Toro Co Q1 FY2021 Earnings Call

Good day, ladies and gentlemen, and welcome to The Toro Company’s First Quarter Earnings Conference Call. My name is Joelle and I’ll 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 provided instructions on how to ask questions. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today’s conference, Nicholas Rhoads, Managing Director of Investor Relations for The Toro Company. Please proceed, Mr. Rhoads.

Thank you, and good morning. Our earnings release was issued this morning and a copy can be found in the Investor Information section of our corporate website, thetorocompany.com. On our call today are Rick Olson, Chairman and Chief Executive Officer; Renee Peterson, Vice President, Treasurer, and Chief Financial Officer; and Julie Kerekes, Senior Managing Director, Global Tax and Treasury. We begin with our customary forward-looking statement policy. During this call, we will make forward-looking statements regarding our business and future financial and operating results. You are all aware of the inherent difficulties, risks and uncertainties in making predictive statements. Our earnings release, as well as our SEC filings, detail some of the important risk factors, including those related to COVID-19, that may cause our actual results to differ materially from those in our predictions. Please note that we do not have a duty to update our forward-looking statements. In addition, during this call, we will reference certain non-GAAP financial measures. Reconciliations of historical non-GAAP financial measures to reported GAAP financial measures can be found in our earnings release or on our website. We believe these measures may be useful in performing meaningful comparisons of past and present operating results to understand the performance of our ongoing operations and how management views the business. Non-GAAP financial measures should not be considered superior to or a substitute for the GAAP financial measures presented in our earnings release and this call. On a personal note, I’d like to take this opportunity to announce that Julie Kerekes will be assuming my responsibilities as Senior Managing Director of Investor Relations, working with Olga Guteneva. It has been a pleasure working with each of you in this capacity over the last year. Julie and Olga are not new to the IR function at The Toro Company, and you will find the transition to be seamless and their leadership of the IR efforts. With that, I will now turn the call over to Rick.

Thanks, Nick, and good morning. I’d like to begin by extending my personal thanks to Nick and congratulate Julie on her expanded role. During the past year, Nick has helped advance our Investor Relations focus, including adding Olga to the team. I’ve enjoyed working with Nick and I look forward to continuing to enhance our external communications under Julie’s leadership. We reported very strong results for the first quarter of fiscal 2021 with continued momentum across our professional and residential businesses. Double-digit growth in this dynamic environment is a testament to our focus on innovation, operational execution and the perseverance of our team and channel partners. To share highlights of the quarter, net sales were up 14% year-over-year and up 11% organically. Professional segment net sales were up 9% — a continuation of the growth trend for this segment. Higher shipments of landscape contractors' zero-turn riding mowers led the growth along with incremental sales from venture products. Residential segment net sales were up 31%, setting another record. We saw broad-based demand across our segment with snow equipment driving significant growth due to favorable weather and enhanced mass retail placement. Momentum also continued for our all-season Flex-Force 60-volt lithium-ion products and demand remained strong for walk power mowers. The introduction of our innovative new products, coupled with effective marketing and expanded mass retail channels, has further strengthened our brand during this recent period of heightened residential growth. From a segment earnings perspective, Professional segment grew 14% and Residential increased 49%. We generated strong free cash flow in the quarter, which allowed us to pay down $90 million in debt and resume share repurchases. We also continued to make investments in key technology areas like alternative power, smart connected, and autonomous to drive sustained long-term growth. Notably, we recently acquired TURFLYNX and Left Hand Robotics, both of which are technology accelerators. Finally, we believe the critical path forward in emerging from the pandemic involves worldwide vaccinations. We have developed specific plans for each of our sites to take full advantage of vaccination opportunities. In addition, we launched our new 'So We Can' campaign to provide education and encourage employees to get vaccinated against COVID-19 as soon as they are able. As we prepare for the broader distribution of vaccines, our team has remained diligent in navigating the continued pandemic environment. They’re keeping health and safety in the forefront while meeting surging demand from our retailers and customers. Thank you to the entire team as well as our channel partners for your perseverance and ongoing commitment. Three underlying elements stand out this quarter as we delivered favorable results in a dynamic environment. The first is the strength of the Residential segment. Coming off a record-setting year, the team delivered another record quarter. These results were driven by expanded distribution and new products complemented by stay-at-home trends and favorable weather. The second element is the productivity story in our business. We continue to drive productivity and synergy benefits enterprise-wide. This has helped mitigate factors such as inflation and COVID-related manufacturing inefficiencies. The third element is our unwavering commitment to innovation. The success of new products across our businesses in the first quarter highlights the strong return on innovation investments. For example, battery-powered products now represent a growing and important part of our business. This commitment to innovation reflects our dedication to constantly provide new solutions for customers' ever-evolving needs regardless of the market environment or macro economy. Our enterprise strategic priorities of accelerating profitable growth, driving productivity and operational excellence, and empowering people guided our strong execution in the quarter. I am optimistic about our momentum as we head further into 2021, given our continued investments in technology and new products, excellent relationships with our channel partners, strong financial position and effective operational and capital deployment capabilities. With that, I will now turn the call over to Renee for a more detailed discussion of our financial results.

