Q3 2022 Lindsay Corp Earnings Call
Good morning. My name is Joe and I will be your conference operator for today. At this time, I would like to welcome everyone to the lindsesay Corporation. Third quarter fiscal year 2022- earnings call.
Speaker 6: Good morning. My name is Joe and I will be your conference operator for today. At this time, I would like to welcome everyone to the lindsesay Corporation. Third quarter fiscal year 2022- earnings call.
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During this call, management may make forward-looking statements that are subject to risks and uncertainties, which reflect management's current beliefs, estimates of future economic circumstances, industry conditions, company performance and financial results.
Speaker 9: During this call, management may make forward-looking statements that are subject to risks and uncertainties, which reflect management's current beliefs, estimates of future economic circumstances, industry conditions, company performance and financial results.
Forward-looking statements include the information concerning possible or assumed future results of operations of the company, and those statements preceded by, followed by or including the words expectation outlook could may, should or similar expressions.
Speaker 7: Forward-looking statements include the information concerning possible or assumed future results of operations of the company, and those statements preceded by, followed by or including the words expectation outlook could may, should or similar expressions.
For these statements. We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of one thousand nine hundred and ninety-five.
Speaker 7: For these statements. We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of one thousand nine hundred and ninety-five.
I would now like to turn the call over to MR randywood, President and Chief Executive Officer.
Speaker 7: I would now like to turn the call over to MR randywood, President and Chief Executive Officer.
Thank you and good morning everyone. Welcome to our third quarter earnings call. With me today is Brian ketchham, our Chief Financial Officer.
Speaker 10: Thank you and good morning everyone. Welcome to our third quarter earnings call. With me today is Brian ketchham, our Chief Financial Officer.
Our third quarter results reflect the ongoing commitment of our employees around the world to support our customers and dealers in a very dynamic environment.
Speaker 9: Our third quarter results reflect the ongoing commitment of our employees around the world to support our customers and dealers in a very dynamic environment.
Our entire organization continues to effectively managed through supply chain challenges, logistics constraints and inflationary pressures, while our commercial teams have effectively manag pricing to reserve business quality.
Speaker 11: Our entire organization continues to effectively managed through supply chain challenges, logistics constraints and inflationary pressures, while our commercial teams have effectively manag pricing to reserve business quality.
This teamwork focus and one lenssay approach is evident in our results.
Speaker 12: This teamwork focus and one lenssay approach is evident in our results.
Our third quarter, revenue and operating income was the second highest in our company history, rivaling the highest quarter ever during the peak of the ag cycho in 2013. we thank our teams around the world for all they're doing to contribute to the success of our customers and our company.
Speaker 9: Our third quarter, revenue and operating income was the second highest in our company history, rivaling the highest quarter ever during the peak of the ag cycho in 2013. we thank our teams around the world for all they're doing to contribute to the success of our customers and our company.
In the area of innovation.
Speaker 12: In the area of innovation.
Our smart pivot program continues to progress forward and we're getting great customer reviews from our new field and user experience that will be released later this fall.
Speaker 12: Our smart pivot program continues to progress forward and we're getting great customer reviews from our new field and user experience that will be released later this fall.
We're also seeing strong market acceptance for our new rope connect lemetry platform in the infrastructure business, and our relationship with blanksey continues to showcase the power of innovation that's possible with strong industry partnerships.
Speaker 12: We're also seeing strong market acceptance for our new rope connect lemetry platform in the infrastructure business, and our relationship with blanksey continues to showcase the power of innovation that's possible with strong industry partnerships.
To date we have devices deployed in 27 states across the U's, with several international sites ready to deployed before the end of the fiscal year.
Speaker 12: To date we have devices deployed in 27 states across the U's, with several international sites ready to deployed before the end of the fiscal year.
Turning to irrigation market conditions.
Speaker 12: Turning to irrigation market conditions.
The market continues to see a combination of factors impacting customer sentiment and business growth.
Speaker 12: The market continues to see a combination of factors impacting customer sentiment and business growth.
Global commodity prices remain high, which is positive. However, this is somewhat tempered by increased input costs, which will keep U's net farm may income relatively flat on a year-over-year basis.
Speaker 12: Global commodity prices remain high, which is positive. However, this is somewhat tempered by increased input costs, which will keep U's net farm may income relatively flat on a year-over-year basis.
This year's crop will be one of the most expenive of our customers have ever planted, So the positive yield and revenue benefit attained with irrigation through a center pivot should support market stability.
Speaker 12: This year's crop will be one of the most expenive of our customers have ever planted, So the positive yield and revenue benefit attained with irrigation through a center pivot should support market stability.
Order demand in the quarter was consistent with prior year. We did see an increase in orders beginning in mid-May due to large storms in the Midwest.
Speaker 12: Order demand in the quarter was consistent with prior year. We did see an increase in orders beginning in mid-May due to large storms in the Midwest.
