Q4 2023 Lindsay Corp Earnings Call
Hello, and welcome to the Lindsay Corporation fourth quarter 'twenty twenty-three earnings conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question.
Speaker 1: Hello and welcome to the Lindsay Corporation fourth quarter twenty twenty three earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.
Speaker 1: To ask a question, you may press star then 1 on your telephone keypad. To withdraw from the question queue, please press star then 2. Please note, this event is being recorded.
You May press Star then one on your telephone keypad to withdraw from the question queue. Please press Star then two please note. This event is being recorded.
Speaker 1: I would now like to turn the conference over to Randy Wood, President and CEO . Please go ahead.
I would now like to turn the conference over to Randy Wood, President and CEO . Please go ahead.
Thank you and good morning, everyone welcome to our fourth quarter and for your earnings call with me today is Brian Ketcham, our Chief Financial Officer.
Speaker 2: Thank you and good morning everyone. Welcome to our fourth quarter and full year earnings call. With me today is Brian Ketchum, our Chief Financial Officer.
Speaker 2: Fiscal 2023 marked a year of significant achievements for Lindsay. Our teams executed extremely well across both of our business segments, which helped deliver record full year net earnings and earnings per share results.
Fiscal 2023 marked a year of significant achievements for Lindsay our teams executed extremely well across both of our business segments, which helped deliver record full year net earnings and earnings per share results.
Speaker 2: Fourth quarter performance was highlighted by strong irrigation results, specifically in Brazil, which recorded record levels of revenue and operating income. Our commercial efforts, including price management, coupled with efficiency initiatives and organic growth in our international regions, help drive record operating income and operating margins within our irrigation business.
Fourth quarter performance was highlighted by strong irrigation results, specifically in Brazil, which recorded record levels of revenue and operating income or.
Our commercial efforts, including price management, coupled with efficiency initiatives and organic growth in our international regions helped drive record operating income and operating margins within our irrigation business. These strong income results were achieved despite difficult year over year comps and a lower top line when compared to 2022.
Speaker 2: These strong income results were achieved despite difficult year-over-year comps and a lower top line when compared to 2022.
Turning to market outlook.
Speaker 2: Similar to the comments I made last quarter, our market outlook for Lindsay's business segments and key end markets remains positive in the near term.
Similar to the comments I made last quarter, our market outlook for Lindsay as business segments and key end markets remains positive in the near term.
Speaker 2: As it relates to our North American irrigation end markets, current commodity prices and US net farm income projections should continue to support healthy demand as we begin our fiscal 2024. While income for growers dip slightly when compared to the record levels we saw a year ago, growers will be profitable this year. While customers did take a wait and see approach this spring, we're seeing evidence of a strong fall selling season based on year-over-year order trends.
As it relates to our North American irrigation end markets current commodity prices and U S. Net farm income projections should continue to support healthy demand as we begin our fiscal 2024.
While income for growers dipped slightly when compared to the record levels. We saw a year ago growers will be profitable this year.
While customers did take a wait and see approach. This spring we're seeing evidence of a strong fall selling season based on year over year order trends.
Speaker 2: Within our international irrigation markets, we experience strong growth during the fourth quarter, particularly across Brazil and South America. We expect international sales volume levels to remain robust in fiscal 2024 supported by strong fundamentals in the mature markets and the continued expansion and project potential in the emerging and developing markets where irrigation presents significant opportunities for yield enhancement to address food security and weather uncertainty.
Within our international irrigation markets, we experienced strong growth during the fourth quarter, particularly across Brazil, and South America, We expect international sales volume levels to remain robust in fiscal 'twenty 'twenty four supported by strong fundamentals in the mature markets and the continued expansion and project potential in the emerging and developing markets.
We're irrigation presents significant opportunities for yield enhancement to address food security and weather uncertainty.
Turning to infrastructure.
Speaker 2: Turning to infrastructure, we continue to see positive near-term and long-term market opportunities driven by federal funding provided by the Infrastructure Investments and Jobs Act in the United States. This funding, as it continues to be distributed, will support necessary investments in roadway infrastructure and we believe this will ultimately broaden our infrastructure sales and leasing pipeline.
We continue to see positive near term and long term market opportunities driven by federal funding provided by the infrastructure investments and jobs Act in the United States. This funding as it continues to be distributed will support necessary investments and roadway infrastructure and we believe this will ultimately broaden our infrastructure sales and leasing pipeline.
Speaker 2: While comparisons were difficult relative to the prior year, where we benefited from a number of non-repetitive road zipper project wins, our focus on funnel management did generate leasing growth in 2023.
While comparisons were difficult relative to the prior year, where we benefited from a number of non repetitive road Zipper project wins are focus on funnel management did generate leasing growth in 2023.
Speaker 2: Going forward, we see secular demand strength to both sales and leasing for RoadZipper and expect solid earning support from our line of road safety products. peoples who are
Going forward, we see secular demand strength to both sales and leasing for road zipper and expect solid earning support from our line of road safety products.
Moving to innovation and technology.
Speaker 2: Our team continues their deliberate focus of delivering customer first innovation, which will continue to strengthen our growth profile and projections.
Our team continues their deliberate focus of delivering customer first innovation, which will continue to strengthen our growth profile and projections. We were pleased to complete our acquisition of feels wise during the fourth quarter of this year field wise as a market leader in agricultural technology products with a focus on subscription based precision irrigation solutions.
Speaker 2: We were pleased to complete our acquisition of FieldWise during the fourth quarter of this year. FieldWise is a market leader in agricultural technology products with a focus on subscription-based precision irrigation solutions.
Speaker 2: This allows Lindsay to reach an expanded set of irrigation technology customers while accessing previously untapped growth markets and sales channels. Opportunities like Fieldwise strengthen Lindsay's irrigation market position but also advance our integrated technology capabilities and overall ability to reach a broader set of customers and service providers globally.
This allows you to reach an expanded set of irrigation technology customers, while accessing previously untapped growth markets and sales channels opportunities like field why strengthened Lindsay irrigation market position, but also advance our integrated technology capabilities and overall ability to reach a broader set of customers and service providers globally.
In the area of sustainability, we were pleased to release the fifth edition of our annual ESG report and our fourth quarter. This highlights our continued progress on our environmental social and governance goals contributing to our mission of conserving natural resources, expanding our worlds potential and enhancing quality of life.
Speaker 2: in the area of sustainability. We were pleased to release the fifth edition of our annual ESG report in our fourth quarter. This highlights our continued progress on our environmental, social, and governance goals contributing to our mission of conserving natural resources, expanding our world's potential, and enhancing quality of life.
Speaker 2: I'd like to thank our employees and team members for their ongoing hard work and dedication in advancing our vision to become the innovation and market leader in our core irrigation and infrastructure segments. I'd also like to thank our loyal customers and dedicated dealers around the world. Without their trust and confidence, we would not be able to achieve the record results we've delivered.
I'd like to thank our employees and team members for their ongoing hard work and dedication in advancing our vision to become the innovation in the market leader in our core irrigation and infrastructure segments. I'd also like to thank our loyal customers and dedicated dealers around the world without their trust and confidence we would not be able to achieve the record results we delivered.
Speaker 2: I'd like to now turn the call over to Brian to discuss our fourth quarter and full year financial results. Brian . Thank you, Randy.
I'd like to now turn the call over to Brian to discuss our fourth quarter and full year financial results Brian .
Thank you Randy and good morning, everyone.
Speaker 3: Total revenues for the fourth quarter of fiscal 2023 decreased 12% to $167.1 million compared to $190.2 million in the same quarter last year.
Total revenues for the fourth quarter of fiscal 2023 decreased 12% to $167 $1 million compared to $192 million in the same quarter last year net.
Speaker 3: Net earnings for the quarter were $19.2 million, or $1.74 per diluted share, each growing more than 7% respectively compared to net earnings of $17.9 million, or $1.62 per diluted share in the prior year.
Net earnings for the quarter were $19 $2 million or $1 74 per diluted share each growing more than 7%, respectively compared to net earnings of $17 $9 million or $1.62 per diluted share in the prior year.
