The Toro Company Price & Performance (TTC)

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 vittoralcompany.com The. We have also posted a first quarter earnings presentation to supplement our earnings release. On our call today are Rick Olson, Chairman and Chief Executive Officer Angie Drake, Vice President and Chief Financial Officer and Jeremy Stefan, Director, Investor Relations.

During this call, we will make forward looking statements regarding our plans and projections for the future. Forward looking statements are based upon our historical performance and current expectations and are subject to risks, uncertainties and other factors that may cause actual results to differ materially from those contemplated by these statements. Additional information regarding these factors can be found in today's earnings release and in our investor presentations as well as in our SEC reports. During today's call, we will also refer to non GAAP financial measures. Which we believe are important in evaluating the company's performance. More details on these measures, the most comparable GAAP measures a reconciliation of the two please refer to this morning's earnings release and our investor presentations. With that, I will now turn the call over to Rick.

Thanks, Julie, and good morning, everyone. Fiscal twenty twenty five is off to a solid start as we reported first quarter bottom line results that exceeded the We delivered this result despite below average snowfall in key markets.

This is a testament to our compelling market leading lineup of innovative products The disciplined execution by our talented team and the extraordinary customer service provided by our best in class network of channel [indiscernible] For the quarter, we achieved total company net sales of nearly $1,000,000,000 with growth in the Professional segment offset by lower shipments as expected in Residential. We drove professional segment growth by successfully increasing output for golf and grounds products demand remains robust in golf coming off another record year of rounds played and order backlog remains elevated.

We also delivered on strong channel demand for our new contractor grade zero turn mowers ahead of the upcoming spring season. This includes our thirtieth anniversary X Mark Laser Z lineup featuring our exclusive Adapt technology to enable quick tool free adjustments of the deck rake The residential segment continued to be affected by elevated field inventories of some products. In addition, last year's first quarter included pulp products which we divested in Q3 of twenty twenty four. Despite the slight reduction in overall sales, we increased adjusted diluted earnings per share to $0.65 on the momentum of our Amplifying Maximum Productivity or AMP initiative, along with improved profitability in the Professional segment. Professional profitability improvement driven by favorable mix positive net price and prudent expense management in addition to productivity gains. Based on our first quarter results and our current visibility, we are maintaining our full year fiscal twenty twenty five net sales and adjusted diluted earnings per share guidance. Due to the uncertain and rapidly changing tariff environment, this guidance excludes all incremental tariffs introduced year to date with the exception of the additional tariffs on China imports that came into effect in February. Angie will walk through our guidance details shortly.

We continue to take actions to strategically position the enterprise for sustained profitable growth. We expect to drive strong returns by prioritizing innovation that directly addresses our customers' most pressing needs and aligns with key market growth trends. Across all our businesses, we are launching cutting edge products equipped with the latest technologies reinforcing our commitment to industry leadership and long term success. Our innovation leadership was very apparent at the recent The Course Superintendents Trade Show where we showcased our suites, of robotic solutions This included the introduction of our new Toro Turf Pro autonomous mower with GPS RTK technology ideal for multiple golf course applications as well as sports fields and grounds. The Turf Pro helps customers improve productivity while keeping grounds consistently well manicured by mowing up to 18.5 acres three times a week with minimal operator input Our new Hexmark Turf Tracer XIQ was also on display. With its 60 inches cutting deck, The Turf Tracer with XiQ provides another robotic option for golf customers First, focused on productivity and efficiency. These solutions are an excellent complement to our Toro Geolink autonomous fairway mower. We are rolling out more broadly this spring. For driving range applications, we introduced our new TORO Range Pro golf ball The robot also a GPS RTK technology, The Range Pro is capable of collecting over 15,000 balls in This is a game changer for our customers looking to free up time and labor while simultaneously maintaining a clean range for golfers.

