sales volumes.

Andrew Drink: The year over year decrease was primarily driven by.

Higher inventory reserves and favorable product mix and lower sales volume.

This was partially offset by the benefits of net price realization, productivity improvements, and lower material costs.

Andrew Drink: This was partially offset by the benefits of net price realization productivity improvements and lower material costs.

For the full year, residential segment earnings were $68.9M compared to $112.7M in fiscal 2022.

Andrew Drink: For the full year residential segment earnings were $68 $9 million compared to $112 7 million in fiscal 2022.

As a percentage of net sales, segment earnings were 8.1% compared to 10.5% in fiscal 2022.

Andrew Drink: As a percentage of net sales segment earnings were eight 1% compared to 10, 5% in fiscal 2022.

Turning to our operating results, our reported and adjusted gross margins were 33.5 and 33.6% respectively for the quarter.

Andrew Drink: Turning to our operating results our reported and adjusted gross margin were $33, five and 33, 6% respectively for the quarter.

This compared to 34 and 34.1% respectively in the same period last year.

Andrew Drink: This compared to 34 and 34, 1% respectively in the same period last year.

The differences were primarily driven by higher material costs and inventory reserves, partially offset by productivity improvements and favorable product mix.

Andrew Drink: The differences were primarily driven by higher material costs and inventory reserves.

Sally offset by productivity improvements and favorable product mix.

For the full year, reported and adjusted gross margin grew to 34.6% and 34.7% respectively.

Andrew Drink: For the full year reported and adjusted gross margin grew to 34.6 and 34, 7% respectively.

This was up from 33.3% and 33.4% respectively in FY2022.

Andrew Drink: This was up from $33, three and 33, 4% respectively in fiscal 2022.

This positive result was primarily driven by net price realization and productivity improvements, partially offset by higher material costs.

Andrew Drink: This positive result was primarily driven by net price realization and productivity improvements, partially offset by higher material costs.

SG&A expense as a percentage of net sales for the quarter was 23.9% compared to 21.2% in the same period last year.

Andrew Drink: SG&A expense as a percentage of net sales for the quarter was 23, 9% compared to 21, 2% in the same period last year.

This increase was primarily driven by lower net sales and increased investment in research and engineering. This was partially offset by lower warranty costs.

Andrew Drink: This increase was primarily driven by lower net sales and increased investment in research and engineering.

Andrew Drink: This was partially offset by lower warranty costs.

For the full year, SG&A expense as a percentage of net sales was 21.8% compared to 20.5% last year.

Andrew Drink: For the full year SG&A expense as a percentage of net sales was 21, 8% compared to 25% last year.

Operating earnings as a percentage of net sales for the fourth quarter were 9.6 percent and on an adjusted basis were 10.1 percent.

Andrew Drink: Operating earnings as a percentage of net sales for the fourth quarter or nine 6%.

Andrew Drink: And on an adjusted basis was 10, 1%.

These compare to 12.8 and 12.9% in the same period last year on a reported and adjusted basis.

Andrew Drink: These compare to $12 eight and 12, 9% in the same period last year on a reported and adjusted basis.

For the full year, operating earnings as the percentage of net sales were 9.5 percent and on an adjusted basis were 12.9 percent.

Andrew Drink: For the full year operating earnings as a percentage of net sales were nine 5% and on an adjusted basis were 12, 9%.

These both compare to 12.8% in fiscal 2022.

Andrew Drink: These both compared to 12, 8% in fiscal 2022.

Interest expense for the quarter was $14.9 million, about $3.4 million from the same period last year.

Andrew Drink: Interest expense for the quarter was $14 9 million up $3 4 million from the same period last year.

Interest expense for the full year was $58.7 million, up $23 million.

Andrew Drink: Interest expense for the full year was $58 7 million up $23 million.

Andrew Drink: The year over year increases were primarily due to higher average interest rates.

Andrew Drink: The reported effective tax rate for the fourth quarter of 19, 1% compared with 17, 9% last year.

Andrew Drink: The increase was primarily due to the geographic mix of earnings and higher tax benefits recorded as excess tax deductions for stock compensation in the prior year period.

Andrew Drink: The adjusted effective tax rate for the fourth quarter was 19, 3% compared with 18, 5% last year.

Andrew Drink: The year over year difference was primarily driven by the geographic mix of earnings.

For the full year, the reported and adjusted effective tax rates were 17.7% and 20.4% respectively.

Andrew Drink: For the full year, the reported and adjusted effective tax rates were 17, 7% and 24% respectively.

This compares to 19.8 percent and 20.2 percent in fiscal 2022.

Andrew Drink: This compares to 19, 8% and 22% in fiscal 2022.

Andrew Drink: Turning to our balance sheet as of year end.

Accounts receivable were $407 million, up 22% from a year ago, primarily driven by payment terms and higher international sales.

Andrew Drink: Accounts receivable were $407 million up 22% from a year ago, primarily driven by payment terms and higher international sales.

Inventory was $1.09 billion, up 3% compared to last year.

Andrew Drink: Inventory was $1 9 billion.

Andrew Drink: Up 3% compared to last year.

This increase was primarily due to higher finished goods largely driven by decreased demand for products sold to homeowners.

Andrew Drink: This increase was primarily due to higher finished goods largely driven by decreased demand for products sold to homeowners.

This was partially offset by improvement and work in process levels year over year, enabled by a stabilizing supply environment.

Andrew Drink: This was partially offset by improvement in work in process levels year over year.

Andrew Drink: Enabled by a stabilizing supply environment.

Sequentially, inventory was down $25 million from the end of the third quarter with improvement in both work in process and finished goods.

Andrew Drink: Sequentially inventory was down $25 million from the end of the third quarter with improvement in the working process and finished goods.

Accounts payable were $430 million, down 26% compared to a year ago, primarily driven by a reduction in material purchase.

Andrew Drink: Accounts payable were $430 million down, 26% compared to a year ago.

Andrew Drink: And really driven by a reduction in material purchases.

Full year free cash flow was $164.4 million, which reflects the conversion ratio of 50% of reported net earnings, as expected.

Andrew Drink: Full year free cash flow was $164 4 million, which reflects a conversion ratio of 50% of reported net earnings as expected.

While this was an improvement from fiscal 2022, elevated working capital continued to affect the results.

Andrew Drink: While this was an improvement from fiscal 2022 elevated working capital continued to affect the result.

For fiscal 2024, we expect a return to our historical average conversion rate of about 100 percent.

Andrew Drink: For fiscal 2024, we expect a return to our historical average conversion rate of about 100%.

Importantly, our balance sheet remains strong. Our gross debt to even all leverage ratio is well within our target range of one to two times.

Importantly, our balance sheet remains strong our gross debt to EBITDA leverage ratio is well within our target range of one to two times.

This, along with our investment grade credit ratings, provides the financial flexibility to fund investments that drive long-term sustainable growth.

Andrew Drink: This along with our investment grade credit ratings provides the financial flexibility to fund investments that drive long term sustainable growth.

We continue to allocate capital with our disciplined approach and consistent priorities, which include

Andrew Drink: We continue to allocate capital with our disciplined approach and consistent priorities which include.

Making strategic investments in our business to drive long term profitable growth both organically and through acquisitions.

Andrew Drink: 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.

