Lindsay Corporation (LNN) Q1 2026 Earnings Report, Transcript and Summary

Good day, and welcome to the Lindsay Corporation Fiscal First Quarter 2026 Earnings Conference Call. [Operator Instructions] 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 first quarter earnings call. With me today is Sam Hinrichsen, our Chief Financial Officer. Once again, I'm very proud of our team's execution in the quarter despite external headwinds impacting our business. While ongoing trade uncertainty, low commodity prices and high input costs have negatively impacted customer profitability and sentiment, our team's focus on price and cost management and operational efficiencies gained through our diversified global footprint helped us deliver solid profitability and maintain earnings quality in the quarter. In our domestic U.S. irrigation business, customers continue to delay large capital purchases due to high input costs and low profitability. In our international business, we're encouraged by the strength and opportunities in the project market, including the Middle East and North Africa. Our ability to help growers globally improve productivity and optimize resources remains a key differentiator for Lindsay and has supported performance amid a challenging macroeconomic environment. Subsequent to the end of our fiscal first quarter, we announced a supply agreement to provide Zimmatic irrigation systems and FieldNET remote management and scheduling technology in the MENA region. This project is valued at approximately $80 million in total revenue with approximately $70 million of revenue realization this fiscal year. This announcement reflects our ability to compete and win large-scale projects globally, but also demonstrates Lindsay's role as a trusted partner in advancing sustainable agriculture while supporting localized production and enhancing food security. We're very proud of our team's commitment to delivering transformative projects in our international markets and look forward to executing this important project in the region. Our Infrastructure segment delivered solid performance in the first quarter with total revenues up 17% year-over-year. Increased road construction activity supported segment performance in the quarter, and we continue to see solid interest in our Road Zipper solutions product. Moving forward, we expect further momentum as infrastructure funding and road project activity advance. Turning to our market outlook. As we mentioned last quarter, in North America, we expect softer market conditions to persist in the near term. Market indicators suggest the current trough environment will persist until there's greater clarity around international trade impacts and an improvement in customer profitability. The U.S. administration has announced a $12 billion Farmer Bridge Assistance package designed to offset trade-related pressures on U.S. farmers. The program includes onetime payments of approximately $44 per acre for corn and $31 per acre for soybeans. While this support will be appreciated by growers, we don't expect it to drive significant incremental demand in the short term. Within our international markets, we remain encouraged by the overall outlook for future growth and market fundamentals in Latin America, including Brazil. Elevated interest rates and ongoing constraints on credit access for growers continue to weigh on near-term equipment investment in the region, tempering what otherwise remains an attractive long-term growth opportunity. Within our infrastructure segment, we continue to see opportunities develop across system sales, leasing and road safety products, and our sales funnel remains strong. As previously communicated, we do not see a large Road Zipper project exiting the funnel in fiscal year '26. This creates a difficult comparison, particularly in Q2, where we shipped a large $20 million project last year. We do have incremental opportunities for smaller projects and other segment growth to offset half of that total with the majority coming in the second half of the fiscal year. Road safety funding in the United States remains steady, and we remain very excited by the long-term potential of our Road Zipper leasing model, which continues to gain traction and supports a more stable and balanced margin profile over time. With that, I'd like to now turn the call over to Sam to discuss our fiscal first quarter financial results. Sam?