We also showcased several industry leading advancements in smart connected solutions that meaningfully increase efficiency, and improve results for golf course superintendents. These include our all new Intelli360 web based digital toolkit to streamline turf equipment management as well as our renewed LinxDrive platform for full mobile irrigation control. These tools are designed to give superintendents The real time information and flexibility they need make proactive decisions anytime and anywhere. Another highlight of The golf show was our announcement of an exclusive partnership with TeraRad, a leader in advanced soil moisture mapping technology. Together, we are introducing the first of its kind data driven soil moisture sensing and management software. This software called Spatial Adjust will integrate exclusively with our Toro Link's central control platform. It will provide real time moisture mapping while mowing along with individual irrigation head adjustment recommendations that can be made with a click of a button. By eliminating the need for manual soil probing, and streamlining irrigation scheduling, This groundbreaking technology will allow superintendents to optimize turf health while at the same time reducing water consumption and operating costs.

Like golf, another key market We recently filled an important gap in our strategic underground product portfolio Pollo with the acquisition of ProCastro Services U. S. Site A. They are the exclusive U. S. Distributor of Germany's Procasro Mechatronics industry leading UV cured in place pipelining and robotic These trenchless solutions are used for the inspection and rehabilitation of water wastewater, and stormwater mainline pipes The perfectly complement our market leading blue light LED product for the lateral light cure market, We see the opportunity to capture early market adoption in The U. S. In this fast growing space By partnering with the proven brand leader in Europe, on current and future products, we're capitalizing on synergies with our HAMR Head product portfolio. In addition to driving innovation and adding strategic products to our portfolio, continue to make progress enhancing productivity and profitability with our AMP initiative. During the first quarter, we implemented nearly $50,000,000 in run rate savings bringing our total to date to $64,000,000 The savings implemented in Q1 were primarily driven by headcount to better align our organizational structure with our long term strategic priorities, also continue to make progress in driving savings with our supply base transformation.

We remain on track to deliver $100,000,000 of annualized run rate savings by fiscal twenty twenty seven from hemp.

As we've discussed, we intend to prudently reinvest up to half of the savings to further accelerate innovation, and long term growth. Importantly, everything we are doing with AMP helps fuel our enterprise strategic priorities of accelerating profitable growth, driving productivity and operational excellence and empowering our people. We remain confident in our ability to generate consistent strong cash flow and deliver positive financial results into the future. This was demonstrated by our repurchase of $100,000,000 in shares during the quarter following nearly $250,000,000 in repurchases last year. With that, I'll turn the call over to Angie.

Thank you, Rick, and good morning, everyone. We were pleased to deliver adjusted diluted EPS growth in the quarter, driven by improved profitability. Consolidated net sales for the quarter were $995,000,000 down slightly from Q1 last year. Note that Q1 last year included net sales from the Coke The business. While the current year does not. Reported EPS was $0.52 per diluted share, compared to $0.62 last year. Adjusted EPS was $0.65 per diluted share up from $0.64 Now to the segment results.

Professional segment net sales for the first quarter were $768,800,000 up 1.6% year over year. This increase was primarily driven by three factors. First, higher shipments of golf and grounds products as a result of increased output. To address the sustained demand that has kept order backlog elevated. Second, increased shipments of zero turn mowers. This is a reflection of strong channel demand for new models And third, net price realization. These positive factors were partially offset by lower shipments of compact utility loaders as expected following last year's channel replenishment and this year's increased macro caution.

Professional segment earnings for the first quarter were $127,200,000 on a reported basis, up 13% from $112,800,000 last year. When expressed as a percentage of net sales, earnings for the segment were 16.5% up from 14.9%. The positive 160 basis point change in profitability was primarily due to net sales leverage, product mix, and productivity improvements. This was partially offset by higher material manufacturing and freight costs.

Residential segment net sales for the first quarter were $221,000,000 down as expected from $240,000,000 last year.

The decrease was primarily driven by lower shipments of snow products given elevated field inventory heading into the season, lower shipments of portable power products, and post divestiture last year and higher sales promotions and incentives. These factors were partially offset by higher shipments of zero turn and watt power mowers.

Residential segment earnings for the quarter were $17,200,000 compared to $23,500,000 last year.

