The Toro Company (NYSE:TTC) Q1 2023 Earnings Call Transcript

David MacGregor: So, just on that point, it seems as though your guidance probably reflects improving price cost sequentially with each quarter as you move through the year. Is that a fair takeaway?

Renee Peterson: Yes, I think it is. We do think when we look specifically at gross margin, that what our guidance included was that gross margin will be higher in the second half of the year versus the first half. And we do expect when we look at operating margins, that we’ll see improvement within the company, as well as within both of the segments.

David MacGregor: Okay. Second question, just on golf. Given the price increases, what are you seeing in demand elasticity from smaller and medium-sized golf courses, I guess your large course customers are fine, but like a little bit about what the small customers, how they’re responding to the pricing.

Rick Olson: We’re seeing honestly very strong demand across our customer base. Oftentimes, the smaller golf courses could be municipal courses, for example, and many of them have €“ they’ve not been in the revenue situation they’re in today in a long time. So their budgets are very healthy. Oftentimes, I mean, there’s a secondary market for our products as well. So, for the very small golf courses, that tends to be something that they’re interested in. That market is actually very tight as well. There’s a shortage of used equipment out there. So, we’re not seeing anything other than very strong demand at this point across our customer base.

David MacGregor: Okay. Thanks for that Rick. And last question for me, just on Landscape Contractor, you talked about the return to more typical seasonal patterns. You’re running your spring sales event right now. Could you just talk a little bit about how the market is responding to that spring sales event? Or how would you characterize the market response to that promotion? And are you seeing any price elasticity there?

Rick Olson: Yes. I mean I just spoke with some of the people directly involved with that yesterday. They’ve been very pleased at the response so far. There are very willing buyers out there in those markets. I think the €“ there’s a portion of that market that would be more cautious about the economy, but they know that they have equipment that needs to be replaced on the landscape contractor professional side of the business. So, it’s just a matter of timing and in this case, a small incentive had a significant impact.

David MacGregor: And Rick, historically €“ have you historically seen a correlation between weaker snowfall and these guys just having less revenue to spend on equipment come to spring? Is there a correlation there we should be mindful of?

Rick Olson: We have, and I think the €“ what we see this year is if they are in parts of the country where they have not had as much snow revenue. First of all, a lot of the snow revenue, snow businesses, a mixture on contracts, so they still have revenue, whether they plow the snow or not. And so, in those cases where they’ve got lower revenue, they will probably make their purchases for the spring as they start to get into the revenue of the spring. So, it could mean just a slightly delayed purchase cycle. And those are some of the things that we can have an impact on with some of the promotions that you mentioned.

David MacGregor: Great. Thanks very much and congratulations on the quarter.

Rick Olson: Thank you.

Operator: Thank you. One moment for our next question. And our next question comes from the line of Eric Bosshard from Cleveland Research. Your question please.

Eric Bosshard: Hi, thanks. Two things. First of all, Rick, on the Pro side, it sounds like the quarter was better and the full-year, it sounds like it’s a little bit better now than what was prior. Within this, what is leading that? What piece of the business is leading that?