Andrew Drink: Returning cash to shareholders through dividends and share repurchases and maintaining our leverage goals.

Andrew Drink: Our commitment to these priorities as demonstrated by our actions this year, including <unk>.

Andrew Drink: Our deployment of $142 million to fund capital expenditures to support new product investments.

Andrew Drink: Vance manufacturing technologies and capacity for growth.

Andrew Drink: And the return of $202 million to shareholders through regular dividend payments of $142 million and share repurchases of $60 million.

We are pleased that our board recently approved a 6% increase in our regular quarterly dividend for the first quarter of fiscal 2024.

As we look ahead to fiscal 2024, we continue to be encouraged by our market leadership and believe we are well positioned to drive long-term profitable growth in each of our attractive end markets.

Andrew Drink: As we look ahead to fiscal 2024, we continue to be encouraged by our market leadership and believe we are well positioned to drive long term profitable growth in each of our attractive end markets.

In the near term, there continues to be a number of factors in play.

In the near term there continues to be a number of factors in play.

Andrew Drink: First we expect incremental growth from our expanded mass channel <unk>.

Andrew Drink: We anticipate this will help offset the headwinds from continued consumer caution and elevated field inventory levels of residential and contractor grade lawn care products.

Of note, there has been some progress in reducing dealer inventories of these products since last quarter's peak.

Andrew Drink: Of note there has been some progress in reducing dealer inventory of these products since last quarter's peak.

Second, we ended fiscal 2023 with a $2 billion order backlog, which remains much higher than typical.

Andrew Drink: Second we ended fiscal 2023, with a $2 billion order backlog, which remains much higher than typical.

This continues to be driven by the strong demand we are experiencing for our underground and specialty construction solutions and Gotham grounds equipment.

Andrew Drink: This continues to be driven by the strong demand we are experiencing for our underground and specialty construction solutions and golf and grounds equipment.

With a more stable supply of key components, we are enabling increased flexible production capacity and are leveraging our existing manufacturing footprint to do so.

Andrew Drink: With a more stable supply of key components, we are enabling increased flexible production capacity and are leveraging our existing manufacturing footprint to do so we.

We expect this will further improve lead times and allow us to better serve our customers.

Andrew Drink: We expect this will further improve lead times and allow us to better serve our customers.

And third, as expected, field inventories of snow products were elevated heading into the new fiscal year, driven by the lower than average snowfall totals last year.

Andrew Drink: And third as expected build inventories of snow products were elevated heading into the new fiscal year, driven by the lower than average snowfall levels last year.

While the snow season has yet to fully play out, early snowfall activity has been light.

While the snow season has yet to fully play out early snowfall activity has been light.

With this backdrop, and based on our current disability, we are providing the following guidance for fiscal 2024.

Andrew Drink: With this backdrop and based on our current visibility we are providing the following guidance for fiscal 2024.

For the full year, we expect low single-digit total company net sales growth with Q2 and Q3 being our larger quarters.

Andrew Drink: For the full year, we expect low single digit total company net sales growth with Q2, and Q3 being our larger quarters.

For the professional segment, we expect net sales to grow at a rate lower than the total company average.

Andrew Drink: For the professional segment, we expect net sales to grow at a rate lower than the total company average.

For the residential segment, we expect net sales to grow at a rate higher than the total company average.

Andrew Drink: For the residential segment, we expect net sales to grow at a rate higher than the total company average.

Looking at profitability, for the full year, we expect overall adjusted operating earnings as a percentage of net sales to be slightly higher than last year.

Andrew Drink: Looking at profitability.

Andrew Drink: For the full year, we expect overall adjusted operating earnings as a percentage of net sales to be slightly higher than last year.

We expect both the professional and residential segment earnings margins to also be higher than last year.

Andrew Drink: We expect both the professional and residential segment earnings margins to also be higher than last year.

We anticipate a return to more normal incentive compensation, and with that, we expect the Other Activities category to reflect higher expense compared to fiscal 2023. Turning to Adjusted Gross Margins.

Andrew Drink: We anticipate a return to more normal incentive compensation and with that we expect the other activities category to reflect higher expense compared to fiscal 2023.

Andrew Drink: Turning to adjusted gross margin.

Andrew Drink: We expect a slight year over year improvement.

Andrew Drink: We expect this to be driven by productivity initiatives, partially offset by manufacturing inefficiencies as we continued to rebalance residential and contractor grade lawn care equipment inventory levels.

With this backdrop, we anticipate full-year adjusted EPS in the range of $4.25 to $4.35 per diluted share. Additionally,

Andrew Drink: With this backdrop, we anticipate full year adjusted EPS in the range of $4 and 25 to $4 35 per diluted share.

Andrew Drink: Additionally for the full year, we expect.

capital expenditures of about $125 million.

Andrew Drink: Capital expenditures of about $125 million.

depreciation and amortization of about $120 to $130 million, interest expense of about

Andrew Drink: Depreciation and amortization of about $120 million to $130 million.

Andrew Drink: Interest expense of about $59 million.

and an adjusted effective tax rate of about 21 percent.

Andrew Drink: And an adjusted effective tax rate of about 21%.

Andrew Drink: Turning to the first quarter of fiscal 2024.

We anticipate total company net sales to be down low double digits year over year.

As a reminder, our net sales grew 23% in the first quarter of fiscal 2023, so a difficult comparison.

Andrew Drink: As a reminder, our net sales grew 23% in the first quarter of fiscal 2023, so a difficult comparison.

We expect professional and residential segment net sales for the first quarter to also be down low double digits compared to the same period last year.

Looking at profitability for the first quarter, we expect total company adjusted operating margin to be lower than the same period last year.

Andrew Drink: Looking at profitability for the first quarter, we expect total company adjusted operating margin to be lower than the same period last year.

We expect the professional segment earnings margin to be slightly lower on a year-over-year basis and the residential segment earnings margin to be meaningfully lower.

Andrew Drink: We expect the professional segment earnings margin to be slightly lower on a year over year basis, and the residential segment earnings margin to be meaningfully lower.

Overall, we expect our first quarter fiscal 2024 adjusted EPF per diluted share to be modestly lower sequentially from the fourth quarter of fiscal 2023.

Andrew Drink: Overall, we expect our first quarter fiscal 2024, adjusted EPS per diluted share to be modestly lower sequentially from the fourth quarter of fiscal 2023.

We are looking forward to fiscal 2024 with confidence and optimism. As Executive Sponsor for AMP, I am personally excited about the significant benefits and opportunities our team expects to unlock with this initiative.

This is made possible with a more stable supply environment and supported by our strong balance sheet.

Speaker Change: This is made possible with a more stable supply environment and supported by our strong balance sheet.

We continue to build our business for long term profitable growth, and we remain confident in our ability to drive sustained value for all stakeholders. With that, I'll

Speaker Change: We continue to build our business for long term profitable growth and we remain confident in our ability to drive sustained value for all stakeholders.

Speaker Change: Now I'll turn the call back to Rick.

Thank you Angie. Our business fundamentals and market leadership remain strong. Our team has a long and proven track record of managing through a range of feasible fluctuations in macro situations with agility and resilience fees.

Rick Olson: Thank you Angie our.

Rick Olson: Our business fundamentals and market leadership remains strong.

