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spk04: Good morning. My name is Joe, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lindsay Corporation fiscal year 2023 first quarter earnings call. All participants will be in a listen-only mode today. And should you need any assistance, please submit a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw a question, please press star, then 2. During this call, management may make forward-looking statements that are subject to risks and uncertainties, which reflect management's current beliefs, estimates of future economic circumstances, industry conditions, company performance, and financial results. Forward-looking statements include the information concerning possible or assumed future results of operations of the company and those statements preceded by, followed by, or including the words expectation, outlook, could, may, should, or similar expressions. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Please do note that today the event is being recorded. I would now like to turn the call over to Mr. Randy Wood, President and Chief Executive Officer.
spk01: Thank you, and good morning, everyone. Welcome to our fiscal 2023 first quarter earnings call. With me today is Brian Ketchum, our Chief Financial Officer. We were pleased to start our fiscal year off strong, delivering revenue growth and earnings that more than doubled compared to last year's first quarter. I'd like to thank our employees, dealers, and suppliers around the world for their contributions. The relentless focus on our customers and execution of our business strategies continues to generate positive results for our shareholders and supports our mission of conserving natural resources, expanding the world's potential, and improving quality of life. I continue to be very proud and appreciative of the job they're doing. Looking at the macro environment. We continue to see supply chain constraints impacting certain areas of our business. Our teams have done a great job mitigating the impact of these challenges, and we expect to see continuous improvement in the situation as the year progresses. Overall inflationary pressure on raw materials and other input costs have moderated. Price realization remains strong, and even in a competitive market, we remain disciplined in our approach to passing cost increases through to the market. In the area of technology and innovation, We were pleased to recently announce our strategic partnership with Cirrus Imaging. This addition to FieldNet expands our SmartPivot platform and provides our customers additional choices and sources of high-resolution imagery and analytics to help them make the best agronomic decisions for their crops. Allowing flexibility in customer choice is a fundamental part of our imagery strategy, and we anticipate additional strategic partnerships in the future. Turning to irrigation market conditions. We continue to see strong market fundamentals in the North American market, including high commodity prices, leading to record net cash farm income in 2022. Drought conditions have eased somewhat in the Far West, but we're seeing conditions worsen year over year in the core Midwest markets, including Nebraska and Kansas. This highlights the importance of irrigated agricultural and should be supportive of a strong market. Customer sentiment is cautious at this stage, due mainly to future concerns about profitability of the 2023 crop and rising interest rates. This may temper market upside, but we don't expect this to create a significant headwind at this time. In the international regions, we see the same strong market fundamentals connected to global commodity prices and farm income having a positive impact in the developed markets, particularly in Brazil. The presidential transition in Brazil has resulted in some market latency that may delay second quarter deliveries, but we don't expect it to impact our full year results. Project activity and visibility across Central Asia and the Middle East continues to be strong. Timing of execution is difficult to predict, but we're pleased with what we see in the market and our ability to leverage our global footprint to compete for and win these projects. Moving to infrastructure. We expect to see the positive impact of the Infrastructure Investment and Jobs Act in the road safety business. November year-to-date state and local government contract awards for highway and pavement projects are up 24% compared to a year ago, supporting an increase in construction activity in the second half of our fiscal year. The full impact of this increase is being somewhat offset by inflation and construction costs. We continue to actively manage the road zipper sales funnel and completed shipment of our large project in Massachusetts in the first quarter. Our global teams continue to identify applications for the road zipper in both permanent installations and temporary lease applications to help mitigate traffic congestion and provide positive protection during roadway construction. I'll now turn the call over to Brian to review our first quarter financial results. Brian.