Thank you, Randy, and good morning, everyone. It is a privilege to join you today for my first earnings call as Chief Financial Officer at Lindsay Corporation. I'm excited to continue partnering with this talented team as we drive our strategy forward, deliver on key initiatives, and create meaningful long-term value for our shareholders. I look forward to building on the strong foundation already in place. Now let me walk you through our financial results for the quarter. Total revenues for the first quarter of fiscal 2026 were $155.8 million, a decrease of 6% compared to revenues of $166.3 million in the same quarter last year. The decline in revenue was driven by lower volumes in our irrigation segment as continued uncertainty around trade, lower commodity prices, and higher input costs continue to weigh on farmer sentiment. Lower volume in irrigation was partially offset by year-over-year growth in our infrastructure segment. Operating income for the quarter was $19.6 million, a decrease of 6% compared to $20.9 million in the prior year period. Operating margin for the quarter was 12.6%, consistent with the prior year. Despite a lower revenue base, our solid operating margin performance for the quarter reflects continued execution of our operational strategy, coupled with effective cost and pricing management. While near-term irrigation market conditions in North America are expected to remain soft, we anticipate that our business will continue to show resilience. Net earnings results for the quarter were $16.5 million or $1.54 of net earnings per diluted share, marking a slight decline compared to net earnings of $17.2 million or $1.57 per diluted share in the first quarter of last year. The difference in net earnings when compared to the prior year period was largely attributable to lower operating income and a slightly higher effective tax rate. These were partially offset by an increase in other income. Turning to our segment results. Irrigation segment revenue for the first quarter were $133.4 million, a decrease of 9% compared to segment revenues of $147.1 million in the prior year. North America irrigation revenues of $74.3 million decreased by 4% compared to $77.7 million in the prior year. Within our North American markets, the impact of lower overall unit sales volume was partially offset by higher average selling prices compared to prior year. In international irrigation markets, we delivered revenues of $59.1 million compared to $69.4 million in the first quarter last year. The decrease was primarily attributable to 2 factors. First, the timing of project revenues in the MENA region is difficult to predict. First quarter results were impacted by the timing gap between last year's project and the recently awarded new project in the region. Secondly, sales volumes in Brazil were lower than anticipated as this key market continues to be constrained by elevated interest rates and an unfavorable credit environment, which is weighing on investor activity for growers in the region. These declines were partially offset by approximately $1.5 million of favorable effects of foreign currency translation compared to the prior year. Total Irrigation segment operating income for the first quarter was $23 million, a decrease of $1.8 million compared to $24.7 million in the first quarter last year. Segment operating margins of 17.2% of sales grew compared to 16.8% of sales in the first quarter of last year. Despite lower segment revenues, our irrigation margin profile continues to reflect resilience in a down cycle market. In our infrastructure segment, revenues for the first quarter increased 17% to $22.4 million compared to $19.2 million in the prior year. The increase was driven by higher sales of road safety products, while Road Zipper System revenues were similar compared to the prior year. Infrastructure segment operating income for the first quarter increased 9% to $4.5 million compared to $4.1 million in the prior year. Infrastructure segment operating margin for the quarter was 20.1% of sales compared to 21.5% of sales last year as revenue growth was offset by higher operating expenses. Turning to the balance sheet and liquidity. Our total available liquidity at the end of the first quarter was $249.6 million, which includes $199.6 million in cash and cash equivalents and $50 million available under our revolving credit facility. Free cash flow for the quarter was impacted by an increase in working capital to support business growth and elevated capital expenditure levels. We also utilized our strong free cash flow conversion to opportunistically buy back shares in the open market. In the first quarter, we deployed $30.3 million into share repurchases, exhausting our original authorization. During the quarter, we were pleased to announce the authorization of a new share repurchase program of up to $150 million. Our team have strategically maintained a very robust balance sheet, and this authorization provides us with the ongoing flexibility to continue returning capital to our shareholders. We are pleased with our strong financial position and balance sheet, which enable us to deliver shareholder returns while continuing to invest in future growth opportunities and innovation. This concludes my remarks. And at this time, I will turn the call over to the operator to take your questions.

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

I guess I'll start with North America irrigation, still down a little bit, but it seems to be bottoming out here. Does it feel to you like we're getting to the trough of the market here? Are there risks that we could take another leg down here? Or I know Valmont's commented that they kind of think we're at replacement level. Is that kind of your feeling about the market where -- I mean, obviously, there's a lot of external headwinds that you can't control, but they seem to all be lining up about as bad as they could get at the moment, which is probably a good thing in itself that if it can't get any worse. Just any commentary you might have about how you're thinking about the domestic irrigation market here?

Yes. Nathan, this is Randy. I'll take that one. And we would agree that we are bouncing along the trough here. And there's been some announcements on incremental funding. That's always good news, not enough to move the needle. And I don't think when we talk to customers that they see a lot of upside until there's more certainty on profitability. So in the near, near term, we don't see it getting progressively better, but I would say also we don't see it get progressively worse. So I do believe bouncing along the bottom of the trough here is how we'd characterize it.

I guess the pipeline on international projects here, nice to see the $80 million one. Can you talk about opportunities for other projects? Could we see some more of those come through this year? I think they've been -- most of the ones you've done over the last few years have been with one customer. Are there opportunities outside of that? Are there things in the funnel that are coming from outside of that? Just any commentary around that, please.

