Conference Transcript - TTC 2026-09-25

Edric Funk, COO

Well, hi everybody. Hello again. I am Mike Shlisky. I'm the analyst here at DA Davidson covering Toro Company. We're here in Nashville at our 20th annual Diversified Industrials and Services Conference. And I'm very pleased to have Edric Funk with us. He's currently the COO, but he's basically the incoming CEO of Toro, starting, I guess, November 1st. That's right. So the fiscal year ends October 31st. First day, but it's been 30 years. So we'll preview that. It's not like it's your first day at Toro. seasoned vet of Toro. We're here to ask a few questions about Toro, tell investors about it, and hopefully get some time for some Q&A towards the end. So first, Edric, tell us a little bit, not everyone's aware, tell us a little bit about the high-level view. Just what does Toro do exactly and your key products?

Speaker 3

Thanks for the invitation and for the opportunity to share that story. We exist to help our customers enrich the beauty, productivity, and sustainability of the land and you might think of us creating value at the intersection of humanity and our natural ecosystems so our products would be used in the beautification of the parks where communities gather in the conditioning of athletic fields where kids play or the iconic stadiums where some of our favorite teams compete on the golf courses where relationships are strengthened and where championships are contested and in backyards where barbecues are hosted or people relax after a challenging day and Mike if you haven't spent time in any of those settings today you were probably still impacted by our products in the first five minutes after you woke up this morning sorry when you switch down the light and and the electricity was there when you use the water for your shower to brush your teeth when you retrieve data on your phone or your laptop all of the infrastructure that delivered those services are installed by our customers using our products so as our team knows what we do really matters and we use that as motivation to invest in innovation that drives real value to to work to serve our customers exceptionally well and we do all of that to deliver consistent and sustainable value to shareholders.

Edric Funk, COO

Now that sounds like a lot more than what some folks think Toro is which is a lawnmower company so let's maybe dive into a little bit why you're not a lawnmower company and I'll just give the preview I think your lawnmower type residential stuff is probably 10% of EBITDA but the rest of it is professional so But maybe tell us a little bit about more in depth, what is the professional, besides professional landscapers, also mowing lawns, but what is the real mix of the business here beyond just caring for grass? Tell us a little bit more about that.

Speaker 3

Yeah, thanks for going there because the professional portion of the business is where our strategic emphasis resides. And we cater to professionals across a number of different markets, all of which connect to that purpose that I shared a moment ago. So many other people would know us for our presence in the golf market. And we're the only supplier of both equipment and irrigation to the maintenance teams that maintain golf courses. We're doing more and more to integrate those solutions and bring more holistic offerings to those golf courses. Several people would know of the significant acquisition we made in the Charles Machine Works companies, which brought brands like Ditch Witch into the fold. And that's to focus on the underground infrastructure and underground specialty construction market. I'm sure we'll talk a bit more about that, but a really important growth driver for the company because that's one of the markets that itself offers the biggest growth opportunity and a number of demand drivers and an area that we're investing in significantly. And you mentioned professional contractors, whether they're caring for residential properties, corporate campuses, partnering with municipalities, whatever the case may be. another group who relies on our products to make their business run more smoothly and relies on us for their means of making a living. And across all of those professional segments, we know that a significant portion of their budgets, often more than 50%, is directed toward labor, which is a real challenge for all of them. And it's a place where we invest a lot of our time in innovation.

Edric Funk, COO

And not that you didn't mention it, but I'm going to mention it as well. some of those same contractors who help mow the lawn and care for the grass in the off season are plowing snow so you do own a large snow plow brand as well one of the largest if not the largest snow plow brand out there it's complementary right it is you you've got it exactly right you know the you're referring to the boss brand and we've got both the plows that would go on trucks and and then their snow radar product is for clearing sidewalks and and uh areas around parking lots and so forth.

Speaker 3

And you're exactly right. In areas that receive snowfall, a number of the contractors cross over and both do that winter hardscape maintenance as well as the turf care maintenance during the summer season. There's also some nice synergy with a number of our channel partners. And, you know, even outside the direct customer piece, we've already made reference to the underground infrastructure. This would be on the surface, the infrastructure that keeps people moving by keeping the roads clear, the parking lot and sidewalks clear.