Some of this demand did ship in the quarter and some carried over into the fourth quarter.
Speaker 12: Some of this demand did ship in the quarter and some carried over into the fourth quarter.
In international irrig, ation we see continued strength across most regions. In the mature markets, this is supported by high commodity prices and in the project-oriented or developing markets, that is supported by more secular drivers.
Speaker 12: In international irrig, ation we see continued strength across most regions. In the mature markets, this is supported by high commodity prices and in the project-oriented or developing markets, that is supported by more secular drivers.
Brazil continues to be a bright spot, where a combination of volume and price realization more than doubled the business versus the prior year.
Speaker 12: Brazil continues to be a bright spot, where a combination of volume and price realization more than doubled the business versus the prior year.
The 2022- 2023 crop plan was also released this week. Government financing incentives for irrigation investments was set at one point 9- one point 9, five billion realice, a 44% increase over the prior plan. This was the largest increase in resources amongst all investment programs, highlighting the focus on expanding efficient irrigation in the region.
Speaker 12: The 2022- 2023 crop plan was also released this week. Government financing incentives for irrigation investments was set at one point 9- one point 9, five billion realice, a 44% increase over the prior plan. This was the largest increase in resources amongst all investment programs, highlighting the focus on expanding efficient irrigation in the region.
We also see continued inquiries for project business across the Europe Africa, Middle East, as concerns over food security and global grain supplies have been tightened by the ongoing conflict between Russia and Ukraine.
Speaker 12: We also see continued inquiries for project business across the Europe Africa, Middle East, as concerns over food security and global grain supplies have been tightened by the ongoing conflict between Russia and Ukraine.
We were pleased to attend the inauguration of the future of Egypt project site with President LC in May. This farm includes the 1200 seamatic pivots that shipped earlier this fiscal year.
Speaker 12: We were pleased to attend the inauguration of the future of Egypt project site with President LC in May. This farm includes the 1200 seamatic pivots that shipped earlier this fiscal year.
There was also news this week that Egypt will receive $5 million from the world bank to boost food security, and a portion of this funding will go towards wheat storage, which will support MO localized grain production and a strong irrigation market.
Speaker 12: There was also news this week that Egypt will receive $5 million from the world bank to boost food security, and a portion of this funding will go towards wheat storage, which will support MO localized grain production and a strong irrigation market.
Moving to infrastructure.
Speaker 12: Moving to infrastructure.
Our commercial teams have been able to return to near prepandemic travel schedules and this has helped to stimulate movement in our road. Zipper sales FT.
Speaker 9: Our commercial teams have been able to return to near prepandemic travel schedules and this has helped to stimulate movement in our road. Zipper sales FT.
Their diligence and perseverance has paid off and the two projects we have been anticipating in the second half of the year are now moving forward. Ryan will provide additional details regarding each project in this financial update.
Speaker 12: Their diligence and perseverance has paid off and the two projects we have been anticipating in the second half of the year are now moving forward. Ryan will provide additional details regarding each project in this financial update.
In the RO safety business. We're also seeing signs of a restart and normalized design and procurement processes at the state DOT left.
Speaker 12: In the RO safety business. We're also seeing signs of a restart and normalized design and procurement processes at the state DOT left.
The funding support provided by the infrastructure bill has been positive, but we do see some headwinds in this segment caused by inflation and labor availability.
Speaker 12: The funding support provided by the infrastructure bill has been positive, but we do see some headwinds in this segment caused by inflation and labor availability.
A number of project bids submitted months ago are being impacted by cost increases that have resulted in project delays or scope reduction. Overall, we remain optimistic regarding growth opportunities for this business, based on the quality of our sales funnel and increasing commercial activity.
Speaker 12: A number of project bids submitted months ago are being impacted by cost increases that have resulted in project delays or scope reduction. Overall, we remain optimistic regarding growth opportunities for this business, based on the quality of our sales funnel and increasing commercial activity.
I'll now turn the call over to Brian to review our third quarter financial results Brian .
Speaker 12: I'll now turn the call over to Brian to review our third quarter financial results Brian .
Thank you Rand, y and good morning everyone.
Speaker 13: Thank you Rand, y and good morning everyone.
Total revenues for the third quarter of fiscal 2022 increased 32% to $214.3 million, compared to $161.9 million in the prior year quarter.
Speaker 1: Total revenues for the third quarter of fiscal 2022 increased 32% to $214.3 million, compared to $161.9 million in the prior year quarter.
Net earnings for the quarter increased 41% to $25.1 million, or $2 of 28 cents per diluted share, compared to net earnings of $17.8 million or $1 and 61 cents per diluted share in the prior year quarter.
Speaker 12: Net earnings for the quarter increased 41% to $25.1 million, or $2 of 28 cents per diluted share, compared to net earnings of $17.8 million or $1 and 61 cents per diluted share in the prior year quarter.