Thank you, Rick, and good morning, everyone. We reported a very strong first quarter as our professional businesses continue to recover in a meaningful way and we continued to capitalize on robust residential demand. We grew net sales by 13.7% to $873 million. Reported EPS was $1.02 and adjusted EPS was $0.85 per diluted share. This compares with reported EPS of $0.65 and adjusted EPS of $0.64 for the comparable quarter last year. Now to the segment results: Professional segment net sales for the quarter were up 9.3% to $650.2 million. This increase was primarily due to higher shipments of landscape contractor zero-turn riding mowers and incremental sales from the Venture Products acquisition, partially offset by decreased sales of underground construction equipment to oil and gas markets and the timing of international shipments of golf and grounds equipment. Professional segment earnings for the quarter were up 14% to $116.8 million. When expressed as a percent of net sales, segment earnings increased 80 basis points to 18%. This increase was primarily due to sales volume leverage, productivity, synergy initiatives, and net price realization, partially offset by manufacturing cost pressures and product mix. Residential segment net sales for the quarter were up 31.3% to $217.7 million. The increase was primarily due to strong retail demand for snow products, driven by favorable weather and expanded mass retail placement, Flex-Force battery-powered products, and shipments of walk power mowers ahead of the key selling season. Residential segment earnings for the quarter were up 48.9% to a record $32.1 million. This reflects a 170 basis point year-over-year increase to 14.7% when expressed as a percent of net sales. The same drivers and offsets that affected Professional segment earnings also affected Residential segment earnings. Turning to our operating results, we reported gross margin for the quarter of 36.1%, a decrease of 140 basis points from the prior year. Adjusted gross margin was also 36.1%, down 150 basis points. The decreases in gross margin and adjusted gross margin were primarily due to manufacturing cost pressures and product mix, partially offset by productivity, synergy initiatives, and net price realization. SG&A expense as a percent of net sales decreased 570 basis points to 19.9% for the quarter. This decrease was primarily due to sales volume leverage, a favorable one-time legal settlement and lower indirect marketing expenses. Operating earnings as a percent of net sales for the quarter increased 430 basis points to 16.2%. Adjusted operating earnings as a percent of net sales increased 210 basis points to 14.2%. Interest expense of $7.5 million was down approximately $600,000 compared with a year ago, driven by lower interest rates. The reported effective tax rate was 18.1% for the first quarter and adjusted effective tax rate was 21.5%. Turning to the balance sheet and cash flow: At the end of the quarter, our liquidity was just over $1 billion. This included cash and cash equivalents of $433 million and full availability under our $600 million revolving credit facility. We have no significant debt maturities until April of 2022. Accounts receivable totaled $306.9 million, down 4.5% from a year ago, due to channel mix and the timing of other receivables. Inventory was down 8.6% from a year ago to $675.3 million. This decrease was due to lower inventory in certain Professional segment businesses, as well as the results of increased demand for our products. Accounts payable increased 4.7% to $364.4 million from a year ago. This was due to increased purchases of component inventories as well as incremental payables from the Venture Products acquisition. First quarter free cash flow was $84.5 million with a reported net earnings conversion ratio of 76%. This positive performance was primarily the result of higher earnings, the favorable one-time legal settlement and lower working capital, mainly due to reduced inventories as compared with the first quarter of last year. Our disciplined capital allocation strategy includes investing in organic and M&A growth opportunities, maintaining an effective capital structure and returning cash to shareholders. Our capital priorities remained the same and include reinvesting in our businesses to support sustainable long-term growth, both organically and through acquisitions; returning cash to shareholders through dividends and share repurchases; and repaying debt to maintain our leverage goals. During the first quarter, we paid down $90 million in debt and returned $59.8 million to shareholders, with $28.4 million in regular dividends and $31.4 million in share repurchases. We are reaffirming our full year fiscal 2021 guidance. Demand remains high across our businesses and our guidance is based on current visibility and certain potential effects of COVID-19. Additionally, we are actively managing a dynamic supply chain and cost inflation environment. I’ll share the guidance highlights and Rick will cover the macro trends and key factors we’ll be watching throughout the remainder of the year. For fiscal 2021, we continue to expect net sales growth in the range of 6% to 8%. This includes four months of incremental sales from the Venture Products acquisition. We expect continued recovery in Professional segment end markets. The strongest growth in the Professional segment will be in the second and third quarters as those comparable periods last year were most impacted by the pandemic. We expect full year residential segment net sales growth to be in the low to mid single digits, following an exceptionally strong fiscal 2020 and first quarter 2021. We anticipate strong retail demand to continue throughout the year, given the comparison to record-setting performance last year and potential supply chain constraints. We expect year-over-year residential segment net sales growth to moderate for the remainder of the year. Looking at overall profitability, we expect moderate improvement in fiscal 2021 adjusted operating earnings as a percent of net sales compared with fiscal 2020. This assumes continued productivity and synergy benefits, net price realization and lower COVID-related manufacturing inefficiencies, partially offset by potential supply chain constraints and an unexpected inflationary environment. In the Professional segment, we expect earnings as a percent of net sales to improve versus fiscal 2020, due to better volume leverage. In the Residential segment, we expect earnings as a percent of net sales to be similar to fiscal 2020. We expect full year adjusted EPS in the range of $3.35 to $3.45 per diluted share. This estimate includes the effects of recently announced acquisitions. It excludes the benefit of the excess tax deduction for share-based compensation and the favorable one-time legal settlement. Based on current visibility, we anticipate adjusted EPS to be higher in the first half of fiscal 2021 versus the prior year period. For the second half of fiscal 2021, we expect adjusted EPS to be comparable with the same period of fiscal 2020. Looking to the rest of the year, we’re excited about the robust near-term demand environment as we continue to execute on our long-term strategic priorities and invest in innovation to capitalize on future growth opportunities. I will now turn the call back to Rick.

