Continued Broad-Based Demand Across Professional and Residential Segments

• Third-quarter net sales up 16.2% year over year to $977 million; Professional segment net sales up 15.2%, Residential segment net sales up 23.0%
• Reported diluted EPS of $0.89; *Adjusted diluted EPS of $0.92, up 12.2% year over year
• Raises full-year fiscal 2021 net sales and *adjusted diluted EPS guidance

The Toro Company (NYSE: TTC) today reported results for its fiscal third quarter ended July 30, 2021.

“Robust sales continued throughout the quarter in both our professional and residential segments,” said Richard M. Olson, chairman and chief executive officer. “As we capitalized on the current demand environment and focused on serving our customers, our dedicated team and channel partners demonstrated extraordinary resolve in navigating global supply chain challenges.

“We delivered double-digit net sales growth for the second quarter in a row for the professional segment, with continued strength in landscape contractor and golf markets worldwide, increased pre-season shipments of BOSS snow and ice management products, and higher demand for rental and specialty construction equipment and Ventrac products. Residential segment net sales were also up double-digits on top of a very strong third quarter last year, driven by increased retail demand for zero-turn and walk power mowers. Customers are excited about our new and enhanced products across both segments, including our expanding line of battery-powered offerings. Our continued investment in key technology areas underscores our commitment to provide a broad range of innovative and sustainable solutions.”

THIRD-QUARTER FISCAL 2021 FINANCIAL HIGHLIGHTS

• Net sales of $976.8 million, up 16.2% from $841.0 million in the third quarter of fiscal 2020.
• Net earnings of $96.3 million, up 8.3% from $89.0 million in the third quarter of fiscal 2020; *adjusted net earnings of $99.4 million, up 12.1% from $88.7 million in the third quarter of fiscal 2020.
• Reported EPS of $0.89 per diluted share, up 8.5% from $0.82 per diluted share in the third quarter of fiscal 2020; *adjusted EPS of $0.92 per diluted share, up 12.2% from $0.82 per diluted share in the third quarter of fiscal 2020.

YEAR-TO-DATE FISCAL 2021 FINANCIAL HIGHLIGHTS

• Net sales of $3.0 billion, up 18.2% from $2.54 billion in the same prior-year period.
• Net earnings of $349.8 million, up 35.8% from $257.5 million in the same prior-year period; *adjusted net earnings of $333.0 million, up 28.8% from $258.6 million in the first nine months of fiscal 2020.
• Reported EPS of $3.21 per diluted share, up 35.4% from $2.37 per diluted share in the same prior-year period; *adjusted EPS of $3.06 per diluted share, up 28.6% from $2.38 per diluted share in the first nine months of fiscal 2020.
• Deployed $100.0 million to pay down debt and returned $261.8 million to shareholders through regular dividends of $84.7 million and share repurchases of $177.1 million. As of July 30, 2021, the company had ample liquidity of $1.1 billion.

OUTLOOK

“As we enter the final quarter of our fiscal year, we anticipate continued strong demand for our innovative product offerings, and are encouraged by the benefits we are realizing from our productivity and synergy initiatives,” added Olson. “We continue to align our actions with market dynamics and are prudently managing expenses for what is likely to be a challenging supply chain, inflation and labor environment into next year. All in, we are positioned to deliver excellent results for the full fiscal year, including record organic growth as we approach $4 billion in annual revenue. I am deeply inspired by our team’s ability to deliver such impressive results in this incredibly dynamic operating environment.

“Looking ahead, we remain focused on our enterprise strategic priorities of accelerating profitable growth, driving productivity and operational excellence, and empowering people. We are actively prioritizing investments in key technology areas of alternative power, smart connected and autonomous, and ensuring we have capacity to meet expected future growth,” concluded Olson.

