Lindsay Corporation

Good morning and welcome to the Lindsay Corporation Fiscal Fourth Quarter and Full Year 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 1 on a touch-tone phone. 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, CEO and President. Please go ahead.

Thank you and good morning everyone. Welcome to our fiscal 2026 fourth quarter and full year earnings call. With me today are Alicia Pfeifer and Brett Coburn, our co-interim chief financial officer. I want to begin by recognizing our global teams for their strong execution, resilience, and operational discipline throughout the year as we remain focused on our priorities, strengthening operational performance, improving our cost structure, and making targeted investments that enhance our competitive position and support long-term growth. From expanding our agricultural technology offerings and manufacturing capabilities to pursuing strategic acquisitions and developing new infrastructure solutions, our actions are designed to position Lindsay to generate sustainable value through the market cycle. In irrigation, we executed extremely well in project markets while remaining disciplined in challenging North America and Brazil markets. In infrastructure, our team continued to leverage improving market fundamentals and stable financing conditions to deliver growth. That same operating discipline is reflected in our safety performance. Safety is a core one Lindsay value and this year we achieved a total recordable incident rate below 1.0 representing a world-class level of performance. Our Norfolk, Olathe, France and Italy operations each achieved perfect safety records for the year. I'm extremely proud of these accomplishments and grateful to our employees around the world for the continued commitment to work safely every day. We also strengthened our financial position by actively managing pricing, implementing structural cost reductions and driving operational efficiencies. In June, we executed a global restructuring plan focused on streamlining operations and simplifying the organization. We expect these actions to generate $8 million in net annualized cost reductions after reinvesting a portion of the savings in our highest priority growth initiatives. The resulting leaner operating model should improve efficiency and drive stronger operating leverage as market conditions improve. In North America, we saw encouraging signs of improvement in the fourth quarter, with irrigation revenues increasing 11%, driven primarily by higher unit volumes and storm damage. Improving commodity prices also supported stronger customer sentiment early in the quarter, with corn moving above $5 per bushel. While commodity prices have receded recently and market conditions remain below what we would consider mid-cycle, the improvement we saw during the quarter reinforces our confidence that demand can recover as farm economics strengthen. For that recovery to become more sustained, growers will need greater forward visibility and improved net farm income. Until then, we expect irrigation equipment investment to remain relatively subdued. Our agricultural technology business continued to build momentum, reflecting strong execution against our innovation strategy. Annual recurring revenue grew approximately 11% year-over-year, extending our five-year CAGR to more than 15%. Through solutions such as FieldNet and FieldNet Advisor, we are expanding our relationships with growers beyond the initial equipment sale, providing technology that helps customers improve productivity, optimize water usage and make more informed operating decisions. The continued growth of this business demonstrates our ability to build recurring revenue streams, deepen customer relationships and create additional opportunities for long-term growth. In Brazil, near-term irrigation demand continues to be constrained by high interest rates, limited credit availability, and softer crop economics, with election-related uncertainty also contributing to some delayed purchasing decisions. However, we are seeing encouraging signs of underlying demand. Expectations for drier conditions in the north are increasing grower interest in irrigation, and quotation activity has improved year over year. We view this as a positive leading indicator, although a more meaningful recovery will depend on improvement in financing conditions and grower economics. In the MENA region, our team completed all scheduled equipment shipments despite ongoing regional uncertainty, and we recognized approximately 70 million of revenue during the fiscal year. The remaining balance is for services revenue in the region, which we expect to recognize over the next 12 to 24 months. Our ability to provide equipment, technology, and ongoing service support is an important differentiator in these large-scale projects. We also believe this services-based model deepens our customer relationships and generates longer-term revenue, and as our install base expands, we see opportunities for additional technology adoption, aftermarket products, and ongoing services, extending the value of these projects beyond the initial equipment sale. In infrastructure, we continue to deliver solid growth and strong operating performance driven