When expressed as a percentage of net sales, earnings for the segment were 7.8% compared to 9.8% last year. The decrease was largely due to higher material, manufacturing and freight costs higher sales promotions and incentives, and product mix with less snow product. These were partially offset by productivity improvements. Turning to our operating results, the total company. Our reported and adjusted gross margins were 33.734.1% respectively for the quarter. This compares to 34.4% for both in the same period last The reported gross margin reflects higher AMP charges compared to last year. Additional changes on both The reported and adjusted basis were primarily due to higher material and manufacturing costs partially offset by productivity improvement. SG and A expense as a percentage of net sales for the quarter was slightly higher at 25.9% from 25.6% a year ago. The change was primarily driven by the higher AMP charges and was partially offset by lower marketing costs. Operating earnings as a percentage of net sales for the quarter were 7.8%, down from 8.8% in the same period last year. On an adjusted basis, operating earnings as a percentage of net sales were 9.4%, a 20 basis point improvement from 9.2% in the first quarter a year ago.

Interest expense for the quarter was $15,000,000 down from $16,200,000 last year.

The decrease was primarily due to lower average outstanding borrowings, The reported effective tax rate for the first quarter was 20.1%, compared with 19% last year. The increase was primarily due to lower tax benefits, recorded as excess tax deductions for stock based compensation in the current year period. This was partially offset by a more favorable geographic mix of earnings this The adjusted effective tax rate for the first quarter was 20.2% compared with 20.8% a year ago. Primarily driven by the geographic mix of earnings. Turning to our balance sheet. Accounts receivable were $494,000,000 up slightly from $489,000,000 a year ago. Primarily driven by increased international shipments. This was partially offset by lower mass channel shipments [indiscernible] Inventory at the end of Q1 was $1,140,000,000 down about 3% compared to last year and higher sequentially from the fourth quarter. As is typical due to the normal seasonal flow. The year over year improvement was primarily driven by lower balance This was partially offset by higher levels of compact utility loaders As expected, Accounts payable were $447,000,000 up 6% from last year. Primarily driven by higher material purchases. Free cash flow in the quarter was a $67,700,000 use of cash.

An improvement over last year.

The use is a reflection of our normal seasonal working capital needs As a reminder, the majority of our operating cash flow is typically generated in the second half of our fiscal year. Importantly, our balance sheet remains strong and provides financial We continue to target a gross debt to EBITDA leverage ratio in the range of one to two times The, along with our investment grade credit ratings, provides the financial flexibility to fund investments The drive long term Our disciplined approach to capital allocation remains unchanged with key priorities of making strategic investments in our business to drive long term profitable growth, both organically and through acquisitions, returning cash to shareholders through dividends and share repurchases Examples of how we are acting on these priorities in fiscal twenty twenty five include [indiscernible] first, our plan to fund $100,000,000 in capital expenditures to support new product investments advanced manufacturing technologies, and capacity for growth. Second, our recent acquisition in the trenchless underground space. Third, paying our regular dividend. And finally, executing on share repurchases.

Including $100,000,000 in the first quarter.

We have continued repurchasing shares in the second quarter a reflection of the confidence we have in our future financial performance and cash flows. As we look ahead to the remainder of the year, in our Professional segment, we continue to expect benefits from the sustained strength in demand and elevated order backlog for underground construction equipment and golf and grounds products. We also continue to expect backlog will be closer to normal by the end of fiscal twenty twenty five. Importantly, we expect the sustained strength in these businesses will help avoid a significant gap as demand and supply normalize. We also expect the continued build inventory normalize Speaking of field inventories, we are entering the spring turf season with dealer field inventories of long care products in a better position This has been driven by the work we have done over the past year to decrease shipments into the channel. Coupled with retail sell through that has outpaced those shipments. This along with the strength of our brand, channel and new product introductions, sets us up well as homeowner markets eventually return to normal strength. For snow products, field levels remain elevated heading into the second quarter. But are trending in the right direction.

While snowfall activity has improved compared to last year, year to date snowfall totals have still been meaningfully below historical averages in many key U. S. Markets. We will be watching to see how late season storm activity clears the channel. In any event, we expect field levels of snow products to be in a better position compared to last year heading into our second half The season sell in. Our guidance considers the below normal snowfall so far this winter as well as the incremental China tariffs that came into effect in February. Due to the uncertain and rapidly evolving trade policy environment, this guidance excludes the impacts of all other incremental tariffs.