Yes. I would say in the region, we have had some repeat business, which we view as a good thing. If you execute well, you get the opportunity for that repeat business. But we've also attracted new clients in the region. So it's a combination of recurring business with repeat customers and some new customers that we've pulled in as well. And I think the language around projects is the same as it's been for the past couple of years. We do see a robust funnel. We see a multiyear runway on projects like this one in this part of the world. And not all of them are in the same country or the same part of the country. We see a broad spectrum of opportunities across the MENA region for the same drivers around food security and stability for those countries in that part of the world. So we do see a good runway here, Nathan. And whether there's another one in 2026 is up in the air. I think the same caveat always applies. These are complex, large, difficult negotiations. Even when you have a deal, you move into credit. logistics. So it's never easy. It's never quick, but I would say there are more opportunities in the market. And again, our track record is a good one. So we'll fight and win for the ones that we want to pull across the finish line. And when we are in a position that the project is locked in, credit secured, that's when you'll hear us talk more about it. Until that time, we'll continue to comment on the positive elements of the funnel and the long-term growth potential in that part of the world.

And I guess one more for me. You guys have had elevated CapEx in fiscal '25 and planned again in fiscal '26 as you're doing a lot of upgrades in Lindsay and around some of your plants. Can you talk about how that's gone, where you are in that process, what contribution that's already generating to profitability, and how we should think about the improved throughput, improved efficiency that you'll gain from that, this year and as we head into next fiscal year as well?

Yes. I'll start on kind of the narrative on what we're doing and where we are and then Sam can comment more specifically on how that might impact some of your models, Nathan. But we, in Lindsay, Nebraska right now have activated our large tube mill investment. This is a world-class tube mill, improving safety, efficiency, productivity. Testing has gone extremely well. And I expect in the next 30 days, we'll turn that over to full production once we get certification from our vendors. That project has gone extremely well and will change the way that we produce tubing and really decrease our reliance on labor, which was a key part of some of these investments. We have a second investment in our galvanizing facility that will completely reengineer that process for us, make it safer, more efficient, more environmentally friendly. And that investment will continue to make throughout this calendar year, and we would expect around the end of calendar 2026, we would see that operation potentially kicking off and going into production. I turn it over to Sam for a little more narrative on the numbers.

Yes. So if you think about margins, this is an ongoing project. It's not been finalized. So there's no impact from a margin perspective in the first quarter. And as Randy alluded, in the short term, once completed, incremental depreciation will offset productivity gains at the current demand level. We expect to see improvements in margins from operating leverage once demand picks up following the completion of the project. And then following, again, the installation, we also expect to get back to more normalized capital spending levels.

Our next question comes from Brian Drab with William Blair.

I wanted to ask maybe a similar question to what Nathan was getting at. But can I ask if this new $80 million MENA project is with the same customer in the same country as the June 2024 $100 million project announcement?

We would acknowledge, Brian, that this is a repeat customer in the same part of the world.

Okay. And then can you comment, Randy, at all on the margin that you're expecting with this new $80 million order?

I would say, overall, we would acknowledge project margins generally are going to be dilutive to the overall business. It does create a lot of operational efficiencies and absorption through the facility. So if we characterize it, the margin profile in this project will be as good as or better than the prior project. I think that's about as directional as we'd want to get, Brian.

Okay. But a little bit below segment average or overall irrigation margin?

Slightly below, correct.

Got it. Got it. Okay.

And that's consistent with the projects of this size.

Yes. Understood. Just wanted to check on this one specifically. Okay. And then just -- I'm curious if The Big Beautiful Bill, I think you mentioned in the slides, I'm not sure there was a lot of commentary in the prepared remarks, but I'm just wondering, did you see any demand related to accelerated depreciation? Is that a narrative that you're hearing from the customer base? And do you expect that to drive any demand going forward?

We -- I would say we didn't see a lot of significant impact, and we didn't anticipate it. I think some of the negative macro market drivers just overwhelmed a little bit of potential incremental benefit from the bill and accelerated depreciation. So not a significant contributor.

Our next question comes from Ryan Connors with Northcoast Research.

I wanted to -- you talked about the cycle earlier in North America in the first question there from Nathan. But I wanted to kind of come back to that and look at it from a bit of a different angle. So we were down 4% irrigation in North America in the first fiscal quarter here. Is that kind of reflective of how we should maybe be thinking of a reasonable run rate for the balance of the year? Or do things get better or worse? Just kind of curious how you think that the 1Q print on North America, what that tells us about the balance of the year specifically? And then also, if you could maybe unpack that on a price versus volume basis as well, that might be helpful.