Edric Funk, COO

Just to clarify for someone who doesn't know, underground construction, that sounds like a subway system, but it's really maybe, maybe is it like getting power lines underground or pipes, fixing pipes, things like that. So it's important for power grid expansion and things along those lines. Am I on the right track there?

Speaker 3

Yeah, you've got it. One of the hot topics, of course, right now would be data centers. And you said the word. Our products don't do a lot of work, although we're finding some interesting crossover on the data center sites themselves. But the majority of what we do is delivering the things that you described to those locations. It's bringing in the enormous amount of fiber optics. It's delivering the water that's used in cooling. It's the power that's required at those sites. The interesting thing, though, is all of those same things from an infrastructure perspective are important even outside of the data center space. We've got, of course, expansion and new development that's calling for that kind of infrastructure, but also a lot of aging infrastructure around the world, particularly here in the United States. From a power perspective, you talked about getting power lines underground. One of the drivers is we know that we've experienced things like wildfires that have been sparked by issues with the above ground lines. It's good to get that underground, and it's more aesthetically pleasing often. On the water side of things, the American Society of Civil Engineers had published a statistic estimating that we lose 6 billion gallons of drinking water a day between the treatment plant and being delivered to people's taps. And so replacing and repairing, you know, infrastructure in that space is really important. And data, not only for the data centers, but continuing to bring high-speed Internet to areas that have been underserved, all of those are drivers that we see extending well into the future.

Edric Funk, COO

Got it. Got it. Let's maybe just touch on your earnings results over the last couple of years. It's interesting. You've almost reported the exact same earnings number every single year for three or four straight years. Thanks for pointing that out. Well, you know, that's not my favorite thing to talk about. We'll talk about the guidance for this year, which is different. But flat's good at times. And there's been some ups and downs and different drivers that have made it flat. Some great years, some bad years for certain markets. They've all balanced out is what I've been gathering. Tell us a little bit about some of the moving parts and how it has, in fact, because this could have been bad, but it ended up being flat. So tell us about how it ended up not being bad and ended up being okay.

Speaker 3

I should really appreciate that perspective because we all know that it has been a dynamic environment and really challenging and our teams have worked really hard in order to deliver even that level of results but that doesn't doesn't live up to our aspirations and we've learned from that experience but I'd say it's generally behind us. We weren't immune to what a number of other companies experienced in terms of demand that became very abnormal disruption in the supply chain but we've come out of that even stronger and we now see a situation where our end markets are strong. We continue to have leading positions within a lot of those markets and just a lot of progress. Inventory would be one example that over the last year and a half we've improved significantly. That's led to us now delivering more than 120% free cash flow conversion. We've seen margins improve, particularly in the residential portion. As you said, that's a small subset of our business, but it's one that was particularly challenged. We now see that back on a path to double digit margin. And we're just really optimistic about the future. Our guide, as you alluded to, puts us back into double digit earnings growth. And that's the kind of performance that we want to continue to see going forward.

Edric Funk, COO

Yeah. So prior to the last couple of years, it was 10% growth every year, if not higher or a lot higher between the Great Recession and COVID basically. So 10 plus years, I think, of really strong growth that people really admired. There was a COVID overhang. There was strength in golf, but other areas got weaker. Didn't snow for a couple of years. So there's some ups and downs, but you kept it kind of flat. As you just mentioned, you're back on that double-edged earnings growth trajectory. That's really strong. So you're kind of finally back on track after, I would say, a very tough COVID hangover. Tell us a bit about the targets that the board or that your company is putting out there going forward. Do you really want to keep that 10% growing? growth rate? Has that been a stated internal goal, at least? Or do you have other aspirations?

Speaker 3

Well, first, maybe just to address the return to performance, it's all about execution. And that doesn't mean we didn't execute a number of things well, but during all that period of disruption, didn't see what historically has been a hallmark of the company. So we'll come back and certainly share more detail on some of the longer term aspirations. But as I said just a moment ago, that double digits earning growth has been something that we've been proud of. It's something that we want to continue to deliver. It's the kind of thing that we want to provide. And we're focused on continuing to drive productivity. We've talked publicly a great deal about our AMP productivity initiative. That's delivered great results. We've talked about the strong end markets. We're capitalizing on the demand that's in front of us.