by our road safety products business. This marked our third consecutive quarter of growth as continued road infrastructure investments supported healthy demand. While the Infrastructure Investments and Jobs Act expired at the end of September, funding has been extended through the end of the calendar year. Looking ahead, as the Build America 250 Act progresses, we remain confident in the underlying infrastructure funding environment and the long-term growth opportunity it provides for our business. We're also encouraged by the momentum and roads of releasing and continue to pursue additional project opportunities. Turning to our outlook. In North America, elevated fuel and fertilizer costs continue to pressure farm economics, but a sustained improvement in net farm income and customer confidence would provide an important catalyst for broader recovery and irrigation investments. We continue to see Brazil as one of the most compelling long-term growth markets for global irrigation. Although financing availability and election uncertainty remain important factors in near-term demand, the underlying fundamentals continue to support our confidence in the market's long-term growth potential. Consistent with that view, we've signed a definitive agreement to acquire Satorial Irrigação, a leading Brazilian manufacturer of hose reel and irrigation equipment. This targeted investment builds on our existing capabilities in the region and advances two strategic priorities, capitalizing on growth opportunities in Brazil and creating incremental value for customers through a broader portfolio of irrigation solutions. We believe hose reels are a natural complement to our zematic center pivots, particularly for smaller and irregularly shaped fields and applications such as sugarcane, where Satorial has strong customer relationships. Over time, we see opportunities to leverage our existing dealer network to expand Sartorial's reach, introduce nomadic solutions to Sartorial customers, and grow the business across Latin America. The transaction is subject to customary closing conditions and is expected to close in the coming months. Our success in MENA continues to reinforce our confidence in the long-term opportunity in the region, supporting food security and water conservation. While the project pipeline remains active, we do not currently anticipate any large project awards to begin delivery in fiscal 2027. In infrastructure, we expect continued growth in road safety products supported by ongoing infrastructure investment and new product introductions. We expect road zipper leasing to remain generally in line with fiscal 2026 while the project pipeline remains active with a number of opportunities under development. Our major capital investment at the Lindsay, Nebraska facility continues to progress with our next generation galvanizing operation expected to be online before calendar year end. Together with our two mill investment, these capabilities are designed to improve safety, increase capacity and productivity, and provide greater operating flexibility across the cycle. We believe the added capacity also creates new growth opportunities by enabling us to expand our contract manufacturing business and serve growing demand for galvanizing services throughout the Midwest. Lastly, I want to thank Alicia and Brett for their leadership and commitment as interim co-CFOs. Together with our board, we've made strong progress in our CFO search and are very pleased with the caliber of candidates we have evaluated. We're now in the final stages of the process and expect to announce our selection in the coming weeks. With that, I'd like to turn the call over to Alicia to discuss our fiscal fourth quarter and full year financial results. Alicia.

Thank you, Randy, and good morning, everyone. Total revenues for the fourth quarter of fiscal 2026 were $161.6 million, an increase of 5% compared to the fourth quarter last year. Net earnings for the quarter were $11.3 million, or $1.10 per diluted share, compared to net earnings of $10.8 million, or $0.99 per diluted share in the fourth quarter last year. Total revenues for the full year, 2026, were $635.9 million, a decrease of 6% compared to the prior year. Net earnings were $55.7 million compared to $74.1 million in the prior year. Earnings per share were $5.33 per diluted share, a decrease of 21% compared to the prior year. Full year results reflected lower revenues in both segments as the irrigation segment was negatively impacted by the lower comparative project size in the MENA region and lower sales volumes in North America and Brazil. Full year, 2026, infrastructure results were affected by lower road zipper system project sales, as the prior year included a $20 million project that we did not expect to repeat in 2026, partially offset by sales growth of road safety products. Turning to our quarterly segment results. Irrigation segment revenues for the fourth quarter increased 4% to $133.7 million compared to the prior year. North America irrigation revenues for the fourth quarter increased 11% to $55.4 million. The increase in revenues resulted primarily from higher unit sales volume, while average selling prices were comparable to the prior year. Higher unit sales volumes