Q2 2025 The Toro Co Earnings Call

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Joshua Wilson: Good day, ladies and gentlemen, and welcome to the Toro Company Second Quarter Earnings Conference Call. My name is Josh and I will be your coordinator for today. At this time, all participants are in a listen-only mode.

Josh: Good day, ladies and gentlemen, and welcome to the Toro Company second quarter Earnings Conference call. My name is Josh and I will be your coordinator for today at this time all participants are in a listen only mode. We will be facilitating a question and answer session towards the end of today's conference.

Operator: We will be facilitating a question and answer session towards the end of today's conference. As a reminder, this conference is being recorded for replay purposes.

Speaker Change: Minder. This conference is being recorded for replay purposes, I would now like to turn the presentation over to your host for today's conference Jeremy Stephan.

Jeremy Steffan: I would now like to turn the presentation over to your host for today's conference, Jeremy Steffan, Director of Investor Relations. Please proceed, Mr. Steffan.

Speaker Change: Director of Investor Relations. Please proceed Mr. Stephane.

Jeremy Steffan: Good morning, everyone. And thank you for joining us for the Toro Company's second quarter 2025 earnings conference call. On the line with me today are Rick Olson, Chairman and Chief Executive Officer, and Angie Drake, Vice President and Chief Financial Officer. During this call, Rick and Angie will provide their insights on our second quarter results, which were released earlier this morning, along with their outlook and priorities for the remainder of the year.

Speaker Change: Good morning, everyone and thank you for joining us for the Toro Company second quarter 2025 earnings Conference call.

Speaker Change: On the line with me today are Rick Olson, Chairman and Chief Executive Officer, and Andrew <unk>, Vice President and Chief Financial Officer.

During this call recognize you will provide their insights on our second quarter results.

Speaker Change: Were released earlier this morning, along with our outlook and priorities for the remainder of the year.

Jeremy Steffan: Following their remarks, we'll open the phone lines for a question and answer session. As a reminder, any forward-looking statements that we make this morning are subject to risks and uncertainty. including those described in today's earnings release, investor presentation, and most recent SEC filing. may cause actual results to differ materially from those compensated by these statements. Also in our remarks, we'll refer to certain non-GAAP financial measures, which we believe are important in evaluating the company's performance.

Speaker Change: Following their remarks, we'll open the phone lines for a question and answer session.

Speaker Change: As a reminder, any forward looking statements that we make this morning are subject to risks and uncertainties.

Speaker Change: Including those described in today's earnings release Investor presentation, and most recent SEC filings.

Speaker Change: That may cause actual results to differ materially from those contemplated by these statements.

Speaker Change: Also in our remarks, we will refer to certain non-GAAP financial measures, which we believe are important in evaluating the company's performance.

Jeremy Steffan: Reconciliations of all non GAP numbers to the most directly comparable GAP number are included in this morning's press release, along with a second quarter presentation containing supplemental information is posted in the investor information section of our corporate website.

Speaker Change: Reconciliations of all non-GAAP numbers to the most directly comparable GAAP number are included in this mornings press release, along with our second quarter presentation containing supplemental information is posted in the Investor information section of our corporate website.

Richard Olson: With that, I will now turn the call over to Thanks, Jeremy, and good morning, everyone. Our team has remained focused on leveraging the strength of our diverse portfolio of leading brands, controlling what we can control in a dynamic environment and driving operational excellence across the organization. In doing so, we exceeded our adjusted earnings per share expectation for the quarter, took decisive actions to overcome near term headwinds, executed on our playbook to mitigate tariffs, and we continue to introduce new innovative products and solutions that enhance customer productivity at a time when it's needed most. These priorities remain at the forefront of our efforts as we navigate the current environment.

Rick: With that I will now turn the call over to Rick.

Rick: Thanks, Jeremy and good morning, everyone.

Rick: Our team has remained focused on leveraging the strength of our diverse portfolio of leading brands controlling what we can control in a dynamic environment and driving operational excellence across the organization.

Rick: In doing so.

Rick: <unk> exceeded our adjusted earnings per share expectations for the quarter.

Rick: Types of actions to overcome near term headwinds executed on our playbook to mitigate tariffs and we continue to introduce new innovative products and solutions that enhance customer productivity at a time when it's needed most.

These priorities remain at the forefront of our efforts as we navigate the current environment.

Richard Olson: For the second quarter, we grew adjusted earnings per share to $1.42, exceeding our expectations. At the same time, we continued to return cash to shareholders through dividends and share repurchases. These results reflect our team's commitment to operational excellence, despite a dynamic macroeconomic environment and unfavorable regional weather that pressured top-line growth in some businesses. Revenue in the quarter declined 2.3% year-over-year to $1.3 billion, as weak consumer confidence coupled with a late spring in many regions created near-term headwinds for products sold to homeowners. This was partially offset by continued strength in our golf and grounds businesses where demand for innovative products remains robust.

Rick: For the second quarter, we grew adjusted earnings per share to $1 42 exceeding our expectations at the same time, we continued to return cash to shareholders through dividends and share repurchases.

Rick: These results reflect our team's commitment to operational excellence, despite a dynamic macroeconomic environment and unfavorable regional weather pressured top line growth in some businesses.

Rick: Revenue in the quarter declined two 3% year over year to $1 3 billion as.

Rick: As weak consumer confidence coupled with a late spring in many regions created near term headwinds for products sold to homeowners.

Rick: It was partially offset by continued strength in our golf and grounds businesses, where demand for our innovative products remains robust.

Richard Olson: We continue to see positive results from our AMP program, which now has generated $70 million of run rate savings and remains on track to deliver $100 million by 2027. As a reminder, in fiscal 2024, we made adjustments to our workforce, manufacturing footprints, and portfolio, and in the current fiscal year, we have reduced our global salaried workforce by an additional 10%. Also in Q2, we took actions to rationalize our operational footprint in the residential segment by winding down production in one of our plants in Mexico and transitioning that production to existing facilities in the United States.

Rick: We continue to see positive results from our Amp program now has generated $70 million of run rate savings and remains on track to deliver $100 million by 2027.

Rick: As a reminder, in fiscal 2024, we made adjustments to our workforce manufacturing footprint and portfolio.

Rick: And in the current fiscal year, we have reduced our global salaried workforce by an additional 10%.

Rick: Also in Q2, we took actions to rationalize our operational footprint in the residential segment by winding down production in one of our plants in Mexico, and transitioning that production to existing facilities in the United States.

Richard Olson: This move will improve fixed cost absorption and efficiency while ensuring we continue to deliver exceptional products and service to our customers. This action also underscores the strength of our supply chain strategies we have in place to mitigate tariff headwinds, which in this dynamic environment we estimate in fiscal 2025 to be approximately 3% of our annual cost of goods sold. Many of these strategies were implemented beginning in 2018 and give us a competitive advantage today. The vast majority of our professional products are manufactured in the United States, and while we do manufacture primarily residential and irrigation products in Mexico, virtually all are USMCA qualified, now making them exempt from Mexico-specific tariffs.

Rick: This move will improved fixed cost absorption and efficiency, while ensuring we continue to deliver exceptional products and service to our customers.

Rick: This action also underscores the strength of our supply chain strategies, we have in place to mitigate tariff headwinds, which in this dynamic environment. We estimate is in fiscal 2025 to be approximately 3% of our annual cost of goods sold.

Rick: Many of these strategies were implemented beginning in 2018 and give us a competitive advantage today.

Rick: The vast majority of our professional products are manufactured in the United States and while we do manufacturer, primarily residential and irrigation products in Mexico.

Rick: Actually all our U S. MCA qualified now making them exempt from Mexico specific tariffs.

Richard Olson: Our sourcing team has been working with our suppliers to optimize our supply chain to remain agile in any environment. In addition, we will continue to thoughtfully implement price increases, ensuring our products remain competitive while protecting our profit margins and fueling investments in our future.

Rick: Our sourcing team has been working with our suppliers to optimize our supply chain to remain agile in any environment.

Rick: In addition, we will continue to thoughtfully implement price increases ensuring our products remain competitive while protecting our profit margins and fueling investments in our future.

Richard Olson: Finally, I'll share some highlights from the quarter that showcase our continued product innovation, leadership in technology driven solutions, and customer focused strategies, all of which reinforce our confidence in the Toro Company's future. market trends across our professional businesses remain robust. Golf continues its sustained momentum with strong participation levels driving equipment investment, while underground construction is benefiting from the compelling runway of infrastructure projects we've been discussing. Our innovation in alternative power, smart connected products, and autonomous solutions continues to drive significant customer value and differentiates our office. During the quarter, our boss business introduced several new products, including our new cold front technology electrical system with smart forward headlights.

Rick: Finally, I'll share some highlights from the quarter that showcase our continued product innovation leadership and technology, driven solutions and customer focus strategies, all of which reinforce our confidence in the company's future.

Rick: Market trends across our professional businesses remained robust.

Rick: Golf continues that sustained momentum with strong participation levels driving equipment investments while underground construction is benefiting from the compelling runway of infrastructure projects, we've been discussing.

Rick: Our innovation in alternative power smart connected products and autonomous solutions continues to drive significant customer value and differentiates our offerings.

Rick: During the quarter, our boss business introduced several new products, including our new Cold front technology electrical system with smart for satellites.

Richard Olson: The system seamlessly enables smart integration of the plow and our new EVX Plus smart spreader through a common truck harness. These advancements are aligned with our long term strategy of helping customers be more productive through technology and innovation. Earlier this year, we expanded our electric construction portfolio to include new E2500 Ultra buggies with high lift and swivel capability. and our new eDingo TX750 in both narrow and wide track format. These products leverage our Hypercell power system, allowing customers to get eight hours of runtime. They are designed to work together on a job site to maximize efficiency and productivity.

Rick: System seamlessly enabled smart integration of the pile and our new EPS plus smart spreader through a common truck harness.

Rick: These advancements are aligned with our long term strategy of helping customers be more productive through technology and innovation.

Rick: Earlier this year, we expanded our electric construction portfolio to include New E 2500, Ultra buggies with high lift and swivel capabilities.

Rick: And our new E Dingo, TX 750 in both narrow and wide track formats.

Rick: These products leverage our hypersound power system, allowing customers to get eight hours of run time.

Rick: Assigned to work together on a job site to maximize efficiency and productivity.

Richard Olson: Additionally, because they are quiet and do not produce exhaust emissions, they provide exceptional value for customers working indoors.

Rick: Additionally, because they are quiet and do not produce exhaust emissions they provide exceptional value for customers working in doors.

Richard Olson: In our residential segment, we were awarded the 2024 ACE Hardware Vendor of the Year. This prestigious award recognizes select corporate-wide vendor partners that delivered substantial sales growth, differentiated innovative products, and excellent customer service. The award is a tremendous honor and served as a significant milestone in our corporate partnership with Ace Hardware that began back in 2015.

Rick: In our residential segment, we were awarded the 2024 ace hardware vendor of the year.

Rick: This prestigious award recognizes select corporate wide vendor partners, but delivered substantial sales growth differentiated innovative products and excellent customer service.

Rick: <unk> is a tremendous honor and served as a significant milestone in our corporate partnership with Ace hardware.

Rick: Began back in 2015.

Richard Olson: Throughout the 110 year history of the Toro Company, we have consistently found ways to successfully navigate the most difficult environment. With our proven track record of resilience and agility and our team's commitment to execute with discipline, I am confident that our deliberate actions will advance our strategic priorities and position us for sustainable, profitable growth.

Rick: Throughout the 110 year history of the Toro company, we have consistently found ways to successfully navigate the most difficult environments.

Rick: With our proven track record of resilience and agility in our team's commitment to execute with discipline.

Rick: I'm confident that our deliberate actions will advance our strategic priorities and position us for sustainable profitable growth.

Angela Drake: With that, I will turn the call over to Angie. Thank you, Rick, and good morning, everyone. We were pleased to deliver adjusted diluted EPS growth in the quarter, highlighted by professional segment growth and profitability improvement. Consolidated net sales for the quarter were $1.32 billion, down slightly from Q2 last year. Reported EPS was $1.37 per diluted share compared to $1.38 in the second quarter of last year. Adjusted EPS was $1.42 per diluted share, up from $1.40.

Angie: I will turn the call over to Angie.

Angie: Thank you Rick and good morning, everyone.

Angie: We were pleased to deliver adjusted diluted EPS growth in the quarter highlighted by professional segment growth and profitability improvement.

Angie: Consolidated net sales for the quarter were $132 billion down slightly from Q2 last year.

Rick: <unk> EPS was $1 37 per diluted share.

Rick: <unk> to $1 38 in the second quarter of last year <unk>.

Rick: Adjusted EPS was $1 42 per diluted share up from $1 40.

Angela Drake: Now, to the segment results. Professional segment net sales for the second quarter were just over $1 billion, up about 1% year over year. This increase was primarily driven by higher shipments of golf and grounds products. This was partially offset by lower shipments of underground products, largely due to the divestitures of construction equipment dealers and lower shipments of specialty construction equipment, more specifically compact utility loaders. Professional segment earnings for the second quarter were $202 million, up 6% year-over-year. Professional segment earnings margin was 19.9 percent, up from 19 percent. The 90 basis point increase in profitability was primarily due to product mix and productivity improvement.

Rick: Now to the segment results.

Rick: Professional segment net sales for the second quarter were just over $1 billion up about 1% year over year.

Rick: This increase was primarily driven by higher shipments of golf and grounds products.

Rick: This was partially offset by lower shipments of underground products largely due to the divestitures of construction equipment dealers and lower shipments of specialty construction equipment more specifically compact utility loaders.

Rick: Professional segment earnings for the second quarter were $202 million up 6% year over year.

Rick: Professional segment earnings margin was 19, 9% up from 19%.

Rick: 90 basis point increase in profitability was primarily due to product mix and productivity improvements.

Angela Drake: This was partially offset by higher material and manufacturing costs.

Rick: This was partially offset by higher material and manufacturing costs.

Angela Drake: The margin improvement we are seeing in the professional segment demonstrates the quality and resilience of its businesses, which continue to be our primary growth and profit driver.

Rick: The margin improvement we are seeing in the professional segment demonstrates the quality and resilience of its businesses, which continue to be our primary growth and profit drivers.

Angela Drake: Residential segment net sales for the second quarter were $297 million, down 11% year-over-year. The decrease was primarily driven by lower shipments of watt-power mowers, zero-turn mowers, and portable power products, and the pump products divestiture last year. These factors were partially offset by higher shipments of snow products and lower sales promotions and incentives. Residential segment earnings for the quarter were $16 million compared to $36 million last year. residential segment earnings margin was 5.4% compared to 10.8%. The decrease was largely due to higher material, manufacturing and freight costs, lower net sales volume, and inventory valuation adjustments. These were partially offset by productivity improvements and lower sales promotions and incentives.

Rick: And then just segment net sales for the second quarter were $297 million down 11% year over year.

Rick: The decrease was primarily driven by lower shipments of walk power mowers zero turn mowers and portable power products and the products divestiture last year.

Rick: These factors were partially offset by higher shipments of snow products and lower sales promotions and incentives.

Rick: Residential segment earnings for the quarter were $16 million compared to $36 million last year.

Rick: Residential segment earnings margin was five 4% compared to 10, 8%.

Rick: The decrease was largely due to higher material manufacturing and freight costs lower net sales volume and inventory valuation adjustments.

Rick: These were partially offset by productivity improvements and lower sales promotions and incentives.

Angela Drake: Turning to our operating results for the total company. Our reported and adjusted gross margins were 33.1% and 33.4% respectively for the quarter. This compares to 33.6% for both in the same period last year. Current quarter reported gross margin reflects higher amp charges compared to last year. Additional year-over-year changes on both a reported and adjusted basis were primarily due to higher material and manufacturing costs partially offset by product mix and productivity improvement. SCNA expense as a percentage of net sales for the quarter was 19.8%, up slightly from 19.7% a year ago. The change was primarily due to lower net sales volume.

Rick: Turning to our operating results for the total company.

Rick: Our reported and adjusted gross margins were $33, one and 33, 4% respectively for the quarter.

Rick: This compares to 33, 6% for both in the same period last year.

Rick: Current quarter reported gross margin reflects higher <unk> charges compared to last year.

Rick: Additional year over year changes on both a reported and adjusted basis were primarily due to higher material and manufacturing costs.

Rick: Partially offset by product mix and productivity improvements.

Rick: SG&A expense as a percentage of net sales for the quarter was 19, 8% up slightly from 19, 7% a year ago.

Rick: The change was primarily due to lower net sales volume.

Angela Drake: Operating earnings margin was 13.3%, down from 13.9% in the same period last year. On an adjusted basis, operating earnings margin was 13.7% down from 14.2%. The reported effective tax rate for the second quarter was 18.9% compared with 19.2% last year. The decrease was primarily due to a more favorable geographic mix of earnings this year. This was partially offset by lower tax benefits recorded as excess tax deductions for stock-based compensation in the current year period. The adjusted effective tax rate for the second quarter was 18.7%, compared with 19.8% a year ago, primarily driven by the geographic mix of earnings.

Rick: Operating earnings margin was 13, 3% down from 13, 9% in the same period last year.

Rick: On an adjusted basis operating earnings margin was 13, 7% down from 14, 2%.

Rick: The reported effective tax rate for the second quarter was 18, 9% compared with 19, 2% last year.

Rick: The decrease was primarily due to a more favorable geographic mix of earnings this year.

Rick: This was partially offset by lower tax benefits recorded as excess tax deductions for stock based compensation in the current year period.

Rick: The adjusted effective tax rate for the second quarter was 18, 7% compared with 19, 8% a year ago.

Rick: Primarily driven by the geographic mix of earnings.

Angela Drake: Free cash flow through the second quarter was $84.7 million, a slight decrease on a year-over-year basis and largely due to changes in working capital. During the quarter, we deployed $100 million towards share repurchases, bringing our year-to-date total to $200 million. This reflects our confidence in cash generation and our commitment to returning capital to shareholders while maintaining balance sheet flexibility.

Rick: Free cash flow through the second quarter was $84 7 million a.

Rick: A slight decrease on a year over year basis, and largely due to changes in working capital.

Rick: During the quarter, we deployed $100 million towards share repurchases, bringing our year to date total to $200 million.

Rick: This reflects our confidence in cash generation and our commitment to returning capital to shareholders, while maintaining balance sheet flexibility.

Angela Drake: Looking ahead to the remainder of the year across the two segments. Our professional segment outlook remains largely unchanged, with continued growth expected in golf and grounds and underground construction. Most importantly, as a United States-based company, the vast majority of our professional products are manufactured here, which strategically positions the segment and overall company favorably in the current macroeconomic environment. Within the residential segment, our actions to adjust our manufacturing footprint in Mexico, combined with the USMCA qualified tariff exemptions, position us well from a cost standpoint and competitiveness. However, current macroeconomic factors, including high interest rates, are resulting in persistent elevated levels of caution from homeowners.

Rick: Looking ahead to the remainder of the year across the two segments.

Rick: Our professional segment outlook remains largely unchanged with continued growth expected in golf and grounds and underground construction.

Rick: Most importantly, as the United States based company the vast majority of our professional products are manufactured here, which strategically positions the segment and overall company favorably in the current macroeconomic environment.

Rick: Within the residential segment, our actions to adjust our manufacturing footprint in Mexico combined with the U S. MCA qualified tariff exemptions position us well from a cost standpoint and competitively.

Rick: However, current macroeconomic factors, including high interest rates are resulting in persistent elevated levels of caution from homeowners.

Angela Drake: Looking ahead to the third quarter of fiscal 2025, we anticipate total company net sales to be flat to slightly up compared to the prior year. We expect professional segment net sales to be up mid-single digits and residential segment net sales to be down high teens compared to the same period last year. Shifting to Third Quarter Profitability We expect total company adjusted operating margin to be similar year over year with slightly higher professional segment earnings margin and lower residential segment earnings margin. Overall, we expect our third quarter fiscal 2025 adjusted diluted EPS to be slightly higher than last year's $1.18.