Speaker 3: Total revenues for the full year decreased 13% to $674.1 million compared to record revenues in the prior fiscal year of $770.7 million.
Total revenues for the full year decreased 13% to $674 $1 million compared to record revenues in the prior fiscal year up $777 million.
Net earnings for fiscal 2023 were $72 $4 million or $6 54 per diluted share compared to net earnings of $65 $5 million or $5 94 per diluted share in the prior fiscal year.
Speaker 3: Net earnings for fiscal 2023 were $72.4 million, or $6.54 per diluted share, compared to net earnings of $65.5 million, or $5.94 per diluted share in the prior fiscal year. Performance that marked year-over-year growth of 11% and 10% respectively.
Performance that marked year over year growth of 11% and 10% respectively.
Speaker 3: As Randy mentioned, this level of earnings is a record for the company, which is significant as efforts we've made to enhance our profitability have taken hold irrespective of lower year-over-year top-line performance.
As Randy mentioned this level of earnings is a record for the company.
Which is significant as efforts we've made to enhance our profitability have taken whole irrespective of lower year over year top line performance.
Turning to our segment results irrigation segment revenues for the fourth quarter decreased 5% to $143 $6 million compared to $155 million in the same quarter last year.
Speaker 3: Turning to our segment results. Irrigation segment revenues for the fourth quarter decreased 5% to $143.6 million compared to $150.5 million in the same quarter last year.
Speaker 3: North America irrigation revenues of $60.2 million decreased 25% compared to last year's fourth quarter.
North America irrigation revenues of $62 million decreased 25% compared to last year's fourth quarter.
Speaker 3: The decrease in North America is primarily attributable to lower unit sales volumes while average selling prices were comparable with the prior year fourth quarter.
The decrease in North America is primarily attributable to lower unit sales volumes, while average selling prices were comparable with the prior year fourth quarter.
Speaker 3: Unit sales volumes in the prior year fourth quarter reflected an exceptional level of storm damage replacement demand, while unit sales volumes in the current year reflected a more normal seasonal demand profile.
Unit sales volumes in the prior year fourth quarter reflected an exceptional level of storm damage replacement demand while unit sales volumes in the current year reflected a more normal seasonable seasonal demand profile.
Speaker 3: As previously noted, the incremental revenue impact from last year's storm damage replacement demand was estimated at approximately $20 million.
As previously noted the incremental revenue impact from last year's storm damage replacement demand was estimated at approximately $20 million.
In international irrigation markets revenues of $83 $4 million increased 18% compared to last year's fourth quarter.
Speaker 3: In international irrigation markets, revenues of $83.4 million increased 18% compared to last year's fourth quarter.
The increase was primarily from higher sales volumes in Brazil, Argentina, and the middle east compared to the prior year fourth quarter.
Speaker 3: The increase was primarily from higher sales volumes in Brazil, Argentina, and the Middle East compared to the prior year fourth quarter.
As we indicated on our third quarter call, we anticipated sales volumes in Brazil to increase in the fourth quarter.
Speaker 3: As we indicated on our third quarter call, we anticipated sales volumes in Brazil to increase in the fourth quarter, supported by the new government financing plan that was announced in June .
Supported by the new government financing plan that was announced in June .
Total irrigation segment operating income for the fourth quarter was $29 $8 million, an increase of 23% compared to the prior year fourth quarter and operating margin was 27% of sales compared to 16, 1% of sales in the prior year.
Speaker 3: Total irrigation segment operating income for the fourth quarter was $29.8 million, an increase of 23% compared to the prior year fourth quarter, and operating margin was 20.7% of sales compared to 16.1% of sales in the prior year.
The increase in operating income and operating margin resulted from gross margin expansion driven by improved price realization.
Speaker 3: The increase in operating income and operating margin resulted from gross margin expansion driven by improved price realization, reduced inflationary impact on input costs, and improved operating performance in our factories compared to the prior year fourth quarter.
<unk> inflationary impact on input costs and improved operating performance in our factories compared to the prior year fourth quarter.
Speaker 3: This record level of profitability in the fourth quarter also was bolstered by record performance in Brazil.
This record level of profitability in the fourth quarter also was both bolstered by record performance in Brazil.
For the full fiscal year total irrigation segment revenues decreased 12% to $586 million.
Speaker 3: For the full fiscal year, total irrigation segment revenues decreased 12% to $586 million, compared to $665.8 million in the prior year.
<unk> to $665 $8 million in the prior year.
Speaker 3: North American irrigation revenues of $309.5 million decreased 13% compared to the prior year and international irrigation revenues of $276.5 million decreased 11% compared to the prior year.
North America irrigation revenues of $309 $5 million decreased 13% compared to the prior year and international irrigation revenues of $276 $5 million decreased 11% compared to the prior year.
Operating income in the irrigation segment for the full fiscal year was $122 million, an increase of 15% compared to the prior year.
Speaker 3: Operating income in the irrigation segment for the full fiscal year was $122 million, an increase of 15% compared to the prior year.
Speaker 3: and operating margin was 20.8% of sales compared to 15.9% of sales in the prior fiscal year.
And operating margin was 28% of sales compared to 15, 9% of sales in the prior fiscal year.
Speaker 3: The increase in operating margin resulted from gross margin expansion driven by the factors noted previously, as well as from a more favorable mix of international revenues compared to the prior year.
The increase in operating margin resulted from gross margin expansion driven by the factors noted previously as well as from a more favorable mix of international revenues compared to the prior year.
Infrastructure segment revenues for the fourth quarter decreased 41%.
Speaker 3: Infrastructure segment revenues for the fourth quarter decreased 41% to $23.5 million compared to $39.7 million in the same quarter last year.
$23 $5 million compared to $39 $7 million in the same quarter last year.
Speaker 3: The decrease resulted from lower road zipper system sales with the prior year fourth quarter, including a number of project sales that did not repeat in the current year fourth quarter.
The decrease resulted from lower road zipper system sales with the prior year fourth quarter, including a number of project sales that did not repeat in the current year fourth quarter.
Speaker 3: One project in particular that was delivered in last year's fourth quarter amounted to approximately $16 million.
One project in particular that was delivered in last year's fourth quarter amounted to approximately $16 million.
Speaker 3: The impact of lower project sales was partially offset by growth in road zipper lease revenue and higher sales of road safety products compared to the prior year fourth quarter.
The impact of lower project sales was partially offset by growth in road zipper lease revenue and higher sales of road safety products compared to the prior year fourth quarter.
Speaker 3: Infrastructure segment operating income for the fourth quarter decreased 73% to $3.1 million compared to $11.5 million in the same quarter last year.
Infrastructure segment operating income for the fourth quarter decreased 73% to $3 1 million compared to $11 5 million in the same quarter last year.
Speaker 3: Infrastructure operating margin for the quarter was 13.3% of sales compared to 28.8% of sales in the prior year.
Infrastructure operating margin for the quarter was 13, 3% of sales compared to 28, 8% of sales in the prior year.
Speaker 3: The decrease in operating income and margin resulted from lower revenues compared to the prior year and the resulting loss in fixed cost leverage.
The decrease in operating income and margin resulted from lower revenues compared to the prior year, and the resulting loss and fixed cost leverage.
Speaker 3: For the full fiscal year, infrastructure segment revenues decreased 16% to $88.1 million compared to $104.9 million in the prior year.
For the full fiscal year infrastructure.
Segment revenues decreased 16% to $88 $1 million compared to $104 $9 million in the prior year.
Speaker 3: Infrastructure operating income for the full fiscal year was $12.1 million compared to $18.3 million in the prior year.
Infrastructure operating income for the full fiscal year was $12 1 million compared to $18 $3 million in the prior year.
Speaker 3: Operating margin for the year was 13.7% of sales compared to 17.5% of sales in the prior year
And operating margin for the year was 13, 7% of sales compared to 17, 5% of sales in the prior year.
Speaker 3: Turning to the balance sheet and liquidity. Our total available liquidity at the end of the fiscal year was $216 million, which includes $166 million in cash, cash equivalents and marketable securities, and $50 million available under our revolving credit facility.
