Toro Co Q2 FY2022 Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to The Toro Company’s Fiscal Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. I would now like to turn the call over to your host, Julie Kerekes, Treasurer and Senior Managing Director of Global Tax and Investor Relations. You may begin.

Thank you and good morning everyone. 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; and Renee Peterson, Vice President and Chief Financial Officer. 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 all are 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 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 and cash flows 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. With that, I will now turn the call over to Rick.

Thanks, Julie, and good morning everyone. The Toro Company has a long history of consistently delivering financial results in line with our expectations and this quarter was no exception. For the second quarter, we drove 8.7% top-line net sales growth. And that was on top of our strong 23.6% growth in the second quarter of fiscal 2021. Our top-line growth was driven by net price realization, continued strong demand for our innovative products and our ability to produce in what remains a highly dynamic operating environment. We continue to see broad-based demand across our professional businesses. We also saw solid demand in our Residential segment for zero-turn riding mowers, although the late spring impacted retail demand for other products. Importantly, we saw areas of incremental improvements in our supply chain. On our last call, we indicated that second quarter adjusted gross margin would be similar to our first quarter. Our team executed well and delivered a 30 basis-point sequential improvement in adjusted gross margin compared to Q1. We also reported a 390 basis-point sequential improvement in adjusted operating earnings margin for the second quarter, as we continue to drive margins towards historic levels. Over the past couple of years, our employees and channel partners have been operating in what has been one of the most dynamic environments that many of us have ever seen. Our team has been creative, resilient, and steadfast in working to optimize the factors within our control and serve our customers well while taking care of one another. As a result of the actions our team has taken to improve our near- and long-term performance, we are increasingly confident in our outlook for the fiscal year. Therefore, we are raising both, our sales and earnings per share guidance for fiscal 2022. Renee will provide more insight into our improved outlook in just a few minutes. Our market leadership is underpinned by a foundation of long-term caring relationships which are central to our purpose of helping customers enrich the beauty, productivity, and sustainability of the land. A few highlights since our last call demonstrate our dedication to this purpose. In March, Singapore’s world-renowned Sentosa Golf Club announced a 10-year partnership with The Toro Company and our local distributor, Jebsen & Jessen. With its pledge to become the world’s first carbon-neutral golf club, Sentosa cited the importance of working with a partner who not only shares a commitment to the environment but also supports their mission to deliver a world-class playing experience. In April, we celebrated our acquisition of the Intimidator Group with state and community leaders at our facility in Batesville, Arkansas. The Intimidator team shares our values and is passionate about serving customers, supporting the community, and doing business the right way. This acquisition represents an incredible opportunity to share resources and technology to expand product lines and geographic reach. And importantly, we’re doing so in the large and growing zero-turn mower space. The integration is off to a great start, and we believe the combination of our teams will drive value for all stakeholders. Throughout the quarter, we kept our focus on our strategic priorities of accelerating profitable growth, driving productivity and operational excellence, and empowering people. With this focus, we delivered near-term results while also capitalizing on long-term opportunities supported by our disciplined capital allocation and strong balance sheet. In our manufacturing facilities, we are seeing the benefits of lean principles and are continuing to invest in automation and capacity. We’re improving our operations for enhanced resiliency, flexibility, and agility and are prepared to emerge from this dynamic period as an even more productive organization. I will now turn the call over to Renee for a more detailed review of our second quarter financial results.