Rick: Looking ahead to the third quarter of fiscal 2025, we.

Rick: We anticipate total company net sales to be flat to slightly up compared to the prior year.

Rick: We expect professional segment net sales to be up mid single digits and residential segment net sales to be down high teens compared to the same period last year.

Rick: Shifting to third quarter profitability.

Rick: We expect total company adjusted operating margin to be similar year over year with slightly higher professional segment earnings margin and lower residential segment earnings margin.

Rick: Overall, we expect our third quarter fiscal 2025, adjusted diluted EPS to be slightly higher than last year's $1 18.

Angela Drake: Based on what we know today and our expectations for the third quarter, we are adjusting our fiscal 2025 guidance to incorporate additional macro headwinds for products sold to homeowners. Trade downs and delayed spending, especially on big ticket items, have created a larger drag than originally planned. Given those factors, we now expect total year revenue will be flat to down 3% from fiscal 2024. We expect the professional segment to be up slightly year over year, while revenue from the residential segment is expected to be down mid-team. We continue to expect total company adjusted gross margins and adjusted operating earnings as the percentage of net sales to improve on a year-over-year basis.

Rick: Based on what we know today and our expectations for the third quarter. We are adjusting our fiscal 2025 guidance to incorporate additional macro headwinds for products sold to homeowners.

Rick: Trade downs and delayed spending, especially on big ticket items, and creating a larger drag than originally planned.

Rick: Given those factors, we now expect total year revenue will be flat to down 3% from fiscal 2024.

Rick: We expect the professional segment to be up slightly year over year, while revenue from the residential segment is expected to be down mid teens.

Rick: We continue to expect total company adjusted gross margin and adjusted operating earnings as a percentage of net sales to improve on a year over year basis.

Angela Drake: Looking at segment profitability, we continue to expect professional segment earnings margin will expand versus the prior year. However, economic headwinds from homeowners are expected to pressure residential segment earnings margin, resulting in a year-over-year decline.

Rick: Looking at segment profitability.

Rick: We continue to expect professional segment earnings margin will expand versus the prior year.

Rick: However, economic headwinds from homeowners are expected to pressure residential segment earnings margin, resulting in a year over year decline.

Angela Drake: Finally, we are slightly reducing our range for adjusted diluted EPS to be $4.15 to $4.33. which at midpoint implies year-over-year growth of 1% even with a likely decline in revenue. These revised projections also assume normal weather patterns aligned with historical averages for the remainder of the fiscal year.

Rick: Finally, we are slightly reducing our range for adjusted diluted EPS to be $4 15 to $4 30.

Rick: Which at midpoint implies year over year growth of 1%, even with a likely decline in revenue.

Rick: These revised projections also assumes normal weather patterns aligned with historical averages for the remainder of the fiscal year.

Angela Drake: Additional adjustments to our full-year guidance include interest expense of about $59 million and an adjusted effective tax rate of 19%. The strategic actions we've discussed, our AMP Transformational Productivity Initiative, and our tariff mitigation strategies are delivering immediate benefits and positioning us for improved operating leverage as markets normalize. Our professional segment continues to perform well, our innovation pipeline remains robust, and our strong cash generation supports our investments in continued growth, as well as returning capital to shareholders.

Rick: Additional adjustments to our full year guidance include.

Rick: Interest expense of about $59 million and an adjusted effective tax rate of 19%.

Rick: The strategic actions, we discussed our amp transformational productivity initiatives and our tariff mitigation strategies are delivering immediate benefits and positioning us for improved operating leverage as markets normalize.

Rick: Our professional segment continues to perform well our innovation pipeline remains robust and our strong cash generation supports our investments and continued growth as well as returning capital to shareholders.

Angela Drake: We are navigating today's environment from a position of strength, supported by our market leadership, operational excellence, and the financial flexibility to create long-term value. This disciplined approach to managing through cycles while investing in our future is how we build enduring value for all stakeholders.

Rick: We are navigating today's environment from a position of strength supported by our market leadership operational excellence and the financial flexibility to create long term value.

Rick: This disciplined approach to managing through cycles, while investing in our future is how we build enduring value for all stakeholders.

Richard Olson: With that, I'll turn the call back to Rich.

Rick: With that I'll turn the call back to Rick.

Richard Olson: Thank you, Angie. Before opening up the call for Q&A, I want to thank our employees and channel partners for their dedication and reinforce what you've heard this morning. We remain committed to driving long term value for all stakeholders. We delivered EPS ahead of our expectations in the second quarter, despite tariff headwinds, macroeconomic conditions, and a delayed start to spring. We're taking decisive actions to align with near-term demand in certain businesses by adjusting headcount, manufacturing footprint, and our portfolio. We are actively mitigating tariffs by optimizing our U.S.-based manufacturing network and capabilities, strategically working with our suppliers to adjust global sourcing, and both quickly and thoughtfully increasing prices while keeping our products competitive and maintaining margins.

Rick: Angie.

Angie: For opening up the call for Q&A I want to thank our employees and channel partners for their dedication and reinforce what you've heard this morning.

Angie: We remain committed to driving long term value for all stakeholders we.

Angie: We delivered EPS ahead of our expectations in the second quarter, despite tariff headwinds macroeconomic conditions and the delayed start to spring.

Angie: We're taking decisive actions to align with near term demand in certain businesses by adjusting head count manufacturing footprint and our portfolio.

Angie: We are actively mitigating tariffs by optimizing our U S based manufacturing network and capabilities strategically working with our suppliers to adjust global sourcing and both quickly and thoughtfully increasing prices, while keeping our products competitive and maintaining margins.

Richard Olson: And finally, we're investing in technology and innovation, which enables us to introduce new products and solutions that enhance customer productivity at a time when it's needed most.

Angie: And finally, we are investing in technology, and innovation, which enables us to introduce new products and solutions that enhance customer productivity at a time when it's needed most.

Operator: With that, we will open up the call for questions. Thank you. Ladies and gentlemen, if you wish to ask a question, please press star followed by one one on your touchtone telephone. If your question has been answered or you wish to withdraw your question, please press star one followed by one one again. Please stand by for your first question.

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

Angie: Thank you, ladies and gentlemen, if you wish to ask a question. Please press star followed by one on your Touchtone telephone. If your question has been answered or you wish to withdraw your question. Please press star one followed by a one one again please standby for your first question.

Timothy Wojs: And our first question comes from Tim Wojs with Baird, you may... Hey, everybody. Good morning. Thanks for all the details. Maybe just to start, Rick, I guess in the landscape business within the pro segment, you know, the inventory in that channel had, I think, still been kind of high coming into this season. Where does that kind of stand now? And I guess, how did the landscape contractor business kind of perform itself in the quarter in pro? Sure, I'd be happy to address that. So first of all, we talked about, we really talked about the last year about adjustments to our field inventory, particularly in the landscape contractor area.

Tim Motors: And our first question comes from Tim Motors with Baird. You May proceed.

Speaker Change: Hey, everybody. Good morning, Thanks for a great start with details.

Speaker Change: Maybe just to start records.

Speaker Change: And I guess in the landscape business within within the pro segment.

Tim Motors: The inventory in that channel has had I think still been kind of high coming into the season.

Tim Motors: Where does that kind of stand now and I guess, how did the landscape contractor business kind of perform itself in the quarter and proud.

Tim Motors: Sure I'll be happy to address that so first of all we've talked about.

Tim Motors: <unk> talked about for the last year about adjustments to our fuel inventory, particularly in the landscape contractor area and last quarter, we talked about the opportunity to adjust that would be during the spring selling season. So we have we've largely returns where we would like to be in that category. The exception would be the slower.

Richard Olson: And last quarter, we talked about the opportunity to adjust that would be during the spring selling season. So we have, we've largely returned to where we would like to be in that category. The exception would be the slower start to spring. So shipments in the spring were as expected, but the delay of the start of spring has it a little bit higher. That's really reflected in our guide for the rest of the year, making sure that we watch that field inventory more closely. So we feel much better about our field inventory position, a little bit higher in the landscape and the residential area because of the start of spring, but otherwise feeling okay about it.

Tim Motors: Start to spring so shipments in the spring.

Tim Motors: Were as expected, but the delay of the start of spring sounds a little bit higher and Thats really reflected in our guide for the rest of the year, making sure that we watched that field inventory more closely so we feel.

Tim Motors: Much better about our field inventory position, a little bit higher in the landscape in the residential area because of the start to the spring, but otherwise feeling okay about it.

Operator: Okay, okay.

Richard Olson: And then on the residential business, I mean, is that really kind of the primary area, you know, where the, you know, guidance has been revised? And I guess when you when you look at the resi business, is there, is it kind of broad base across the customer, you know, customer channels and products? Or is it you , and Michael Shlisky. Thank you. You're right. It's the residential business, but the reason why we use the word homeowner is because it's the residential business plus that portion of our landscape contractor business that is sold to homeowners, homeowners that desire a professional level product.

Tim Motors: Okay, Okay and.

Tim Motors: And then on the residential business I mean is that really kind of the primary area.

Tim Motors: Where the.

Tim Motors: Guidance has been revised and I guess when you look at the resi business is there is it is it kind of broad base across the customer customer channels and products or is it.

Tim Motors: Specific to maybe the.

Tim Motors: Independent dealers or home centers, or just a little bit of color on the residential business specifically.

Tim Motors: You're right, it's the residential business, but.

Tim Motors: Reason why we use the word homeowner is because it's the residential business plus that portion of our landscape contractor.

Tim Motors: Business.

Tim Motors: It is sold to homeowners homeowners that desire a professional level product. So both of those areas are absolutely the prime drivers of.

Richard Olson: So both of those areas are absolutely the prime drivers of the reduction that you're seeing. And the factors really are, the two major factors are, first of all, just the macroeconomic environment and the sense of consumer confidence that's out there for those buyers, you know, whether it's the, you know, the tariff dynamics, the inflation, interest rates, and so forth. And when they do buy, they're tending to buy down, down ticket a little bit or down the line a little bit. So that does affect our margins a little bit as we go more towards entry level products.

Tim Motors: The reduction that you're seeing.

Tim Motors: And the factors really are the two major factors are first of all just the macroeconomic environment in the sense of consumer confidence that's out there for those buyers.

Tim Motors: Whether it's of the tariff dynamics inflation and interest rates and so forth.

Tim Motors: And when they do buy they are tending to buy down.

Tim Motors: Downtick, a little bit or down Hawaii, a little bit.

Tim Motors: Affect our margins a little bit as we go more towards entry level products.

Richard Olson: So that's the macro factor that's in play. And then the other factor is just, as I mentioned, the timing of spring. We lost a lot of the first portion of average spring, if you will, in April, with a slower warm up, actually really across the US, but the South particularly was slow to warm. So those are the two major factors, a lot of strengths across the professional business in general. And, you know, we usually don't talk about the other, the opposite side of the landscape contractor, but the contractor portion of that business has remained strong throughout this process and continues to be very strong today.

Tim Motors: So that's the macro factors.

Tim Motors: In play and then the other factor is just as I mentioned on the timing of spring. We lost a lot of the first portion of average spring. If you will in April with a slower warm up.

Tim Motors: Actually really across the U S, but the south particular was slow to warm. So those are the two major factors a lot of strength across the professional business in general.

Tim Motors: We usually don't talk about the other the opposite side of the landscape contractor, but the contract or a portion of that business has remained strong throughout this process and continues to be very strong today landscape contractors, our adult very healthy.

Richard Olson: Landscape contractors are in a very healthy position, a little bit better snow year last year. They did snow work and came into the season very strong. So that's been great. It's also helped by the introduction of new products. So Exmark has seen a really nice surge with the introduction of the new laser platform there, which is kind of the icon of the industry. Okay, okay, great.

Tim Motors: <unk> position a little bit better.

Tim Motors: No year last year or is it still work and came into the season very strong so that's been great.

Tim Motors: Helped by the introduction of new products. So X Mark has seen a really nice surge with the introduction of the new laser platform <unk> co.

Tim Motors: The icon industry.

Tim Motors: Okay, Okay, Great and then just.

Richard Olson: And then just the last one I had on the underground business. You had called it out in the script about it being down year over year, but then, you know, on the other hand, you're also talking about pretty good demand metrics, or you're encouraged by what you're seeing from a demand perspective. So can you just kind of tie those two things together? Was it last year kind of backlog normalization was happening and this year that's just creating a tough comp? Or how would you kind of, you know, marry, you know, the business being down, but seeing good demand?

Tim Motors: The last one I had on the underground business.

Tim Motors: I mean, you called it out in the script about it being down year over year, but then on the other hand Youre also talking about.

Tim Motors: Good demand metrics are you encouraged by what you're seeing from a demand perspective. So could you just kind of tie those two things together with it.

Tim Motors: Last year kind of backlog normalization was happening in this year that is just trading a tough comp.

Tim Motors: How would you kind of.

Gary: Gary the business being down but have seen good demand.

Richard Olson: Yeah, so if you if you look at the impact in the in the current quarter, the two actually the three major factors really are the sale of two dealers. And that's kind of normal for us in making transitions of ownership to be involved with that process of buying the dealers and then reselling them to the new owners. So that was the biggest factor there. We had some rationalization of skews for non-core products. So just kind of doing, you know, portfolio management on our line, if you will, taking taking out some of the non-performing skews. And then we mentioned last time we're making tremendous progress in this area, but the startup of some new products, particularly product design for specifically for the telecommunications business, were through those startup challenges, but still ramping that up and making great progress at this point.

Tim Motors: Yes.

Tim Motors: If you look at the impact in the in the current quarter. The two actually the three major factors really are the sale of two dealers.

Tim Motors: Just kind of normal for us in making transitions of ownership.

Tim Motors: To be involved with that process, so buying the dealers and then reselling them to the new owners.

Tim Motors: So that was the biggest factor there we had some rationalization of skus for noncore products. So just kind of doing.

Tim Motors: Portfolio management's on our line if you will.

Tim Motors: King.

Tim Motors: Some of the nonperforming Skus and then we mentioned last time, we're making tremendous progress in this area, but the startup of some new products.

Tim Motors: Particularly product designed for specifically for the telecommunications business, we're through those startup.

Tim Motors: Challenges, but still ramping that up and making great progress at this point, we remain extraordinarily excited about this business long term very positive about the drivers over the next several years and has a tremendously long runway.

Richard Olson: We remain extraordinarily excited about this business long term, very positive about the drivers over the next several years and have a tremendously long runway. Now, if you think of the drivers of fiber utilities work that's happening, and specifically the data infrastructure, the building of data centers and all of the infrastructure that needs to go with that, the power that we're all talking about that's needed for those centers, all of that gets installed underground and uses our equipment. I think a good proxy would be to look at some of the key customers in this area that use these products.

Tim Motors: So if you think of the drivers of fiber utilities work, that's happening and specifically the data infrastructure building of data centers and all the infrastructure that needs to go with the power.

Tim Motors: We're all talking about that's needed for those centers.

Tim Motors: All of that gets installed.

Tim Motors: <unk> underground and uses our equipment.

Tim Motors: Good good.

Tim Motors: Good proxy would be to look at some of our key customers in those areas of the youth area of use these products so di Com Quants.

Richard Olson: So DICOM, Quanta, MassTech, MosTech, that's good places to look and they're all signaling very positive outlooks for the business as well.

Tim Motors: Quanta Mastec.

Tim Motors: <unk>.

Tim Motors: Good places look and they are all.

Tim Motors: Signaling very positive outlook for their business as well.

Richard Olson: You might mention the trade show that you attended. Oh, yeah. A month ago, just to talk about this as a worldwide phenomenon, we were at the trade show in Germany, largest equipment trade show in Europe, and I was there with our underground team and the demand and excitement from those contractors is incredible. The amount of work that is ahead of them in Europe is quite amazing, whether it's the infrastructure for hydrogen that we talked about, massive kind of rerouting of where power is coming from, so large transmission cables that are going underground. We are also introducing specific products that will be tailored to that work in Europe, so we're very excited about this business.

Tim Motors: And in terms of things that you.

Tim Motors: You might mention the trade show that <unk>.

Tim Motors: A month ago, just to talk about this as a worldwide phenomenon we were at peak.

Tim Motors: <unk> trade show in Germany largest equivalent trade show in Europe.

Tim Motors: And I was there with our underground team and the demand and excitement from those contractors is incredible the amount of work that is ahead of them in Europe is quite amazing whether it's the infrastructure for hydrogen that we talked about massive kind of rerouting of where power is coming from.

Tim Motors: So large transfer.

Tim Motors: Transmission cables that are going underground.

Tim Motors: We're also introducing specific products that will be tailored to that work in Europe. So we're very excited about this business.

Operator: These are all the details. You can look on the rest of the year.

Tim Motors: Thanks for all the details and look on the rest of the year.

Operator: Thank you, Joe. Thank you.

Tim Motors: Thank you Tim.

Tim Motors: Thank you.

Samuel Darkatsh: Our next question comes from Samuel Darkatsh with Raymond James. You may proceed.

Speaker Change: Our next question comes from Samuel Dark cash with Raymond James You May proceed.

Samuel Darkatsh: Good morning, Rick. Good morning, Angie. How are you? Good afternoon. Thank you. Well, thank you.

Speaker Change: Good morning, Rick Good morning, Angie how are you.

Tim Motors: How are you.

Angie: Well thank you.

Richard Olson: I wanted to explore some of the tariff disclosures that you had today. 3% of COGS, which is, I don't know, around 100 million bucks or so. Can you be more specific in terms of which countries and what sorts of either products or components this is referring to? Yeah, we can do that. I mean, just to set the foundation, as we've talked about, the majority of our products are manufactured in the United States, and virtually all of our professional products are produced in the United States. And most of our supply base is also based in the United States.

Angie: Wanted to explore some of the tariff disc.

Angie: Disclosures that you had today you're mentioning it's.

Angie: 3% of Cogs, which is I don't know around 100 million Bucks or so can you be more specific in terms of which countries and what sorts of either products or components. This is referring to.

Angie: Yes, we can do that because I mean, just to set the foundation as we've talked about the majority of our products are manufactured in the United States and virtually all of our professional products are produced in United States.

Angie: Most of our supplier bases also basically United States, our exposure to China from a supply standpoint is about 3% or so.

Richard Olson: Our exposure to China from a supply standpoint is about 3% or so. And if you think about the products that we talked about that are produced in Mexico, those are all USMCA qualified. We've been through a qualification process for those. Then to get to your kind of core question, the biggest drivers are, first of all, even though it's a small percentage, if you project the potential tariffs for the rest of the year, China is still the number one category. So even though it's very small, if you're looking at the, you know, 100 plus percent potential tariff returning, that becomes still a significant number of the 100, you know, less than 100 million that you're talking about.

Tim Motors: And if you think about the products that we talked about that are produced in Mexico. Those are all U S. MCA qualified we've been through a qualification process for those.

Tim Motors: Then to get to your kind of core question. The biggest drivers are first of all even though it's a small percentage of your projects the potential tariffs for the rest of the year, China is still the number one category Cleveland. So it's very small if youre looking at.

Tim Motors: <unk> plus percent potential tariff returning that become the sales still a significant number of 100.

Tim Motors: Less than a 100 million that youre talking about.

Richard Olson: Second category would be steel and aluminum. And just since the announcement yesterday, it's kind of a little bit of a challenger for the top category with China. And then after that would be the general reciprocal tariffs across other countries at this point. So that's really the kind of the big three breakdowns that probably takes you 80% of through the tariff. Yeah, I think it's important just And I would just reiterate that we plan to mitigate all of that, virtually all of that, through our actions this year.

Tim Motors: Second category would be steel and aluminum and just since the announcement yesterday, it's kind of a little bit of a challenger.

Tim Motors: Category.

Tim Motors: With China, and then after that would be the general.

