Toro Q1 2026 Earnings Report

Toro EPS Results

• Actual EPS: $0.74
• Consensus EPS: $0.65
• Beat/Miss: Beat by +$0.09
• One Year Ago EPS: $0.65

Toro Revenue Results

• Actual Revenue: $1.04 billion
• Expected Revenue: $1.00 billion
• Beat/Miss: Beat by +$35.84 million
• YoY Revenue Growth: +4.20%

Toro Announcement Details

• Quarter: Q1 2026
• Date: 3/5/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, March 5, 2026
• Conference Call Time: 11:00AM ET

The Toro (NYSE:TTC) Company (NYSE: TTC) specializes in the design, manufacture and marketing of a broad range of outdoor environment equipment for residential, commercial and professional markets. Its product portfolio includes lawn mowers, utility vehicles, snow throwers, irrigation systems and landscape maintenance equipment. Toro’s offerings span walk-behind and ride-on mowers, zero-turn radius mowers, snow blowers, sprinklers, drip irrigation products, spreaders and specialty turf maintenance machines tailored to golf courses, sports fields and municipal parks.

Founded in 1914 and headquartered in Bloomington, Minnesota, Toro has built a century-long legacy of innovation in the grounds-care industry. Early breakthroughs included the introduction of residential rotary mowers in the mid-20th century and the development of commercial zero-turn mowers in the 1960s. Over the years, Toro has expanded its technological capabilities through in-house R&D and strategic acquisitions, developing advanced digital irrigation controls, robotic mowers and precision spraying systems aimed at improving water efficiency and operator productivity.

Toro operates manufacturing facilities and distribution centers across North America, Europe, Asia-Pacific and Latin America, serving a diverse customer base that ranges from homeowners and landscape contractors to sports turf managers and public-sector maintenance programs. Its products are sold through a network of independent dealers, mass merchandisers and e-commerce channels, supported by a global parts and service infrastructure. Toro continues to emphasize sustainable solutions in outdoor maintenance, leveraging its global footprint to introduce environmentally responsible technologies and support partners in water-scarce regions.

Toro Q1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Q1 outperformance: Consolidated net sales rose 4.2% to $1.04 billion and adjusted EPS was $0.74 (vs. $0.65 a year ago), with both professional and residential segments beating expectations.
• Positive Sentiment: Raised full-year guidance: Fiscal 2026 sales growth now expected at 3.0%–6.5% and adjusted EPS at $4.40–$4.60, with professional margins guided to 18.5%–19.5% and an improved free cash flow conversion target of ≥120%.
• Positive Sentiment: Operational gains via AMP: The AMP productivity program has delivered $95 million of cost savings toward a $125 million target, helping lift adjusted operating margin to 9.8% and produce $14.6 million of free cash flow in a typically cash-using quarter.
• Positive Sentiment: Strategic growth and innovation: Toro expanded capabilities with the Tornado acquisition and new products (BOSS CFT plows, Ditch Witch SK1000, JT21 drill) and is scaling autonomous and water-management technologies to drive long-term addressable market expansion.
• Negative Sentiment: Ongoing headwinds and risks: Higher material and manufacturing costs, some international softness (Europe and Asia), and macro/geopolitical/weather uncertainties remain potential downside risks despite price realization and productivity offsets.

Presentation

[Operator]

Good day, ladies and gentlemen, and welcome to The Toro Company's first quarter earnings conference call. My name is Daniel, and I will be your coordinator for today. At this time, all participants are in listen-only mode. 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. I would now like to turn the conference over to your host for today's call, Heather Hille, Vice President, Corporate Affairs and Investor Relations. Please proceed, Ms. Hille.

[Heather Hille, VP, Corporate Affairs, and Investor Relations at The Toro Company]

Morning, everyone, and thank you for joining us for The Toro Company's first quarter 2026 earnings conference call. I'm Heather Hille, Head of Investor Relations. On the line with me today are Rick Olson, Chairman and Chief Executive Officer, Edric Funk, President and Chief Operating Officer, and Angie Drake, Vice President and Chief Financial Officer. Rick, Edric, and Angie will provide an overview of our first quarter results, which were released earlier this morning, and discuss our priorities and outlook for the remainder of fiscal 2026.

[Heather Hille, VP, Corporate Affairs, and Investor Relations at The Toro Company]

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 uncertainties, including those described in today's earnings release, investor presentation and most recent SEC filings, and may cause actual results to differ materially from those contemplated by these statements.

