Lindsay Corp (LNN) 2025 Q4 法說會逐字稿

Good day and welcome to the Lindsay Corporation fiscal 4th quarter 2025 earnings conference call.

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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 4th quarter and full year 2025 earning call. With me today is Brian Ketcham, 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 4th 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 wheat crop receipts continue 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 continued to execute international irrigation projects during the quarter, including the $100 million dollar project in the Mid East 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 dollar 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 MIA 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 and 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 GAAP.

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 tower Watch. This is the first new product introduction on our Smart Pivot 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 of the customer feedback we've received and helps our growers make faster decisions, strengthening their fuel net user experience.

We continue to leverage capabilities like the new tower watch 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 Henrichson, 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 a 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 4th 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 pri 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 MA 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 dollar project and began delivering a separate $20 million dollar 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. An 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 Mina 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 4th quarter included Road zipper project sales that did 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 to 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 Rozipper 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 4th 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 Henrickson 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.

We will now begin the question-and-answer session. To ask a question, you may press then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.

If at any time your question has been addressed and you would like to withdraw the question, please press star then 2.

At this time, we will pause momentarily to assemble our roster.

Our first question comes from Kristen Owen with Oppenheimer. Please go ahead.

Good morning and thank you for taking the question. So just understanding that there's a lot of uncertainty in your a markets right now. I'm hoping you can outline just some of the catalysts that you're watching that are shaping your outlook for fiscal '26. And then my my follow-up question is related. So just assuming that we are in this more cautious ag investment backdrop, like what are the margin levers that you have at your disposal that you're thinking about for next year?

Thank you.

Yeah, good morning, Christian. This is Randy. I'll take the first part and then have Brian cover the cost levers that we're actively managing. And from a market perspective, it really depends where you are. And in Brian's comments, he talked about the geographic diversity of our business. And when you look at North America, obviously anybody providing a narrative or commentary on North American market conditions, there's not a lot of, tailwinds there right now. And we've been here before. We know how to manage through these cycles, and again, Brian will comment on some of that, but I think we're blessed right now to be a global company and we're going to see more than half of our revenues come from outside of the US this year. So I think we batten down the hatches. We manage responsibly in North America and the catalysts that we look for, some of those customer sentiment indicators right now are, approaching lows that we haven't seen since the pandemic. Farm income, there's not a lot of positive upside in trade or demand side of the equation to drive pricing. We do see some potential government support, which to me, as I said, is a bit of a safety net that bridges guys to next year, but they're not going to invest that money like they would, crop receipts and profits that they get from growing marketing and selling a crops. So in 2026 North American expectations.

Are not for significant growth. We will probably bounce along the bottom of the trough, and again we know how to do that internationally, Brazil is stable and maybe not at all-time highs, but still a very strong business for us. The project business continues to deliver and as we've stated, 2026 should see us realize more project opportunity. Australia, New Zealand, the Asia Pacific. Region we see some signs of a strong recovery there. So I think when you separate the mature versus the project business we see two different narratives, Kristen, and right now I think we're well positioned to manage through the trough conditions here and capitalize on the growth opportunities in those international markets. And again ask Brian to comment on some of those cost levers.

Yeah, Kristen, on the, margin side, obviously if You know North America is softer, that's going to pressure margins just like it did in the 4th quarter, but I think that the things that we have that we can manage, starting with price and we, we've increased price with some of the raw material cost increases that we've seen. We always TRY to get out ahead of of that when it comes to price, but, maintaining pricing discipline going forward is going to be key to maintaining margins, managing the cost, as Randy has said. And then the other thing that is supportive of margins, we saw that in the last couple of quarters, and we expect to see that continue into 2026 is just the growth in our recurring subscription revenue and that's high margin revenue and it's really cycle proof. It's not, farmers aren't going to.

Decide not to invest when the market is down, it's something that is going to continue to grow. So those are a couple of things, related to North America primarily, and then, in Brazil we've seen as that volume is picking up, we've seen some marginal improvement happening in that market.

