Lindsay Corporation

Q1 2022 Earnings Conference Call


spk_0: morning my name is life now the and i will be a conference africa today at the time i would like to welcome everyone to the corporation fourth quarter if go your twenty twenty two earnings call oh good of the fence will be in a less than only mode should be needed the sensory fucking the conference specialist by pressing start than zero after today presentation they'll be an opportunity to ask question to ask a question in a press thought than one on a touchstone phone to retry question please place for thought been to please note this event of being recorded during the call management may make forward looking statements that us object or risks and uncertainties which reflect management of correct police estimate of future economic circumstances industry condition company the farm and and financial results forward looking statements include the information concerning possible or is the beyond future results of operations of the company and don't take my preceded by followed by or including the word expectation outlook could make sure it or similar expression for the treatment reclaim the production of the safe harbor for forward looking statements contained in the private security medication reform act of ninety nine five i would now like the come the call overcome the show randy what president and chief executive officer please go ahead
spk_1: both you and good morning everyone look into our fourth one orange play with me today is brian catch up or chief financial officer i'd like to start by once again for your for used around the world for their continue brazilian food burgers during a pandemic or manufacturing james continue to operate safely and efficiently around the world that nonmanufacturing nonmanufacturing resources continue to maintain productivity in efficiency by water from her are the odds would greatly appreciate all you're doing to support yours distributors and customers around the world trying to record everything about material cost increases and supply drink and strength continue to out your business we expect out to persist through the spring and summer seasons for irrigation and you prefer to products okay james continue to work diligently to watch that these risks while minimizing put more impact we have been able to leverage are socially challenging little for point to take advantage of the strong man we continue to pass to cost increases as the irrational pricing environment in the market in the area of innovation we continue to enhance both if you're mad and road connect platforms we see growth and adoption of these technologies that reduce labor improve efficiency for customers we're so pleased to announce that mark star former head of a climber cooperation and digital going to pay or has join our team at an innovation advisor report directly to me mike is a pioneer trusted expert in the arctic space and have guns will prove invaluable as we continue to expand our product offering and leverage partnership to deliver guy for customers and much personal views on sustainability and environmentally sound management practices the line well with our mission purpose ross are very pleased to welcome pablo defeat what board of directors pablo was currently the executive chairman for volkswagen latin america it's previous experience includes finance leadership role that junaid global kimberly clark and monsanto powers experience and international operations and business management as well his knowledge or corporate finance been tremendous value to our board in our company and we look forward to his contributions pablo fills the board opening created by the departure of michael know who announced his retirement at the end of last year michael has been a significant contributor to lindsay since you joined our board in two thousand and three we thank you for dedication to company and wish him the best in the future trying to market conditions and the domestic us irrigation market demand remain strong as commodity prices in their farm income continue to be positive market drivers now farm income is projected to approach one hundred and seventy billion dollars and twenty twenty one this is up twenty three percent from the prior year and we would be the high farm income levels and two thousand and thirteen an international irrigation we see some of the same positive market drivers way too strong commodity prices in farming come in the developed markets including brazil or we continue to set shipping records australia zealand and western europe a developing project or markets of central and eastern europe middle east and africa or offer showing signs of continued strength like to put security economic diversification a private investment we have continued shipments of our thirty six million dollar project into egypt and expect those deliveries will carry into the first half of our second or we continue to be well positioned to compete for and when additional project business in this region moving to infrastructure consistent with discussions on our fourth quarter earnings call we did not see any she never get roger projects exit the cellphone the first order and we have similar expectations for second quarter however we do expect to see projects beginning to close to deliver in the second half of the year the project far remains robust and we're seeing signs of progress as we've been able to get back into the market to visit customers and accurate when projects along maintaining the ability to travel will be key to managing the felt process and actually project from the cell phone the infrastructure and investment job act was signed into law on november fifteenth this legislation at one hundred and ten billion dollars and incremental funding to repair our roads and bridges and support major transformational projects the bill also includes at three hundred seventy billion dollar reauthorization of the fixing america surface transportation or fact that this read reauthorization coupled with the increased infrastructure bill funding provides long term stability or surface transportation investments we expect this will support public funding over the next several months and we should see some market lived in that white white to or construction see hamilton the color grind to review our fourth quarter financial results thank you randy and good morning everyone total revenues for the first