[Heather Hille, VP, Corporate Affairs, and Investor Relations at The Toro Company]

Also in our remarks, we'll refer to certain non-GAAP financial measures, which we believe are important in evaluating the company's performance. Reconciliations of all non-GAAP numbers to the most directly comparable GAAP number are included in this morning's press release, which, along with a first 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 Rick.

[Rick Olson, Chairman and CEO at The Toro Company]

Thanks, Heather, and good morning, everyone. Throughout the first quarter of 2026, our teams remained diligently focused on executing our strategic priorities. We capitalized on market opportunities and customer demand, drove operational excellence, and leveraged our portfolio of leading brands for profitable growth and competitive advantage. At the same time, we invested in value-creating technology and innovation. As a result, we beat expectations in both segments and increased consolidated net sales by more than 4% to $1.04 billion. Our outperformance was driven by strong execution in both our professional and residential segments, which allowed us to capitalize on incremental demand for snow and ice products and continued growth in underground and specialty construction.

[Rick Olson, Chairman and CEO at The Toro Company]

We reported better than expected adjusted earnings per share of $0.74, up from $0.65 a year ago, due to higher earnings in our professional segment, which represents about 80% of our portfolio. We expanded our hydrovac excavation solutions through our acquisition of Tornado Infrastructure Equipment, further strengthening our capabilities. We continued to implement our multi-year AMP program, which is fueling sustainable productivity improvements and has contributed $95 million in cost savings toward our aggregate goal of $125 million. We generated free cash flow of $14.6 million, resulting in an impressive free cash flow conversion rate of 22% in a quarter where our seasonal preparations typically result in a net use of cash. We repurchased approximately $95 million of common stock, reflecting our commitment to return value to shareholders.

[Rick Olson, Chairman and CEO at The Toro Company]

In summary, through strong execution of our strategic priorities throughout the first quarter, we drove favorable sales and earnings growth and further strengthened our financial position. During the first quarter, our teams were prepared to deliver snow and ice products and capitalize on incremental demand as a series of winter storms hit in major population areas. This operational agility and strong execution not only contributed to excellent Q1 top-line growth but also positions us well for robust performance in these categories in the back half of this year. Adding to this optimism is our fresh lineup of BOSS plows with new Cold Front Technology or CFT, which has been well received by customers. The innovative CFT system integrates plow and spreader functionality and is engineered for effortless connections, smart performance, and maximum efficiency.

[Rick Olson, Chairman and CEO at The Toro Company]

We also continue to invest in underground and specialty construction, reflecting our expectations of multi-year growth in these businesses. Our efforts underscore our focus on broadening our offering to drive both near and long-term results. During the first quarter, horizontal directional drills like the innovative JT21, which launched last year, contributed to our sales upside. We expect customer demand to remain strong. We were very excited to welcome Tornado to The Toro Company during the quarter. As a natural adjacency to our existing businesses, its complementary offering enables us to expand our growth opportunities in this market.

[Rick Olson, Chairman and CEO at The Toro Company]

This spring, we look forward to showcasing our recently launched Ditch Witch SK1000, a compact stand-on skid steer with increased lifting capacity and reduced maintenance, making it ideal for utility work as well as landscaping. To preserve our profit margins and remain price competitive, we continue to pursue deliberate strategies through our AMP program to drive sustainable productivity improvements, cost savings, and net price realization. Through the AMP improvements, we are working to moderate the effect of higher material and manufacturing costs and fully offset the effect of tariffs. We're also carefully managing inventory at all stages of production, as evidenced by our healthy net inventory position at the end of the first quarter. This was a key driver of working capital improvement.

[Rick Olson, Chairman and CEO at The Toro Company]

While external factors like the economy, geopolitical environment, and weather are ongoing considerations, we are committed to maintaining our discipline and aligning our inventories with expected demand as the year unfolds. These actions are strengthening our operations and driving improved financial results. Our teams and channel partners are highly motivated to build on this momentum. I wanna thank them for their ongoing commitment to advancing our product and technology innovations, as well as our cost savings and productivity initiatives. Angie will share additional insights on our first quarter results and provide our outlook for the year.