Tim Motors: Reciprocal tariffs across other countries at this point, so that's really the kind of the big three breakdowns, but probably takes it to 80% through the tariffs.

Tim Motors: Yes.

Tim Motors: Horton.

Tim Motors: And I would just reiterate that we plan to mitigate all of that virtually all of that through through our actions this year.

Angela Drake: Right, which is my next question. So, the mitigation, is that dollar for dollar? Is that rate for rate? And would there still be pressure from a tariff standpoint, maybe second quarter, third quarter, and then neutral to positive in the fourth quarter? I know you're looking to offset it in its entirety, just trying to get a sense of the trajectory. Our estimate is based on the known tariffs and the timing of when those tariffs would turn to the higher levels in some cases, so the impact is actually, correct me if I'm wrong, Angie, but probably greater in the fourth quarter if you look at those larger tariffs coming back.

Tim Motors: Alright, which is my next question. So the mitigation is that dollar for dollar is that right for rate.

Tim Motors: And.

Tim Motors: Would there still be.

Tim Motors: Pressure.

Tim Motors: From a tariff standpoint, maybe second quarter third quarter, and then neutral to positive in the fourth quarter. I know you are looking to offset it.

Tim Motors: In its entirety, just trying to get a sense of the trajectory.

Tim Motors: Our estimate is based on the known tariffs and the timing of when those tariffs would turn to higher levels. In some cases. So the impact is actually correct me, if I'm wrong, but probably greater in the fourth quarter.

Tim Motors: If you look at those larger tariffs coming back.

Richard Olson: And with regard to offsetting them, it is dollar-for-dollar offsetting. We understand, you know, potential pressure and margin. We'll continue to work on that. And then just the tools that we're using there, price is kind of where we go at the end, where we can't make up the net difference, but we go to productivity. Very grateful that we had already launched the AMP initiative. Extraordinarily helpful in the current environment where we've got, you know, some unforeseen new costs related to the tariffs. We're taking advantage of the strategies that we have put in place since 2018, reducing exposure to China specifically, and the team is very oriented towards productivity and efficiency in this environment.

Tim Motors: And with regard to offsetting them. It is dollar for dollar offsetting we understand potential pressure on margin will continue to work on that and then just the tools that we're using their prices kind of where we go at the end, where we can't make up.

Tim Motors: <unk> difference, but we go into productivity very grateful that we had already launched the Amp initiative extraordinarily helpful. In the current environment, where you've got some unforeseen.

Tim Motors: Costs related to the tariffs.

Tim Motors: We're taking advantage of the strategies that we have put in place in 2018, reducing exposure to.

Tim Motors: China, specifically and.

Tim Motors: The team is very oriented towards productivity and efficiency in this environment.

Angela Drake: Relates even to the announcement that we made in our prepared remarks about reducing our footprint in Mexico as well. Is the 90 million, is that a an annualized number? Is that just for fiscal 25? How should we think about, you know, especially since you're saying it's mostly 4Q? Yeah, that's going to be for fiscal 2025. So we're on annualized. So on an annualized basis, Angie, what does the number look like? Yeah, we haven't shared that. Sam, what we're thinking is that if we calculate that based on what we know today, and what those executive orders are saying that will go back in place, potentially, after this pause, it'll be about that $90 million-ish for 2025.

Tim Motors: It's even two or three announcements that we.

Tim Motors: <unk> made in our prepared remarks about reducing our footprint in Mexico as well.

Tim Motors: Is the is the $90 million is that a.

Tim Motors: An annualized number or is that just for fiscal 'twenty five.

Tim Motors: How should we think about.

Tim Motors: Especially since you're saying, it's mostly <unk>.

Tim Motors: Yes, that's going to be for fiscal 2025.

Tim Motors: So on an annualized.

Speaker Change: So on an annualized basis Angie what is the what is the number look like.

Angie: Yes, we haven't shared that Sam what we're thinking is that if we calculate that based on what we know today and what those executive orders are saying that will go back in place potentially after this part.

Tim Motors: It'll be about that $90 million ish for 'twenty filing.

Richard Olson: And my last, thank you, my last question, oops, sorry, sorry, Rick. Yeah, Sam, I think where we're coming from there is just how dynamic this is. We're challenged to calculate what it is for 25 with the ups and downs. So I think any estimate that we would give you for the four following years would be, you know, way out there.

Speaker Change: And my last thank you my last question, sorry, sorry, Rick.

Rick: Yes, so I think the where we're coming from there is just how dynamic this is where we are.

Rick: Challenge to calculate what it is for 25 with the ups and downs. So I think any estimate that we would give you for the quarter following years would be.

Rick: Out there.

Angela Drake: My last question, on the RESI margins, was the inventory evaluation adjustment the primary negative variance? versus your plan? And what was the amount of that valuation adjustment? Does it continue? Was it one-off, that kind of thing? That was the primary, you know, we saw decreased sales year over year, also some increased production costs, but the inventory valuation was a big factor, a big driver in that profitability. That is kind of a one-off. It is, you know, the fact that we're looking at our businesses and really trying to manage what we need to do right now, but also thinking about our battery adoption rates, you know, those are lower than we had expected them to be.

Rick: My last question on the resi margins.

Rick: Was the inventory valuation adjustment the primary negative variance.

Rick: Versus your plan and what was the amount of the valuation adjustment does it continue was it one off that kind of thing.

Rick: That was the primary.

Rick: We saw decreased sales year over year also some increased production costs back inventory valuation loss.

Rick: While the big factor I think driver and that profitability that is kind of a one off and it is the fact that we're looking at at our businesses and really trying to to maintenance, what we need to do right.

Rick: Right now, but also thinking about our battery adoption rates are lower than we had expected them to be so let me talk about this in our sustainability report, we talk about battery being 20% of our business and today, that's somewhere around 7%.

Angela Drake: So, when we talk about this in our sustainability report, we talk about battery being 20% of our business, and today that's somewhere around 7%. So, just being realistic about reserving some of that excess inventory as we think about battery as well. Overall, I'm sorry. Overall, I'd say we're taking action. to help improve our long-term, Sam, and make sure that we can create value in the future with that residential segment. What was the amount of the allowance for the valuation adjustment? I don't believe we've shared that. You should see some information in the queue. Perfect.

Rick: So just being.

Rick: Realistic about our reserving some of that excess inventory as we as we think about battery it's Bob.

Rick: Overall now.

Rick: I'm sorry.

Rick: Overall, I'd say I'm sorry.

Rick: Through our long term, Sam and make sure that we can create value in the future with that residential segment.

Rick: What was the amount of the allowance for the valuation adjustment.

Rick: I don't think we've shared that you should see some information in the queue.

Samuel Darkatsh: Thank you very much. Thank you. Thanks, Sam. Thank you.

Rick: Perfect. Thank you very much thank you.

Rick: Thanks, Tim.

Rick: Thank you.

David Macgregor: Our next question comes from David MacGregor with Longbow Research. He may pursue. Yeah, yes.

Speaker Change: Our next question comes from David Macgregor with Longbow Research you May proceed.

David Macgregor: Good morning, everyone. I want to start off by just asking about price Good morning. I wanted to start off by just asking about price-cost. And you called out materials cost as a headwind for both professional and residential. We expect to fully cover that, cost inflation and, you know, whatever incremental tariff pressure. Our price for Q2, our price will be slightly up, really driven kind of by less promotion and incentives in our residential space, and our cost was more. So if we look forward to Q3, we haven't guided, but our price should be up based on the implemented tariff price actions that we have taken.

David Macgregor: Yeah, Yes, good morning, everyone.

Speaker Change: Wanted to start off by just asking about price.

Speaker Change: Good morning, I wanted to start off by just asking about price cost and you.

Speaker Change: You called out materials costs as a headwind for both professional and residential given the pricing actions that you've taken in <unk> and early <unk> do you expect to fully cover that cost inflation and whatever incremental tariff pressures may occur.

Speaker Change: Second half.

Speaker Change: Our price for Q2, our price will be slightly up really driven kind.

Speaker Change: By less promotion.

Speaker Change: And our residential space and our cost was more so as we look forward to Q3, we havent guidance.

Speaker Change: But our price should be up based on the implemented tariffs price actions that we have taken and overall for the full year, we expect our price to be slightly higher than our normal 1% to 2%, though we also expect to see higher cost.

Angela Drake: And overall, for the full year, we expect our price to be slightly higher than our normal 1 to 2%, but we also expect to see higher costs. I guess I'm just trying to get a sense. You've indicated that you expect to fully offset the tariff pressures, but you're calling up materials headwinds in both segments, and I'm just wondering if there's also enough that we're not going to be talking about material headwinds. Yeah, I think what we're working on in those product costs and material headwinds, luckily, our AMP Transformational Productivity Initiative is helping mitigate some of those costs as well.

Speaker Change: Right I guess I'm, just trying to get a sense of.

Speaker Change: You've indicated that you expect to fully offset the.

Speaker Change: The tariff pressures.

Speaker Change: But you are calling you up materials headwinds in both segments. So I'm just wondering if theres also enough.

Speaker Change: Been provided for in terms of the pricing initiatives and the reduced promotional actions that we're not going to be talking about material headwinds in the second half.

Speaker Change: Yes, I think what we're working on those product costs and material headwinds Luckily our amp transformational productivity initiatives is helping mitigate some of those costs as well so.

Angela Drake: So the timing for that initiative has been very good. We were able to deliver another $6 million in run rate savings in the quarter and a total of $70 million for year to date. or actually project to date for the initiative. So those are also helping to offset some of those material costs that you've mentioned. I believe the largest category within AMP would be cost of goods sold. So it's directly working on those. Yeah, you know, supply base. Okay.

Speaker Change: That's the timing for that initiative has been very good and we were able to deliver another $6 million in run rate savings in the quarter and a total of $70 million for year to date.

Speaker Change: Actually project today for the initiatives that those are also helping to offset some of those material costs achievements I believe the largest category within the app would be cost of goods sold so it's directly working with our.

Speaker Change: Our supply base.

Speaker Change: Okay. St portion of it is helpful to bridge.

Operator: That's helpful, thank you.

Speaker Change: That's helpful. Thank you.

Operator: The second question, just on POS sell-through, can you just talk about... I realize weather was an issue and we've talked about that, but just even taking that Let's talk about... and maybe, more importantly, how the quarter ended. Let's try to get a sense of how the And we talked about the two big factors affecting homeowners. The first and probably the largest is the general consumer confidence that's in play as they're making a purchase decision. That means that they're probably more likely to buy the product if they need it versus if they want to buy it.

Speaker Change: Second question just on Pos sell through could you just talk about what did you see this quarter in both residential and landscape contractor I realize weather was an issue and we've talked about that but just even taking that into consideration can you just talk about sell through and then maybe more importantly, how the quarter ended and if you can talk at all but what you're seeing here in may.

Speaker Change: I'm, just trying to get a sense of how that velocity may be picking up.

Speaker Change: And we talked we talked about the two big factors affecting homeowners the first and probably the largest is the general consumer confidence.

Speaker Change: It's in play as Theyre, making a purchase decision.

Speaker Change: That means that they are probably more likely to buy the product if they need it versus if they want to buy it and when they do buy out there.

Richard Olson: And when they do buy it, they're kind of working down the product line range a little bit to more entry level products. And then the late spring was the other factor. And, you know, retail is good, to answer your question, in May, much better than it was in April. Now into June continues to be, you know, solid. But in the current kind of with those macro clouds kind of hanging over, it's less likely that we would make up that April loss because of the delay of spring, as we sometimes do in some years where the weather is ideal, consumer confidence is higher.

Speaker Change: And there are kind of working down.

Speaker Change: The product line range, a little bit to more entry level products.

Bill: And then bill.

Speaker Change: Late spring was the other factor.

Speaker Change: <unk>.

Speaker Change: We.

Speaker Change: Retail is good to answer your question and may be much better than it was in April.

Speaker Change: Now into June continues to be.

Speaker Change: Solid.

Speaker Change: But in the current kind of with those macro.

Speaker Change: Clouds kind of hanging over it's less likely that we would make up that April.

Speaker Change: Loss because of the delay of spring as we sometimes do in some years, where the weather is ideal.

Speaker Change: Consumer confidence is higher so we're just building we built that into our guidance that we do not expect to get back some of that early spring sales that we lost and we're making sure that we watch inventories to keep those in line as a result.

Richard Olson: So we're just building, we've built that into our guidance that we do not expect to get back some of that early spring sales that we lost, and we're making sure that we watch inventories to keep those in line as a result. We mentioned that replacement demand or duress demand is holding up well, discretionary demand maybe not so much. Can you just remind us in your major categories, the residential and maybe How much of that is replacement milk? is probably, you know, 90% 80 to 90% replacement. And maybe more precisely what I'm referring to is that kind of up and down the range.

Speaker Change: Great.

Speaker Change: You mentioned that you know.

Speaker Change: Replacement demand address demand is holding up well discretionary demand maybe not so much can you just remind us.

Speaker Change: In your major categories, the residential and maybe landscape contractor as well how much of that is replacement to what percentage do you think of as being replacement demand versus more discretionary types of purchases.

Speaker Change: It was probably.

Speaker Change: 90%, 80%, 90% replacement and maybe more precisely what I'm, referring to is that kind of up and down the range. So.

Richard Olson: So You know, if you're feeling great about the economy and macro factors, you're more likely to go up our range and even jump into professional level products. So we see more more activity at the lower end of our range. and, you know, if you're buying it because you need it. because, you know, either bought a new house, your previous product needs to be replaced, it's not functional, those types of things. and obviously Landscape Contractors, 80-90% as well. Uh, yeah. Please remind us what percentage of Landscape Contractors is that kind of aspiration. We don't split that apart, but it is significant and it is different by brand.

Speaker Change: If you are feeling great about the economy and macro factors you are more likely to.

Speaker Change: Go up our range and even jump into professional level products.

Speaker Change: So we see more activity at the lower end of our range.

Speaker Change: And.

Speaker Change: You are buying it because you need it.

Speaker Change: Because you know either bought a new house here.

Speaker Change: Previous products needs to be replaced with functional those types of things.

Speaker Change: And would you say landscape contractors, even 90% as well.

Speaker Change: Yes.

Speaker Change: Okay and can you just remind us what percentage of landscape contractor or is that kind of aspirational residential customer.

Speaker Change: We don't split the part, but it is significant and it.

Speaker Change: It is different by brand.

Richard Olson: The X-Mark is going to be more professional on the professional side, Toro kind of crosses the range but really starts with the strength in the residential area, and the Spartan brand is kind of in between in that pro-sumer space.

Speaker Change: The X Mark is going to be more professional on the professional side.

Speaker Change: <unk> kind of crosses the range, but really it starts with the strength of our residential area.

Speaker Change: Spartan brand is kind of in between in that process of workspace.

Speaker Change: Okay quick.

Angela Drake: Any questions on promotion? Just talk about how you use promotions in this environment, you talked about the fact that you're dialing that back, but yet the Toro customer is conditioned, I would think at this point, to expect some level of promotional support. Just talk about how you use promotion. And particularly given the need to sort of manage... Sure, yes, we, I wouldn't say that we're dialing back our promotions, so we did mention that promotion incentives were a little bit lower for residential in Q2, and that was really related to the comp from last year. If you remember, we had high field inventory, we were working through some of those issues, and so our promotions and incentives were just a bit higher in F24 than they were this year.

Speaker Change: Quick question on promotions can you just talk about how you use promotions in this environment you talked about the fact that you are dialing that back.

Speaker Change: But yet the Toro customers conditions I would think at this point to expect some level of promotional support just in terms of your seasonal sales events.

Speaker Change: Can you just talk about how you use promotions at this point.

Speaker Change: Particularly given the need to sort of manage the tariff exposure and pass that through.

Speaker Change: Sure, Yes, I wouldn't say that we're dialing back our promotions that we did mentioned that promotional incentives were a little bit lower for residential in Q2 and that was really related to the comps from last year if.

Speaker Change: You'll remember we have high field inventory, we were working through some of those issues and so our promotions and incentives were just a bit higher in F. 'twenty four than they were this year still using those promotions and incentives to to get product out the door in our residential and landscape contractor business, certainly and we'll continue to see that after out there.

Angela Drake: Still using those promotions and incentives to get product out the door in our residential landscape contractor business, certainly, and we'll continue to see that throughout the rest of the year.

Speaker Change: Rest of this year.

Speaker Change: Okay. Okay last question for me is on capital allocation.

Angela Drake: Last question for me is on capital allocation, on the share we purchased is $200 million. My model's correct. That's the highest mid-year allocation in Toro. I guess the obvious question, what does that portend for the second half of this year, just how you Sure, yes, we were proud to report that, that we repurchased $200 million a year to date. We just have high confidence in our ability to generate cash. Typically, as you know, we generate the majority of our cash in the second half. But we have a disciplined approach to our capital allocation, and that really remains unchanged.

Speaker Change: On the share repurchases $200 million.

Speaker Change: If my model is correct, that's the highest midyear allocation towards history, a $200 million.

Speaker Change: I guess.

Speaker Change: Next question what does that.

Speaker Change: What does that portend for the second half of this year.

Speaker Change: Just how you're thinking about that.

Speaker Change: Sure Yes.

Speaker Change: We're proud to report that we repurchased $200 million a year to date.

Speaker Change: We just have high confidence in our ability to generate cash typically as you know we generate the majority of our cash in the second half, but we have a disciplined approach to our capital allocation and that really remains unchanged and we will take an opportunity opportunistic approach to our share repurchases as well as first we will invest.

Angela Drake: So we'll take an opportunistic approach to our share repurchases as well. But first, we will invest in ourselves, continue investing in research and development, innovation and technology, M&A, where that's applicable, continue to pay dividends to our shareholders, and then finally, number four is share repurchases. So we're going to continue to look at that through the rest of the year, and we have continued to repurchase shares in Q3. and any change in your capi- No change there.

Speaker Change: And ourselves continue investing in research and development innovation in technology, M&A, where that's applicable.

Speaker Change: <unk> continued to pay dividends to our shareholders and then finally number four and share repurchases. So we're going to continue to look at that through the rest of the year and we have continued to repurchase shares in Q3.

Speaker Change: Great and any change in your Capex expectations.

Speaker Change: No change there.

David Macgregor: Wonderful. Thanks very much. Thank you. Thank you, David. Thank you.

Speaker Change: No change there wonderful thanks, very much I appreciate the answers.

David Macgregor: Thank you. Thank you David.

David Macgregor: Thank you.

Eric Bosshard: Our next question comes from Eric Bosshard with Cleveland Research Company. He may proceed. Thanks. Good morning. Rick, I thought your comments about a bit more normal May and spring starting to show up were helpful. I'm curious, the reduction in the revenue guide for the back half of the year. What's the what's notably different? You know, as you said, you had upside in the second quarter. What's what's different in the assumptions in the back half of the year? It's the reduction is really being driven by that the homeowner behavior as absolutely the dominant portion of that.

Speaker Change: Our next question comes from Eric Bosshardt with Cleveland Research Company you May proceed.

Eric Bosshardt: Oh, Thanks, good morning.

Eric Bosshardt: Hi.

Eric Bosshardt: Your comments about.

Eric Bosshardt: A bit more normal may and spring starting to show up.

Eric Bosshardt: Helpful I'm curious.

Eric Bosshardt: The reduction in the revenue guide for the back half of the year whats the whats, notably different as you said you had upside in the second quarter, what's what's different in the assumptions in the back half of the year.

Eric Bosshardt: It's the reduction is really being driven by that the homeowner behavior.

Eric Bosshardt: Absolutely the dominant portion of that so it is acknowledging that what happened in April were not going to get those sales back from a later spring, especially in an environment, where confidence is lower for those customers.

Richard Olson: So it is acknowledging that what happened in April, we're not going to get those sales back from the later spring, especially in an environment where confidence is lower for those customers. So it's really the homeowner, it shows up in residential directly and it shows up in professional by virtue of the products that are purchased by homeowners in that landscape contractor category. You're right, it's in those areas.

