Lindsay Corporation

Good morning and welcome to the Lindsay Corporation Fiscal Third Quarter 2026 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 your telephone keypad. To withdraw your question, please press star then 2. 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 2026 third quarter earnings call. With me today is Sam Henriksen, our Chief Financial Officer. Starting with our third quarter results. I'm proud of our team's continued execution and resilience through what's been a difficult environment amid a cyclical bottom in agricultural markets. Trade uncertainty, high input costs, and weak farmer sentiment continue to weigh on our business. We remained focused on the levers within our control including pricing, cost management, and operational efficiency while continuing to invest strategically to position the business for long-term growth. In North America, our irrigation customers continue to delay large capital purchases given current farm economics, which resulted in lower unit sales volumes in the quarter. Demand remains soft, consistent with our expectations. While commodity prices showed some improvement and government support programs have provided modest relief to growers, neither has significantly impacted demand. In our international business, revenues were down slightly year over year, Driven by lower sales volumes in Brazil due to the high interest rate environment and limited access to credit, which continues to constrain growers' ability to finance capital equipment purchases. Our infrastructure business continued to grow year over year. Third quarter revenues increased 8%, driven by higher road safety product revenues, marking three consecutive quarters of growth. Road zipper lease revenues were similar to the prior year. As we said previously, we don't anticipate a large road zipper project this fiscal year. Turning to our market outlook. The U.S. irrigation market remains soft as growers await further trade certainty and improvement in profitability. Current USDA projections indicate cost of production will exceed commodity prices for several key commodities this year, a continuation of a multi-year trend. We do not expect a meaningful near-term recovery in North American demand until these economics improve. In Brazil, We continue to view the market as one of the most attractive long-term growth opportunities in global irrigation. Customer engagement at recent agricultural trade shows, including Agrishow, was encouraging, with strong traffic, high levels of grower interest, and robust quoting activity. These interactions reinforce our view that growers increasingly recognize the productivity, water efficiency, and profitability benefits that mechanized irrigation can deliver. These underlying demand drivers in Brazil remain compelling, including the ability to increase yields, improve crop consistency, and support multi-year growing cycles per year. We are also pleased to see the financing rate under Brazil's 2026-2027 crop plan decline from 12.5% to 11.5%. Lower financing costs are a positive development for growers and should improve the affordability and return on investment of irrigation systems. This rate certainty should drive customers who have been taking a wait-and-see approach to enter the market. Historically, access to attractive financing programs has been an important catalyst for irrigation adoption, and the reduction in rates is directionally supportive for future demand. At the same time, we believe it's important to remain measured in our outlook. While financing rates improve, the total funding allocated to irrigation within the FONAMI program has been reduced from approximately 2.75 billion to 1.7 billion reais. As a result, the availability of credit remains a constraint, and many more. We remain cautiously optimistic in the short term while maintaining a high degree of confidence in the long-term growth opportunity in Brazil. In the MENA region, we will continue delivery of the large irrigation project through our fiscal fourth quarter and we remain encouraged by the overall outlook for future growth in our international markets, particularly in regions focused on improving food security and water resource management. As always, The timing of project wins and deliveries is difficult to predict, but our proven track record on project execution, technology strength, and local presence positions us well in the region. Our leadership position in irrigation technology and innovation continues to accelerate adoption across our FieldNet and FieldWise platforms, reinforcing the strength of our connected equipment strategy. Our new tower watch feature within the SmartPivot platform is improving machine diagnostics and reducing downtime, directly enhancing grower economics and increasing the stickiness of our technology. This performance further validates our view that technology is a core competitive advantage, expanding our recurring revenue base, improving margin mix, and strengthening long-term customer retention. We expect these dynamics to support sustained double-digit technology revenue growth in fiscal 2026. In infrastructure, we anticipate continued growth in road safety product sales globally. The road zipper pipeline remains strong, and while we continue to actively manage a robust set of opportunities, the timing of these projects is difficult to predict. The House Transportation and Infrastructure Committee has advanced the Build America 250 Act, a bipartisan five-year reauthorization totaling $580 