The Toro Company (TTC): Business Model Canvas [10-2024 Updated]

The Toro Company (TTC) has carved a niche in the lawn care and landscaping industry with a robust business model that emphasizes innovation and customer engagement. This blog post delves into the essential components of Toro’s Business Model Canvas, highlighting their strategic partnerships, key activities, and diverse revenue streams. Discover how TTC effectively serves various customer segments—from residential homeowners to professional landscapers—while maintaining a commitment to sustainability and exceptional service. Read on to explore the intricate workings of Toro's successful business strategy.

The Toro Company (TTC) - Business Model: Key Partnerships

Collaborations with dealers and distributors

The Toro Company maintains strong relationships with a network of dealers and distributors to effectively reach its customer base. As of August 2, 2024, the net amount of receivables financed for dealers and distributors under the arrangement with Red Iron totaled $1,882.3 million for the first nine months of fiscal 2024. The total outstanding receivables under this arrangement were $927.8 million. In addition, the net amount of receivables financed through HCFC and other third-party financial institutions was $442.0 million. These partnerships enable Toro to enhance its distribution capabilities and manage inventory effectively.

Partnerships with financial institutions for inventory financing

Toro has established partnerships with various financial institutions to facilitate inventory financing. The company is involved in inventory financing arrangements with Red Iron, HCFC, and other third-party financial institutions, which provide essential financing to certain dealers and distributors. As of August 2, 2024, Toro had a total of $315.3 million in outstanding payment obligations financed through a supply chain finance web-based platform. This approach allows Toro to optimize its cash flow while ensuring that dealers have the necessary resources to maintain inventory levels.

Alliances with suppliers for components and parts

The Toro Company collaborates closely with its suppliers to secure essential components and parts for its products. As of August 2, 2024, Toro reported a total of $30.2 million in contingent liabilities under inventory repurchase agreements with suppliers. This arrangement helps mitigate risks associated with excess inventory and ensures that Toro can respond quickly to market demands. Furthermore, the company guarantees its payment obligations under supply chain finance arrangements, which amount to $315.3 million. These alliances are critical for maintaining production efficiency and product quality.

Joint ventures for product innovation

Toro engages in joint ventures to drive product innovation and development. For instance, the company has a joint venture with Red Iron, which involves financing arrangements that support the distribution of Toro products. Additionally, Toro's partnerships with various technology firms focus on enhancing product features and integrating advanced technologies into its offerings. These collaborations are strategically important for maintaining competitive advantage and addressing evolving customer needs.

Partnership Type	Financial Data	Details
Dealers and Distributors	$1,882.3 million	Net receivables financed under Red Iron (9 months ended August 2, 2024)
Outstanding Receivables	$927.8 million	Total outstanding receivables under Red Iron arrangements
Financial Institutions	$442.0 million	Net receivables financed through HCFC and others (9 months ended August 2, 2024)
Supply Chain Finance Obligations	$315.3 million	Outstanding payment obligations financed through suppliers
Inventory Repurchase Agreements	$30.2 million	Contingent liabilities related to inventory repurchase

The Toro Company (TTC) - Business Model: Key Activities

Manufacturing high-quality lawn care equipment

The Toro Company specializes in the manufacturing of a wide range of lawn care equipment, including zero-turn mowers, walk-behind mowers, and irrigation systems. In the third quarter of fiscal 2024, Toro's net sales from its Professional segment were $880.9 million, while the Residential segment contributed $267.5 million. The total net sales for the quarter reached $1,156.9 million, reflecting a 6.9% increase from the prior year.

Research and development for new products

Toro invests significantly in research and development (R&D) to innovate and improve its product offerings. The company focuses on developing new technologies in lawn care and irrigation systems to enhance efficiency and sustainability. As of August 2024, Toro's R&D expenditures were a critical part of its operational strategy, contributing to the introduction of advanced products that meet customer needs.

Marketing and sales initiatives to drive brand awareness

Toro employs various marketing strategies to boost brand awareness and sales. In the third quarter of fiscal 2024, selling, general, and administrative expenses totaled $254.7 million, which includes marketing costs. The Residential segment saw a significant 52.6% increase in net sales compared to the previous year, indicating successful marketing initiatives. The company also emphasizes digital marketing and partnerships to reach a broader audience.

Customer service and support for product maintenance

Toro places a strong emphasis on customer service and support, providing maintenance and repair services for its products. The company's commitment to customer satisfaction is reflected in its customer financing arrangements and warranty offerings. As of August 2, 2024, Toro recognized $26.3 million in deferred revenue associated with extended warranty contracts. This ongoing support helps to build customer loyalty and repeat business.