Irrigation segment revenues for the third quarter increased 35% to $188.7 million, compared to $140.2 million in the prior year quarter.
Speaker 1: Irrigation segment revenues for the third quarter increased 35% to $188.7 million, compared to $140.2 million in the prior year quarter.
North America irrigation revenues of $96.2 million increased 10% compared to the prior year quarter.
Speaker 12: North America irrigation revenues of $96.2 million increased 10% compared to the prior year quarter.
The increase in North America irrigation revenues resulted from higher average selling prices, while unit sales volume was lower year-over-year.
Speaker 1: The increase in North America irrigation revenues resulted from higher average selling prices, while unit sales volume was lower year-over-year.
As Randy indicated, order rates during the third quarter were similar to last year. However, we entered last year's third quarter with a larger backlog of orders, as frequent and significant price increases at the time pulled orders forward.
Speaker 12: As Randy indicated, order rates during the third quarter were similar to last year. However, we entered last year's third quarter with a larger backlog of orders, as frequent and significant price increases at the time pulled orders forward.
While an increase in storm damage replacement orders beginning late in the quarter provided some additional volume for this year's third quarter, most of this increased volume from storm damage replacement will be realized in our fourth quarter.
Speaker 1: While an increase in storm damage replacement orders beginning late in the quarter provided some additional volume for this year's third quarter, most of this increased volume from storm damage replacement will be realized in our fourth quarter.
In the international irrigation market markets: revenues of $92.5 million, increased 75% compared to the prior year quarter.
Speaker 12: In the international irrigation market markets: revenues of $92.5 million, increased 75% compared to the prior year quarter.
This increase resulted from a combination of higher average selling prices and higher unit sales volumes in most international markets, with the most significant increase in Brazil.
Speaker 1: This increase resulted from a combination of higher average selling prices and higher unit sales volumes in most international markets, with the most significant increase in Brazil.
Also contributing to the revenue increase was the favorable effect of a net foreign currency translation gain of approximately $2.5 million compared to the prior year quarter.
Speaker 12: Also contributing to the revenue increase was the favorable effect of a net foreign currency translation gain of approximately $2.5 million compared to the prior year quarter.
Total irrigation segment operating income for the third quarter was $39.6 million, an increase of 65% compared to the prior year quarter, and operating margin was 21% of sales compared to 17% of sales in the prior year.
Speaker 13: Total irrigation segment operating income for the third quarter was $39.6 million, an increase of 65% compared to the prior year quarter, and operating margin was 21% of sales compared to 17% of sales in the prior year.
Improved operating margin resulted from improved price realization and additional volume leverage, which more than offset the impact of inflationary cost increases.
Speaker 12: Improved operating margin resulted from improved price realization and additional volume leverage, which more than offset the impact of inflationary cost increases.
Infrastructure segment revenues for the third quarter were $25.6 million, an increase of 17% compared to the prior year quarter.
Speaker 14: Infrastructure segment revenues for the third quarter were $25.6 million, an increase of 17% compared to the prior year quarter.
The increase resulted from higher sales of road safety products and road Zipper system project sales, which were partially offset by lower Road Zipper system lease revenue.
Speaker 1: The increase resulted from higher sales of road safety products and road Zipper system project sales, which were partially offset by lower Road Zipper system lease revenue.
Lower lease revenue resulted from the completion of certain lease projects, along with the delays in the startup of new lease projects.
Speaker 12: Lower lease revenue resulted from the completion of certain lease projects, along with the delays in the startup of new lease projects.
During the quarter we began delivery of a roadzipper project in Australia.
Speaker 1: During the quarter we began delivery of a roadzipper project in Australia.
The total value of this project is approximate, approximately $9 million, with about half of the value representing the sale of barriers and the other half representing the lease of two machines over a 30 -month period.
Speaker 1: The total value of this project is approximate, approximately $9 million, with about half of the value representing the sale of barriers and the other half representing the lease of two machines over a 30 -month period.
We delivered about half of the barrier in the third quarter and expect to deliver the remainder of the barrier in our fourth quarter.
Speaker 15: We delivered about half of the barrier in the third quarter and expect to deliver the remainder of the barrier in our fourth quarter.
This is our first-lease project in Australia and we are optimistic about the future project potential in this market.
Speaker 12: This is our first-lease project in Australia and we are optimistic about the future project potential in this market.
Infrastructure segment. Operating income for the third quarter was $3.8 million, which was comparable to the prior year quarter.
Speaker 12: Infrastructure segment. Operating income for the third quarter was $3.8 million, which was comparable to the prior year quarter.
Current year results reflect a less favorable margin mix of revenues compared to the prior year, as well as certain underabsorbed fixed overhead costs.
Speaker 1: Current year results reflect a less favorable margin mix of revenues compared to the prior year, as well as certain underabsorbed fixed overhead costs.