were supported by near-term improvement in agricultural commodity prices, which strengthened demand, and slightly higher storm damage replacement volume compared to the prior year. In international irrigation markets, revenues for the fourth quarter were $78.3 million, a level that was comparable to prior year. Increases in project sales in the MENA region and higher sales volume in other developed markets were largely offset by the decrease in volumes from Brazil. In the MENA region, as Randy mentioned, we completed equipment delivery for the $80 million project during the quarter. Total irrigation segment operating income for the fourth quarter was $17.3 million, comparable to the prior year. Operating margin was 12.9% of sales compared to 13.7% of sales last year. The decrease in operating margin resulted from higher input costs, which were partially offset by reductions in operating expenses compared to the prior year. For the full fiscal year, total irrigation segment revenues decreased 5% to $541.5 million. North America irrigation revenues of $262.1 million decreased 4%. primarily due to lower unit sales volume compared to the prior year as weaker agricultural commodity pricing continued to weigh on farm incomes and demand. International irrigation revenues of $279.3 million decreased 5%, primarily a function of the smaller overall project scale in the MENA region and the lower sales volumes in Brazil. The favorable impact of foreign currency translation was approximately $12.1 million compared to the prior year. International irrigation revenues exceeded North America irrigation revenues for the second consecutive fiscal year, highlighting the value of our geographic diversification and the strong growing demand for irrigation outside of North America. Operating income in the irrigation segment for the full fiscal year was $80.1 million, a decrease of 17% compared to the prior year, and operating margin of 14.8% of sales compared to 17.1% of sales in the prior year. The decrease in operating income resulted primarily from lower revenues where the decrease in operating margin was a function of lower unit volume and the resulting lower fixed cost absorption as well as higher input costs. Infrastructure segment revenues for the fourth quarter increased 13% to $27.8 million. The solid increase in revenues resulted primarily from higher sales of road safety products, which were partially offset by lower road zipper system sales in lease revenues compared to the prior year. Infrastructure segment operating income for the fourth quarter increased 41% to $5 million. Infrastructure operating margin for the quarter was 17.9% of sales, up compared to 14.4% of sales in the fourth quarter last year. Higher operating income and operating margin resulted from higher revenues in a more favorable margin mix of revenues compared to the prior year. For the full fiscal year, infrastructure segment revenues decreased 13% to $94.4 million. The decrease was primarily due to a $20 million road zipper system project in the prior year that did not repeat. Infrastructure operating income for the full fiscal year was $16 million compared to $26.3 million in the prior year. Operating margin for the year was 17% of sales compared to 24.3% of sales in the prior year. The decrease in operating income and operating margin resulted from the non-repeat of last year's project sale. Excluding the impact of the large road zipper project sale in the prior year, revenue and operating income for the infrastructure business increased 11% and 12% respectively compared to the prior year. Turning to the balance sheet and liquidity. Our total available liquidity at the end of the fourth quarter was $239.8 million, which included $189.8 million in cash and cash equivalents and $50 million available under our revolving credit facility. Free cash flow for the year was 62% of net earnings and included capital expenditures of $40.2 million. As Randy mentioned in his opening remarks, we have entered into a definitive agreement to purchase 100% of Satoriall. We expect to fund the transaction with cash on hand and closing is subject to the fulfillment of customary conditions expected to occur in the upcoming months. During fiscal 2026, we returned $96.1 million to shareholders, including $80.7 million of share repurchases and $15.4 million of dividends representing approximately 173% of net earnings. During the year, our board of directors approved a new share repurchase program of up to $150 million. Our repurchases this year exhausted a prior $250 million authorization and leave $100 million available under this current program. Our strong balance sheet and cash flow generation provide the flexibility to execute against our capital allocation priorities. We remain focused on deploying capital where we believe it can generate attractive long-term returns, including investments in productivity, innovation, and strategic growth opportunities while continuing to return capital to shareholders. We believe this balanced approach reflects our commitment to maintaining financial discipline in creating sustainable shareholder value throughout the cycle. This concludes my remarks and I will now turn the call over to the operator to take your questions.