[Angie Drake, VP and CFO at The Toro Company]

Thank you, Rick, and good morning, everyone. Before getting into the details of our results, I'll highlight three key takeaways from our 1st quarter performance. First, we delivered better than expected top-line growth in both our professional and residential segments through disciplined execution that enabled us to capitalize on seasonal demand opportunities. Second, we delivered adjusted EPS above expectations and prior year through deliberate productivity improvement initiatives that drove favorable operating leverage. Third, our positive free cash flow and strong balance sheet position underscore our commitment to financial discipline and returning cash to shareholders. In short, our consolidated 1st quarter results demonstrate the strength of our portfolio and market-leading innovation, our commitment to operational excellence, and our thoughtful strategic and financial stewardship. Let's dig into some of the details.

[Angie Drake, VP and CFO at The Toro Company]

Consolidated net sales for the first quarter were $1.04 billion, up 4.2% from prior year and better than expected as sales in both the professional and residential segments exceeded our guidance. Professional segment net sales in the first quarter were $824 million, while residential segment net sales were $206 million. Both segments benefited from higher shipments of snow and ice products and net price realization. Strength in underground construction, including the successful integration of Tornado and growth in our landscape business, also contributed to top-line growth in the professional segment. We delivered a 9.8% consolidated adjusted operating earnings margin in the first quarter, up from 9.4% a year ago.

[Angie Drake, VP and CFO at The Toro Company]

Both professional segment earnings of $137.6 million and residential segment earnings of $13.2 million exceeded our expectations. Year-over-year results in both segments reflect net price realization and the favorable impact of our ongoing productivity improvement and cost savings measures. This was partially offset by higher material and manufacturing costs. Finally, our first quarter adjusted EPS was $0.74, which exceeded both our prior year adjusted EPS of $0.65 and our previous outlook for this period. Now turning to our balance sheet and cash flow results. Our balance sheet continues to afford us meaningful strategic optionality, enabling us to focus our capital investment on initiatives that generate profitable growth. Our current leverage ratio of 1.5x remains healthy and well within our stated target range.

[Angie Drake, VP and CFO at The Toro Company]

Our free cash flow for the quarter was $14.6 million, a year-over-year increase of more than $80 million, resulting in a free cash flow conversion rate of 22%. We achieved this performance through meaningful inventory improvement driven by our integrated business planning process and seasonal demands for snow products. As a result, our inventory turnover improved to 2.8x in the quarter. Additionally, we returned $133 million to shareholders in the quarter through dividends and share repurchases, demonstrating continued confidence in our ability to generate cash. Looking ahead, we remain focused on capitalizing on top-line growth opportunities, thoughtfully managing our balance sheet and cash flow, and integrating AMP operating efficiency benefits that support our $125 million run rate target by the end of 2026.

[Angie Drake, VP and CFO at The Toro Company]

We are raising our sales and earnings outlook for fiscal 2026 based on our strong execution and the strength of our first quarter performance. We are increasing our expectation for total company net sales growth to 3% to 6.5%. This reflects, first, professional segment net sales that are expected to grow mid-single digits, and second, residential segment net sales that are expected to be flat to down 3%. This is an increase from our prior residential segment net sales guidance, reflecting strong Q1 results and an improved outlook for the balance of the year.

[Angie Drake, VP and CFO at The Toro Company]

We are also raising our full year 2026 adjusted earnings per share guidance to be in the range of $4.40-$4.60. This outlook assumes a higher total year adjusted gross margin rate consistent with our prior guidance and underscoring our ability to navigate cost pressures while investing in innovation. Higher adjusted operating earnings margin, which reflects annual professional segment earnings margin between 18.5% and 19.5%, and an improved outlook for the residential segment earnings margin between 6.5% and 8.5%. Interest expense of approximately $60 million. An adjusted effective tax rate of about 21%, and capital expenditures of $90 million-$100 million. We now expect an improved free cash flow conversion rate of at least 120%.

[Angie Drake, VP and CFO at The Toro Company]

For the second quarter of 2026, we expect total company net sales to increase mid-single digits from the same period in 2025, with mid-single-digit net sales growth expected in both segments. Professional segment earnings margin in the second quarter is expected to be similar to a year ago, while residential segment earnings margin is expected to approach double digits. For the total company, we are expecting mid-single-digit adjusted earnings per share growth in Q2. As a reminder, our second quarter is typically the largest of the year. As evidenced by our strong first quarter performance, we are managing our business to take advantage of our strengths as well as market opportunities while mitigating external pressures.

[Angie Drake, VP and CFO at The Toro Company]

With our team's continued commitment to providing innovative solutions that create value for our customers and drive operational excellence across our business portfolio, I am confident in our ability to deliver sustainable, profitable growth for the long term. With that, I'll turn the call over to Edric.