Thanks, Renee. Looking ahead, we’ll be watching several macro trends to provide us with additional insights into the remainder of the year. These include the ongoing effects of COVID-19, including its impact on manufacturing efficiencies and potential global supply chain disruptions; weather patterns including the timing of spring in Northern climates; global economic recovery factors driving general consumer and business confidence; as well as the related commodity and inflationary effects. From an end market perspective, demand trends are positive and we’re well positioned for further growth. Recent strong retail demand has reduced field inventory and many of our channel partners are seeking to replenish given the improved outlook. We’re watching a number of key end market drivers for our residential and certain professional businesses: continuing customer interest in home investments; for landscape contractors, improved business confidence leading to the resumption of capital investments along with catch-up purchases of prior deferrals; for golf, a strong start to the season in Northern markets, an increase in international course reopenings and the expected return of travel and resort golf, all leading to another great year for rounds played; for grounds equipment, increased spending on outdoor space maintenance and improvement projects by municipal and other tax-supported entities; for underground, increased funding for 5G and broadband build-out and critical need infrastructure rehab and replacement; for rental and specialty construction, continued upgrades and replacements of fleets by independent rental companies and national accounts; and for snow and ice management, channel response to lower end-of-season inventory levels as a result of recent snow events. We continue to be excited about our innovative suite of products that are well positioned to capitalize on these market opportunities. These products directly address customer trends, including the focus on home improvements with a complete line of residential products from walk and zero-turn mowers to irrigation and lighting solutions, including the zero-emission all-season Flex-Force 60V lithium-ion suite of products, and our professional line of maintenance and renovation products. For the growing interest in professional battery electric solutions, we have the Greensmaster eTriFlex and hybrid riding Greensmowers, the Toro e-Dingo compact utility loader and the expanding line of lithium-ion Workman GTX Utility Vehicles. For increased productivity solutions, we offer the Toro Dingo TXL 2000 and Ditch Witch SK3000 stand-on skid-steers, Toro Exmark and Ventrac high-capacity mowers, a new line of Ditch Witch horizontal directional drills, the BOSS drag pro rear-mount truck plow and Ventrac sidewalk snow and ice management equipment. It’s because of our deep commitment to innovation, strong customer relationships, exceptional sales and service through our channel partners and stellar product lineup that we are seeing significant momentum across our businesses with world-class partners. Two exciting examples in golf are our new partnerships with PGA Frisco and Pebble Beach Resorts. We’re honored that every 2021 major championship tournament will be played on a course serviced by Toro-branded turf equipment. And we are the official Ryder Cup turf equipment and irrigation provider for the remainder of the decade. In closing, we are optimistic as we head into our peak selling season, while the environment remains dynamic as we manage through COVID-related manufacturing and supply chain challenges. We have a number of factors working in our favor: a diverse portfolio of businesses and strong customer relationships, productivity initiatives to drive increased profitability and operational excellence, continued investments in innovative products and emerging technologies, and as always, our team is the key to The Toro Company’s continued success. Thank you to our employees for your dedication and resilience and to our channel partners, customers and shareholders for your continued support. With that Renee and I will take your questions.