Thank you for the time.

Our next question comes from Nathan Jones with Steel. Please go ahead.

Morning everyone. Congratulations Brian, and thanks for all the help over the years.

I guess maybe just trying to set some expectations here for 2026. There's obviously, some demand headwinds and some discrete comparison headwinds that you're going to have heading into 2026. We're clearly bumping along the bottom, in North America. Is it your expectation for North America irrigation that will be somewhere close to flat in 26, or should we expect to see that market be down overall, given the lack of real catalysts, there?

I guess I'll start with that one and then I'll go to international.

Yeah, Nathan, on the North America side, I, our expectation is volume will be down, maybe low to mid single-digits in 2026, but offsetting that, partially offsetting that is price. We do expect that the price increases that we put in place will carry over into, the first two or three quarters next year. I think the other thing that I just mentioned is subscription revenue. Being up, so when you balance lower volume, higher price, higher subscription revenue, I think from a revenue standpoint, we, we're expecting to be more flattish 426 overall compared to 2025.

And then you probably actually with that, have some tailwinds, on the margin side, just in the North America business particularly, prices, obviously drops through at 100% kind of margin, carrying over from this year and subscription revenue is going to be higher margin.

And you're going to have some benefits, I imagine from all of the upgrades that you've been doing, Within the manufacturing footprint. So could we expect that on a flat revenue number in North America, irrigation, your profit would be higher?

I would say our expectations would, remaining, having the operating margin, be relatively similar to last year. We do have some additional depreciation coming on board in the Lindsay factory that in the short-term, we put some pressure on margins, but. As the, as volume picks up in the future, that's where we'll see the benefit of those investments in our ability to respond quickly to market demand without adding a lot of costs. So in the short-term a little bit of a headwind on margins just because of the additional depreciation.

Fair enough. I guess I'll just slide 1 in on international revenue. You obviously had a large project, and a smaller large project, to deliver in fiscal 2025.

I think that the outlook for the project business is pretty solid, but there's always timing dependency on that.

I mean, is it possible that you could overcome the headwind from the lack of the Middle East project, in 2026, or is the starting point assumption for that in 2026 should be that revenue will be down in international?

Yeah, good morning, Nathan. This is Randy. I'll I'll take that one. And I think you used a keyword there. The potential is there to kind of lap that project and backfill with additional project volume that that could be close to that revenue, but you're absolutely right, the timing is unknown and and the project funnel for us. There's lots of moving pieces in many different parts of the world, and when one pops through, we'll be very clear in how we communicate when it's going to start, when it's going to stop the magnitude of the project, and we do expect to have more news on that as we go into fiscal year 206 and continue through the year, but that potential does does exist.

All right, thanks very much for taking my questions.

Our next question comes from Brian Drrab with William Blair. Please go ahead.

Hi, good morning. Thanks for taking the questions and congratulations, Brian, and we'll talk more later when we're not on a public call, but congrats.

Thank you.

I just want to follow-up on Nathan's questions there and just the outlook for a first and make sure I understood this, your comments around volume being down low single-digit to mid-single-digit, that was a that was a North America specific comment.

Yeah, that's right for Fiscal for North America correct.

Yeah, okay, got it and.

And then I think that also I think Randy made the comment that you expect probably more revenue to come from the international business in in irrigation in 26 relative to domestic is that, did I hear that correctly?

Yeah, that, that's our expectation today. We do see continuing improvement in the South American markets next year. We've seen some recovery continuing in Australia, but then, as Randy referred to the project side of the business. We feel pretty confident that there's the opportunity to replace, the projects that we've had in 2025. So our view right now is international revenues, overall could be up slightly in 2026.

We're not expecting to take a big step backwards.

Okay. Do you, do you have to have an additional project hit in the emia region?

In addition to the 20 million that you that you announced for for that to happen.

I think Brian, we would we would require, and it doesn't have to be the in the region or the meaner region, we would require some project volume coming through the funnel, and starting to deliver in the year for that to be true.

