Good day, and welcome to the Lindsay Corporation Fiscal Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions] 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 2024 earnings call. With me today is Brian Ketcham, our Chief Financial Officer. We are pleased with our fourth quarter and full year performance as our teams executed extremely well during the fiscal year. This allowed us to deliver profitable operating performance amidst challenging market fundamentals, particularly in our irrigation business. In North America in Irrigation, we were pleased to see volume up slightly in the quarter versus last year, driven by carryover storm damage that shipped early in the quarter. In international irrigation, market softness in Brazil due to lower grower profitability and poor customer sentiment continues to persist. This headwind has been partially offset by the large project in the MENA region that started shipping in the fourth quarter. Turning to our irrigation market outlook. While net farm income projections in North America have improved slightly versus earlier forecast, much of that good news impacted the livestock sector, and we still see major headwinds for the cropping segment more closely associated with our irrigation solutions. And recent customer sentiment surveys indicate some of the lowest ratings ever recorded. While we have tougher year-over-year comparisons in the first half of the year, we would expect to see a slightly down market overall, unless there is a significant improvement in net farm income in 2025. These projections won't be visible until we get into the next growing season. We are seeing some storm damage replacement demand in the Southeast connected to the tragic hurricane activity, but it's too early to quantify that volume and most growers have a window between now and next spring to make those decisions. We are working closely with our dealers to ensure that we support recovery in the region. We expect…

Thank you, Randy, and good morning, everyone. Total revenues for the fourth quarter of fiscal 2024 were $155 million, a decrease of 7% compared to the fourth quarter last year. Net earnings for the quarter were $12.7 million or $1.17 per diluted share compared to net earnings of $19.2 million or $1.74 per diluted share in the fourth quarter last year. Total revenues for the full year of $607.1 million decreased 10% compared to the prior fiscal year. And net earnings for fiscal 2024 were $66.3 million or $6.01 per diluted share, a decrease of 8% compared to record net earnings of $72.4 million and $6.54 per diluted share in the prior year. Turning to our segment results. Irrigation segment revenues for the fourth quarter were $125.9 million, a decrease of 12% compared to the prior year. North America irrigation revenues of $61.7 million increased 2% compared to the prior year. The increase in revenues resulted primarily from higher unit sales volumes while average selling prices were comparable with the prior year. Increased irrigation equipment sales were driven by a higher level of storm damage replacement demand compared to the prior year. The impact of higher equipment sales was partially offset by lower sales of replacement parts due to wet field conditions in certain parts of the country that limited equipment run times. In international irrigation markets, revenues of $64.2 million decreased 23% compared to last year. The decrease resulted primarily from lower revenues in Brazil compared to record revenues in the prior year fourth quarter. Revenues were also lower in other parts of Latin America, while demand in other developed markets remained relatively stable. These decreases were partially offset by higher project sales in developing markets. As Randy mentioned in his remarks, we began delivery on the previously announced…

[Operator Instructions] The first question comes from Nathan Jones with Stifel.

Good morning, everyone. Let's start off with a question about the decremental margins, both in the quarter and the year. I think for the year, it was almost 50% for the quarter, it was above 70%. So just some commentary on what led to that, I guess, over deleveraging that you've seen in the quarter and the year. I think maybe it has something to do with Brazil being more profitable than I thought it was potentially. But just any color you can provide us around the mix impacts that are contributing to that deleveraging.

Yes, Nathan, this is Brian. Yes, when you look at the year-over-year decremental margins, it's entirely related to the international irrigation business. When you look at North America, and we don't break this out, but I would say North America margins have maintained and even slightly improved this year. And when you look at last year, especially in the fourth quarter, it was a a record fourth quarter for Brazil and the amount of leverage we got on that additional volume and price, obviously, was very strong last year. So very strong year last year in Brazil this year off quite a bit. So that deleverage there is pretty significant. And then a little bit of the mix and the shift of less Brazil volume this year, and we got the additional volume from the project business, which is slightly dilutive to overall margins as well. But the biggest single impact was the year-over-year Brazil change.

Makes sense. Can you talk about the Middle East project that started shipping in the fourth quarter? Like how much revenue shifted in the fourth quarter, how much ships in 2025? And I guess given that you're going to have growth in these international projects next year, and it's probably fairly likely that Brazil is going to be one of the weaker markets for you again in 2025, should we think that there's some mix headwinds and additional deleveraging that would get in Brazil that create headwinds for margins in 2025?

Yes. First of all, in the fourth quarter, we shipped roughly $14 million of the project. And next year, we anticipate roughly $80 million, which would be spread throughout each of the 4 quarters. So there is a dilutive effect because the margins on the large projects like that are generally going to be below our normal margins. But if you look at it in context of the entire segment, for the full year, I mean, there's clearly more deleverage on the gross margin line, but you get leverage on SG&A. So when you get down to operating margin for the full year, it's probably in the neighborhood of about 100 basis points of dilution.