[Edric Funk, President and COO at The Toro Company]

Thank you, Angie. Good morning, everyone. Our results in the first quarter demonstrate our competitive positioning and business resilience, our market-leading innovation, and our team's skillful execution of key initiatives. Together, these factors provide a solid foundation for future success. With our strong balance sheet of free cash flow, we continue to invest in technological innovations and growth markets that provide significant value for customers and The Toro Company. Let me share a few examples. We are actively pursuing opportunities to capitalize on the growing global demand for underground construction equipment, which is being fueled by aging infrastructure, new data centers, and a rise in energy and telecommunications projects. ConExpo, which is North America's largest construction trade show, is taking place this week. At the show, we are exhibiting our broadest offering ever of underground and specialty construction solutions.

[Edric Funk, President and COO at The Toro Company]

With our recent acquisition of Tornado, which is a natural complement to our existing products, we are poised to extend our reach and impact within this category and beyond. In golf grounds and irrigation, we're building a pipeline of innovations that help customers maximize workforce productivity and reduce costs. Last November, we introduced our AI-enabled spatial adjust software, which is proving to be, in the words of our customers, an absolute game changer. This water management system is simultaneously helping to preserve one of our most precious resources, delivering more consistent playing conditions, and bolstering subscription service offerings that provide incremental recurring revenue for The Toro Company. This spring, we are further expanding our water management suite with the launch of our new RXC irrigation controller.

[Edric Funk, President and COO at The Toro Company]

This reliable and contractor-friendly irrigation solution provides modular expandability, advanced flow monitoring, and smart features such as predictive weather-based scheduling, seasonal adjustments, and intuitive programming. Innovations like this enable our customers to better manage costs, conserve water, and maintain the condition of the grounds in their care. Finally, by coupling targeted acquisitions and strategic partnerships with years of our own internal development, we are incredibly excited that we now offer the market's broadest range of autonomous turf maintenance solutions. We've accomplished this by leveraging multiple localization and navigation technologies across an array of high-energy and low-energy product platforms. While most of these innovations are still early in their growth lifecycle, we're very optimistic about their future potential. At the same time, we're also excited about the near-term opportunities within our core businesses.

[Edric Funk, President and COO at The Toro Company]

For example, following the strong performance of our snow categories during Q1, and given the current health of the channel, we're confident about the prospects for those product lines in the second half of this year. Finally, our team's commitment to operational excellence and optimization of our global supply chain will continue to help us mitigate increases in materials and manufacturing costs, streamline our supply chain operations, and manage our inventory with exceptional success. Through the steadfast engagement of our team, we are building strong momentum for future growth. Now Rick has a few closing remarks.

[Rick Olson, Chairman and CEO at The Toro Company]

Thank you, Edric. In closing, I want to underscore our confidence in The Toro Company's strategic direction and continued profitable growth. Our actions are enhancing our customers' performance, strengthening our competitive advantage, and increasing our operational efficiency. Through our disciplined approach to capital allocation and balance sheet flexibility, as well as our commitment to strong free cash flow.

[Rick Olson, Chairman and CEO at The Toro Company]

We are well positioned to deliver significant value to all our stakeholders for many years to come. Now, Edric, Angie, and I would be happy to take your questions.

[Operator]

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 followed by one one again. Please stand by for your first question. Our first question comes from Sam Darkatsh with Raymond James. Your line is open.

[Sam Darkatsh, Managing Director at Raymond James]

Good morning, Rick, Angie, Edric. How are you?

[Rick Olson, Chairman and CEO at The Toro Company]

Morning. Morning, Sam. Morning. How are you?

[Sam Darkatsh, Managing Director at Raymond James]

I'm well, thank you. A few quick questions, if I could. First off, pro sales were up 7% in the quarter. Can you give us a sense of what that was organically, excluding the Tornado effects?

[Rick Olson, Chairman and CEO at The Toro Company]

Yes. The largest portion of the increase in the quarter was would be snow. The portion specifically attributed to

[Angie Drake, VP and CFO at The Toro Company]

Yeah, we also saw improved underground and pro contractor shipments. Of course you said Tornado. Excluding Tornado, it would be snow in an underground contractor and golf and grounds. I'm sorry, underground construction and pro contractor.

[Sam Darkatsh, Managing Director at Raymond James]

Figure maybe 5% or so is organic and a point or two would be Tornado. Would that be fair?

