Well, hi everybody. Hello again. I am Mike Shlisky. I'm the Analyst here at D.A. Davidson, covering The Toro Company. We're here in Nashville at our 25th Annual D.A. Davidson Diversified Industrials & Services Conference, and I'm very pleased to have Edric Funk with us. He's currently the COO, but he's basically the incoming CEO of Toro starting, I guess, November 1st?
That's right.
The fiscal year ends October 31st. His first day. But it's been 30 years. We'll preview that. It's not like it's your first day at Toro. Seasoned vet of Toro. We're here to ask a few questions about Toro, tell investors about it, and hopefully get some time for some Q&A towards the end. First, Edric, not everyone's aware, tell us a little bit about the high-level view. Just what does Toro do exactly and your key products?
Thanks for the invitation and for the opportunity to share that story. We exist to help our customers enrich the beauty, productivity, and sustainability of the land. You might think of us creating value at the intersection of humanity and our natural ecosystems. Our products would be used in the beautification of the parks where communities gather, in the conditioning of athletic fields where kids play, or the iconic stadiums where some of our favorite teams compete, on the golf courses where relationships are strengthened and where championships are contested, and in backyards where barbecues are hosted or people relax after a challenging day. Mike, if you haven't spent time in any of those settings today, you were probably still impacted by our products in the first five minutes after you woke up this morning.
That's right.
When you switched on the light and the electricity was there, when you used the water for your shower to brush your teeth, when you retrieved data on your phone or your laptop, all of the infrastructure that delivered those services are installed by our customers using our products. As our team knows, what we do really matters, and we use that as motivation to invest in innovation that drives real value, to work to serve our customers exceptionally well, and we do all of that to deliver consistent and sustainable value to shareholders.
Yeah, that sounds like a lot more than what some folks think Toro is, which is a lawnmower company. Let's maybe dive into a little bit why you're not a lawnmower company. I'll just give the preview. I think your lawnmower-type residential stuff is probably 10% of EBITDA, but the rest of it is professional. So maybe tell us a little bit about more in depth, what is the professional, besides professional landscapers who are also mowing lawns, but what is the real mix of the business here beyond just caring for grass? Tell us a little bit more about it.
Yeah. Thanks for going there because the professional portion of the business is where our strategic emphasis resides, and we cater to professionals across a number of different markets, all of which connect to that purpose that I shared a moment ago. Many other people would know us for our presence in the golf market. We're the only supplier of both equipment and irrigation to the maintenance teams that maintain golf courses. We're doing more and more to integrate those solutions and bring more holistic offerings to those golf courses. Several people would know of the significant acquisition we made in The Charles Machine Works companies, which brought brands like Ditch Witch into the fold. That's to focus on the underground infrastructure and underground specialty construction market.
I'm sure we'll talk a bit more about that, but a really important growth driver for the company because that's one of the markets that itself offers the biggest growth opportunity and a number of demand drivers, and an area that we're investing in significantly. You mentioned professional contractors. Whether they're caring for residential properties, corporate campuses, partnering with municipalities, whatever the case may be, another group who relies on our products to make their business run more smoothly and relies on us for their means of making a living. Across all of those professional segments, we know that a significant portion of their budgets, often more than 50%, is directed towards labor, which is a real challenge for all of them, and it's a place where we invest a lot of our time and innovation.
You didn't mention it, but I'm going to mention it as well. Some of those same contractors who help mow the lawn and care for the grass in the off-season are plowing snow.
Yes.
You do own a large snowplow brand as well, one of the largest, if not the largest, snowplow brand out there. It's complementary, right?
It is. You've got it exactly right. You're referring to the BOSS brand, and we've got both the plows that would go on trucks and then their Snowrator product is for clearing sidewalks and areas around parking lots and so forth. You're exactly right. In areas that receive snowfall, a number of the contractors cross over and both do that winter hardscape maintenance as well as the turf care maintenance during the summer season. There's also some nice synergy with a number of our channel partners. Even outside the direct customer piece, we've already made reference to the underground infrastructure. This would be on the surface, the infrastructure that keeps people moving by keeping the roads clear, the parking lots, and sidewalks clear.