Another one of the projects that we have been expecting in the second half of our year is a barrier replacement project in Massachusetts.
Speaker 16: Another one of the projects that we have been expecting in the second half of our year is a barrier replacement project in Massachusetts.
This project has now been approved and is expected to be awarded in our fourth quarter.
Speaker 12: This project has now been approved and is expected to be awarded in our fourth quarter.
The value of our portion of this project is approximately $24 million and we anticipate being able to deliver about two -thirds of this project in the fourth quarter and the remainder delivering in the first quarter of fiscal 2020 -three.
Speaker 12: The value of our portion of this project is approximately $24 million and we anticipate being able to deliver about two -thirds of this project in the fourth quarter and the remainder delivering in the first quarter of fiscal 2020 -three.
Turning to the balance sheet and liquidity, our total available liquidity at the end of the third quarter was $145.7 million, with $95.7 million in cash, cash equivalents and marketable Securities and $5 million available under our revolving credit facility.
Speaker 12: Turning to the balance sheet and liquidity, our total available liquidity at the end of the third quarter was $145.7 million, with $95.7 million in cash, cash equivalents and marketable Securities and $5 million available under our revolving credit facility.
Our total debt was $116 million almost all of which matures in two thousand and thirty and.
Speaker 12: Our total debt was $116 million almost all of which matures in two thousand and thirty and.
And at the end of the third quarter we were well within the financial covenants of our borrowing facilities, including a gross funded debt to EBITDA leverage ratio of 1.2, compared to a covenant limit of three point zero.
Speaker 12: And at the end of the third quarter we were well within the financial covenants of our borrowing facilities, including a gross funded debt to EBITDA leverage ratio of 1.2, compared to a covenant limit of three point zero.
At this time. I'd like to turn the call over to the operator to take your questions.
Speaker 17: At this time. I'd like to 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 Star than one on your telephone key pad.
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To withdraw your question, please press Star and then two at this time we will pause momentarily to assemble our roster.
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Our first question will come from Nathan Jones with Steve. Please go ahead.
Speaker 2: Our first question will come from Nathan Jones with Steve. Please go ahead.
Good morning everyone.
Speaker 20: Good morning everyone.
Remain an umb.
Speaker 20: Remain an umb.
Maybe starting on some of these barrier projects. I mean, you guys have been talking for the last couple of quarters about to going two of these projects going in the back half of the year and have been spot on with the guidance there. Maybe you can talk a little bit about what that pipeline looks like for 23 and 24 and confidence in conversion of those growth we should be expecting in that business, the impact of the infrastructure bill stimulus, just any kind of outlook you can give us on the project environment there.
Speaker 21: Maybe starting on some of these barrier projects. I mean, you guys have been talking for the last couple of quarters about to going two of these projects going in the back half of the year and have been spot on with the guidance there. Maybe you can talk a little bit about what that pipeline looks like for 23 and 24 and confidence in conversion of those growth we should be expecting in that business, the impact of the infrastructure bill stimulus, just any kind of outlook you can give us on the project environment there.
And this is Brian , you we've been, we've been saying all along, you know we have pretty good confidence in our sales funnel. We've talked about that and you know the challenge has been in the last couple of years in the cot environment with travel restrictions and things like that, moving some of these projects through the funnel. But we had these two projects that we had line of site earlier, really late last year already, that we felt would be coming through the funnel this year and we're seeing that realizede now, you know, looking forward, I would say with, you know, being able to engage with the customers and as things kind of return to normal, we would anticipate continuing to see some of these projects moved through the funnel. I also mentioned on the leasing side of the business. We're seeing good interest in including road Zipper as part of the overall construction programs in. You know a number of states. The one that we started to deliver in Australia is actually construction related program that I mentioned- a 30- 30 month lease there and we- And once we, you know, prove what Road Zipper can do. I think we we've.
Speaker 22: And this is Brian , you we've been, we've been saying all along, you know we have pretty good confidence in our sales funnel. We've talked about that and you know the challenge has been in the last couple of years in the cot environment with travel restrictions and things like that, moving some of these projects through the funnel. But we had these two projects that we had line of site earlier, really late last year already, that we felt would be coming through the funnel this year and we're seeing that realizede now, you know, looking forward, I would say with, you know, being able to engage with the customers and as things kind of return to normal, we would anticipate continuing to see some of these projects moved through the funnel. I also mentioned on the leasing side of the business. We're seeing good interest in including road Zipper as part of the overall construction programs in. You know a number of states. The one that we started to deliver in Australia is actually construction related program that I mentioned- a 30- 30 month lease there and we- And once we, you know, prove what Road Zipper can do. I think we we've.
Demonstrated add-on business as a result of some of that so again pretty. We remain optimistic on where we're at and.
Speaker 23: Demonstrated add-on business as a result of some of that so again pretty. We remain optimistic on where we're at and.