Operator provided instructions on how to ask questions. And your first question comes from Tim Wojs with Baird. Your line is now open.

Hey, everybody. Good morning. Thanks for the details. And congrats Julie and Nick. We’ll miss working with you. Maybe just first question I had was, just to focus a little bit on the supply chain. If you could maybe elaborate a little bit on where you’re seeing constraints currently and how you’re managing through that. And more broadly, what your confidence is that you’ll be able to meet spring demand from a production, supply chain and capacity standpoint?

Supply chain is something that we’ve been managing very closely over the last year in the COVID environment and that challenge continues. It’s in the context now of pretty significant demand — demand is very strong at this point. This is an industry-wide issue. It’s a global challenge. In fact, beyond just our industry, demand has come back fairly rapidly and many of the suppliers are still in a COVID-restricted environment and probably hadn’t fully anticipated the recovery happening at that rate. We have a very close working relationship with our suppliers. We’re in constant contact with them making sure that we can do every possible thing we can to keep our lines running. Another part of that is making sure that we’ve got the right product in the right location to serve the customers and make sure that we don’t short anyone. So we’re confident coming into the season that we have matched our supply with demand, but that will continue to be an ongoing challenge as we go forward. I would also point out our operations team has done a heroic job of keeping lines running and keeping the communication lines open with our suppliers to make sure that we can do everything we can to produce.