Just to clarify for someone who doesn't know, underground construction, it sounds like a subway system, but it's really maybe is it like getting power lines underground or pipes, fixing pipes, things like that. It's important for power grid expansion and things along those lines. Am I on the right track there?
Yeah, you've got it. One of the hot topics, of course, right now would be data centers.
You said the word.
Our products don't do a lot of work. Although, we're finding some interesting crossover on the data center sites themselves. But the majority of what we do is delivering the things that you described to those locations. It's bringing in the enormous amount of fiber optics. It's delivering the water that's used in cooling. It's the power that's required at those sites. The interesting thing, though, is all of those same things from an infrastructure perspective are important, even outside of the data center space. We've got, of course, expansion and new development that's calling for that kind of infrastructure, but also a lot of aging infrastructure around the world, particularly here in the U.S. From a power perspective, you talked about getting power lines underground.
One of the drivers is we know that we've experienced things like wildfires that have been sparked by issues with the above ground lines. It's good to get that underground and it's more aesthetically pleasing often. On the water side of things, the American Society of Civil Engineers have published a statistic estimating that we lose 6 billion gallons of drinking water a day between the treatment plant and being delivered to people's taps. So replacing and repairing infrastructure in that space is really important. And data, not only for the data centers, but continuing to bring high speed internet to areas that have been underserved. All of those are drivers that we see extending well into the future.
Got it. And maybe let's maybe just touch on your earnings results over the last couple of years. It's interesting, you've almost reported the exact same earnings number every single year for three or four straight years.
Thanks for pointing that out.
Well, it's not my favorite thing to talk about. We'll talk about the guidance for this year, which is different.
Yeah.
But flat's good at times, and there's been some ups and downs in different drivers that have made it flat. Some great years, some bad years for certain markets. They've all balanced out is what I've been gathering. Tell us a little about some of the moving parts and how it has, in fact, because this could've been bad, but it ended up being flat. Tell us about how it ended up not being bad and ended up being okay.
I should really appreciate that perspective because we all know that it-
Very differently that question.
-it has been a dynamic environment and really challenging, and our teams have worked really hard in order to deliver even that level of results. That doesn't live up to our aspirations, and we've learned from that experience. But I'd say it's generally behind us. We weren't immune to what a number of other companies experienced in terms of demand that became very abnormal, disruption in the supply chain. But we've come out of that even stronger, and we now see a situation where our end markets are strong. We continue to have leading positions within a lot of those markets and just a lot of progress. Inventory would be one example that over the last year and a half we've improved significantly. That's led to us now delivering more than 120% free cash flow conversion. We've seen margins improve, particularly in the residential portion.
As you said, that's a small subset of our business, but it's one that was particularly challenged. We now see that back on a path to double-digit margin, and we're just really optimistic about the future. Our guide, as you alluded to, puts us back into double-digit earnings growth, and that's the kind of performance that we want to continue to see going forward.
Yeah. So prior to the last couple of years, it was 10% growth every year, if not higher or a lot higher, between the Great Recession and COVID, basically. So 10+ years, I think, of really strong growth that people really admired. There was a COVID overhang. There was strength in golf, but other areas got weaker. It didn't snow for a couple of years. So things were, there were some ups and downs, but you kept it kind of flat. As you just mentioned, you're back on that double-digit earnings growth trajectory. That's really strong. So you're kind of finally back on track after, I would say, a very tough COVID hangover. Tell us a bit about the targets that the board or that your company's putting out there going forward. Do you really want to keep that 10% growth rate?
Has that been a stated internal goal at least, or do you have other aspirations?
Well, first, maybe just to address the return to performance. It's all about execution. That doesn't mean we didn't execute a number of things well, but during all that period of disruption, didn't see what historically has been a hallmark of the company. So we'll come back and certainly share more detail on some of the longer-term aspirations. But as I said just a moment ago, that double digits earning growth has been something that we've been proud of. It's something that we want to continue to deliver. It's the kind of thing that we want to provide, and we're focused on continuing to drive productivity. We've talked publicly a great deal about our AMP productivity initiative. That's delivered great results. We talked about the strong end markets, where we're capitalizing on the demand that's in front of us.