[Angie Drake, VP and CFO at The Toro Company]

That's probably close. What I failed to mention, though, is that we did see some of that offset by some softness that we saw in international. Yes, overall, I think 1%-2% is probably fair. What we had mentioned in Q4 is that Tornado would contribute about 2% growth for sales. For inorganic growth, it would be about 2%. Their sales we were expecting to be about $100 million for the year. Pretty well in line with what our expectations were for Q1.

[Sam Darkatsh, Managing Director at Raymond James]

Gotcha. On an all-in basis, what was snow and ice? I understand it's a relatively attractive, margin category in both segments for you. Can you help us contextualize how much snow and ice was up in the quarter?

[Rick Olson, Chairman and CEO at The Toro Company]

Yeah, it was. As Angie said, we had strength across our businesses. If you look at the two reporting segments, it was the largest portion of each of those segments. On the residential portion, it would be the largest, but also offset by some shipments of spring products that will be a little bit later, rolling into the second quarter. There was some offset there, but it was definitely the largest portion of the increase there. Interestingly, on the residential side, as we talked about, there was field inventory in place, so retail was even stronger than the shipments that we saw. Shipments, if you look at a 10-year average, they were about on average on the residential side. On the professional side, a little different story.

[Rick Olson, Chairman and CEO at The Toro Company]

The shipments were well above the 10-year average. In both cases, it just puts us in a very positive field inventory position as we go into the second half of the year. That gives us confidence in the preseason fills both for the professional and the residential side as we go into the third and the fourth quarter. The largest portion of each of the segments was snow, but really strength across the businesses. You know, in the case of residential, kind of back to a more normal snow shipment year for us.

[Sam Darkatsh, Managing Director at Raymond James]

Got you. My, my last question has to do with the annual guide. The 6.5% high end of your range. I'm trying to... First off, I'm trying to get there with the professional and residential guide, professional up mid-single, high end of the residential is flat. Obviously, that doesn't get you to 6.5. In order to get to 6.5, would pro be closer to high single digit growth, or would resi turn positive? I'm just trying to get a sense of how to think about the high end of the range, Angie.

[Angie Drake, VP and CFO at The Toro Company]

Sam, I think what we can, what we can talk to the pieces of that would be as we think about the full year. Tornado, we expect to contribute about 2%. We expect to get a little bit more than our average 1%-2% on net realized price, and then the balance of that will be driven by organic growth, and that would be largely in the professional segment and in the categories that we talked about earlier: underground, professional contractor, golf and grounds, and a strong second half, snow sell-in.

[Sam Darkatsh, Managing Director at Raymond James]

Okay. Okay, I'll ask that offline. It's fine. Thank you all. Appreciate it. Very, very good stuff.

[Angie Drake, VP and CFO at The Toro Company]

Thank you.

[Rick Olson, Chairman and CEO at The Toro Company]

Thank you.

[Operator]

Thank you. Our next question comes from Tim Wojs with Baird. Your line is open.

[Tim Wojs, Senior Research Analyst at Baird]

Hey, hey, everybody. Good, good morning. Nice job. Maybe just to kind of piggyback off Sam's question. Just I guess, you raised the residential guide, but you didn't raise the professional guide. Is that just Kind of going from one end of the range to the other end of the range, or is there something in Pro that's kind of offsetting some of the upside that you saw in the quarter in Q1?

[Angie Drake, VP and CFO at The Toro Company]

I'd say that, from the Pro, we probably saw a little more softness in international than we expected. We are having to offset some of that. The rest of it is really largely as we expected in the professional segment for the year. We raised resi because we did see some upside in snow that was a little higher than we expected in Q1 based on some of the snow events that we saw across the country.

[Tim Wojs, Senior Research Analyst at Baird]

Okay, great. I guess one question, just when you look at your snow contractor base and your lawn and garden kind of contractor base, do you have any sort of sense as to what the overlap between the two is, and if strong snow does kind of help the professional landscape business and vice versa?

[Rick Olson, Chairman and CEO at The Toro Company]

There is, excuse me, there is a lot of overlap. I think what you're, what you're kind of getting at is if you come into the spring season with contractors that do both snow and summer work, they're gonna come in in a healthy position, and we would anticipate that that would be the case for the contractors. One thing to keep in mind is contractors have really been strong throughout the cycle. Where we had some softness was with the homeowners that were buying professional products. They've been pretty solid throughout. The current strength is also being bolstered by the new products that we're introducing. For example, in the Exmark area, the Lazer that was introduced two years ago and the Radius are both selling very strongly. That...