Turning to the balance sheet and liquidity, our total available liquidity at the end of the fiscal year was $216 million, which includes $166 million in cash cash equivalents in marketable securities and $50 million available under our revolving credit facility.
Speaker 3: Our strong operating performance for the year, along with effective working capital management, resulted in free cash flow of $100.9 million, or 139% of net earnings.
Our strong operating performance for the year, along with effective working capital management resulted in free cash flow of $109 million or 139% of net earnings.
Speaker 3: This improved cash flow further strengthens our balance sheet and positions us well to continue executing our capital allocation strategy.
This improved cash flow further strengthens our balance sheet and positions us well to continue executing our capital outlook allocation strategy.
Speaker 3: In closing, I'd like to provide investors with an updated view of the company's longer-term financial goals and targets.
In closing I'd like to provide investors with an updated view of the company's longer term financial goals and targets.
Speaker 3: Over the past three years, Lindsay has delivered marked growth and solid financial results across a variable macroeconomic backdrop.
Over the past three years Lindsay has delivered marked growth and solid financial results across our variable macroeconomic backdrop and.
And we have updated our five year financial goals as highlighted on page 15 of the earnings presentation.
Speaker 3: And we have updated our five-year financial goals as highlighted on page 15 of the earnings presentation.
Speaker 3: Over this period, our goal for organic revenue growth is to average greater than 7% annually.
Over this period our goal for organic revenue growth is to average greater than 7% annually.
Speaker 3: Additionally, our goals are to to deliver annual operating margins greater than 14%.
Additionally, our goals are to deliver annual operating margins greater than 14%.
Speaker 3: return on invested capital greater than 12%, and earnings per share growth greater than 10%.
Return on invested capital greater than 12%.
And earnings per share growth greater than 10%.
These five year goals are supported by the performance momentum, we have been able to deliver <unk>.
Speaker 3: These five-year goals are supported by the performance momentum we've been able to deliver and our alignment to positive secular growth trends across both our irrigation and infrastructure business.
And our alignment to positive secular growth trends across both our irrigation and infrastructure businesses.
Speaker 3: That concludes my remarks and at this time I'd like to turn the call over to the operator to take your questions.
That concludes my remarks, and at this time I'd like to turn the call over to the operator to take your questions.
Thank you very much we will now begin the question and answer session.
Speaker 1: Thank you very much. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key.
A question you May Press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys.
Speaker 1: To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.
To withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Today's first question comes from Nathan Jones with Stifel. Please go ahead.
Speaker 1: Today's first question comes from Nathan Jones with Stifel. Please go ahead.
Good morning, everyone.
And then Fernando.
Speaker 4: I guess I have to start with a question on the five year financial goals. Um, and I guess specifically after start with operating margin greater than 14%, uh, I think you did, you just did a operating margin greater than 14% for 2023. Um, you know, it looks like it's over 15%.
I guess I have to start with a question on a five year financial goals.
Specific that this thought with operating margin greater than 14%.
I think you did you just dig operating margin greater than 80% for 2023.
Yes, it looks like its Doug.
Is that.
Speaker 4: Can you just talk about the expectations for him?
Can you just talk about the.
Expectations for them.
Speaker 4: From there, I mean, I just how you come up with, you know, greater than 14% five year target when you're already at 15. Yeah.
From there I mean, just how do you come up with greater than 14% five year target. When you are already at 58.
Yeah, I think when you look at.
Speaker 3: kind of again where we where we're at today. I think this year we we did benefit, you know, from some of the raw material.
Kind of again, where we where we're at today I think this year, we did benefit.
From some of the raw material softening, but we also had some LIFO benefit this year that I wouldn't plan on going forward, but you know I guess, our feeling is.
Speaker 3: softening, but we also had some lipo benefit this year that I wouldn't plan on going forward. But I guess our feeling is operating on a regular basis above 14% and then reinvesting into our business with the cash family tried.
Operating on a on a regular basis above 14% and then reinvesting in our business with the.
Speaker 3: technology and new product development. That's kind of what our thoughts are behind the greater than 14%.
Technology.
And new product development.
Kind of.
What our thoughts are behind the greater than 14%.
Okay, and then I guess I'll go to domestic irrigation.
Speaker 4: Okay, and then I guess I'll go to domestic irrigation. I mean, some of your commentary was pretty bullish there, Randy.
I mean, it'll be all commentary was pretty bullish there Randy.
Despite the fact that we've seen a few quarters in a row here.
Speaker 4: Despite the fact that we've seen, you know, a few quarters in a row here of negative growth, daily negative growth in domestic irrigation business. You talked about strong near-term demand, you talked about positive order rate year over year so far this quarter.
A negative growth while the negative growth in domestic irrigation business. I mean, you talked about strong near term demand you talked about positive order rate year.
Year over year.
So far this quarter.
Speaker 4: I understand that was a negative impact from storm revenue year over year in the fourth quarter of 23.
I understand that was that.
<unk> been pipe from storm revenue year over year in the fourth quarter of 'twenty.
Speaker 4: It would seem that it's likely that you are still going to have some negative comps here in the short term in domestic irrigation. But Randy, your commentary sounded maybe a bit more bullish than that. So maybe if you could just give us some more colour on the near term expectations around the domestic side of the irrigation business.
It would seem that it.
It's likely that you are still going to have some negative comps here in the short term I mean domestic irrigation, but Randy your commentary sounded maybe a bit more bullish than that so maybe if you could just give us some more color on the near term expectations around the domestic side of the irrigation business.
Sure you bet, Nathan and I think what we've talked about today is consistent with what we talked about earlier in the year.
Speaker 2: Sure, you bet Nathan. And I think what we've talked about today is consistent with what we talked about earlier in the year.
Speaker 2: And we talked about this wait and see approach where we know customers are going to be profitable this year.
And we've talked about this wait and see approach, where we know customers are going to be profitable this year and they've demonstrated when they make money they invest money and we know that we can battle for and when that capital when they make investments to improve their operations to enhance yields improve yield consistency. We know we can get those dollars. So I think this spring we saw kind of a drug.
Speaker 2: and they've demonstrated when they make money, they invest money, and we know that we can battle for and win that capital when they make investments to improve their operations, to enhance yields, improve yield consistency. We know we can get those dollars. So I think this spring, we saw kind of a truncated season, and we were a little disappointed with some of the results, but we did see strong quotation demand. We just didn't see customers taking those quotations all the way to order. So some of this was expected based on feedback from customers in our channel, and again, when they're profitable, they're gonna make these investments. So we feel good.
<unk> season, and then we were a little disappointed with some of the results, but we did see strong quotation demand. We just didn't see customers taking those quotations all the way to order. So some of this was was expected based on feedback from customers and our channel and again, when they're profitable they're going to make these investments. So we feel good about what we see in the order.
Speaker 2: about what we see in order demand right now. This is customers selling or buying based on the crop they're selling this year.
Demand right now this is customers selling or buying based on crop theyre selling this year.
Speaker 2: and profits generated this year. As we move forward into next season, I think every year starts new. So, do we carry a lot of optimism into next spring? I still think the yield enhancement benefits are going to be a tailwind for us. I still think customers are going to be profitable, maybe not record profit levels that we saw last year.
And profits generated this year as we move forward into next season I think every year starts are new so does do we carry a lot of optimism into next spring I still think the yoga enhancement benefits are going to be a tailwind for us I still think customers are going to be profitable maybe not record profit levels that we saw last year.
Speaker 2: But again, customers make money, they invest money. I think that's really given us confidence in this market need.
But again customers make money they invest money I think that's really given us competency in this sign this market Nathan.
Speaker 4: I know you guys don't give guidance, but do you ask the question, would you expect to be able to generate organic revenue growth in the domestic business in fiscal 24?
I know you guys don't give guidance, but do you.
Ask the question would you expect to be able to generate organic revenue growth in the domestic business in fiscal 'twenty four.
Yes, Nathan this is Brian .