The company is increasing its full-year fiscal 2021 guidance, and now expects net sales growth of about 17%, up from a range of 12% to 15% previously, and *adjusted EPS in the range of $3.53 to $3.57 per diluted share, up from the prior range of $3.45 to $3.55 per diluted share. The company’s updated guidance is based on management’s current visibility, and reflects expectations of a strong demand environment, coupled with continuing supply chain, inflation and labor pressures. The *adjusted diluted EPS guidance range excludes the benefit of the excess tax deduction for stock-based compensation and the net impact of certain legal settlements.

FISCAL THIRD-QUARTER SEGMENT RESULTS

Professional Segment

• Professional segment net sales for the third quarter were $718.5 million, up 15.2% compared with $623.6 million in the same period last year. The increase was primarily driven by strong demand for landscape contractor, golf, snow and ice management, rental and specialty construction, and Ventrac products, slightly offset by decreased sales of underground construction equipment due to product availability.
• Professional segment earnings for the third quarter were $122.3 million, up 7.6% compared with $113.7 million in the same period last year, and when expressed as a percentage of net sales, 17.0%, down from 18.2%. The 120 basis point decrease was largely due to higher material and freight costs, partially offset by net price realization and productivity improvements.

Residential Segment

• Residential segment net sales for the third quarter were $252.1 million, up 23.0% compared with $205.0 million in the same period last year. The increase was primarily due to strong retail demand for zero-turn and walk power mowers.
• Residential segment earnings for the third quarter were $31.5 million, up 10.5% compared with $28.5 million in the same period last year, and when expressed as a percentage of net sales, 12.5%, down from 13.9%. The 140 basis point decrease was largely driven by higher material and freight costs, partially offset by net price realization, productivity improvements and product mix.

OPERATING RESULTS

Gross margin for the third quarter was 33.9%, down 110 basis points compared with 35.0% for the same prior-year period. *Adjusted gross margin for the third quarter was 33.9%, down 130 basis points compared with 35.2% for the prior-year period. The decreases in gross margin and adjusted gross margin were primarily due to higher material and freight costs, partially offset by net price realization and productivity improvements.

SG&A expense as a percentage of net sales for the third quarter increased 20 basis points to 21.4% from 21.2% in the prior-year period. The increase was primarily driven by more normalized spending compared with a year ago and a legal settlement in the third quarter of this year.

Operating earnings as a percentage of net sales decreased 130 basis points to 12.5% for the third quarter. *Adjusted operating earnings as a percentage of net sales decreased 80 basis points to 13.1% for the third quarter.

Interest expense was down $1.3 million for the third quarter to $7.0 million, driven by lower debt levels and decreased interest rates.

The effective tax rate for the third quarter was 18.0% compared with 19.8% for the third quarter of fiscal 2020. The *adjusted effective tax rate for the third quarter was 19.3% compared with 20.9% for the third quarter of fiscal 2020. The decreases were primarily driven by one-time adjustments related to prior years, partially offset by the geographic mix of earnings.

*Non-GAAP financial measure. Please see the tables provided for a reconciliation of historical non-GAAP financial measures to the most comparable GAAP measures.

LIVE CONFERENCE CALL

September 2, 2021 at 10:00 a.m. CDT

www.thetorocompany.com/invest

The Toro Company will conduct its earnings call and webcast for investors beginning at 10:00 a.m. CDT on September 2, 2021. The webcast will be available at www.thetorocompany.com/invest. Webcast participants will need to complete a brief registration form and should allocate extra time before the webcast begins to register and, if necessary, install audio software.

About The Toro Company

The Toro Company (NYSE: TTC) is a leading worldwide provider of innovative solutions for the outdoor environment including turf and landscape maintenance, snow and ice management, underground utility construction, rental and specialty construction, and irrigation and outdoor lighting solutions. With sales of $3.4 billion in fiscal 2020, The Toro Company’s global presence extends to more than 125 countries through a family of brands that includes Toro, Ditch Witch, Exmark, BOSS Snowplow, Ventrac, American Augers, Subsite Electronics, HammerHead, Trencor, Unique Lighting Systems, Irritrol, Hayter, Pope, Perrot, Lawn-Boy and Radius HDD. Through constant innovation and caring relationships built on trust and integrity, The Toro Company and its family of brands have built a legacy of excellence by helping customers work on golf courses, sports fields, construction sites, public green spaces, commercial and residential properties and agricultural operations. For more information, visit www.thetorocompany.com.