Rick Olson: <unk> has a long and proven track record of managing through a range of seasonal fluctuations and macro situations with agility and resiliency.

Additionally, we expect our resiliency will help us navigate through the current rebalancing of homeowner and channel demand for lawn care solutions and position us well as this market recovers.

We're closely watching business and consumer confidence and spending patterns, as well as inflation, monetary policy actions, and the geopolitical environment.

Rick Olson: We are closely watching business and consumer confidence and spending patterns as well as inflation monetary policy actions and the geopolitical environment.

While the rebalancing in homeowner markets has created some near-term headwinds, we believe our well-established market leadership positions us to drive positive long-term results.

Rick Olson: While the rebalancing and homeowner markets has created some near term headwinds, we believe our well established market leadership positions us to drive positive long term results.

This leadership is reinforced by our innovative products, trusted brands, and extensive distribution and support networks.

Rick Olson: This leadership is reinforced by our innovative products trusted brands and extensive distribution and support networks.

We also expect continued benefits from the essential nature and regular replacement cycles of our products.

Rick Olson: We also expect continued benefits from the essential nature and regular replacement cycles of our products.

I'll now comment on factors in our end markets that could affect future results.

For underground and specialty construction, we expect end-user demand to remain robust.

Rick Olson: For underground and especially construction, we expect end user demand to remain robust.

This is supported by increased private and public spending to address global issues such as aging infrastructure, broadband access, and alternative energy buildup.

Rick Olson: This was supported by increased private and public spending to address global issues, such as aging infrastructure broadband access and alternative energy build outs.

Rick Olson: We're focused on helping our customers address these needs with our trusted channel and the most comprehensive equipment lineup in the industry, including innovative solutions for new installations, as well as repair rehab and replacement.

For golf, we expect continued strength and demand driven by sustained momentum in new golfers and rounds played. This momentum is not just a U.S. trend, it's global.

Rick Olson: For golf, we expect continued strength in demand driven by sustaining momentum in new golfers and rounds played.

Rick Olson: This momentum is not just a U S trend it's global.

For example, since 2020, there has been an 18% rise in the number of on-course golfers participating in markets outside North America, and we are uniquely positioned to make sure that golfers participate in markets outside of North America.

For example, since 2020, there has been an 18% rise in the number of encores golfers participating in markets outside North America.

Rick Olson: And we are uniquely positioned in this space.

We're the only company to offer both equipment and irrigation solutions. And we are the global market leader in both.

Rick Olson: We're the only company to offer both equipment and irrigation solutions and we are the global market leader in both.

An example of our leadership is our selection as the official turf maintenance and irrigation provider for the Ryder Cup through 2029. This is.

Rick Olson: An example of our leadership as our selection as the official turf maintenance of irrigation provider for the Ryder Cup through 2029.

Rick Olson: This was a tremendous honor.

For municipalities and grounds, we expect continued healthy budgets and the prioritization of public green space.

Rick Olson: For municipalities and ground, we expect continued healthy budgets and the prioritization of public green spaces.

To capitalize on these trends, we remain focused on developing innovative solutions that drive productivity, including zero exhaust emission alternatives with no compromise on performance.

Rick Olson: To capitalize on these trends, we remain focused on developing innovative solutions that drive productivity, including zero exhaust emission alternatives with no compromise on performance.

An example is our new Vista line of people mover vehicles with battery and gas powered options available in multiple configurations.

Rick Olson: An example is our new Vista line of people mover vehicles with batteries and gas powered options available in multiple configurations.

This is a growth opportunity for us in a new product category built on our foundation of more than three decades of proven success and reliability in the work utility vehicle space.

For snow and ice management, we continue to expect more subdued contractor demand following last year's below average snowfall that resulted in elevated field inventories.

Rick Olson: For snow and ice management, we continue to expect more subdued contractor demand following last year's below average snowfall resulted in elevated field inventories.

They're keeping an eye on storm activity as they return to more normal snowfall would be positive.

We're keeping an eye on storm activity as they return to more normal snowfall would be positive.

Rick Olson: A steady cadence of new product launches continues to enhance our leadership position in this market, including our new eight foot stainless steel boss Speedway in the file and our 72 inch Ventrad box power attachment.

Both plows are designed to quickly and effectively clear large amounts of snow.

Rick Olson: Both towers are designed to quickly and effectively clear large amounts of snow.

Rick Olson: For residential and commercial irrigation and lighting, we expect uneven demand from contractors and continue to watch consumer spending weather patterns and housing market trends the.

Rick Olson: The drought conditions across many geographies over the last year highlight the importance of water conservation.

We're committed to designing solutions that address this need.

Rick Olson: We are committed to designing solutions that address this need.

We were honored to receive our ninth consecutive EPA WaterSense Award in October for our efforts in promoting the efficient use of water through our products, education, and outreach.

Rick Olson: We were honored to receive our ninth consecutive EPA Waterside Award in October for our efforts in promoting the efficient use of water through our products education and outreach.

Rick Olson: <unk> that drive increased productivity and efficiency.

For landscape contractors, we expect steady retail demand with some price sensitivity.

Rick Olson: We expect continued interest in our high productivity high capacity solutions that allow more work to be done with less labor resources.

Equally important for contractors is our best in class service and support network.

Rick Olson: For homeowners, we expect continued caution driven by the same macro factors we have discussed.

Despite the recent dynamics, we believe these remain excellent markets for us, given our leadership position, along with the regular replacement cycles and essential nature of these products.

Rick Olson: Despite the recent dynamics, we believe these remain excellent market for us given our leadership position along with the regular replacement cycles and essential nature of these products.

We have high confidence in our ability to drive sustained value for all stakeholders over the long term.

Rick Olson: We have high confidence in our ability to drive sustained value for all stakeholders over the long term.

Rick Olson: We're taking decisive actions to adjust our production and cost structure and the current demand environment.

Rick Olson: And we are focused on prudent and disciplined capital allocation that delivers excellent returns.

Rick Olson: This includes our investment in <unk>.

we believe will drive near and long-term productivity and margin benefit.

We believe will drive near and long term productivity and margin benefits.

As always, our actions are guided by our enterprise strategic priorities, by accelerating profitable growth, driving productivity and operational excellence, and empowering people.

Rick Olson: As always our actions are guided by our enterprise strategic priorities, we're accelerating profitable growth driving productivity and operational excellence and empowering people.

On that note, I would like to thank our employees and channel partners for going above and beyond every day to help our customers enhance the beauty, productivity, and sustainability of the land.

Speaker Change: On that note I would like to thank our employees and channel partners for going above and beyond every day to help our customers enhance the beauty productivity and sustainability of the land.

Speaker Change: I would also like to extend my gratitude to our customers and shareholders for your continued support.

Speaker Change: I wish everyone, a safe and happy holiday season.

Speaker Change: With that we will open up the call up for questions.

Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star 11 on your telephone.

Speaker Change: Thank you, ladies and gentlemen, I'd like to ask a question. Please press star one on your telephone.

If your question has been answered and you wish to withdraw your question, please follow by pressing 1-1-1, star 1-1.

Speaker Change: If your question has been answered, which you wish to withdraw your question. Please followed by pressing 111 star one one.

Speaker Change: One moment for our first question.

Our first question comes from the line of Sam Darkas of Raymond James, your line is open.