I referenced the residential margin, but across the company, looking to continue to expand margins. We'll provide more detail, but those are the things that we're certainly thinking about and things that we know are important to our investors.
You touched on some of the cost reductions you made as part of what's called the AMP program. Any numbers behind that you can share with us, where you've gotten to that so far? Has cost reductions, are those permanent? The mindset of cost controls, how has it changed as an employee mindset the last couple of years?
There's probably a before, during, and after AMP that's worth referencing. Even before the AMP initiative came to be, productivity was an important part of our culture, and we were always looking to use productivity to offset the effects of inflation. But as we navigated the post-pandemic situation and all of the hyperinflation that we experienced, we knew that we had some extra work to do to get that back, and we wanted some additional focus from our employee base, and that's what led to establishing that initiative. We originally announced a plan to achieve $100 million of annual run rate savings. We ultimately increased that goal to $125 million, and we were excited for our CFO, Angie Drake, who championed that initiative, to be able to announce at our last earnings call, we've already achieved that run rate savings.
That will flow through now to next year and beyond. So those are our permanent and durable savings. As we go forward, we shared in that earnings call, while the initiative ends at the end of this fiscal year, we've achieved what we intended, which was to reinvigorate the employee base, to build that muscle. AMP and productivity will remain something that stays with us even beyond the end of the formal program, even while we shift our attention to other things like a return to growth.
Great. As you are the incoming CEO, as I mentioned earlier, you are starting in about a month. You have been at Toro for 30 years, and you have headed up the golf division. You have done a couple other areas over the years. You are not new, but as the new CEO, is there anything that you are thinking about doing differently, or at least anything that the board, broadly speaking, even with or without the CEO change, anything new you think you have got going on for 2027 from a strategy perspective that we should know about?
Yeah. Of course, there are things we are thinking about doing differently. We have talked a fair amount about this, and people obviously have the question with our leadership transition, what is going to change? I have been consistently describing it as continuity balanced with evolution. We think the continuity is important. We have a really powerful foundation that we work from. We have got a strong product portfolio, as you know, industry-leading brands. We have incredible relationships with our channel partners and end customers, and we have a culture that is genuinely built on innovation and disciplined execution. I view those as just a really good place to start. But we know our customers' needs are evolving, our markets are evolving, the world around us is evolving, and we have to evolve with that.
When I have shared specific examples, if we were to contrast maybe the last decade to the one to come, our current CEO, Rick Olson, did such a brilliant job of putting forth a vision that helped us to transform our approach to technology development and ushered in a lot of the work that we are doing, from autonomous solutions to smart and connected products to alternative energy. Those remain pillars of our technology development. That will not change. But what will shift is we are now at a point that we need to invest more in accelerating commercialization and accelerating adoption of some of those technologies. That is one place that I will focus. Another, you have already highlighted some of the acquisitions that we have made and how those brands have contributed to the company.
That will continue to be important, but as we go forward, we will look for even more integration of the products. There is more technology that we can leverage across product lines and more alignment of our businesses, including the channels through which we serve our customers. Finally, as I said just a moment ago, we are coming off the heels of this extra attention and focus on productivity. It is not going to go away, but we are going to again, get back to driving growth, which was also something that prior to the disruption of the pandemic and what followed, had been something that we were known for and something that we are going to get back to. So the foundational pieces will be the same, but we have a number of things that will change, and we look forward to sharing more detail on that here in the coming months.
Got it. You will have earnings just before Christmas. Is that correct?
Yeah, that is right.
Okay. All right. Great. Maybe let us just hone in on one or two of the end markets that have been interesting. The golf business. You were until recently the head of the golf business. You were CEO for a couple of years, COO for a few years, but prior to that, golf.
Yeah.
Tell us about the strength you saw during the COVID period. Golf is a very socially distant sport, I guess, because you are 200 yards away. Well, with me, it is 10 yards away. But most people are 200 yards away. And it has been six years of pretty strong golf. People are out there playing golf. How much do you think is left in the tank in interest in golf to continue? And maybe more importantly, how much is left in the tank for golf courses after a couple of years of continuing to spend on their green space equipment?
