Lindsay Corporation

Good day, and welcome to the Lindsay Corporation Fiscal First Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal 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 one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Randy Wood, President and CEO. Please go ahead.

Thank you and good morning everyone. Welcome to our fiscal 2025 first quarter earnings call. With me today is Brian Ketchum, our Chief Financial Officer. I'm pleased with our company's performance during the first quarter as our results continue to demonstrate the resilience of our business and our team's collective operational and commercial execution. This execution was clearly reflected in our results as we delivered year-over-year revenue growth and a meaningful expansion to our net earnings and earnings per share, overcoming the weaker fundamentals and headwinds in the mature global irrigation markets. Our international irrigation business delivered 37% year-over-year revenue growth, supported primarily by the additional sales volume of our previously announced record project in the MENA region, and we've also observed early positive sales trends in Western Europe and regions of Latin America. Turning to our infrastructure segment. While we did see a slight decline in our top line, we have delivered another quarter of strong operating income and margin expansion, driven by a continued focus on cost management and our ability to capture additional operational efficiencies. On the commercial side, we recently finalized a $20-plus million contract for a large road zipper system project in the northeast. This is a result of our shift left strategy to go upstream in the design and decision-making process of these large roadway projects. We expect this project will fully deliver in our second quarter. Shifting gears to market outlook. In North America, we continue to expect slightly weaker market conditions in the near term as net farm income continues to be tempered by low commodity prices and high input costs. There are some potential tailwinds in the mid to longer term. We have seen a recent uptick in customer sentiment connected to the U.S. elections, and the federal government recently announced an agricultural aid package connected to the federal spending bill passed in late December. This adds $10 billion to help offset low commodity prices. The bill also includes approximately $21 billion in natural disaster aid for farmers and ranchers affected by drought, wildfires, and hurricanes over the past two years. In the international irrigation markets, Brazil order volume is stabilized and we've seen regional financing programs launched in Paraná and Sao Paulo states. These programs should support stronger volumes in the second half of the year. Brazil remains a key long-term growth market given the low degree of market penetration for mechanized irrigation and their ability to generate strong ROI with two to three crops per year with irrigation. We continue to expect strong performance in our developing international markets, specifically in the MENA region, as food security and water scarcity continue to be positive demand drivers. While the project funnel continues to be robust, these projects are very competitive and timing is always difficult to predict. We have proven our ability to identify, win, and deliver on these large complex projects, and we have line of sight to additional projects in the region that we expect to move forward this fiscal year. Moving to infrastructure. We expect growth in the segment, supported by the large road zipper system project, which is expected to be delivered in Q2. We are not expecting any material changes to the IIJA as the new administration takes office. However, some of the positive benefits from the legislation have been offset by cost inflation, making it difficult to estimate the actual impact of the increase in federal funding at this stage. Our solid performance in the segment has continued to be supported by operational expense reductions and improved efficiencies in our manufacturing processes. These improvements, along with the improved margin mix from higher road zipper revenues, are expected to bolster profitability in the infrastructure segment in the near term. Turning to innovation and technology, I'm pleased to announce that we closed the previously announced deal to acquire a minority interest in Austria-based Pestle Instruments. This partnership adds incremental capabilities to the FieldNet and FieldWise platforms and creates an opportunity to grow annual recurring revenue by leveraging their significant global install base of devices. With the Pestle investment, we now have access to over 240,000 connected devices, which will support long-term growth and annual recurring revenue. Our teams have already begun collaborating, and we're excited about the opportunities this creates for our customers around the world. I'd like to now turn the call over to Brian to discuss our first quarter financial results. Brian. Thank you, Randy, and good morning, everyone.

Consolidated revenues for the first quarter of fiscal 2025 increased 3% to $166.3 million compared to $161.4 million in the prior year. Revenue growth was driven by an increase in international irrigation revenues, which was partially offset by lower North America irrigation and infrastructure revenues compared to the prior year. Net earnings for the quarter increased 14% to $17.2 million or $1.57 per diluted share compared to net earnings of $15 million or $1.36 per diluted share in the prior year. While operating income was similar to the prior year, Current year results benefited from an increase in other income and a lower effective income tax rate compared to the prior year. Turning to our segment results, irrigation segment revenues for the quarter increased 5% to $147.1 million compared to $140.2 million in the prior year. North America irrigation revenues of $77.7 million decreased 13% compared to the prior year. The decrease resulted primarily from lower unit sales volume of irrigation equipment, as well as a less favorable mix of shorter machines and slightly lower average selling prices compared to the prior year. A reduction in net farm income for calendar 2024 continues to temper demand for irrigation equipment in the near term. In international irrigation markets, revenues of $69.4 million increased 37% compared to the prior year. The increase resulted primarily from revenues related to our large project in the MENA region, along with higher sales in Europe and certain regions of Latin America compared to the prior year. This increase was partially offset by lower revenue in Brazil, where market activity remained lower than the prior year due to lower commodity prices that have pressured grower profitability and available liquidity. Revenues in the current year quarter were also impacted by the unfavorable effects of foreign currency translation of approximately $2.1 million compared to the prior year. Irrigation segment operating income for the quarter of $24.7 million was 2% lower compared to the prior year, and operating margin was 16.8% of sales compared to 18.1% of sales in the prior year. Lower operating income and operating margin resulted primarily from a larger proportion of international project revenues compared to the prior year, which were dilutive to overall segment margin. Infrastructure segment revenues for the quarter of $19.2 million were 9% lower compared to the prior year. This decrease resulted primarily from a difference in the timing of road zipper system lease revenue and lower sales of road safety products compared to the prior year. Infrastructure segment operating income for the quarter of $4.1 million increased 14% compared to the prior year. and infrastructure operating margin for the quarter was 21.5% of sales compared to 17.1% of sales in the prior year. The increase in operating income and operating margin resulted primarily from improved manufacturing efficiency and lower operating expenses compared to the prior year. The large road zipper project that Randy mentioned in his opening remarks had been contemplated in our full year fiscal 2025 outlook However, the timing was not clear until the contract was signed after the end of our first quarter. We have been building the machine and barrier required for this project, and we expect to deliver the entire project valued at more than $20 million in our second fiscal quarter. Turning to the balance sheet and liquidity, our total available liquidity at the end of the first quarter was $244.1 million, which includes $194.1 million in cash and cash equivalents and $50 million available under our revolving credit facility. Our strong balance sheet and ample access to liquid capital resources continue to serve as a strategic asset for Lindsay as we execute our capital allocation strategy to create enhanced and sustained value for our shareholders. This concludes my remarks, and at this time, I'll turn the call over to the operator to take your questions.