Okay. And then can you put any more of a, fine point on the revenue that you have from the from the 100 million project and, in the quarter and then how much of that carries over into 26 and And then do you, and then do you ship the whole 20 million on on the additional project in the first quarter?

Yeah, so on the $100 million dollar project we had had been able to pull forward some of that into the second and 3rd quarters this past year. In the fourth quarter we delivered, let's say in round numbers, roughly $10 million of that, another $10 million remaining for the first quarter, and then of that $20 million dollar project, we delivered about half of that in the fourth quarter, so the remainder will be in the first quarter, so. First quarter, comparisons on the project side year over year should be fairly similar with the two remaining projects.

Okay, got it. So in total 10 million from each of those in the first quarter is a good estimate.

Yeah, I'd say round number.

Okay, got it. And then I'll just say it's 11 more if that's all right. And, on the infrastructure side, you said that the mix was weighing on margins in the near term, and I'm just wondering that how do you see that mix, playing out going forward in the margin dynamics related to that?

Yeah, with the large project that we had in the second quarter this year, obviously high margins drove the overall margins for the year above 24%.

As Randy mentioned, we don't anticipate another $20 million dollar project coming in 2026, but between some smaller ones, an increase in leasing. We expect, without the large projects, this business runs right around that 20% operating margin level, so a little bit of a step back just with, when you have a $20 million dollar project that doesn't be or doesn't get replaced, so but still very solid operating margin performance is what our expectation is.

Got it. All right, thanks very much.

Our next question comes from Ryan Connors with North Coast Research. Please go ahead.

Good morning. Thanks for your time and congratulations Brian. Thanks Ryan.

I want to start on the international side, specific to Brazil.

Randy, you mentioned, credit constraints there, and, you know that that's something I wonder if you can expand on because there was, you had a peer company actually come out and talk about some bad debt, and raising bad debt reserve in Brazil specifically for that. So can you just expand on that comment you made on credit constraints is that just on the impact on. Actual sales or or is there act are you seeing any of that actual credit loss issue as well? Yeah.

I think our our commentary wasn't.

Connected to credit loss at all. I think we run a pretty tight chip when it comes to credit risk in Brazil. So yeah, nothing newsworthy from our perspective there. I think the comments really relate to our customers' ability to access low finance rates to support irrigation and investments, and we do have the hanami program. And what we're seeing right now is total government funding for that program was up year over year, and that was launched in July, but at this point we're really seeing like mid single-digit utilization, so that that money isn't getting through the system and into the hands of the growers. If you look at the and that that program rate is about 12.5%. If you look at just the regular, you go to the bank to get a loan for Agequipment, that rate is, in that 20% range, so. I think that that has some some customers kind of, taking that wait and see approach. There's an election next year if they're anticipating additional support or funding, some customer might wait for that, but we also offset that with, 3 crops a year and what we know we can generate an incremental yield and returns for irrigation. So it creates a bit of a. Short-term headwood in the market, but there's still a lot of strong fundamentals for investment in irrigation, so we we still describe the market as stable, but we're not going to see, some of the pop that you may expect because of the trade disruption, some of that Chinese demand may shifting to Latin America, and credit is, I would say right now probably the lead reason for that.

Got it. Very helpful.

Thank you. And then, 11 housekeeping, for you, Brian, before I have a big picture question, but just you mentioned the the capital project in Lindsay extending out now towards the end of calendar 26 can you give any update on the corresponding impact on the capital investment and dollar terms there associated with that or is that that just the same dollars or are we adding dollars? No.

We'll be adding dollars, Ryan, and our expectation for 2026 is CapEx of around $50 million.

So the scope of the project did expand and, mainly due to the galvanizing investment where we've decided to increase the scope of that. So we will have elevated CapEx again next year, a little bit higher than what we had in 2026 or 2025.

Got it. Okay. And then, and lastly just so Randy, you mentioned a few times, this idea that the the grower does not spend the government support.

