Lindsay Corporation

Good day, and welcome to the Lindsay Corporation Fiscal Second 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 second quarter earnings call. With me today is Brian Ketchum, our Chief Financial Officer. I'm extremely proud of our team and their execution during the second quarter as our results reflect record quarterly net earnings supported by revenue growth in both business segments. These results demonstrate our commitment to deliver on our long-term goals despite market headwinds in our key irrigation markets. Our irrigation business delivered year-over-year revenue growth led by strength in our international markets, while the domestic irrigation market has continued to perform in line with our expectations. We continue to deliver the large project in the MENA region and also saw growth in other non-project business in this part of the world. We're encouraged by the recent improvement in market conditions in Brazil with unit sales volumes returning to levels comparable to prior year. Turning to our infrastructure segment, our team delivered very strong results this quarter as they completed the road zipper project in the Northeast valued at over $20 million that we mentioned during our first quarter call. We remain optimistic in our road zipper project sales pipeline. However, the timing on large projects such as this one remain challenging to predict. Our leasing revenues and unit sales of road safety products were slightly lower compared to prior year. However, as we've mentioned on prior calls, we remain focused on growing our road zipper system leasing business over the long term as this supports a higher and more stable margin profile for the segment and our overall results. We were also pleased to receive FHWA approval on our new TOW XR express repair crash cushion in the quarter. This product is designed for high-frequency impact locations, improving safety for motorists and ease of maintenance for work crews. This product ships fully assembled and can be repaired in less than 30 minutes after a head-on or side impact. Shifting gears to our market outlook. In North America, we don't expect meaningful improvement in market conditions in the near term. While the USDA is forecasting a 29% increase in net farm income for 2025, this increase is primarily due to higher government support payments, while crop receipts are projected to be slightly lower compared to last year. We anticipate demand for irrigation equipment in the second half of our fiscal 2025 will be stable relative to prior year, pending any significant storm damage activity. In our international irrigation market, particularly the developing regions, we expect to see continued growth driven by project activity as these countries continue to prioritize food security and water resource conservation. In Brazil, we are encouraged to see some improvement in commodity prices, supporting increased customer sentiment. However, rising interest rates and a more challenging credit environment does provide a headwind that can temper demand. Regarding infrastructure, our strong year-to-date performance sets us up for full-year growth in fiscal 2025. Our road zipper sales funnel continues to be strong, and while additional project sales are on the horizon, the timing of these more complex sales remains uncertain. For the second half of the year, we expect overall activity to be comparable with last year. Before I turn the call over to Brian, I would like to outline our approach to addressing the tariff plan released by the White House yesterday. We've already implemented a comprehensive action plan that includes supplier negotiation, strategic inventory placement, and other supply chain initiatives, to manage potential cost impacts to our business. We anticipate the impact of the proposed tariffs to result in marginal increase to our cost of goods, which we will pass through and increase pricing. We are also evaluating the potential impact of additional or retaliatory tariffs. While the situation remains fluid, we have the structure in place to react quickly and plan to utilize our global footprint and supply chain to minimize the potential impact of these actions on our business and our customers. I'd now like to turn the call over to Brian to discuss our second quarter financial results. Brian.

Thank you, Randy, and good morning, everyone. Consolidated revenues for the second quarter of fiscal 2025 increased 23% to $187.1 million, compared to $151.5 million in the prior year. Revenue growth in international irrigation and infrastructure was partially offset by lower North America irrigation revenues compared to the prior year. Net earnings for the quarter increased 47% to $26.6 million, or $2.44 per diluted share, compared to net earnings of $18.1 million, or $1.64 per diluted share in the prior year. As Randy mentioned, these results represent the highest quarterly net earnings and earnings per share in the company's history. Turning to our segment results, irrigation segment revenues for the quarter increased 11% to $148.1 million compared to $133 million in the prior year. North America irrigation revenues of $77.1 million decreased 7% compared to the prior year. The decrease resulted primarily from lower unit sales volume of irrigation equipment, slightly lower average selling prices, and lower sales of replacement parts compared to the prior year. This decline in unit sales volume was slightly less than expected, as we did see year-over-year growth in certain regions of the US. In international irrigation markets, revenues of $71 million increased 42% compared to the prior year. The increase resulted from revenues related to our large project in the MENA region, along with higher sales in other parts of this region compared to the prior year. This increase was partially offset by lower revenue in other international markets and by the unfavorable effects of foreign currency translation of approximately $4.7 million compared to the prior year. As Randy mentioned, the Brazil market showed signs of improvement during the quarter, with unit sales volume being comparable to the prior year. Irrigation segment operating income for the quarter of $27.4 million increased 7% compared to the prior year, while operating margin was 18.5% of sales compared to 19.3% of sales in the prior year. Operating income increased due to higher revenues, while a larger percentage of project revenues resulted in some dilution to operating margin compared to the prior year. Infrastructure segment revenues for the quarter of $38.9 million more than doubled compared to revenues of $18.5 million in the prior year. The increase resulted primarily from the completion of a large road zipper system project valued at over $20 million that was delivered during the quarter, while road zipper lease revenue and sales of road safety products were slightly lower compared to the prior year. Infrastructure segment operating income for the quarter of $13.3 million more than tripled compared to $3.5 million in the prior year. Infrastructure operating margin for the quarter was 34.1% of sales compared to 19% of sales in the prior year. The increase in operating income and operating margin resulted primarily from higher revenues and a more favorable mix, margin mix of revenues as road zipper system sales represented a higher percentage of revenues compared to the prior year. Turning to the balance sheet and liquidity, our total available liquidity at the end of the second quarter was $236.7 million, which includes $186.7 million in cash, cash equivalents, and marketable securities, and $50 million available under our revolving credit facility. The strength of our 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.