Q2 2024 Lindsay Corp Earnings Call
Operator: Hello and welcome to the Lindsay Corporation fiscal second quarter 2024 earnings conference call. All participants will be in listen only mode.
Hello, and welcome to the Lindsay Corporation fiscal second quarter 2024 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.
Operator: 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. To ask a question, you may press star, then 1 on your telephone keypad, and to withdraw from the queue, please press star, then 2.
Ask questions to ask a question you May Press Star then one on your telephone keypad and to withdraw from the queue. Please press Star then two.
Operator: As a reminder, this conference is being recorded. I would now like to hand the call to Randy Wood, President and CEO. Please go ahead.
As a reminder, this conference is being recorded.
I'd now like to hand, the call to Randy Wood, President and CEO. Please go ahead.
Randy A. Wood: Thank you and good morning, everyone. Welcome to our fiscal 2024 second quarter earnings call. With me today is Brian Ketcham, our chief financial officer. I'm pleased with the consolidated performance and resilience of our business through the first half of this fiscal year. While market conditions in South America have temporarily impacted activity across the agriculture industry, the performance of our North American irrigation business continues to be supported by steady demand amid tempered grower centers. Additionally, in our infrastructure business, the continued mixed shift towards leasing for our leading road zipper system is delivering meaningful margin expansion. Overall, I'm encouraged by our ability to execute operationally and strategically in order to drive profitability across the organization, as well as the actions we've taken to navigate suboptimal market conditions in some areas.
Randy A. Wood: Thank you and good morning, everyone welcome to our fiscal 2024 second quarter earnings call with me today is Brian Ketcham, our Chief Financial Officer.
Randy A. Wood: I'm pleased with our consolidated performance and resilience of our business through the first half of this fiscal year, while market conditions in South America have temporarily impacted activity across the agriculture industry. The performance of our North American irrigation business continues to be supported by steady demand amid tempered grower sentiment additions.
Additionally, in our infrastructure business. The continued mixed shift towards leasing for our leading road zipper system is delivering meaningful margin expansion.
Randy A. Wood: Overall, I'm encouraged by our ability to execute operationally and strategically in order to drive profitability across the organization as well as the actions we've taken to navigate sub optimal market conditions in some regions.
Randy A. Wood: In North America, our irrigation business saw comparable whole goods demand versus the second quarter of last year, which was largely in line with expectations and supported by the carryover impact of solid farm profits from last year. While stable demand in North American end markets has supported our year-to-day revenue results, we are approaching the back half of the year with tempered expectations. The USDA recently released its initial 2024 net farm income projections, which were significantly below initial market forecasts and expectations.
Randy A. Wood: In North America, our irrigation business saw comparable whole goods demand versus the second quarter of last year, which was largely in line with expectations and supported by the carryover impact of solid farm profits from last year.
Randy A. Wood: While stable demand in North American end markets has supported our year to date revenue results. We are approaching the back half of the year with tempered expectations. The USDA recently released its initial 2024 net farm income projections, which were significantly below initial market forecast and expectations. While this has the potential to negatively impact.
Randy A. Wood: While this has the potential to negatively impact farmer sentiment and the deployment of investment dollars for new equipment in the near term, it's still very early in the season. Moving to international irrigation, where we continue to see a softening of demand. In particular, the Brazilian market has experienced reduced grower profitability, limited access to financing, and constrained investment capacity. While we're facing a challenging external operating environment in Brazil in the near term, we're still very confident in the mid- to long-term opportunities in this market. Ongoing droughts in Sao Paulo, Mato Grosso do Sul, and Paraná have increased state-level support for irrigation, and with low penetration levels and the ability to support up to three crops per year, these markets will continue to grow.
Randy A. Wood: Farmer sentiment and the deployment of investment dollars for new equipment in the near term, it's still very early in the season.
Randy A. Wood: Moving to international irrigation, where we continue to see a softening of demand in particular, the Brazilian market has experienced reduced grower profitability limited access to financing and constrained investment capacity.