Our first question comes from the line of Sam <unk> of Raymond James Your line is open.

Sam: Good morning, Rick Good morning, Angie how are you.

Good morning, Sam. Doing well. How are you? I'm well as well. Thank you. Three topics, if I could, to explore this morning. First, regarding the Resi market.

Sam: For example, doing well how are you.

Speaker Change: Well as well thank you.

Speaker Change: Three topics if I could.

Speaker Change: Florida. This morning first regarding the resi market.

Speaker Change: Within the first quarter guide how much if at all does the Lowe's load in and helped the quarter or is that more so in April quarter dynamic and then related to that.

First quarter guide, how much, if at all, does the Lowe's load-in help the quarter? Or is that more so an April quarter dynamic? And then related to that,

If you exclude the effects of the net effects of the Lowe's win, what are you incorporating within your guidance for the residential market for the year?

If you exclude the effects of the net effects of the Lowe's win.

Speaker Change: What do you what are you incorporating within your guidance for the residential market for the for the year.

Okay, I will answer the first question first with regard to lows. Most of the lows impact will be in the second quarter. There is the start of the process should be in the first quarter, but it will have more significant, most of these effects will be in the second quarter.

Speaker Change: Okay <unk>.

Speaker Change: <unk> answer the first question first with regard to lows most of the Lowe's impact will be in the second quarter.

Speaker Change: There is the start of the process shipping in the first quarter, but will have more significant most of those do you think.

Speaker Change: Good day metrics will be in the second quarter.

And hopefully it's clear that it will be a net benefit to residential overall.

Speaker Change: And if it's.

Speaker Change: Hopefully it was clear that it will be a net benefit to residential overall.

Right, so that if you back out the net benefit of the Lowe's win, what are you anticipating within your guidance for the base residential market for 24 again?

Speaker Change: Right. So then if you back out the net benefit of the Lowe's win what are you anticipating with within your guidance for the <unk>.

Speaker Change: <unk> residential market for 24 again.

Yeah, that would be all included within our guidance. Because of field inventory and so forth, those are the adjustments that are kind of the net on the opposite side. But we do feel that residential will go through the recovery period in 2024.

Speaker Change: Yes that would be all included within within our guidance because of field inventory and so forth. Those are the adjustments that are kind of the net.

Speaker Change: On the opposite side, but we do feel that.

Speaker Change: Residential.

Speaker Change: We will go through the recovery period in 2024, and we've seen some positive signs from a retail standpoint at this point. So it's really a matter excluding lowe's of what's what's in the channel between us and them.

And, you know, we've seen some positive signs from a retail standpoint at this point. So it's really a matter of excluding loads of what's in the channel between us and them.

I think with those higher field inventories, Sam, we'll kind of start the year with that and then continue to align our manufacturing to our demand so that we can rebalance that inventory. But we are certainly poised to grow our share in residential.

Speaker Change: But it does.

Speaker Change: Higher field inventory, Sam will will kind of start the year with that and then continue to align our manufacturing to our demand. So that we can rebalance that inventory, but we are certainly poised to grow our share and residents.

Gotcha. Second topic, the backlog. You mentioned $2 billion. What is that sequentially versus last quarter? And then if you could give some color around the orders of growth that you're seeing on a year-on-year basis and then related to that order cancellation experience of late.

Speaker Change: Got you a second topic.

Speaker Change: The backlog you mentioned $2 billion.

Speaker Change: What is that sequentially versus last quarter, and then if you could give some color around.

Speaker Change: The orders.

Speaker Change: Growth that youre seeing on a year on year basis, and then related to that order cancellation experience of late.

Yes, starting with backlog year over year per the per our information is down about 300 million dollars year over year

Speaker Change: Starting with the backlog year over year per the per our information is down about $300 million year over year and your question sequentially is down from the third quarter.

And your question sequentially is down from the third quarter.

slightly from the third quarter, so stepping down really in the second half of 2023. Actually bumped up slightly in the first and second quarters of 2023 and then has stepped down.

Speaker Change: Slightly from the third quarter, so stepping down early in the second half of 2023 actually bumped up slightly in the first and second quarters of 2023 and has stepped down so we have made.

So we have made, you know, probably the first significant net bite out of that backlog in the last couple of years.

Speaker Change: Probably the first significant nets bites out of that backlog in the last couple of years, that's something that we're working hard on it mainly reflects the additional output from our plants in the healthier supply chain.

That's something we've been working hard on. It mainly reflects the additional output from our plants and the healthier supply chain. So that's the situation.

Speaker Change: That's both situations the backlog.

And orders and order cancellations, what trends are you seeing there, Rick?

Speaker Change: And orders and order cancellations what trends are you seeing there Rick.

Minimal, very minimal order cancellations and continue to have a very strong order flow at this point.

Rick Olson: Minimal very minimal order cancellations and continue to have a very strong order flow at this point.

You're seeing the net impact of the backlog, but it's actually, I think we talked about last quarter, the aging of those orders is actually improving. So we're fulfilling some of the long-term orders. They are being replaced by new orders, and that's really the net that you see. But our goal is to reduce the open order situation just because most important for us is our promise to our customers, make sure we serve them in their expected time.

Rick Olson: Youre seeing that thats impacting the backlog, but it's actually I think we talked about last quarter. The aging of those orders is actually improving.

So we're fulfilling some of the long term.

Orders they are being replaced by new orders and that's really the net that you see but our goal is to reduce.

Rick Olson: The.

Rick Olson: Open order situation, just because most important for us is our promise to our customers to make sure we serve them.

Rick Olson: At this time.

Speaker Change: Yes, you're right.

Speaker Change: Got you and my final topic, and then I'll defer to others apologies.

Speaker Change: Steel prices have obviously been going batty over the past couple of months or so as it stands right now.

Speaker Change: What is your raw material or input cost stack for fiscal 'twenty, four and then related to that do you anticipate pricing.

Speaker Change: Up down the same.

Speaker Change: Accordingly, as things stand.

Yes, so our commodities have been stabilizing, but we are certainly watching the steel prices and have considered that in our guidance.

Speaker Change: Yes, so our commodities have been stabilizing but we are certainly watching steel prices and have considered that in our guidance.

Speaker Change: When it comes to price cost.

Speaker Change: F. 'twenty four we are returning to kind of our 1% to 2% normal average pricing, we do expect to see some productivity benefits throughout the year. Although we are continuing to work on really aligning our production our production to our demand and so we're seeing some manufacturing inefficiencies and variances continue.

Very helpful. Happy holidays to your entire team. Thank you.

Speaker Change: Very helpful Happy holidays to your entire team. Thank you.

Happy Holidays to you Sam. Thank you. Thank you. Thank you. One moment please.

Speaker Change: The holiday season. Thank you. Thank you.

Speaker Change: Thank you one moment please.

Our next question comes from the line of Tim Woese of Bay Area. Your line is open.

Speaker Change: Our next question comes from the line of Tim woes.

Tim Baird: Of Baird. Your line is open.

Tim Baird: Hey, everybody good morning.

Speaker Change: Good morning.

Morning, maybe just to start off in the professional business. I guess just to confirm, do you expect that business to grow?

Speaker Change: Yeah.

Speaker Change: Good morning, maybe maybe just to start off in the in the professional business I guess just to confirm.