quarter of fiscal twenty twenty two increased fifty three percent two hundred sixty six point two million dollars compared to one hundred and eight point five million dollars in the prior quarter that earnings for the quarter or seven point nine million dollars or seventy two cents per diluted share there compared the net earnings of seven point one million dollars or sixty five cents per diluted share in the prior quarter net earnings for the quarter were reduced by an after tax like low impact of approximately four point five million dollars or forty one cents per diluted share were while their earnings in the prior year quarter included an income tax benefit of one point seven million dollars or sixteen cents per diluted share related to the release of evaluation allowance in a foreign jurisdiction irrigation segment revenues for the first quarter increased sixty seven percent to one hundred and forty five point nine million dollars compared to eighty seven point four million dollars in the prior quarter north america irrigation revenues of seventy nine million dollars increased fifty percent compared to the prior your quarter the increase in north america irrigation revenues resulted from a combination of higher irrigation equipment unit sales volume and higher average selling price in the international erudition mortgage revenues of sixty six point nine million dollars increased ninety four percent compared to the prior quarter the increase in international irrigation revenues resulted primarily from higher unit sales volume along with higher selling prices and a favorable or currency translation impact of one point one million dollars the larger sales volume increases were in the brazil middle east and europe market total irrigation segment operating income for the first quarter was seventeen point two million dollars an increase of sixty two percent compared to the prior year quarter and operating margin was eleven point eight percent of sales compared to twelve point two percent of sales in the prior year the impact of higher irrigation system unifying was partially offset by the impact of higher cost of raw materials and other inputs while we have been successful in passing along most of our cost increases through higher prices during the quarter we continue to experience additional inflation in a number of areas first quarter operating results for irrigation were reduced by approximately five million dollars resulting from the impact of the like a method of accounting for inventory under which more recent and more expensive raw material costs are included in costs of goods sold rather than in in ending inventory days we we would expect to realize some benefit of this like low impact in future but future period as the current inventory quantities decline infrastructure segment revenues for the first quarter or twenty point two million dollars a decrease of four percent compared to twenty one point one million dollars in the prior quarter the decrease resulted from lower wrote zipper system sales which were partially offset by higher road zipper least revenue and increase sales of road safety products compared to the prayer or infrastructure segment operating income for the first quarter was two point eight million dollars compared to four point three million dollars in the prior quarter infrastructure operating margin to the quarter was thirteen point seven percent of sales compared to twenty point one percent of sales in the prior year korea results reflect lower revenues and a less favorable margin next of revenues compared to the prior quarter and were also reduced by approximately one million dollars resulting from the impact of like running to the balance sheet and liquidity our total available quality at the end of the first quarter was one hundred and sixty four point nine million dollars with a hundred and fourteen point nine met million dollars in cash cash equivalents mark or securities and fifty million dollars available under our revolving credit facility our total that was one hundred and fifteen point seven million dollars almost all of which matures and twenty thirty at the end of our first quarter we were well within the financial provenance of are borrowing facilities including a gross funded debt either to leverage ratio of one point four compared to covenant limit of three point zero we are well positioned going forward to invest in growth opportunities that create value for our shareholders at this time i'd like to turn the call over the operator to take your questions
spk_0: even now can the question unanswered question to ask a question a pest dot on one on your touched on phone if you are using the speaker phone please pick up your hands the topic in the key if i plan on buying a question happy not just and you would like to retire question please don't to a go find new apartment and can lead to some long after the first question comes from meeting don't have a pay phone please go ahead
spk_2: but everyone
spk_1: more in a monitor
spk_3: better than a start on on some of the yeah supply chain issue debate that out the and that or another quarter he got to thing the backlog an irrigation and gray you are added the heavily slowed period can you talk about the i'd have to apply chain is that the my that whether it's getting worse weather getting better and have confident you are on your ability to ramp up with volume as we go into the the faintly stronger spring telling favor
spk_1: or cover our that were nathan in and supply chain issues obviously i you you see these are across industries right now and and we're no different than anyone else it's it's a daily our task of are searching organization to to identify where shortages might exist and and then fight that defines apply to keep our factories running and we really benefited or in our could you from our global footprint and we have the ability to to move supply around as as market dictates and and good example is a market like australia new zealand that would generally get most of their supply of here from the us we've been able to divert that's applied factories in turkey in south africa to open up some additional capacity here so the supply chain constraints we do see those persisting through spring and summer enter into next year or but our teams are working their way to make sure they don't disrupt our ability to meet demand and were in our and a good position based again on our little for going to meet the demand that we see for are coming season anywhere at the deli to adapt on the outside or the downside