All good questions. Let's not forget, golf has been around for centuries, so there's some pretty good resiliency there. There's no doubt that COVID provided a boost to the game. As I shared with some other people recently, we were seeing the signs of improvement in golf even before COVID. A lot of the fruits of the labors of a number of organizations that, frankly, we've helped support in terms of growing the game. Today, we see more and more youth participating, female golfers. It's just a lengthy list of underserved demographics that are now playing the game of golf. The surgence of off-course opportunities that at one time we wondered if would be in conflict with green grass golf, have all just proved to increase the funnel of participants.
To your point, we've seen multiple years of records on top of records in terms of rounds played. That's driving more money into the industry. Private club memberships are full, waiting lists are robust, tee times are full. We're just seeing a lot of investment in the sport, and that's ultimately good for those of us that serve that marketplace. It's not only on the equipment side where people know they have to go out and maintain their properties and everything else, but from an irrigation perspective, the useful life of an irrigation system might be 20 or 25 years. If you go back to around the turn of the century, many people would know of the phrase the Tiger boom associated with when Tiger Woods was ascending in popularity, and it was causing a significant influx in development of golf to rise to meet the demand.
We kind of went from over-demand, under-supply to the other way around, given all the properties that were opened up, and then we went through a period where that was coming back to normalization. Now I think a lot of us would say it's in balance. Some would probably argue there's room for more, and we're seeing some development.
Yeah.
Because the tee times can be tough to get. So we still see a lot of runway there. Really, really important. Even as demand has, let's say, normalized after a concentration or a surge, that remains a really important market for us and a really valuable one to the company.
Golf courses, I assume they can raise prices at certain times, and they've got the money to spend on equipment and on irrigation. That's not changing.
Yeah. It's really allowing them to tap into I talked about the technology that we've been working on. To a greater and greater degree, we're integrating the equipment and irrigation. I mentioned we're the only supplier that does both, and that gives us some unique opportunities to have the equipment talk to the control system for the irrigation, and to have, while our equipment is out canvassing the property, it can collect passively, moisture data, for instance, and feed that into the irrigation system, and use that to make recommendations to the superintendents.
We're tapping into AI, not only for our internal productivity, but in the products to help provide recommendations to the superintendents who can then look at what we're suggesting, accept that with a click of a button, and do things that would've otherwise taken them hours to do to balance the water, save water, but ultimately bring their conditions into better balance and delight the customers that they're trying to serve.
Driving out to 18 holes, visually checking every green and making sure it's not flooded. There's ways to find out using, potentially, to spend less than a few minutes figuring out whether everything's good.
Yeah. Spatial Adjust is the brand name, if you will, of that software enhancement that we made. You will hear more and more about that as customers are embracing it. As I told somebody else, I do not use that game changer label loosely, but that is what we are hearing our customers describe to us, that this is making that big of a difference to their productivity.
Can we maybe discuss other tech on the golf course? Things like electrified equipment, hybrid equipment, autonomous equipment. That is the mowing part.
Yeah.
Have you seen a rapid adoption, and how soon do you think those will have a pretty significant share of the overall market?
It is interesting. It is something we are monitoring every day. There are some really interesting pieces in what you just talked about. Electrification is one. If we look more broadly across markets and product lines, we have seen some slowing in the adoption of electric products, some of that having to do with policy, some of it to do with incentives. But golf has been one exception for us, and greens mowers are a great example where we have seen customers continue to invest in that technology. It is because of the other benefits that you get beyond a reduction in exhaust emissions. Being quiet is important on a golf course, whether it is because you have residences near the playing area, the clubhouse, or whatever the case may be. On the putting green, there is a high premium placed on eliminating the potential for hydraulic leaks.
By going with an all-electric product, that's peace of mind for the superintendent. It's not just the mower, but we've recently launched a new greens roller. We highlighted that in our last earnings call. All electric, has some incredible new innovations that make it easier for the operators to control, makes it easier for the superintendents to put a wider range of operators on the product. Shame on us, we underestimated how enthusiastically that would be received. We're already sold out for this year and making plans to ramp up production in the year ahead. Electrification has actually been widely adopted or some of the hybrid solutions on fairway mowers and elsewhere. On the autonomous side, lots and lots of experimentation going on in golf because labor, again, is such a key driver for them.
