Good day welcome to the Lindsay Corporation Fiscal First Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. 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 2025 first quarter earnings call. With me today is Brian Ketcham, our Chief Financial Officer. I am pleased with our company's performance during the first quarter as our results continue to demonstrate the resilience of our business and our team's collective operational and commercial execution. This execution was clearly reflected in our results as we delivered year-over-year revenue growth and a meaningful expansion to our net earnings and earnings per share, overcoming the weaker fundamentals and headwinds in the mature global irrigation markets. Our international irrigation business delivered 37% year-over-year revenue growth, supported primarily by the additional sales volume of our previously announced record project in the MENA region. We have also observed early positive sales trends in Western Europe and regions of Latin America.

Turning to our infrastructure segment, while we did see a slight decline in our top line, we have delivered another quarter of strong operating income and margin expansion. This was driven by a continued focus on cost management and our ability to capture additional operational efficiencies. On the commercial side, we recently finalized a $20+ million contract for a large road zipper system project in the Northeast. This is a result of our strategic shift to go upstream in the design and decision-making process of these large roadway projects. We expect this project will fully deliver in our second quarter.

Shifting gears to market outlook, in North America, we continue to expect a slightly weaker market tempered by low commodity prices and high input costs. We have seen a recent uptick in customer sentiment connected to the US elections, and the federal government recently announced an agricultural aid package connected to the federal spending bill passed in late December. This adds $10 billion to help offset low commodity prices. The bill also includes approximately $21 billion in natural disaster aid for farmers and ranchers affected by drought, wildfires, and hurricanes over the past two years.

In the international irrigation markets, Brazil order volume has stabilized, and we have seen regional financing programs launched in Parana and Sao Paulo states. These programs should support stronger volumes in the second half of the year. Brazil remains a key long-term growth market given the low degree of market penetration from mechanized irrigation and their ability to generate strong ROI with two to three crops per year with irrigation. We continue to expect strong performance in our developing international markets, specifically in the MENA region, as food security and water scarcity remain critical issues. While the project funnel continues to be robust, these projects are very competitive, and timing is always difficult to predict. We have proven our ability to identify, win, and deliver on these large complex projects, and we have line of sight to additional projects in the region that we expect to move forward this fiscal year.

Moving to infrastructure, we expect growth in this segment supported by the large road zipper system. We are not expecting any material changes to the IIJA as the new administration takes office. However, some of the positive benefits from the legislation have been offset by cost inflation, making it difficult to estimate the actual impact of the increase in federal funding at this stage.

Alright.

Solid performance in the segment has continued to be supported by operational expense reductions and improved efficiencies in our manufacturing processes. These improvements, along with the improved margin mix from higher road zipper revenues, are expected to bolster profitability in the infrastructure segment in the near term. Turning to innovation and technology, I am pleased to announce that we closed the previously announced deal to acquire a minority interest in Austria-based PESL Instruments. This partnership adds incremental capabilities to the FieldNET and FieldWise platforms and creates an opportunity to grow annual recurring revenue by leveraging their significant global installed base of devices. With the PESL investment, we now have access to over 240,000 connected devices, which will support long-term growth and annual recurring revenue. Our teams have already begun collaborating, and we are excited about the opportunities this creates for our customers around the world. I would like to now turn the call over to Brian to discuss our first quarter financial results.

Right. Thank you, Randy, and good morning, everyone. Consolidated revenues for the first quarter of fiscal 2025 increased 3% to $166.3 million compared to $161.4 million in the prior year. Revenue growth was driven by an increase in international irrigation revenue and infrastructure revenues compared to the prior year. Net earnings for the quarter increased 14% to $17.2 million or $1.57 per diluted share compared to net earnings of $15 million or $1.36 per diluted share in the prior year. While operating income was similar to the prior year, current year results benefited from an increase in other income and a lower effective income tax rate compared to the prior year.