Use of Non-GAAP Financial Information

This press release and our related earnings call references certain non-GAAP financial measures, which are not calculated or presented in accordance with U.S. GAAP, as information supplemental and in addition to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP. The non-GAAP financial measures included within this press release and our related earnings call that are utilized as measures of our operating performance consist of gross profit, gross margin, operating earnings, earnings before income taxes, net earnings, net earnings per diluted share, and the effective tax rate, each as adjusted. The non-GAAP financial measures included within this press release and our related earnings call that are utilized as measures of our liquidity consist of free cash flow, and free cash flow conversion percentage.

The Toro Company uses these non-GAAP financial measures in making operating decisions and assessing liquidity because it believes these non-GAAP financial measures provide meaningful supplemental information regarding core operational performance and liquidity and provide the company with a better understanding of how to allocate resources to both ongoing and prospective business initiatives. Additionally, these non-GAAP financial measures facilitate the company's internal comparisons for both historical operating results and competitors' operating results by factoring out potential differences caused by charges not related to its regular ongoing business, including, without limitation, certain non-cash, large, and/or unpredictable charges and benefits; acquisitions and dispositions; legal judgments, settlements, or other matters; and tax positions. Further, the company believes that these non-GAAP financial measures, when considered in conjunction with the financial measures prepared in accordance with U.S. GAAP, provide investors with useful supplemental financial information to better understand its core operational performance and liquidity.

Reconciliations of historical non-GAAP financial measures to the most comparable U.S. GAAP financial measures are included in the financial tables contained in this press release. These non-GAAP financial measures, however, should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the U.S. GAAP financial measures included within this press release and the company’s related earnings call. These non-GAAP financial measures may differ from similar measures used by other companies.

The Toro Company cannot provide quantitative reconciliations of forward-looking non-GAAP financial measures provided herein or in its related earnings call without unreasonable effort because the combined effect and timing of recognition of potential charges or gains is inherently uncertain and difficult to predict. In addition, since any adjustments could have a substantial effect on U.S. GAAP measures of financial performance, such quantitative reconciliations would imply a degree of precision and certainty that could be confusing to investors. From a qualitative perspective, it is anticipated that the differences between the forward-looking non-GAAP financial measures and the most directly comparable GAAP financial measure will consist of items similar to those described in the financial tables later in this release, including, for example and without limitation, certain non-cash, large, and/or unpredictable charges and benefits; acquisitions and dispositions; legal judgments, settlements, or other matters; and tax positions.

Forward-Looking Statements

This news release contains forward-looking statements, which are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s current assumptions and expectations of future events, and often can be identified by words such as “expect,” “strive,” “looking ahead,” “outlook,” “guidance,” “forecast,” “goal,” “optimistic,” “anticipate,” “continue,” “plan,” “estimate,” “project,” “believe,” “should,” “could,” “will,” “would,” “possible,” “may,” “likely,” “intend,” “can,” “seek,” “potential,” “pro forma,” or the negative thereof or similar expressions. Forward-looking statements involve risks and uncertainties that could cause actual events and results to differ materially from those projected or implied. Forward-looking statements in this release include the company’s fiscal 2021 financial guidance. Particular risks and uncertainties that may affect the company’s operating results or financial position include: COVID-19 related factors, risks and challenges; adverse worldwide economic conditions; disruption at or in proximity to its facilities or in its manufacturing or other operations, or those in its distribution channel customers, mass retailers or home centers where its products are sold, or suppliers; fluctuations in the cost and availability of commodities, components, parts, and accessories, including steel, engines, hydraulics and resins; the effect of abnormal weather patterns; the effect of natural disasters, social unrest, and global pandemics; the level of growth or contraction in its key markets; customer, government and municipal revenue, budget, spending levels and cash conservation efforts; loss of any substantial customer; inventory adjustments or changes in purchasing patterns by customers; the company’s ability to develop and achieve market acceptance for new products; increased competition; the risks attendant to international relations, operations and markets; foreign currency exchange rate fluctuations; financial viability of and/or relationships with the company’s distribution channel partners; risks associated with acquisitions; impairment of goodwill or other intangible assets; impacts of any restructuring activities; management of alliances or joint ventures, including Red Iron Acceptance, LLC; impact of laws, regulations and standards, consumer product safety, accounting, taxation, trade, tariffs and/or antidumping and countervailing duties petitions, healthcare, and environmental, health and safety matters; unforeseen product quality problems; loss of or changes in executive management or key employees; the occurrence of litigation or claims, including those involving intellectual property or product liability matters; and other risks and uncertainties described in the company’s most recent annual report on Form 10-K, subsequent quarterly reports on Form 10-Q or current reports on Form 8-K, and other filings with the Securities and Exchange Commission. The company makes no commitment to revise or update any forward-looking statements in order to reflect events or circumstances occurring or existing after the date any forward-looking statement is made.