And we should expect some additional headwinds from Brazil probably being one of the worst markets in 2025? Or is that not your expectation that it will be one of the worst markets?

No, we expect, especially in the first 2 quarters of the year to still see year-over-year, another leg down in Brazil. But as we look at the full year, I think in third and fourth quarters, we would expect to get at least more flattish compared to this year. So overall, yes, we would expect Brazil to be down probably in that double digit – low double-digit area for the full year next year.

And our next question comes from Ryan Connors with Northcoast Research Partners.

So I wanted to actually push on the margins a little bit because if you cite the negative volume leverage, but if I look at the gross margin, actually, we held up pretty well close to 30%, but SG&A actually ramped pretty significantly year-over-year, 20% up in selling about 10% up in G&A. So it seems like there's certainly some upward creep in cost in addition to the negative leverage. So just want to try to reconcile that and if you can provide any color around the SG&A drivers as well.

Yes. This is Brian. I would say on the SG&A side, one of the components is on these project businesses both in infrastructure and in irrigation. There's going to be sales commissions that are going to accompany those. So some of that increase is just related to sales commissions. We also continue to invest in some of our R&D and technology development. And when you look at the project activity that we're seeing in the MENA region, there's some additional resources that we've deployed to address that. But to offset that, we have taken action to reduce costs in some other areas where we can. But we'll probably see more of an impact in 2025. I would say just the other thing on the gross margin side that we talked about, not just the deleveraging of fixed costs, but we did -- we have spoken before about Brazil and how pricing has been under pressure in Brazil. And so that's also contributing to the bit of the margin compression.

Got it. Yes. That price wouldn't be what I would -- and then in terms of these other large projects in Middle East, is there anything -- I know you can't discussed too much there. You're working on new business. But are we talking anything of order of magnitude as large as the current big MENA project or it's a bunch of smaller ones. Just any color on kind of the -- what that pipeline looks like, anything that's quite that large?

Ryan, this is Randy, and I'll take that one. And I'd say there's a mix of projects and being able to identify and pull another $100 million plus through in fiscal year not highly probable, but do we have a handful of smaller projects that add up to that sum. That's more than likely. But there is a strong mix here several small ones, a couple of big ones. We like the funnel we see, and these aren't highly speculative. These are specific customers, specific pieces of ground as we've said before, and you hear from others in the industry, these are incredibly complex, time-consuming both on the deal itself. And sometimes we'll have a deal signed, and it could take several weeks, several months to work through credit approvals, terms and conditions. So we'll generally talk about the funnel being robust and it remains that way, but we won't talk about specific projects until we know we've got terms and conditions agreed, credit secured and we're ready to start building and shipping those units. But we do see an opportunity to cover a lot of that volume in the coming years.

And then just one last one for me, a bit of a housekeeping, Brian. The tax rate has been sort of jumping around all over the place. I assume that has to do with the volatility in the different tax jurisdictions and the earnings contribution. But any help you can give us on kind of where we think about that coming in for fiscal '25?

Yes. I think in the most recent quarter, just the shift in income from Brazil being down and then the project business, which we ship out of our Turkey facilities, which is in a tax-free zone. So that had an impact. But as we look in – early in the year, we had the tax credits that also had a pretty significant impact. As we look forward to next year, given the anticipated blend in our earnings, I would say we’re probably in that 25% range, absent any other onetime kind of things. But I would say 25% would be where we’d expect to be next year.

Our next question comes from Brian Drab with William Blair.

Tyler here filling in for Brian. Starting off, could you elaborate on the progress of the Road Zipper funnel? Is this a tailwind from the IGA funds flowing through? Or is this other federal funds? And how is the pipeline looking quarter-over-quarter? And then I'll have a follow-up.

You bet, Tyler. Yes, the Road upper funnel from our perspective continues to build, and this is really a couple of things, momentum coming out of COVID when we really had to shut down some of those face-to-face meetings. And this really is a person-to-person sales process. So I think time now is on our side. We do see when the infrastructure investment and jobs ecmoney goes to the market we can see some increases in Road differ business as they start to deploy the projects as they use the Road differ to manage through the construction period. So I think there are a couple of different factors providing some tailwind for us there. We continue to see new projects and new interest enter the funnel, and it's really a global funnel at this point as well. We've had a lot of success in Japan. We've had a lot of success in Italy that we've talked about, and this business is getting some of that momentum, which we love to see.

Great. That was helpful. And then I understand that large projects are dilutive, but can you kind of unpack how that all works? Is there anything new to the dynamics since the last time you had some strong project orders -- and how do you expect that mix to look going forward between project sales and lease revenue.

Yes. No, on the – if you’re talking about the infrastructure side, Tyler, the project sales there are going to be accretive to margins versus international irrigation projects. So as we see projects moving through the sales funnel and expect to see some growth in 2025, we would expect that to be accretive to overall margins.

Next question comes from Brett Kearney with American Reber Opportunities.