The growth potential of that business.
Speaker 12: The growth potential of that business.
Thanks I'm going to ask the question on inflation slash- potential deflation.
Speaker 2: Thanks I'm going to ask the question on inflation slash- potential deflation.
To see what kind of thoughts you can get on that or we can get from you on that. You've obviously had, you know, big revenue tailwinds over the last couple of years from from inflation which was been, you know, negative for margins. They're probably positive for earnings. We've seen hot rolled coil prices in the? U's come down quite a bit. The Fed is clearly focused on inflation. Just like that to get any thoughts you have gone. You know the potential reversal here and now, how that could impact your business. You know, if we saw steel prices revert back to where they were a few years ago, have you guys done the mth to figure out, I guess, how much earnings you would lose from you know pricing going back to where it was. You think you could maintain some of that pricing. Just any thoughts you can give us. As you know, invtors that clearly focused on what might happen here with the F that continuing to TI poluling.
Speaker 21: To see what kind of thoughts you can get on that or we can get from you on that. You've obviously had, you know, big revenue tailwinds over the last couple of years from from inflation which was been, you know, negative for margins. They're probably positive for earnings. We've seen hot rolled coil prices in the? U's come down quite a bit. The Fed is clearly focused on inflation. Just like that to get any thoughts you have gone. You know the potential reversal here and now, how that could impact your business. You know, if we saw steel prices revert back to where they were a few years ago, have you guys done the mth to figure out, I guess, how much earnings you would lose from you know pricing going back to where it was. You think you could maintain some of that pricing. Just any thoughts you can give us. As you know, invtors that clearly focused on what might happen here with the F that continuing to TI poluling.
Yes again as Brian , just to put things in perspective. I mean we do see the hople coil prices softening.
Speaker 24: Yes again as Brian , just to put things in perspective. I mean we do see the hople coil prices softening.
It's roughly 15 or so percent of our cost goods sold. But we still see structural steel which is another 15% or so of our cost of goods sold. That continues to.
Speaker 12: It's roughly 15 or so percent of our cost goods sold. But we still see structural steel which is another 15% or so of our cost of goods sold. That continues to.
Actually increase slightly. We see zinc, you know some other input costs logistics, more recently, you know, increasing. So the overall inflationary environment, I would say, is still still there. I I say it's moderated obviously from what it had been, you know, let's say a year ago. So again, depending on what the, what steel does, going forward, you know.
Speaker 25: Actually increase slightly. We see zinc, you know some other input costs logistics, more recently, you know, increasing. So the overall inflationary environment, I would say, is still still there. I I say it's moderated obviously from what it had been, you know, let's say a year ago. So again, depending on what the, what steel does, going forward, you know.
If there's a recession and demand falls off, we would expect it to continue to soften. In that case, we are always, just as we were on the way up, focused on protecting our margins and as prices begin to come down. If that happens, we would.
Speaker 12: If there's a recession and demand falls off, we would expect it to continue to soften. In that case, we are always, just as we were on the way up, focused on protecting our margins and as prices begin to come down. If that happens, we would.
Tend to lag. As much as we can to retain the value that we.
Speaker 12: Tend to lag. As much as we can to retain the value that we.
Kind of sacrificed on the way up, but at some point obviously we'd have to com.
Speaker 12: Kind of sacrificed on the way up, but at some point obviously we'd have to com.
Respond to competitive movements in price, but our objective would be to maintain margins.
Speaker 12: Respond to competitive movements in price, but our objective would be to maintain margins.
Okay thanks for that commentary. I allow, I LL pass on.
Speaker 2: Okay thanks for that commentary. I allow, I LL pass on.
Our next question will come from Brian Drab with William Blair. Please go ahead.
Speaker 2: Our next question will come from Brian Drab with William Blair. Please go ahead.
Morning thanks for taking the questions. I wanted to start just by asking about drought conditions and how that's either positively or negatively impacting demand at the moment and in the? U's the, the Brad.
Speaker 26: Morning thanks for taking the questions. I wanted to start just by asking about drought conditions and how that's either positively or negatively impacting demand at the moment and in the? U's the, the Brad.
Yes moren Brian , this is Randy. All coverred that. 1, we obviously watch the droughtg monitor and you see significant drought, particularly in the West. We've seen that now grived Western Texas and panella Texas and getting a lot close some of the repivoityirrigation market. So it does a couple of things. It probably provide some price support in the market. If the market feels that theres going to be some diminished yield potential in those areas. That will impact certain commodities differently. It certainly could promote more efficient use of water. If some of these irrigating with something that there not a center pvot and they want to stretch their water application out than switching to a centerpvot, which would be more efficient, could be an option for them. But you also get to a point where theres not enough water to finish a crop and unfortunately theres some regions and they may not be the core pivoity irrigation markets. Some of the regions might be reaching a point now where they don't have enough water to finish a crop and and that's a very difficult situation for those, those customers. But again I I don't know. theres going to be a significant impact for us and if you look globally it really depends where you are. You know I saw something about Australia getting too much their water right now really the office of a drought impact in several regions. But this time of year is as a weather marketkets, So whether it rains doesn't have to drought improves or gets worse. I think it does have an impact on commodity prices, in particular in customers sentiment. So it is something we watch. But I would say theres a significant impact on on our demand up or down right now.