Edric Funk, COO

And I referenced the residential margin but across the company looking to continue to expand margins so we'll provide more detail but but those are the things that we're certainly thinking about and things that we know are important to our investors the you just you touched on that the some of the cost reductions you made as part of what's called the amp program any numbers behind that you can share with us we've gone through that so far and has cost reductions are those permanent and the mindset of cost controls how has it changed as a employee mindset the last couple of years?

Speaker 3

It's probably a before, during, and after AMP that's worth referencing. You know, even before the AMP initiative came to be, productivity was an important part of our culture, and we were always looking to use productivity to offset the effects of inflation. But as we navigated the post-pandemic situation and all of the hyperinflation that we experienced, we knew that we had some extra work to do to get that back, and we wanted some additional focus from our employee base and that's what led to establishing that that initiative we originally announced a plan to do to achieve a hundred million dollars of annual run rate savings we ultimately increase that goal to 125 million and we were excited for our CFO Angie Drake who championed that initiative to be able to announce at our last earnings call we've we've already achieved that run rate savings and that will flow through now to next year and beyond. So those are permanent and durable savings. And as we go forward, we shared in that earnings call, while the initiative ends at the end of this fiscal year, we've achieved what we intended, which was to reinvigorate the employee base, to build that muscle, and amp and productivity will remain something that stays with us even below the end of the formal program. And even while we shift our attention to other things like a return to growth.

Edric Funk, COO

Great. And as you're the incoming CEO, as I mentioned earlier, you're starting in about a month. But you've been on TOR for like 30 years. You've headed up the golf division. You've done a couple other areas over the years. So you're not new. But as the new CEO, is there anything that you're thinking about doing differently? Or at least anything that the board, broadly speaking, even with or without the CEO change, Anything new you think you've got going on for 2027 from a strategy perspective that we should know about?

Speaker 3

Yeah, of course there are things we're thinking about doing differently. We've talked a fair amount about this, and people obviously have the question with our leadership transition, what's going to change? And I've been consistently describing it as continuity balanced with evolution. And we think the continuity is important. We have a really powerful foundation that we work from. We've got a strong product portfolio, as you know, industry-leading brands. We have incredible relationships with our channel partners and end customers, and we have a culture that is genuinely built on innovation and discipline execution. So I view those as just a really good place to start. But we know our customers' needs are evolving, our markets are evolving, the world around us is evolving, and we have to evolve with that. And when I've shared specific examples, if we were to contrast, you know, maybe the last decade to the one to come, our current CEO, Rick Olson, did such a brilliant job of putting forth a vision that helped us to transform our approach to technology development and ushered in a lot of the work that we're doing from autonomous solutions to smart and connected products to alternative energy. Those remain pillars of our technology development. That won't change. But what we'll shift is we're now at a point that we need to invest more in accelerating commercialization and accelerating adoption of some of those technologies. And that's one place that I'll focus. Another, you've already highlighted some of the acquisitions that we've made and how those brands have contributed to the company. That will continue to be important. But as we go forward, we'll look for even more integration of the products. There's more technology that we can leverage across product lines. and more alignment of our businesses, including the channels through which we serve our customers. And finally, as I said just a moment ago, we're coming off the heels of this extra attention and focus on productivity. That's not going to go away, but we're going to, again, get back to driving growth, which was also something that prior to the disruption of the pandemic and what followed had been something that we were known for and something that we're going to get back to. So the foundational pieces will be the same, but we have a number of things that will change. And we look forward to even sharing more detail on that here in the coming months.

Edric Funk, COO

You'll have earnings just before Christmas, am I correct? Yeah, that's right. All right, great. Maybe let's just hone in on one or two of the end markets that have been interesting. The golf business. You were, until recently, the head of the golf business. You were COO for a few years, but prior to that, golf. Tell us about the strength you saw during the COVID period. Golf is a very socially distant sport, I guess, because you're 200 yards away. Well, with me, it's 10 yards away. But most people are 200 yards away. But it's been six years of pretty strong golf, people out there playing golf. How much do you think is left in the tank in interest in golf to continue? And maybe more importantly, how much is left in the tank for golf courses after a couple of years of continuing to spend on their green space equipment?