You bet, Ryan. I'll cover the first part and kind of turn it over to Sam for the second part. And I think we'd characterize North America as flat to down on a full year basis. And whether that 4% carries forward or degrades slightly, improves slightly, as you know, the tricky part for us in Q4 is going to be storm volume. And last year was a relatively light storm volume year. The year before that was relatively high. So if we kind of split the difference, I think the run rate that we saw through Q1 could be pretty consistent with what we see the rest of the year. So we're planning for flat to down in our spending, our inventory, our supply chain, and we'll react up or down if we have to. But I think that's probably a good starting point. I'll let Sam cover.

And then -- yes, on the price versus volume.

Yes. So again, if you think about pricing, we called out that average selling prices in North America were up during the first quarter. We have a history of price stewardship, and we expect to be able to continue maintaining solid margins. Pricing is one key contributor. In addition, of course, there's cost management, there's productivity gains across the organization that are contributing to maintaining this margin profile despite the current top end situation.

Yes. Okay. And then kind of -- maybe while I have you there, Sam, a bit of a below-the-line item. Pretty nice contribution from the interest, other income line, as you mentioned. Is there any color you can give us around what drove that, and how we should think about modeling that line over the balance of the year? Is that something that should continue? Or are we going to kind of revert back to normal there?

So I can't go into the very specific details, but I would say interest income, of course, is driven by the regional mix of funds at the interest rates in various regions. And that's why we have seen an increase year-over-year in Q1. I'm not going to speculate on the interest rate environment, but that's what's the key driver for this improvement in Q1.

Got it. Okay. And then lastly, we haven't really talked much about infrastructure here in the Q&A. And I wondered, Randy, if you can kind of unpack for us this lull in Road Zipper. I mean, obviously, it's a lumpy business and there are lulls from time to time. But is there anything we should read into that in terms of are we -- is the low-hanging fruit plucked to any degree in terms of the TAM there? Or just any color you can give us on how you're thinking about the fact that we're into a pretty light year it looks like on Road Zipper?

Yes. And I don't think we're anywhere near plucking all of the easy to pick fruit or addressing the cap on the TAM. This is a lumpy project-oriented business. And I think just like the irrigation business, the good news for us is we're at the table. We're engaged with our sales funnel. We're talking to specific customers about specific bridges, about specific project sites where Road Zipper is going to allow them to solve their problem better than any other option in the market. It just takes time. So this is a very different type of business. And I think as you model it out, you look at the historical lumpiness, some of the big projects that we've dumped in prior fiscal periods, we love them. When they hit it, it just creates a really difficult comp the next year because they're not -- we can't calendarize one every second quarter, every fiscal year. So this is us being transparent, I believe, in what we think we see in the market. And as we start to get better clarity on fiscal '27, fiscal '28, that's where we see more of these Road Zipper projects landing right now. And if that changes, where we see some accelerating because incremental funding is available, we'll certainly be transparent and clear with you. But I think the narrative we've shared indicates what we see this year, but it's not an indication that the market is any better, any worse, any softer than it has been. It has been lumpy project business. It's going to continue to be lumpy project business. Again, the good news is with our shift-left strategy, we've got better visibility, both short and long term. And I think that's where we're willing to be more transparent and open with you guys, so you can kind of work that into your models as well. But we see long-term growth opportunities for Road Zipper well into the future.

Our next question comes from Brett Kearney with American Rebirth Opportunity.

I know the most recent project win you have, Middle East North Africa includes your FieldNET capabilities. Obviously, I think those are incorporating all the Pivot sales you make in North America at this point. But just curious what you're seeing as you look to the international irrigation project funnel today, what kind of adoption appetite there is an opportunity for you all with some of your technology offerings in some of these regions?

I'd characterize it this way that when you're making these significant investments. These are huge agro operations where there has been basically nothing. And in the Mid East, it's essentially desert that they're converting to be these highly productive, highly efficient farms. And with the size of investments they're making, they want every piece of technology that's available to them. And this isn't a normal technology adoption curve where you start with small equipment and you migrate towards large equipment. They're starting with the biggest tractors, the biggest planters, the biggest combines, and they want every technological advantage that they can find to be as efficient as they can be in their production, in their consumption of water and energy. So I think this has really been a shift in the last 5 to 10 years where the technology has proven itself, where it brings real value to our customers. And again, at these investment levels, I think the customers are intelligent. They're smart, and they want every advantage that they can bring to the table. And certainly, FieldNET, FieldNET Advisor and the advantage that it creates for our growers is an important part of that mix.

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 again for joining us today. We appreciate your ongoing support, and we look forward to updating you on our second quarter earnings call. Thanks for joining us.

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