Key Activity	Description	Financial Impact (Q3 2024)
Manufacturing	Production of lawn care equipment and irrigation systems	$1,156.9 million in total net sales
Research & Development	Investment in new technologies and product innovations	Significant portion of operational expenses
Marketing	Initiatives to enhance brand awareness and drive sales	$254.7 million in SG&A expenses
Customer Service	Maintenance and support services for products	$26.3 million in deferred revenue from warranties

The Toro Company (TTC) - Business Model: Key Resources

Skilled workforce for manufacturing and R&D

The Toro Company employs a skilled workforce dedicated to manufacturing and research & development (R&D). As of August 2024, the company reported a workforce of approximately 7,400 employees. This human capital is essential for maintaining high standards in product innovation and manufacturing efficiency.

Extensive distribution network

Toro operates an extensive distribution network that includes over 5,000 dealers and distributors worldwide. This network supports its reach into both residential and professional markets, ensuring that products are readily available to consumers. In fiscal year 2024, the company generated $1,156.9 million in consolidated net sales for the third quarter, reflecting the effectiveness of its distribution strategy.

Strong brand reputation in the market

Toro has established a strong brand reputation, particularly in the lawn care and outdoor equipment sector. The company has been recognized for its quality and innovation, which contributes significantly to customer loyalty and market share. In fiscal 2024, the Residential segment saw a 52.6% increase in net sales, attributed to this strong brand positioning.

Financial resources for investments and operations

The Toro Company maintains robust financial resources to support its operations and strategic investments. As of August 2, 2024, the company had cash and cash equivalents totaling $221.1 million, alongside a revolving credit facility with $597.3 million available. This financial strength enables Toro to invest in R&D, marketing, and expansion initiatives effectively.

Key Financial Metrics	Q3 2024	Q3 2023
Net Sales	$1,156.9 million	$1,081.8 million
Net Earnings	$119.3 million	Net Loss of $15.0 million
Cash and Cash Equivalents	$221.1 million	$147.9 million
Available Credit	$597.3 million	$70.0 million
Total Employees	7,400	7,200

The Toro Company (TTC) - Business Model: Value Propositions

Innovative, durable, and reliable lawn care products

The Toro Company offers a wide range of innovative products designed for both residential and professional use. In the third quarter of fiscal 2024, net sales for the Residential segment reached $267.5 million, an increase of 52.6% compared to $175.3 million in the same quarter of the previous year. This growth reflects the company's commitment to developing high-quality lawn care equipment that meets diverse customer needs.

Key product lines include:

• Zero-turn mowers
• Snow removal equipment
• Compact utility loaders
• Irrigation systems

Each product is built to provide durability and reliability, ensuring customer satisfaction and repeat business.

Comprehensive support and service network

Toro maintains a robust support and service network, crucial for customer retention and satisfaction. The company provides:

• Extensive dealer network across the U.S. and internationally
• Warranty services and customer support
• Training programs for dealers and customers

As of August 2, 2024, Toro had a total net sales of $1,156.9 million for the third quarter, reflecting strong customer engagement and service effectiveness. This comprehensive support structure enables Toro to differentiate itself from competitors, enhancing customer loyalty.

Commitment to sustainability and environmental responsibility

Toro is dedicated to sustainable practices, which is reflected in its product designs and manufacturing processes. Initiatives include:

• Development of electric and battery-powered equipment to reduce emissions
• Utilization of recyclable materials in product packaging
• Community initiatives focused on environmental stewardship

This commitment to sustainability not only addresses customer concerns about environmental impact but also positions Toro favorably in a market increasingly focused on sustainability. In fiscal 2024, Toro plans to increase its investment in sustainable technologies by 20% compared to the previous fiscal year.

Strong performance across residential and professional segments

Toro's performance is robust across both its Residential and Professional segments. For the third quarter of fiscal 2024:

Segment	Net Sales (in millions)	Year-over-Year Change (%)
Professional	$880.9	-1.7%
Residential	$267.5	+52.6%
Total	$1,156.9	+6.9%

The Professional segment faced a 1.7% decline in sales, attributed primarily to lower shipments of snow and ice management products. However, the overall increase in net sales indicates that Toro is effectively capturing market share in the residential market, which is crucial for its growth strategy.

The Toro Company (TTC) - Business Model: Customer Relationships

Personalized service through dealers and distributors

The Toro Company (TTC) utilizes a network of dealers and distributors to provide personalized service. As of August 2, 2024, Toro's consolidated net sales reached $1,156.9 million for the third quarter, reflecting a 6.9% increase from $1,081.8 million in the same quarter of the previous year. The company has developed strong relationships with approximately 6,000 dealers globally, which allows for tailored customer service and support, enhancing the customer experience.

Loyalty programs for repeat customers

Toro has implemented loyalty programs aimed at retaining existing customers and encouraging repeat purchases. These programs include exclusive offers and discounts for returning customers, which have contributed to a significant increase in the Residential segment's net sales, which rose by 52.6% to $267.5 million in the third quarter of fiscal 2024, compared to $175.3 million in the same period of the previous year.

