Lindsay Corporation

Good day and welcome to the Lindsay Corporation Fiscal Fourth 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 fourth quarter and full year 2025 is earning call. With me today is Brian Ketchum, our Chief Financial Officer. I'm extremely pleased with our fiscal year 2025 results and proud of our team for demonstrating resilience in the face of challenging market fundamentals and a volatile macroeconomic environment. Double digit revenue and operating income growth in both our businesses combined with execution of our key strategic initiatives enabled us to achieve record earnings and earnings per share for the year. Our fourth quarter performance was marked by revenue growth in our irrigation segment, driven by double-digit increases in our international irrigation business, as South America, the Middle East, North Africa, and Australia all delivered strong results. In North America, low commodity prices and weak crop receipts continued to negatively impact demand. We also saw a large reduction in storm damage volume versus prior year, impacting whole goods orders and aftermarket revenues in the quarter. We also dealt with the wet summer that impacted our runtime hours. Pivot analytics data indicates irrigated hours across the core Midwest markets of Nebraska, Oklahoma, and Texas were down over 20% versus prior year. Our global road safety products business delivered strong results, underscoring the resilience and demand in this segment. However, this performance was offset by lower sales and a decline in global leases within our road zipper business. Turning to our outlook. We expect North American irrigation headwinds to persist. Near record yields will be offset by low commodity prices and weak crop returns, and the effect of trade disruptions will continue to weigh on customer sentiment. Increased government support may create a safety net, but we don't expect this to drive significant market activity. We anticipate demand for irrigation equipment in North America to remain suppressed until the outlook for commodity prices and overall net farm income meaningfully improves. Internationally, we're encouraged by the early signs of recovery we're seeing across several key growth markets, particularly Brazil, where demand for irrigation equipment remains stable. However, high interest rates and ongoing credit constraints will continue to present market headwinds in the near term. We continue to execute international irrigation projects during the quarter, including the $100 million project in the Mideast North Africa region that we expect to complete in our first quarter of our 2026 fiscal year. During the fourth quarter, we also began delivery of an additional $20 million project in the region, which we also expect to complete in the first quarter of fiscal 2026. Looking ahead, we continue to see other compelling opportunities within our project pipeline, particularly in the MENA and other developing regions. These project opportunities remain a long-term growth opportunity for our business as the region continues to adopt mechanized irrigation to address food security and GDP diversification. We are pleased at the momentum we have been able to generate and expect to realize additional project volume during fiscal 2026. In our infrastructure business, we expect to see growth in road zipper system leasing and road safety product sales this fiscal year due to ongoing implementation of the IIJA in the introduction of new products. The road zipper system project sales funnel remains active, but we do not anticipate a large project will exit the funnel in 2026 to offset the $20 million project delivered in fiscal 2025. We do see the potential for several smaller projects to fill a portion of this gap. The large capital project at our Lindsay, Nebraska facility is going well, and we've activated our new state of the art automated tube mill, providing increased safety, efficiency and throughput. We recently began construction of our next generation galvanizing facility, which will provide us with industry leading capabilities and increased capacity. Our initial plans anticipated completion of this contract by the end of the calendar year. However, with the expanded galvanizing scope, we anticipate this work will be completed by the end of calendar year 2026. Innovation leadership continues to be a strategic priority and a core piece of our growth strategy. During the quarter, we advanced our position as a leader in precision irrigation with the introduction of TowerWatch. This is the first new product introduction on our SmartPivot platform that allows customers to diagnose machine faults at individual towers. In testing, this reduced troubleshooting time by up to 75%, enabling growers to save time and maximize yields and profitability. This solution is a direct response to voice to the customer feedback we've received and helps our growers make faster decisions, strengthening their FuelNet user experience. We continue to leverage capabilities like the new TowerWatch to differentiate and increase penetration of our technology portfolio. This has allowed us to surpass 150,000 total connected devices while delivering 20% year-over-year growth in annual recurring revenue. Entering fiscal 2026, we remain dedicated to investing in opportunities and technology advancements that will continue to drive growth and extend our leadership position. Before I turn the call over to Brian, I'd like to take a moment and acknowledge his upcoming retirement. Since joining Lindsay in 2016, Brian has played a pivotal role in strengthening our financial foundation, promoting transparency, and shaping an organization that's become recognized for excellence. Under his leadership, we've achieved record earnings performance, maintained a consistently strong balance sheet, and laid the groundwork for continued growth across our businesses. While his retirement marks a significant transition, we're pleased that he'll continue to serve as a consultant through 2026, helping ensure a smooth transition. On a more personal note, I'm deeply grateful for Brian's partnership and friendship. On behalf of all of us at Lindsay, thank you, Brian. We wish you the very best in your well-earned retirement. I'm also pleased to formally welcome Sam Hinrichsen, who will join us in November and transition to the CFO role with Brian's departure in January. Sam brings strong financial leadership experience, investor engagement, and will be instrumental in continuing our focus on disciplined execution and creating value for our shareholders. Now I'll turn the call over to Brian for review of our financial results. Brian.