Eric Bosshardt: So it's really the homeowner it shows up in residential directly and it shows up in professional by virtue of the products that are purchased by homeowners in that landscape contractor category. So it's.

Eric Bosshardt: You are right. It's in it's in those areas.

Angela Drake: I would just add to that, Eric, that, you know, the environment just remains so dynamic. And so for our consumers, it's dynamic, but also for our professional customers. And we're continuing to watch our field inventories, too. So continuing to watch what we're pushing into the field. And but importantly, we're seeing continued growth in golf and grounds underground and then our contractor space. So overall, the outlook is positive for the year from from a demand perspective.

Speaker Change: I would just add to that Eric.

Eric Bosshardt: The environment just remains so dynamic and so for our consumers. That's dynamic that's also for our professional customers.

Eric Bosshardt: Continuing to watch our field inventories changed so.

Eric Bosshardt: Continuing to watch what we're pushing into the field.

Eric Bosshardt: Importantly, we are seeing continued growth in golf and grounds umbrella underground and then our contractor space. So overall.

Eric Bosshardt: Overall, the outlook is positive for the year from a demand perspective.

Eric Bosshardt: Okay.

Eric Bosshardt: Okay. Okay.

Richard Olson: Well, the second question on the the underground construction equipment ditch, which business I understand there's some moving parts with. dealers and the other pieces. I also know this business has got quite a lengthy backlog that provides ongoing support for demand. Is the underlying demand or the new order trend the same that it's been? Is it better? Is it worse? Just trying to get a sense of the underlying demand. Yeah, the base, the base business and demand remains strong for the factors that I talked about. And the backlog, we are having an impact on the backlog.

Eric Bosshardt: The second question on the underground construction equipment.

Eric Bosshardt: Which business.

Eric Bosshardt: Understand there are some moving parts with the <unk>.

Eric Bosshardt: And the other pieces I also know that business has got quite a lengthy backlog that provides.

Eric Bosshardt: Ongoing support for demand is that underlying demand or is the new order trend. The same that it's been is it better is it worse to trying to get a sense of the underlying demand in this business.

Eric Bosshardt: Yes, the base the base business and demand remains strong for the factors that I talked about.

Eric Bosshardt: The backlog we are.

Eric Bosshardt: Having an impact on the backlog.

Richard Olson: We're working, obviously working that down to meet our customers expectations. But no change to the demand profile. From our perspective, we continue to see strong demands as we go forward. We are managing that backlog down would be the factor that that we didn't talk much about yet. Yeah, the backlog, as we've said in the past, will probably not be back to normal levels for that business until I'm 26. We still have low field inventory, low channel inventory for those underground construction dealers as well. But just just as a reminder, I'm actually both for that business and for Golf and Grounds, it is our desire to reduce the backlog to make sure that we meet our customer expectations for availability.

Eric Bosshardt: Working obviously working that down to meet our customers' expectations, but no change to the demand profile from our perspective, we continue to see strong demand as we go forward, we are managing that backlog down to be the factor that we didn't talk much about yet yes. The backlog as we said in the past will probably not be back to <unk>.

Eric Bosshardt: <unk> levels for that business until August 26.

Eric Bosshardt: Still have low field inventory channel inventory for those underground construction dealerships.

Eric Bosshardt: But just just as a reminder, our backs both for that business and for golf and grounds. It is our desire to reduce the backlog to make sure that we meet our customer expectations for availability.

Richard Olson: Okay, and the current quarter reduction or down revenue in this business, this should be a one off this. I mean, with the amount of backlog and with no change that may add like this business should generate growth as we move forward, this should just be a two cue result that's that's unique. Is that the right way to think about it? We expect it to continue to grow, and those one-off items were the biggest factors in which you saw this quarter. Yeah, and those are just related to a comp year over year, so the sales of dealers and some of the skewed rationalization will be a comp.

Eric Bosshardt: In the current quarter.

Eric Bosshardt: Duction or down revenue in this business this should be a one off with the amount of backlog and with no change demand like disposition generate.

Eric Bosshardt: Growth as we move forward that should just be a <unk> result, that's unique is that the right way to think about it.

Eric Bosshardt: We expect it to continue continue to grow at those one off items, where are the biggest factors in which you saw this quarter, yes, and those are just related to a comp year over year. So the sales of dealers and that.

Eric Bosshardt: Some of the SKU rationalization will be a comp okay.

Richard Olson: Okay.

Angela Drake: And the last question I just had, the clarity on the tariffs in terms of offset, I get that AMP and the cost out of productivity is the lion's share of what you're doing. The pricing, I guess, is a two part question. First of all, is the pricing more skewed to pro and away from residential? And then two, How would you characterize the traction that you're having with these price increase efforts that you put in place? I'll start, Rick, and jump in here. I'd say the pricing is not skewed either way. It's really kind of across the board, and we've got both prices and surcharges.

Eric Bosshardt: And then the last question I just had clarity on the tariffs in terms of offset I get the app and the cost out and productivity is the lion's share of what Youre doing.

Eric Bosshardt: The pricing.

Eric Bosshardt: I guess a two part question first of all is the pricing more skewed to pro and away from residential and then too right.

Eric Bosshardt: How would you characterize the traction that you're having with these price increase efforts that you've put in place.

Eric Bosshardt: I'll start rent and jump in here.

Eric Bosshardt: I'd say the pricing is not skewed either way, it's really kind of across the board and we've got both prices and surcharges. So both of those are there and it wouldn't be skewed towards the later half of the year, obviously, just implementing those price increases sometime in may. So we'll continue to see that throughout the rest of this year.

Angela Drake: So both of those are there, and it would be skewed for the later half of the year, obviously, just implementing those price increases sometime in May. So we'll continue to see that throughout the rest of this year. Yes, the only thing I would add is it's a very surgical process based on the specific markets and the specific product lines. It's specific to the business, obviously very dynamic environment competitively and with the tariffs themselves, so. We didn't do blanket increases across the company, we did it very specific to the businesses.

Steve: Steve the only thing.

Eric Bosshardt: I'd add its a very surgical process based on the specific markets or specific product lines. So.

Eric Bosshardt: It's specific to the business, obviously, a very dynamic environment competitively and with the tariffs themselves. So.

Eric Bosshardt: So we didn't do blanket increases across the company, we did it very specific to the businesses.

David Macgregor: Thank you very much. Thank you.

Eric Bosshardt: Thank you very much.

Eric Bosshardt: Thank you.

Operator: Thank you and as a reminder to ask a question please press star 1 1 on your telephone.

Speaker Change: Thank you and as a reminder to ask a question. Please press star one on your telephone. Our next question comes from Ted Jackson with Northland Capital markets. You May proceed.

Ted Jackson: Our next question comes from Ted Jackson with Northland Capital Markets. Thanks very much. Good morning, Rick, Angie, Jeremy. Good morning. So first question is just kind of more for curiosity. You know, if my memory's right, with second quarter, you were still going through some last year, you were still going through, you know, kind of the stocking for Lowe's. And if that's true, and what the decline in residential if you have more. I mean, you're down a lot. 0.4%. But I mean, he had a pretty tough cop, if my memory's correct. Have you taken a look at what it was?

Speaker Change: Thanks, very much good morning breakeven here Jeremy.

Speaker Change: Good morning, Doug.

Speaker Change: So first question just kind of corporate curiosity.

Speaker Change: Memories, right, where second quarter, you were still going through some last year, you were still going through kind of the stocking for Lowe's.

Speaker Change: That's true.

Speaker Change: The decline in residential.

Speaker Change: If you were to normalize for that you were down 11%.

Speaker Change: 4%.

Speaker Change: You had a pretty tough comp if my memory's correct to be taken out with kind of what it would have been in a more organic basis.

Richard Olson: And so we have a little trouble hearing you, but if you're talking about the Lowe's comp, that that definitely is a factor last year, the first year with Lowe's, you know, stocking the stores and so forth was still taking place in the second quarter. So the other factor I would just mention is snow, that's part of the equation. So based on the flow through the season, the actual snow season, that product would be shipped through normally in the third quarter is the biggest quarter. So we've included a lower snow projection. That was a factor. in the second quarter as well.

Speaker Change: Yes, so we had a little trouble hearing you, but if you're talking about the lowest comp.

Speaker Change: <unk> is a factor last year, the first year with loads.

Eric Bosshardt: Stocking the stores and so forth, we are still taking place in the second quarter.

Eric Bosshardt: So the other the.

Eric Bosshardt: The other factor I just mentioned is snow that's part of the equation. So based on the flow through the season the asphalt season.

Eric Bosshardt: Products with these shifts.

Eric Bosshardt: Normally in the third quarter is the biggest quarter. So we've included a lower snow projections that what that was.

Eric Bosshardt: A factor.

Eric Bosshardt: In the second quarter as well.

Richard Olson: second quarter is not a huge snow, snow quarter, but it was one of the factors. The biggest things were the overall macro situation with the homeowner and the timing of spring, the comp to last year with lows is that's a legitimate call out as well. And then a little bit of snow. Do you hear me better now? I don't know. I can't do much about it if you can't hear me. No, I just, I was just kind of curious, like if you were to normalize for Lowe's, what would it look like? I mean, I assume it wouldn't be down 11 plus percent.

Eric Bosshardt: Second quarter is not a huge snow.

Eric Bosshardt: <unk> quarter, but it was one of the factors the biggest things were in the overall macro situation with the homeowner and the timing of spring the comp to last year with Lowe's, that's a legitimate callout as well and then a little bit of snow.

Eric Bosshardt: Take care.

Eric Bosshardt: You hear me better now.

Speaker Change: But I don't know much about it if you take it okay. No I guess I was just kind of curious like if you were to normalize for Lowe's, what the what your what would what would it look like I mean.

Eric Bosshardt: I assume you'd be it wouldn't be down 11, plus percent I. Just it was kind of curious on them or organic basis, what it might look like that was my question and I have a couple of them.

Richard Olson: I just was kind of curious on a more organic basis what it might've looked like. and I have a couple more. I think if you put the normal spring back in, it just wipes that out. So it's a that the spring is a bigger factor than the roses. So it's kind of a dwarf. Yeah, because the light spring is a big factor not just for the consumer, but also for the channel and then mass as well.

Eric Bosshardt: I think if you put the normal spring back and it just wiped that out.

Eric Bosshardt: The spring is a bigger factor than the losses.

Eric Bosshardt: So okay kind of dwarf them.

Eric Bosshardt: Yeah, because it relates Rob if factor in.

Eric Bosshardt: Consumer, but also for them that channel in mass as well.

Angela Drake: Okay, and then my next question, just kind of going into working capital and thinking about the second half of the year, you know, so if the The outlook for the second half of the year is not what you had expected at the beginning of the year. What does that do in terms of working capital? I mean, where are you, you know, particularly with regards to inventories, does that leave you a little, you know, heavier on that front and something to work through as we kind of get through the year? Just maybe a little color in terms of how to think about, you know, second half working capital.

Speaker Change: Okay and then my next question, just kind of going into working capital and thinking about the second half of the year.

Eric Bosshardt: So if the.

Eric Bosshardt: The outlook for the second half of the year as you know.

Eric Bosshardt: What you had expected.

Eric Bosshardt: At the beginning of the quarter.

Eric Bosshardt: What does that do in terms of working capital I mean, where are you with particularly with regards to inventories does that leave you a little heavier on that frightened something to work through as we kind of get through the year just talk maybe a little color in terms of how to think about second half.

Eric Bosshardt: Working capital or given your revised guidance.

Angela Drake: or a given. That's a great question. So, overall, if we think about just working capital and inventory, we are a little higher on finished goods, driven by the late spring that we've been talking about, but sequentially, we're actually down in that inventory about 1%. We are working our work in process down, so it is lower, and continuing to drive productivity and manufacturing output in some of our areas of backlog, for sure, but that continues to be an area of focus for us. So, as we talked about earlier with some of those inventory valuations, we're working through and moving through some of our excess and obsolete inventory.

Eric Bosshardt: Mhm.

Eric Bosshardt: That's a great question. So overall, if we think about just working capital and inventory we are a little higher on finished goods driven by the late spring that we've been talking about that sequentially, we're actually down in net inventory about 1% we are working on.

Eric Bosshardt: We are working our working process down so it is lower and continuing to drive.

Eric Bosshardt: Productivity and manufacturing output in some of our areas of backlog for sure but that continues to be a an area of focus for us. So.

Eric Bosshardt: And as we talked about earlier with some of those inventory valuations, where we're working through and moving through some of our excess and obsolete inventory so continuing to focus in and move that working.

Angela Drake: So, continuing to focus and move that working capital number down along with our inventory.

Eric Bosshardt: Working capital number down along with our inventory.

Eric Bosshardt: Yeah.

Ted Jackson: Okay, and then my third and final question, just shifting back over to tariffs, you know, if one was to take an optimistic viewpoint with regards to Trump's ability to bring a deal across the finish line with someone like China, because, you know, he is a negotiator and a transactional guy. Would that change your guidance if you were to see, say, the reprieve that we had with regards to tariffs with China and everyone else? become permanent. Would you come back out? I mean, there could be some positive pickups, there are so many moving pieces to this, there are also, you know, Tariffs in other directions.

Eric Bosshardt: Okay, and then my third and final question, just shifting back over to tariffs.

Speaker Change: If one was to take an optimistic viewpoint with regards to trumpf ability to bring a deal across the finish line with someone like China, because he is a negotiator to transactional guy.

Speaker Change: Would that change your guidance. If you were to see say the three that we had with <unk>, the tariffs with China and everyone else.

Speaker Change: Because the apartment, which you come back out and be changing your guidance.

Speaker Change: Yes.

Speaker Change: I mean, there could be some positive pick ups. There are so many moving pieces to this there are also.

Speaker Change: <unk>.

Speaker Change: Tariffs and other directions. So the best thinking as is reflected in our guidance.

Richard Olson: So the best thinking is reflected in our guidance. As we talked about, a lot of the tariff impact as it comes back to the higher levels would be in the fourth quarter. So we'll certainly give you guidance as we get into the next earnings release. We'll obviously know much more about the outlook in those cases. That'll be the time that we can talk about, you know, how that looks for the rest of the year again. But so, but in your guide. Right now, in your guidance, you're expecting tariffs to snap back to these ridiculous levels.

Speaker Change: As we talked about a lot of the tariff impact as that comes back to the higher levels would be in the fourth quarter. So we will certainly give you guidance as we get into the next earnings release, we'll obviously know much more about.

Speaker Change: The outlook in those cases that will be the time that we can talk about that.

Speaker Change: It works for the rest of the year again.

Speaker Change: But so but guidance right.

Speaker Change: Right now in your guidance Youre expecting tariffs to snapback that these ridiculous level, so all else being equal.

Ted Jackson: So, all else being equal, you know, if we see an extension or some kind of deal that's better than that, all else being equal, there would be an We have included all of those tariffs, yes. So that could be, if something could go better or worse, that is one of those items, Ted, that it could go better if tariffs don't pop back to the levels that we expect them to with the executive order. Okay, that's it for me. Thank you very much for taking my question. Thank you.

Speaker Change: If we see an extension or some kind of deal that's.

Speaker Change: Better than that all else being equal there would be no there would be an improvement for you.

Speaker Change: We have included all of those tariffs yes.

Speaker Change: Okay.

Speaker Change: And so the higher rates.

Speaker Change: So that could be if something could go better or worse that is one of those items, but it could go better.

Speaker Change: Yes, if tariffs don't pop back to the levels that we expect them to with the executive orders.

Speaker Change: Okay. That's it for me. Thank you very much for taking my questions.

Speaker Change: Thanks, Thank you.

Speaker Change: Thank you.

David Macgregor: Our next question comes from David MacGregor with Longbow Research, you may proceed. Yeah, thanks for taking the follow up. I just had a just on the tariffs while we're on that. I guess I'm thinking competitively and Any comment that you'd be willing to provide? How these terrifying And then, you know, I guess I'm also looking for some clarity and I'm going to get a little wonky. competitors are sustaining 232 tariffs. Are they also exposed to the IEPA 10% tariff on top of that? You're talking about compilers? competitors. Yeah, your numbers are so small. Did you want to?

Speaker Change: Our next question comes from David Macgregor with Longbow Research you May proceed.

David Macgregor: Yeah. Thanks for taking the follow up I just had a just on the tariffs over on that.

Speaker Change: I guess im thinking competitively and if there is.

Speaker Change: Any comment that you'd be willing to provide us in terms of how these tariffs impact your competitive position.

Speaker Change: And then I.

Speaker Change: I guess I'm also looking for some clarity I'm going to get a little wonky here on your butt.

Speaker Change: If your competitors are sustaining $2 32 tariff exposure through the steel and aluminum.

Speaker Change: Are they also exposed to the 10%.

Speaker Change: Tariff on top of that or are they is it one or the other.

Speaker Change: Youre talking about competitors.

Speaker Change: Competitors, yes.

Speaker Change: Your numbers are so small that I think I'd really like to get your perspective on the competitive dynamic here and do you want to.

David Macgregor: Yeah, I don't know that we can speak to the competitors necessarily, so, yeah, exposure. I'm just just wondering competitively. How I mean, is this providing you with an advantage?

Speaker Change: Yes, I don't know that we can speak to the competitors necessarily.

Speaker Change: So I was just in the tariff exposure I'm, just just wondering competitively.

Speaker Change: This is providing you with an advantage do you feel.

Speaker Change: Do you expect to gain a little market share as a consequence of the.

Richard Olson: So, maybe a couple comments in that area. On the professional side, we're fairly similarly positioned, I would say, more on the homeowner type of products. If you take in all the factors like exposure to China, the fact that we're a U.S. company, and the strategies that we've put in place since 2018, we believe we're in a very solid competitive position. Are you able to talk at all about the 232 versus IEPA? Are they cumulative or? They, I believe they're mutually exclusive, but don't quote me on that, David. I, you know, the stackable and, you know, non-stackable, it's changing constantly.

Speaker Change: Tariff regimen or a few.

Speaker Change: So yes, maybe a couple of comments in that area on the professional side, we're fairly similarly positioned I would say more on the homeowner type of products.

Speaker Change: If you.

Speaker Change: So we've taken all of the factors like exposure to China. The fact that we're a U S company.

Speaker Change: And the strategies that we've put in place since 2018, we believe we're in a very solid competitive position.

Speaker Change: Okay.

Pete: And then Pete.

Speaker Change: Are you able to talk at all about the 232 versus <unk> or the cumulative are they mutually exclusive.

David Macgregor: Hey, I believe theyre mutually exclusive but don't quote me on that David.

David Macgregor: Stackable and our non stackable, it's changing constantly so it's such a dynamic environment, where can go watch it every day.

Richard Olson: So it's such a dynamic environment. We're continuing to watch it every day. Yeah, we have, I think we mentioned before, we have the task force together. They're working on all the details of what was announced yesterday, and we'll be able to provide more information as we go on that. I appreciate the comment. Thank you. You bet. Thank you.

Speaker Change: I think we mentioned before we put a task force together they are working on all of the details of what was announced yesterday and we'll be able to provide more information as we go on that.

David Macgregor: I appreciate the comments thank you very much.

David Macgregor: You bet. Thank you. Thank you.

Operator: This concludes the question and answer session.

Speaker Change: Thank you. This concludes the question and answer session. Mr. Stephan. Please proceed to closing remarks.

Jeremy Steffan: Mr. Steffan, please proceed to closing remarks. Thank you everyone for your questions and interest in Toro Company. We look forward to talking to you again in September to discuss our fiscal 2025 third quarter results.

Mr. Stephan: Thank you everyone for your questions and interest in the Toro company, we look forward to talking with you again in September to discuss our fiscal 2025 third quarter results.

Mr. Stephan: Yeah.

Operator: Thank you for your participation in today's conference.

Mr. Stephan: Thank you for your participation in today's conference. This concludes the presentation you may now disconnect good day.