Kind of addressed part of it already in the previous question. But I was curious with the momentum in the infrastructure side of the business, is the outsized opportunity you see really, I guess, state side? Or I know there have been some similar kind of physical infrastructure support packages passed and some of your other international markets, I guess both for road safety products as well as Road Zipper opportunities, how you're thinking about the opportunity set in fiscal '25 and beyond, international versus domestic?

Yes, Brett, this is Brian. I think as we look at 2025, the growth that we're expecting next year is going to be primarily U.S. And again, a lot of that supported by just the additional funding that's in the sector. But as Randy mentioned, the funnel includes global opportunities as well. But just the near-term growth that we expect would be primarily in the U.S. And on the Road Zipper project sales side, there's potential outside the U.S. as well. But the near line of sight that we have is primarily U.S.-based.

Excellent. If I could ask one more. Terrific to see the adoption on some of your new products, both the Tau XR as well as our connected offerings across both segments. I guess, -- as you think about how your markets are evolving, anything you can share in terms of product innovation, both internal at Lindsay as well as potential external solutions that would make sense, bringing into the Lindsay portfolio based on how you see the markets developing from here?

Of course, Brett, this is an area and a key area of differentiation for us. Our investments in technology, those are the ones that we want to protect in the down cycle and certainly want to enhance when we can in the up cycle. We’ve made strategic investments in companies like Field wise that are now integrated in the business and producing some outstanding results in the partnership and innovation that we see. We’ve announced minority investments working through peso instruments that brings weather and environmental monitoring into the mix. And when we talk to customers, this is an area that I think they really are counting on us to differentiate, to drive innovation, to improve their ability to conserve resources to conserve energy and really turn this technology into a profit maker for them. So when we see the types of growth that we see there, even in a down market, it really validates the strategy and that’s an area that we’ll continue to invest in and hopefully continue to differentiate Lindsay.

[Operator Instructions] Our next question comes from Jon Braatz with Kansas City Capital.

And Brian, Randy or Ryan, can you talk a little bit about the level of maybe storm revenues that you saw this year? And then maybe the impact the hurricanes might have over the next couple of months. Are you going to see some storm-related revenue from the hurricanes?

Yes, Jon, I'll take the first part of that. This is Brian, and then Randy can speak about the second part of your question. But I would characterize this year, our fourth quarter storm damage activity being slightly above average. If you recall, last year, we were below average in storm damage replacement following 2022, which was probably an all-time record for storm damage replacement. So relatively speaking, over a longer period, this was, I would say, above average. We look at our unit volumes for the quarter being up without the storm damage, we were probably been down low single digits. So it did have an impact on the quarter. But when you put it in perspective of what has been in other years. It's, I would say, again, slightly above average.

And I'll cover kind of the most recent activity in the Southeast and talking with our dealers, with our field representatives, some of the insurance companies we estimate there's several hundred machines down across all brands in that part of the world. And a lot of those customers, as we mentioned in our opening remarks, there's not a rush to get a machine put back in there. We're at the end of the season. We're getting through harvest. So that volume is really going to start now and run right through spring planting. So we don't expect a huge spike in 1 month. It's not like a summer storm in the Midwest where they want to get the machines back on quickly. They're going to be replaced on a much longer time line. We're also hearing from a lot of customers mainly due to insurance that there might be more repayers replacement this time around there. There's a big gap between kind of the insured price and the cost of the new machine. So this might be a replacement cycle where we see maybe more pipeline structural parts purchases as opposed to completely new machines. But as I mentioned again in the comments, we're working very closely with our regional teams, our dealers and helping those customers as best we can as quickly as we can.

Randy, secondly, you seem to be very positive on the EMEA region in terms of activity. And I sense maybe it's picked up a little bit maybe from last year or whatever. But is there something maybe changing in the EMEA region that supports -- that's supporting the additional activity, irrigation activity?

I would say that the interest in investing in irrigation connected to population growth, connected to food security, the motivation this year is consistent with last year and even the year before. Maybe some shifts in credit availability access to capital. There’s been some funding into that region that has now maybe given a more ability to invest and purchase than they’ve had historically. But I think those long-term secular drivers and motivators, they’re as strong and as positive as they’ve ever been. Just maybe more ability now to execute those because the funds are available to them. But that is going to continue to be, as we’ve said, as others have said, a pretty significant growth opportunity for the industry. And we like the way that we’re positioned. We like our competitiveness, our ability to identify, compete and win and then execute those projects very well.

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 all for joining us on today’s call. I’m proud of our performance in the quarter and full fiscal year and pleased with the continued operational execution demonstrated by our teams around the world. Our focus on price and cost management have supported our underlying results in a cyclically challenging market. While we’re managing costs, we continue to invest in innovation to grow our installed base and annual recurring revenue in both the irrigation and infrastructure segments, we’ll continue to leverage our strong balance sheet to invest capital in our facilities around the world to improve safety, productivity and efficiency. We look forward to updating you on our progress at the end of our fiscal 2025 first quarter. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.