We are prepared to take with the continued goal of being a good supplier while protecting our market leadership and profitability. As a reminder, we have significantly reduced our exposure to China supply since the initial round of tariffs in 2018. In addition, the vast majority of our manufacturing production takes place in The U. S. Particularly for our higher margin professional segment. We do have production facilities in Mexico primarily for residential and irrigation products With this backdrop, we are maintaining The full year net sales and adjusted diluted EPS guidance we shared on our last earnings call. This includes total company net sales growth in a range of 0% to 1% for the full year. Which assumes continued strong demand and stable supply for our businesses with elevated backlog a continuation of the macro caution we have seen in markets connected to homeowners And weather patterns align with historical averages for the remainder of the fiscal year.

It also considers the additional adjustments needed to normalize field levels of lawn care and snow products. For the Professional segment, we continue to expect full year net sales to be up low single digits For the residential segment, we continue to expect net sales to be down high single digits which considers the continued rebalancing of our mass partners as well as the full year impact of last year's post divestiture. Looking at profitability, For the full year, we continue to expect improvement in both adjusted gross margin and adjusted operating earnings as a percentage of net sales. We also continue to expect both the residential and professional segment earnings margins to be higher than last year. With this, we continue to anticipate full year adjusted diluted EPS in the range of $4.25 to $4.4 Additionally, for the full year, we continue to expect depreciation and amortization of about $125,000,000 interest expense of about $54,000,000 and adjusted effective tax rate of about 20%, and a free cash flow conversion rate of about 100% of reported net income. Turning to the second quarter of fiscal twenty twenty five. We anticipate total company net sales to be similar year over year.

We expect professional segment net sales to be up low single digits and residential segment net sales to be down mid single digits. Compared to the same period last year. Looking at profitability, For the second quarter, we expect total company adjusted operating margin to be slightly lower year over year. We expect the Professional segment earnings and the residential segment earnings margins to be slightly lower. Overall, We continue to execute with discipline. And are excited about the momentum we are gaining with our customer centric technology investment This includes our robust new product pipeline, aimed at driving success for our customers and for the Toro company. We are also confident in our ability to unlock significant benefits and opportunities with our AMP productivity initiative. As we continue to build our business for long term profitable growth. With that, I'll turn the call back to Rick. Thank you, Angie.

As I mentioned from the outset of the call, we are pleased with our BioBlind performance to begin the year in what is a very dynamic operating environment. We continue to expect benefits from our market leadership and strong fundamentals the ongoing success of our AMP initiative and the essential nature and regular replacement cycle of our products With this and the continued agility and dedication of our team, we have confidence in our ability to deliver positive financial results into the future. We recognize the high degree of uncertainty that exists in the current macro environment This includes the economy, consumer and business confidence, and the geopolitical environment. We are closely monitoring the risk and benefits associated with potential policy and regulatory changes including tariff developments.

The situation is rapidly evolving and changing and we will remain nimble We are prepared to quickly make adjustments I'd like to emphasize once again while we are confident and excited about our future. First, the near and long term prospects for our underground construction business remain extremely compelling. This is supported by a rapidly growing demand for data communication infrastructure data center build out and energy grid modernization as well as the global focus on replacing aging infrastructure. In terms of the aging water infrastructure, recent surveys point to more than $630,000,000,000 in spending over the next twenty years to ensure safe drinking water in The U. S. With most of those dollars expected to go to clean water distribution. Outside of The U. S, a sprawling network of 30,000 miles of hydrogen gas pipeline is planned across Europe. These are just a few examples of many that support the widespread need and positive runway for infrastructure investments. We are very well positioned to capitalize on this runway for growth as a worldwide market leader with the most comprehensive equipments and brand lineup in the industry. And our best in class channel. The strength of demand combined with our deep relationships and our technology and innovation leadership make this an extremely attractive space for us and our shareholders.

Second, the near and long term prospects for our golf business are also extremely compelling. Data continues to support the sustained strength of this market. U. S. Participation in OnCourse golf exceeded 28,000,000 players in 2024. Marking the seventh consecutive annual increase.