While some of them may have to find a way to get work done without labor that they can't get, or others may be looking at opportunities to reduce their labor force, the overwhelming use case is looking for opportunities to redeploy the human labor to do other important jobs to elevate conditions. Anywhere that we can help them take the human out of the more mundane tasks, that's valuable. We just introduced most of our autonomous solutions, from a commercial perspective, within the last year, and we're seeing really great momentum. We've taken care as we've commercialized to make sure that we're ready for the market, acknowledging that adoption won't become enormous overnight.
But like I said, seeing really good momentum and we'll remain cautiously optimistic and prudent in our expectations for the next year or two, but couldn't be more excited about what that means for the long-term horizon.
I'm a little worried about the electrified quiet products on the golf course because I often blame the mower for why there's water hazards.
Plenty of other excuses you can use, Mike.
A new excuse, so I'll think about that. You did mention earlier the snowplow business, the BOSS business. It's been a good business. I don't know if everyone's aware, is that a margin-accretive business for Toro? Is it just more of a throw-in, and doesn't have a lot of margin? Finally, we did see a pretty decent winter, at least parts of the country this past winter. Can you give us what that means, the heavy winter last winter, for what that means for what might be ahead of us over the next few months as far as shipments are concerned?
Well, first of all, it is a product that has attractive margins for us, and it is accretive to the company. Of course, it's in our control to make that even better when we manage it really well. What I mean there is being disciplined in our expectations. To your point, had a really nice snow season last year after a couple of years that weren't so great, and that helped to clear out the channel. That's true not only for BOSS, but some of the other snow products that are a part of our portfolio.
One of the interesting things for BOSS with the work that they do with the plows and with the sidewalk clearing, even small snowfalls ultimately need to be cleaned up, and their products go into operation even if we're not getting those massive winter storms that may drive more of the business for some of the snowblowers and other things that we make. We're optimistic there. The channel's in a healthy position. They're calling for more. There's all kinds of questions I know that people have about what's it going to mean when we have a super El Niño, and I don't think any of us would profess to be excellent forecasters of the weather. It's challenging enough for the trained meteorologists. What we do know is, even when there is an El Niño, you tend to get snow. It moves around.
We tend to get more moisture in the south, and you can get snow and ice in the transition zones. The Mid-Atlantic will tend to get snow, even if we don't see as much of it in the Great Lakes. We're conscientious about that. We're being intentional about our forecasting, about our production. We're ready to adapt and adjust, and if we see more opportunity, we'll follow that, but we'll make sure that we don't get out ahead of ourselves and manage that prudently. Bringing it all back to the core of your question, a really valuable part of our overall business and an important one and one that we like a lot.
Does it snow last season? Does that mean you feel better about this coming season? They were out there using their product. They got cash, paid for their services. Does it feel like you're going to be seeing a somewhat strong winter ahead?
Yeah, look, when there's more usage, more things wear or break, so it's great for the aftermarket business. The businesses themselves tend to be more optimistic. They can have a short memory, and they remember things were good, and they're going to prepare for that. We're seeing nice load into the channel as we prepare for the season. Yeah, we're optimistic, but we're also going to be really diligent, really sensible in terms of how we approach the business.
Got it. Why don't we pause there? We've got an audience here. Make sure people have a chance to ask a question or two. I've got more questions. My questions really go on for three sessions' worth. I'm not going to do that. Does anyone have any questions they want to bring up at this point? Feel free to just shout them out. If you ever have an opportunity to do it, we always do it. Not everyone takes it. That's fine. We can just keep on.
I have one.
You have one? Sure. Thanks.
Autonomous mowers. Should we be as excited about that as maybe some people are? I feel like we've talked about it the last five, 10 years. Can it move the needle?