Operator: This concludes the presentation.

Operator: You may now disconnect.

Operator: Good day.

Mr. Stephan: [music].

Mr. Stephan: Okay.

Mr. Stephan: [music].

Mr. Stephan: Okay.

Mr. Stephan: [music].

Mr. Stephan: Yes.

Mr. Stephan: [music].

Mr. Stephan: Yes.

Mr. Stephan: [music].

Mr. Stephan: [music].

Mr. Stephan: [music].

Joshua Wilson: Good day, ladies and gentlemen, and welcome to the Toro Company second quarter earnings conference call. My name is Josh and I will be your coordinator for today.

Josh: Good day, ladies and gentlemen, and welcome to the Toro Company second quarter Earnings Conference call. My name is Josh and I will be your coordinator for today at this time all participants are in a listen only mode. We will be facilitating a question and answer session towards the end of todays conference. As a reminder, this conference is being recorded for replay purpose.

Operator: At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of today's conference.

Operator: As a reminder, this conference is being recorded for replay purposes.

Jeremy Steffan: I would now like to turn the presentation over to your host for today's conference, Jeremy Steffan, Director of Investor Relations. Please proceed, Mr. Steffan. Good morning, everyone. And thank you for joining us for the Toro Company's second quarter 2025 earnings conference call. On the line with me today are Rick Olson, Chairman and Chief Executive Officer, and Angie Drake, Vice President and Chief Financial Officer. During this call, Rick and Angie will provide their insights on our second quarter results, which were released earlier this morning, along with our outlook and priorities for the remainder of the year.

Jeremy Stephan: I would now like to turn the presentation over to your host for today's conference Jeremy Stephan <unk>.

Josh: Director of Investor Relations. Please proceed Mr. Stephan.

Jeremy Stephan: Good morning, everyone and thank you for joining us for the Toro Company second quarter 2025 earnings Conference call.

Speaker Change: With me today are Rick Olson, Chairman, and Chief Executive Officer, and Engineering, Vice President and Chief Financial Officer.

Speaker Change: During this call Rick and Andrew will provide their insights on our second quarter results, which were released earlier this morning, along with our outlook and priorities for the remainder of the year.

Jeremy Steffan: Following their remarks, we'll open the phone lines for a question and answer session. As a reminder, any forward-looking statements that we make this morning are subject to risks and uncertainty. including those described in today's earnings release, investor presentation, and most recent SEC filing. may cause actual results to differ materially from those compensated by these statements. Also in our remarks, we'll refer to certain non-GAAP financial measures, which we believe are important in evaluating the company's performance.

Jeremy Stephan: Following their remarks, well open the phone lines for a question and answer session.

Jeremy Stephan: As a reminder, any forward looking statements that we make this morning are subject to risks and uncertainties.

Jeremy Stephan: Putting those described in today's earnings release Investor presentation, and most recent SEC filings.

Jeremy Stephan: It may cause actual results to differ materially from those contemplated by these statements.

Jeremy Stephan: Also in our remarks will refer to certain non-GAAP financial measures, which we believe are important in evaluating the company's performance.

Jeremy Steffan: Reconciliations of all non-GAAP numbers to the most directly comparable GAAP number are included in this morning's press release, along with a second quarter presentation containing supplemental information is posted in the investor information section of our corporate website. With that, I will now turn the call over to Thanks, Jeremy, and good morning, everyone. Our team has remained focused on leveraging the strength of our diverse portfolio of leading brands, controlling what we can control in a dynamic environment, and driving operational excellence across the organization. In doing so, we exceeded our adjusted earnings per share expectation for the quarter, took decisive actions to overcome near term headwinds, executed on our playbook to mitigate tariffs, and we continue to introduce new innovative products and solutions that enhance customer productivity at a time when it's needed most.

Jeremy Stephan: Reconciliations of all non-GAAP numbers to the most directly comparable GAAP number are included in this morning's press release.

Jeremy Stephan: Along with our second quarter presentation containing supplemental information is posted in the Investor information section of our corporate website.

Rick: With that I will now turn the call over to Rick.

Rick: Thank you Amy and good morning, everyone.

Rick: Our team has remained focused on leveraging the strength of our diverse portfolio of leading brands.

Speaker Change: Trolling, what we can control in a dynamic environment and driving operational excellence across the organization.

Rick: In doing so we exceeded our adjusted earnings per share expectations for the quarter took decisive actions to overcome near term headwinds executed on our playbook to mitigate tariffs and we continue to introduce new innovative products and solutions that enhance customer productivity at a time when it's needed most.

Richard Olson: These priorities remain at the forefront of our efforts as we navigate the current environment. For the second quarter, we grew Adjusted Earnings Per Share to $1.42, exceeding our expectations. At the same time, we continued to return cash to shareholders through dividends and share repurchases. These results reflect our team's commitment to operational excellence, despite a dynamic macroeconomic environment and unfavorable regional weather that pressured top-line growth in some businesses. Revenue in the quarter declined 2.3% year over year to $1.3 billion as weak consumer confidence, coupled with a late spring in many regions, created near-term headwinds for products sold to homeowners.

Rick: These priorities remain at the forefront of our efforts as we navigate the current environment.

Rick: For the second quarter, we grew adjusted earnings per share to $1 42 exceeding our expectations at the same time, we continued to return cash to shareholders through dividends and share repurchases.

Rick: These results reflect our team's commitment to operational excellence, despite a dynamic macroeconomic environment and unfavorable regional weather pressured top line growth in both businesses.

Rick: Revenue in the quarter declined two 3% year over year to $1 3 billion.

Rick: As weak consumer confidence coupled with a late spring in many regions created near term headwinds for products sold to homeowners.

Richard Olson: This was partially offset by continued strength in our golf and grounds businesses where demand for innovative products remains robust. We continue to see positive results from our AMP program, which now has generated $70 million of run rate savings and remains on track to deliver $100 million by 2027. As a reminder, in fiscal 2024, we made adjustments to our workforce, manufacturing footprints, and portfolio, and in the current fiscal year, we have reduced our global salaried workforce by an additional 10%. Also in Q2, we took actions to rationalize our operational footprint in the residential segment by winding down production in one of our plants in Mexico and transitioning that production to existing facilities in the United States.

Rick: This was partially offset by continued strength in our golf and grounds businesses, where demand for our innovative products remains robust.

Rick: We continue to see positive results from our <unk> program now has generated $70 million of run rate savings and remains on track to deliver $100 million by 2027.

Rick: As a reminder, in fiscal 2024, we made adjustments to our workforce manufacturing footprint and portfolio.

Rick: And in the current fiscal year, we have reduced global salaried workforce by an additional 10%.

Rick: Also in Q2, we took actions to rationalize our operational footprint in the residential segment by winding down production in one of our plants in Mexico, and transitioning that production to existing facilities in the United States.

Richard Olson: This move will improve fixed cost absorption and efficiency while ensuring we continue to deliver exceptional products and service to our customers. This action also underscores the strength of our supply chain strategies we have in place to mitigate tariff headwinds, which in this dynamic environment we estimate in fiscal 2025 to be approximately 3% of our annual cost of goods sold. Many of these strategies were implemented beginning in 2018 and give us a competitive advantage today. The vast majority of our professional products are manufactured in the United States, and while we do manufacture primarily residential and irrigation products in Mexico, virtually all are USMCA qualified, now making them exempt from Mexico-specific tariffs.

Rick: This move will improved fixed cost absorption and efficiency, while ensuring we continue to deliver exceptional products and service to our customers.

Rick: This asset and also underscores the strength of our supply chain strategies, we have in place to mitigate tariff headwinds, which in this dynamic environment we estimate.

Rick: In fiscal 2025 to be approximately 3% of our annual cost of goods sold.

Rick: Many of these strategies were implemented beginning in 2018 and give us a competitive advantage today.

Rick: The vast majority of our professional products are manufactured in the United States and while we do manufacturer, primarily residential and irrigation products in Mexico.

Rick: Really all of our U S. MCA qualified now making them exempt from Mexico specific tariffs.

Richard Olson: Our sourcing team has been working with our suppliers to optimize our supply chain to remain agile in any environment. In addition, we will continue to thoughtfully implement price increases, ensuring our products remain competitive while protecting our profit margins and fueling investments in our future. Finally, I'll share some highlights from the quarter that showcase our continued product innovation, leadership and technology driven solutions, and customer focused strategies, all of which reinforce our confidence in the Toro Company's future. market trends across our professional businesses remain robust. Golf continues its sustained momentum with strong participation levels driving equipment investments, while underground construction is benefiting from the compelling runway of infrastructure projects we've been discussing.

Rick: Our sourcing team has been working with our suppliers to optimize our supply chain to remain agile in any environment.

Rick: In addition, we will continue to thoughtfully implement price increases ensuring our products remain competitive while protecting our profit margins and fueling investments in our future.

Rick: Finally, I will share some highlights from the quarter that showcase our continued product innovation leadership and technology, driven solutions and customer focus strategies, all of which reinforce our confidence in the company's future.

Rick: Market trends across our professional businesses remained robust.

Rick: Golf continues its sustained momentum with strong participation levels driving equipment investments while underground construction is benefiting from a compelling runway of infrastructure projects we've been discussing.

Richard Olson: Our innovation in alternative power, smart connected products, and autonomous solutions continues to drive significant customer value and differentiates our office. During the quarter, our boss business introduced several new products, including our new cold front technology electrical system with smart forward headlights. This system seamlessly enables smart integration of the plow and our new EVX Plus smart spreader through a common truck harness. These advancements are aligned with our long term strategy of helping customers be more productive through technology and innovation. Earlier this year, we expanded our electric construction portfolio to include new E2500 Ultra buggies with high lift and swivel capabilities.

Rick: Our innovation in alternative power smart connected products and a pilot solutions continues to drive significant customer value and differentiates our offerings.

Rick: During the quarter, our box business introduced several new products, including our new Cold front technology electrical system with smart for satellites. This system seamlessly enabled smart integration of our file and our new Evs plus smart spreader through a common truck harness.

Rick: These advancements are aligned with our long term strategy of helping customers be more productive through technology and innovation.

Rick: Earlier this year, we expanded our electric construction portfolio to include New E 2500, ultra buggies with higher lift and swivel capabilities.

Richard Olson: and our new eDingo TX750 in both narrow and wide track format. These products leverage our Hypercell power system, allowing customers to get eight hours of runtime. They're designed to work together on a job site to maximize efficiency and productivity. Additionally, because they are quiet and do not produce exhaust emissions, they provide exceptional value for customers working indoors. In our residential segment, we were awarded the 2024 ACE Hardware Vendor of the Year. This prestigious award recognizes select corporate-wide vendor partners that delivered substantial sales growth, differentiated innovative products, and excellent customer service. The award is a tremendous honor and served as a significant milestone in our corporate partnership with Ace Hardware that began back in 2015.

Rick: And our new E Pingo, <unk> 750 in both narrow and wide track formats.

Rick: These products leverage our hypersound power system, allowing customers to get eight hours of run time.

Rick: And to work together on a job site to maximize efficiency and productivity.

Rick: Additionally, because they are quiet and do not produce exhaust emissions they provide exceptional value for customers working in doors.

Rick: In our residential segment, we were awarded the 2024 Ace hardware vendor of the year. This.

Rick: This prestigious award recognizes select corporate wide vendor partners that delivered substantial sales growth differentiated innovative products and excellent customer service.

Rick: The award is a tremendous honor and served as a significant milestone in our corporate partnership with Ace hardware.

Rick: That began back in 2015.

Richard Olson: Throughout the 110-year history of the Toro Company, we have consistently found ways to successfully navigate the most difficult environments. With our proven track record of resilience and agility and our team's commitment to execute with discipline, I am confident that our deliberate actions will advance our strategic priorities and position us for sustainable, profitable growth.

Rick: Throughout our 110 year history of the Toro company, we have consistently found ways to successfully navigate the most difficult environments.

Rick: With our proven track record of resilience and agility in our team's commitment to execute with discipline.

Rick: I'm confident that our deliberate actions, we will advance our strategic priorities and position us for sustainable profitable growth.

Angela Drake: With that, I will turn the call over to Angie. Thank you, Rick, and good morning, everyone. We were pleased to deliver adjusted diluted EPS growth in the quarter, highlighted by professional segment growth and profitability improvement. Consolidated net sales for the quarter were $1.32 billion, down slightly from Q2 last year. Reported EPS was $1.37 per diluted share compared to $1.38 in the second quarter of last year. Adjusted EPS was $1.42 per diluted share, up from $1.46.

Angie: With that I will turn the call over to Angie.

Angie: Thank you Rick and good morning, everyone.

Speaker Change: We're pleased to deliver adjusted diluted EPS growth in the quarter highlighted by professional segment growth and profitability improvement.

Speaker Change: Consolidated net sales for the quarter were 132 billion.

Speaker Change: Slightly from Q2 last year.

Speaker Change: Reported EPS was $1 37 per diluted share compared to $1 38 in the second quarter of last year.

Speaker Change: Adjusted EPS was $1 42 per diluted share up from $1 40.

Angela Drake: Now to the segment results. Professional segment net sales for the second quarter were just over $1 billion, up about 1% year over year. This increase was primarily driven by higher shipments of golf and grounds products. This was partially offset by lower shipments of underground products, largely due to the divestitures of construction equipment dealers and lower shipments of specialty construction equipment, more specifically compact utility loaders. Professional segment earnings for the second quarter were $202 million, up 6% year-over-year. Professional segment earnings margin was 19.9 percent, up from 19 percent. The 90 basis point increase in profitability was primarily due to product mix and productivity improvement.

Speaker Change: Now to the segment results.

Speaker Change: Professional segment net sales for the second quarter were just over $1 billion.

Speaker Change: Up about 1% year over year.

Speaker Change: This increase was primarily driven by higher shipments of golf and grounds products.

Speaker Change: This was partially offset by lower shipments of underground products largely due to the divestitures of construction equipment dealers and lower shipments of specialty construction equipment more specifically compact utility loaders.

Speaker Change: Professional segment earnings for the second quarter were $202 million.

Speaker Change: Up 6% year over year.

Speaker Change: Professional segment earnings margin was 19, 9% up from 19%.

Speaker Change: A 90 basis point increase in profitability was primarily due to product mix and productivity improvements.

Angela Drake: This was partially offset by higher material and manufacturing costs. The margin improvement we are seeing in the professional segment demonstrates the quality and resilience of its businesses, which continue to be our primary growth and profit driver.

Speaker Change: This was partially offset by higher material and manufacturing costs.

Speaker Change: The margin improvement we are seeing in the professional segment demonstrates the quality and resilience of its businesses, which continue to be our primary growth and profit drivers.

Angela Drake: Residential segment net sales for the second quarter were $297 million, down 11% year-over-year. The decrease was primarily driven by lower shipments of watt-power mowers, zero-turn mowers, and portable power products, and the pump products divestiture last year. These factors were partially offset by higher shipments of snow products and lower sales promotions and incentives. Residential segment earnings for the quarter were $16 million compared to $36 million last year. residential segment earnings margin was 5.4% compared to 10.8%. The decrease was largely due to higher material, manufacturing and freight costs, lower net sales volume, and inventory valuation adjustments. These were partially offset by productivity improvements and lower sales promotions and incentives.

Speaker Change: Residential segment net sales for the second quarter were $295 million down 11% year over year.

Speaker Change: The decrease was primarily driven by lower shipments of walk power mowers zero turn mowers and portable power products and the products divestiture last year.

Speaker Change: These factors were partially offset by higher shipments of snow products and lower sales promotions and incentives.

Speaker Change: Residential segment earnings for the quarter were $16 million compared to $36 million last year.

Speaker Change: <unk> segment earnings margin was five 4% compared to 10, 8%.

Rick: The decrease was largely due to higher material manufacturing and freight costs lower net sales volume and inventory valuation adjustments. These.

Rick: These were partially offset by productivity improvements and lower sales promotions and incentives.

Angela Drake: Turning to our operating results for the total company. Our reported and adjusted gross margins were 33.1% and 33.4% respectively for the quarter. This compares to 33.6% for both in the same period last year. Current quarter reported gross margin reflects higher amp charges compared to last year. Additional year-over-year changes on both a reported and adjusted basis were primarily due to higher material and manufacturing costs partially offset by product mix and productivity improvement. SCNA expense as a percentage of net sales for the quarter was 19.8%, up slightly from 19.7% a year ago. The change was primarily due to lower net sales volume.

Rick: Turning to our operating results for the total company.

Rick: Our reported and adjusted gross margins were $33, one and 33, 4% respectively for the quarter.

Rick: This compares to 33, 6% for both in the same period last year.

Rick: Current quarter reported gross margin reflect higher <unk> charges compared to last year.

Rick: Additional year over year changes on both a reported and adjusted basis were primarily due to higher material and manufacturing costs.

Rick: Partially offset by product mix and productivity improvements.

Rick: SG&A expense as a percentage of net sales for the quarter was 19, 8%.

Rick: Slightly from 19, 7% a year ago.

Rick: The change was primarily due to lower net sales volume.

Angela Drake: Operating earnings margin was 13.3%, down from 13.9% in the same period last year. On an adjusted basis, operating earnings margin was 13.7% down from 14.2%. The reported effective tax rate for the second quarter was 18.9% compared with 19.2% last year. The decrease was primarily due to a more favorable geographic mix of earnings this year. This was partially offset by lower tax benefits recorded as excess tax deductions for stock-based compensation in the current year period. The adjusted effective tax rate for the second quarter was 18.7%, compared with 19.8% a year ago, primarily driven by the geographic mix of earnings.

Rick: Operating earnings margin was 13, 3% down from 13, 9% in the same period last year.

Rick: On an adjusted basis operating earnings margin was 13, 7% down from 14, 2%.

Rick: The reported effective tax rate for the second quarter was 18, 9% compared with 19, 2% last year.

Rick: The decrease was primarily due to a more favorable geographic mix of earnings this year.

Rick: This was partially offset by lower tax benefits recorded as excess tax deductions for stock based compensation in the current year period.

Rick: The adjusted effective tax rate for the second quarter was 18, 7% compared with 19, 8% a year ago.

Rick: Primarily driven by the geographic mix of earnings.

Angela Drake: Free cash flow through the second quarter was $84.7 million, a slight decrease on a year-over-year basis and largely due to changes in working capital. During the quarter, we deployed $100 million towards share repurchases, bringing our year-to-date total to $200 million. This reflects our confidence in cash generation and our commitment to returning capital to shareholders while maintaining balance sheet flexibility.

Rick: Free cash flow through the second quarter was $84 7 million.

Rick: Slight decrease on a year over year basis, and largely due to changes in working capital.

Rick: During the quarter, we deployed $100 million towards share repurchases, bringing our year to date total to $200 million.

Rick: This reflects our confidence in cash generation and our commitment to returning capital to shareholders, while maintaining balance sheet flexibility.

Angela Drake: Looking ahead to the remainder of the year across the two segments. Our professional segment outlook remains largely unchanged, with continued growth expected in Gulf and Browns and underground construction. Most importantly, as a United States-based company, the vast majority of our professional products are manufactured here, which strategically positions the segment and overall company favorably in the current macroeconomic environment. Within the residential segment, our actions to adjust our manufacturing footprint in Mexico combined with the USMCA qualified tariff exemptions position us well from a cost standpoint and competitively. However, current macroeconomic factors, including high interest rates, are resulting in persistent elevated levels of caution from homeowners.

Rick: Looking ahead to the remainder of the year across the two segments.

Rick: Our professional segment outlook remains largely unchanged with continued growth expected in golf and grounds and underground construction most.

Rick: Most importantly, as a United States based company the vast majority of our professional products are manufactured here, which strategically positions the segment and overall company favorably in the current macroeconomic environment.

Rick: Within the residential segment, our actions to adjust our manufacturing footprint in Mexico combined with the U S. MCA qualified tariff exemptions.