[Rick Olson, Chairman and CEO at The Toro Company]

Put those factors together, and it's a very positive position for landscape contractor on the pure Pro side.

[Tim Wojs, Senior Research Analyst at Baird]

Gotcha. Okay. Okay, that's helpful. The last one I had, just as we kind of did our golf, kind of checks this quarter, we got back kind of an abnormally high response rate around autonomous adoption. I guess, could you just review for us kind of where you are in autonomous in golf and if there's any sort of kind of KPIs around how big autonomous is, how it's growing, you know, kind of the products that golf courses are adopting. I think that'd be really helpful. Thanks.

[Edric Funk, President and COO at The Toro Company]

Yeah, great question, Tim. The response you got is not surprising. There's a lot of interest and that wouldn't surprise any of us knowing that labor represents such a significant portion of golf course budgets, and that for a lot of golf courses, they're finding it difficult to find and attract the labor. That's clearly the driver. It has been for some time. We've seen it's kind of difficult to find a golf course that hasn't at least experimented with some autonomous solutions. I think they're still looking for how that ultimately fits into their business. Some of what we're excited about, we've been investing in this category because of those drivers for a long time. As I mentioned in the prepared remarks, we're pretty excited now that we cover all the bases.

[Edric Funk, President and COO at The Toro Company]

If somebody's looking for that traditional mobot style, whether that's for around the clubhouse or smaller areas of the rough, we have that. If they're looking for still low energy, but a more productive piece, we now offer that product as well. If they're looking to rather than mow, collect balls on the range, we've got a version of that platform that does that piece. We're also now offering products up in the higher energy range. If it's about mowing that longer turf that again, you might find in the rough, but they're looking for an even more productive machine and one with the traditional mowing technology, we've got the platform for that, and then all the way now to the fairway mowers. We're pretty excited there.

[Edric Funk, President and COO at The Toro Company]

As we said, it's still early days on people, you know, I'd say being all in across the board, but we only expect additional interest and growth in that area.

[Tim Wojs, Senior Research Analyst at Baird]

Awesome. Thank you. Thanks for the detail. Good luck, guys.

[Angie Drake, VP and CFO at The Toro Company]

Thank you.

[Edric Funk, President and COO at The Toro Company]

Thank you.

[Rick Olson, Chairman and CEO at The Toro Company]

Thank you.

[Operator]

Thank you. Our next question comes from David MacGregor with Longbow Research. Your line is open.

[Joe Nolan, Associate Analyst at Longbow Research]

Hey, good morning. This is Joe Nolan on for David. I was just wondering.

[Angie Drake, VP and CFO at The Toro Company]

Hi, Joe.

[Joe Nolan, Associate Analyst at Longbow Research]

Hey, guys. With the bottlenecking investments and other investments you've made in the Ditch Witch business, just can you talk about how much improvement you're seeing on margins today in that business and how much more improvement we could see in 2026?

[Rick Olson, Chairman and CEO at The Toro Company]

Yeah, Angie can comment specifically, but we continue to see really from the time of the acquisition in 2019 steady growth in our profitability in that business. it's, you know, from a number of factors, obviously leveraging across the scale of The Toro Company, but just also the continued improvement by that business. we're back in the, you know, firmly in the range of the professional profitability at this point. the investments that you mentioned, like the new paint system and others within the facility, are helping us to continue to fuel the growth that we see across a lot of drivers within that business. Business continues to be healthy.

[Rick Olson, Chairman and CEO at The Toro Company]

We've continued to make solid profit improvements, we're very optimistic about the outlook for that business going forward with a long runway.

[Joe Nolan, Associate Analyst at Longbow Research]

Got it. That's encouraging. On the international business, you mentioned some weakness there. Could you just expand on what markets that's in and just how that's factoring into your guidance?

[Rick Olson, Chairman and CEO at The Toro Company]

Yeah. Out of broadly across our businesses, that's the one area that's a little bit behind where we'd expect them to be at this point in the year, just through the first quarter. You know, I just looked at that detail actually this morning, and it's kind of broadly across a number of areas, both in Europe and in Asia across multiple categories. It's more just kind of a general, you know, economic environment sort of situation. Our team is still optimistic that they'll pull that, you know, be on track for the year, but we just see some softness there so far this year that we wanted to pass on commentary.

[Joe Nolan, Associate Analyst at Longbow Research]

Got it. Just one last one for me quickly. On M&A, can you just talk about what you're seeing in terms of valuations and just also update us on within the existing enterprise where you see the greatest opportunity to build with inorganic growth?