Last year's net increase of approximately $1,500,000 Gulf was the biggest single year jump since the year February At the same time, total U. S. Golf participation including both on and off course players rose 5% and was up 38% when compared to pre pandemic twenty nineteen data. All of The points to an extremely healthy end market with more new course development than any time since 2011. We are uniquely positioned to capitalize on this market as the only company to offer both equipment and irrigation [indiscernible] and as the clear market leader in both As you could hear from my earlier remarks, the strength of our innovation pipeline for this market is unmatched The. With our steady introduction of solutions that drive enhanced performance productivity and efficiency for our golf customers. Third, we enjoy multi brand leadership the important zero turn mower space, is the largest single turf care category for both our professional and residential segments. As these markets return to more normal strength, we're extremely well positioned to benefit from the share gains and these strategic actions that we've taken to strengthen our independent dealer network and mass partnerships. Fourth, our proven ability to leverage technology and innovation investments, a across our broad portfolio enhances the durability of our competitive advantage and market leadership This leverage enables the accelerated development of new products aligned with market trends that help our customers with their most pressing needs such as addressing labor challenges via shortages or skill requirements conserving scarce resources such as water while at the same time reducing costs.

And improving outcomes with access to the most up to date technology advancements. And finally, it comes down to the strength of our agile organization which has been resilient through many macro cycles. Our talented team is equipped and determined to capitalize The the many opportunities in front of us as we build on our fifteenth consecutive year of top line growth, and we have a best in class network of strategically aligned channel partners focused on going above and beyond to serve our customers every day. All of this positions us extremely well to drive value for all stakeholders in both the near and long term.

With that, will open the call for questions. Our first question comes from David MacGregor with Longbow Research.

Line is open.

Yes. Good morning, everyone. Thanks for taking my question.

I wanted hey, Rick, I wanted to start by just asking about AMP.

And clearly, there's a very good level of progress being made here. But I just want to be clear around kind of the movement some of the numbers here. You talked about $64,000,000 run rate. In cost savings to date. Dollars 50,000,000 of that occurred in the first quarter, which is up a great start. I guess, how much of this reached the bottom line in first quarter if any at all? You talked about trying to redirect a portion of that into investment, some portion plus The the bottom line. Try to help us understand just how much of that might have benefited 1Q? And then just the cadence on these AMP benefits and the dropped earnings over the remaining March of 25% would be really helpful. Thanks. Yes. Sure, David. The timing of our emphasis on productivity could not have been better in the current environment. And Angie is leading this initiative. So maybe I'll let Angie do you want to review?

Sort of the basics?

Yes. First of all, I'll address your question on kind of The the savings that we saw in the quarter. So you'll see later with the October that we have $7,000,000 in gross realized savings in the quarter And remember that we had mentioned that we will reinvest a portion of that. So not all of that necessarily drops to the bottom line. So But everything that we have done and everything that we have reinvested, we considered in our full year outlook and included in our guidance. To your point on how we expect to see this play out over the rest of the year, we did see that $49,000,000 run rate savings in Q1, which gets us to $64,000,000 in run rate savings to date. The majority of that did come from the restructuring events that we did in December. And if you'll remember last year, we mentioned that we would expect to see the majority of The rest of what we have left in that $100,000,000 run rate to be achieved in F-twenty five. So we still have some opportunity with other things like supply base, route to market, the things that we have mentioned are working capital and efficiencies.

To play out for the rest of the year. However, we haven't defined that exactly by quarter. Okay. So what we are confident [indiscernible] Okay.

Just to be clear on the numbers here, when you talk about a $49,000,000 run rate and $7,000,000 of gross realized savings, Are you suggesting that it was $42,000,000 in expenses and the gross difference is The $7,000,000 I just want to be clear on the math.

No. The $49,000,000 run rate just means that those savings will be into the future. So the $7,000,000 is what was realized in Q1.

Okay, it's a run rate.

Okay. Thanks for that.

Secondly, can you just talk about pro snow? I know in the residential snow, you talked about volume were down The the inventory dynamic in the channel. But on the Pro side with BOSS, Where are dealer inventories here? And how should we read through to landscape contractor in the season ahead given everything we're hearing through our channel checks are that these guys have a pretty good plow season, which puts cash in their pocket and there's obviously been deferred spending in L. So just trying to think through the read from pro snow in this quarter to what DTR pro grade DTR could look like this summer.