Rick: And as well from a cost standpoint and competitively.

Rick: However, current macroeconomic factors, including high interest rates are resulting in persistent elevated levels of caution from homeowners.

Angela Drake: Looking ahead to the third quarter of fiscal 2025, we anticipate total company net sales to be flat to slightly up compared to the prior year. We expect professional segment net sales to be up mid-single digits and residential segment net sales to be down high teens compared to the same period last year. Shifting to Third Quarter Profitability We expect total company adjusted operating margin to be similar year over year with slightly higher professional segment earnings margin and lower residential segment earnings margin. Overall, we expect our third quarter fiscal 2025 adjusted diluted EPS to be slightly higher than last year's $1.18.

Rick: Looking ahead to the third quarter of fiscal 2025.

Rick: We anticipate total company net sales to be flat to slightly up compared to the prior year.

Rick: We expect professional segment net sales to be up mid single digits and residential segment net sales to be down high teens compared to the same period last year.

Rick: Shifting to third quarter profitability.

Rick: We expect total company adjusted operating margin to be similar year over year, let's slightly higher professional segment earnings margin and lower residential segment earnings margin.

Rick: Overall, we expect our third quarter fiscal 2025, adjusted diluted EPS to be slightly higher than last year's $1 18.

Angela Drake: Based on what we know today and our expectations for the third quarter, we are adjusting our fiscal 2025 guidance to incorporate additional macro headwinds for products sold to homeowners. Trade downs and delayed spending, especially on big ticket items, have created a larger drag than originally planned. Given those factors, we now expect total year revenue will be flat to down 3% from fiscal 2024. We expect the professional segment to be up slightly year over year, while revenue from the residential segment is expected to be down mid-teens. We continue to expect total company adjusted gross margins and adjusted operating earnings as the percentage of net sales to improve on a year-over-year basis.

Rick: Based on what we know today and our expectations for the third quarter. We are adjusting our fiscal 2025 guidance to incorporate additional macro headwinds for products sold to homeowners.

Rick: Trade down and delayed spending, especially on big ticket items, and creating a larger drag than originally planned.

Rick: Given those factors, we now expect total year revenue will be flat to down 3% from fiscal 2024.

Rick: We expect the professional segment to be up slightly year over year, while revenue from the residential segment is expected to be down mid teens.

Rick: We continue to expect total company adjusted gross margin and adjusted operating earnings as a percentage of net sales to improve on a year over year basis.

Angela Drake: Looking at segment profitability, we continue to expect professional segment earnings margins will expand versus the prior year. However, economic headwinds from homeowners are expected to pressure residential segment earnings margins, resulting in a year-over-year decline. Finally, we are slightly reducing our range for adjusted diluted EPS to be $4.15 to $4.36. which at midpoint implies year-over-year growth of 1% even with a likely decline in revenue. These revised projections also assume normal weather patterns aligned with historical averages for the remainder of the fiscal year. Additional adjustments to our full-year guidance include interest expense of about $59 million and an adjusted effective tax rate of 19%.

Rick: Looking at segment profitability.

Rick: We continue to expect professional segment earnings margin will expand versus the prior year. However.

Rick: However, economic headwinds from homeowners are expected to pressure residential segment earnings margin, resulting in a year over year decline.

Rick: Finally, we are slightly reducing our range for adjusted diluted EPS to be $4 15 to $4 30.

Rick: Which at midpoint implies year over year growth of 1%, even with a likely decline in revenue.

Rick: These revised projections also assumes normal weather patterns aligned with historical averages for the remainder of the fiscal year.

Rick: Additional adjustments to our full year guidance include <unk>.

Rick: Interest expense of about $59 million and an adjusted effective tax rate of 19%.

Angela Drake: The strategic actions we've discussed, our AMP Transformational Productivity Initiative, and our tariff mitigation strategies are delivering immediate benefits and positioning us for improved operating leverage as markets normalize. Our professional segment continues to perform well, our innovation pipeline remains robust, and our strong cash generation supports our investments in continued growth, as well as returning capital to shareholders. We are navigating today's environment from a position of strength, supported by our market leadership, operational excellence, and the financial flexibility to create long-term value. This disciplined approach to managing through cycles while investing in our future is how we build enduring value for all stakeholders.

Rick: The strategic actions, we discussed our amp transformational productivity initiatives and our tariff mitigation strategies are delivering immediate benefits and positioning us for improved operating leverage as markets normalize.

Rick: Our professional segment continues to perform well our innovation.

Rick: Pipeline remains robust and our strong cash generation supports our investments and continued growth as well as returning capital to shareholders.

Rick: We are navigating today's environment from a position of strength supported by our market leadership operational excellence and the financial flexibility to create long term value.

Rick: This disciplined approach to managing through cycles, while investing in our future is how we build enduring value for all stakeholders.

Richard Olson: With that, I'll turn the call back to Rich. Thank you, Angie. Before opening up the call for Q&A, I want to thank our employees and channel partners for their dedication and reinforce what you've heard this morning. We remain committed to driving long term value for all stakeholders. We delivered EPS ahead of our expectations in the second quarter, despite tariff headwinds, macroeconomic conditions, and a delayed start to spring. We're taking decisive actions to align with near-term demand in certain businesses by adjusting headcount, manufacturing footprint, and our portfolio. We are actively mitigating tariffs by optimizing our U.S.-based manufacturing network and capabilities, strategically working with our suppliers to adjust global sourcing, and both quickly and thoughtfully increasing prices while keeping our products competitive and maintaining markets.

Rick: With that I'll turn the call back to Rick.

Rick: Thank you Angie.

Speaker Change: Before opening up the call for Q&A I want to thank our employees and channel partners for their dedication and reinforce what you've heard this morning.

Speaker Change: We remain committed to driving long term value for all stakeholders we.

Rick: We delivered EPS ahead of our expectations in the second quarter, despite tariff headwinds macroeconomic conditions and a delayed start to spring.

Rick: We're taking decisive actions to align with near term demand in certain businesses by adjusting head count any factoring footprint and our portfolio.

Rick: We are actively mitigating tariffs by optimizing our U S based manufacturing network and capabilities strategically working with our suppliers to adjust global sourcing and both quickly and thoughtfully increasing prices, while keeping our products competitive and maintaining margins.

Richard Olson: And finally, we're investing in technology and innovation, which enables us to introduce new products and solutions that enhance customer productivity at a time when it's needed most.

Rick: And finally, we are investing in technology, and innovation, which enables us to introduce new products and solutions that enhance customer productivity at a time when it's needed most.

Operator: With that, we will open up the call for questions. Thank you.

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

Operator: Ladies and gentlemen, if you wish to ask a question, please press star followed by one one on your touchtone telephone.

Rick: Thank you, ladies and gentlemen, if you wish to ask a question. Please press star followed by one one on your Touchtone telephone. If your question has been answered or you wish to withdraw your question. Please press star one followed by a one one again please standby for your first question.

Operator: If your question has been answered or you wish to withdraw your question, please press star one followed by one one again.

Timothy Wojs: Please stand by for your first question. And our first question comes from Tim Wojs with Baird, you may press start. Hey, everybody. Good morning. Thanks for all the details. Maybe just to start, Rick, I guess in the landscape business within the pro segment, you know, the inventory in that channel had, I think, still been kind of high coming into this season. Where does that kind of stand now? And I guess, how did the landscape contractor business kind of perform itself in the quarter in pro? Sure, I'd be happy to address that. First of all, we talked about, we really talked about for the last year about adjustments to our field inventory, particularly in the landscape contractor area.

Tim Motors: And our first question comes from Tim Motors with Baird. You May proceed.

Tim Motors: Hey, everybody. Good morning, Thanks for let me start with details.

Speaker Change: Maybe just to start Reg.

Speaker Change: Yes, I guess in the landscape business within within the pro segment.

Speaker Change: The inventory in that channel has had I think still been kind of high coming into the season.

Speaker Change: Where does that kind of stand now and I guess, how did the landscape contractor business kind of perform itself in the quarter and proud.

Speaker Change: Sure I'll be happy to address that first of all we've talked about.

Speaker Change: <unk> talked about for the last year about adjustments to our fuel inventory, particularly in the landscape contractor area and last quarter, we talked about the opportunity to adjust that would be during the spring selling season. So we have we've largely returns where we would like to be in that category exceptionally be slower.

Richard Olson: And last quarter we talked about the opportunity to adjust that would be during the spring selling season. So we have, we've largely returned to where we would like to be in that category. The exception would be the slower start to spring. So shipments in the spring were as expected, but the delay of the start of spring has it a little bit higher. That's really reflected in our guide for the rest of the year, making sure that we watch that field inventory more closely. So we feel much better about our field inventory position, a little bit higher in the landscape and the residential area because of the start of spring, but otherwise feeling okay about it.

Speaker Change: Start to spring so shipments in the spring.

Speaker Change: Were as expected, but the delay of the start with spring has a little bit higher and Thats really reflected in our guidance for the rest of the year, making sure that we wash that field inventory more closely so we feel.

Speaker Change: Much better about our field inventory position, a little bit higher in the landscape and the residential area because of the start to the spring, but otherwise.

Speaker Change: Okay about it.

Richard Olson: Okay, okay. And then on the residential business, I mean, is that really kind of the primary area, you know, where the, you know, guidance has been revised? And I guess when you when you look at the resi business, is there, is it kind of broad base across the customer, you know, customer channels and products? Or is it Specific to, you know, maybe the, you know, independent dealers or home centers, or just a little bit of color on the residential business specific. You're right. It's the residential business. But the reason why we use the word homeowner is because it's the residential business plus that portion of our landscape contractor business that is sold to homeowners, homeowners that desire a professional level product.

Speaker Change: Okay. Okay, and then on the residential business I mean is that really kind of the primary area.

Speaker Change: Where the.

Speaker Change: Guidance has been revised and I guess when you look at the resi business is there is it is it kind of broad base across the customer customer channels and products or is it.

Speaker Change: Specific to maybe.

Speaker Change: Independent dealers or home centers, or just a little bit of color on the <unk>.

Speaker Change: Financial business specifically.

Speaker Change: You're right, it's the residential business, but the reason why we use the word homeowner is because it's the residential business plus that portion of our landscape contractor.

Speaker Change: Business.

Speaker Change: That is sold to homeowners homeowners that desire a professional level product. So both of those areas are absolutely the prime drivers of the reduction that you're seeing.

Richard Olson: So both of those areas are absolutely the prime drivers of the reduction that you're seeing. And the factors really are, the two major factors are, first of all, just the macroeconomic environment and the sense of consumer confidence that's out there for those buyers, you know, whether it's the, you know, the tear up dynamics, the inflation, interest rates, and so forth. And when they do buy, they're tending to buy down, down ticket a little bit or down the line a little bit so that that does affect our margins a little bit as we go more towards entry level products.

Speaker Change: And the factors really are the two major factors are first of all just the macroeconomic environment in the sense of consumer confidence.

Speaker Change: Out there for those buyers.

Speaker Change: Whether it's.

Speaker Change: The tariff dynamics inflation interest rates and so forth.

Speaker Change: And when they do buy they are tending to buy downs.

Speaker Change: Ticket, a little bit or down the line a little bit.

Speaker Change: Our margin was a little bit as we go towards entry level products. So that's the macro factors.

Richard Olson: So that's the macro factor that's in play. And then the other factor is just, as I mentioned, the timing of spring. We lost a lot of the first portion of average spring, if you will, in April, with a slower warm up, actually really across the US, but the South particularly was slow to warm. So those are the two major factors, a lot of strength across the professional business in general. And, you know, we usually don't talk about the other, the opposite side of the landscape contractor, but the contractor portion of that business has remained strong throughout this process and continues to be very strong today.

Speaker Change: In play and then the other factor is just as I mentioned the timing of spring we lost a lot of the first portion of average spring. If you will in April with a slower warm up.

Speaker Change: Actually really across the U S, but the solid particularly was slow to warm. So those are the two major factors.

Speaker Change: So strength across the professional business in general.

Speaker Change: We usually don't talk about the other the opposite side of the landscape contractor, but the contract or a portion of that business has remained strong throughout this process and continues to be very strong today why inscape contractors are built very healthy.

Richard Olson: Landscape contractors are in a very healthy position, a little bit better snow year last year, if they did snow work and came into the season very strong. So that's, that's been great. It's also helped by the introduction of new products. So Exmark has seen a really nice surge with the introduction of the new laser platform there, which is kind of the icon of the industry. Okay, okay, great.

Speaker Change: Position, a little bit better snow year last year, a visit so work and came into the season very strong. So that's been great. It's also helped by the introduction of new products. So X Mark has seen a really nice surge with the introduction of the new laser platform <unk> co.

Speaker Change: The icon in the industry.

Speaker Change: Okay, Okay, Great and then just.

Richard Olson: And then just the last one I had on the underground business. You had called it out in the script about it being down year over year, but then, you know, on the other hand, you're also talking about Pretty good demand metrics, sir. You're encouraged by what you're seeing from a demand perspective. So can you just kind of tie those two things together? Was it last year kind of backlog normalization was happening and this year that's just creating a tough comp? Or how would you kind of, you know, marry, you know, the business being down, but it's seeing good demand?

Speaker Change: Just wanted to add.

Speaker Change: <unk> business.

Speaker Change: You called it out in the script about it being down year over year, but then on the other hand Youre also talking about.

Speaker Change: It's pretty good demand metrics are you encouraged by what you're seeing from a demand perspective. So can you just kind of tie those two things together and with it.

Speaker Change: Last year kind of backlog normalization, what's happening in this year that is just trading a tough comp.

Speaker Change: How would you kind of.

Speaker Change: Mary.

Speaker Change: Being down but have seen good demand.

Richard Olson: Yeah, so if you if you look at the impact in the in the current quarter, the two, actually the three major factors really are the sale of two dealers. And that's kind of normal for us in making transitions of ownership to be involved with that process of buying the dealers and then reselling them to the new owners. So that was the biggest factor there. We had some rationalization of SKUs for non-core products. So just kind of doing, you know, portfolio management on our line, if you will, taking taking out some of the non-performing SKUs. And then we mentioned last time we're making tremendous progress in this area, but the startup of some new products, particularly product design for specifically for the telecommunications business.

Speaker Change: Yes.

Speaker Change: If you look at the impact in the in the current quarter. The two actually the three major factors really are the sale of two dealers.

Speaker Change: That's kind of normal for us in making transitions of ownership.

Speaker Change: To be involved with that process by the dealers and the reselling them to the new owners.

Speaker Change: So that was the biggest factor there we had some rationalization of skus per non core product. So just kind of doing.

Speaker Change: Portfolio management on our line if you will taking.

Speaker Change: Taking out some of the nonperforming Skus and then we mentioned last time, we're making tremendous progress in this area, but the startup of some new products.

Speaker Change: Particularly product designed specifically for the telecommunications business.

Richard Olson: We're through those startup challenges, but still ramping that up and making great progress at this point. We remain extraordinarily excited about this business long term, very positive about the drivers over the next several years and have a tremendously long runway. Now, if you think of the drivers of fiber utilities work that's happening and specifically the data infrastructure, the building of data centers and all of the infrastructure that needs to go with that, the power that we're all talking about that's needed for those centers, all of that gets installed underground and uses our equipment. I think a good proxy would be to look at some of the key customers in this area that use these products.

Speaker Change: Through those startup.

Speaker Change: Challenges, but still ramping that up and making great progress at this point, we remain extraordinarily excited about this business long term very positive about the drivers.

Speaker Change: Over the next several years that has a tremendously long runway.

Speaker Change: Yes, if you think of the drivers of fiber utilities work, that's happening and specifically the data infrastructure. The building of data centers and all the infrastructure that needs to go with the power.

Speaker Change: We're all talking about that's needed for those centers.

Speaker Change: All of that gets installed.

Speaker Change: <unk> underground and <unk>.

Speaker Change: Users of our equipment.

Speaker Change: Thank you good.

Speaker Change: Good proxy would be to look at some of the key customers in those areas area of use these products so di Com Kwan.

Richard Olson: So DICOM, Quanta, Mass Tech or Mos Tech, that's good places to look and they're all signaling very positive outlooks for the business as well. You might mention the trade show that you attended, Michael. A month ago, just to talk about this as a worldwide phenomenon, we were at the trade show in Germany, largest equipment trade show in Europe, and I was there with our underground team, and the demand and excitement from those contractors is incredible. The amount of work that is ahead of them in Europe is quite amazing, whether it's the infrastructure for hydrogen that we talked about, massive kind of rerouting of where power is coming from, so large transmission cables that are going underground.

Speaker Change: Quanta Mastec.

Speaker Change: <unk>.

Speaker Change: Good places look and they are all.

Speaker Change: Signaling very positive outlook for their businesses as well.

Speaker Change: So thats very important.

Speaker Change: And the trade show that you attend.

Speaker Change: A month ago, just so let's talk about this as a worldwide phenomenon we were at peak.

Speaker Change: Trade show in Germany largest equivalent trade show in Europe.

Speaker Change: And they are with our underground team and the demand and excitement from those contractors is incredible the amount of work that is ahead of them in Europe is quite amazing whether it's the infrastructure for hydrogen, though he talked about massive kind of rerouting of where power is coming from.

Speaker Change: So large.

Speaker Change: <unk> mission cables that are going underground. We are also introducing specific products that will be tailored to that work in Europe. So we're very excited about this business.

Operator: We are also introducing specific products that will be tailored to that work in Europe, so we're very excited about this business. Thanks for all the details, and good luck on the rest of the year. Thank you, Joe.

Speaker Change: Thanks for all the details if you look on the rest of the year.

Speaker Change: Thank you Tim.

Operator: Thank you.

Speaker Change: Thank you.

Samuel Darkatsh: Our next question comes from Samuel Darkatsh with Raymond James, you may proceed. Good morning, Rick. Good morning, Angie. How are you? Good afternoon. How are you? Well, thank you. I wanted to explore some of the tariff disclosures that you had today. 3% of COGS, which is, I don't know, around 100 million bucks or so. Can you be more specific in terms of which countries and what sorts of either products or components this is referring to? Yeah, we can do that. I mean, just to set the foundation, as we've talked about, the majority of our products are manufactured in the United States, and virtually all of our professional products are produced in the United States.

Speaker Change: Our next question comes from Samuel Darko <unk> with Raymond James You May proceed.

Speaker Change: Good morning, Rick Good morning, Angie how are you.

Speaker Change: Youre welcome.

Speaker Change: Well. Thank you wanted to explore some of the tariff.

Speaker Change: Disclosures that you had today and you're mentioning it.

Speaker Change: 3% of Cogs, which is I don't know around 100 million Bucks or so can you be more specific in terms of which countries and what sorts of either products or components. This is referring to.

Speaker Change: Yes, we can do that and let me just set the foundation as we've talked about the majority of our products are manufactured in the United States and virtually all of our professional products are produced in United States and.

Richard Olson: And most of our supply base is also based in the United States. Our exposure to China from a supply standpoint is about 3% or so. And if you think about the products that we talked about that are produced in Mexico, those are all USMCA qualified. We've been through a qualification process for those. Then to get to your kind of core question, the biggest drivers are, first of all, even though it's a small percentage, if you project the potential tariffs for the rest of the year, China is still number one category. So even though it's very small, if you're looking at the, you know, 100 plus percent potential tariff returning, that becomes still a significant number of the 100, you know, less than 100 million that you're talking about.

Speaker Change: And most of our supply base is also basically United States, our exposure to China from a supply standpoint, it was about 3% or so.

Speaker Change: And if you think about the products that we talked about that are produced in Mexico. Those are all U S. MCA qualified we've been through a qualification process for those.

Speaker Change: Then to get to your kind of core question. The biggest drivers are first of all even though it's a small percentage of a few projects.

Speaker Change: Potential tariffs for the rest of the year, China is still the number one category. So even though it is very small if youre looking at.

Speaker Change: 100, plus percent potential tariff returning that become the sales still a significant number of the 100.