Speaker 3: Yeah, Nathan, this Brian , I think that is our expectation. I think as Randy talked about, you know, we saw some of this demand being deferred, you know, and it's so far, you know, into the fall, it's kind of playing out that way. So, um,
That is our expectation I think as Randy talked about we saw some of this demand being deferred.
And then so far.
The fall is kind of playing out that way so.
Speaker 3: You know, and then we get into our second, third quarters and we do have easier comps. So I think it's realistic to expect year over year, unibodym growth in North America.
And then we get into our second and third quarters, and we do have eased.
Easier comps so.
I think it's realistic to expect year over year.
Unit volume growth in North America.
Okay. Thanks, I'll pass it on.
Thank you. The next question comes from Brian Wright with Roth Capital Partners. Please go ahead.
Speaker 1: Thank you. The next question comes from Brian Wright with Ross Capital Partners. Please go ahead.
Okay.
Speaker 3: Thanks and good morning. I just wanted to follow up on the comment in the press release about the Brazilian financing switching to quarterly allocation and just how to think about that having any impact on seasonality and the international sales in 24.
Thanks, and good morning.
Just wanted to follow up on the comment in the press release out briefly and finance, which means two quarterly allocation and just.
How to think about that having any impact on seasonality and the.
International sales and 24.
Yes. Good morning, Brian This is Randy I'll take that one and this was a fundamental change in how the program is administered in Brazil and at the macro level. We did see aggressive finance rates 10, 5%. We did see an increase a published increase in the amount of money that will go into the program, but historically there was one tranche it was announced.
Speaker 2: Yeah, good morning, Brian . This is Randy. I'll take that one. And this was a fundamental change in how the program is administered in Brazil. And at the macro level, we did see aggressive finance rates, 10.5%. We did see an increase, a published increase in the amount of money that will go into the program. But historically, there was one tranche. It was announced in the June-July timeframe. All the applications were entered, all the money was allocated. So we saw a lot of that order backlog early, and then we generally burned it down through the remainder of the year.
<unk> in that June July timeframe, all of the applications were entered all the money was allocated so we saw a lot of that order backlog early and then we generally burned it down through the remainder of the year. This year. It is being administered very differently and the government is now managing four tranches quarterly tranches throughout the year, so there'll be an application process, but.
Speaker 2: This year it's being administered very differently and the government is now managing four tranches, quarterly tranches throughout the year. So there'll be an application process but then that money will get metered out four different times across the year. So it does change the order pattern.
And that money will get metered out four different times across the year. So it does change the order pattern and in our view it is going to change backlog in Brazil, it's going to be more staged and spread out over the year.
Speaker 2: And in our view, it is going to change backlog in Brazil. It's going to be more staged and spread out over the year. And we'll have to wait and see how that really corresponds into projects being shipped and revenue being recognized. Overall, it's still very good news for the market. The government continues to invest and support.
And well have to wait and see how that really corresponds into project being shipped and revenue being recognized overall, it's still a very good news for the market. The government continues to invest in support and agriculture, but the timing is going to look different this year and not having any historical reference point on how these quarterly tranches are going to work, it's tough to predict but the strong March.
Speaker 2: in agriculture, but the timing is going to look different this year and not having any historical reference point on how these quarterly tranches are going to work, it's tough to predict but the strong market fundamentals there in our view still will generate growth in the region.
Operator: Hello and welcome to the Lindsay Corporation 4th quarter 2023 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
The fundamentals there in our view, we still will generate growth in the region.
Speaker 5: Over time after we get through this first year transition, do you think that that will over the long term actually improve your visibility on that part of the business potentially?
Yes.
Over time after we get through this first year transition do you think that that will over the long term actually improve your visibility.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw from the question queue, please press star then two. Please note, this event is being recorded.
On that part of the business.
Hi, Julie.
Speaker 2: It could and it couldn't and I think where it can't or maybe won't is when the program's administered once a year you've kind of got immediate demand or immediate visibility of market demand.
It could and it couldn't and I think.
Where it can't or maybe won't is when the program is administered once a year you've kind of got immediate demand.
Randy Wood: I would now like to turn the conference over to Randy Wood, President and CEO. Please go ahead. Thank you and good morning everyone.
Visibility of market demand now as these programs are administered quarterly youre, just going to see that demand for different times throughout the year as opposed to a single time in the year. So I think it's good for material planning efficiency through the factory I'd, rather have flat volume flow month over month quarter over quarter, we can run more efficiently.
Speaker 2: Now as these programs are administered quarterly, we're just going to see that demand four different times throughout the year as opposed to a single time in the year. I think it's good for material planning, efficiency through the factory. I'd rather have flat volume flow month over month, quarter over quarter. We can run more efficiently that way.
Randy Wood: Welcome to our fourth quarter and four year earnings call with me today is Brian Ketcham, our chief financial officer, fiscal 2023 marked a year of significant achievements for Lindsay. Our teams executed extremely well across both of our business segments, which helped deliver record full year net earnings and earnings per share results. Fourth quarter performance was highlighted by strong irrigation results, specifically in Brazil, which recorded record levels of revenue and operating income.
Really that way, but it's also nice to see the backlog I know what you've got in in front of you, but I think our ability to support customers run inefficient state factory I think thats going to be certainly a lot easier with the way. The program is administered this year, but there's no guarantee that this is how the government will continue to operate at if they like what they see I expect they would and good if they see.
Speaker 2: But it's also nice to see the backlog and know what you've got in front of you. But I think our ability to support customers, run an efficient, safe factory, I think that's going to be certainly a lot easier with the way the program is administered this year. But there's no guarantee that this is how the government will continue to operate it. If they like what they see, I expect they would and could. If they see other administrative issues with managing this way, I wouldn't be surprised if they went back to the older way as well.
Randy Wood: Our commercial efforts, including price management, coupled with the efficiency initiatives in organic growth in our international regions, held drive record operating income and operating margins within our irrigation business. These strong income results were achieved despite difficult year of year comps and a lower top line when compared to 2022.
Other administrative issues with managing this way I wouldn't be surprised if they went back to the ER the older way as well.
Okay. Thanks.
Speaker 5: Okay, thanks. That's really helpful for that color. Can you help us with inventory? We've seen a nice reduction in inventory. Is that normalization pretty much complete, or could that also be a benefit to cash flow in 24?
That's really helpful color.
Color.
Is there any way can you help us with inventory.
Randy Wood: Turning to market outlook. Similar to the comments I made last quarter, our market outlook for Lindsay's business segments and key end markets remains positive in the near term. As it relates to our North American irrigation end markets, current commodity prices and US net farm income projections should continue to support healthy demand as we begin our fiscal 2024. While income for growers dips slightly when compared to the record levels we saw a year ago, growers will be profitable this year.
We've seen a nice reduction in inventory is that normalization pretty much complete or could that also be a benefit to cash flow in 'twenty four.
Yeah, Brian Yes, we had.
Speaker 3: Yeah, Brian . Yeah, we had a very dedicated focus on inventory this year and I would say it was really
Very dedicated focus on inventory this year and I would say.
It was really across the board I mean, a lot of it came out of our U S plant, but we also had.
Speaker 3: across the board. I mean a lot of it came out of our US plant, but we also had
Randy Wood: While customers did take a wait and see approach this spring, we're seeing evidence of a strong fall selling season based on year over year order trends. Within our international irrigation markets, we experience strong growth during the fourth quarter, particularly across Brazil and South America. We expect international sales volume levels to remain robust in fiscal 2024, supported by strong fundamentals in the mature markets, and the continued expansion and project potential in the emerging and developing markets, where irrigation presents significant opportunities for yield enhancement to address food security and weather uncertainty.
Speaker 3: reduced inventories in Brazil and Turkey. And it was really reflective of, you know, during the pandemic and afterwards with supply chain issues and things, we all carried, like a lot of other companies, carried more inventory than we normally would. So this is primarily reflective of, you know, just getting the inventories down to a more manageable level. And so, yeah, I think, we think there's still opportunity there, but not to the level that we saw in 2020.
Reduced inventories in Brazil, and Turkey, and it was really reflective of during the pandemic and afterwards with supply chain issues and things we all.