Randy A. Wood: While we are facing a challenging external operating environment in Brazil in the near term, we're still very confident in the mid to long term opportunities in this market ongoing droughts in Sao Paulo, Mato Grosso do Sul in paradox have increased state level support for <unk> and with low penetration levels and the ability to support up to three crops per year. These markets will continue to grow.
Randy A. Wood: Okay.
Randy A. Wood: Moving to infrastructure, as I mentioned in my opening remarks, our overall profitability continues to benefit from the strong growth of our road zipper system leasing business, an encouraging indicator as we move forward. Despite revenue that was comparable to the prior year period, we captured meaningful margin improvement that Brian will touch on later. We expect continued growth in our road zipper lease revenue in the second half of this year as we move into the heart of the road construction season, coupled with a strong backlog and sales pipeline for the overall infrastructure business. Additionally, as we mentioned in prior calls, we expect our infrastructure business to benefit over time as U.S. infrastructure spending ramps up as part of the Infrastructure Investments and Jobs Act. However, we've only recently begun to see that dynamic play out.
Randy A. Wood: Moving to infrastructure.
Randy A. Wood: As I mentioned in my opening remarks, our overall profitability continues to benefit from the strong growth of our road zipper system leasing business and encouraging indicator as we move forward.
Randy A. Wood: Despite revenue that was comparable to the prior year period, we captured meaningful margin improvement that Brian will touch on later.
We expect continued growth in our road zipper lease revenue in the back half of this year as we move into the heart of the road construction season, coupled with a strong backlog and sales pipeline for the overall infrastructure business.
Additionally, as we mentioned in prior calls, we expect our infrastructure business to benefit overtime as U S infrastructure spending ramps up as part of the infrastructure investments and jobs Act. We've only recently begun to see that dynamic play out and we believe that we're in the early innings of a multiyear growth trajectory for infrastructure spending domestically.
Randy A. Wood: We believe that we're in the early innings of a multiyear growth trajectory for infrastructure spending domestically. Turning to innovation and technology, as we announced yesterday, we've agreed to acquire a 49.9% interest in Pestle Instruments, with an option to acquire the remainder of the company in the future. Pestle is a leading developer and distributor of Vinfield Monitoring Solutions for Agricultural Markets.
Randy A. Wood: Turning to innovation and technology.
Randy A. Wood: As we announced yesterday, we've agreed to acquire a 49, 9% interest in peso instruments with an option to acquire the remainder of the company in the future.
Purcell is a leading developer and distributor of infield monitoring solutions for agricultural markets. The company deploy software and Iot hardware, including weather stations in environmental sensors, supporting agricultural decision, making including pest and disease control crop management and irrigation management. We believe this relationship further highlights our COO.
Randy A. Wood: The company deploys software and IoT hardware, including weather stations and environmental sensors, supporting agricultural decision-making, including pest and disease control, crop management, and irrigation management. We believe this relationship further highlights our commitment to providing world-class water management solutions to growers around the globe. Our combined platforms and integrated technologies will allow users to monitor and adjust irrigation operations based on key atmospheric conditions, while also enhancing overall predictive analytics capabilities. This further strengthens our digital water management portfolio, allowing us to reach a broader set of customers and service providers globally. Lastly, I'd like to address our recent announcement to expand and modernize our manufacturing facility. In January, we announced our commitment to invest more than $50 million over the next two years to implement state-of-the-art technology that will greatly benefit our global operation.
Randy A. Wood: Commitment to providing world class water management solutions to growers around the globe.
Randy A. Wood: Our combined platforms and integrated technologies will allow users to monitor and adjust the irrigation operations based on key atmospheric conditions, while also enhancing overall predictive analytics capabilities.
Randy A. Wood: Further strengthens our digital water management portfolio, allowing us to reach a broader set of customers and service providers globally.