Speaker Change: Do you expect that business to grow.

positively in fiscal 24. And I know it's gonna be kind of lower than the total company, but I just wanna confirm that there's growth there. And then is there a way within the professional business to maybe give us some color, how you're thinking of some of the subcomponents, whether it's kind of underground and golf, or you've got the backlog visibility and maybe what's kind of embedded in the guide for landscape.

Speaker Change: Positively in fiscal 'twenty, four and I know, it's going to be kind of lower than that.

Speaker Change: The total company, but I just want to confirm that there's growth there and then.

Sure. Well, first of all, back to the first part of the question, we do expect the professional business to grow slightly year over year.

Speaker Change: Sure well first of all back to the first part of the question. We do expect the professional business to grow slightly year over year.

And the second part of your question is the important piece to understand is a range within the professional segments of expected outcomes. So on the areas that coincide with where we have high back order at this point, so golf grounds, underground construction, we do expect continued growth mainly driven by improved output in our plants. That's something that

Speaker Change: And the second part of your question is the important piece to understand it.

Speaker Change: It's a range within the professional segment of expected outcomes on the areas that coincide with where we have high back order at this point, so golf grounds underground construction we.

Speaker Change: We do expect continued growth mainly driven by improved output.

Speaker Change: Our plans so that's something that.

steadily increased or improved throughout this last year. So we enter into this new year at a much better place with the supply chain and with our plants.

Speaker Change: Steadily increased or improved throughout this last year, so we enter into those.

Speaker Change: This new year at a much better place with the supply chain with our plants.

And if you go to the other end of the spectrum, we do expect continued rebalancing within the channel on the landscape contractor side, especially the homeowner customers related to the landscape contractor. So the more commercial these portion would be

Speaker Change: And if you go to the other end of the spectrum, we do expect continued rebalancing with them within the channel.

Speaker Change: The landscape contractor side, especially the homeowner customers related to the landscape contractor so the.

Speaker Change: More commercial fees portion would be.

part that we're talking about there. So that's going to go through the rebalancing, probably acting more similar to residential.

Speaker Change: The part that we're talking about there so let's kind of go through the rebalancing probably acting more similar to the residential market.

Okay, okay. So, I mean, is there a pretty it sounds like there's a pretty meaningful gap between the two at least.

Speaker Change: Okay.

Okay. So I mean is there a pretty it sounds like there's a pretty meaningful gap between the two at least what what's kind of factored into guidance.

It's a meaningful range of expected growth between the two spectrums, the two ends that I talked about.

Speaker Change: It's a meaningful range of expected growth between the two for.

Two spectrum.

Speaker Change: So you talked about.

Okay, okay, good. And then just on AMP, I guess how different.

Speaker Change: Okay. Okay. Good and then just on just on Amp.

Speaker Change: I guess how different.

Is this program than what you'd kind of normally be doing around things like the supply chain and product design and things like that on an annualized space is just to improve productivity. I'm just, I guess I'm trying to.

Speaker Change: Is this program than what you'd kind of normally be doing around things like the supply chain and product design and things like that on an annualized basis, just to improve productivity I'm, just I guess I'm trying to.

Just make sure I understand, like, is this something that would be. You know, purely incremental to what you'd kind of expect from a normal incremental margin perspective, or is this something that that does more to kind of support that the normalized incremental margins and I guess how do we save that?

Speaker Change: Just to make sure I understand like is this something that would be purely incremental to what you'd kind of expect from a normal incremental margin perspective or is this something that does more to kind of support.

Speaker Change: The normalized incremental margins and I guess, how do we phase that in.

Yeah, so I think what I'd start with this, so it is different than our than our drive for five initiative, which is an employee initiative that will remain intact. Amp is really a transformational productivity initiative and the largest that we've ever done in TTC history. It really, we've been able to do this because our supply chain has really

Speaker Change: Yes, so I think what I'd start with just the way it is different than our than our drive for five.

Speaker Change: Initiative, which is an employee initiative that will remain intact.

You know, improved over time and allow us to focus more on productivity. It will be incremental. So our goal is to get $100 million in annual run rate cost savings by 2027, which will be incremental To to our normal gross margin and productivity improvements and we do expect that savings to accelerate over time, probably seeing the majority of those savings come in years two and three.

Speaker Change: Improved over time and allow us to focus more on productivity it will be incremental.

Speaker Change: Our goal is to get $100 million in annual run rate cost savings by 2027, which will be incremental.

Two to our normal gross margin and productivity improvements and we do expect that savings to accelerate over time, probably seeing the majority of those savings come in years, two and three.

Speaker Change: Okay. Okay. That's helpful and then just the last one.

Speaker Change: You gave us a little bit of color on that.

Speaker Change: Fiscal Q1 kind of expectation.

Speaker Change: Anything else to kind of think about in terms of the cadence as we think about the rest of the fiscal 'twenty for either from a revenue and EPS perspective.

Speaker Change: Sure, Yes, so as we said in our prepared remarks, typically Q2, and Q3 are our largest quarters, but if we think about kind of the cadence for our adjusted EPS. It is typically higher in the second half than it is in the first half.

Speaker Change #100: And we expect it to be.

Speaker Change #101: Okay sounds good thanks, a lot I appreciate the color.

Speaker Change #102: You bet.

Speaker Change #103: Thank you one moment please.

Speaker Change #104: Our next question comes from the line of.

Speaker Change #104: Tom Hayes of C. L. King your line is open.

Hi, Greg. Good morning. Thanks for taking my call. Rick, maybe just a little bit. I think you may have mentioned in your prepared remarks, but I just want to go back because we've heard some some weakness in the channel. Maybe it's your thoughts on where the rental channel is right now.

Tom Hayes: Great. Good morning, Thanks for taking my call from Rick maybe just a little bit.

Speaker Change #105: Thank you May have mentioned in your prepared remarks, but I just wanted to go back up because we've heard some weakness.

The channel maybe just your thoughts on where the rental channel is right now.

Speaker Change #105: From our perspective, the rental channel continues to be very healthy. It's been it was a strong driver for us in 2023 and order positions continue to be very strong.

Speaker Change #105: Really there are adjustments taking place by category and.

Speaker Change #105: Yes by an individual customer, but we still see that as a as a.

Speaker Change #105: Healthy business for us.

Okay, and then maybe it's come up in a few other questions, but maybe it's on the

Speaker Change #106: Okay, and then maybe just.

Speaker Change #106: And a few other questions, but maybe just on the.

field-level inventories on the residential and your professional lawn care, do you think we're closer to the end of the de-stocking than...

Speaker Change #106: Field level inventories on the residential and your professional lawn care.

Speaker Change #106: Think we're closer to the end of the Destocking then.

Speaker Change #106: Then.

then kind of the midpoint or just kind of some additional color on kind of where you feel you are as far as the field inventory levels right now.

Speaker Change #107: And then kind of the midpoint or just kind of some additional color on kind of where you feel you are as far as the field inventory levels right now.

Field inventories are still meaningfully elevated from where we would like to see them at this time of year, especially given for spring products, it's really the off-season at this point, so we're not going to see major retail flow through until we get into the spring in North America where we'll start to see the momentum, so still higher.