Carried like in a lot of other companies carried more inventory than we normally would so this is primarily reflective of just getting the inventories down to a more manageable level and so yes, I think we think there's still opportunity there, but not to the level that we saw in 2023.
Okay.
Speaker 5: Great, great. And one last one if I could sneak it in. Can you just help us out with the tax rate in the quarter and then how to think about tax rate for 24?
Great Great and one last one if I can sneak it in can you just help us out with the tax rate in the quarter and then how to think about tax rate for 24.
Randy Wood: Turning to infrastructure. We continue to see positive near term and long term market opportunities driven by federal funding provided by the Infrastructure Investments and Jobs Act in the United States. This funding, as it continues to be distributed, will support necessary investments in roadway infrastructure, and we believe this will ultimately broaden our infrastructure sales and leasing pipeline. While comparisons were difficult relative to the prior year, where we benefited from a number of non-repetitive road zipper project wins, our focus on funnel management did generate leasing growth in 2023.
Speaker 3: Yeah, good question. In the quarter, you know, we had, there was a change in US tax regulations that took place during the quarter that now allows foreign tax credit for earnings in Brazil prior to that.
Yeah. Good question in the quarter.
We had there was a change in the U S tax regulations that took place during the quarter that now allows.
Foreign tax credit for earnings in Brazil prior to that.
Speaker 3: because Brazil wasn't compliant with the global or the, yeah, worldwide transfer pricing rules. The US was gonna disallow the foreign tax credit. That got changed in the fourth quarter. So what happens then is it's a cumulative adjustment for the year.
Because Brazil wasn't compliant with the global or the worldwide transfer pricing rules. The U S was going to disallow the.
Foreign tax credit that got changed in the fourth quarter. So what happens then is it's accumulative adjustment for the year.
Randy Wood: Going forward we see secular demand strength to both sales and leasing for road zipper and expect solid earning support from our line of road safety products. Moving to innovation and technology, our team continues their deliberate focus of delivering customer first innovation, which will continue to strengthen our growth profile and projections.
Speaker 3: Taking into account that we can take that tax credit now. So it. 22 little over 22% of the.
Taking into account that we can take that tax credit now so it.
22, little over 22% for the quarter.
Speaker 3: Going forward though, as we talked about before with the shift in the growth.
Going forward, though as we talked about before with.
The shift in the growth being stronger outside the U S than inside the U S. It does drive a higher effective tax rate and you saw that probably on a year over year basis in 'twenty two versus 'twenty three.
Randy Wood: We were pleased to complete our acquisition of field-wise during the fourth quarter of this year. Field-wise is a market leader and agricultural technology products with the focus on subscription-based precision irrigation solutions. This allows Lindsey to reach an expanded set of irrigation technology customers while accessing previously untapped growth markets and sales channels.
Speaker 3: stronger outside the US than inside the US, it does drive a higher effective tax rate. And you saw that probably on a year-over-year basis in 22 versus 23.
Speaker 3: But I would say for 24, our expectation is it's probably going to be around 29%.
But I would say 424, our expectation is it's probably going to be around 29%.
For the year.
Randy Wood: Opportunities like field-wise strengthen Lindsey's irrigation market position, but also advance our integrated technology capabilities and overall ability to reach a broader set of customers and service providers Lee. In the area of sustainability, we were pleased to release the fifth edition of our annual ESG report in our fourth quarter. This highlights our continued progress on our environmental, social, and governance goals, contributing to our mission of conserving natural resources, expanding our world's potential, and enhancing quality of life.
Speaker 5: Great, great. Thanks so much. Congrats on the quarter and thanks.
Great great. Thanks, so much.
Congrats on the quarter and then thanks.
Thank you. Thank you.
Speaker 1: Thank you. The next question comes from Brian Drab with William Blair. Please go ahead. Good morning. Thanks for taking my time.
Thank you. The next question comes from Brian Drab with William Blair. Please go ahead.
Good morning, Thanks for taking my questions.
Speaker 6: I just wanted to start first with a look at fiscal 2024 and the operating margin is being asked previously on the call, but some discussion around the long term goal of 14% plus. What what do you expect in the near term? I know you said you had the life of benefit. Um, that was pretty material recently. I mean, could 2024 margin operating margin. I guess be down then.
I just wanted to start first with <unk>.
I'll look at fiscal 2024, and the operating margin is being asked previously on the call but.
Some discussion around the long term goal of 14% plus.
Randy Wood: I'd like to thank our employees and team members for their ongoing hard work and dedication and advancing our vision to become the innovation and market leader in our core irrigation and infrastructure segments. I'd also like to thank our loyal customers and dedicated dealers around the world. Without their trusting confidence, we would not be able to achieve the record results we've delivered.
What do you expect in the near term I know you had you said you had the LIFO benefit.
That was pretty material recently.
Could 2024 margin operating margin I guess be down then.
No we would expect that to be the case, Brian Let me just also state in 2023.
Speaker 3: No, we wouldn't expect that to be the case, Brian . And let me just also state, you know, in 2023, there really wasn't any significant project volume, either in irrigation or in infrastructure. And so you know that operating margin where we're at today.
Brian Ketcham: I'd like to now turn the call over to Brian to discuss our fourth quarter and full-year financial results. Brian. Thank you, Randy.
There really wasn't any significant project volume either in irrigation or in infrastructure and so.
Brian Ketcham: Good morning, everyone. Total revenue is for the fourth quarter of fiscal 2023, decreased 12 percent to $167.1 million compared to $190.2 million in the same quarter last year. Net earnings for the quarter were $19.2 million or $1.74 per diluted share, each growing more than 7 percent respectively compared to net earnings of $17.9 million or $1.62 per diluted share in the prior year. Total revenues for the full-year decreased 13 percent to $674.1 million compared to record revenues in the prior fiscal year of $770.7 million.
Operating margin, where we're at today.
Independent of large projects and we said on the irrigation side some of those projects can be dilutive on the infrastructure side. Some of those projects are generally going to be accretive. So it can vary depending on what kind of project business that we have but but no we are comfortable with.
Speaker 3: independent of large projects. And we said, you know, on the irrigation side, some of those projects can be diluted on the infrastructure side, some of those are the projects are generally going to be accretive. So it can vary depending on you know, what kind of project business that we have, but but no, we we are comfortable with
Being able to operate at this kind of level.
Speaker 3: being able to operate at this kind of level and obviously having the opportunity to reinvest money in R&D and new product development and those kinds of things.
And obviously, having the opportunity to reinvest.
Money in R&D, and new product development and those kinds of things.
Sure.
Speaker 6: Okay, yeah, I guess I'm just thinking about the long term guidance, but I just find the main question I'm walking away with is, you know, if you are capable of. Of that organic revenue growth of around 7 and operating margin is. Uh, you know, maybe flat to, I mean, I guess some people might. Model it trending towards slightly above 14 since that's the guidance, uh. You know, where does that.
Okay, Yeah, I guess I'm, just thinking about the long term guidance that I just find that the main question Im walking away with as you know if if.
Brian Ketcham: Net earnings for fiscal 2023 were $72.4 million or $6.54 per diluted share compared to net earnings of $65.5 million or $5.94 per diluted share in the prior fiscal year. Performance that marked year-over-year growth of 11 percent and 10 percent respectively. As Randy mentioned, this level of earnings is a record for the company which is significant as efforts we've made to enhance our profitability have taken hold irrespective of lower year-over-year top-line performance.
You are capable of of that organic revenue growth of around seven.
And operating margin is.
You know maybe flat to I guess, some people might model it trending towards slightly above 2014.
Since that's the guidance.
Where does that.
Speaker 6: confidence and greater than, you know, how does that end up in a model that has greater than 10% EPS growth?
Confidence in greater than how does that end up in a model that has greater than 10% EPS growth.
Well I think.
Speaker 3: Well, I think combining the revenue growth, you know, the incremental margin that that comes from that, I think, you know, and then the other aspect of that, you know, could potentially be share repurchase, if you know, again, following our capital allocation policy, if that, you know, comes into play, that's another thing that would influence the EPS. Yeah, sure. Okay.
Combining the the revenue growth.
The incremental margin that that comes from that I think you know and.