spk_4: the you they supply play chinese as limiting your belly to wrap up with the seasonality and reading it
spk_1: we we do not right now
spk_3: great and then maybe like a bride on the lot by charge we have think they'll prices stop to come down pretty significantly people in the us or the last few months given expectation for your what the life by judge might be in the second quarter and when we should stop paying the last
spk_5: i did disappear
spk_1: yeah well let me first start with just explaining a little bit about the like though impact that i'm not sure that it's well understood by everyone yeah we are under like though the wiper method of accounting for inventory which very few companies are anymore but under like with in an inflationary environment like we've had the most recent purchases and higher priced purchases flow through cost to gets all right away where where as if you are under fight though those higher costs would be in including in your ending inventory valuation so what we saw in our fourth quarter is we had called out of that was the same number of six million dollar total like low impact were in been ending inventory he's had we done under viper would have been six million dollars higher going into the first quarter what we what we saw was at the end of our first quarter that that difference between bible and like those as actually twelve million dollars so we did have that the six million dollars for the first quarter that that road through you know as a benefit in that the first quarter but it was offset by in on additional all twelve million of inflation so you know the full impact of inflation you know we we really started to see the increase of it in our fourth quarter it's continued on into the first quarter what's your point about deal really been the hot rod coil that we wish started to see that moderate and and reduce really toward the end of our first quarter into our second quarter but at the same time in a we've seen to junior cost increases in structural steel and and other component so you know we're still in a an inflationary environment as you as we look forward to our sec
spk_6: the quarter to your question on that anticipated like low impact their
spk_1: we may see in us the hot rod coil continue to soften but other items continued to increase so i would expect to have a similar like low impact in our second quarter because i don't expect our inventory values to decline between now and the end of february where we could start to see more of a benefit would be in our
spk_4: third and fourth quarters
spk_0: ah that very helpful thank our puppet on
spk_1: the next question comes from brian drop him off can go home
spk_4: i morning i i thought maybe i could start by hear about the international irrigation segment what you're saying it for saw with the egypt project how they are progressing and looks like a you know that project you've had a that function increase in international your geisha revenue system and that's that's going well but it an update would be great and what he thing in the
spk_1: the other markets and and and to any trans there brian this is randy of a gallon or your project is is going very well deliveries are moving through the system wretched installations operations going very well locally ads become obviously a very important market in ny the international scope of our business and and we do see continued opportunities there and executing well on our current project we go certainly puts his in a good position to compete and win for future projects as as restated and the rest of the international markets you you really see to trends that that we've talked a lot about here one news those more mature ish markets like brazil australia new zealand we see a lot of the same strong market fundamentals connected to it birmingham connected to strong commodity prices globally so he wished he sustained growth there are in the project oriented are developing markets we go back to those macro trans on to security diversification of gdp and and still continue down going private investment in those markets so ran a barman our we see our which strength
spk_7: good opportunities and both those developed and developing margaret brian
spk_4: great thanks and and now you know your and in irrigation
spk_1: if you're you're coming up on the tough can't and i'm wondering if you know with you know
spk_7: corn prices so being near six dollars you know there's you just mentioned there's a positive sentiment largely driven by the a higher commodity prices
spk_1: the big deal expect the irrigation segment
spk_4: to continue even with these top comparison that you're coming up on the you know that thirty percent next quarter and than fifty and sixty
spk_1: can you grow on top of those can't yeah i brian i'll take that it it i think we we see that continued demand obviously last year in a very strong demand and i think some of that demand that pulled forward a little bit with the rapidly increasing still costs another costs but done we be feel that that year over year young unifying growth won't be as strong in our second and third quarters but which which still have the benefit of the higher pricing we don't anticipate you know prices to drop just given the continued inflationary environment we have so we with the domestic market growing up driven primarily by price but still having some unit volume growth and up israeli mentioned in the international markets we continue to expect
spk_8: a strong growth there
spk_7: okay and then to the
spk_1: continuing along that line of thinking on pricing you know what what did price can can you tell us at least roughly what price contributed to revenue growth in each of the segments in the in the first quarter yeah i are starting with the domestic irrigation business and just related to the the pivot revenue in a price was in the up the mid forty percent range we had
spk_9: increase in the in the mid teens
spk_1: and you know some of our other years
spk_10: service parts subscription revenue did not grow as much they were up but that's that's what drove the the domestic revenue in greece on the international side by and large it's a volume increase we had we have had the similar inflation in brazil that we've seen in us but you know unify him bridge