Sure. I'd be happy to answer that. First of all, if you just look at the context of the winter, I know there were some kind of headline grabbing snow events [indiscernible] snow in Florida or Georgia does not really drive a lot of our snow product sales. So overall, as across The U. S, snow relative to average was down about 13.5%. And if you look at the major snow markets, it was down more than 50%. So I think here in Minnesota, we're down roughly two thirds. We just had a snow event The the last couple of days that may have taken a little bit off of The, but roughly well over half reduction from norm. The the different markets respond a little bit differently. And on the residential side, it tends to be heavy major events, heavy snow major events that drive a lot of the business early in the season. From a contractor perspective, The ideal event is a lighter snow event that's palatable. Because it's can be done efficiently And if you cover the ground that you need to clear, you get paid for that job.

So a palletable snow might be one or two inches, that's kind of ideal. And we did have a decent amount of The. So it helped to drive some of the business Relative to the residential business, a little bit better on the pro side. So field inventories, we are down a little bit year over year. Based on the winter was a little bit better than last year. So in spite of my comments, it was a little bit better than last year. But still higher than we would have expected, but we've included all of that in our guidance at this point, including the knowledge of where where the inventories are. The good news is The the facts that I mentioned, a little bit better quite a few notable events in many markets. Contractor budgets, we believe, are going into the spring in better shape, in fact, good shape at this point.

So that is a positive. So kind of a complicated answer, but there's a few details that kind of different depending on which part of the business we're talking about.

No, that's helpful.

Just last question for me. It'd be interesting to get your updated price cost expectations for this year. You talked about raw materials being a bad guy in the first Just how are you thinking about the price cost spread here through the balance of the year?

Yes. Our for Q1, our slight we have slight price increase or so. Our price was up Our cost was up more.

And that was really due to higher manufacturing and freight costs and some inflation. There's also variability in timing, but productivity improvements did off offset The some. We didn't guide for Q2 on price cost, but for the full year, we do expect to return to a more normal 1% to 2% price. Based on those areas that that is before tariffs. I do want to say that. That's before those tariffs. But especially for businesses where demand remains stronger and we believe we didn't get price.

Very good. Thank you very much.

Thank you.

One moment for our next question. Our next question comes from Tim Wojs with Baird. Your line is open.

Hey, everybody. Good morning. Maybe just the first question on some of the moving pieces on tariffs. Could you just remind us kind of how much of your COGS are related to kind of Mexico manufacturing and China supply chain? And then Is there how big is Canada? And I guess do you produce in Canada or do you produce in The U. S? Just if you could run through a couple of those kind of exposure related kind of items, I think that'd be helpful.

Yes, sure. Tim, as you can now fully understand, it's a very dynamic situation. We've had a task force in place since last fall with a scenario for every possibility that you can imagine and that seems to be changing on short notice. So we're working that very closely. Just to give you some overall picture tariff exposure. First of all, the vast majority of our products are made in The United States.

The The backlog products that we've talked a lot about over the last couple of years, the golfing grounds and underground businesses, are virtually 100% built in The United States, so very little exposure on The professional side. We do have operations in Mexico And and irrigation products. So that's kind of the the Mexico exposure in the residential and irrigation areas. But again, vast majority of overall products in The U. S. Do not produce products in Canada.

We do have customers in Canada From that perspective, as we do part of our global business. And then back to think the first part of the question for China The, we've talked about The exposure has been significantly vastly reduced from what it was back in 2017 and 2018 we last had these conversations and it's low single digits kind of percents of COGS and we've built into our guidance the first round of the China tariffs that were implemented in February.

We've had a chance to process that and we'll be offsetting those within within our year that's been included in our guidance. They're probably the major areas that gets more complicated when you start talking about any reciprocal tariffs, those kinds of things. Those are on the board, but we don't have information to be able to respond to those. Okay.

Okay. And I guess if the current so if tariffs on China are 20 or it will be incremental 10% on China and then the 25% on The it does stay intact. Is there a a ballpark figure in terms of what the gross impact would be for for Toro in those situations? [indiscernible] I thought it's a moving target right now. So we're working through that process But regard specifically to China, We're currently determining what portion we could offset with through negotiation with our suppliers, We have the option to strategically move products sources and so forth. So that process is in process right now. But we go through the normal process of first of all, try to minimize the impact of tariffs by making sure we're represented with our industry groups and we try to mitigate the tariffs with offsetting by changing locations of sources or manufacturing offsetting with cost savings negotiating with our suppliers and then ultimately The rest of that gets passed through and price and all The discussions are taking place. We just haven't been able to process that relative to incremental planned tariffs at this point.