Speaker Change: Westwood 100 million that Youre talking about.

Richard Olson: Second category would be steel and aluminum. And just since the announcement yesterday, it's kind of a little bit of a challenger for the top category with China. And then after that would be the general reciprocal tariffs across other countries at this point. So that's really the kind of the big three breakdowns that probably takes the 80 percent through the tariffs. Yeah, I think it's important just And I would just reiterate that we plan to mitigate all of that, virtually all of that, through through our actions this year. Right, which is my next question. So the mitigation, is that dollar for dollar?

Speaker Change: Second category would be steel or aluminum and just since the announcement yesterday, it's kind of a little bit of a challenger.

Speaker Change: Top category with.

Speaker Change: With China, and then after that would be the general.

Speaker Change: Reciprocal tariffs across other countries at this point, so that's really the kind of the big three breakdowns, but probably takes it to 80%.

Speaker Change: Through the tariffs.

Speaker Change: Yes, I think thank you Gordon.

Speaker Change: I would just reiterate that we plan to mitigate all of that virtually all of that through through our actions this year.

Speaker Change: Right, which is my next question. So the mitigation is that dollar for dollar is that right for rate and wood.

Richard Olson: Is that rate for rate? And would there still be pressure from a tariff standpoint, maybe second quarter, third quarter, and then neutral to positive in the fourth quarter? I know you're looking to offset it in its entirety, just trying to get a sense of the trajectory. Our estimate is based on the known tariffs and the timing of when those tariffs would turn to the higher levels in some cases. So the impact is actually, correct me if I'm wrong, Angie, but probably greater in the fourth quarter if you look at those larger tariffs coming back. And with regard to offsetting them, it is dollar for dollar offsetting.

Speaker Change: Would there still be.

Speaker Change: Pressure.

Speaker Change: From a tariff standpoint, maybe.

Speaker Change: Second quarter third quarter, and then neutral to positive in the fourth quarter I know youre looking to offset it.

Speaker Change: In its entirety, just trying to get a sense of the trajectory.

Speaker Change: Our estimate is based on knowing the tariffs and the timing of when those tariffs would turn to higher levels in some cases.

Speaker Change: The impact is actually correct me, if I'm wrong, you've been probably greater in the fourth quarter.

Speaker Change: If you look at those larger tariffs coming back.

Speaker Change: And with regard to offsetting them. It is dollar for dollar offsetting we understand potential pressure on margin will continue to work on that and then just the tools that we're using their prices kind of where we go at the end, where we can make up.

Richard Olson: We understand, you know, potential pressure on margin. We'll continue to work on that. And then just the tools that we're using there, price is kind of where we go at the end, where we can't make up the net difference, but we go to productivity. Very grateful that we had already launched the AMP initiative. Extraordinarily helpful in the current environment where we've got, you know, some unforeseen new costs related to the tariffs. We're taking advantage of the strategies that we have put in place since 2018, reducing exposure to China specifically, and the team is very oriented towards productivity and efficiency in this environment.

Speaker Change: <unk> difference, but we go into productivity very grateful that we had already launched the App initiative extraordinarily helpful. In the current environment, where you've got some other unforeseen.

Speaker Change: New costs related to the tariffs.

Speaker Change: We're taking advantage of the strategies that we have put in place in 2018, reducing exposure to.

Speaker Change: For China specifically.

Speaker Change: The team is very oriented towards productivity and efficiency in this environment.

Angela Drake: Relates even to the announcement that we made in our prepared remarks about reducing our footprint in Mexico as well. Is the 90 million, is that an annualized number, or is that just for fiscal 25? How should we think about, you know, especially since you're saying it's mostly 4Q? Yeah, that's going to be for fiscal 2025. That's the one on annualized. So on an annualized basis, Angie, what does the number look like? Yeah, we haven't shared that. Sam, what we're thinking is that if we calculate that based on what we know today, and what those executive orders are saying that will go back in place, potentially, after this pause, it'll be about that $90 million-ish for 2025.

Speaker Change: Even to our.

Speaker Change: The announcements.

Speaker Change: <unk> made in our prepared remarks about reducing our footprint.

Speaker Change: Mexico as well.

Speaker Change: Is the is the $90 million is that a.

Speaker Change: An annualized number or is that just for fiscal 'twenty five.

Speaker Change: How should we think about.

Speaker Change: Yes, because especially since you are saying, it's mostly <unk>.

Speaker Change: Yes, that's going to be for fiscal 2025.

Speaker Change: So on an annualized.

Speaker Change: So on an annualized basis Angie what is the what is the number look like.

Angie: Yes, we haven't shared that Sam what we're thinking is that if we recalculate that based on what we know today and what those executive orders are saying that will go back in place potentially after this part.

Speaker Change: Will be about that $90 million ish for 'twenty filing.

Angela Drake: And my last, thank you, my last question, oh, sorry, sorry, Rick. Yeah, Sam, I think the where we're coming from there is just how dynamic this is. We're challenged to calculate what it is for 25 with the ups and downs. So I think any estimate that we would give you for the four following years would be, you know, way out there. My last question, on the RESI margins, was the inventory evaluation adjustment the primary negative variance? versus your plan? And what was the amount of that valuation adjustment? Does it continue? Was it one off, that kind of thing?

Speaker Change: And my last my last question, sorry, sorry, Rick.

Speaker Change: Yes, so I think the where we're coming from there is just how dynamic. This is where we are challenged to calculate what it is for 25 with the ups and downs. So I think any estimate that we will give you for the quarter following years would be.

Speaker Change: We're out there.

Speaker Change: My last question on the resi margins.

Speaker Change: Was the inventory valuation adjustment the primary negative variance versus your plan and what was the amount of that valuation adjustment does it continue was it one off that kind of thing.

Angela Drake: That was the primary, you know, we saw decreased sales year over year, also some increased production costs, but the inventory valuation was a big factor, a big driver in that profitability. That is kind of a one-off. It is, you know, the fact that we're looking at our businesses and really trying to manage what we need to do right now. But also thinking about our battery adoption rates, you know, those are lower than we had expected them to be. So when we talk about this in our sustainability report, we talk about battery being 20% of our business.

Speaker Change: That was the primary.

Speaker Change: <unk> decreased sales year over year also some increased production costs.

Speaker Change: The inventory valuation loss.

Speaker Change: While the big factor I think driver and that profitability that is kind of a one off I mean it is the fact that we're looking at at our businesses and really trying to to me and that's what we need to do right.

Speaker Change: Right now, but also thinking about our battery adoption rates are lower than we had expected them to be so let me talk about this in our sustainability report, we talk about battery being 20% of our business and today, that's somewhere around 7%.

Angela Drake: And today that's somewhere around 7%, so just being realistic about reserving some of that excess inventory as we think about battery as well. Overall, I'm sorry. Overall, I'd say we're taking action. to help improve our long-term, Sam, and make sure that we can create value in the future with that residential segment. What was the amount of the allowance of the valuation adjustment? I don't believe we've shared that. You should see some information in the queue. Perfect. Thank you very much. Thank you. Thanks, everyone.

Speaker Change: So just being.

Speaker Change: Realistic about our reserving some of that excess inventory as we as we think about battery it's Bob.

Speaker Change: Overall im.

Speaker Change: I'm sorry.

Speaker Change: Yeah.

Speaker Change: Overall, I'd say im sorry.

Speaker Change: Improve our long term, Sam and make sure that we can create value in the future with that residential segment.

Speaker Change: What was the amount of the allowance for the valuation adjustment.

Speaker Change: I don't think we've shared that you should see some information in the queue.

Speaker Change: Perfect. Thank you very much thank you.

Sam: Thanks Sam.

Samuel Darkatsh: Thank you.

Speaker Change: Thank you.

David Macgregor: Our next question comes from David MacGregor with Longbow Research. He may pursue. Yeah, yes. Good morning, everyone. I wanted to start off by just asking about price. Good morning. I wanted to start off by just asking about price-cost, and you called out materials cost as a headwind for both professional and residential. We expect to fully cover that cost inflation and you know whatever incremental tariff pressure Our price for Q2, our price will be slightly up, really driven kind of by less promotion and incentives in our residential space, and our cost was more. So if we look forward to Q3, we haven't guided, but our price should be up based on the implemented tariff price actions that we have taken.

Speaker Change: Our next question comes from David Macgregor with Longbow Research you May proceed.

David Macgregor: Yes, good morning, everyone.

Speaker Change: To start off by just asking about price.

Speaker Change: Good morning, I wanted to start off by just asking about price cost and.

Speaker Change: You called out materials costs as a headwind for both professional and residential given the pricing actions that you've taken in <unk> and early <unk> do you expect to fully cover that cost inflation and whatever incremental tariff pressures may occur in the <unk>.

Speaker Change: Second half.

Speaker Change: Our price for Q2, our price will be slightly up really driven kind of.

Speaker Change: By less promotion.

Speaker Change: And our residential space and our cost was more so if we look forward to Q3, we havent guidance.

Speaker Change: But our price should be up based on the implemented tariffs price action that we have taken and overall for the full year, we expect our price to be slightly higher than our normal 1% to 2% that we also expect to see higher cost.

Angela Drake: And overall, for the full year, we expect our price to be slightly higher than our normal 1-2%, but we also expect to see higher costs. I guess I'm just trying to get a sense. You've indicated that you expect to fully offset the tariff pressures, but you're calling up materials headwinds in both segments, and I'm just wondering if there's also enough that we're not going to be talking about material headwinds. Yeah, I think what we're working on those product costs and material headwinds. Luckily, our AMP transformational productivity initiative is helping mitigate some of those costs as well.

Speaker Change: Right I guess I'm, just trying to get a sense of.

Speaker Change: You've indicated that you expect to fully offset the.

Speaker Change: The tariff pressures.

Speaker Change: But you are calling you up materials headwinds in both segments. So I'm just wondering if theres also enough.

Speaker Change: Been provided for in terms of the pricing initiatives and the reduced promotional actions that we're not going to be talking about material headwinds in the second half.

Speaker Change: Yes, I think what we're working on those product costs and material headwinds Luckily our transformational productivity initiatives.

Speaker Change: Helping mitigate some of those costs as well so.

Angela Drake: So that the timing for that initiative has been very good. We were able to deliver another six million dollars in run rate savings in the quarter and a total of 70 million dollars for year to date or actually project to date for the initiative. So those are also helping to offset some of those material costs that you mentioned. I believe the largest category within AMP would be cost of goods sold. So it's directly working on those. Yeah, you know, supply base. OK, that's helpful. That's helpful, thank you. The second question, just on POS sell-through, can you just talk about...

Speaker Change: That the timing for that initiative has been very good and we were able to deliver another $6 million in run rate savings in the quarter and a total of $70 million for year to date.

Speaker Change: <unk> actually project today for the initiatives that those are also helping to offset some of those material costs that you've mentioned I believe the largest category within the app would be cost of goods sold so it's directly working on.

Speaker Change: Our supply base.

Speaker Change: Okay St portion.

Speaker Change: Thats helpful converge.

Speaker Change: That's helpful. Thank you.

Speaker Change: Second question just on POS sell through can you just talk about what did you see this quarter in both residential and landscape contractor I realize weather was an issue and we've talked about that but just even taking that into consideration can you just talk about sell through and maybe more importantly, how the quarter ended and if you can talk at all but what youre seeing here in may.

Richard Olson: I realize weather was an issue and we've talked about that, but just even taking that Let's talk about self-love. and maybe, more importantly, how the quarter ended. Let's try to get a sense of how the And we talked about the two big factors affecting homeowners. The first and probably the largest is the general consumer confidence that's in play as they're making a purchase decision. That means that they're probably more likely to buy the product if they need it versus if they want to buy it. And when they do buy it, they're kind of working down the product line range a little bit to more entry-level products.

Speaker Change: I'm, just trying to get a sense of how that velocity may be picking up.

Speaker Change: And we talked we talked about the two big factors affecting homeowners the first and probably the largest is the general consumer confidence.

Speaker Change: And play as Theyre, making a purchase decision.

Speaker Change: That means that they are probably more likely to buy the product they needed versus if they want to buy it and when they do buy out there.

Speaker Change: And there are kind of working down.

Speaker Change: The product line range, a little bit more entry level products.

Richard Olson: And then the late spring was the other factor. And retail is good, to answer your question, in May, much better than it was in April. Now into June, continues to be solid. But in the current, with those macro clouds kind of hanging over, it's less likely that we would make up that April loss because of the delay of spring, as we sometimes do in some years where the weather is ideal, consumer confidence is higher. So we've built that into our guidance that we do not expect to get back some of that early spring sales that we lost.

Bill: And then bill.

Speaker Change: Late spring was the other factor.

Speaker Change: <unk>.

Speaker Change: We.

Speaker Change: Retail is good to answer your question in May much better than it was in April.

Speaker Change: Now into June continues to be.

Speaker Change: Solid.

Speaker Change: But in the current kind of where those macro.

Speaker Change: Clouds kind of hanging over it's less likely that we would make up that April.

Speaker Change: Loss because of the delay of spring as we sometimes do in some years, where the weather is ideal.

Speaker Change: Consumer confidence is higher so.

Speaker Change: We believe we've built that into our guidance that we do not expect to get back some of that early spring sales that we lost and we're making sure that we watch inventories to keep those in line as a result.

Richard Olson: And we're making sure that we watch inventories to keep those in line as a result. You mentioned that replacement demand or duress demand is holding up well, discretionary demand maybe not so much. Can you just remind us, in your major categories, the residential and maybe How much of that is replacement milk? is probably, you know, 90% 80 to 90% replacement. And maybe more precisely what I'm referring to is that kind of up and down the range. So You know, if you're feeling great about the economy and macro factors, you're more likely to go up our range and even jump into professional level products.

Speaker Change: Great.

Speaker Change: You mentioned that.

Speaker Change: Replacement demand address demand is holding up well discretionary demand maybe not so much can you just remind us.

Speaker Change: In your major categories, the residential and maybe landscape contractor as well how much of that is replacement to me what percentage do you think of as being replacement demand versus more discretionary types of purchases.

Speaker Change: It was probably.

Speaker Change: 90%, 80%, 90% replacement and maybe more precisely what I'm, referring to is that kind of up and down the range. So.

Speaker Change: If you are feeling great about the economy and macro factors you are more likely to.

Speaker Change: Go up our range and even jump into professional level products.

Richard Olson: So we see more more activity at the lower end of our range. and, you know, if you're buying it because you need it. because, you know, either bought a new house, your previous product needs to be replaced, it's not functional, those types of things. I see Landscape Contractors 80 to 90% as well. Uh, yep. Please remind us what percentage of landscape contractor is that kind of aspiration. We don't split that apart, but it is significant and it is different by brand. The Exmark is going to be more professional, on the professional side. Toro kind of crosses the range, but really starts with the strength in the residential area.

Speaker Change: So we see more activity at the lower end of our range.

Speaker Change: And.

Speaker Change: You are buying because you need it.

Speaker Change: Because either bought a new house here.

Speaker Change: Previous products needs to be replaced with functional those types of things.

Speaker Change: Would you say landscape contractors, even 90% as well.

Speaker Change: Yes.

Speaker Change: Okay and can you just remind us what percentage of landscape contractor or is that kind of aspirational residential customer.

Speaker Change: We don't split the part but it is significant.

Speaker Change: Is different by brand.

Speaker Change: The X Mark is going to be more professional on the professional side.

Speaker Change: <unk> kind of crosses the range, but really it starts with the strength of our residential area.

Richard Olson: And the Spartan brand is kind of in between in that pro-sumer space.

Speaker Change: Spartan brand is kind of in between in that process of workspace.

Speaker Change: Okay quick.

Angela Drake: Any questions on promotion? Just talk about how you use promotions in this environment. You talked about the fact that you're dialing that back, but yet the Toro customer is conditioned, I would think, at this point to expect some level of promotional support. Let's talk about how you use promotion. And particularly given the need to sort of manage... Sure, yes, we, I wouldn't say that we're dialing back our promotions, so we did mention that promotion incentives were a little bit lower for residential in Q2, and that was really related to the comp from last year. If you remember, we had high field inventory, we were working through some of those issues, and so our promotions and incentives were just a bit higher in F24 than they were this year.

Speaker Change: Quick question on promotions can you just talk about how you use promotions in this environment you talked about the fact that you are dialing that back.

Speaker Change: But yet the Toro customers conditions I would think at this point to expect some level of promotional support just in terms of your seasonal sales events.

Speaker Change: Can you just talk about how you use promotions at this point and particularly given the need to sort of manage the tariff exposure and pass that through.

Speaker Change: Sure Yes.

Speaker Change: I wouldn't say that we're dialing back our promotions that we did mention that our promotion and tenants were a little bit lower for residential in Q2 and that was really related to the comps from last year.

Speaker Change: You'll remember we have high yield inventory, we were working through some of those issues and so our promotions and incentives were just a bit higher in F. 'twenty four than they were this year still using those promotions and incentives to to get product out the door in our residential and landscape contractor business, certainly and we'll continue to see that after out there.

Angela Drake: Still using those promotions and incentives to get product out the door in our residential and landscape contractor business, certainly, and we'll continue to see that throughout the rest of the year.

Speaker Change: Of this year.

Speaker Change: Okay. Okay last question for me is on capital allocation.

Angela Drake: Last question for me is on capital allocation, on the share we purchased is $200 million. My model's correct, that's the highest mid-year allocation in Toro. I guess the obvious question, what does that portend for the second half of this year? Sure. Yes, we were proud to report that, that we repurchased $200 million a year to date. We just have high confidence in our ability to generate cash. Typically, as you know, we generate the majority of our cash in the second half. But we have a disciplined approach to our capital allocation, and that really remains unchanged.

Speaker Change: Share repurchases $200 million.

Speaker Change: If my model is correct, that's the highest midyear allocation and tourists history $200 million.

Speaker Change: I guess the obvious.

Speaker Change: Question, what does that what.

Speaker Change: What does that portend for the second half of this year.

Speaker Change: Just how youre thinking about that.

Speaker Change: Sure Yes.

Speaker Change: We're proud to report that we repurchased $200 million year to date.

Speaker Change: We just have high confidence in our ability to generate cash typically as you know we generate the majority of our cash in the second half, but we have a disciplined approach to our capital allocation and that really remains unchanged and we will take an opportunity opportunistic approach to our share repurchases as well as first we will invest in.

Angela Drake: So we'll take an opportunistic approach to our share repurchases as well. But first, we will invest in ourselves, continue investing in research and development, innovation and technology, M&A, where that's applicable, continue to pay dividends to our shareholders, and then finally, number four is share repurchases. So we're going to continue to look at that through the rest of the year, and we have continued to repurchase shares in Q3. No change there. Wonderful. Thanks very much. Thank you.

Speaker Change: Our sales continue investing in research and development innovation in technology, M&A, where that's applicable.

Speaker Change: Continued to pay dividends to our shareholders and then finally number four and share repurchases. So we're going to continue to look at that through the rest of the year and we have continued to repurchase shares in Q3.

Speaker Change: Great and any change in your Capex expectations.

Speaker Change: No change there.

Speaker Change: No change there wonderful thanks, very much I appreciate the answers.

David Macgregor: Thank you, David.

David Macgregor: Thank you. Thank you David.

Operator: Thank you.

David Macgregor: Thank you.

Operator: Our next question comes from Eric Bosshard with Cleveland Research Company. He may proceed. Thanks. Good morning. Rick, I thought your comments about a bit more normal May and Spring starting to show up were helpful. I'm curious, the reduction in the revenue guide for the back half of the year. What's the what's notably different? You know, she said you had upside in the second quarter. What's what's different in the assumptions in the back half of the. It's the reduction is really being driven by that, the homeowner behavior as absolutely the dominant portion of that. So it is acknowledging that what happens in April, we're not going to get those sales back from the later spring, especially in an environment where confidence is lower for those customers.

