The Toro Company (TTC) Q3 2026 Earnings Call Transcript

Operator: Good day, ladies and gentlemen, and welcome to the Toro Company's Third Quarter Earnings Conference Call. My name is Marvin, and I will be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I'll now turn the presentation over to your host for today's conference, Heather Hille, Vice President, Corporate Affairs and Investor Relations. Please proceed, Ms. Hille.

Heather Hille: Good morning, everyone, and thank you for joining us for the Toro Company's Third Quarter 2026 Earnings Conference Call. I'm Heather Hille, Vice President of Corporate Affairs and Investor Relations. On the line with me today are Rick Olson, Chairman and Chief Executive Officer; Edric Funk, President and Chief Operating Officer; and Angie Drake, Vice President and Chief Financial Officer. Rick, Edric, and Angie will provide an overview of our third quarter results, which were released earlier this morning and discuss our priorities and outlook for the remainder of fiscal 2026. Following their remarks, we'll open the phone lines for a question-and-answer session. Before we begin, please note that any forward-looking statements made today are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks are detailed in our earnings release, investor presentation and our most recent filings with the SEC. During our remarks, we will also reference certain non-GAAP financial measures. We believe these metrics provide useful insight into the company's performance. Reconciliations to the most directly comparable GAAP measures can be found in this morning's press release. Both the release and our third quarter supplemental presentation are available in the Investor Information section of our corporate website. With that, I will now turn the call over to Rick.

Richard Olson: Thank you, Heather, and good morning, everyone. We delivered a strong third quarter, growing net sales 8% and generating adjusted earnings per share of $1.33. The sales momentum from the first half continued into Q3 with both our Professional and residential segments growing net sales over 8%. Within the professional segment, landscape contractor sales increased double digits with underground and specialty construction growing mid-single digits. As expected, golf shipments were down modestly year-over-year against a strong prior-year comparison. The strength in professional contractor was driven in part by the redesigned Exmark Radius zero-turn mower launched earlier this year. Another key contributor was the GrandStand MULTI FORCE product line now equipped with a new, more powerful and fuel-efficient engine. This versatile stand-on machine has numerous attachments, enabling customers to expand services, increase profitability and remain productive in every season. Our Ventrac business continues to grow with professional landscape contractors and homeowners with acreage. This season, we added to the more than 30 Pro-grade attachments with the newly introduced fence post mower. It virtually eliminates one of the most labor-intensive trimming processes, and it's a great example of our innovation process, identifying a customer pain point and developing an effective solution. Customer response has exceeded expectations with demand already surpassing our initial production run. Rounding out a strong season for professional contractors was a successful Q3 load-in for BOSS snow and ice management products. Liquid deicing technologies and the Snowrator delivered the strongest year-over-year growth rates within the portfolio. Underground construction continues its strong performance, growing mid-single digits in the third quarter. We have seen increased market adoption for our industrial and utility pipe relining solutions like HammerHead Bluelight, which has grown over 30% year-to-date. This is an advanced Cured-In-Place pipe rehabilitation system that avoids the disruption of digging a large trench for a full pipe replacement. Our patented LED Bluelight Curing technology cures up to 5x faster than traditional steam, hot water or ambient air methods. Moving on to the residential segment. We grew net sales by over 8%, supported by the continued success of our partnership with Lowe's. Importantly, this growth was accompanied by a margin improvement of 400 basis points year-over-year. We remain on track to achieve our goal of sustainable double-digit operating margins in residential. In a moment, Angie will highlight the progress of our AMP program and the resulting margin expansion for the company. In addition to AMP, we are driving working capital improvements. Year-to-date, these improvements have contributed to our $425 million in free cash flow at a conversion rate of 128%. As a result of our strong cash flow, we executed $358 million of share repurchases. We are entering the fourth quarter with strong momentum and high expectations. Healthy end markets, disciplined execution and ongoing productivity initiatives are driving margin expansion and robust free cash flow. Our strong year-to-date performance gives us the confidence to raise our adjusted EPS guidance to a range of $4.60 to $4.65, up from our prior range of $4.50 to $4.62, bringing the midpoint up over $0.07 to $4.63. Now I'll turn the call over to Angie for the details on the quarter.