Speaker 14: Yes moren Brian , this is Randy. All coverred that. 1, we obviously watch the droughtg monitor and you see significant drought, particularly in the West. We've seen that now grived Western Texas and panella Texas and getting a lot close some of the repivoityirrigation market. So it does a couple of things. It probably provide some price support in the market. If the market feels that theres going to be some diminished yield potential in those areas. That will impact certain commodities differently. It certainly could promote more efficient use of water. If some of these irrigating with something that there not a center pvot and they want to stretch their water application out than switching to a centerpvot, which would be more efficient, could be an option for them. But you also get to a point where theres not enough water to finish a crop and unfortunately theres some regions and they may not be the core pivoity irrigation markets. Some of the regions might be reaching a point now where they don't have enough water to finish a crop and and that's a very difficult situation for those, those customers. But again I I don't know. theres going to be a significant impact for us and if you look globally it really depends where you are. You know I saw something about Australia getting too much their water right now really the office of a drought impact in several regions. But this time of year is as a weather marketkets, So whether it rains doesn't have to drought improves or gets worse. I think it does have an impact on commodity prices, in particular in customers sentiment. So it is something we watch. But I would say theres a significant impact on on our demand up or down right now.
Ok God Thank, Thank you. And then you know gross margin impacts from the you know the barrier projects is my next question. You know how should we think about, maybe even just roughly directionally, gross margin for the company overall given, you know, the significant barrier revenue that you're going to recognize in just ad Zipper revenue in general in the fourth quarter?
Speaker 27: Ok God Thank, Thank you. And then you know gross margin impacts from the you know the barrier projects is my next question. You know how should we think about, maybe even just roughly directionally, gross margin for the company overall given, you know, the significant barrier revenue that you're going to recognize in just ad Zipper revenue in general in the fourth quarter?
Yeah Brian know, as we've spoken before, higher margins on barrier versus machines, and so in this case, the project, the massachusetts- is all all barrier, So that we tend to be a higher than average margin. So I would say it's it's going to be similar to what we've realized in the past on some of our larger probles, our Japan being a good example of a year or two ago when we had barrier sales there.
Speaker 24: Yeah Brian know, as we've spoken before, higher margins on barrier versus machines, and so in this case, the project, the massachusetts- is all all barrier, So that we tend to be a higher than average margin. So I would say it's it's going to be similar to what we've realized in the past on some of our larger probles, our Japan being a good example of a year or two ago when we had barrier sales there.
And you may have said it, but what was the total for barrier revenue? issu ES say roads IP for revenue in the third quarter.
Speaker 14: And you may have said it, but what was the total for barrier revenue? issu ES say roads IP for revenue in the third quarter.
Our total road ship per revenue. And this is just the sale, not necessarily the leasing would have been. It's really, it was really the Australia project. So roughly two and a half million dollars of sale.
Speaker 14: Our total road ship per revenue. And this is just the sale, not necessarily the leasing would have been. It's really, it was really the Australia project. So roughly two and a half million dollars of sale.
And you know least. I don't have that, that number.
Speaker 12: And you know least. I don't have that, that number.
Broken up but.
Speaker 12: Broken up but.
Relatively like in the third quarter for.
Speaker 1: Relatively like in the third quarter for.
rosyper.
Speaker 12: rosyper.
Ok got and so So that did. That wasn't a major.
Speaker 28: Ok got and so So that did. That wasn't a major.
A contributor than to the significant increase that you saw sequentially in gross margin the road Zipper or infrastructure in general.
Speaker 29: A contributor than to the significant increase that you saw sequentially in gross margin the road Zipper or infrastructure in general.
No I say frtructure infrastructure side was actually a negative gross margins is because of the know lease revenue which is generally higher than even the barrier in the the machine sales. So not having the- you know- a reduction in lease revenue offset by an increase in the road zit for sales and road safety products, you know we were flat in operating income year-over-year.
Speaker 30: No I say frtructure infrastructure side was actually a negative gross margins is because of the know lease revenue which is generally higher than even the barrier in the the machine sales. So not having the- you know- a reduction in lease revenue offset by an increase in the road zit for sales and road safety products, you know we were flat in operating income year-over-year.
Okay and then the main driver of the 700 basis point increase in gross margin sequentially in the third quarter was what?
Speaker 31: Okay and then the main driver of the 700 basis point increase in gross margin sequentially in the third quarter was what?