Thank you, Rick, and good morning everyone. As Rick said, in the second quarter, we once again delivered on our expectations. We drove sequential improvement in profitability over Q1 as our team executed well in what remains a constrained supply environment. We grew net sales to $1.25 billion, an increase of 8.7% compared to the second quarter of last year. Reported EPS for the quarter was $1.24 per diluted share, down from $1.31 for the same period a year ago. Adjusted EPS was $1.25 per diluted share as compared to the record $1.29 in the second quarter a year ago. Professional segment net sales for the second quarter were $925.8 million, up 11.8% from the same period last year. This growth was primarily driven by net price realization and incremental revenue from our first quarter acquisition. This was partially offset by lower volume in certain key product categories, future product availability constraints. Professional segment earnings for the second quarter were $165.4 million, and when expressed as a percent of net sales, 17.9%, this was down from 20.2% in the second quarter last year. The year-over-year decrease was primarily due to higher material freight and manufacturing costs and the addition of our first quarter acquisition at a lower initial margin relative to the segment average, partially offset by increased price realization and productivity initiatives. Residential segment net sales for the second quarter were $319.7 million, up 1.5% from last year, building on the 20.2% growth we reported in the second quarter of fiscal 2021. The increase was primarily driven by net price realization and higher shipments of zero-turn riding mowers. This was partially offset by lower sales of walk-power mowers and portable-power products, primarily due to the delayed spring weather patterns across many parts of the U.S. Residential segment earnings for the quarter were $37.1 million, and when expressed as a percent of net sales, 11.6%. This was down from 14.6% for the second quarter last year. The year-over-year decrease was primarily driven by higher material freight and manufacturing costs, partially offset by increased price realization and productivity improvements. Turning to our operating results. In Q2, we reported a gross margin of 32.4% and an adjusted gross margin of 32.5%, both compared to 35.1% in the same period last year. The year-over-year decreases were primarily due to higher material freight and manufacturing costs, and the addition of our first quarter acquisition at a lower initial gross margin relative to the Company average, partially offset by increased price realization and productivity improvements. Sequentially, we achieved a 30 basis-point improvement in adjusted gross margin when compared to the first quarter of fiscal 2022. We continue to manage the factors within our control and are making progress on net price realization and productivity initiatives. We intend to restore and improve margins over the long term. As part of this effort, we will continue to drive additional productivity and synergy benefits across the organization. SG&A expense as a percent of net sales for the quarter was 18.7% compared to 19.4% in the same period last year. This improvement was primarily driven by net sales leverage and lower incentive expense, partially offset by higher indirect marketing expenses. Operating earnings as a percent of net sales for the second quarter were 13.7% compared to 15.7% in the same period last year. Adjusted operating earnings as a percent of net sales for the quarter were 13.8% compared to 15.7% in the same period a year ago. Interest expense for the quarter was $8 million, up $900,000 from the same period last year. This was driven by incremental borrowing to fund our acquisition in the first quarter of this year. The reported and adjusted effective tax rates for the second quarter were 20.6% and 20.8%, respectively, compared to 19.8% and 20.9% in the same period a year ago. Turning to the balance sheet. Accounts receivable were $439 million, up 12% from a year ago, primarily driven by higher organic sales and our acquisition of the Intimidator Group. Inventory was $892 million, up 42% compared to last year. This increase was driven by higher work in process, finished goods and parts. This reflects our efforts to procure key components and ensure service parts availability for our customers in this time of constrained supply. In addition, this includes the incremental inventory from our first quarter acquisition. Accounts payable increased 34% from last year to $567 million. This was primarily driven by higher purchase activity. In April, we borrowed $200 million under a new five-year term loan credit facility to refinance outstanding revolver borrowings used in the first quarter to fund the Intimidator Group acquisition. We intend to refinance an additional $100 million during the third quarter, and we are also prioritizing $100 million in debt paydown by the end of fiscal 2022. We remain within our gross debt-to-EBITDA target ratio of 1 to 2 times. We continue to follow our disciplined approach to capital allocation, supported by our strong balance sheet. Our priorities remain: making strategic investments in our business to support long-term growth, both organically and through acquisitions; returning cash to shareholders through dividends and share repurchases and maintaining our leverage goals to support financial flexibilities. These priorities are highlighted by our actions this year, including our plan to deploy approximately $150 million in capital expenditures to fund capacity, productivity and new product investments. Our $400 million acquisition of Intimidator Group in January, and our return of $138 million to shareholders year-to-date with $63 million in regular dividends and $75 million in share repurchases. We continue to benefit from strong demand across our diverse portfolio of businesses. Our biggest challenge remains meeting this heightened demand in the current global operating environment. As Rick mentioned, we are increasing our full year fiscal 2022 guidance based on current visibility. We will continue to monitor developments in the macro environments and our end markets very closely and take actions as appropriate. For the full year, we now expect net sales growth in the range of 14% to 16%, up from our previous range of 12% to 14%. This increase reflects our production outlook and net price realization expectations supported by order backlogs and continued strength in demand. We expect less variation in net sales between our third and fourth quarters. For the Professional segment, we expect a full year net sales growth rate above the company average. This assumes incremental net sales from the Intimidator acquisition at the second quarter run rate. For the Residential segment, we expect a full year net sales growth rate below the Company average, primarily due to the late spring. Looking at profitability, we expect our positive gross margin momentum to continue. We expect higher gross margins in the second half of the year compared to the first half. For the full year, we expect gross margins to be slightly below fiscal 2021, given current macro factors and the addition of Intimidator Group at a lower initial gross margin than the Company average. Moving to operating earnings. For the full year, we continue to expect similar adjusted operating earnings as a percent of net sales compared to fiscal 2021. We now expect the full year Professional segment margin to be slightly above last year, and the Residential segment margin to be slightly below last year. This takes into account the operational improvements we are realizing, the impacts of continued supply chain and inflationary pressures along with our first quarter acquisition. This also considers more normalized spending in the second half as we expect to engage more directly with our customers, along with the continued prioritization of strategic research and development investments. With this backdrop, we are also raising our full year adjusted diluted EPS guidance to a range of $4 to $4.15. We expect our third quarter adjusted diluted EPS to be slightly higher than the fourth quarter. As a reminder, our adjusted diluted EPS guidance excludes the benefit of the excess tax deduction for stock compensation as well as one-time acquisition-related costs. Additionally, for the full year, we now expect interest expense to be about $36 million. We continue to expect depreciation and amortization to be about $120 million, free cash flow conversion in the range of 80% to 90% of reported net earnings, and an adjusted effective tax rate of about 21%. We remain well-positioned as we continue to execute on our long-term strategic priorities and invest prudently in our business for the future. I will now turn the call back to Rick.