Okay. And I guess, relative to others in the industry, given your scale, do you think you’re at a relative advantage versus other players in the industry?

It is an industry-wide issue, but we do a lot of work to build relationships with our suppliers and to put contracts in place to protect us. So it’s going to be a challenge for everyone, but we believe that we’re in a good position with our suppliers relative to our competition.

Okay. Okay. That’s great. And then on the Residential business, is there a way to frame what the placement or product lineups at some of your key retailers look like this year versus maybe the last year or two? And you talked about battery in your prepared remarks — could you elaborate on what percentage of sales battery is for Toro on a trailing 12-month or this quarter basis and how that compares to POS?

Starting with the first quarter, snow was a big part of the story for residential. That was, in addition to a better-than-average snow year in some parts of the country, also due to improved placement. That was part of a more complete lineup with our channel partners. We continue to add placement with our key partners; with our dealers we continue to offer additional products and with mass retailers we continue to add lines. You probably saw the emphasis from The Home Depot specifically on electric. We’re pleased to be one of the brands that will be featured as an electric supplier and a focus area. As a percentage of sales, I don’t know that we have that number in front of us today. It’s still a relatively small portion of the overall business, but it’s a very rapidly growing piece of our business.

Okay. I’m going to sneak one last one — these are small, but you did do two robotics acquisitions over the last couple of months. Robotics does seem to be a game changer. If you talk to golf course superintendents and others where labor is a big issue, could you talk a little bit about how you see that developing and any sort of timeline and commercialization there?

We agree. It is an important part of the future and for us that cuts across all of our markets. You talk about golf, but there’s interest in many of our markets for robotics solutions, driven by a number of factors. For example, in the spray or chemical application business, the ability to do that more accurately reduces environmental impact and costs. Labor is another key driver. We showed in 2019 a vision of what our autonomous solutions look like for golf and we’re on track to bring solutions to market. I can’t be specific about timing, but we’re on track with our plans relative to what we talked about at that time. The acquisitions specifically are a perfect fit for the strategies we have described previously. They hit all of the technology areas, including alternative power, connected and robotics, and they’ll be a great boost to our capabilities internally as well.

Thank you. Your next question comes from Mike Shlisky with Colliers Securities. Your line is now open.

Good morning. In your prepared remarks, you mentioned a few times there were some manufacturing cost pressures. Can you comment on what those exactly were? Is it cost of labor, availability of labor, things stuck in the ports, freight issues? Just some color as to what Toro is seeing on that side.

Mike, for the quarter it’s important to recall that we’re comparing to a pre-COVID quarter. What we’re seeing is some impact from social distancing and capacity constraints driven by that, as well as a number of other impacts related to suppliers ramping up as demand increases. Certainly commodities have taken a step-up as well — steel in particular — and we’re seeing the impact of that. As always, we focus first and foremost on our synergies and productivity efforts to try to offset that. We do tend to get some price realization, typically between one and two points. We always price to market, not to cost. These situations aren’t unique to Toro; we anticipate they’re happening across the industry. Over time, pricing kind of balances out with that as well.

Got it. Can you also comment on the cold weather and storms we recently saw in Texas and parts of the Southeast U.S. in February? I’m curious if you were able to deliver inventory to that region at the last minute and/or in the aftermath are you seeing any unusual utilization or demand either on the underground equipment side or on the rental side as opposed to clean-up?

There were a number of effects both on the supply and on the demand side. On the demand side, through the central portion of the country, the snow events of the last several weeks have been very positive in terms of driving snow product demand. On the supply side, we have a number of key suppliers within the Gulf Coast region, especially in resin; there’s a concentration of resin suppliers in that area. They are coming back online but they have had some delays. Freight moving products around the country during those weeks with the severe storms challenged our operations footprint. We have operations in areas that were affected by the cold. Our facilities are up and running completely now, but they did experience some delays. It’s really the continued recovery — bringing power back on to the region, fixing the utilities and so forth. We will see some positive effect on demand with utilities repair and so forth, but it’s not going to be a significant driver specific to the repair process.