spk03: Thank you, Randy, and good morning, everyone. Total revenues for the first quarter of fiscal 2023 increased 6% to $176.2 million, compared to $166.2 million in the same quarter last year. Net earnings for the quarter were $18.2 million, or $1.65 per diluted share, compared to net earnings of $7.9 million, or 72 cents per diluted share in the prior year. Irrigation segment revenues for the first quarter increased 4% to $152.1 million compared to $145.9 million in the same quarter last year. North America irrigation revenues of $83.9 million increased 6% compared to last year's first quarter. The increase in North America irrigation revenues resulted primarily from higher average selling prices as unit sales volume was comparable to the prior year. In the international irrigation markets, revenues of $68.1 million increased 2% compared to last year's first quarter, including unfavorable effects of foreign currency translation differences of approximately $1.6 million. Higher sales in Brazil and other markets more than offset the impact of lower sales in Ukraine and Russia as well as Egypt project sales of $9 million in the prior year that did not repeat. Total irrigation segment operating income for the first quarter was $28.6 million, an increase of 66% compared to the prior year first quarter, and operating margin was 18.8% of sales compared to 11.8% of sales in the prior year first quarter. The increase in operating income and operating margin resulted primarily from improved price realization, less inflationary impact on input costs, and a more favorable margin mix of international irrigation revenues compared to the prior year first quarter. The prior year first quarter included LIFO expense of $5 million, while the current year LIFO impact was minimal. Infrastructure segment revenues for the first quarter increased 19%, to $24.1 million compared to $20.2 million in the same quarter last year. The increase resulted from higher road zipper system project sales, which were partially offset by lower road zipper lease revenue and lower sales of road safety products compared to the prior year. During the quarter, we delivered the remaining $8 million of the $24 million barrier replacement project in Massachusetts that began in our fiscal fourth quarter last year. Infrastructure segment operating income for the first quarter increased 22% to $3.4 million compared to $2.8 million in the same quarter last year. Infrastructure operating margin for the quarter was 14% of sales compared to 13.7% of sales in the prior year. Improved current year results resulted primarily from higher revenues and less inflationary impact on input costs compared to the prior year first quarter. This increase was partially offset by a less favorable margin mix of revenues compared to the prior year first quarter because of lower road zipper lease revenue. Turning to the balance sheet and liquidity, our balance sheet remains solid, and our total available liquidity at the end of the quarter was $160.6 million. With $110.6 million in cash, cash equivalents, and marketable securities, and $50 million available under our revolving credit facility. Through an ongoing focus on working capital management, we expect to improve our free cash flow generation in fiscal 2023 and further enhance our position to invest in growth opportunities that create value for our shareholders. At this time, I'd like to turn the call over to the operator to take your questions.
spk04: We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause just momentarily to assemble our roster. And our first question here will come from Tyler Hewton with William Blair. Please go ahead.
spk05: Hey, good morning. Thanks for taking my question. I was just wondering if you could start off with any updates on larger projects internationally in irrigation, and then I'll have one more follow-up.
spk01: Sure, I'll cover that one, Tyler. And as we said in the script, the timing... of confirmation, the timing of execution is always difficult to predict. So really, we focus on the number of opportunities that we see. And right now, there is a robust funnel, and it's linked to food security, population growth. We've talked at different times, you know, the pandemic. really accelerated a lot of discussions in different parts of the world on improving food security for a lot of governments and countries around the world. So we are pleased with what we see in the funnel, but it is difficult, again, to predict when we're going to see those confirmed and start delivering. But the funnel is strong. Right.
spk05: Thank you for confirming that. And then in infrastructure, with the number of small to midsize projects for fiscal 23, how would that stack up against that one large project in Massachusetts for fiscal 22? Thank you.
spk03: Yeah, Tyler, this is Brian. I would say, you know, what we see is an increase in the leasing part of our business in probably the second half of the year as the construction season starts. gets underway, and then, as we said before, some smaller, medium-sized projects on the road zipper projects side of the business. And so, in total, road safety products, we expect some growth. So, year over year, we expect to be able to offset that Massachusetts project with growth from some of the other areas.
spk05: Okay. Thank you for the call on that. That's all I had for today. Thank you.
spk04: And our next question will come from Ryan Connors with North Coast Research. Please go ahead.
spk00: Morning, and congrats on super results there to everyone on the team. So it looks like what we saw here is, you know, pricing really holding up very well as some of the inflation, you know, moderates. So I guess my question is, that jump in the gross margin, you know, how should we be thinking about that going forward? Obviously, you never want to be a on a call like this telegraphing, you know, anything, any kind of negative price. But, you know, how should we think about price, cost, and sustainability as inflation moderates and we're up at this kind of a margin level?
