The Toro Company reports record Q3 fiscal 2022 results
Record third-quarter net sales up 18.8 percent year over year to $1.16 billion.
“We delivered record results while advancing our strategic initiatives during the third quarter,” says Richard M. Olson, chairman and CEO. “Our ability to achieve this performance despite the broader macro uncertainty is a testament to the strength of our portfolio, disciplined execution and collaborative approach. Our team continued to demonstrate resiliency and agility in this unique operating environment, while making progress in restoring historic margin levels and maintaining a sharp focus on serving our customers.
“Professional segment demand remained robust and broad-based. Our biggest challenge continued to be our ability to fulfill heightened order levels in this time of constrained supply. Residential segment demand was solid, moderating as expected on top of the higher base we have built with the past two years of double-digit growth, and aligned with more typical seasonal trends.
“During the quarter, we continued to invest for the long term and prioritized the key technology areas of alternative power, smart-connected, and autonomous solutions. Our focus on technology leadership dovetails with our enterprise-wide commitment to environmental, social, and governance best practices. We were excited to introduce goals and metrics in our latest sustainability report, which should help us drive change in a meaningful way for all stakeholders.”
3Q fiscal 2022 financial highlights
- Net sales of $1.160 billion, up 18.8 percent from $976.8 million in the third quarter of fiscal 2021.
- Net earnings of $125.2 million, up 29.9 percent from $96.3 million in the third quarter of fiscal 2021; *adjusted net earnings of $125.1 million, up 25.8 percent from $99.4 million in the third quarter of fiscal 2021.
- Reported diluted EPS of $1.19 versus $0.89 in the third quarter of fiscal 2021; *adjusted diluted EPS of $1.19 versus $0.92 in the third quarter of fiscal 2021.
Year-to-date fiscal 2022 financial highlights
- Net sales of $3.3427 billion, up 11.5 percent from $2.9989 billion in the first nine months of fiscal 2021.
- Net earnings of $325.8 million, down 6.9 percent from $349.8 million in the first nine months of fiscal 2021; *adjusted net earnings of $327.0 million, down 1.8 percent from $333.0 million in the first nine months of fiscal 2021.
- Reported diluted EPS of $3.08 versus $3.21 in the first nine months of fiscal 2021; *adjusted diluted EPS of $3.09 versus $3.06 in the first nine months of fiscal 2021.
Outlook
“We continue to see solid demand for our innovative solutions across our end markets and are well-prepared to capitalize on growth opportunities,” says Olson. “Orders in our professional segment remain strong, including exceptional momentum in underground construction and golf. For solutions geared to landscape contractors and residential customers, demand remains favorable and, as expected, retail patterns are beginning to normalize.
“On a macro basis, we are keeping a close eye on the mixed signals we are seeing in the economy. We are also watching the broader supply chain environment, which continues to show signs of improvement. Importantly, our team is driving operational efficiencies that put us in a favorable position as we close out our fiscal year and set us up as an even more productive and agile organization."
The company is updating its full-year fiscal 2022 guidance and now expects total net sales growth of about 14 percent and *adjusted diluted EPS in the range of $4.07 to $4.17. This guidance is based on management’s current visibility in what continues to be a dynamic macro environment and reflects expectations for more normal residential demand patterns and continued operational execution, as well as modest accretion from the company’s Intimidator Group acquisition.
Q3 fiscal 2022 segment results
Professional segment
- Professional segment net sales for the third quarter were $886.2 million, up 23.3 percent from $718.5 million in the same period last year. The increase was driven primarily by net price realization, higher shipments of zero-turn and stand-on mowers, and incremental revenue from the company’s fiscal 2022 Intimidator Group acquisition, partially offset by lower volume in certain key product categories due to product availability constraints.
- Professional segment earnings for the third quarter were $166.2 million, up 35.9 percent from $122.3 million in the same period last year, and when expressed as a percentage of net sales, 18.8 percent, up from 17.0 percent in the prior-year period. The increase was primarily due to net price realization, productivity improvements, and net sales leverage, partially offset by higher material, freight and manufacturing costs, and the addition of the Intimidator Group at a lower initial margin than the segment average.
Residential segment
- Residential segment net sales for the third quarter were $270.0 million, up 7.1 percent from $252.1 million in the same period last year. The increase was primarily driven by net price realization and higher shipments of zero-turn riding mowers and snow products, partially offset by lower sales of walk-power mowers and portable-power products.
- Residential segment earnings for the third quarter were $26.3 million, down 16.5 percent from $31.5 million in the same period last year, and when expressed as a percentage of net sales, 9.8 percent, down from 12.5 percent in the prior-year period. The decrease was largely driven by higher material, freight, and manufacturing costs, partially offset by increased net price realization, productivity improvements, and favorable product mix.
Operating results
Gross margin for the third quarter was 34.5 percent, compared with 33.9 percent for the same prior-year period. The increase in gross margin was primarily due to net price realization and productivity improvements, partially offset by higher material, freight and manufacturing costs, as well as the addition of the Intimidator Group at a lower initial gross margin than the company average.
SG&A expense as a percentage of net sales for the third quarter was 20.5 percent compared with 21.4 percent in the prior-year period. The improvement was primarily due to the impact of a one-time legal settlement in the prior-year period and increased net sales leverage, partially offset by higher indirect marketing expenses.
Operating earnings margin was 14.0 percent for the third quarter, compared with 12.5 percent in the same prior-year period. *Adjusted operating earnings margin for the third quarter was 14.1 percent, compared with 13.1 percent in the same prior-year period.
Interest expense was up $2.2 million for the third quarter to $9.2 million, driven by incremental borrowing to fund the company’s acquisition of the Intimidator Group, as well as higher average interest rates.
The reported effective tax rate for the third quarter was 20.3 percent, compared with 18.0 percent for the same prior-year period. The reported effective tax rate increase was primarily due to less favorable one-time adjustments in the current-year period, as well as lower tax benefits recorded as excess tax deductions for stock compensation in the current-year period. The *adjusted effective tax rate for the third quarter was 20.7 percent, compared with 19.3 percent in the third quarter of 2021. The increase was primarily due to less favorable one-time adjustments in the current-year period.
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 $4.0 billion in fiscal 2021, The Toro Company’s global presence extends to more than 125 countries through a family of brands that includes Toro, Ditch Witch, Exmark, Spartan Mowers, BOSS Snowplow, Ventrac, American Augers, Trencor, Pope, Subsite Electronics, HammerHead, Radius HDD, Perrot, Hayter, Unique Lighting Systems, Irritrol, and Lawn-Boy. 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.
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https://www.thetorocompany.com/news-releases/news-release-details/toro-company-reports-record-third-quarter-fiscal-2022-results
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