Got it. One more: the stimulus plan is currently being discussed in Congress. Can you give us a sense — is your outlook at all based upon consumers getting more stimulus checks? If things change, would that affect retail sell-through at some of your national partners?

I think the most positive effect would be to continue to bring the economy back faster, putting more money into the economy. We don’t determine specifically which of our potential customers could be directly advantaged by any of that legislation. For us, the biggest thing would be focusing on getting the COVID situation under control. We believe that has a lot of benefits internally and externally. You heard us talk about how important we feel the vaccination processes are and we’re directly making sure that we can optimize our own access and vaccination process within our facilities.

Yes. I think that will help not only Toro but it will help our supply base as well.

Good point.

Got it. Rick, Renee, thanks so much.

Your next question comes from Eric Bosshard with Cleveland Research Company. Your line is now open.

Good morning.

Good morning.

Curious — it sounded like on the Pro side the growth was more focused in landscape contractor. What’s going on in terms of end-market demand trends in golf and Charles Machine Works, and how do you feel about your ability to manage supply relative to where demand is going in those two end markets?

The trends that we talked about in the fourth quarter have continued for Pro, so a pretty significant recovery. Most of the markets that were affected this time last year have come back very nicely, including golf — we see orders going forward and the resumption of capital purchases. The one exception is a very small portion related to oil and gas exposure through Charles Machine Works; they’re kind of in a pause mode as energy policy becomes more clear. But that’s a couple percent of our total business. In terms of the ability to meet that demand, we’re doing everything possible. We are working with our suppliers to have the products and we’ll continue to manage that as our top priority.

Within Charles Machine Works, between what’s going on in energy, the change that’s taken place, residential construction, and 5G, when you look at all of those together, is the growth outlook for that business now worse because of energy, or are the others offsetting that? How do you feel about the growth outlook for that business relative to perhaps a year ago?

We feel outstanding about the drivers. The key drivers you mentioned — 5G broadband build-out, alternative energy and infrastructure rehab — are very positive. If you look at the timeline of previous build-outs like 4G, there’s still more dollars being spent on 4G infrastructure today than 5G, so 5G is nowhere close to hitting its peak. Investments in infrastructure are higher now than in 2019. Alternative energy also has a significant underground element. Recent issues with water mains in the South highlight aging infrastructure. All those demands are positive for Charles Machine Works. To put it in perspective, direct oil and gas exposure is less than 10% — high single digits — so other factors will be much stronger drivers going forward and have a lot of momentum.

Very helpful. Thank you.

Your next question comes from Ross Gilardi with Bank of America. Your line is now open.

Good morning, guys.

Good morning, Ross.

I was wondering if you could talk a little bit more about the outdoor category at The Home Depot. Toro has a big position at The Home Depot, but there’s a lot happening — EGO is going to Lowe’s, competitors are pushing cordless riders, building capacity for cordless mowers in the U.S. How are you investing to ensure you get your appropriate share of shelf space at The Home Depot in the cordless category as that evolution continues? And any insight on what kind of role Amazon is playing in outdoor and your position with Amazon as a distribution partner?

We’re always aware of what’s happening with our competitors. The Home Depot is a long-term partner of ours and we’ve grown our battery line there steadily over the years. We’ll be a key part of their battery solutions going forward. We’re aware of competitors’ investments and branding work. This has been a very competitive market for a long time and we compete with very high-quality competitors. Regarding battery investments, that’s been a priority for us. We have the ability to leverage across different areas as we go into higher-power applications — that’s a heavy use of batteries and fundamentally important to shelf strategy. We approach the market differently in some ways and have advantages including our reputation in outdoor equipment. As you shift from low-power to higher-power applications, customers decide whether to stick with a brand that’s more of a power tools company or one with deep outdoor experience; we believe our 100 years of outdoor experience is an advantage. On Amazon, it is a factor in many markets. We have some relationships with Amazon in various parts of the world and markets. We also have a significant online retail e-commerce business through both ourselves and key channel partners who are significant in e-commerce, and we partner closely with them. So we have a strong e-commerce presence; Amazon is one factor among many.