It's going to be irrigation and it's going to be both North America and international.
Speaker 14: It's going to be irrigation and it's going to be both North America and international.
voline spine volume leverage and.
Speaker 14: voline spine volume leverage and.
Yeah I would say it's price realizations by the single, you know, biggest factor and then the volume. And you know we're seeing that in both the price and volume impacts in international. To where that you? I think historically we've talked about international being lower overall operating margin compared to North America. What we saw in the third quarter is that it's become, you know, similar to what we have in North America. So that's, that was a real positive force as well.
Speaker 23: Yeah I would say it's price realizations by the single, you know, biggest factor and then the volume. And you know we're seeing that in both the price and volume impacts in international. To where that you? I think historically we've talked about international being lower overall operating margin compared to North America. What we saw in the third quarter is that it's become, you know, similar to what we have in North America. So that's, that was a real positive force as well.
Ok next. Thanks for moal.
Speaker 28: Ok next. Thanks for moal.
Our next question will come from Bret carney with caabbelli funds, Please go ahead.
Speaker 2: Our next question will come from Bret carney with caabbelli funds, Please go ahead.
Hi guys. Good more and thank take my question.
Speaker 32: Hi guys. Good more and thank take my question.
Morning breab.
Speaker 33: Morning breab.
Curious what kind of internal investments and CapEx projects you've lined up. Neither capacity or productivity side, with the balance sheet in great shape. Anything you've lined up kind of internal investments and thoughts on potentially any other uses of capital.
Speaker 32: Curious what kind of internal investments and CapEx projects you've lined up. Neither capacity or productivity side, with the balance sheet in great shape. Anything you've lined up kind of internal investments and thoughts on potentially any other uses of capital.
Yes I would say bretword currently more in an evaluation phase in terms of looking at our international business and where we need to add capacity, and I think two areas would be Brazil and Turkey, as we see the growth in that project market increase, which is primarily service out of Turkey, and then the Brazil market. We've done a lot of things to increase capacity without a whole lot of CapEx up to this point, but that would be an area that we would.
Speaker 14: Yes I would say bretword currently more in an evaluation phase in terms of looking at our international business and where we need to add capacity, and I think two areas would be Brazil and Turkey, as we see the growth in that project market increase, which is primarily service out of Turkey, and then the Brazil market. We've done a lot of things to increase capacity without a whole lot of CapEx up to this point, but that would be an area that we would.
Consider spending some money from a CapEx standpoint. I would say. The other area is, you know, adding to our lease fleet on the infrastructure side. You know, with some of the delays that we've seen in some of the lease projects we've kind of delayed the CapEx associated with that as well. But going forward that be another source where we see good returns from additional CapEx.
Speaker 12: Consider spending some money from a CapEx standpoint. I would say. The other area is, you know, adding to our lease fleet on the infrastructure side. You know, with some of the delays that we've seen in some of the lease projects we've kind of delayed the CapEx associated with that as well. But going forward that be another source where we see good returns from additional CapEx.
Ok traffic. Thanks so much.
Speaker 32: Ok traffic. Thanks so much.
Again if you have a question, please press Star and then one.
Speaker 2: Again if you have a question, please press Star and then one.
Our next question will come from John brats with KC CAA. Please go ahead.
Speaker 34: Our next question will come from John brats with KC CAA. Please go ahead.
mningin Randy bryine.
Speaker 32: mningin Randy bryine.
Brian , in the first two quarters you had some significant lile charges and you've talked about recovering those charges. You quote unquote: recoing. Are we actually seeing that in the in the third quarter results?
Speaker 33: Brian , in the first two quarters you had some significant lile charges and you've talked about recovering those charges. You quote unquote: recoing. Are we actually seeing that in the in the third quarter results?
No John we really haven't I would say there was even a slight LIFO impact negative impact in the quarter I'd say maybe around a million dollars. I think that the big thing there is if you look at where our inventory levels were at the end of the quarter similar to where they were at the end of the second quarter and so.
Speaker 13: No John we really haven't I would say there was even a slight LIFO impact negative impact in the quarter I'd say maybe around a million dollars. I think that the big thing there is if you look at where our inventory levels were at the end of the quarter similar to where they were at the end of the second quarter and so.
Really no no benefit from lifoo in the quarter. I think where we see. The benefit is just the the impact of the price realization starting to really.
Speaker 35: Really no no benefit from lifoo in the quarter. I think where we see. The benefit is just the the impact of the price realization starting to really.
Take hold. So okay, we again expect to see some of that life of benefit as we see inventory levels come down, okay. Okay, Brian. Also the Turkey's lira has been very, very weak.
Speaker 36: Take hold. So okay, we again expect to see some of that life of benefit as we see inventory levels come down, okay. Okay, Brian . Also the Turkey's lira has been very, very weak.