Angela Drake: Thank you, Rick, and good morning, everyone. Our third quarter results were driven by strong customer demand and disciplined execution. Net sales increased 8.4% to $1.23 billion, or 6.2% organically. Adjusted operating margin was 13.9%, up 30 basis points from the prior year. This improvement was driven primarily by the benefits of our AMP initiative, which will exceed our target of $125 million in run rate savings by year-end. We launched AMP in 2024 to focus on 4 key areas: supply base transformation, design-to-value engineering, route-to-market optimization and operational efficiency. The program has delivered meaningful benefits across each of these areas and has also been instrumental in helping mitigate tariff-related impacts. While AMP will conclude in fiscal 2026, our commitment to continuous improvement will not. Across our supply chain and functional organizations, we will continue to use the muscle gained by the AMP initiative to improve efficiency, reduce complexity, and enhance profitability. Productivity is a critical part of the Toro Company's DNA. The net result for Q3 was an adjusted EPS of $1.33. The year-over-year increase was driven by $0.12 from operational performance, $0.05 from share repurchases and $0.06 from tariff refunds. Partially offsetting these benefits was an $0.08 impact from a higher adjusted tax rate and $0.06 of other corporate items, mainly a higher incentive accrual due to year-to-date performance and less Red Iron income due to lower field inventories. The adjusted tax rate in the third quarter was 22.4%, higher versus our expectations due to the geographic mix of earnings. Our adjusted earnings excludes a noncash impairment charge of $43 million as part of our AMP-related network optimization and product portfolio rationalization. Moving on to our segment details. Within professional, net sales increased 8.8% with 6.1% coming from organic growth. Adjusted operating margin was 20.9%, down 40 basis points year-over-year. This was primarily due to product mix and higher manufacturing costs, partially offset by pricing, productivity improvements and volume leverage. Within residential, net sales increased 8.6%. Adjusted operating margin improved to 5.9%, up 400 basis points year-over-year. The increase was driven by productivity improvements, pricing, volume leverage and a favorable comparison to a prior-year inventory valuation adjustment. These benefits were partially offset by higher material and manufacturing costs. Turning to balance sheet highlights. We improved inventory by $153 million year-over-year due to lower finished goods balances. Accounts receivable were up slightly as a result of the Tornado acquisition, with accounts payable also up slightly due to higher purchases with a greater level of sales. As a result, working capital improved $217 million year-over-year, contributing to the strong free cash flow conversion that Rick mentioned. Turning to our outlook. We are raising our full-year guidance based on our sustained broad-based customer demand and the results of our productivity initiatives. We now expect our full-year net sales to be in the range of 6.3% to 6.6%, up from the prior range of 4% to 6.5%. At the segment level, we anticipate professional net sales to be up mid-single digits, continuing the momentum of recent quarters. Residential net sales will be approximately flat as we lap last year's strong snow-related demand. We are closely monitoring winter weather patterns and will react quickly as the season develops. Moving to profitability. The adjusted EPS range is expected to be between $4.60 to $4.65, up from our prior range of $4.50 to $4.62. The midpoint of our guidance increases from $4.56 to $4.63, reflecting our third quarter outperformance and a better outlook for the fourth quarter. The implied fourth quarter guidance puts net sales between 3.9% and 5.1% and adjusted EPS between $0.93 and $0.98. This guidance includes $7 million of anticipated IEEPA refunds. That is less than the previously expected $12 million, as $5 million has been classified as outside of Phase 2. The refund timing of this portion of IEEPA refunds is uncertain given the current process. If they are available in the future, we will include them in our guidance at that time. We continue to build our business for long-term profitable growth. This includes prioritizing innovation investments that we believe will deliver outstanding returns, driving sustainable margin expansion with disciplined execution, including our productivity initiatives and leveraging the talents of our team and the power of our best-in-class distribution networks. We are confident in our ability to drive significant benefits and opportunities for all of our stakeholders. With that, I will turn the call over to Edric.