The key thing for us Tim, is that we want to as a market leader make sure we support our customers, at the same time, protect our own business at the same time. Okay.

And just as a reminder, as we said in our prepared remarks, we have included those February and Chinese tariffs in our best estimates in the guidance.

Okay. Understood. On the field channel inventory, just in the in kind of the pro kind of ground business, landscape contractor business, Rick, where are you relative to normal at this point, in kind of The year? And I guess what's the sentiment like when you talk to your distributor and dealers just around expectations for sales and just how much kind of inventory they're kind of willing to kind of hold?

I think the areas that we've talked about where we've been working down our inventory on the pro landscape contractor side, especially the products that go that typically get sold to homeowners in that category. We are pretty much where we left off when we started talking about this in the latter part of last year. We're a little bit higher than we would like to be typically but vastly improved over a year ago at this The. And it's really when you get into The key selling season where I will have another opportunity to reset that even further. We get into the spring. But we're we We are in position to be able to do that. The great thing is I think we mentioned our X Mark The introduction. New products really help to fuel demand that's help us move products faster. So we're a little bit higher than we'd like to be, much better than last year and in position for the spring.

In that landscape contractor area.

The underground business, for example, is still well under where we should be with our field inventory.

We feel good about where we are with the golf products. So it's really kind of isolated to landscape contractor As a result of a little bit less snow, we do have higher snow inventories, but that's been built into our projection for the rest of the year as well. It just means a little bit less pre season shipment but that's been built in now to our plan. Okay. And then just the last one The, On underground, I mean, it's been mentioned as a growth driver for the past several quarters. I guess it wasn't kind of mentioned as one in Pro this quarter. So just given what you just said about the fact that field inventory could be higher there and I I assume there was still a backlog The. Is it a timing issue there? Just trying to understand kind of what happened with the underground business in the The?

Yes. But I think you pretty much outlined to see very, very strong demand in the underground space. And feel very positive about that business. It just didn't rise to some of the other some of the other categories that we talked about as we go through the process of our comments. Also are introducing new products in that area. So there's a little bit of ramp up taking place. It's a timing factor strictly. Still still very positive, still strong driver of our future.

Okay. Sounds good. Thanks for the time.

Yes, thank you.

One moment for our next question. Our next question comes from Ted Jackson with Northland.

Your line is open.

Thanks very much. Actually, I had three questions to ask.

And two have been hit, but I do have a kind of a nuanced one on going back into tariffs. [indiscernible] so I know it's your favorite topic, right. But with regards to going back, you said you didn't have anything with retaliatory tariffs, but is there how much two parts, one is how is there how much product do you actually make here in The States that actually is ex exported that could come at risk if there were retaliatory tariffs And The, going back into kind of the Mexico The The products that you make there, how hard would it be for you to ship production and bring some of that stuff into The U. S? Is it something you would think would be worthwhile to do? Or is it the kind of thing where you just have to deal with the tariffs and that's it? That'd be my my question for you. Thanks. Okay, sure. First of all, on the first part, it would really be the ratio that we're looking at is 80% of our sales are there in The U. S. And the vast majority of our products are produced in The U. S. So it would be the net difference that we sell the 20% that we sell internationally could be subject to whatever retaliatory measures might be there.

With regard to the residential products, we do have flexibility to move that product around. Some of it's easier to move than others. But it's really primarily focused The the cost competitive type of products. So it's a it's a portion of our residential business, not 100% of our residential business. It's in Mexico.

Okay. And then actually can I ask just quickly like what was what would have been like how much was Pope in the last quarter just to kind of get a sense in terms of the dynamic with its impact on kind of the year over year for you? And then I'm done. Thanks.

Yes. The Pope piece for Q1 was probably about 7 point Okay.

Last year. Yes, last year.

Thanks very much. [indiscernible] And I'm not showing any further questions at this time. This concludes the question and answer session. Ms. Karakas, please proceed with closing remarks.

Thank you, Kevin, and thank you everyone for your questions and interest in the Toro Company. Look forward to talking with you again in June to discuss our fiscal twenty twenty five second quarter results.

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