Brian Ketcham: Turning to our segment results, irrigation segment revenues for the fourth quarter decreased 5 percent to $143.6 million compared to $150.5 million in the same quarter last year. North America irrigation revenues of $60.2 million decreased 25 percent compared to last year's fourth quarter. The decrease in North America is primarily attributable to lower unit sales volumes while average selling prices were comparable with the prior year fourth quarter. Unit sales volumes in the prior year fourth quarter reflected in an exceptional level of storm damage replacement demand while unit sales volumes in the current year reflected a more normal seasonal demand profile.
And then the other aspect of that.
Could potentially be share repurchases.
Following our capital allocation policy if that.
You know it comes into play that's another thing that would influence the EPS.
Yeah sure Okay, Thanks and.
Speaker 6: I guess maybe just one more for now. You know, you talked about Brazil in terms of strong international regions. Where else are you seeing some relative strength internationally in the irrigation business? I'll take it.
Maybe just one more for you talked about Brazil in terms of strong international regions, where else are you seeing some some relative strength internationally in the irrigation business.
I'll take that one Brian .
Speaker 2: The ending in the notes we talked about the Middle East as another region where we're seeing growth and some of that.
And the notes we talked about the middle East is another region, where we're seeing growth in some of that business is the large.
Speaker 2: business is the large military type contracts, but some of that is also smaller.
Military type contracts for some of that is also a smaller project business. Some of that is business in the private markets as well, where we continue to see more smaller projects coming to conclusion in sub Saharan Africa.
Brian Ketcham: As previously noted, the incremental revenue impact from last year's storm damage replacement demand was estimated at approximately $20 million. In international irrigation markets, revenues of $83.4 million increased 18 percent compared to last year's fourth quarter. The increase was primarily from higher sales volumes in Brazil, Argentina and the Middle East compared to the prior year fourth quarter, as we indicated on our third quarter call, we anticipated sales volumes in Brazil to increase in the fourth quarter, supported by the new government financing plan that was announced in June.
Speaker 2: project business. Some of that is business in the private markets as well. We continue to see smaller projects coming to conclusion in sub-Saharan Africa.
Speaker 2: So we are seeing some pretty broad, widespread opportunities and again it goes back to food security, yield enhancements, unpredictable weather. All those factors in our view really support strong...
So we are seeing some some pretty broad widespread opportunities and again it goes back to food security yields enhancements unpredictable weather all of those factors in our view really support strong.
A strong tailwind in all of those project oriented markets Theyre, just not going to come one a quarter theyre going to be a little lumpy, there or a little longer term tail in terms of closing the project ensuring financing is in place getting the right credit risk in place, but we do see again, a strong funnel of those opportunities and it's across a number of geographies, which are which.
Speaker 2: strong tailwinds in all those project-oriented markets. They're just not gonna come one, one and a quarter. They're gonna be a little lumpy, they're a little longer term tail in terms of closing the project, ensuring financing is in place, getting the right credit risk in place. But we do see, again, a strong funnel of those opportunities and it's across a number of geographies, which gives us some...
Brian Ketcham: Total irrigation segment operating income for the fourth quarter was $29.8 million and increase of 23% compared to the prior fourth quarter, and operating margin was 20.7% sales compared to 16.1% of sales in the prior year. The increase in operating income and operating margin resulted from growth margin expansion driven by improved price realization, reduced inflationary impact on input costs, and improved operating performance in our factories compared to the prior year fourth quarter.
It gives us some optimism.
Speaker 6: Great thanks and then just quickly on field wise. I'm looking at my notes I can't remember did that close that deal close and can you give us any sense for what revenue. That that brings it so we can model in organic and organic revenue.
Great. Thanks, and then just quickly on field wise.
I'm looking at my notes I can't remember did that debt deal close and can you give us any sense for.
What revenue that that brings and so we can model in inorganic and organic revenue.
Yes. This is Brian .
Speaker 3: Yeah, this is Brian . We haven't disclosed the revenue. It's small, but it's been growing rapidly. And I guess the other thing I would say is it's accretive to margins fairly significantly. It's more the traditional SAS type margins. But it's a smaller business and we haven't.
We havent havent disclosed the revenue it's small.
But it's been growing rapidly and I guess the other thing I would say is it's.
Accretive to margins fairly significantly as more.
Traditional SaaS type margins, but.
Brian Ketcham: This record level of profitability in the fourth quarter also was both bolstered by record performance in Brazil. For the full fiscal year, total irrigation segment revenues decreased 12% to $586 million compared to $665.8 million in the prior year. North American irrigation revenues of $309.5 million decreased 13% compared to the prior year, and international irrigation revenues of $276.5 million decreased 11% compared to the prior year. Operating income in the irrigation segment for the full fiscal year was $122 million and increase of 15% compared to the prior year, and operating margin was 20.8% of sales compared to 15.9% of sales in the prior fiscal year.
But it's a it's a smaller business and we haven't disc.
Speaker 3: disclose what the revenue is for some of the competitive reasons.
Disclose what the revenue is for some of them for competitive reasons.
Okay. Thank you very much.
Speaker 1: Thank you. As a reminder, if you have a question, you may press star then 1.
Thank you as a reminder, if you have a question you May Press Star then one.
Speaker 1: The next question comes from Brett Kearney with Gabelli Funds. Please go ahead. Hi guys.
The next question comes from Brett Kearney with Gabelli funds. Please go ahead.
Hi, guys. Good morning, Thanks for taking my question.
Alright.
Speaker 7: With this supportive outlook over the next five years, I guess how do you guys think about some of the cash that the business will generate? Brian , I know you mentioned opportunities, continue to invest in new product development and technology, just anything you can elaborate on that front, I guess organically and inorganic.
With the support of outlook over the next five years I guess, how do you guys think about some.
Some of the cash that the business will generate Brian I know you mentioned opportunities continue to invest in new product development and technology. Just anything you can elaborate on that front, I guess organically and inorganically.
Speaker 3: Yeah, yeah. So it starts with supporting our organic growth opportunities. And, and, you know, we've talked about capital being
Yeah, Yeah, so it starts with supporting our organic growth opportunities and.
We've talked about.
Capital.
Being part of that.
Brian Ketcham: The increase in operating margin resulted from growth margin expansion driven by the factors noted previously, as well as from a more favorable mix of international revenues compared to the prior year. Infrastructure segment revenues for the fourth quarter decreased 41% to $23.5 million compared to $39.7 million in the same quarter last year. The decrease resulted from lower road zipper system sales with the prior year fourth quarter including a number of project sales that did not repeat in the current year fourth quarter.
Speaker 3: potentially capacity expansion in places like Brazil and Turkey. I think we're also looking at
Potentially capacity expansion in places like Brazil, and Turkey, I think we're also looking at.
Speaker 3: really globally modernizing investments in modernization, industry 4.0, productivity improvements in our factory. So we are anticipating in 2024 that we're gonna increase our capital expenditures. Right now we're estimating between 30 and 35 million for CapEx.
Really globally modernizing investments and modernization.
Industry four <unk>.
Productivity improvements in our factories. So we are anticipating in 2024 that were going to increase our our capital expense.
Capital expenditures right now, we're estimating between 30% and $35 million for Capex.
Speaker 3: And then, you know, longer term there's
And then.
Longer term there is.
Speaker 3: As things settle down in Ukraine, Russia as an example, there's opportunities for other geographical expansion. But then from there, M&A is clearly a priority.
As things settle down in Ukraine, Russia as an example, there's opportunities for expansion other geographical expansion, but.
Brian Ketcham: One project in particular that was delivered in last year's fourth quarter amounted to approximately $16 million. The impact of lower project sales was partially offset by growth in road zipper lease revenue and higher sales of road safety products compared to the prior year fourth quarter. Infrastructure segment operating income for the fourth quarter decreased 73% to $3.1 million compared to $11.5 million in the same quarter last year. Infrastructure operating margin for the quarter was 13.3% of sales compared to 28.8% of sales in prior year.
But then from there M&A is clearly a priority and.
Speaker 3: FieldWise is a small example of that, but we're actively looking at opportunities where we can.