[Rick Olson, Chairman and CEO at The Toro Company]

Our approach to M&A has remained pretty consistent through the years, the activity has always taken place, building opportunities for M&A. We stay pretty focused in areas where we know we can compete and win, it's close to our existing businesses. If you pick those out, it's gonna be likely on the professional side, we see opportunities within, as evidenced by the Tornado acquisition within the underground, especially construction particularly, but also opportunities for technology investments and adjacencies that might be there as well. The key point is process out, continues on an ongoing basis. Valuations have been high, but some signs of moderating a little bit, just recent data points. Nothing, nothing necessarily statistically valid there, but valuations may be moderating a little bit.

[Joe Nolan, Associate Analyst at Longbow Research]

Great. Thanks for answering my questions. I'll pass it on.

[Rick Olson, Chairman and CEO at The Toro Company]

Thank you.

[Operator]

Thank you. Our next question comes from Eric Bosshard with Cleveland Research Co. Your line is open.

[Eric Bosshard, CEO and Analyst at Cleveland Research]

Thanks. Two things if I could. First of all, with leverage at now 1.5, I'm curious how you're thinking next 12-18 months is, you know that there's been a handful of acquisitions, tuck-in acquisitions and some bigger ones. I'm curious, as we move forward, what the strategy is with the leverage opportunity. Is this buying more stock? Is it more acquisitions? If you could just start on that would be helpful.

[Rick Olson, Chairman and CEO at The Toro Company]

Yeah, thanks for the question. Our capital allocation strategy remains the same. We first invest in research and our new products and innovations. We invest in opportunities for productivity improvement and technology within our facilities. We obviously look for opportunities with M&A. Of course, we fund our dividends and typically would buy back stock at the end of that list. With regards to M&A, you know, we have the capacity, and we have, you know, the interest in M&A of all sizes. It's really for us, the process that we go through and the discipline that we maintain in that process.

[Rick Olson, Chairman and CEO at The Toro Company]

We're always open to M&A, but it's really the process that and the opportunities and the timing for potential sellers that is the gauging factor. Did that answer your question?

[Eric Bosshard, CEO and Analyst at Cleveland Research]

Yeah. That helps. The second question-

[Rick Olson, Chairman and CEO at The Toro Company]

Yeah. Okay.

[Eric Bosshard, CEO and Analyst at Cleveland Research]

-is from a, from a field inventory perspective on both the pro and residential side. Curious what that looks like presently and also the appetite for loading in both the pro and the residential side from your partners.

[Rick Olson, Chairman and CEO at The Toro Company]

Yeah. We're actually in a very healthy position from a field inventory standpoint. There are, even in a normal situation, there will be differences by businesses, so some a little high, some a little low, and those businesses are working to adjust those just with the normal flow. I would say we're pretty normalized at this point. And, you know, with regards to your question about channel still, it really as we mentioned earlier, sets us up and gives us confidence in the second half of the year with the snow, in particular, the professional products would be going into the preseason in the third quarter and the residential product in the fourth quarter. It does give us confidence in the second half, de-risk some of those factors for the second half.

[Eric Bosshard, CEO and Analyst at Cleveland Research]

Okay. Thank you.

[Rick Olson, Chairman and CEO at The Toro Company]

Thank you.

[Operator]

Thank you. Our next question comes from Michael Shlisky with D.A. Davidson & Co. Your line is open.

[Michael Shlisky, Managing Director and Senior Equity Research Analyst at DA Davidson]

Hi, good morning. Thanks for taking my questions.

[Rick Olson, Chairman and CEO at The Toro Company]

Good morning.

[Michael Shlisky, Managing Director and Senior Equity Research Analyst at DA Davidson]

Hey, guys. not sure if people on your staff who track this, does the heavy snowfall that we saw most of this winter, does that lead to a potential greener spring, assuming temperatures, you know, are somewhat normal?

[Rick Olson, Chairman and CEO at The Toro Company]

It does, Mike. Yeah, obviously snowfall leads to early spring moisture that gets, obviously the growth started early in the spring, so it is typically a positive. We've seen, you know, solid snowfall across the U.S., interestingly, on average, a little bit below. Just because of the extremes, the West had little snow, if you think about some of the ski locations. The Midwest was kind of mixed relative to normal. You experienced on the East Coast, really exceptional winter. That would also influence the effect that you talked about. Less snow in the West would be, you know, less positive going into the spring.