(Financial tables follow)

THE TORO COMPANY AND SUBSIDIARIES

Reconciliation of Non-GAAP Financial Measures (Unaudited)

(Dollars in thousands, except per-share data)

The company has provided financial measures that are not calculated or presented in accordance with United States ("U.S") generally accepted accounting principles ("GAAP") ("non-GAAP financial measures"), as information supplemental and in addition to the most directly comparable financial measures presented in the accompanying press release that are calculated and presented in accordance with U.S. GAAP. The company uses these non-GAAP financial measures in making operating decisions because the company believes they provide meaningful supplemental information regarding the company's core operational performance and cash flows, as a measure of the company's liquidity, and provide the company with a better understanding of how to allocate resources to both ongoing and prospective business initiatives. Additionally, these non-GAAP financial measures facilitate management's internal comparisons to both the company's historical operating results and to the company's competitors' operating results by factoring out potential differences caused by charges and benefits not related to the company's regular, ongoing business, including, without limitation, certain non-cash, large, and/or unpredictable charges and benefits; acquisitions or dispositions; legal judgments, settlements or other matters; and tax positions. The company believes that such non-GAAP financial measures, when considered in conjunction with the company's financial measures prepared in accordance with U.S. GAAP, provide investors with useful supplemental financial information to better understand the company's core operational performance and cash flows. These non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the most directly comparable U.S. GAAP financial measures presented in the accompanying press release. The non-GAAP financial measures presented in the accompanying press release may differ from similar measures used by other companies.

Reconciliation of Non-GAAP Financial Performance Measures

The following table provides a reconciliation of financial performance measures calculated and reported in accordance with U.S. GAAP to the most directly comparable non-GAAP financial performance measures included within the accompanying press release for the three and nine month periods ended July 30, 2021 and July 31, 2020:

Reconciliation of Non-GAAP Liquidity Measures

The company defines non-GAAP free cash flow as net cash provided by operating activities less purchases of property, plant and equipment. Non-GAAP free cash flow conversion percentage represents non-GAAP free cash flow as a percentage of net earnings. The company considers non-GAAP free cash flow and non-GAAP free cash flow conversion percentage to be liquidity measures that provide useful information to management and investors about the company's ability to convert net earnings into cash resources that can be used to pursue opportunities to enhance shareholder value, fund ongoing and prospective business initiatives, and strengthen the company's Consolidated Balance Sheets, after reinvesting in necessary capital expenditures required to maintain and grow the company's business. The following table provides a reconciliation of net cash provided by operating activities, the most directly comparable GAAP financial measure, to non-GAAP free cash flow for the nine month periods ended July 30, 2021 and July 31, 2020:

View source version on businesswire.com: https://www.businesswire.com/news/home/20210902005132/en/

The Toro Company reports record third quarter fiscal 2021 results on strong performance across professional and residential businesses.