Edric Funk: Thank you, Angie. I'd like to start today by recognizing and thanking Rick for his leadership, partnership, and unwavering commitment to the Toro Company and its people. Rick has led the organization through a remarkable period of transformation and growth. His vision to strengthen the portfolio. And under his guidance, the company has successfully navigated the many macro and geopolitical challenges of the past 10 years. Today, the company is in a position of strength and poised to capture the opportunities ahead. The team did just that in the third quarter as evidenced by our adjusted operating earnings growth of 11%. This was underpinned by our constant focus on operational excellence. One example was our recent Supplier Summit, which brought together more than 180 organizations. The event reinforced our dedication to building strong supplier partnerships that support supply continuity, innovation and productivity. Direct engagement between leaders of The Toro Company and our supplier partners creates opportunity to identify and accelerate continuous improvement initiatives and to strengthen long-term partnerships that create value for both Toro and our customers. Relationships have always been a strength of The Toro Company, and our golf business is one great example. In early August, we welcomed 36 golf course leaders to our headquarters, representing top courses from across North America. Participants raved about our engineering and manufacturing operations, and were highly enthusiastic about our emerging technology demonstrations in the areas of automation, artificial intelligence, electrification and connected solutions. The investment we make in people and relationships continues to pay dividends. After 2 years of exceptional double-digit growth, golf continues to perform in line with our expectations this year. More importantly, the industry's underlying drivers remain strong. We've now placed hundreds of autonomous products across golf facilities worldwide, including the Turf Pro, Range Pro and GeoLink Autonomous Fairway Mower. Toro's autonomous solutions demonstrated their capabilities on one of golf's biggest stages when Shinnecock Hills hosted the 126th U.S. Open. During tournament Week, the Turf Pro 500 and Range Pro 100 operated together in the practice area, with the Range Pro autonomously collecting golf balls, while the Turf Pro simultaneously maintained the turf. This showcased how automation can help customers optimize labor resources even under the most demanding conditions. I'm very proud of our team for the successful launch of our GeoLink Autonomous Fairway Mower. This product combines the trusted excellence of our renowned quality of cut with advanced autonomous technology to help golf courses maintain superior playing surfaces, all from a smartphone app and allowing the grounds crew to track one or more units as they perform other work on the course. While we've already made considerable progress with this technology, I'm even more excited about what's to come. Next spring, we will add another model, the larger Reelmaster 5010-H as we accelerate the commercialization of our autonomous platform launches. We're also seeing excellent adoption of other new product introductions within golf. The new electric greens roller is already sold out for 2026. This reflects customer appreciation for both its intuitive controls and the built-in pass alignment feature that helps the crew achieve uniform and repeatable results. In addition, the fact that it's all-electric eliminates the risk of oil leaks on sensitive putting surfaces. Demand across our businesses continues to be broad-based. Strong adoption of new products, continued healthy conditions in golf and sustained strength in underground and specialty construction position us well to deliver on our updated full-year guidance. Looking forward, our team remains highly focused on key strategic initiatives that will deliver long-term sustainable value for customers and shareholders alike. Now I'll turn the call back over to Rick for some closing remarks.

Richard Olson: Thank you, Edric. During the past decade, I've had the privilege of leading The Toro Company and working alongside an extraordinary team of dedicated and talented employees. Together, we have accelerated growth, doubling revenues and expanding into new markets. We completed 10 strategic acquisitions, including our largest ever in Charles Machine Works. These investments strengthened and diversified our portfolio, making us more resilient and reducing our reliance on weather patterns and consumer purchase cycles. The strong performance by Ditch Witch, Ventrac, and Tornado this quarter reflects the positive impact of this strategy and the value it creates for all stakeholders. We also significantly advanced our technology capabilities; whether helping customers reduce downtime through fleet management solutions, addressing labor challenges with autonomous technologies or offering high-performance gas and electric product options, we continue to innovate. Today, we are expanding these capabilities with AI-enabled business processes and product innovations such as our Spatial Adjust Precision Irrigation Technology. Our team remains focused on execution and delivering value for customers. Our end markets are healthy, inventory levels are well positioned, and we continue to see encouraging demand trends across the business. I would like to thank our employees, channel partners and shareholders for their continued partnership, dedication and trust. I am confident in our ability to deliver on our updated full-year guidance and to finish the year strong. I am also confident in The Toro Company's future with Edric at the helm. He is an exceptional leader who understands our business, customers and people. And I know that he and the team will continue to build on our momentum, leading the company into its next chapter of growth and success. Now we'll open up the line for questions.

Operator: [Operator Instructions] And your first question comes from the line of David MacGregor of Longbow Research.

David S. MacGregor: Rick, thanks for all the help over the last many years it's really been a pleasure working with you, and I wish you well with whatever comes next. I guess I wanted to explore the Ditch Witch business, the underground construction business. And it seems as though there's been more of a normalization perhaps now as well as some of the benefits from the AMP productivity program. But I wonder if you could just talk about where we are right now in terms of margin contribution there and the extent to which maybe there's further upside yet to be achieved.