Does that? What kind of role does that have on your margins and your profitability in Turkish facility?
Speaker 37: Does that? What kind of role does that have on your margins and your profitability in Turkish facility?
John , the functional currency for our Turkey business is U's dollar right, because it's really exporting, So a lot of those markets and a lot of the input costs are based in U's dollars as well. I'd say the one area that we've seen the impact is obviously on on our employee compensation and some of the local expenses there. You we've seen the impact of the devaluation and inflation where we've had to adjust some of the compensation of our employees, but overall I would say not a significant.
Speaker 13: John , the functional currency for our Turkey business is U's dollar right, because it's really exporting, So a lot of those markets and a lot of the input costs are based in U's dollars as well. I'd say the one area that we've seen the impact is obviously on on our employee compensation and some of the local expenses there. You we've seen the impact of the devaluation and inflation where we've had to adjust some of the compensation of our employees, but overall I would say not a significant.
Not much of an impact on our overall profitability there.
Speaker 12: Not much of an impact on our overall profitability there.
Okay okay good, and then and then. Lastly, you know, obviously there's been a sizable working capital build this year. Of course now you're entrying need the the seasonally strong period in Brazil, in the Southern Hemisphere. But how do you see that working capital, maybe disinvestment in in in the next few quarters? Which should we see that investment coming, coming down?
Speaker 38: Okay okay good, and then and then. Lastly, you know, obviously there's been a sizable working capital build this year. Of course now you're entrying need the the seasonally strong period in Brazil, in the Southern Hemisphere. But how do you see that working capital, maybe disinvestment in in in the next few quarters? Which should we see that investment coming, coming down?
I would say I would expect that a reduction in North America particularly receivables. Some of those get collected in the fourth quarter. On the international side, I think what we're seeing is, you know we're supporting the growth in Brazil, also in Turkey, South Africa, where we, you know, we have active project activity going on. You know we're carrying more inventory than we normally would, just so that we can respond. You know, these projects, we talk about them for quite a while, we've got line of sight to them and then when they actually, when they actually happen, they expect delivery pretty quickly. So you know, I would say that's the one area that's a little bit of an uncertainty- is know we're maining, maintaining the inventory of the international business to be able to respond to that project business. Ok ok, all Brian , Thank you very much.
Speaker 14: I would say I would expect that a reduction in North America particularly receivables. Some of those get collected in the fourth quarter. On the international side, I think what we're seeing is, you know we're supporting the growth in Brazil, also in Turkey, South Africa, where we, you know, we have active project activity going on. You know we're carrying more inventory than we normally would, just so that we can respond. You know, these projects, we talk about them for quite a while, we've got line of sight to them and then when they actually, when they actually happen, they expect delivery pretty quickly. So you know, I would say that's the one area that's a little bit of an uncertainty- is know we're maining, maintaining the inventory of the international business to be able to respond to that project business. Ok ok, all Brian , Thank you very much.
There are no further questions at this time.
Speaker 2: There are no further questions at this time.
This will conclude our question-and-answer session. I would now like to turn the conference back over to MR Randy wood for any closing remarks.
Speaker 7: This will conclude our question-and-answer session. I would now like to turn the conference back over to MR Randy wood for any closing remarks.
Thank you for your interest and participation today.
Speaker 10: Thank you for your interest and participation today.
Our infrastructure segment continues to be supported by the incremental funding provided by the infrastructure investments in job sact and a return to more traditional travel capabilities that improve funnel management and rozipper project sales.
Speaker 9: Our infrastructure segment continues to be supported by the incremental funding provided by the infrastructure investments in job sact and a return to more traditional travel capabilities that improve funnel management and rozipper project sales.
This is tempered slightly by the impact of inflation and potential project delays caused by rising costs and labor availability.
Speaker 9: This is tempered slightly by the impact of inflation and potential project delays caused by rising costs and labor availability.
The irrigation segment of our business continues to see strong drivers connected to high commodity prices and international project demand, offset slightly by rising input cost that affect net farm income. We do believe the positive ROI provided by an investment in irrigated agriculture will continue to support a stable market.
Speaker 9: The irrigation segment of our business continues to see strong drivers connected to high commodity prices and international project demand, offset slightly by rising input cost that affect net farm income. We do believe the positive ROI provided by an investment in irrigated agriculture will continue to support a stable market.
Both segments benefit from ongoing investments in technology and innovation that allow our customers to operate more sustainably and more profitably.
Speaker 11: Both segments benefit from ongoing investments in technology and innovation that allow our customers to operate more sustainably and more profitably.
This concludes our third quarter earnings call. We look forward to updating you on our continued progress following the close of our fiscal 2023 fourth quarter. Thanks for joining us.
Speaker 11: This concludes our third quarter earnings call. We look forward to updating you on our continued progress following the close of our fiscal 2023 fourth quarter. Thanks for joining us.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Speaker 2: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.