Speaker Change: Our next question comes from Eric Bosshardt with Cleveland Research Company you May proceed.

Eric Bosshardt: Thanks, Good morning.

Speaker Change: Rick.

Speaker Change: I thought your comments about.

Speaker Change: A bit more normal may and spring starting to show up.

Speaker Change: Helpful I'm curious.

Speaker Change: The reduction in the revenue guide for the back half of the year whats the whats, notably different as you said you had upside in the second quarter, what's what's different in the assumptions in the back half of the year.

Speaker Change: It's the reduction is really being driven by that the homeowner behavior.

Speaker Change: Absolutely the dominant portion of that so it is acknowledging that what happens in April we're not going to get those sales back from a later spring, especially in an environment, where confidence is lower for those customers.

Richard Olson: So it's really the homeowner, it shows up in residential directly and it shows up in professional by virtue of the products that are purchased by homeowners in that landscape contractor category. You're right, it's in those areas. I would just add to that, Eric, that, you know, the environment just remains so dynamic. And so for our consumers, it's dynamic, but also for our professional customers. And we're continuing to watch our field inventories, too. So continuing to watch what we're pushing into the field. And but importantly, we're seeing continued growth in golf and grounds underground and then our contractor space.

Speaker Change: So it's really the homeowner it shows up in residential directly and it shows up in professional by virtue of the products that are purchased by homeowners in that landscape contractor category. So it's.

Speaker Change: You are right. It's in it's in those areas.

Eric Bosshardt: I would just add to that Eric.

Eric Bosshardt: The.

Eric Bosshardt: Environment, just remains so dynamic and so for our consumers is dynamic that's also for our professional customers and we're continuing to watch our field inventories chain scale.

Speaker Change: Continuing to watch what we're pushing into the field.

Speaker Change: Importantly, we are seeing continued growth in golf and grounds and Brian underground and then our contractor space. So.

Angela Drake: So overall, the outlook is positive for the year from from a demand perspective.

Speaker Change: Overall, the outlook is positive for the year from a demand perspective.

Speaker Change: Okay. Okay.

David Macgregor: The second question on the the underground construction equipment ditch which business I understand there's some moving parts with dealers and the other pieces. I also know this business has got quite a lengthy backlog that provides ongoing support for demand. Is the underlying demand or the new order trend the same that it's been? Is it better? Is it worse? Just trying to get a sense of the underlying demand. Yeah, the base, the base business and demand remains strong for the factors that I talked about. And the backlog, we are having an impact on the backlog. We're working, obviously working that down to meet our customers expectations.

Speaker Change: The second question on the underground construction equipment.

Speaker Change: Which business.

Speaker Change: Understand there are some moving parts with the <unk>.

Speaker Change: Dealers and the other pieces I also have this business has got quite a lengthy backlog that provides.

Speaker Change: Im going to support for demand is that underlying demand or is the new order trend. The same that it's been is it better is it worse to trying to get a sense of the underlying demand in this business.

Speaker Change: Yes, the base the base business and demand remains strong for the factors that I talked about.

Speaker Change: The backlog we are having.

Speaker Change: Having an impact on the backlog, we're working obviously working that down to meet our customers' expectations, but no change to the demand profile from our perspective, we continue to see strong demand as we go forward, we are managing that backlog down to be the factor that we didn't talk much about it yet yes.

Richard Olson: But no change to the demand profile. From our perspective, we continue to see strong demands as we go forward. We are managing that backlog down would be the factor that that we didn't talk much about yet. Yeah, the backlog, as we've said in the past, will probably not be back to normal levels for that business until I 26. We still have low-field inventory, low-channel inventory for those underground construction dealers as well. But just just as a reminder, I'm back both for that business and for Golf and Grounds. It is our desire to reduce the backlog to make sure that we meet our customer expectations for availability.

Speaker Change: Backlog as we said in the past, we will probably not be back to normal levels for that business until August 26.

Speaker Change: We still have low field inventory channel inventory for those underground construction dealers.

Speaker Change: But just as a reminder, our backs both for that business and for golf and grounds. It is our desire to reduce the backlog to make sure that we meet our customer expectations for availability.

Richard Olson: Okay, and the current quarter reduction or down revenue in this business, this should be a one off this. I mean, with the amount of backlog and with no change that may add like this business should generate growth as we move forward, this should just be a two cue result that's that's unique. Is that the right way to think about it? We expect it to continue to grow, and those one-off items were the biggest factors in which you saw this quarter. Yeah, and those are just related to a comp year over year, so the sales of dealers and some of the skewed rationalization will be a comp.

Speaker Change: In the current quarter.

Speaker Change: Duction or down revenue in this business this should be a one off with the amount of backlog and with no change in demand like disposition generate growth as we move forward. This should just be a <unk> result, that's unique is that the right way to think about it.

Speaker Change: We expect it to continue continue to grow at those one off items were the biggest factors in which you saw this quarter and those are just related to a comp year over year. So the sales of dealers and then.

Speaker Change: Some of the SKU rationalization will be a comp okay. Okay.

Richard Olson: Okay. And the last question I just had, the clarity on the tariffs in terms of offset, I get that AMP and the cost out of productivity is the lion's share of what you're doing. The pricing, I guess, is a two part question. First of all, is the pricing more skewed to pro and away from residential? And then two, How would you characterize the traction that you're having with these price increase efforts that you put in place? I'll start, Rick, and jump in here. I'd say the pricing is not skewed either way. It's really kind of across the board, and we've got both prices and surcharges.

Speaker Change: Okay.

Speaker Change: And then the last question I just had clarity on the tariffs in terms of offset I get that app and the cost out and productivity is the lion's share of what Youre doing.

Speaker Change: The pricing I.

Speaker Change: I guess a two part question first of all is the pricing more skewed to pro and away from residential and then too.

Speaker Change: How would you characterize the traction that you're having with these price increase efforts that you've put in place.

Speaker Change: I'll start ready to jump in here.

Speaker Change: I'd say the pricing is not skewed either way, it's really kind of across the board and we've got both prices and surcharges. So both of those are there and it wouldn't be skewed towards the later half of the year, obviously, just implementing those price increases sometime in may. So we'll continue to see that throughout the rest of this year.

Angela Drake: So both of those are there, and it would be a skewed for the later half of the year, obviously, just implementing those price increases sometime in May. So we'll continue to see that throughout the rest of this year. Yes, the only thing I would add is it's a very surgical process based on the specific markets and the specific product lines. It's specific to the business, obviously very dynamic environment competitively and with the tariffs themselves, so. We didn't do blanket increases across the company, we did it very specific to the businesses. Thank you very much.

Speaker Change: Steve the only thing I would add it's a very surgical process based on the specific markets or specific product lines. So.

Speaker Change: Specific to the business, obviously very dynamic environment competitively and with the tariffs themselves. So.

Speaker Change: So we didn't do blanket increase those across the company, we did it very specific to the businesses.

Speaker Change: Thank you very much.

Angela Drake: Thank you.

Speaker Change: Thank you.

Operator: And as a reminder, to ask a question, please press star one one on your telephone.

Speaker Change: Thank you and as a reminder to ask a question. Please press star one on your telephone. Our next question comes from Ted Jackson with Northland Capital markets. You May proceed.

Ted Jackson: Our next question comes from Ted Jackson with Northland Capital Markets. Thanks very much. Good morning, Rick, Angie, Jeremy. Good morning. So, first question, just kind of more for curiosity, you know, if my memory's right, with second quarter, you were still going through some, last year, you were still going through, you know, kind of the stocking for lows. And if that's true, and what's the decline in residential? if you have more. I mean, you're down a lot. 0.4%. But I mean, he had a pretty tough cop, if my memory's correct. Have you taken a look at what it was?

Ted Jackson: Thanks, very much good morning, breaking teeth Jeremy.

Speaker Change: Good morning.

Speaker Change: So first question just kind of corporate curiosity.

Speaker Change: Right, where second quarter, you were still going through some last year, you were still going through kind of the stocking for Lowe's.

Speaker Change: That's true.

Speaker Change: The decline in residential.

Speaker Change: If you were to normalize for that.

Speaker Change: You were down 11.

Speaker Change: 4%.

Speaker Change: You had a pretty tough comp if my Memory's correct, if you've taken a look at kind of what it would've been a more organic basis.

Richard Olson: And so we have a little trouble hearing you, but if you're talking about the Lowe's comp, that that definitely is a factor last year, the first year with Lowe's, you know, stocking the stores and so forth was still taking place in the second quarter. So, the other factor I would just mention is snow. That's part of the equation. So, based on the flow through the season, the actual snow season, that product would be shipped through, normally in the third quarter is the biggest quarter. So, we've included a lower snow projection. That was a factor. in the second quarter as well.

Speaker Change: Yes, so we have a little trouble hearing you, but if you're talking about.

Speaker Change: Those comps.

Speaker Change: <unk> is a factor last year, the first year with Lowe's.

Speaker Change: Stocking in the stores and so forth, we are still taking place in the second quarter.

Speaker Change: So the other the.

Speaker Change: The other factor I just mentioned is snow that's part of the equation. So based on the flow through the season, the actual snow season.

Speaker Change: <unk> products would be shifts through normally in the third quarter is the biggest quarter. So we've included a lower snow projections that.

Speaker Change: That was a.

Speaker Change: A factor.

Speaker Change: In the second quarter as well.

Richard Olson: second quarter is not a huge snow, snow quarter, but it was one of the factors. The biggest things were the overall macro situation with the homeowner and the timing of spring, the comp to last year with lows is that's a legitimate call out as well. And then a little bit of snow. can't can't I mean, do you hear me better now? I don't know. Okay, no, I just I was just kind of curious, like if you were to normalize for lows, what the what what your what would it what would it look like? I mean, you know, I mean, I assume you'd be it wouldn't be down, you know, 11 plus percent.

Speaker Change: Second quarter does not a huge snow.

Speaker Change: <unk> quarter, but it was one of the factors the biggest things where the overall macro situation with the homeowner and the timing of spring the comp to last year with Lowe's. This vessel legitimate callout as well and then a little bit of snow.

Speaker Change: I mean do you hear me better now, but I don't know Michael if you take it okay. No I guess I was just kind of curious like if you were to normalize for those what the what your what would what would it look like I mean.

Speaker Change: I assume you'd be it wouldn't be down 11, plus percent I. Just it was kind of curious on a more organic basis, what it might look like that was my question and I have a couple more.

Richard Olson: I just it was kind of curious on a more organic basis. What it might have looked like. and I have a couple more. I think if you put the normal spring back in, it just wipes that out. So it's a the spring is a bigger factor than the loses. So, okay, we're awesome. Yeah, because the lights bring up a big factor not only for the consumer, but also for the channel and then mass as well. Okay, and then my next question, just kind of going into working capital and thinking about the second half of the year, you know, so if the The outlook for the second half of the year is not what you had expected at the beginning of the year.

Speaker Change: I think if you put the normal spring back and just wait that out so.

Speaker Change: The spring is a bigger factor than the losses.

Speaker Change: Okay got it.

Speaker Change: Yes, as it relates to factor in that.

Speaker Change: Tomorrow, but also part of that channel and then map as well.

Speaker Change: Okay and then my next question, just kind of going into working capital and thinking about the second half of the year.

Speaker Change: So if the.

Speaker Change: The outlook for the second half of the year.

Speaker Change: What you had expected.

Speaker Change: At the beginning of the quarter.

Angela Drake: What does that do in terms of working capital? I mean, where are you, you know, particularly with regards to inventories, does that leave you a little, you know, heavier on that front and something to work through as we kind of get through the year? Just maybe a little color in terms of how to think about, you know, second half working capital. Thank you. Moro given That's a great question. So overall, if we think about just working capital and inventory, we are a little higher on finished goods, driven by the late spring that we've been talking about.

Speaker Change: What does that do in terms of working capital I mean, where are you, particularly with regards to inventories does that leave you a little heavier on that front and something to work through as we kind of get through the year just talk maybe a little color in terms of how to think about second half.

Speaker Change: Working capital at or given your revised guidance.

Speaker Change: That's a great question. So overall, if we think about just working capital and inventory we are a little higher on finished goods driven by the late spring that we've been talking about that sequentially, we're actually down in net inventory about 1%.

Angela Drake: But sequentially, we're actually down in that inventory about 1%. We are working our work in process down, so it is lower and continuing to drive productivity and manufacturing output in some of our areas of backlog, for sure. But that continues to be an area of focus for us. So, as we talked about earlier, with some of those inventory valuations, we're working through and moving through some of our excess and obsolete inventory. So continuing to focus and move that working capital number down along with our inventory. Okay, and then my third and final question, just shifting back over to tariffs, you know, if one was to take an optimistic viewpoint with regards to Trump's ability to bring a deal across the finish line with someone like China, because, you know, he is a negotiator and a transactional guy.

Speaker Change: We are working on.

Speaker Change: We are working our working process down so it is lower and continuing to drive.

Speaker Change: Productivity and manufacturing output in some of our areas of backlog for sure but that continues to be a an area of focus for us. So.

Speaker Change: As we talked about earlier with some of those inventory valuations, where we're working through and moving through some of our excess and obsolete inventory so continuing to focus on and to do that.

Speaker Change: Working capital number down along with our inventory.

Speaker Change: Okay, and then my third and final question, just shifting back over to tariffs.

Speaker Change: If one was to take an optimistic viewpoint with regards to trumps ability to bring a deal across the finish line with someone like China, because he is a negotiator to transactional guy.

Ted Jackson: Would that change your guidance if you were to see, say, the reprieve that we had with regards to tariffs with China and everyone else? become permanent. Would you come back out? I mean, there could be some positive pickups, there are so many moving pieces to this, there are also, you know, Tariffs in other directions. So the best thinking is reflected in our guidance. As we talked about, a lot of the tariff impact as it comes back to the higher levels would be in the fourth quarter. So we'll certainly give you guidance as we get into the next earnings release.

Speaker Change: Would that change your guidance if you were to see say the three that we had with <unk>.

Speaker Change: Chris with China, and everyone else.

Speaker Change: Because the apartment, which you come back out and be changing your guidance.

Speaker Change: Okay.

Speaker Change: I mean, there could be some positive pick ups. There are so many moving pieces to this there are also no.

Speaker Change: Tariffs and other directions. So the best thinking news is reflected in our guidance.

Speaker Change: As we talked about a lot of the tariff impact as it comes back to the higher levels would be in the fourth quarter. So we will certainly give you guidance as we get to the next earnings release, we'll obviously know much more about.

Richard Olson: We'll obviously know much more about the outlook in those cases. That'll be the time that we can talk about, you know, how that looks for the rest of the year again. But so, but in your guide. Right now, in your guidance, you're expecting tariffs to snap back to these ridiculous levels. So, all else being equal, you know, if we see an extension or some kind of deal that's better than that, all else being equal, there would be an We have included all of those tariffs, yes. So that could be, if something could go better or worse, that is one of those items, Ted, that it could go better if tariffs don't pop back to the levels that we expect them to with the executive order.

Speaker Change: Yes look in those cases that will be the time that we can talk about.

Speaker Change: It looks for the rest of the year again.

Speaker Change: But so but guidance right.

Speaker Change: Right now in your guidance Youre expecting tariffs to snapback. These ridiculous levels, so all else being equal.

Speaker Change: If we see an extension or some kind of deal that's.

Speaker Change: Better than that all else being equal there would be there would be an improvement for you.

Speaker Change: We have included all of those tariffs yes.

Speaker Change: Okay.

Speaker Change: And so the higher rates.

Speaker Change: So that could be if something could go better or worse that is one of those items.

Speaker Change: It could go better.

Speaker Change: Yes, if tariffs don't pop back to the levels that we expect them to with the executive orders.

Ted Jackson: Okay, that's it for me. Thank you very much for taking my question. Thank you.

Speaker Change: Okay. That's it for me. Thank you very much for taking my questions.

Speaker Change: Thanks, Thank you.

Speaker Change: Thank you.

David Macgregor: Our next question comes from David MacGregor with Longbow Research, you may proceed. Any comment that you'd be willing to provide? how these terrifying And then, you know, I guess I'm also looking for some clarity and I'm going to get a little wonky. are they also exposed to the IEPA 10% tariff on top of that or is it one? You're talking about compilers? competitors. Yeah, your numbers are so small. Did you want to? Yeah, I don't know that we can speak to the competitors necessarily, so, yeah, exposure. I'm just just wondering competitively how I mean, is this providing you with an advantage?

Speaker Change: Our next question comes from David Macgregor with Longbow Research you May proceed.

David Macgregor: Yes, thanks for taking the follow up I just had a just on the tariffs over on that.

Speaker Change: I guess im thinking competitively and if there is.

David Macgregor: Any comment that you'd be willing to provide us in terms of how these tariffs impact your competitive position.

David Macgregor: And then I guess I'm also looking for some clarity I'm going to get a little wonky here on your butt.

Speaker Change: If your competitors are sustaining $2 32 tariff exposure through the steel and aluminum.

Speaker Change: Are they also exposed to the IEP.

Speaker Change: 10%.

Speaker Change: Tariff on top of that or are they is it one or the other.

Speaker Change: You are talking about competitors.

Speaker Change: Competitors, yes. Your numbers are so small that I think I'd really like to get your perspective on the competitive dynamic here.

Speaker Change: Yes, I don't know that we can speak to the competitors necessarily.

Speaker Change: So yeah in the tariff exposure I'm, just just wondering competitively.

Speaker Change: This is providing you with an advantage do you feel do you expect to gain a little market share as a consequence of the.

Richard Olson: , Jeff Voss, . . If you take in all the factors like exposure to China, the fact that we're a U.S. company, and the strategies that we've put in place since 2018, we believe we're in a very solid competitive position. Are you able to talk at all about the 232 versus IEPA? Are they cumulative or? They, I believe they're mutually exclusive, but don't quote me on that, David. I, you know, the stackable and, you know, non-stackable, it's changing constantly. So it's such a dynamic environment. We're continuing to watch it every day. Yeah, we have, I think we mentioned before, we have a task force together.

Speaker Change: Tariff regimen of a few.

Speaker Change: So yes, maybe a couple of comments in that area on the professional side, we're fairly similarly positioned I would say more on the homeowner type of products.

Speaker Change: If you.

Speaker Change: So we've taken all of the factors like exposure to China. The fact that we're a U S company.

Speaker Change: And the strategies that we've put in place since 2018, we believe we're in a very solid competitive position.

Speaker Change: Okay.

Pete: And then Pete.

Speaker Change: To talk at all about the 232 versus <unk> or the cumulative are they mutually exclusive.

David Macgregor: Hey, I believe they are mutually exclusive but don't quote me on that David.

Speaker Change: Stackable and lost.

Speaker Change: Basketball is changing constantly.

Speaker Change: Dynamic environment, we're watching every day.

Speaker Change: I think we mentioned before we have a task force together they are working on all the details of what was announced yesterday and we'll be able to provide more information as we go on that.

Richard Olson: They're working on all the details of what was announced yesterday, and we'll be able to provide more information as we go on that. I appreciate the comment. Thank you. You bet.

Speaker Change: I appreciate the comments thank you very much.

Operator: Thank you.

Speaker Change: You bet. Thank you. Thank you.

Operator: This concludes the question and answer session.

Speaker Change: Thank you. This concludes the question and answer session. Mr. Stephan. Please proceed to closing remarks.

Jeremy Steffan: Mr. Steffan, please proceed to closing remarks. Thank you everyone for your questions and interest in Sorrel Company. We look forward to talking to you again in September to discuss our fiscal 2025 third quarter results.

Speaker Change: Thank you everyone for your questions and interest in Toro company, we look forward to talking to you again in September to discuss our fiscal 2025 third quarter results.

Speaker Change: Yeah.

Operator: Thank you for your participation in today's conference.

Speaker Change: Thank you for your participation in today's conference. This concludes the presentation you may now disconnect good day.

Operator: This concludes the presentation.

Operator: You may now disconnect.

Operator: Good day.