Thanks, Renee. As we enter the second half of the fiscal year, end market demand remains very strong, and we are well positioned in each of the markets we serve. In addition, our products are not discretionary and provide a reliable source of replacement demand. For our Residential segment, our channel partners remain positive on retail demand. In addition, the arrival of seasonably warmer weather, coupled with strong preseason snow bookings should provide momentum as we move into the third quarter. In our Professional segment, we continue to see broad-based demand across our markets and businesses. We anticipate demand in the underground construction market to grow even stronger as public and private infrastructure investments are prioritized around the world. The golf market is also as healthy as ever. Over the past two years, we’ve seen new golfers picking up the sport at an even faster rate than in the peak of the Tiger Woods era. We’re seeing the return of travel to golf destinations. As the exclusive equipment and irrigation partner to St Andrews, who will be on site to support them as they host the historic 150th Open Championship in July. Of course, given geopolitical events, inflationary pressures, and supply chain challenges, the heightened level of uncertainty remains in the macro environment. We are keeping an eye on overall business confidence as well as consumer sentiment and spending. Our teams remain sharply focused on enterprise-wide operational excellence and collaborating with our channel partners to serve our customers well. We believe this focus and commitment, coupled with our state-of-the-art innovation capabilities and extensive distribution network will drive sales momentum and value for all stakeholders going forward. Strategic investments in alternative power, smart connected and autonomous solutions continue to be key future growth drivers. We’re bringing our technology advancements to market and leveraging innovation across our broad portfolio. We’re excited about the technology transformations that are happening in our industry, and we are even more excited about our innovation leadership as evidenced by our breakthrough tech-forward product introductions. Last week, we announced the launch of our next-generation autonomous mower designed for residential yard care. This robotic, battery-powered, smart connected mower features the industry’s first vision-based localization system with wire-free navigation. Our patented system enables quick and easy setup for homeowners without the costly installation or maintenance headaches of the traditional boundary wire system. This robotic mower joins our full suite of sustainable no-compromise solutions for homeowners. Our focus on sustainability extends beyond our products to the way we invest in our people, serve customers and support our communities. Sustainability is fundamental to our strategic priorities and is ingrained in our purpose and actions. In 2020, we launched our Sustainability Endures platform, and we continue to commit resources and accelerate change to deliver measurable results. The upcoming addition of our sustainability report will highlight goals and metrics that we expect will drive further change for all stakeholders in a meaningful way. As part of our ongoing commitment to create a welcoming and inclusive workplace, we recently launched an employee resource group called the Women’s Initiative Network. Our commitment to diversity, equity, and inclusion reaches beyond our corporate walls and into our communities. In April, we announced our support of the R&A Women in Golf Charter by becoming a signatory of this industry-wide initiative. This charter aims to create a more inclusive golf culture by enabling more women and girls to realize their full potential in all areas of the game. As part of our involvement, we will provide annual apprenticeships to promote diversity in the industry. This initiative builds on our existing partnerships with organizations such as First Tee and the Onica Foundation to introduce and expand access to the game. In closing, The Toro Company has a legacy of consistently delivering value to all stakeholders. We’re making steady progress on manufacturing efficiency while investing prudently to capture near- and long-term growth opportunities. Going forward, we expect to remain well-positioned for further success. We expect our deep industry expertise and best-in-class distribution and service networks to strengthen our position in attractive end markets. We are prepared to emerge from this period even stronger, more efficient, and more agile. As always, our extended team is the key to The Toro Company’s success. On that note, I would like to thank our employees for your dedication and resilience. I would also like to extend my gratitude to our channel partners, customers, and shareholders for your continued support. With that, Renee and I will open up the call for questions.