[Michael Shlisky, Managing Director and Senior Equity Research Analyst at DA Davidson]

Got it. Thanks for that. Turning to ConExpo, I really enjoyed that. I checked out the booth the other day at ConExpo, the Ditch Witch booth. I was curious about something I saw there called the Orange Intel system, which looks like an interesting fleet management, kind of telematics type of system. The other brands that you have have similar systems like Horizon360, for example. I was curious how you feel about your offerings compared to the competition. Are both of those other offerings on shared infrastructure that maybe other people can't really replicate? Are there any other digital offerings on the way, like getting Tornado added to it or other digital offerings that might have a good subscription tailwind here?

[Edric Funk, President and COO at The Toro Company]

Yeah. Great observation, Mike, and thanks for the question on that as well. We get more excited every day with the development of those things. In addition to the ones you referenced, Intelli 360 would be another one that we're using on the golf and grounds side of the business. Some of those grew up in different places. Orange Intel is something that had existed with the Ditch Witch brand in the form of Charles Machine Works company, even prior to the acquisition by The Toro Company. Now all of those teams are working together. We execute something within the company that we call our technology forum that brings all of our technology practitioners together to share and continue to co-develop.

[Edric Funk, President and COO at The Toro Company]

Going forward, what you hinted at is absolutely likely that you'll see more and more commonality, let's say, and ability for customers who work across different segments of our product lines to be able to use some common infrastructure. Lots and lots of good stuff going on now and excitement for the future there.

[Michael Shlisky, Managing Director and Senior Equity Research Analyst at DA Davidson]

Great. Maybe one last one on the golf business. I think last quarter you said that, you know, grounds would be a little bit more of a growth area than golf, just 'cause golf had such tough comps and grounds had been a little bit of a kind of hard to meet that demand when golf was so strong. A quarter later, do you still feel that way? Are golf courses? Is grounds gonna be a bigger driver than it was before? I would also be curious about the outlook for international golf courses versus domestic.

[Edric Funk, President and COO at The Toro Company]

Yeah, another good question. I'd say we're probably feeling a bit more optimistic on both fronts in golf and grounds. Our efforts in grounds are showing benefits. You remember well that that was something that we were intending to put more energy toward. On the golf side, we've done some recent research that's showing actually continued growth in equipment purchase expectations and the budgets to support that. We were prepared for some, I guess you'd say, softening off the incredible growth trajectory that we've been on, seeing that normalize more, and it has. The incoming orders have been a bit more brisk than we probably anticipated. I'd say we're probably more optimistic than we were three months ago in that regard.

[Michael Shlisky, Managing Director and Senior Equity Research Analyst at DA Davidson]

Just your thoughts on global golf as opposed to domestic. Any differences there?

[Edric Funk, President and COO at The Toro Company]

Oh, yeah. Yeah. Thank you. Yeah. You know, to connect it back to Rick's earlier comments, things haven't been as strong. Participation internationally has been really good, just as it has been in the U.S. There's still money going into the industry, but we've seen a bit more softness there. Development remains pretty strong. We've given some of the geopolitical things that are going on in the world, we were prepared that that may slow and defer some of the projects in certain regions. Generally, we think things are just connected back to the macroeconomic environment not being quite as strong and maybe a bit less investment internationally than we're seeing in the U.S. Nothing that we're alarmed about, but something that we're watching closely.

[Michael Shlisky, Managing Director and Senior Equity Research Analyst at DA Davidson]

Thanks for that. I appreciate it. I'll pass it along.

[Operator]

Thank you. This concludes the question and answer session. Ms. Hille, please proceed to closing remarks.

[Heather Hille, VP, Corporate Affairs, and Investor Relations at The Toro Company]

Thank you everyone for your questions and interest in The Toro Company. We look forward to talking with you again in June to discuss our second quarter 2026 results.

[Operator]

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.

Participants

Executives

• Angie Drake, VP and CFO
• Edric Funk, President and COO
• Heather Hille, VP, Corporate Affairs, and Investor Relations
• Rick Olson, Chairman and CEO

Analysts

• Eric Bosshard, CEO and Analyst at Cleveland Research
• Joe Nolan, Associate Analyst at Longbow Research
• Michael Shlisky, Managing Director and Senior Equity Research Analyst at DA Davidson
• Sam Darkatsh, Managing Director at Raymond James
• Tim Wojs, Senior Research Analyst at Baird