Field wise as a small example of that but.
We're actively looking at opportunities where we can.
Speaker 3: leverage our capabilities and increase shareholder value through M&A, increasing our annual dividend, and then share repurchase is kind of the order that we go through when we look at capital allocation.
Leverage our capabilities and increase shareholder value through M&A.
Increasing our annual dividend and then share repurchase is kind of the order that we go through when we look at capital allocation.
Excellent very helpful. Thanks, so much Brian .
Speaker 1: Thank you. This concludes our question and answer session. I would now like to hand the call back to Mr. Randy Wood for closing remarks.
Thank you. This concludes our question and answer session I would now like to hand, the call back to Mr. Randy Wood for closing remarks.
Brian Ketcham: The decrease in operating income and margin resulted from lower revenues compared to the prior year and the resulting loss in fixed cost leverage. For the full fiscal year, infrastructure segment revenues decreased 16% to $88.1 million compared to $104.9 million in the prior Infrastructure operating income for the full fiscal year was $12.1 million compared to $18.3 million in the prior year. And operating margin for the year was 13.7% of sales compared to 17.5% of sales in the prior year.
Speaker 2: Thank you all for joining today's conference call. I'm proud of our performance for the quarter and full fiscal year, particularly our demonstrated ability to execute both operationally and commercially to deliver improved returns and strong profitability despite softer top line revenue.
Thank you all for joining today's conference call I am proud of our performance for the quarter and full fiscal year, particularly our demonstrated ability to execute both operationally and commercially to deliver improved returns and strong profitability. Despite softer topline revenues. However, I'm more excited about the opportunities that lie ahead for Lindsay our leadership in irrigation technology.
Speaker 2: However, I'm more excited about the opportunities that lie ahead for Lindsay. Our leadership in irrigation technology, including our established and growing install base and the expanding infrastructure opportunity both domestically and globally, provide us with a unique competitive advantage as we look to capitalize on multiple sustainable growth opportunities.
Including our established and growing installed base and the expanding infrastructure opportunity both domestically and globally provides us with a unique competitive advantage as we look to capitalize on multiple sustainable growth opportunities. We look forward to updating you on our progress at the end of our fiscal 'twenty four first quarter. Thank you.
Speaker 2: We look forward to updating you on our progress at the end of our Fiscal 24 first quarter.
Brian Ketcham: Turning to the balance sheet and liquidity, our total available liquidity at the end of the fiscal year was $216 million, which includes $166 million in cash, cash equivalents and marketable securities and $50 million available under our revolving credit facility. Our strong operating performance for the year, along with effective working capital management, resulted in free cash flow of $100.9 million or 139% of net earnings. This improved cash flow further strengthens our balance sheet and positions us well to continue executing our capital allocation strategy.
Speaker 1: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Okay.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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Brian Ketcham: In closing, I'd like to provide investors with an updated view of the company's longer term financial goals and targets. Over the past three years, Lindsay has delivered marked growth and solid financial results across a variable macro economic backdrop. And we have updated our five year financial goals as highlighted on page 15 of the earnings presentation. Over this period, our goal for organic revenue growth is to average greater than 7% annually. Additionally, our goals are to deliver annual operating margins greater than 14% return on invested capital greater than 12% and earnings per share growth greater than 10%.
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Brian Ketcham: These five year goals are supported by the performance momentum we've been able to deliver and our alignment positive secular growth trends across both our irrigation and infrastructure businesses. That concludes my remarks and at this time, I'd like to turn the call over the operator to take your questions. Thank you very much.
Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster.
Nathan Jones: Today's first question comes from Nathan Jones with Steeple. Please go ahead.
Brian Ketcham: Good morning, everyone. I'm Nathan. I guess I have to start with a question on these five year financial goals. And I guess specifically, I have to start with operating margin greater than 14%. I think you did, you just did operating margin greater than 14% for 2023. You know, it looks like it's over 15%. Can you just talk about the expectations from from there? I mean, I just how you come up with greater than 14% five year target when you're already at 50%.
Brian Ketcham: Dave. Yeah, I think, you know, when you look at kind of again, where we, where we're at today, I think this year we, we did benefit, you know, from some of the raw material, softening, but we have had some, you know, some life of benefit this year that, you know, I wouldn't plan on going forward. But, you know, I guess our feeling is operating on a regular basis above 14% and then reinvesting into our business, you know, with the technology and new product development. That's, that's kind of what our thoughts are behind the, the greater than 14%.
Nathan Jones: Okay, and then I, I guess I'll go to domestic irrigation. I mean, some of your commentary was pretty bullish there, Randy. Despite the fact that we've seen, you know, a few quarters in a row here of negative growth, fairly negative growth in domestic irrigation business. When you talked about strong near-time demand, you talked about positive order rate year over year, so far this quarter. I understand there was a, you know, a negative impact from storm revenue year over year in the fourth quarter, 23. It would seem that it's likely that you are still going to have some negative comps here in the short term in domestic irrigation, but Randy, your commentary sounded maybe a bit more bullish than that.
Randy Wood: So, maybe if you can just give us a more color on the near term expectations around the domestic side of the irrigation. Sure, you bet, Nathan. And I think what we've talked about today is as consistent with what we talked about earlier in the year. And we talked about, you know, this wait and see approach where we know customers are going to be profitable this year. And they've demonstrated when they make money, they invest money.
Randy Wood: And we know that we can battle for and win that capital when they make investments to improve their operations, to enhance yields, improve yields, consistency. We know we can get those dollars. So, I think this spring we saw kind of a truncated season. And then we were a little disappointed with some of the results, but we did see strong quotation demand. We just didn't see customers taking those quotations all the way to order.
Randy Wood: So, some of this was expected based on feedback from customers in our channel. And again, when they're profitable, they're going to make these investments. So, we feel good about what we see in order to man right now. This is customers selling or buying based on profit or selling this year. And profits generated this year.
Nathan Jones: As we move forward into next season, I think every year starts new. So, does we carry a lot of optimism into next spring? I still think the yield enhancement benefits are going to be a tailwind for us. I still think customers are going to be profitable. Maybe not record profit levels that we saw last year. But again, customers make money to invest money. I think that's really given us confidence in this market nation. I know you guys don't give guidance. But I'll ask the question.
Brian Ketcham: Would you expect to be able to generate organic revenue growth in the domestic business in fiscal 24?
Brian Ketcham: Yeah, Nathan is Brian. I think that is our expectation. I think as Randy talked about, you know, we saw some of this demand being deferred. You know, and so far into the fall, it's kind of playing out that way. So... You know, and then we get into our second, third quarters and we do have easier comps. So I think it's realistic to expect you're over your univoyant growth in North America. Okay, thanks.
Nathan Jones: I'll pause it on.
Operator: Thank you.
Brian Wright: The next question comes from Brian Wright with Ross Capitol Partners. Please go ahead. Thanks. Thank you. Good morning.
Randy Wood: I just wanted to pull it up on the comment in the press release about the Bruce Lee and finance switching to quarterly allocation and just how to think about that having any impact on seasonality and the international sales and in 24. Yeah. Good morning, Brian. This is Randy. I'll take that one. And this was a fundamental change in how the program is administered in Brazil. And at the macro level, we did see aggressive finance rates 10.5%.
Randy Wood: We did see an increase, a published increase and the amount of money that will go into the program. But historically, there was one charge. It was announced in the June, July time frame. All the applications were entered. All the money was allocated. So we saw a lot of that order backlog early. And then we generally burned it down through the remainder of the year. This year is being administered very differently. And the government is now managing four tranches, quarterly tranches throughout the year.
Randy Wood: So there'll be an application process. But then that money will get metered out four different times across the year. So it does change the order pattern. And in our view, it is going to change backlog in Brazil. It's going to be more staged and spread out over the year. And we'll have to wait and see how that really corresponds into projects being shipped and revenue being recognized. Overall, it's still very good news for the market. The government continues to invest in support in agriculture. But the timing is going to look different this year.
Randy Wood: And not having any historical reference point on how these quarterly tranches are going to work. It's tough to predict. But the strong market fundamentals there in our view still will generate growth in the region.