Thank you, Randy, and good morning, everyone. Total revenues for the fourth quarter of fiscal 2025 were $153.6 million, a decrease of 1% compared to the fourth quarter last year. Net earnings for the quarter were $10.8 million, or $0.99 per diluted share, compared to net earnings of $12.7 million, or $1.17 per diluted share in the fourth quarter last year. Total revenues for the full year increased 11% to $676.4 million and net earnings increased 12% to $74.1 million and earnings per share increased 13% to $6.78. These record results were driven by double digit revenue growth and operating income growth in both irrigation and infrastructure for the year. Turning to our segment results. Irrigation segment revenues for the fourth quarter increased 3% to $129 million compared to the prior year. North America irrigation revenues for the fourth quarter decreased 19% to $50 million. The decrease in revenues resulted primarily from lower unit sales volume, while average selling prices were up slightly compared to the prior year. Lower unit sales volume was due primarily to less storm damage replacement demand compared to the prior year, along with soft market conditions. Higher selling prices reflected the pass-through of tariff-related raw material cost increases. In international irrigation markets, revenues for the fourth quarter increased 23% to $79 million. The increase resulted primarily from higher sales volume in South America, increased project sales in the MENA region, and higher sales volume in Australia. Markets in South America are benefiting from increased exports of agricultural products to China. In the MENA region, as Randy mentioned, we continued delivery of a $100 million project and began delivering a separate $20 million project during the quarter. Total irrigation segment operating income for the fourth quarter was $17.7 million, an increase of 4% compared to last year, and operating margin was 13.7% of sales compared to 13.6% of sales last year. For the full fiscal year, total irrigation segment revenues increased 11% to $568 million. North America irrigation revenues of $273.8 million decreased 9%, primarily due to lower unit sales volume compared to the prior year. International irrigation revenues of $294.2 million increased 39%, primarily due to project sales in the MENA region and supported by higher sales volume in Brazil and other parts of South America. The unfavorable impact of foreign currency translation was approximately $9.5 million compared to the prior year. This marks the first time in company history that international irrigation revenues were greater than North America revenues in a fiscal year, highlighting the value of our geographical diversification. Operating income for the irrigation segment for the full fiscal year was $97 million, an increase of 11% compared to the prior year. An operating margin of 17.1% of sales was similar to the prior year. Infrastructure segment revenues for the fourth quarter decreased 16% to $24.5 million. The decrease in revenues resulted primarily from lower road zipper system project sales and lease revenues, while sales of road safety products were slightly higher compared to the prior year. The prior year fourth quarter included road zipper project sales that did not repeat in the current year. Infrastructure segment operating income for the fourth quarter decreased 37% to $3.5 million, and infrastructure operating margin for the quarter was 14.4% of sales compared to 19.2% of sales in the fourth quarter last year. Lower operating income and operating margin resulted from lower revenues and a less favorable margin mix of revenues compared to the prior year. For the full fiscal year, infrastructure segment revenues increased 16% to $108.4 million. The increase was primarily due to higher road zipper system project sales and higher sales of road safety products, while road zipper lease revenues were slightly lower compared to the prior year. Infrastructure operating income for the full fiscal year increased 39% to $26.3 million. Operating margin for the year was 24.3% of sales compared to 20.4% of sales in the prior year. Increased operating income and operating margin resulted from higher revenues and a more favorable margin mix of revenues compared to the prior year. Turning to the balance sheet and liquidity, Our total available liquidity at the end of the fourth quarter was just over $300 million, which included $250 million in cash and cash equivalents and $50 million available under our revolving credit facility. Our record earnings performance for the year, along with active working capital management, resulted in free cash flow of 122% of net earnings and included capital expenditures of $42.5 million. Our demonstrated cash flow generation further strengthens our balance sheet and positions us well to continue executing on our capital allocation priorities of investing in the business, balancing organic and inorganic investments, and returning capital to our shareholders. During the quarter, we completed share repurchases of $8.8 million, bringing the total share repurchases to $11.5 million for the year. As I conclude my remarks, I would like to say that it has been a tremendous experience to serve as CFO of Lindsay. I'm deeply grateful for the talented colleagues I've had the honor of working alongside and proud of all that we've accomplished together. I'm confident in Lindsay's continued success and in the team that we have built, and I look forward to working with Sam Henriksen on the CFO transition over the next couple of months. And now with that, I will turn the call over to the operator to take your questions.