Our first question comes from Tim Wojs with Baird.

Hey, everybody. Good morning. Great job on the results. I have a two-part question. First, regarding the guidance increase, could you clarify what is driving the updated guidance? Secondly, looking at the second half of the year, it suggests a significant increase in revenue compared to the first half. It seems like there could be around 20% growth needed in the latter half to reach the midpoint of the new guidance. Could you walk us through the factors that are contributing to the shift from the first half to the second half?

Sure, Tim. I’ll comment on some of the drivers and Renee can comment specifically on the guidance numbers themselves. For us, it’s really a combination. The demand continues to be very strong and looks very solid into the future. And then, as we mentioned in our prepared remarks, we are seeing some improvement from an integrated supply chain perspective. So, that’s both, advancements that we’re making internally plus some signs of improvement with our suppliers as well. So, the combination of the two and really actually quite similar to our previous earnings release comments. What had happened at that time was really the invasion in Ukraine. So, we’re kind of back to where we were having kind of digested that aspect as well.

Yes. And as far as just the timing, looking at the guidance, if you think about it, we included Intimidator certainly in the second half of the year as well as continued improvement in price realization and slightly higher volume for the reasons that Rick has mentioned. Tim, if you think about the revenue sequentially, starting with maybe Q2 versus a year-over-year growth rate, we do see some seasonality. So Q2 would be higher than and a little bit of a ramp down in Q4, but less than we normally would see. So, it’s more muted because of the fact that we do have a lot of demand. We also have backlog and field inventory to replenish as well. Last year, in the second half of the year is really when we saw the impact of the supply chain challenges really accelerate as well as inflation. So, it’s a little bit easier comparison year-over-year. But, our demand remains really strong. We have a strong order backlog. And as I said, we have the field inventory. So, we feel we have better visibility into the second half.

Okay. That’s really helpful. And then, maybe on the margins in the back half of the year, from an operating income perspective. I think you said kind of Q3 and Q4, there wouldn’t be like a big difference in kind of the growth rates. How would you think of the margin contribution? I mean, how much of the implied year-over-year margin accretion in the back half of the year is kind of Q3 versus Q4?

Yes. We discussed that we anticipate the gross margin for the second half to be greater than that of the first half. Currently, it's challenging to break down the gross margin between Q3 and Q4, as it's tough to make that level of estimation. However, we do expect Q3 EPS to be slightly higher than Q4. We provided details regarding both pro and residential margins for the full year. From an operational perspective, we foresee operating margins to be similar year-over-year, factoring in the impact of the Intimidator acquisition. We expect pro margins to be slightly above fiscal '21, while residential margins may be slightly below fiscal '21.

