TORO CO

Overview

Consolidated net sales for the first quarter of fiscal 2026 were $1,036.3 million, up 4.2 percent compared to $995.0 million in the first quarter of fiscal 2025.

Professional segment net sales for the first quarter of fiscal 2026 were $824.0 million, an increase of 7.2 percent compared to $768.8 million in the first quarter of the prior fiscal year.

Residential segment net sales for the first quarter of fiscal 2026 were $206.0 million, a decrease of 6.8 percent compared to $221.0 million in the first quarter of the prior fiscal year.

Net earnings for the first quarter of fiscal 2026 were $67.9 million, or $0.69 per diluted share, compared to $52.8 million, or $0.52 per diluted share, for the first quarter of fiscal 2025.

Adjusted net earnings for the first quarter of fiscal 2026 were $72.6 million, or $0.74 per diluted share, compared to $65.9 million, or $0.65 per diluted share, for the first quarter of fiscal 2025.

We maintained our tradition of paying quarterly cash dividends and increased our cash dividend for the first quarter of fiscal 2026 by 2.6 percent to $0.39 per share compared to $0.38 per share paid in the first quarter of fiscal 2025. We also repurchased shares of our common stock under our Board authorized stock repurchase program ("stock repurchase program"), thereby reducing our total shares of common stock outstanding. As a result of the combination of quarterly cash dividends and common stock repurchases, we returned $133.2 million of cash to our stockholders during the first three months of fiscal 2026.

Field inventory levels were lower as of the end of the first quarter of fiscal 2026 compared to the end of the first quarter of fiscal 2025, primarily due to decreased balances of snow and ice management, lawn care, and golf and grounds products, partially offset by higher balances of underground construction products.

Our order backlog represents unfulfilled customer orders at a point in time. Our order backlog (including shipments beyond 12 months) was higher as of the end of the first quarter of fiscal 2026 compared to the end of the fourth quarter of fiscal 2025 primarily due to normal seasonal trends for lawn care products.

Net Sales

Consolidated net sales for the first quarter of fiscal 2026 were $1,036.3 million, up 4.2 percent compared to $995.0 million in the first quarter of fiscal 2025. The increase was primarily driven by net price realization, higher shipments of Professional segment products, and the Tornado Infrastructure Equipment acquisition, partially offset by lower shipments of Residential segment products.

Net sales in international markets decreased by $23.9 million for the first quarter of fiscal 2026. The decrease was primarily driven by lower shipments of Professional segment products.

Changes in foreign currency exchange rates resulted in an increase in our net sales of approximately $4.9 million for the first quarter of fiscal 2026.

The following table summarizes our results of operations as a percentage of consolidated net sales:

Gross Profit and Gross Margin

Gross profit for the first quarter of fiscal 2026 was $336.5 million, up 0.3 percent compared to $335.6 million for the first quarter of fiscal 2025. Gross margin was 32.5 percent for the first quarter of fiscal 2026 compared to 33.7 percent for the first quarter of fiscal 2025, a decrease of 120 basis points. The decrease in gross margin for the first quarter comparison was primarily due to higher material and manufacturing costs, partially offset by net price realization and productivity improvements.

Selling, General, and Administrative ("SG&A") Expense

SG&A expense decreased $8.4 million, or 3.3 percent, for the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025. As a percentage of net sales, SG&A expense decreased 180 basis points for the first quarter of fiscal 2026 compared to the same respective period of fiscal 2025. The decrease in SG&A expense as a percentage of net sales for the first quarter was primarily due to net sales leverage, lower productivity initiative charges, lower corporate expenses, and cost savings measures.

Interest Expense

Interest expense decreased $0.8 million for the first quarter compared to the first quarter of fiscal 2025. The decrease in interest expense was primarily due to lower average interest rates.

Other Income, Net

Other income, net increased $10.7 million for the first quarter of fiscal 2026 compared to the same respective period of fiscal 2025. The increase in other income, net for the first quarter comparison was primarily due to a gain on a facility sale and the net favorable impact from foreign currency and derivative instruments, partially offset by lower income from our Red Iron joint venture.

Income Tax Provision

The effective tax rate for the first quarter of fiscal 2026 was 21.9 percent compared to 20.1 percent in the first quarter of fiscal 2025. The adjusted effective tax rate for the first quarter of fiscal 2026 was 21.5 percent, compared to an adjusted effective tax rate of 20.2 percent in the first quarter of fiscal 2025. The increase in both the reported and adjusted effective tax rate was primarily due to a less favorable geographic mix of earnings.

Net Earnings

Net earnings for the first quarter of fiscal 2026 were $67.9 million, or $0.69 per diluted share, compared to $52.8 million, or $0.52 per diluted share, for the same period of fiscal 2025. Adjusted net earnings for the first quarter of fiscal 2026 were $72.6 million, or $0.74 per diluted share, compared to $65.9 million, or $0.65 per diluted share, for the same period of fiscal 2025. The increase in net earnings per diluted share for the first quarter comparison was primarily due to higher Professional segment earnings, partially offset by lower Residential segment earnings.