Richard Olson: Yes. Thanks for asking about the underground business. We are extraordinarily excited about the underground business and particularly the future runway for opportunity there, both for growth, which is driven by the market demand across -- we talk about data centers, but also utility work, broadband, et cetera. But the opportunities to continue to grow in profitability internally with the work that we've done. The trajectory from the acquisition to now is pretty remarkable from a profitability standpoint. We see more opportunity there. If you look specifically, data centers, for example, as an example, we were just looking at a case study. It's not so much the work that's done on the site. It's the work that's done to get the data, the power and the utilities to the site. Just an example, in Frederick, Maryland, 14 miles, 25 drills, 160 people that it took to get the data only to that was a 10-month project. So data centers are a deal for us, but it's just one slice of the demand that we see in that area. So that would be more of a drill and a trencher type of opportunity. And then I think we -- you just heard us feature the relining capabilities with our patented Bluelight system that's multiple times faster than other methods for rehabilitating. So -- and then lastly, just the impact of Tornado. And as we've talked about previously, those are key tools on a drill site or underground site that's adjacent to our products, but they also open up nodes to new opportunities of growth just for soft excavation in general as that becomes more important and required in many areas.

David S. MacGregor: And just to build on that, I guess, you've done the Tornado acquisition here. Can you just talk about the extent to which maybe underground is growing as a priority within your capital allocation process and the extent to which we might expect inorganic growth to continue there?

Richard Olson: It is a high priority for us, and it cuts across different investment categories. So the largest investment currently in our plants is taking place to unleash unlock more capacity within our facilities for the Ditch Witch business. And it is a high priority from a nonorganic perspective as well. We think there are -- continue to be opportunities for small, medium, and large opportunities within that category as we go forward. So you're exactly right, it does go to the top of our list in several of those categories just based on the opportunity and the runway for continued growth.

David S. MacGregor: And my second question, I wanted to just explore the AMP program here because you've reached $125 million in terms of program-to-date. I'm not sure what you've got planned, whether there's a formal AMP 2.0 program or whether this is just something you're going to continue to leverage off going forward. But if you think about the -- I realize it's a little early to be talking about 2027, but just from a construct standpoint, you talked about 8% sort of EPS -- 8% to 10% EPS growth as part of your algorithm. But it seems like there's some unrealized drop to the earnings line from the AMP program as well. And so I guess I'm thinking about 2027 earnings. And I'm just thinking whether there's a carryover benefit from AMP that should be supplemental to that 8% to 10% sort of algorithmic growth next year and we see maybe an above average level of bottom-line growth.

Angela Drake: Thanks for the question, David. I'm really pleased with how the AMP initiative has worked for us and created really durable earnings and margin improvements throughout our business. But we also have said, I think, many times that the timing could not have been better as it helped us offset some of the tariff-related impacts and inflationary impacts that we've seen over the past few years. We did mention in our prepared remarks that we expect to achieve our $125 million run rate savings by year-end. We've actually made it there and still have a productivity pipeline in place and expect that to continue in the future. I think as we look forward, once we would -- what we would say, and we're not ready to guide yet for F '27, but we would certainly say that this has created durable earnings margin potential for us. And what you're referring to is our 8% to 10% kind of near-term growth expectations for EPS. The fact that we had to offset -- use some of those savings to offset tariffs and commodity inflation, we're not realizing all of that in this year in F '26. But as we move forward and realize those F '27 -- those run rate savings as we move into F '27, we should be able to see continued margin expansion, to your point.

Operator: And our next question comes from the line of Mike Shlisky of D.A. Davidson & Co.

Michael Shlisky: Rick, I want to echo thank you for all the information over the last decade or so. It's just been great working with you and talking with you. Your knowledge has been tremendous and your [indiscernible] all of us has been great. So I really appreciate it. On my question, I want to follow up on David's question about the AMP program. It sounds like you've gotten to where you wanted it to be, maybe even better. You've always had kind of a named strategic initiative that the team works on internally, it's not guidance, there's always been some target a couple of years away. Now that you pretty much reached the stated AMP the stated goals. Is there a new name program in the works? And could it actually be a sales-related growth program rather than a margin-related one this coming time around?

Edric Funk: Mike, it's Edric here, and thanks for the question. We've actually been giving that a lot of consideration and are working on what's next. So as Angie alluded to all the way back when we kicked off the AMP program, our intention and our hope was that the initiative would ultimately become just more ingrained in the culture and something that we'd operationalize over time. And so we don't expect to deviate or lose ground on that, but we are, in fact, looking at what might be next and not ready to announce anything specific today, but we do anticipate having another initiative and likely will have some element of growth that's a part of that.