Speaker Change #107: Our field inventories are still meaningfully elevated from where we would like to see them at this time of year.

Speaker Change #107: Especially given for spring products. So it's really the off season at this point, so that we're not going to see major retail flow through until we get into the spring in North America.

Speaker Change #107: To see the momentum so still higher.

Uh snow is uh is uh higher we had you know relatively poor snow season last year That off to a great start so far this year, but that's all built into our guidance as we

Speaker Change #107: Snow is is higher we had relatively poor snow season last year got off to a great start so far this year, but that's all built into our guidance as we provided it.

Speaker Change #108: Okay, maybe just.

Speaker Change #109: And then just Tom just one last thing regarding on the pro side of things field.

Tom Hayes: <unk> inventory is still very low historically low for underground specialty construction and the golf and grounds businesses. So that's still a channel that needs to be refilled once the once the balance is found with demand and supply.

Okay, I guess similar along the lines of that last point. I think last time you and I talked, you indicated that you felt the municipal budgets remain pretty solid and that would be a good

Speaker Change #110: Okay, I guess similar along the lines of that last point I think last time, you and I talk you indicated that you felt that municipal budgets remained pretty solid and that would be a good good.

indicator for your grounds and golf-related revenue opportunities. Is that still the case? Sounds like it is.

Speaker Change #110: Indicator for your ground and.

Speaker Change #110: Ralph related revenue opportunity is that still the case it sounds like it is.

That is uh, that's still the case. I was just looking at some golf, uh information just this morning and the strongest Growth and participation has actually been in municipal access

Speaker Change #111: That's still the case, so I was just looking at some golf.

Speaker Change #111: Information just this morning, and the strongest growth and participation has actually been in municipal access golf courses. So.

golf courses so open access golf courses so that that's strong from a golfing standpoint budgets continue to be strong and really prioritized to green spaces for municipalities. I guess the last piece would be the investments that we've made to have zero emission products.

Speaker Change #111: Open access golf courses.

Speaker Change #111: <unk> from a golfing standpoint budgets continue to be strong and really prioritized to green spaces for municipalities and I guess, the last piece would be the investments that we've made to have zero emission.

Speaker Change #111: Products has really positioned us well with municipalities that tend to be the early adopters and making those investments. So it puts us in a really good position from a municipal standpoint.

has really positioned us well with municipalities that tend to be the early adopters in making those investments. So it puts us in a really good position from a municipal standpoint.

Appreciate the color. Thank you. Thank you. Thank you. One moment, please.

Okay I appreciate the color. Thank you.

Speaker Change #112: Thank you.

Speaker Change #113: One moment please.

Speaker Change #114: Our next question comes from a lot of David Macgregor.

David Macgregor: Of Longbow Research your line is open.

Yes. So good morning, everyone. Thanks for taking the question.

David Macgregor: Yes, good morning, everyone and thanks for taking my question Good morning, Eric and David Rick.

Hey, good morning, everyone. I mean, arguably the most important event for 2024 for you is the addition of the Lowe's business, which is just a tremendous addition to the enterprise.

Speaker Change #115: Hey, good morning, everyone.

David Macgregor: Our.

Speaker Change #116: Arguably the most important event for 2024 for you is the addition of the Lowe's business, which is just tremendous.

In addition to the to the enterprise.

But if I could just maybe come back to Sam's question and ask it maybe a little bit differently, you know, within the low single-digit 2024 Revenue Growth Guide.

Speaker Change #117: But if I could just maybe come back to Sam's question and ask it maybe a little bit differently within the low single digit 2020 for revenue growth guidance, what's the expected incremental contribution from the lowest business net of likely reductions to your other big box retail partners will this incremental business be accretive or dilutive to margins.

What's the expected incremental contribution from the lowest business net of likely reductions to your other big box retail partners? And will this incremental

You know, NETs, we don't break down to the specifics of MIX, we also just, if you think about the major portion that goes through our dealer network as well, so there are other elements that we're not even kind of bringing into the equation here that are really key.

Speaker Change #118: Net we don't break down to the specifics of the mix. We also just if you think about the major portion of it goes through our dealer network as well. So there are other elements, though we're not even trying to bring into the equation here that are really key.

Our dealer business has been very healthy, it's continued to grow for some time, but the nets with Lowe's will be a benefit overall for the residential business.

Speaker Change #118: Our dealer business has been very healthy has continued to grow for some time.

Speaker Change #118: But the nuts.

Speaker Change #118: With Lowe's will be a benefit overall for the residential business.

Um, you know, we our desire is to continue to grow with all of our partners. Uh, so we will continue to work on that with every every all of our mass and dealer partners Look for differentiated products mixes for them And uh work to continue to grow that but the net the net effect with Lowe's would be a positive for residents

Speaker Change #118: We are desirous to continue to grow with all of our partners. So we will continue to work on that with every every Oliver mass and dealer partners look for differentiated product mixes for them and work to continue to grow that but the net net effect of those laws would be a positive for residential.

And Rick, can you speak to whether the incremental business is accretive or dilutive to margins?

Speaker Change #119: And can you speak to whether the incremental business is accretive or dilutive to margins.

Speaker Change #119: Sure.

It should be consistent, it's not a big swing in either direction.

Speaker Change #119: It should be it should.

Speaker Change #119: It should be consistent.

Speaker Change #119: A big swing in either direction.

Yeah, and our best estimates for that, David, are included in our guidance.

Speaker Change #120: Yeah, and our best estimates for that David are included in our guidance.

Okay, because on the surface, it looks like if you exclude the lowest business, your EPS forecast is down in 2024 versus 2023. I just want to make sure I'm reading that properly.

David Macgregor: Okay, because on the surface it looks like if you exclude the Lowe's business. Your EPS forecast is down in 2024 versus 2023, I just want to make sure I'm reading that properly.

David Macgregor: The lost business.

Yes, we are. I mean, we're still working to get through some of our manufacturing variances and rebalancing that inventory. So I think if you look at our overall EPS, we've got this homeowner demand that we're continuing to work through and and offsetting that, of course, with what we're seeing in our in our professional business and the backlog businesses that are doing that are doing well and improving output and volume.

Speaker Change #121: Yes, we are I mean, we're still working to get through some of our manufacturing variances and rebalancing that inventory. So I think if you look at our overall EPS. We've got this homeowner demands that we're continuing to work through them.

And offsetting that of course with what we're seeing in our in our professional business Sandy.

Speaker Change #121: The backlog businesses that are doing that.

Speaker Change #121: That are doing well and improving outlet in volume.

Speaker Change #121: Okay.

Speaker Change #122: And then my follow up question is on free cash flow conversion and I'm. Just wondering if you could walk us through the drivers behind the recovery to a 100% free cash flow.

Speaker Change #122: From 50% this year.

Speaker Change #122: It looks if you back into the math it looks like Youre anticipating inventories down approximately $300 million.

Speaker Change #122: Working capital down maybe $2 75 somewhere in that order of magnitude. So I'm. Just wondering if you could help us is it all just working capital reduction are there other things going on in there any help there would be appreciated. Thanks.

Sure. Yes, the majority of that opportunity is going to be working capital reduction. So, as you know, we've had a focused effort on working capital really the last year, and we will continue to have a sharp focus on that. We want to convert that to 100 percent. And typically, we generate the majority of that free cash flow in the second half.

