Executive Summary

Adjusted EPS of $1.24 beat Wall Street consensus ($1.215), while revenue of $1.131B missed consensus ($1.160B); reported EPS fell to $0.54 due to a non‑cash $81.1M Spartan trade name impairment ($0.62 per share) .
Professional segment outperformed: net sales +5.7% YoY to $930.8M and margin expanded 250 bps to 21.3%, offsetting Residential headwinds (net sales −27.9% YoY; margin 1.9%) .
FY25 outlook tightened to the low end of prior ranges: net sales flat to down 3% and adjusted EPS ~$4.15; interest expense ~$60M, capex ~$90M, free cash flow conversion ~110% .
Management expects tariff mitigation and AMP productivity savings ($75M run-rate; $47M FY25 in‑year realized) to support margin neutrality by year-end despite incremental tariff headwinds (~$45M) .

What Went Well and What Went Wrong

What Went Well

Professional segment strength: “Professional segment achieving 6 percent growth and 250 basis points of margin expansion,” driven by underground construction and golf and grounds, plus AMP savings .
Cost discipline: SG&A fell to 20.8% of sales (vs 22.0% LY) on “cost savings measures and lower marketing costs,” supporting adjusted operating margin of 13.6% .
Proactive mitigation: CEO emphasized AMP program “on track to deliver run rate savings of at least $100 million by 2027,” and tariff mitigation/pricing initiatives to protect margins .

What Went Wrong

Residential demand: Net sales −27.9% YoY to $192.8M; margin compressed to 1.9% on lower volume, higher material/manufacturing costs, inventory adjustments, and promotions .
Reported EPS hit by impairment: Non‑cash $81.1M Spartan trade name impairment reduced reported EPS to $0.54 (from $1.14 LY) .
Gross margin pressure: Reported gross margin 33.7% (−110 bps YoY) and adjusted 34.4% (−100 bps YoY) due to lower volume and cost inflation despite productivity and mix benefits .

Financial Results

Consolidated Metrics

Metric	Q3 2024	Q2 2025	Q3 2025
Revenue ($USD Millions)	$1,156.9	$1,317.9	$1,131.3
Reported Diluted EPS ($)	$1.14	$1.37	$0.54
Adjusted Diluted EPS ($)	$1.18	$1.42	$1.24
Gross Margin % (Reported)	34.8%	33.1%	33.7%
Gross Margin % (Adjusted)	35.4%	33.4%	34.4%
Operating Margin % (Reported)	12.8%	13.3%	5.7%
Operating Margin % (Adjusted)	13.7%	13.7%	13.6%

Actual vs Consensus (Wall Street)

Metric	Consensus	Actual	Result
Revenue ($USD Millions)	1,160.2*	1,131.3*	Miss*
Primary EPS ($)	1.215*	1.24*	Beat*

Values marked with * retrieved from S&P Global.

Segment Breakdown

Segment	Net Sales ($USD Millions)	Net Sales ($USD Millions)	Segment Earnings ($USD Millions)	Segment Earnings Margin %
	Q3 2024	Q3 2025	Q3 2024	Q3 2025
Professional	$880.9	$930.8	$165.7	$198.5
Residential	$267.5	$192.8	$32.6	$3.7
Other	$8.5	$7.7	$(54.1)	$(144.4)
Margin % (Pro/Res)	18.8% / 12.2%	21.3% / 1.9%	—	—

KPIs and Operating Items

KPI	Q3 2025	9M 2025
Interest Expense ($USD Millions)	$15.1	$45.9
Effective Tax Rate (Reported / Adjusted)	7.4% / 17.3%	16.9% / 18.5%
International Net Sales ($USD Millions)	$199.2	$666.2
Free Cash Flow ($USD Millions)	—	$291.9
FCF Conversion (%)	—	90.0%
Share Repurchases ($USD Millions)	$90 in Q3; $290 YTD	$290

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Total Company Net Sales	FY 2025	Flat to down 3% (updated in Q2)	At low end: flat to down 3%	Maintained (tightened to low end)
Adjusted Diluted EPS	FY 2025	$4.15–$4.30 (Q2 update)	~$4.15 (low end)	Lowered to low end
Adjusted Diluted EPS	FY 2025	$4.25–$4.40 (Q1)	$4.15–$4.30 (Q2) → ~$4.15 (Q3 low end)	Reduced twice
Segment Revenue	FY 2025	Pro up slightly; Res down mid-teens	Pro up slightly; Res down mid-teens	Maintained
Pro Segment Earnings Margin	FY 2025	Expand vs LY	Expand vs LY	Maintained
Residential Earnings Margin	FY 2025	Decline vs LY	Decline vs LY	Maintained
Adjusted Gross Margin	FY 2025	Improve YoY	Improve YoY	Maintained
Adjusted Operating Margin	FY 2025	Improve YoY	Flat to slightly lower vs LY	Lowered
Interest Expense	FY 2025	~$59M	~$60M	Slightly higher
Capex	FY 2025	No change (implied)	~$90M	Clarified
FCF Conversion	FY 2025	n/a	~110%	Raised