Michael Shlisky: Great. I also wanted to ask about some more details on the golf business. I guess you had a lot of details to kind of say about autonomous growth and just broadly golf being a strong business. You didn't mention much about irrigation. And I've been hearing a lot about both taking on some pretty big projects and some courses around the U.S. Can you comment on how that's been going order-wise, installation-wise and also globally, how has irrigation performed for Toro this year?

Edric Funk: Yes. Thanks for asking. Irrigation has remained strong for us. We've been mentioning in several of the previous calls just about the significant pipeline of projects, and demand remains really, really strong there. And that's fueled by things we've talked about before, a number of courses that have reached really the end of their useful life for their irrigation system. And so they're looking at doing upgrades and replacements and tapping into some of the new technology that we've developed. So the demand remains really strong. And the installation rate has been somewhat gated, as we've talked about, by availability of crews to do the work, and that continues to be the case. But we're seeing projects on the books and bids taking place as far out as 2029. So it's been a good year this year, and we expect that demand and momentum to continue.

Operator: Our next question comes from the line of Tim Wojs of Baird.

Timothy Wojs: Rick, it's been great working with you. And Edric, congrats on being on a hot seat going forward. Maybe just first question for me. It sounds like the lawn and garden or the professional contractor business had some pretty good volume growth this quarter. How much of that was kind of snow? How much of that was kind of product-specific to Toro? And I guess as you're kind of exiting the season in the contractor side, how would you kind of assess field inventories at this point, just given we've seen some areas of drought here over the past few months?

Richard Olson: If you just look at landscape contractor in general, really broad-based demand across really the categories that you mentioned. We saw very strong demand from -- for our mowing products throughout the summer. Contractors came into the prime mowing season this year feeling healthy from a healthy snow season in the prior year. So they came in a good condition. We were in a good position from a field inventory standpoint. And really, landscape contractor was a key driver for the quarter. The BOSS shipments that go along to those same contractors, many of them are the same, were very strong. And it was great to see some of the categories beyond plows, the liquid deicing and the Snowrator products really were strong contributors to that as well. So I think that gets to the last part of the question. It is the innovation and the new products that caused the overperformance probably relative to the market there. The excitement about the refreshment of the Exmark products like the Radius zero-turn mower. And an area that we talked about a bit of the contractor pool that we haven't talked about a lot about in the last couple of years is Ventrac. Ventrac acquisition from 2020, one of the strongest contributors in terms of percentage growth in the quarter. And I mentioned in the prepared remarks, the importance of attachments and it's a super versatile machine the latest, it sounds like a small deal, but fence post trimming, if you can do that autonomously or automatically, that's a huge productivity pickup for a contractor and even someone that has an acreage or something like that. And what it does is it drives tractor sales. And so its innovation tied to healthy market tied to the strength of our portfolio that drives that for us. And the homeowners, I will say, homeowners with acreage that are part of that, they had a decent year. It was -- they're a little bit more responsive if you get into drier conditions during the latter part of the season. So a little bit slower there.

Timothy Wojs: And do you feel like the field is okay exiting kind of the season? Or how would you describe that?

Edric Funk: We entered in good condition, we are leaving in great condition. So it sets us up for a direct impact of demand as that starts in the spring.

Timothy Wojs: I know it's not a huge part of your business, but just as you're -- as investors are kind of thinking about more headlines around Super El Nino, how are you guys' kind of planning that internally? And how does your customer base kind of think about planning for potentially warmer kind of northern temperatures in the winter?

Richard Olson: Tim, we're trying to prepare for any potential outcomes. If you've studied the history as we have around what happens when there isn't El Nino, in particular the strong El Nino, certainly, there are areas that get less snowfall. Other areas receive more than normal. As the atmosphere continues to warm, we know that it holds more moisture, and so it sets up the possibility for more extreme snow events. So I'd say as we go into the season, we're prepared for the season. We're not going to overextend ourselves, but we're not going to overreact in either direction. And you may remember last year, we set ourselves up when we had a better snow season than perhaps expected that we were able to react quickly and add some product that ultimately flowed through to retail. We're making sure that we've set ourselves up with the same ability to respond if conditions warranted, but also on the other side, balancing against -- not wanting to get back into where field inventory becomes a problem if the weather pattern plays out in a way that we don't have strong snowfall.