billion, establishing a framework ahead of the September 2026 deadline. The bill prioritizes core highway and bridge investments, strengthens funding to states and introduces new highway trust fund revenue, providing long-term funding stability. Operationally, our new tube mill has been successfully commissioned and is now in full production in Lindsay, Nebraska. This is a core operation for us, and we now have industry-leading automation and technology that increases safety, efficiency, and throughput. It also gives us the ability to rapidly respond to short-term shifts in demand, ultimately preparing us to operate successfully through the market cycles. As we've discussed in the past, we will need market recovery in order to fully capture the impact of the productivity gains. Our new galvanizing facility remains on schedule, and we expect that to be turned over to production in early 2027. This will further expand our galvanizing capabilities while improving quality and opening new opportunities for growth. While market conditions across portions of our agricultural end markets remain challenging, we believe it's important to position the business for the realities of the current cycle while preserving the capability to capitalize on future growth opportunities. We have taken the initiative to restructure and right-size portions of our organization and optimize our operating cost structure. These actions are focused on improving efficiency, eliminating complexity, and better aligning resources with anticipated market demand. This initiative is about creating a stronger and more agile company in support of our long-term strategy. Importantly, this initiative does not alter our commitment to investing in our core strategic priorities including innovation, Digital Solutions, Manufacturing Capabilities, and Growth Opportunities across our businesses. We expect savings to begin in fiscal 2027. I'd like to now turn the call over to Sam to discuss our fiscal third quarter financial results.

Sam. Thank you, Randy, and good morning, everyone. Total revenues for the third quarter of fiscal 2026 were $160.8 million, a decrease of 5% compared to $169.5 million in the prior year. The decline in revenues reflects continued softness in our irrigation segment, consistent with the challenging agricultural environment we have been navigating this fiscal year. This was partially offset by growth in our infrastructure segment. Operating income for the third quarter was $18.5 million, compared to $23.8 million in the prior year, and operating margin was 11.5% of sales, compared to 14% of sales last year. The decrease in operating income was mainly driven by lower revenues and the impact of fixed-cost deleverage in the irrigation segment. It was partially offset by growth in the infrastructure segment and a reduction of corporate expenses. Despite the challenging environment, we delivered double-digit operating margins. Third quarter results include a one-time benefit related to tariff refunds. This represents a partial reversal of tariff costs incurred to date. We have seen input cost escalate during the fiscal year and our pricing actions still need to catch up. Net earnings for the quarter were $15.8 million or $1.53 per diluted share compared to $19.5 million or $1.78 per diluted share in the prior year. The year-over-year decrease reflected the impact of lower operating income, which was partially offset by an increase in other income and a lower effective tax rate. Turning to segment results. Irrigation segment revenues for the third quarter were $133 million, a decrease of 7% compared to $143.7 million in the prior year. Results were largely in line with our expectations given the challenging environment. North America irrigation revenues were $61.3 million, a decrease of 11% compared to $69.1 million in the prior year. The decrease resulted primarily from lower unit sales volume, which was partially offset by higher average selling prices. International irrigation revenues were $71.7 million, a decrease of 4%, compared to $74.7 million in the prior year. The decrease was driven by lower sales volume in Brazil, which was partially offset by growth in other international markets. Irrigation segment operating income for the quarter was $20.3 million compared to $27.2 million in the prior year, and operating margin was 15.3% of sales compared to 18.9% of sales last year. The decrease in operating income was due to lower unit sales volume, higher input costs, and the impact of fixed cost leverage. In our infrastructure segment, revenues for the quarter increased 8% to $27.7 million, Thank you very much. Turning to the balance sheet and liquidity. At the end of the third quarter, our total available liquidity was $204.8 million, which includes $154.8 million in cash and cash equivalents and $50 million available under our revolving credit facility. Capital expenditures for the first nine months of the fiscal year were $35.5 million, reflecting our ongoing strategic investments at the Lindsay, Nebraska site. continue to execute against our capital allocation priorities and deploy $25.2 million towards share repurchases during the quarter. During the first nine months of the fiscal year, we have returned $80.7 million to shareholders through share repurchases. We remain confident in the strength of our balance sheet and our ability to prepare the business for future profitable growth. This concludes my remarks. At this time, I will turn the call over to the operator to take your questions.