Turning to our segment results, irrigation segment revenues for the quarter increased 5% to $147.1 million compared to $140.2 million in the prior year. North America irrigation revenues of $77.7 million decreased 13% compared to the prior year. The decrease resulted primarily from lower unit sales volume of irrigation equipment as well as a less favorable mix of shorter machines and slightly lower average selling prices compared to the prior year. A reduction in net farm income for calendar 2024 continues to temper demand for irrigation equipment in the near term. In international irrigation markets, revenues of $69.4 million increased 37% compared to the prior year. The increase resulted primarily from revenues related to our large project in the MENA region, along with higher sales in Europe and certain regions of Latin America compared to the prior year. This increase was partially offset by lower revenue in Brazil, where market activity remained lower than the prior year due to lower commodity prices that have pressured grower profitability and available liquidity. Revenues in the current year quarter were also impacted by the unfavorable effects of foreign currency translation of approximately $2.1 million compared to the prior year.

Irrigation segment operating income for the quarter of $24.7 million was 2% lower compared to the prior year, and operating margin was lower compared to the prior year. Lower operating income and operating margin results primarily from a larger proportion of international project revenues compared to the prior year, which were dilutive to overall segment margin. Infrastructure segment revenues for the quarter of $19.2 million were 9% lower compared to the prior year. This decrease resulted primarily from a difference in the timing of Road Zipper System lease revenue and lower sales of road safety products compared to the prior year. Infrastructure segment operating income for the quarter of $4.1 million increased 14% compared to the prior year, and infrastructure operating margin for the quarter was 21.5% of sales, compared to 17.1% of sales in the prior year. The increase in operating income and operating margin resulted primarily from improved manufacturing efficiency and lower operating expenses compared to the prior year. The large road zipper project that Randy mentioned in his opening remarks had been contemplated in our full-year fiscal 2025 outlook. However, the timing was not clear until the contract was signed after the end of our first quarter. We have been building the machine and barrier required for this project, and we expect to deliver the entire project valued at more than $20 million in our second fiscal quarter.

Turning to the balance sheet and liquidity, our total available liquidity at the end of the first quarter was $244.1 million, which includes $194.1 million in cash and cash equivalents and $50 million available under our revolving credit facility. Our strong balance sheet and ample access to liquid capital resources continue to serve as a strategic asset for Lindsay as we execute our capital allocation strategy to create enhanced and sustained value for our shareholders. This concludes my remarks, and at this time, I will turn the call over to the operator to take your questions.

We will now begin the question and answer session. At this time, we will pause momentarily to assemble our roster. The first question will come from Ryan Connors with Northcoast Research. Please go ahead.

Good morning. Thanks for taking my question. So you had a comment there regarding irrigation and the mix effect of shorter systems or smaller systems in irrigation. I have never heard you make that comment before. Can you elaborate on the magnitude of that or exactly what that is and what might be driving that? That is a new one for me.

Yes, Ryan. This is Brian. It is generally driven more on a regional basis. You get into places, let us say, like the Pacific Northwest, where they have installed larger machines over time, and then maybe they are filling in some of the corners or there are other odd-shaped pieces of ground that they are adding irrigation to. So I would say, you know, mix like that varies from quarter to quarter, but it is really regional. But in terms of the revenue breakdown for the quarter, the main driver was really just the decrease in overall volume.

Makes sense. Okay. So it was on the margin then?

Yes. Yep.

Okay. And then one more on irrigation, and I have one on infrastructure as well. This large project, once that is completed, what is the follow-on service component, if any, on something like that of that magnitude? Is that something where you can move the needle supplying parts and service into that on a go-forward basis, or is it just sort of once it is done, it is done, and you have to go find and look for the next one?

Yeah. Good morning, Ryan. This is Randy. I will take that one. I think it is a combination of both comments you have made. Certainly, the machines in this part of the world are operating a significant number of hours. They are almost irrigating around the clock all year. So there is going to be some parts consumption there. Generally, on these deals, the initial purchase will include some stock parts for more of those fast-moving maintenance items. We may not see it right away, but I think some of the long-term revenue-generating potential is certainly going to include aftermarket. On the service side, that generally and in all the markets is dealer revenue, not necessarily Lindsay revenue. And I think on those military contracts in particular, they have been trained. They generally take care of their own machines. So the long-term revenue there is really going to be the service parts for us.