Randy A. Wood: Lastly, I'd like to address our recent announcement to expand and modernize our manufacturing facilities in January we announced our commitment to invest in more than $50 million over the next two years to implement state of the art technology that will greatly benefit our global operations.
Randy A. Wood: Our strategic plans for the modernization of our facilities include the implementation of Industry 4.0 technologies, data connectivity, analytics, artificial intelligence, and the addition of automation and robotics. Our renovated facility will also house new equipment and the latest advancements in galvanizing, a core process for manufacturing mechanized irrigation systems and road safety products. Additionally, we'll be expanding our Lindsay, Nebraska facility by 40,000 square feet to allow for increased manufacturing capacity and capabilities in metal forming.
Randy A. Wood: Our strategic plans for the modernization of our facilities include the implementation of industry four <unk> technologies data connectivity analytics artificial intelligence and the addition of automation and robotics are renovated facility will also house, new equipment and the latest advancements in galvanizing, our core process for manufacturing mechanized irrigation.
Randy A. Wood: And road safety products. Additionally, we'll be expanding our Lindsay Nebraska facility by 40000 square feet to allow for increased manufacturing capacity and capabilities and metal forming this investment is the largest in our company's history and look forward to updating you as we invest further into operational excellence and innovation.
Randy A. Wood: This investment is the largest in our company's history, and we look forward to updating you as we invest further in operational excellence and innovation. I'd like to turn the call over to Brian to discuss our second quarter financial results.
Randy A. Wood: I'd like to turn the call over to Brian to discuss our second quarter financial results Brian.
Brian L. Ketcham: Thank you, Randy, and good morning, everyone. Consolidated revenues for the second quarter of fiscal 2024 were $151.5 million, a decrease of 9% compared to $166.2 million in the prior year. The decrease resulted from lower irrigation segment revenues as infrastructure revenues were comparable to the prior year's second quarter. Net earnings for the quarter were $18.1 million or $1.64 per diluted share compared to net earnings of $18.1 million or $1.63 per diluted share in the prior year.
Brian L. Ketcham: Thank you Randy and good morning, everyone.
Brian L. Ketcham: Consolidated revenues for the second quarter of fiscal 2024 were $151 5 million, a decrease of 9% compared to $166 $2 million in the prior year.
Brian L. Ketcham: The decrease resulted from lower irrigation segment revenues as infrastructure revenues were comparable to the prior year second quarter.
Brian L. Ketcham: Net earnings for the quarter were $18 $1 million or $1.64 per diluted share compared to net earnings of $18 $1 million or $1 63 per diluted share in the prior year.
Brian L. Ketcham: The impact of lower revenues and lower operating income was favorably offset by an increase in other income and a lower effective tax rate compared to the prior year's second quarter. Other income benefited from increased interest income and favorable foreign currency translation results compared to the prior year's second quarter. An income tax expense for the quarter was reduced by the realization of a one-time tax benefit of $1.1 million in Brazil.
Brian L. Ketcham: The impact of lower revenues and lower operating income was favorably offset by an increase in other income and a lower effective tax rate compared to the prior year second quarter.
Brian L. Ketcham: Other income benefited from increased interest income and favorable foreign currency translation results compared to the prior year second quarter and.
Brian L. Ketcham: An income tax expense for the quarter was reduced by the realization of a one time tax benefit of $1 $1 million in Brazil.
Brian L. Ketcham: Turning to our segment results, irrigation segment revenues for the quarter were $133 million, a decrease of 10% compared to $147.8 million in the prior year. North America irrigation revenues of $82.8 million decreased 8% compared to $90.4 million in the prior year's second quarter. Most of the decrease resulted from lower sales of replacement parts, along with slightly lower average selling prices and the impact of a less favorable mix of shorter machines compared to the prior year second quarter. Sales of replacement parts in the prior year included a substantial number of modem and RTU upgrades connected to the sunset of 3G coverage that did not repeat this year. While overall selling prices in North America remained relatively stable during the quarter, we did see selective competitive discounting in some regions that we responded to. The impact of these revenue decreases was partially offset by moderately higher unit sales volume compared to the prior year's second quarter. In international irrigation markets, revenues of $50.2 million decreased 13% compared to revenues of $57.4 million in the prior year's second quarter.