Just to ensure that those that are listening remotely know the question, the question was around how excited should we be about autonomous mowers. We've been talking about that for five years, and will it move the needle? I love the question, and I'll actually build on something you said. We've been talking about it for more than 30 years. When I joined the company 30 years ago, our research and development team had been working on prototypes that don't look that different than some of what we've commercialized now. Now, at the time, the technology wasn't ready. It was far too costly to ultimately deliver for customers. But we've stayed at it over time. We've stayed in close contact with our customers, and the need to address their labor challenges has only intensified. So we know there's a problem to be solved, and that's where we start.
We also have evidence that while there's talk of automation in all sorts of areas and different industries or different places, the use case is pretty clear with our golf customers. I mentioned earlier, people have been experimenting with a number of solutions. We've seen residential products deployed on golf courses. We've seen startups that are looking to come into that place. What we've continued to hear from our customers over and over is, "We know there's a place for this eventually. We're not quite sure how. We're exploring." I know this sounds self-serving, but they told us, "We're waiting for Toro to bring these products because we trust that you know what we're trying to accomplish. We trust the partners that we, Toro, have across the industry that provide the local service," and they're ready.
I mentioned recently, I really believe we're approaching an inflection point where that's going to move from experimentation to execution and adoption. We're already seeing that with the products that we've rolled out. As I said in response to Mike, we're not going to get ahead of ourselves in terms of what that might mean for revenue next year, maybe even the year after. But we're sensing a legitimate change, and I'll wrap that by talking about a recent activity that we had. We host an event with golf course superintendents that we call our Innovation Experience, and it's to come in and it's just to collaborate together, to brainstorm, and we had a focus on autonomous mowers. We heard them saying, with even more gusto, a lot of what I just talked about.
It's going to be real, and this isn't a matter of if, it's a matter of when we see that significant escalation. Thanks for the question.
I want to follow up and ask another to that question. You are seeing sales of electrified and hybrid. It's growing nicely. You will soon hopefully have autonomous and a lot more of that. Is there a pricing and margin difference between what you're not selling and then these new models?
Yeah. When we add the guidance, the localization, navigation technology, it certainly increases the price point. Our aspirations are to actually increase margins, not to have them diluted. I've heard some people talk about the new technology being diluted to margins. That's not going to be the case for us. There's value for the customers, and that means there's value for us to share that we can capture more pricing, and they can improve their operation. At this point, we're really close to margin neutral, so we're capturing more margin dollars on that higher selling price. As we scale, as the technology costs come down, there'll be an opportunity for us to increase margins over time.
Got you. Make sure we are still. Yeah. We have a little bit of time left. All right? Let's talk about maybe M&A. Let's just maybe discuss your most recent large-ish deal, the Tornado Infrastructure Equipment Ltd. deal out of Canada. Tell us a bit about what that's done for Toro since you bought it a few quarters ago, maybe from a product mix and channel standpoint, and also just from a financial standpoint. How's that gone for you?
It's been fantastic. We probably need to rewind that M&A story back to what we talked about earlier, as we got into the underground construction with the purchase of The Charles Machine Works, Inc. That immediately became a really significant portion of the company. A lot of people wouldn't realize, that's more than a quarter of the company now that sits in that underground and specialty construction realm. The addition of Tornado Infrastructure Equipment Ltd. just continues to enhance our offering through the channel and ultimately to the end customers. I imagine folks have different levels of familiarity with that brand and with that company, but Tornado Infrastructure Equipment Ltd. specializes in vacuum excavation, or some people would talk about soft excavation. If you haven't seen the product, you can visualize it as injecting really high-pressure water to loosen the soil, and then a giant vacuum that's sucking the spoils away.
It's used in a number of ways. It's used in concert with our horizontal directional drills for something called daylighting, which is where rather than dig a trench or bring in an excavator to dig down towards existing infrastructure, we'd use this hydro-excavation practice to expose where the existing infrastructure is. It's used to verify that when the new infrastructure is installed, we didn't go through an existing pipe, we went above it or below it. It's becoming an increasingly common practice, in fact, regulated in a number of areas, identified as a best practice in many regions. We see continued demand driving that. That's true of the underground, but there are other applications in terms of cleanup and other things where it's really complementary. It's expanded our reach in the Canadian market. Tornado Infrastructure Equipment Ltd. is based in Canada.