Okay, great. And specifically related to Texas, with water infrastructure issues, are those problems an opportunity for Ditch Witch, or are they more in areas that wouldn’t involve that type of equipment for remediation?

Remediation is a modest opportunity. Many of the entities working to fix those issues have existing equipment and may not immediately replace it. So there is a modest short-term effect. The larger effect is the broader realization that we need to address aging infrastructure. Decisions to weatherproof facilities and other investments add to the longer-term demand trend that will be positive for Charles Machine Works and Ditch Witch.

Thank you very much.

Your next question comes from David MacGregor with Longbow Research. Your line is now open.

Good morning, everyone.

Good morning, Dave.

I wanted to ask about the outlook on the Pro business. You talked about a catch-up opportunity in 2021 with deferred spending by landscape contractors. How big might that opportunity be for you as you think about your 2021 guidance?

The catch-up is part of it, but the bigger portion is the return of business confidence. We expect continued strength across the Pro line: LCE is an important growth driver, construction businesses are strong, rental pickup with national accounts and independent rental companies was strong throughout 2020, and golf continues to pick up. There’s some uncertainty around municipal budget-driven business, which depends on relief funding and budget prioritization. However, we’ve seen evidence that cities and municipal budgets are prioritizing outdoor spaces based on their use last year.

Do you feel you’re sufficiently inventoried in the field in your Pro business for the strong 2021 demand you’re talking about?

Our field inventory is in generally good shape. There are a few areas where we would like to have more field inventory on both the Professional and Residential side. Strong demand in the fourth quarter and the first quarter made that more challenging to build out inventory, but we will take the opportunity to build as we can and we feel generally good about field inventory.

On the Residential business, up 31% — if possible, could you give more transparency into the drivers behind that growth? Specifically, what did extended favorable weather in November and December contribute, and how did Flex-Force contribute?

Some factors we discussed in 2020 remain: stay-at-home trends helped, but that’s one of many factors. For us it’s our refreshed line, enhanced placement with current partners, addition of new mass channel partners like Tractor Supply, the strength of the brand and marketing. Snow was a major factor in the quarter — both weather conditions and placement — and Flex-Force lithium-ion products were a significant contributor. Walk power mowers also had positive comparisons given small comps in that period. Overall it was broad strength with snow as the biggest upside driver.

If Flex-Force and battery grow, how do you think about potential cannibalization of gas-powered lines and what net growth could be achieved?

It’s likely there will be some cannibalization, particularly in categories like walk power mowers. Our plans are aimed at maintaining or growing market share regardless of power source. As battery maturity progresses, the focus becomes features, benefits and quality of cut and support, and those are areas where we have advantages.

On TURFLYNX and Left Hand Robotics, what are the limiting factors for acceptance of autonomous products and what would you need to do to encourage purchasing decisions rather than having customers wait for the next generation?

There is significant demand now for autonomous products driven by labor and productivity challenges. The limiting factor is having products that meet customer needs. We won’t bring products to market just to say we have a robot — we tested autonomous solutions before. Our timing will be based on confidence that we have terrific solutions that resolve customer issues and delight them. We believe demand is there and growing; we’re focused on delivering the right product solutions.

Can you leverage your existing dealership network with these products? That seems like an opportunity for you.

We have an incredible dealer network across multiple brands and thousands of dealer points, and that is absolutely an advantage as we bring products that are more technical and require support and infrastructure to work well. We view that as an advantage.

All right. Congratulations on the progress in this area. Thanks.

This concludes the question-and-answer session. Mr. Rhoads, please proceed to closing remarks.

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

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