Speaker Change #123: Sure, Yes, the majority of that opportunity is going to be working capital reductions. So as you know we've had a focused effort on working capital really the last the last year and we will continue to have a sharp focus on that.

We want to can to convert that to a 100% and typically we generate the majority of that free cash flow in the second half.

And that 300 million of that number I just offered you, that's sort of a close approximation of how you're thinking about it.

Speaker Change #124: Right and the $300 million of that number I just do that.

Speaker Change #124: Close approximation of how you're thinking about it.

I don't know that we've said exactly what that would be, but inventory is the sharp focus. And if you look at our inventory, we did see with decline, both year over year and sequentially from two, three. So we are making some improvements. Good. Thanks very much.

Speaker Change #125: I don't know that we have set exactly what that would be the inventory is the sharp focus and if you look at our inventory we did see lift decline both year over year and sequentially from Q3, So we are making some improvements.

Speaker Change #126: Good alright, thanks very much.

Speaker Change #127: I look forward to catching up with you in Phoenix.

Speaker Change #128: Thank you one moment please.

Speaker Change #128: Yeah.

Our next question comes from a line of Eric Boschard of Cleveland Research, your line

Speaker Change #129: Our next question comes from the line of Eric Boshart of Cleveland Research. Your line is open.

Hi there. A couple of things if I could. First of all, you've had historically these three-year programs that are generally focused on revenue growth, and I think you've still got that one going as well.

Eric Bosshardt: Hi, there a couple of things if I could first of all.

Eric Bosshardt: You have had historically these three year programs that are generally focused on revenue growth I think you've still got that one going on what.

What I'm curious about is the AMP program is notably different. I think there was a comment made that the supply chain enables the

Eric Bosshardt: What I'm curious about is the Amp program as is notably different and I think there was a comment made that the supply chain enables this.

At this point in time, I guess, taking a half step back, I'm just curious, like, why the need for this? There hasn't been one like this historically. Is there something different?

Eric Bosshardt: At this point in time, I guess, taking a half step back I'm just curious like why the need for this there hasnt been one like this historically is there something different.

with the business, with the market, with competition. I'm just curious, what's different that created a need for.

Eric Bosshardt: With the business with the market with competition I'm, just curious what's what's different that.

Eric Bosshardt: <unk> created a need for this relative to the history of the business.

Yeah, Eric, I'll take this one. So if you think relative to our employee initiatives, this is different. This is really laser focused on productivity and cost improvement.

Speaker Change #130: Yeah, Eric I'll take this one so if you think relative to our employee initiatives. This is different this is really laser focused on productivity and cost improvement.

and if there is something that's unique and why now is the right time. We're coming out of a period of the pandemic where it's been difficult to do some of that work particularly with our supply base.

Speaker Change #130: And.

Speaker Change #130: If there is something Thats unique and why now is the right time, we're coming out of a period out of the pandemic, where it's been difficult to do some of that work, particularly with our supply base.

Efficiency within our manufacturing plants and we are now back at a point where we can go back to our focus on improving productivity within the plants, working with our supply base to improve pricing.

Speaker Change #130: Wyszynski within our manufacturing plants and we are now back at a point, where we can go back to our focus on improving productivity within the plants are working with our supply base to improve pricing.

The whole go-to-market portion that Angie mentioned in her prepared remarks of, you know, taking costs out of that and, you know, the scale to be able to leverage some of our costs. So now is the perfect time. It's something that cuts across everything else we do, and it helps us and enables the other things that we're doing.

Speaker Change #130: The whole go to market portion, but Angie mentioned in her prepared remarks.

Speaker Change #130: Taking taking cost out of that.

Speaker Change #130: The scale to be able to leverage some of our cost. So now is the perfect time, it's something that cuts across everything else, we do and it helps us.

Speaker Change #130: The other things that we're doing.

Is there anything from a market standpoint that is different in terms of price point?

Speaker Change #130: Is there anything from a market standpoint that is different in terms of.

Speaker Change #130: Price points product and.

end market that is different that relates to this? Or is this, as you characterized it, kind of catch up for things that you weren't able to do during pandemic and supply chain? I'm just curious if the end market is changing in a way that also

Speaker Change #130: End market that is different that relates to this or is this as you characterize it kind of catch up for things that you weren't able to do during the pandemic and supply chain I'm. Just curious if the end market is changing in a way that also amplifies the need for us.

It's not driven by any particular external factor. It's always obviously a key to being competitive to be able to have options from our pricing standpoints, but it's not driven or triggered by any particular external factor. It helps us be more competitive is one thing we can say.

Speaker Change #130: It's not driven by any particular external factor that's always obviously.

Speaker Change #130: Key to being competitive to be able to have options from our pricing standpoint, but it does not prevent our trigger buying particular external factor that helps us be more competitive that's one thing we can say.

And I just would clarify, you know, we have one year left of our employee initiative drive for five. We've left those stretch goals out there for 2024. That's an internal employee number. We'll launch a new employee initiative that we'll announce in December of next year. So next year at this time.

Speaker Change #130: Just would clarify we have one year left of our employee initiatives drive for five we've left those stretch goals out there for 2024, that's an internal employee number and will launch a new employee initiative that we'll announce in December of next year. So I'm not sure at this time.

Um, then the, the 2nd thing there, there was a comment also made a lot of moving parts within residential, but the comment made on positive retail signs. I just wonder if we could dig into that a little bit. What are the, what are the positive retail signs that you're seeing that. Provide encouragement.

Speaker Change #130: Yeah.

Speaker Change #130: Then the second thing there was a comment also made it a lot of moving parts within residential but the comment made a positive retail signs I just wonder if we could dig into that a little bit what are the what are the positive retail science that youre, saying that provide encouragement in that business.

I wouldn't I wouldn't read too much into at this point. We just had the first, you know, housing starts, for example, has some correlation to residential business. We see a little bit of retail activity. That's more positive.

Speaker Change #131: I wouldn't I wouldn't read too much into that at this point, we just had the first.

Speaker Change #131: Housing starts for example have some correlation to the residential business, we see a little bit of retail activity that's more positive.

But this is a very low portion of the year for the bulk of our residential products. We're just getting, you know, there's a few tiny signs of improvement there. And the biggest factor for us is not going to be even so much the retail, but it's what's between the retail and us.

Speaker Change #131: But this is a very low portion of the year for the bulk of our residential products were just giving a few tiny signs of improvement there and the biggest factor for us those that could be given so much of the retail, but it's what's between the retail and OSM for that case.

So just, you know, just early early finds, which I would not draw too many conclusions from, but slightly positive.

Speaker Change #131: Just.

Speaker Change #132: Yes, just early early signs, which I would not draw too many conclusions from that.

Slightly positive.

Speaker Change #132: And then the last comment I wanted clarity on there was.

A comment about returning to more normal price mix realization within the business.

A comment about returning to more normal price mix realization within the business and I was just trying to square that with there was also a comment made about landscape contract are more price sensitive than in the past.

I was just trying to square that with there was also comment made about landscape contractor more price sensitive than in the.

And so I'm curious if there is a return to normal, if there is something different within price mix from an end market standpoint or within your opportunity in that area, just a clarity.

And so I'm curious if you know if there is a return to normal or if there is something different.