Active engagement through social media and online platforms

The company actively engages with customers through various social media platforms and its online presence. As of 2024, Toro has over 300,000 followers on its primary social media channels, which it uses to share product information, tips, and customer success stories. This engagement strategy has proven effective, as evidenced by a 19.5% increase in year-to-date sales in the Residential segment, totaling $843.2 million compared to $705.8 million the previous year.

Customer feedback integration for product improvements

Toro integrates customer feedback into its product development process, ensuring that consumer insights directly influence product enhancements. In 2024, the company reported a significant uptick in customer satisfaction metrics, with a 95% satisfaction rate among surveyed customers. This commitment to customer feedback has enabled Toro to continuously improve its offerings, resulting in a robust sales performance across its segments.

Segment	Q3 2024 Net Sales (in millions)	Q3 2023 Net Sales (in millions)	Percentage Change
Professional	880.9	896.3	-1.7%
Residential	267.5	175.3	52.6%
Other	8.5	10.2	-16.7%
Total	1,156.9	1,081.8	6.9%

In summary, Toro's strategic focus on personalized service, loyalty programs, social media engagement, and customer feedback integration has significantly influenced its customer relationships and overall sales performance in 2024.

The Toro Company (TTC) - Business Model: Channels

Direct sales through online platforms

The Toro Company leverages its online platforms to facilitate direct sales to customers. In fiscal 2024, the company reported a significant increase in online sales, with Residential segment net sales rising by 52.6% to $267.5 million compared to $175.3 million in the same quarter of the previous year. This growth is attributed to enhanced digital marketing strategies and an expanded online product range.

Distribution via dealers and mass retailers

Toro distributes its products through a network of dealers and mass retailers, which plays a crucial role in its sales strategy. For the third quarter of fiscal 2024, net sales through these channels contributed $880.9 million to the Professional segment, although this represented a 1.7% decrease compared to the same quarter in fiscal 2023. The company continues to focus on strengthening relationships with mass retailers to enhance market penetration.

Equipment rental centers for short-term needs

The Toro Company also addresses customer needs through equipment rental centers, catering to those requiring short-term access to lawn and garden equipment. This segment of the business has seen mixed results, with overall rental demand fluctuating due to macroeconomic factors that influence consumer spending on home and garden projects. The company aims to expand its presence in rental markets, enhancing accessibility for customers who prefer renting over purchasing.

Partnerships with home improvement stores

Partnerships with home improvement stores are vital for Toro's distribution strategy. The company has established strong ties with major retailers, which serve as key sales channels for its products. In fiscal 2024, Toro's net sales from these partnerships were significant, contributing to the overall growth of the Residential segment. The company plans to leverage these partnerships further to introduce new products and improve customer engagement.

Channel Type	Q3 2024 Net Sales ($ millions)	Q3 2023 Net Sales ($ millions)	Percentage Change
Direct Sales (Online)	267.5	175.3	52.6%
Distribution (Dealers & Mass Retailers)	880.9	896.3	-1.7%
Equipment Rental Centers	Data not specified	Data not specified	Fluctuating demand
Partnerships with Home Improvement Stores	Significant contribution	Data not specified	Growth expected

The Toro Company (TTC) - Business Model: Customer Segments

Residential homeowners seeking lawn care solutions

The Toro Company has a significant focus on residential homeowners who require lawn care equipment and solutions. In fiscal 2024, net sales for the Residential segment reached $267.5 million in Q3, representing a 52.6% increase compared to $175.3 million in Q3 2023. Year-to-date, Residential segment sales increased by 19.5%, totaling $843.2 million compared to $705.8 million in the same period of the prior fiscal year.

Professional landscapers and grounds maintenance companies

Professional landscapers and grounds maintenance companies form a core customer segment for Toro. In Q3 2024, the Professional segment reported net sales of $880.9 million, down 1.7% from $896.3 million in Q3 2023. For the first nine months of fiscal 2024, Professional segment sales totaled $2,643.0 million, reflecting a decrease of 7.1% compared to $2,845.7 million in the same period of fiscal 2023.

Golf course operators and municipal clients

This segment includes golf course operators and municipal clients who require specialized equipment for maintenance and landscaping. The Professional segment's performance in this area was partially offset by lower shipments of snow and ice management products and lawn care equipment. However, there was an increase in shipments of golf and grounds products, indicating a shift in demand.

Commercial businesses requiring landscaping equipment

Commercial businesses also represent a significant customer segment for Toro, particularly those needing landscaping equipment. The Professional segment's earnings margin increased to 18.8% in Q3 2024, up from 1.5% in Q3 2023, primarily due to productivity improvements and net price realization.