spk03: Yeah, I think, Ryan, this is Brian. You know, where we finished the, you know, the first quarter, obviously year over year, you know, big increase in I think, you know, you look at a good chunk of that attributed to the, you know, negative LIFO impact we had last year and not as much this year. But still, you factor that out, you factor the dilutive nature of the Egypt project last year, and we still had very strong incremental margin improvement. And I think, you know, what we've been saying since third quarter last year is we've gotten the full price realization that we've expected. You know, there's still some noise in some of the inflation, but I would say both in North America and in Brazil, we've seen some margin expansion as a result as we've come through this, you know, gotten through the inflationary impact, you know, looking at a strong demand environment. So we've been able to expand margins and, you know, You know, we continue to look at other opportunities through productivity improvement to continue to grow margins. But, you know, we're pretty pleased with the progress we've made to date.
spk00: Okay. And then my other one has to do with this issue of, you know, obviously 2022, talking full year or fiscal year, rather, you had a pretty nice impact of storm damage and replacement demand. I wonder if you can kind of frame that issue for us as we look ahead to 23, both in terms of, you know, to what extent that was a driver and, you know, any way that you might be able to quantify the impact there in 22. And then also there's been some talk about insurance carriers, at least some insurance carriers, dropping coverage of pivots because in part of the claim frequency with all that storm damage. Curious if you have any thoughts on how that could impact customer buying decisions going forward.
spk01: Yeah, we can tackle both of those, Ryan. Looking at storm volume impact last year, I'll maybe let Brian quantify that when I'm through, but it certainly will see that difficult comp in our fourth quarter, our fiscal fourth quarter. You always plan for some storm damage in your volume forecasting and supply chain and labor planning, but last year was really an extraordinary, particularly in the fourth quarter for us. I'll let Brian quantify that. Relative to insurance, we have seen the same types of discussions and same chatter, and we've been personally in contact with a lot of the insurers, reinsurers across the industry. And there's an ebb and a flow here, I think, just like you see in the insurance market and residential homes when there's disasters in certain parts of the country. Our view now is there's always going to be a market. There's always going to be somebody willing to provide coverage where it's necessary for And even if the economics change slightly on insurance premiums, when you look at that as part of the total cost of ownership compared to the benefits of irrigated agricultural production, we might see some hesitation, but we don't view it as a significant headwind. Irrigation is still going to be a requirement in a lot of parts of the country, and we don't see any incremental insurance costs driving a lot of negative sentiment right now. And, Brian, maybe quantification on storm.
spk03: Yeah, Ryan, I think last year in our fourth quarter, we kind of quantified that exceptional incremental storm damage in the neighborhood of around $15 million in revenue. And so we would expect, you know, this year to kind of fall back into the more traditional storm season. But who knows, you know, with the kind of weather changes that we've been seeing. But that's kind of how we're looking at things today.
spk00: Understood. Very helpful. Hey, thanks for your time today. Thanks, Ryan.
spk04: And our next question will come from Brett Carney with Gabelli Funds. Please go ahead.
spk02: Hi, guys. Good morning. Thanks for taking my question. Hi, Brett. With the new partnership with Ceres Imaging, Curious, you know, that option you're able to offer to customers, I assume that will primarily be within the North America market, at least initially, and kind of what, I guess, how do you think about the opportunity longer term to, do they have the capabilities to go into some of the other developed irrigation markets internationally, Brazil, Western Europe, and, you know, how much demand is there relative to the North American opportunity for a solution like that?
spk01: Yeah, Brett, we'd say that the initial opportunities are going to be largely focused on North America. And when you look at technology adoption in general for irrigated acreage telemetry coverage, it's certainly the penetration rates are higher in North America. So we do see that being the short-term opportunity. The good news on technology like this is it is incredibly scalable. And I think the ability for us to leverage our channel, leverage our current installed base, does create some significant opportunities. And imagery is really in the early innings in our view, and there are a lot of regional strengths, even if you look at just the North American market, that some companies are stronger in some parts of the country relative to others. So that's really a key part of our strategy to offer choice for our customers, and we're very excited about what Sears is going to do for our customers, and we do see some growth opportunities. But we will start, in our view, with a strong base here in North America.