Speaker 3

All good questions. You know, let's not forget golf has been around for centuries, so there's some pretty good resiliency there. And there's no doubt that COVID provided a boost to the game. But as I shared with some other people recently, we were seeing the signs of improvement in golf even before COVID. A lot of the fruits of the labors of a number of organizations that, frankly, we've helped support in terms of growing the game. And today we see more and more youth participating, female golfers. It's just a lengthy list of underserved demographics that are now playing the game of golf. And the surgence of off-course opportunities that at one time we wondered if would be in conflict with Greengrass Golf have all just proved to increase the funnel of participants. And to your point, we've seen multiple years of records on top of records in terms of rounds played. That's driving more money into the industry. Private club memberships are full. Waiting lists are robust. Tea times are full. We're just seeing a lot of investment in the sport, and that's ultimately good for those of us that serve that marketplace. And it's not only in the equipment side where people know we have to go out and maintain the properties and everything else, but from an irrigation perspective, the useful life of an irrigation system might be 20 or 25 years. And if you go back to around the turn of the century, many people would know of the phrase the tiger boom associated with when Tiger Woods was ascending in popularity. And it was causing a significant influx and development of golf to rise to meet the demand. And we kind of went from over demand under supply to the other way around, given all the properties that were opened up. And then we went through a period where that was coming back to normalization. And now I think a lot of us would say it's in balance, and some would probably argue there's room for more and we're seeing some development because the tee times can be tough to get. So we still see a lot of runway there, really, really important, and even as demand has, let's say, normalized after a concentration or a surge, that remains a really important market for us and a really valuable one to the company. um so that so golf courses are i assume they can raise prices at certain times and they've got the money to spend on equipment and on on irrigation that's not changing it sounds like and and it's really allowing them to tap into i talked about the technology that we've been working on to a greater and greater degree we're integrating the equipment and irrigation i mentioned we're the only supplier that does both and that gives us some unique opportunities to have equipment talk to the control system for the irrigation and to have while our equipment is out canvassing the property it can collect passively moisture data for instance and feed that into the irrigation system and use that to make recommendations to the superintendents we're tapping into AI not only for our internal productivity but in the products to to help provide recommendations to the superintendents who can then look at what we're suggesting accept that with a click of a button and do things that would have otherwise taken them hours to do to balance the water, save water, but ultimately bring their conditions into better balance and delight the customers that they're trying to serve.

Edric Funk, COO

You're not driving on to 18 holes, visually checking every green and making sure it's not flooded. There's ways to find out using potentially to spend less than a few minutes figuring out whether anything's flooded.

Speaker 3

Yeah, and spatial adjust is the brand name, if you will, of that software enhancement that we made you'll hear more and more about that as as customers are embracing it and as I told somebody else I don't use that game changer label loosely but that's what we're hearing our customers described to us that this is making that big of a difference to their productivity we may discuss other other tech on the golf course things like electrified equipment hybrid equipment autonomous equipment that's you know the actual the mowing part.

Edric Funk, COO

Have you seen a rapid adoption, and how soon do you think those will have a pretty significant share of the overall market?