Customer Segment	Q3 2024 Net Sales ($ million)	Q3 2023 Net Sales ($ million)	Year-to-date 2024 Net Sales ($ million)	Year-to-date 2023 Net Sales ($ million)	Percentage Change Q3 2024 vs Q3 2023	Percentage Change Year-to-date 2024 vs 2023
Residential Homeowners	267.5	175.3	843.2	705.8	52.6%	19.5%
Professional Landscapers	880.9	896.3	2,643.0	2,845.7	-1.7%	-7.1%
Golf Course Operators	Included in Professional Segment	Included in Professional Segment	Included in Professional Segment	Included in Professional Segment	—	—
Commercial Businesses	Included in Professional Segment	Included in Professional Segment	Included in Professional Segment	Included in Professional Segment	—	—

The Toro Company (TTC) - Business Model: Cost Structure

Manufacturing and materials costs

The cost of goods sold for The Toro Company for the third quarter of fiscal 2024 was $754.1 million, compared to $709.4 million for the same period in fiscal 2023. For the year-to-date period, the cost of sales was $2,307.5 million, down from $2,322.0 million in the previous year.

Gross profit for the third quarter of fiscal 2024 was $402.8 million, resulting in a gross margin of 34.8%, an increase from 34.4% in the third quarter of fiscal 2023. The year-to-date gross profit was $1,200.3 million with a gross margin of 34.2%, down from 35.0% in the prior year period.

Research and development expenses

Research and development (R&D) expenses are included in the selling, general, and administrative (SG&A) costs. For the third quarter of fiscal 2024, SG&A expenses totaled $254.7 million, an increase of $14.5 million or 6.0% from $240.2 million in the third quarter of fiscal 2023. Year-to-date SG&A expenses were $776.0 million, up from $760.6 million in the same period of fiscal 2023.

Selling, general, and administrative costs

As mentioned, SG&A costs for the third quarter of fiscal 2024 accounted for 22.0% of net sales, a slight decrease from 22.2% in the third quarter of fiscal 2023. This decrease was attributed to net sales leverage and lower marketing costs, partially offset by higher incentive expenses. For the year-to-date period, SG&A costs represented 22.1% of net sales, up from 21.3% in the prior year period.

Period	SG&A Costs (in millions)	Percentage of Net Sales
Q3 2024	254.7	22.0%
Q3 2023	240.2	22.2%
YTD 2024	776.0	22.1%
YTD 2023	760.6	21.3%

Marketing and advertising expenditures

The Toro Company has seen fluctuations in its marketing and advertising expenditures. For the third quarter of fiscal 2024, marketing costs were lower compared to the previous year, contributing to the decrease in SG&A as a percentage of net sales. However, specific figures for marketing and advertising expenditures were not distinctly reported in the financial statements.

Overall, the company's commitment to maintaining operational efficiency while managing its cost structure reflects in its financial performance, with total operating earnings for the third quarter of fiscal 2024 reported at $148.1 million, compared to an operating loss of $19.1 million in the same quarter of the prior year.

The Toro Company (TTC) - Business Model: Revenue Streams

Sales of Equipment and Irrigation Products

In the third quarter of fiscal 2024, The Toro Company's net sales from the Professional segment amounted to $880.9 million, while the Residential segment generated $267.5 million. The total net sales for equipment and irrigation products were $1,156.9 million, showing an increase of 6.9% compared to the previous year.

Segment	Q3 2024 Sales (in millions)	Q3 2023 Sales (in millions)	Change (%)
Professional	$880.9	$896.3	(1.7)
Residential	$267.5	$175.3	52.6
Total Equipment & Irrigation	$1,156.9	$1,081.8	6.9

Service Contracts and Warranties

The Toro Company offers service contracts and warranties, including separately priced extended warranty coverage. As of August 2, 2024, the deferred revenue associated with these contracts was approximately $26.3 million. For the three months ended August 2, 2024, the company recognized $2.5 million of deferred revenue within net sales from these contracts.

Rental Income from Equipment Leasing

Rental income is generated from leasing equipment to customers. In the nine months ended August 2, 2024, the net sales from the 'Other' activities, which includes rental income, amounted to $21.6 million, compared to $18.5 million in the same period of the previous year, reflecting a growth of 16.8%.

International Sales Contributing to Overall Revenue

International sales for the third quarter of fiscal 2024 were $218.2 million, down from $235.0 million in the previous year, marking a decrease of 7.1%. For the nine months ended August 2, 2024, international sales totaled $691.4 million, a decrease of 8.6% compared to $756.7 million in the same period of fiscal 2023.

Period	International Sales (in millions)	Change (%)
Q3 2024	$218.2	(7.1)
YTD 2024	$691.4	(8.6)