Within price mix from an end market standpoint, or within your your opportunity in that area just a clarity on that if he would.

Speaker Change #133: Yeah. So we talked about returning to a more typical averaged 1% to 2% price.

Speaker Change #133: For the year, but the businesses that have high field inventory, we expect to see less realized price and the others.

Speaker Change #134: Does that answer your question.

Half of it, some get more than normal because some are getting less than normal to get you back to normal, I guess.

Speaker Change #134: Half of it that the.

Speaker Change #134: So the.

Speaker Change #134: Some get more than normal because some are getting less than normal to get you back to normal I guess, that's what I'm trying to figure out.

I think it, you know, relates to something we probably haven't mentioned as often, but we really have a market-based approach to pricing. So, we get the price in the market that's relative to features, innovation, customer value. And this is the, you know, our guidance reflects the total of that across all of our markets. Yeah, so it would be puts and takes, as you can see. Okay, I hear what you're saying. Thank you. Thank you very much. Thank you.

Speaker Change #134: I think it relates to something we probably Havent mentioned is often but we really have a market based approach to pricing. So we get the price in the market that's relative to features innovation customer value.

Speaker Change #134: This is the in our guidance reflects that.

Speaker Change #134: The total of that.

Speaker Change #134: Across all of our markets.

Speaker Change #135: Yes, so there will be puts and projects.

Speaker Change #136: I hear what you're saying, but thank you. Thank you very much.

Speaker Change #136: Thank you.

Speaker Change #136: Okay.

Speaker Change #136: One moment please.

Speaker Change #136: Our next question comes from a lot of Michael Slutsky.

Michael Slutsky: M D a Davidson and company your line is open.

Good morning and thanks for taking my question.

Speaker Change #137: Good morning, and thanks for taking my question.

I wanted to first touch on

Speaker Change #137: One I wanted to first touch on them on.

the Amplify program. Do you have any sense as to, I guess it's a two-part question. One is, do you have any sense as to where you'll see a large cash outlay at the outset of the program to get some of these costs reductions done kind of on a one-time basis? Maybe secondly, have you figured out how much of the $100 million you want to reinvest? You said it was going to be a portion, but I wasn't sure if it's just a small piece of it or almost all of it will go back to R&D or other kinds of growth.

Speaker Change #137: On the amplify program.

Speaker Change #137: Do you have any sense as to I guess, it's a two part question. One is do you have any because of the way.

Speaker Change #137: You'll see a large cash outlay at the outset of the program to get some of these cost reductions done kind of on a onetime basis, maybe secondly have you figured out.

Speaker Change #138: How much of a 100 million you want to reinvest you said it was going to be a portion, but I wasn't sure. If that's just a small piece of it or almost all of it will go back to R&D or other kinds of growth initiatives.

Yes, so we will see some one time and restructuring charges that will be reflected in our gap earnings. We'll ramp those up over time as we implement and we'll communicate those as we evolve. We have set up our transformational productivity office this quarter and are really beginning to get into all of those details.

Speaker Change #138: Yes, so we will see some one time and restructuring charges that will be reflected in our GAAP earnings will ramp those up over time as we implement and we'll communicate those as we evolved we have set up our transformational productivity office this quarter and are really beginning to get into all of those details.

Speaker Change #138: Your question on reinvestment, yes, we do intend to reinvest as much as maybe 50% of desk and are back in our business, we want to invest in innovation and technology and in areas, where we can see accelerating our profitable growth.

Speaker Change #139: Got it.

And then I wanted to just follow up with some comments you made about ramping up in the professional business in the last quarter so to get production rates moving.

Speaker Change #139: And then I wanted to just follow up with the comments you made about ramping up in the professional business in the last quarter or so to get production rates moving I'm kind of curious was there anything down there that was the.

I'm kind of curious, was there anything down there that was out of the ordinary for Toro's history, or is it just typically Toro doing what it does best and kind of being flexible when they have to?

Speaker Change #139: The ordinary for tourists history or is it just typically taro doing what it does best and kind of being acceptable when when they have to.

And I guess, given the backlogs you've got and some of the trends you've seen, do you think we need to permanently grow the capacity of our infrastructure and golfing grounds and the other businesses, you know, with some additional permanent square footage there? Or is this all just very temporary to kind of meet the current needs?

Speaker Change #139: Just given the backlog you've got in some of the trends you're seeing do you think need to permanently.

Speaker Change #139: Grow the capacity of construction.

Speaker Change #139: Construction in golf and grounds and then the other businesses.

Speaker Change #139: With some additional.

Speaker Change #139: Permanent square footage there or is this all just very temporary to kind of meet the current market conditions.

To the first part of your question, the results are really the effect of doing what we do, so it's a combination of many disciplines within the Toro company, really focused on our integrated supply chain team and incredible work that was done in our plants to get additional work output.

Speaker Change #139: So the first part of your question. The results are really the effect of doing what we do so as the combination of many disciplines within the Toro company.

Speaker Change #139: We focused on our integrated supply chain team an incredible work that was done at our plants to get additional work.

Speaker Change #139: Output.

That was based on a healthier supply base and more consistent supply of components that really enabled that.

Speaker Change #139: That was based on a healthier.

Speaker Change #139: Supply base and more consistent supplier of components without really enabled that.

Uh, if you, uh, break down the capacity question, that's really a split answer. So In areas where we see an inflection in growth rate going forward Underground construction

Speaker Change #139: If you breakdown the capacity question, that's really a split answer so in areas, where we see an inflection in growth rate going forward.

Speaker Change #139: Underground construction et cetera.

We are adding structural capacity to be able to support that into the future. We see a different growth rate than probably a historical growth rate in those areas.

Speaker Change #139: We're adding structural capacity to be able to support that into into the future. We see a different growth rates on par with historical growth rate in those areas.

Speaker Change #139: In areas that we know that we're going to return to more typical glide path, let's say golf and grounds, we're working not to add structural capacity that we would regret and instead using our existing capacity in a flexible way so shifting production.

between facilities, working more extended hours, et cetera. That's really the solutions that we're looking for for those businesses that we expect to return to more traditional growth rates. Okay, thanks.

Speaker Change #139: Between facilities working more extended hours et cetera, Thats really the solutions that we're looking for for those businesses, but we expect to return to more.

Traditional growth rates.

Speaker Change #140: Okay. Thanks, I appreciate the discussion and happy holidays.

Speaker Change #141: Okay. Thank you Michael.

Thank you. I'm showing no further questions at this time. I'd like to turn the call back over to Ms. Karikatz for any closing remarks.

Speaker Change #142: Thank you I'm showing no further questions at this time I'd like to turn the call back over to MS. Karen <unk> for any closing remarks.

Thank you, everyone, for your questions and interest in the Toro Company. We wish you all a joyful holiday season, and we look forward to talking with you again in March to discuss our fiscal 2024 first quarter results.

Karen: Thank you everyone for your questions and interest in Massaro company and wish you all a joyful holiday season, and we look forward to talking with you again in March to discuss our fiscal 2024, our first quarter results.

Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may now disconnect. Have a great day.

Speaker Change #143: Thank you ladies and gentlemen, this does conclude today's conference. Thank you all participating you may now disconnect have a great day.

Q4 2023 The Toro Company Earnings Call

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