Speaker 3

It's interesting. It's something we're monitoring every day, but there are some really interesting pieces in what you just talked about. Electrification is one. If we look more broadly across markets and product lines, we've seen some slowing in the adoption of electric products, some of that having to do with policies, some of it to do with incentives but golf has been one exception for us and greens mowers are a great example where we've seen customers continue to invest in that technology and it's because of the other benefits that you get beyond a reduction in exhaust emissions being quiet is important on a golf course whether it's because you have residences near the playing area the clubhouse or whatever the case may be on the putting green there's a high premium placed on eliminating them eliminating in the potential for hydraulic leaks so by going with an all-electric product that's peace of mind for the superintendent it's not just the the mower but we've recently launched a new greens roller we highlighted that in our last earnings call all-electric has some incredible new innovations that make it easier for the operators to control makes it easier for the superintendents to put a wider range of operators on the product and you know shame on us we underestimated how enthusiastically that would be received. We're already sold out for this year and making plans to ramp up production in the year ahead. So electrification has actually been widely adopted or some of the hybrid solutions on fairway mowers and elsewhere. On the autonomous side lots and lots of experimentation going on in golf because labor again is such a key driver for them and while some of them may have to find a way to get work done with without labor that they can't get or others may be looking at opportunities to reduce their labor force. The overwhelming use case is looking for opportunities to redeploy the human labor to do other important jobs to elevate conditions. And so anywhere that we can help them take the human out of the more mundane tasks, that's valuable. We just introduced most of our autonomous solutions from a commercial perspective within the last year, and we're seeing really great momentum. And, you know, we've We've taken care as we've commercialized to make sure that we're ready for the market, acknowledging that adoption won't become enormous overnight, but like I said, seeing really good momentum, and we'll remain cautiously optimistic and prudent in our expectations for the next year or two, but couldn't be more excited about what that means for the long-term horizon.

Edric Funk, COO

I'm a little worried about the electrified, quiet products on the golf course because I often blame the mower for why I hit water hazards. Plenty of other excuses you can use, Mike. A new excuse, so I'll have to think about that. You did mention, you did mention, we did mention earlier the snowplow business, the boss business. It's been a good business. I don't know if everyone's aware, you know, is that a margin accretive business for Toro? Is it just more of a throw-in and doesn't have a lot of margin? And finally, you know, we did see a pretty decent winter, at least part of the country this past winter. Can you take us through, like, what that means, a heavy winter last winter, for what that means for what might be ahead of us over the next few months as far as shipments are concerned?

Speaker 3

First of all, it is a product that has attractive margins for us, and it is accretive to the company. And, of course, it's in our control to make that even better when we manage it really well. And what I mean there is being disciplined in our expectations. So, to your point, had a really nice snow season last year after a couple of years that weren't so great, and that helped to clear out the channel. That's true not only for Boss, but some of the other snow products that are a part of our portfolio. One of the interesting things for Boss with the work that they do with the plows and with the sidewalk clearing, even small snowfalls ultimately need to be cleaned up, and their products go into operation, even if we're not getting those massive winter storms that may drive more of the business for some of the snowblowers and other things that we make. So we're optimistic there. The channel's in a healthy position. They're calling for more. There's all kinds of questions I know that people have about what's it going to mean when we have a super El Nino. And I don't think any of us would profess to be excellent forecasters of the weather. It's challenging enough for the trained meteorologists. But what we do know is even when there is an El Nino, you tend to get snow, it moves around. We tend to get more moisture in the south, and you can get snow and ice in the transition zones. The Mid-Atlantic will tend to get snow, even if we don't see as much of it in the Great Lakes. So we're conscientious about that. We're being intentional about our forecasting, about our production. We're ready to adapt and adjust, and if we see more opportunity, we'll follow that, But we'll make sure that we don't get out ahead of ourselves and manage that prudently. So, you know, bringing it all back to the courier question, a really valuable part of our overall business and an important one and one that we like a lot.

Edric Funk, COO

So, again, so it did snow last season. Does that mean you feel better about this coming season? They were out there using their product. They got cash paid for their services. Does it feel like you're going to be seeing a somewhat strong winter ahead?

Speaker 3

Yeah, look, when there's more usage, more things wear or break. So it's great for the aftermarket business. The businesses themselves tend to be more optimistic. You know, they can have a short memory and they remember things were good and they're going to prepare for that. So we're seeing nice load into the channel as we prepare for the season. So, yeah, we're optimistic, but we're just we're also going to be really diligent, really, really sensible in terms of how we approach the business.

Edric Funk, COO

Got it. But why don't we pause there. We've got an audience here. Make sure people have a chance to ask a question or two. I've got more questions. My questions literally go on for three sessions worth. So we're not going to do that. But anyone have any questions they want to bring up at this point? Feel free to just shout them out. We always do it. Not everyone takes it. That's fine. We can just keep on. We have one.