spk_1: so we're roughly double what they were last year and dub ya pricing
spk_4: probably and that fifty percent range just a pretty significant price increases in brazil that by and large volume is is what's driving the international revenue
spk_1: okay and and on the and and i infrastructure side you also mentioned and you're prepared remarks price increases is that the in a cave we had some granularity lack hammer yeah i think i'm that on the infrastructure side up prices gonna be less impactful as that the driver in lebanon in that case i mean any talking about the lease revenue on roads at burn and from the project i business which we really didn't have any in the quarter was the road safety products and i would change road safety products
spk_11: tom price increase your of the years probably in it that twenty percent range
spk_0: okay thanks very much up i'll pass it up
spk_12: the next question come from can back counterfeited capital gonna have my randy brian
spk_13: hum fellow there are some economic anchored in turkey and i know you have a our facility their up the turkish players down significantly is that impact and your business at all and in turkey and your ability to
spk_14: to meet orders and and and produce
spk_1: yeah janice brian yeah with it despite the devaluation in the turkish lira it's really i would say had minimal impact on our business are functional currency in in turkey is the us dollar it's really a business that set up to be an export business or us so most of all of our sales are based in us dollars and most of our significant him input costs are also in us dollars that the exception to that would be labor costs and and it's really up devaluations men and more impactful for employees and inflation in some of their
spk_13: daily needs and purchases so we yeah we've had wage and glacier are we expect a half brother wage inflation and and not turkey but that is again upset when you translate that back into us dollars and again minimal minimal impact on our business at this point okay okay
spk_15: thanks and then and bryant you know when you look at the third quarter results
spk_16: i can cost
spk_13: are are a little bit above the were here
spk_17: if your price increases
spk_13: you're on net how much
spk_1: how much of your how much cause we're on recovered in the corner can you give us an idea
spk_6: you know and i would say john and both the domestic market and are brazil market which we've called out before you know as having a little bit of a lag until you get the full price realization are they by the end of our quarter or even during our quarter yeah we were where we needed to be from a price standpoint
spk_1: given the inflation that we had expected i'm so you know if there's further inflation like we're saying in a while have for their price increases but i don't think it was it outside of the like that which we're not the alley that incident more the timing difference but done i would say that you know the pricing headwinds or have subsided at this point in again
spk_18: further inflation the required for the price increases okay thank you brian
spk_19: i'm like fucking congrats come when global com cuckoo hot
spk_20: i can morning thanks for taking the question
spk_13: my rep
spk_21: i was curious what the opportunities that looks like for you all i am in a landscape
spk_1: and i know there is a highway products business that transacted recently curious if that's the type of asset you law value way or arm in a white is coyote best fit that you guys are looking at on that front yeah brad this is brian i would say our where our main focus is from a lemonade stand standpoint would be more aligned with our irrigation business and and more specifically anything related to technology and up in a building out our capabilities you're on the irrigation technology side broadening that out a bit you know where technology and water where there's a connection there not necessarily looking to add to our road safety product portfolio i think on the infrastructure side as we stated before you know anything that would help us with road zipper growth because that's where the portion of infrastructure that we're really focused on growing to high value high margin
spk_21: product where we see a lot of growth opportunities there so hopefully that helps
spk_0: yeah it's very helpful i very much
spk_22: next question a timeline connell the enemy canada and a half
spk_23: great thank you
spk_21: the wouldn't want to sort of explore the supply chain dynamics in and and a couple different angles the first is
spk_13: have you had any kind of sort of component switching wait where you had to switch out to different suppliers a different types of chips something thing like that especially in the field that died
spk_24: an hour any other significant sort of alterations to the component days for the supply chain that they could potentially at some point the future manifests itself in terms of product quality issue or warranty you hear anything like that i mean is there anything that that's had switched on the fly that they give you any concern
spk_1: the other side yeah i'll take our ryan and and i i don't know that i describe it as a significant swap out but like many companies we are really going leveraging engineering talent sourcing and supply chain talent to allow us to respond quickly to do any shortages that we see in front of us are or shortages that we might see even month in advance so i think we got the systems and demand tracking which is obliged to really understand and and be attractive as we can to to get in front of the rhine and and i would say with confidence are nothing gets released without for validation so while we are making some substitutions to our to allow us to meet the needs of our customers i don't see that creating any or risk at all for rocky
spk_23: your product quality
spk_13: got it okay that's reassuring and then the other thing
spk_23: yeah one of the unique things about lindsay is that even for the farm industry sector your your flagship facility in you namesake town of lindsay nebraska is to very rural the facility and that's why the prior management a moved and at hq to omaha a little old to off the beaten path
spk_25: i'm curious how that impacts how that filthy facilities been impacted more or less by all the supply chain issues
spk_23: the given given it's them