Timothy Wojs: Understood. And then just 2 questions on margins. So first on the Pro margin, I know it down year-over-year. If you would take out Tornado, how did the Pro margins perform on a year-over-year basis? And then second, the $5 million less of tariffs that's in guidance, which quarters did that kind of get taken out of? Was it Q3 or Q4 or both?

Angela Drake: Yes. Tim, this is Angie. So your question on Pro margin, Tornado does have an impact, as we had mentioned at acquisition time that we would see sales growth coming from that, the inorganic sales growth, but it wouldn't have a strong impact on margin in year 1. So there is a little bit of a negative impact to our overall operating margin from the Tornado acquisition. And the IEEPA refund, the $5 million is coming out of Q4. So, as we think about our guidance and implied guidance for Q4, that really comes out of the residential operating margin for the most part.

Operator: Our next question comes from the line of Sam Darkatsh of RJA.

Sam Darkatsh: And Edric, again, congratulations on the new post. And Rick, I'm going to obviously echo what everybody else has said. It's been an absolute pleasure working with you over the years. It's been a heck of a ride, too. And I'm very hopeful that our paths cross again very soon. A few questions here. First off, as it relates to the Canadian retaliatory tariffs, have you been able to ballpark or ring-fence what the what the general impact might look like at this point? I know it probably affects Tornado at a minimum and whether that is included within your fourth quarter guidance.

Richard Olson: Yes. Sam, I can speak to that a bit. So the -- obviously, the tariff situation is an ever-unfolding, ever-dynamic situation. But based on what has already taken place and what's going into effect here in the near term, really minimal impact to our business. And that just has to do with which tariffs apply to our product lines that we import. So there's some yet-to-unfold discussions, that's taken place that could change things for next year. We'll monitor that closely. But we have factored everything into our Q4 guidance and the impact is relatively minimal. And then on the export side, as it relates to the retaliatory side of things, it has, in some cases, caused our channel partners to ask about making adjustments to the flow of product as they prepare for their upcoming seasons. And so we're working closely with them to manage that flow of product as well. So I'd say the summary comment is everything is contemplated in the updated guidance and relatively minimal impact here in the near term.

Sam Darkatsh: The second question, Angie, if you could help a little bit with a bridge. I know it's early and way too early for fiscal '27 guidance per se. But just some line items or factors that are a bit exogenous as it relates to gross tariffs year-on-year, refunds year-on-year. I'm coming up with somewhere around a refund headwind somewhere around $10 million to $15 million and a gross tariff headwind of somewhere around $20 million to $40 million year-on-year. Is that math generally accurate? I know you're going to be offsetting it with AMP, you'll offset it with pricing. I'm just trying to get a sense of the gross cost headwinds next year.

Richard Olson: Yes, I can speak to that one as well, Sam. And the -- I'm trying to see where you may have come up with those numbers. I can probably follow what you might be assuming there. I'd suggest maybe if we take a step back, we're reaching a point where I think it's not particularly useful to look at the tariff number as a stand-alone number anymore. And I say that because as you alluded to, there are productivity things that we've put in place. We've made some strategic sourcing decisions. We've continued to make adjustments to our manufacturing network. And so when you net all of those things out, even with a slight adjustment in the timing of refunds, as we look forward, we don't expect next year for tariffs to have a meaningful impact really in one way or the other. Rather, it just becomes part of the overall inflationary message. And as you alluded to, we won't do formal guidance until next quarter, but I'd be happy to share how we're thinking about next year, which is we expect to carry in really strong momentum as we start F '27. We expect our markets to remain strong and continued demand from across the entire portfolio. We talked a bit about AMP, Angie reinforced there as we move some of this year's run rate savings into next year's in-year savings. That will help to be a part of offsetting headwinds, whether they're tariff-related or otherwise. We're expecting our residential business to return to double-digit profitability as we've been signaling for a while. We're on track to do that. And at the end of the day, expecting it will continue to expand margins overall. And we'll do all of that while continuing to add growth to the company. And that's growth fueled not only by the market strength that I described, but also by new product introductions. So we're just really excited about next year, to be perfectly honest. And the tariff piece is something we've got a team that's paying attention to, but that's not presenting any kind of outsized influence on our thinking.

Operator: This concludes the question-and-answer session. Ms. Hille, please proceed to closing remarks.

Heather Hille: Thank you, everyone, for your questions and interest in The Toro Company. We look forward to talking with you again in December to discuss our fiscal 2026 fourth quarter and full year results.

Operator: Thank you for your participation in today's conference. This concludes the program. You may now disconnect.