Got it. Okay. And then on infrastructure, Brian, you mentioned the timing of lease revenue as one of the headwinds on the revenue line there. I mean, my understanding of the leasing model was that it is actually less volatile, less lumpy than the book-ship that we had in the past. So explain exactly what the dynamics are that can drive timing on lease revenue to cause the kind of volatility?

Yeah. It is really just, you know, one project ending and then the other one not starting immediately. It is those kinds of things. And, you know, in the scope of, you know, the change for the revenue, I mean, we are talking about a couple of million dollars probably, but that is really what drives it. I mean, we have got mine aside to, you know, continuing to add to the lease portfolio. But I think it is just as some projects end, and new projects begin, sometimes there is a small gap there.

Yep. Okay. But just to be clear, so when a lease project is signed, that becomes pretty much an annuity stream on a go-forward basis. There is no real volatility associated with a leased system once it is up and running. Is that a fair characterization of that?

We do have some situations where it is a multiyear lease. Obviously, that one is going to be very stable. But the other ones, if they are tied to a construction project, they could be, you know, a nine-month project or a twelve-month project. And so then, you know, when those come to an end, there can be a gap before a new project starts. But again, when you look at it over a full-year basis, it is very stable. But quarter to quarter, there could be some timing.

Got it. So it is not a permanent installation. It is just on a specific project.

Yeah, a lot of the incremental leases that we have added over the last year have been more directly tied to construction projects.

Got it. Okay. That makes sense. Thanks for your time.

Thank you. The next question will come from Brian Drab with William Blair.

Hey, guys. Tyler on for Brian. Appreciate you guys taking my questions. Just starting with the international irrigation business, did you recognize about $60 million in revenue for the Middle East and North African project? I know that was supposed to be kind of evenly spread through the year. Just wondering if that cadence is the same.

Yeah. In general, Tyler, the cadence is the same. I think we were slightly above $20 million for the quarter. And what we had said coming into the year is we were expecting roughly $20 million a quarter.

Got it. And then one more for international irrigation. Your European and Latin American sales are stronger, as you said. Does that kind of change your expectations for the base international irrigation business in the second half of the year?

No. I do not think it changes our expectations. I think we had seen growth opportunities in both of those regions coming into the year. You know, it is positive to see some green shoots in some of those regions, but I do not think it at this point changes the outlook that we have for the full year.

Okay. Great. And just one more for the infrastructure segment. You clearly had some efficiency in cost savings in this quarter. I am just wondering, with the project activity picking up, were these OpEx savings a one-time occurrence, or do you expect that to kind of roll through the future quarters?

Yeah. Our expectation is these operational cost savings will continue. I think a big part of it also is, as I mentioned in my comments, as we are building new machines, building new barriers, that is absorbing a lot of fixed costs. But we have also done some improvements in our factory in order to increase our overall capacity and the flow through the factory as it relates to the road zipper product line.

Okay. Great. Thank you for the time. I will pass it on.

Next question will come from Nathan Jones with Stifel. Please go ahead.

Yeah. Good afternoon. This is Adam Farley on for Nathan. Maybe first looking at Brazil, are there signs of it reaching a bottom here? What is the expectation for the year if irrigation markets continue to stabilize there?

Yes. This is Randy. I will maybe start, and Brian can add on if necessary. We do not see a lot of further deterioration in Brazil. We are starting to lap the strong growth that we have seen there and then some of the regression with soy prices in particular coming back. Access to credit has been kind of a limiting factor on market upside as well. And we kind of see all those things leveling off at this point. So I think our projection would be not significantly worse, but in the near term maybe not significantly better either. The two credit programs that we have seen, we are not quite sure how quickly they are going to get rolled out, how quickly those funds are going to get consumed. But we do view that as some potential uplift in the market. But again, we do not see it getting significantly better or significantly worse in the near term.

Okay. Thank you for that. And then on domestic irrigation, I think the presentation called out slightly lower ASPs in the quarter. Where are you seeing pricing pressure? And then if you think about it in aggregate, is price cost positive, neutral, or negative?