Their business, even outside of what we would do through our Ditch Witch channel, has been really good. We shared a number of times. This was an easy acquisition because it was strategically very much aligned with where we want to invest. We had experience with Tornado Infrastructure Equipment Ltd. because they were a supplier to our Ditch Witch business for the hydrovacs that we already had there. So we knew the people, we knew the innovation. It's been a great alignment culturally, and the performance has not only met but actually exceeded our expectations so far.
Just to be clear for those who are listening, it's a vacuum truck, but it's not a sewer-type truck.
Yes.
It's not for infrastructure on the road. Some of the competitors are public companies, too, but it's not that.
Yeah.
Off-highway on the truck side.
The trucks can be configured to do different jobs, but our focus is really in that underground infrastructure space.
Soil, yeah.
Yeah.
Not sewer trash and stuff like that.
Yeah.
Got it. Toro, as you just mentioned Tornado Infrastructure Equipment Ltd., you've mentioned Ditch Witch, we've mentioned BOSS Snowplow. Ultimately, you're a collection of brands. Toro is another brand, of course. A lot of it's been assembled through M&A over a very long period of time, some more recently, some a few decades ago. What are you looking to do going forward? If you have a very robust pipeline, are there areas that you want to fill in or expand your product line up? Would you look to expand internationally? International is only about 20% of your sales, so would you want to go bigger in other countries? A little bit about some of your acquisition plans through inorganic growth.
I have to go back and first share, I found myself cringing a little when you described us as a collection of brands. It's probably accurate from-
That's not fair, but-
I know. It's not a fair thing, but what I would point out is we've been really intentional in our acquisitions to align with the things that are important to our values and at the core. What you'll see as a consistency across all of them is a focus on customers, really good innovation, really strong channel. They're not all the same channel, but a strong channel. As I talked about earlier, as we evolve, we're going to look to leverage all of those strengths, but be even more aligned and more integrated. It is true that we have a number of different brands that each have their own place in the markets that they serve. But we view it really as one clear family. To your other question then of where we might look going forward, we're going to continue to look for those things.
I will add to that. We look for cultural alignment from the beginning, and that is one of the reasons that we have been so successful with our integrations. That is not an afterthought or something that we have to solve at the end. As we contemplate our M&A priorities, we have a robust pipeline across our entire enterprise, but we will focus in the professional area. We have been pretty vocal about underground infrastructure continuing to be a really important area. There are some near-term adjacencies in some of the landscape and turf management as well. Then to the international piece, like anything, we will look at what makes sense for us there. There are cases where our product lines and our strengths very naturally scale globally, and there are others where, of course, things differ pretty significantly regionally. Anything is on the table for consideration.
We will be intentional, and we have so many great priorities. We do not have to settle or chase some of the things that may not be as attractive from a return perspective.
Got it. We only have time for maybe one more question left, and I will just throw it out there. As you head towards that first day as CEO, just tell me a little bit about your key concerns. What do you want to get right from the get-go, and what are the major issues that you think you and the board need to be dealing with today on an enterprise-wide basis?
Well, the good news is, if I come back to what I said earlier, the company is in a really strong place.
It's pretty healthy, yeah.
We've talked about the operating results, but I got to come back around to the balance sheet is in great shape. We've been generating cash. Our leverage is in a really stable place. We're at 1.3x for a leverage ratio. So one that, to some degree, insulates us against some of the challenges we're seeing in the macro environment, and it gives us strategic optionality. Our team is excited about looking at where are we going to make those next investments. Yeah, November 1st will be a change. I do understand that's significant and important, but at some level, it's the next day. We're turning the calendar, and we're continuing to execute the things that we're already doing well.
We're continuing to make progress on the strategic priorities and just continue to look for margin expansion, generating cash, serving customers really, really well, and continuing to invest in innovation because we've always seen that to deliver the strongest returns. Frankly, it's something we're really good at.
Well, great. Edric, thank you for joining us. Thank you for being with me up here on the stage and all the investors. Everyone, enjoy the rest of your day here and a great weekend.
Yeah. Thanks for spending the time with us.