spk02: Terrific. Thanks so much, Randy.
spk04: Our next question will come from Brian Wright with Roth Capital. Please go ahead.
spk07: Thanks. Good morning. I was just hoping you could provide a little more color on just the backlog. And you said it was kind of, you know, impacted both segments.
spk06: Is there a way to think about it, North America versus South America, and then just magnitude kind of comparing the segments and the backlog changes?
spk03: Yeah, Brian. You know, when you look at the year-over-year comparison, I would say last year's backlog, both in North America and in Brazil primarily, were driven by by still having some pretty significant price increases, which generally pulls volume forward into the backlog. I would say with where we're at this year with more stability and inflation and in our prices, it's reverted more to the traditional kind of selling season and the timing of the backlog. That's the biggest thing year over year, which is affecting both, you know, North America and international backlog there. And on the infrastructure side, I think as we end our first quarter, we're, you know, into the winter. The construction season is really winding down. So that, you know, backlog is typically pretty low at the end of November. So nothing significant, you know, from our view in what that, you know, means for future projects. future results, which we've always said the backlog isn't necessarily the strongest indicator of what the next couple of quarters are going to look like.
spk07: Oh, great. Thank you so much for that clarification. Thank you.
spk04: And again, if you have a question, please press star, then 1. Our next question here will come from Chris Shaw with Moniz, Crespi, and Hart. Please go ahead.
spk08: Hey, good morning, everyone. Chris, in the irrigation, you might have given a bit... What was the volume growth and the pricing growth during the quarter?
spk03: Yeah, so we said the volume was comparable to last year, so pretty much flat. I think that the pricing is probably in that 7% to 8% range, and then there's some other changes that brought the overall down to 6%. Got it. And then the...
spk08: Just to remember the infrastructure, the road zipper, the new road zipper machine that you introduced this week, I was just looking at, I guess, the news there. You're going to have two machines now that are available. I forgot the names, like Gemini and Titan. I didn't really understand what the – one was smaller, one was bigger, but I didn't really understand the difference, I guess, maybe in applications or, you know, customers, or I couldn't tell if one was for leasing or buying. Could you just go into that a little bit more?
spk03: Yeah. We've always had – a few different models of road zipper, depending on the application. And so, you know, when, when it's a lease situation, which is going to be part of a construction project, it's, it's, let's say a little, doesn't have quite the, you know, all the options and things like that, that a permanent installation would have. So we've, really from a branding standpoint, you know, I have come out with the two, two brands as we've went through the refurbishment and redesign of the road zipper machine, but we've always had multiple types. One, you know, specifically for Japan that we have produced Hawaii was another classification where it could move the road, the barrier two lanes. So that part of it's really nothing new. The, the big thing was just the redesign and, and some of the additional options that are now part of the machine.
spk08: The newer machine, that's not like a – it doesn't expand the market. You don't have like a new customer base. It wasn't anything like that. It was just sort of an iteration of the old ones.
spk03: Yeah, I would say primarily. I mean, I think it's something that we think from a marketing perspective might drive some additional interest, but nothing game-changing, I don't think. Great. Thanks a lot.
spk04: Again, if you have a question, you may press star the 1 to join the queue. All right. And with no further questions, we will conclude our question and answer session. I would like to turn the conference back over to Mr. Randy Wood for any closing remarks.
spk01: Thank you all for your interest and participation today. We're very pleased with our first quarter results and look forward to carrying that momentum through 2023. The infrastructure segment continues to be supported by incremental funding provided by the Infrastructure Investments and Jobs Act. The irrigation segment continues to see strong near-term fundamentals due to elevated farm income and longer-term secular drivers connected to food security and population growth. Positive ROI provided by an investment in irrigated agriculture will continue to support strong markets around the world. Both segments benefit from ongoing investments in innovative technologies that improve customer profitability while conserving resources and making our roadways safer. This concludes our first quarter earnings call. We look forward to updating you on our continued progress following the close of our fiscal 2023 second quarter. Thanks for joining us.
spk04: The conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect your lines.
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