spk_26: you know it there are far flung it is it and also a tablet a labour fraud is there is there a sufficient labor force their where are you have you had issues you know staffing they're just just curious how that rural facility as has held up and and
spk_1: the in this environment sure you've bet ryan this ah this is a facility obviously a did the flags your facility for us around the world are are largest most vertically integrated facility and i think when you look at that the workforce quality in a rural work environment we we've got people that work an episode of that understand the importance of the products they're making to to the customers that don't serves so i think we we like that the work ethic about a good midwest workforce we like that that work ethic of a robot worse because again the understand how this equipment has to use our how to do more food for growing population is about the mindset that we like in terms of labor attraction out there is adequate workforce and in the area and our human resources deem as they work very aggressively to pull people and as we as we needed them were implementing a number of lean initiatives to be more efficient and and require less labour to produce goods that will allow us to to meet demand are we we have the ability to work overtime so we're runner in a good position not we feel with that about it workforce and and are
spk_23: melody to attract workers with the supply chain specifically it it's really a similar answer were in front of that the things that we we think we need to be in front of our strategic you group or be aggressively book short and long term to to be attractive as they can and we don't see that's creating any significant risk or are being a detriment to the business overall
spk_0: oh good okay thanks so much free time a little minder if you have a question please pray god then one to be joining the team
spk_27: all next question comes from church charlotte monnet crap before you go ahead
spk_1: the good wire on out of order
spk_28: ah
spk_1: a backlog a reporter the up quite significantly year over year that to do it all to irrigation business the given for the your comments are the numbers you gave on five five the quarter it again check how much of that is that and backlog is frightening approximately a guess that would you like the a lot of the get what you said the the project was for the quarter but the that accurate yeah chris is brian the to i just say on that job increase in backlog of the domestic backlog is is probably at a similar level to last year and as recall last year and a the first quarter we had a significant increase in that so it's a similar
spk_4: in the domestic market so awful that increase or most of the increase i should say is coming from the international markets and
spk_1: again most to that would be volume related
spk_28: again at the end of november
spk_27: there's always the timing on the domestic side but there's there's clearly some price baked into their on a domestic side job you know roughly the same level as last year
spk_1: that's interesting but there would be that much in the on the international
spk_27: i plan out there would be that much of the egypt roddick left and right i mean i've mostly been recorded he added
spk_1: i think we roughly ten million left to ship in the second quarter on that
spk_28: there's a lot of new international flight of the alex great if i would characterize that international backlog is really being up in all markets again the primary you know the largest increase your ears can be in brazil and in fact that you can get a lot of is probably know my external back on plateau and climate
spk_1: that's what it is it you know you've had a lot of that a robot he can you looking at like emanate for for text up to do i need this reference that that's kind of area where you're looking at them day
spk_28: are you can i get be more supply kind of
spk_1: or integrate your platform navy with other thing that i like live at or who can whoever has stuff out that right now is right by with all the the competing products out there the air ag digital world so discouraged to live anymore he color
spk_29: yeah might mike's gonna play a critical role in technology strategy were innovation strategy it'll include industry partnerships will include potential assessment integration of emanate idol include more to the customer work to make sure we're in front of market needs help somebody with that that experiences go the much as we're we're going to
spk_0: average human are in a number of different and unique ways rather a got they got to the company we can't wait to get started with that's great at actually help
spk_7: you guess
spk_1: up next to follow up ah from prime target for named marian please go ahead
spk_4: i just too quick followup questions that randy you mentioned i'd i'd think road zipper project
spk_1: the activity picking up in the second half of fiscal twenty two that
spk_30: quoting activity effect revenue from some major projects in the second half
spk_1: yeah lot of these brian our projects that have been kind of delayed and deferred and forced through our through the kogan era for these these are ones that have been moving their way through the final ones where we got line of sight on on funding so we're out will move into a sales funnel exits in the second half year and and she started using revenue recognition on amazon projects okay
spk_31: and i guess it just the last one brain it eventually you're going to put this in the fight the think if i to fire for another and years but yet that the question or on the breakdown of the irrigation clinton fails dry land replacement etc
spk_0: the have their a yeah you're right it would make it easier for i just put it in in the slot so are yeah dry land in the first quarter was twenty five percent conversion thirty eight percent and replacement thirty seven percent
spk_1: added thank you very much he that at this time there appear to be no my question letter word out on the call back to you for clothing a much
spk_0: thank you all for your interest in participation today mega trends fueled by google to security sustainable agricultural practices infrastructure capacity and roadway safety or cray positive tell wins and will remain optimistic about the growth potential for both the infrastructure and irrigation business segments we continue to develop tech

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