Speaker 3

And just to ensure that those that are listening remotely, to the question. The question was around how excited should we be about autonomous mowers? We've been talking about that for five years, and will it move the needle? I love the question, and I'll actually build on some of what you said. We've been talking about it for more than 30 years. When I joined the company 30 years ago, our research and development team had been working on prototypes that don't look that different than some of what we commercialize now. Now, at the time, the technology wasn't ready. It was far too costly to ultimately deliver for customers. But we've stayed at it over time. We've stayed in close contact with our customers. And the need to address their labor challenges has only intensified. So we know there's a problem to be solved. And that's where we start. We also have evidence that while there's talk of automation in all sorts of areas and different industries are in different places, the use case is pretty clear with our golf customers. And I mentioned earlier, people have been experimenting with a number of solutions. We've seen residential products deployed on golf courses. We've seen startups that are looking to come into that place. And what we've continued to hear from our customers over and over is we know there's a place for this eventually. We're not quite sure how we're exploring. But I know this sounds self-serving, but they've told us we're waiting for Toro to bring these products because we trust that you know what we're trying to accomplish. We trust the partners that we, Toro, have across the industry that provide the local service, and they're ready. So I mentioned recently, I really believe we're approaching an inflection point where that's going to move from experimentation to execution and adoption. We're already seeing that with the products that we've rolled out. So as I said in response to Mike, we're not going to get ahead of ourselves in terms of what that might mean for revenue next year, maybe even the year after, but we're sensing a legitimate change. And I'll just wrap that by talking about our recent activity that we had. We host an event with golf course superintendents that we call our Innovation Experience. And it's to come in, and it's just to collaborate together, to brainstorm. and we had a focus on autonomous mowers and we heard them saying with even more gusto a lot of what I just talked about. So it's going to be real and this isn't a matter of if, it's a matter of when we see that significant escalation. Thanks for the question.

Edric Funk, COO

I want to follow up and ask to that to that question we are you are seeing sales of electrified and hybrid they are it's growing nicely you will soon hopefully have autonomous a lot more of that is there a pricing and margin difference between what you're what you're not selling and then these new models yeah whether the when we add the the guidance the localization navigation technology it certainly increases the price point.

Speaker 3

And our aspirations are to actually increase margins, not to have them diluted. I've heard some people talk about the new technology being diluted to margins. That's not going to be the case for us. There's value for the customers, and that means there's value for us to share that we can capture more pricing and they can improve their operation. At this point, we're really close to margin neutral. So we're capturing more margin dollars on that higher selling price. And as we scale, as the technology costs come down, there'll be an opportunity for us to increase margins over time. Gotcha.

Edric Funk, COO

Make sure we have a little bit of time left. Am I right? Let's talk about maybe M&A. Let's just maybe discuss your most recent large-ish deal, the Tornado deal out of Canada. Tell us about what that's done for Toro since you bought it a few quarters ago, maybe from a product mix and channel standpoint, and also just from a financial standpoint. How's that gone for you?

Speaker 3

It's been fantastic. We probably need to rewind that M&A story back to what we talked about earlier as we got into the underground construction with the purchase of the Charles Machine Works company. That immediately became a really significant portion of the company. A lot of people wouldn't realize that's more than a quarter of the company now that sits in that underground and specialty construction realm. And the addition of Tornado just continues to enhance our offering through the channel and ultimately to the end customers. I imagine folks have different levels of familiarity with that brand and with that company, but Tornado specializes in vacuum excavation, or some people would talk about it as soft excavation. and if you haven't seen the product you could visualize it as injecting really high pressure water to loosen the soil and then a giant vacuum that's sucking the spoils away and it's used in a number of ways it's used in concert with our horizontal directional drills for something called daylighting which is where rather than dig a trench or bring in an excavator to dig down towards existing infrastructure we'd use this hydro excavation practice to expose where the existing infrastructure is and it's used to verify that when the new infrastructure is installed we didn't go through an existing pipe we went above it or below it it's becoming an increasingly common practice in fact regulated in a number of areas identified as a best practice in many regions and so we see continued demand driving that and that's true of the underground but there are other applications in terms of cleanup and other things where it's it's really complementary It's expanded our reach in the Canadian market. Tornado is based in Canada. But their business, even outside of what we would do through our Ditch Witch channel, has been really good. We've shared a number of times. This was an easy acquisition because it was strategically very much aligned with where we want to invest. And we had experience with Tornado because they were a supplier to our Ditch Witch business for the Hydrovacs that we already had there. So we knew the people. We knew the innovation. It's been a great alignment culturally, and the performance has not only met but actually exceeded our expectations so far.