Okay. Good. And then maybe just the last question for me. Just on the new products, I mean, any way to kind of provide like a quantitative update on some of your new product introductions, whether it’s just Revolution Series or some of the autonomous green mowers or what you’re seeing in kind of battery-powered products in residential? Just trying to frame how those are kind of performing and the initial feedback that you’ve received from customers there.

I think it’s still early to be able to project that accurately. But what we can say is the response has been absolutely fantastic across the board. So, the Revolution Series that we talked about last quarter, the interest has continued. That will help to contribute later this year. And the launch of the robot, honestly, or the introduction of the robot far exceeded our expectations in terms of interest and the number of social media and other outlets that picked that up just way exceeded our expectations. So, there’s a ton of excitement. And then just in general, the investments that we’re making in technology, we are just really kind of seeing what should be a steady flow of some really exciting products going forward. That also gives us confidence in the future and contributes really to your previous question as well.

Our next question comes from Sam Darkatsh with Raymond James.

A couple of quick questions, if I could. First off, with respect to price, could you remind us the timing and the magnitude of pricing actions? I guess, I’m talking about realization as opposed to asking prices, but realization this fiscal year? And then, remind us how much price rollover you’re expecting for fiscal ‘23?

Yes. We have achieved greater price realization this quarter compared to the previous one, and we continue to see that number grow. We're also focused on improving our productivity. As you know, we make every effort to manage cost increases as well as price increases overall. Throughout the year, we've implemented several price actions, which is why we're seeing price realization increase. Looking ahead to fiscal ‘23, we will experience some rollover as a result, but we typically adjust our pricing for the season. We will need to assess that in light of the competitive environment at that time, which may lead to additional pricing actions. In the long run, we are committed to enhancing our margins and restoring them to our historical averages.

So, excluding pricing actions to come, whether normal or otherwise, just trying to get a sense of the pricing rollover next year just from this year’s actions, would it be kind of low mid-single digit, or is that the right way to think about it, excluding any prospective actions?

Yes. I would say that normally, we would say our price is 1 to 2 points of price. It has been higher than that. And because we’ve taken multiple pricing actions, there will be some element that rolls over into next year. And I mean that’s a reasonable estimate.

Okay. My second question is about inventories. I understand you mentioned the year-on-year comparison, but I’m more focused on the sequential data. It was up 20% from Q1 to Q2, which is unusual for your organization given the seasonality. I believe Intimidator was included in both periods. So, I'm curious about your guidance for year-end inventories and your thoughts on production versus shipments in the second half of the year as you manage that inventory level.

Let me address that question. As I assess inventory sequentially, you’re right that Intimidator was present in both periods, so that’s not the main factor. We are focusing on work in progress (WIP) management to enhance our plant efficiency. We are disciplined in what we bring in while considering items with long lead times and those that are in short supply. Currently, our WIP remains higher than usual, but we plan to reduce it by year-end and expect to return to more typical levels. Additionally, this quarter, we have experienced higher finished goods, mostly due to residential demand and the late spring. We anticipated this and are not worried, as the timing of spring can vary between Q2 and Q3. We expect a significant pickup in Q3 and will sell through that inventory. These are the main factors that have changed sequentially. We aim to lower our WIP by year-end and will need to evaluate the finished goods based on our operating environment. Typically, we start building finished goods towards the end of the year for seasonality, but we haven't reached that point recently. We'll make that assessment as we progress through the year.

Okay. Let me rephrase that. We expect inventories in dollars to be lower by year-end compared to the fiscal second quarter, which usually happens, but this year it seems more noticeable. Regarding production versus shipments, there are seasonal variations. Overall, will your production be less than or more than shipments on a year-over-year basis? Can you clarify that for me? I apologize, Renee.

Our production is expected to be about the same as or slightly more than our shipments. Besides the residential inventory I mentioned, we currently have limited finished goods inventory.

The significant factor is the WIP, and that’s really been a part of our success in being able to produce more consistently as being really prudent about making sure if we have the opportunity to bring in key components that are on the risk list, if you will, that we would bring those in. As we gain confidence in our supply chain, we will obviously manage that back down again, but this is not an environment where you want things coming in 5 minutes before you need them. So, that’s the factor really from a WIP standpoint. Let’s say, just the other thing is making sure we have the components before we start building a particular model, and that results in a little bit higher average WIP in itself. But the disruptiveness of the stopping and starting on our assembly line is really one of the core issues that we’ve been working on.