Yeah. Adam, this is Brian. I would say we have not changed our selling prices. What we have seen is selective discounting, maybe it is regional, maybe it is on certain orders or whatever. I would say it has been margin neutral at this point. We have seen steel coil prices soften, but on the same token, we still have inflation in other raw materials. So overall, the cost environment, I would say, has been stable. But really not on ASPs, some impact on top line, but I would say margin neutral overall.

Alright. Great. Thank you for taking my questions.

Next question will come from Jon Braatz with Kansas Capital.

Good morning, Randy, Brian.

Hi, John.

Randy, since this fall, we have seen corn prices move up at least on the board, up about 20%, and soybeans up a little bit less. But nonetheless, they have recovered a little bit. I guess when you look at the recovery that we have seen, do you sense any change in the supply and demand issues affecting these prices? What might account for some of the price improvement? Any ideas?

I would say, John, in this window, seasonally at least, in the northern hemisphere, there are not a lot of significant movers on the supply side. The harvest is done, and we have what we have. Anything that moves is generally going to be on the demand side. I know we were watching, you know, like year-round approval of the E15 ethanol that did not get passed as part of the package here recently, that would have been certainly a demand-side driver. Right now, I think we are kind of in a holding pattern until we get to the planting intentions for next year, and there is maybe a better view on export at that time. Are there going to be trade disruptions? Tariff-related issues? So it is nothing on the supply-demand side, and I always distill it down to those very pure supply-demand economic drivers. There is nothing that has moved significantly one way or the other right now. There is no speculation in the market moving it around, but I do not think we will see anything significant in either supply or demand until we get closer to next spring and understand what those planning intentions look like, John.

Okay. What about in Brazil in terms of soybean prices? What is the trend been there?

It has been dropping from the highs. You know, stable, maybe getting more stable than what we have seen historically, and I guess when you are on the slide, the customer view is where is it going to stop? And I think we have probably bottomed out, and we know that we are not going to go past the lower threshold. So that adds to the stability comment that I made in my comments earlier. I do not think customers, again, our view is the same. It is not going to get progressively worse in the near term, but it is probably not going to get progressively better either.

Okay. And, Brian, in the quarter, you talked a little bit about a lower tax rate and some positive other income. Do you see that going forward?

Yeah. I think really, for the rest of the year, we expect to have a lower rate. And the primary driver of that is a pretty significant shift in our earnings from Brazil into Turkey, which is providing the equipment for the large project in Turkey. We are in a free trade zone, so we do not have tax there in Brazil, you know, at a 35% rate. So going forward, probably somewhere in that 23% range.

Okay. Okay. And the other income? Anything that...

The other income, I think, when you look at interest expense and interest income, I would expect that trend to continue. You know, on the other side is really the currency fluctuations that have an impact, and that one is obviously hard to predict.

Yep. Absolutely. And, Brian, in the past, the large infrastructure projects have typically had a nice margin to it. How do you view this $20 million project?

This should be similar to some of the other projects that we had. We expect it to be accretive to overall operating margin for the segment and for the company actually.

Right. And well, in the past, has it been, you know, over 30% or something like that?

Yeah. It has definitely been over 30%.

Okay, alright. Thank you very much.

Thanks, John.

Our next question will come from Brett Kearney with American ReBirth Opportunity Partners. Go ahead.

Randy, Brian. Good morning. Thanks for taking my question. I was just going to ask for a quick update on the CapEx projects you guys have underway this fiscal year. I know the largest one being the expansion at the Lindsay, Nebraska facility. Just how planning, procurement, processes are going around that at this stage as well as the other initiatives you guys have underway?

Yeah, Brett. That is something obviously we are tracking pretty closely. In all the reviews we have got at this point, we do not see any real red flags. We have had some short-term weather issues to deal with here in Nebraska, but they are part of the timeline. So nothing that we are concerned with. Everything still appears to be on track.

Okay. Terrific. Thanks very much, Randy.

Thanks, Brett.

With no further questions, 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. While we are encouraged and optimistic about the opportunities in front of us, we look forward to delivering value for our customers and shareholders in fiscal 2025. Thank you.

The conference is now concluded. Thank you for attending today's presentation.