Edric Funk, COO

And just to be clear, for those who are listening, it's a vacuum truck, but it's not a sewer type. It's not for infrastructure on the road. Some of the competitors are public companies, too, but it's not that. It's off highway on the construction site.

Speaker 3

The trucks can be configured to do different jobs, but our focus is really in that undergrad infrastructure.

Edric Funk, COO

Soil, yeah, not sewer, trash, and stuff like that. Got it. So Toro, as you just mentioned, Tornado. You've mentioned Ditch Witch. We've mentioned Boss Snowplow. Ultimately, you're a collection of brands. Toro is another brand, of course. A lot of it's been assembled through M&A over a very long period of time, some more recently, some a few decades ago. What are you looking to do going forward? Do you have a very robust pipeline? Are there areas that you want to fill in or expand your product line up and then maybe would you look to expand internationally? International is only about 20% of your sales so would you want to go bigger in other countries? A little bit about some of your expansion plans through inorganic growth.

Speaker 3

I have to go back in first year I found myself twinging a little when you described us as a collection of brands. It's probably accurate. That's not fair but it's not a fairness thing but what I would point out is we've been really intentional in our acquisitions to align with the things that are important to our values and at the core, what you'll see is a consistency across all of them is a focus on customers, really good innovation, really strong channels. They're not all the same channel, but a strong channel. And as I talked about earlier, as we evolve, we're going to look to leverage all of those strengths, but be even more aligned and more integrated. So it is true that we have a number of different brands that each have their own place in the markets that they serve. But we view it really as one clear family. And so to your other question then of where we might look going forward, we're going to continue to look for those things. And we, I'll add to that, we look for cultural alignment from the beginning. And that's one of the reasons that we've been so successful with our integrations, that that's not an afterthought or something that we have to solve at the end. As we contemplate our M&A priorities, we have a robust pipeline across our entire enterprise, but we will focus in the professional area, and we've been pretty vocal about underground infrastructure continuing to be a really important areas, and there are some near-term adjacencies in some of the landscape and turf management as well. And then to the international piece, like anything, we'll look at what makes sense for us there, and there are cases where our product lines and our strengths very naturally scale globally. And there are others where, of course, things differ pretty significantly regionally. And so anything's on the table for consideration, but we'll be intentional. And we have so many great priorities. We don't have to settle or chase some of the things that may not be as attractive from a return perspective.

Edric Funk, COO

Got it. We only have one more question left, and I'll just throw it out there. As you head towards that first day as CEO, So just tell me a little bit about your key concerns, you know, what do you want to get right from the get-go, and what are the major issues that you think you and the board need to be dealing with today on an enterprise-wide basis?

Speaker 3

Well, the good news is, I'll come back to what I said earlier, the company is in a really strong position. And we've talked about the operating results, but I've got to come back around to the balance sheet is in great shape. You know, we've been generating cash. Our leverage is in a really stable place. We're at 1.3 times for a leverage ratio. So one that to some degree insulates us against some of the challenges we're seeing in the macro environment. And it gives us strategic optionality. And so our team is excited about looking at where are we going to make those next investments. We, yeah, yeah, November 1st will be a change. I mean, I do understand that that's significant and important. But at some level, it's the next day we're turning the calendar and we're continuing to execute the things that we're already doing well. We're continuing to make progress on the strategic priorities and just continue to look for margin expansion, generating cash, serving customers really, really well, and continuing to invest in innovation because we've always seen that to deliver the strongest returns. And frankly, it's something we're really good at.

Edric Funk, COO

Well, great. Andrew, thank you for joining us. Thank you for being with me up here on the stage and all the investors. Everyone enjoy the rest of your day here and a great weekend.

Speaker 3

Yeah, thanks for spending the time with us.