Randy Wood: Over time, after we get through this first year transition, do you think that that will over the long-term actually improve your visibility on on that part of the business potentially? It could and it couldn't. And I think where it can or maybe won't is when the programs administered once a year, you've kind of got immediate demand visibility of market demand. Now as these programs are administered quarterly, we're just going to see that demand for different times throughout the year as opposed to a single time in the year.
Randy Wood: So I think it's good for material planning, efficiency through the factory. You know, I'd rather have flat volume flow month over month order report. We can run more efficiently that way. But it's also nice to see the backlog and know what you've got in front of you. But I think our ability to support customers run any efficient safe factory. I think that's going to be certainly a lot easier with the way the program is administered this year.
Randy Wood: But there's no guarantee that this is how the government will continue to to operate it. If they like what they see, I expect they would and could. If they see other administrative issues with managing this way, I wouldn't be surprised if they went back to the older way as well.
Brian Wright: Okay, thank you. That's that's really helpful for that color.
Brian Wright: Is there any way that can you help us with inventory?
Brian Ketcham: Is that normalization pretty much complete or could that also be a benefit to cash flow in in 24? Yeah, Brian. Yeah, we had a very dedicated focus on inventory this year. And I would say it was really across the board. I mean, a lot of it came out of our US plant, but we also had reduced inventories in Brazil and Turkey. And it was really reflective of, you know, during the pandemic and afterwards with supply chain issues and things.
Brian Ketcham: We all carried like a lot of other companies carried more inventory than we normally would. So this is primarily reflective of, you know, just getting the inventories down to a more manageable level. And so, yeah, I think we think there's still opportunity there, but not to the level that we we saw in 2023. Great, great.
Brian Ketcham: In one last one, if I could make it in, can you just help us out with the tax rate in the quarter and then how to think about tax rate for 24? Yeah, good question. In the quarter, you know, we had, there was a change in US tax regulations that took place during the quarter that now allows foreign tax credit for earnings in Brazil prior to that. Because Brazil wasn't compliant with the global or the worldwide transfer pricing rules, the US was going to disallow the foreign tax credit that got changed in the fourth quarter.
Brian Ketcham: So what happens then is it's a cumulative adjustment for the year, taking into account that we can take that tax credit now. So it's 22, little over 22% of the quarter going forward though, as we talked about before with the shift in the growth being stronger outside the US and inside the US, it does drive a higher effective tax rate. And you saw that probably on a year over your basis in 22 versus 23.
Brian Ketcham: But I would say for 24, our expectation is it's probably going to be around 29% for the year.
Brian Wright: Great, great, thanks so much. Congrats on the quarter and then thank you. Thank you.
Brian Drab: The next question comes from Brian Drab with William Blair. Please go ahead.
Brian Drab: Good morning. Thanks for taking my questions. I just wanted to start first with a look at fiscal 2024 and the operating margin is being asked previously on the call, but you know, some discussion around, you know, the long term goal of 14% plus. What do you expect in the near term? I know you said you had the life of benefit. That was pretty material recently. I mean, could 2024 margin operating margin?
Brian Drab: I guess be down then. Now, we would expect that to be the case, Brian. And let me just also state, you know, in 2023, that really wasn't any significant project volume, either an irrigation or an infrastructure. And so, you know, that operating margin where we're at today is independent of large projects. And we said, you know, on the irrigation side, some of those projects can be dilutive on the infrastructure side. Some of those for the projects are generally going to be a creative.
Brian Drab: So it can vary depending on, you know, what kind of project businesses have. But, but no, we are comfortable with being able to operate, you know, at this kind of level and, you know, and obviously having the opportunity to reinvest money and, you know, an R&D and new product development and those kinds of things. Okay, yeah, I guess I'm just in thinking about the long-term guidance, the main question I'm walking away with is, you know, if you are capable of that organic revenue growth of around seven and operating margin is, you know, maybe flat, I mean, I guess some people might model it trending towards slightly above 14 since that's the guidance.
Brian Drab: You know, where does that confidence in greater than, you know, how does that end up in a model that has greater than 10% EPS growth? Well, I think, combining the revenue growth, you know, the incremental margin that comes from that, I think, you know, and then the other aspect of that, you know, could potentially be share repurchase of, you know, again, following our capital allocation policy, if that, you know, comes into play, that's another thing that would influence the EPS. Yeah, sure.
Brian Ketcham: Okay, thanks.
Randy Wood: And if maybe just one more for now, you know, you talked about Brazil in terms of strong international regions, where else are you seeing some relative strength internationally in the irrigation business? I'll take that one, Brian. The, I think in the notes we talked about the Middle East as another region where we're seeing growth and some of that business is the large, you know, military type contracts. But some of that is also smaller project business.
Randy Wood: Some of that is business in the private markets as well, where we continue to see, you know, smaller projects coming to conclusion in Sub-Saharan Africa. So we are seeing some, some pretty broad widespread opportunities. And again, it goes back to food security, yield enhancements, unpredictable weather. All those factors in our view really support strong, strong tailwinds in all those project-oriented markets. They're just not going to come one more quarter. They're going to be a little lumpy.
Randy Wood: They're a little longer term tail in terms of closing the project, ensuring financing is in place, getting the right credit risk in place. But we do see, again, a strong funnel of those opportunities. And it's across a number of geographies, which gives us some optimism. Great. Thanks.
Brian Ketcham: And then just quickly on field-wise. If I'm looking at my notes, I can't remember. Did that, that deal close? And can you give us any sense for what revenue that brings so we can model in organic and organic revenue? Yeah, the Sprint. You know, we haven't, haven't disclosed the revenue. It's small, you know, but it's been growing rapidly. And I guess the other thing I would say is it's a creative to margins fairly significantly. It's more, you know, the traditional SaaS type margins. But, but it's a, you know, it's a smaller business. And, you know, we haven't disclosed what the revenue is for some of the competitive reasons. Yeah.
Brian Drab: Okay.
Operator: Thank you very much. Thank you. As a reminder, if you have a question, you may press star then one.
Brett Kearney: The next question comes from Brett Kerney with Gabelli Funds.
Brian Ketcham: Please go ahead. Hi guys. Good morning. Thanks for taking my question. All right. With this support of Outlook over the next five years, I guess had you guys think about some of the cash that the business will generate. Brian, I know you mentioned opportunities, continue to invest in new product development and technology. Just anything you can elaborate on that front, I guess, organically and in organic. Yeah, so it starts with supporting our organic growth opportunities, and you know, we've talked about capital being part of that, you know, potentially capacity expansion places like Brazil and Turkey.
Brian Ketcham: I think we're also looking at really globally modernizing investments in modernization industry 4.0 productivity improvements in our factory. So we are anticipating in 2024 that we're going to increase our capital expenditures, right now we're estimating between 30 and 35 million for CAPEX, and then, you know, longer term, there's, you know, as things settle down and, you know, Ukraine. Russia as an example, there's opportunities for other geographical expansion, but then from there, emanate, you know, it's clearly.
Brian Ketcham: It's really a priority and, you know, field wise is a small example of that, but we're actively looking at opportunities where we can leverage our capabilities and increase shareholder value through M&A, you know, increasing our annual dividend and then share purchases kind of the order that we go through when we look at capital allocation. Excellent, very helpful. Thanks much, Brian. Thank you.
Operator: This concludes our question and answer session.
Randy Wood: I would now like to hand the call back to Mr. Randy Wood for closing remarks. Thank you all for joining today's conference call. I'm proud of our performance for the quarter in both this go year, particularly our demonstrated ability to execute both operationally and commercially to deliver improved returns and strong profitability despite softer top line revenues. However, I'm more excited about the opportunities to lie ahead for Lindsay, our leadership and irrigation technology, including our established and growing install base and the expanding infrastructure opportunity, both domestically and globally, provide us with a unique competitive advantage as we look to capitalize on multiple sustainable growth opportunities.
Randy Wood: We look forward to updating you on our progress at the end of our fiscal 24 first quarter. Thank you.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you. [inaudible]