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
AMP Productivity Savings	Run‑rate $64M by Q1; $70M by Q2; pricing/surcharges implemented surgically	$75M run‑rate; $47M FY25 in‑year realized; $21M savings in Q3; AMP 2.0 discussion in Q4	Improving
Tariffs/Mitigation	Estimated ~~3% of COGS (~~$90M), planned dollar‑for‑dollar mitigation via productivity/pricing	Incremental tariffs estimate cut to ~$45M; aim to be margin neutral by year‑end	Stabilizing with stronger mitigation
Professional Segment Momentum	Growth in golf/grounds; underground demand strong; backlog normalization targeted by FY26	Q3 Pro net sales +5.7% YoY; margin +250 bps; order books healthy	Improving
Residential Demand/Channel	Weak homeowner demand, late spring start; battery adoption ~7% vs 20% goal; promotions normalize vs FY24	Homeowner caution persists; channel inventories reduced; positioning for stronger 2026	Deteriorating short‑term; improving inventory
Supply Chain/Lead Times	Progress in underground output; golf/grounds lead times moving toward normal	Golf lead times “much more current,” some models still extended; underground field inventory still low	Improving
Portfolio Actions	Dealer divestitures; SKU rationalization; plant consolidation in Mexico	Trencor & Auger Boring product divestitures; COO appointment to drive ops	Focus sharpened

Management Commentary

CEO: “We delivered third quarter adjusted earnings that exceeded our expectations, with our Professional segment achieving 6 percent growth and 250 basis points of margin expansion… savings from our AMP productivity program enabled us to exceed adjusted earnings expectations despite headwinds in our Residential segment.”
CEO: “Our AMP program… delivering $75 million in annualized savings today and targeting at least $100 million by 2027… positions us to deliver earnings growth independent of revenue expansion.”
CFO: “Adjusted diluted EPS of $1.24… better than our internal expectations… impairment of the Spartan trade name is the result of persistently lower homeowner demand and slower market recovery.”
CFO: “We expect adjusted diluted EPS to be at the low end of our prior guidance range at about $4.15… interest expense of about $60 million, capital expenditures of about $90 million, and… free cash flow conversion guidance to about 110%.”
COO: “We are laser focused on delivering earnings growth independent of revenue expansion… investing in value‑generating technology and innovation and optimizing our global supply chain operations.”

Q&A Highlights

Professional vs consumer demand: Landscape contractor demand grew in Q3, offsetting muted homeowner demand within the pro channel .
Margin drivers and AMP: Professional margin expansion driven by mix, productivity, price realization, and cost savings; AMP delivered $21M Q3 savings, $47M FY25 YTD .
Tariffs: Incremental tariff impact revised to ~$45M; management aims to be margin‑neutral by year‑end via productivity and selective pricing .
Residential margin trajectory: Historic “normal” Residential margin 8–10%; unlikely to reach that in FY25, targeting improvement as inventory actions set up FY26 .
Backlog/lead times: Year‑end backlog expected substantially reduced; golf lead times “much more current,” underground still building field inventory .

Estimates Context

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue Consensus ($USD Millions)*	1,004.98*	1,352.11*	1,160.16*
Revenue Actual ($USD Millions)*	995.0*	1,317.9*	1,131.3*
Primary EPS Consensus ($)*	0.627*	1.395*	1.215*
Primary EPS Actual ($)*	0.65*	1.42*	1.24*

Values retrieved from S&P Global.

Implication: Q3 delivered an EPS beat and revenue miss vs consensus, consistent with management’s narrative of Professional strength and Residential headwinds .

Key Takeaways for Investors

EPS beat with revenue miss: Adjusted EPS $1.24 (beat) vs revenue $1.131B (miss); mix/productivity offset demand softness—focus on Pro momentum and cost actions .
Professional segment is the earnings engine: Net sales +5.7% YoY; margin 21.3% (+250 bps); underground and golf/grounds demand durable with backlog normalizing into FY26 .
Residential remains cyclical; margin recovery expected into FY26: Inventory cleanup and promotions support sell‑through; historical margin range 8–10% not likely in FY25 .
Tariff overhang mitigated: Incremental tariffs ~$45M; management targeting margin neutrality by year‑end via AMP productivity and surgical pricing .
FY25 guide at low end: Net sales flat to down 3%; adjusted EPS ~$4.15; watch Q4 execution on margin neutrality and cash conversion (~110%) .
Capital returns signal confidence: $90M repurchased in Q3 ($290M YTD) alongside strong YTD free cash flow ($291.9M) and improving working capital .
Tactical catalysts: Continued Pro margin expansion, tariff outcomes, Residential demand inflection (rates/consumer confidence), and AMP 2.0 update in Q4 could re-rate expectations .

TORO CO (TTC)·Q3 2025 Earnings Summary