Money the same way as as as as profits and but I know there's a lot of lobbying going on right now for additional federal support is there any way that that could be structured that would be more beneficial to manufacturers like Lindsay, any, anything the industry is, working to to include in that that would be more beneficial, or should we just think of, any kind of federal, benefits we see just just don't really accrue to the company.

Yeah, I think it's an insightful question, and my view would be, and this is an opinion, that it really doesn't matter how those funds are structured. I don't think it's in how they're worded or how they're administered or how you apply for them. That's not what drives, the customer view on how that money is used. It's always been, from my perspective, kind of, rainy day funds. That's money that, we're not going to get next year. It's not part of money I earned growing marketing and, selling and shipping my grain. It's always going to have that perception that this is, the rainy day fund money, so I don't see any administrative change in the programs that would change that customer perception, and I mean the number that we're seeing now is, an incremental 10 billion.

I know there's been a lot of talk about American and Argentinian beef this this week, in particular, creating a bit of a stir, and I'm confident that there will be some support for the farmers if they need it. As a result of some of the trade disputes. It's just a matter of when and then how they how they invest it. But again, our assumption isn't that that's going to be a windfall and that we, see a significant change. And market demand and farm income this year, if you look at the number in around 180 billion for both net cash farm income and net farm income, 35 billion of that is what we call ad hoc government support from some of the payments and the weather related issues last year.

So farm income being up this year, you'd expect, should be supportive of the market. From a fundamental perspective, and it's just not the case, and that again goes back to, our view that the customers aren't going to invest those government payments the same way that they'd invest crop receipts. We continue to see that.

I appreciate the perspective. Thanks again for your time.

Right.

Again, if you have a question, please press one. Our next question comes from John Bratz with Kansas City Capital. Please go ahead.

Morning everyone, and Brian, congratulations on your retirement.

I wish you nothing but the best and enjoy the Lake of the Ozarks.

Thanks, John.

You got my number.

Yeah, I do.

Randy, I just want to go back to Brazil a little bit and maybe your view, your commentary is it's stable, obviously facing some headwinds. Yesterday I read where, Banco Brazil in the second quarter took some, saw an increase in rural loan defaults and so on. How would you view Brazil at this time, sort of the downside risk.

In Brazil versus maybe a stable environment.

I wouldn't view the downside risk as significant and then again, I think you kind of combined the headwinds and the tailwinds, and certainly there's more demand going there from China in particular, so that bodes well. There's a currency overlay that's that's a little complex and the credit thing obviously we've talked a lot about creates a bit of a headwind. So stable is is the best word, I think. That describes where the market is. I don't think we're going to see that huge upside from the increases in demand, but I also don't think that market, continues to decline in any significant way. So we'll watch for signs, that's a market that's a year-round market, not as seasonal as what we see in the northern hemisphere. So we'll know pretty quickly if things do start to turn and we'll react to that. But right now I don't project or foresee any significant downturn issues with with the Brazil market. There's too much good news there, and again, the investments in irrigation we know are going to support and prop up a customer's bottom line and allow them to grow more 3 crops a year. Those fundamental market, conditions for us really gives us a bit of a bit of a parachute there.

Okay, thank you. And Brian, obviously free cash flow is very strong this year.

Working capital, very good.

How would you view that in 2026? Do you see that that similar type of potential, or are we're going to see a little bit less in terms of free cash flow?

Yeah, I think the potential is maybe a little bit less next year. I think we've we've done a great job, particularly in inventories, inventory management this last year, and maybe not the same kind of potential there. And then, as I mentioned, our CapEx. It's going to be up, close to $10 million compared to what it was this year, so probably not the, if you look historically we've always been around that, 100% free cash flow, but, the CapEx obviously makes a difference.

Okay, all right, thank you.

Thanks, John.

This concludes our question-and-answer session. I would like to turn the conference back over to Randy Wood for any closing remarks.

Thank you again for joining us today. We appreciate your interest and believe fiscal 2026 will be another strong year for Lindsay, and we look forward to updating everyone at our first quarter earnings call. Thanks for joining us.

The conference is now concluded.

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