Got you. If I can ask one more question, I apologize if you already mentioned this in the prepared remarks and I missed it. What were the acquired sales in the quarter from Intimidator?

It’s about $60 million, specifically $60.5 million. We didn’t mention it during the call; it will be in the Q as well, but it is $60.5 million. We would anticipate a similar run rate for the quarters in the second half of the year as well, Sam.

Our next question comes from David MacGregor with Longbow Research.

I wanted to ask about the expectations for margin improvement in the second half. How much of that is related to working through the legacy priced backlog and achieving better price realizations on your shipments compared to volume improvements as supply channels start to open up?

Yes. I would say continued price realization is a component of it. As I mentioned earlier, our work on productivity is also important from that standpoint. We do see inflation continuing, but the rate of inflation moderating somewhat as we look at first half to second half, and then it does include two quarters of an Intimidator versus one quarter. But all-in-all, when we look at all of those factors, we do expect the gross margin in the second half of the year to improve over the first half. But it really is all of those factors, including Intimidator at an initial lower gross margin. So, we’re offsetting that with some of those other actions as well.

Renee, just on that question before, because I got a follow-up. But just on that question, are you able to talk about what gross margins were in the quarter, excluding the acquisition or how you’re thinking about the second half or the full year number, excluding the acquisition?

Yes. We haven’t provided a specific breakdown, but from our perspective, whether considering the quarter or the total year, the acquisition is dilutive in terms of gross margin overall. However, the acquisition is performing well and has made a significant contribution to revenue. We do expect the acquisition to be modestly accretive, and we are observing that trend as well.

And then also, I guess, Sam was asking about the rollover on pricing into 2023, maybe just thinking about volume in the same regard. And Rick, you talked about products not being discretionary. But just given the backlog as it delayed product availability, how much demand you would have normally been satisfying in 2022? Do you think it’s now likely to occur in 2023?

We believe the backlog or order bank has continued to grow throughout the first half of this year. Despite our discussions on improvements in the supply chain, demand remains particularly strong. Therefore, we expect that demand in the order bank will extend well into next year in several highlighted categories. For instance, the underground and construction business, the golf business, and grounds are some of the areas that will definitely carry over into next year as well.

Is there any way of previously quantitative context around that?

We have not broken that down in terms of anticipated roll into next year at this point. The back order position at the end of last year was $1.6 billion.

Our next question comes from Eric Bosshard with Cleveland Research.

Good morning. I have a couple of questions. First, regarding the residential sector, could you provide some context about the late spring you mentioned? Is the updated sales forecast for residential still in line with your expectations at the start of the season? Additionally, how confident are you in recovering the losses from this quarter in the upcoming quarters of the year?

Residential remains a very strong business. The main issue we are facing is the late spring, particularly in the Midwest where it has historically been delayed by as much as 30 days. It's important to note that the residential business has experienced over 20% growth for the past two years and a 17% increase in the first quarter. The effects of the late spring are a significant factor, but we are optimistic about the future health of that business. All the factors we’ve discussed over the past couple of years are still in effect. Our product line has been updated, and we have new channel partners that are helping to maintain this new growth level. Additionally, exciting new technology introductions are generating considerable interest among our customers. Regarding the sales we lost in the second quarter, we anticipate recovering a significant portion of those in the third quarter. While it may not be possible to regain 100% of those sales right away, our team is actively working to maximize recovery, and the current weather in North America is more favorable to support these efforts.

To clarify about the increased sales guidance for the full year by 2 points, what changes occurred within Residential and Pro? I understand that Pro is expected to grow faster than Residential, but was the entire increase attributed to Pro, or was it more than just Pro?

Yes. We’ve taken all those factors into consideration, and more of the driver would be on the Pro side.

And I’m not showing any further questions at this time. I’d like to turn the call back to Julie for any closing remarks.

Thank you, Kevin, and thank you all for your questions and interest in The Toro Company. We look forward to talking with everyone again in September to discuss our third quarter fiscal 2022 results.

Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect and have a wonderful day.