Brian L. Ketcham: Turning to our segment results irrigation segment revenues for the quarter were $133 million, a decrease of 10% compared to $147 8 million in the prior year.
Brian L. Ketcham: North America irrigation revenues of $82 $8 million decreased 8% compared to $94 million in the prior year second quarter MAU.
Brian L. Ketcham: Most of the decrease resulted from lower sales of replacement parts, along with slightly lower average selling prices and the impact of a less favorable mix of shorter machines compared to the prior year second quarter.
Brian L. Ketcham: Sales of replacement parts in the prior year included a substantial number of modem and <unk> upgrades connected to the sunsetting of three G coverage that did not repeat this year.
Brian L. Ketcham: While overall selling prices in North America remained relatively stable during the quarter, we did see selective competitive discounting in some regions that we responded to.
Brian L. Ketcham: The impact of these revenue decreases was partially offset by moderately higher unit sales volume compared to the prior year second quarter.
Brian L. Ketcham: In international irrigation markets revenues of $52 million decreased 13% compared to revenues of 57 $4 million in the prior year second quarter.
Brian L. Ketcham: The decrease resulted primarily from lower revenues in Brazil and other Latin America markets compared to the prior year, while the impact of increases and decreases in other markets mainly offset one another. In Brazil, a 20% drop in cash soybean prices from December to February, coupled with lowered yield expectations, is negatively impacting the outlook for grower profitability and Available Liquidity, as growers are indicating an unwillingness to sell their crops at current price levels. This situation is also resulting in a more constrained credit environment, which is also limiting investment in irrigation equipment in the near term.
Brian L. Ketcham: The decrease resulted primarily from lower revenues in Brazil, and other Latin American markets compared to the prior year, while the impact of increases and decreases in other markets, mainly offset one another.
Brian L. Ketcham: In Brazil.
Brian L. Ketcham: 20% drop in cash soybean prices from December to February coupled with lower yield expectations is negatively impacting the outlook for grow our profitability.
Brian L. Ketcham: And available liquidity as growers are indicating an unwillingness to sell their crops at current price levels. This situation is also resulting in a more constrained credit environment, which is also limiting investment in irrigation equipment in the near term.
Brian L. Ketcham: Irrigation segment operating income for the quarter was $25.6 million, a decrease of 22% compared to the prior year, and operating margin was 19.3% of sales compared to 22.2% of sales in the prior year. Lower operating income and operating margin resulted primarily from lower revenues and the resulting impact from the leverage of fixed operating expenses. Infrastructure revenues for the quarter were $18.5 million and were comparable overall to the prior year. An increase in Road Zipper System lease revenues was offset by lower Road Zipper System project sales and lower sales of road safety products compared to the prior year's second quarter. Infrastructure segment operating income for the quarter was $3.5 million, an increase of 74% compared to $2 million in the prior year.
Brian L. Ketcham: Irrigation segment operating income for the quarter was $25 6 million, a decrease of 22% compared to the prior year and.
Brian L. Ketcham: And operating margin was 19, 3% of sales compared to 22, 2% of sales in the prior year.
Lower operating income and operating margin resulted primarily from lower revenues and the resulting impact from deleverage of fixed operating expenses.
Brian L. Ketcham: Infrastructure revenues for the quarter were $18 $5 million and were comparable overall to the prior year.
Brian L. Ketcham: An increase in road Zipper system lease revenues was offset by lower road Zipper system project sales and lower sales of road safety products compared to the prior year second quarter.
Brian L. Ketcham: Infrastructure segment operating income for the quarter was $3 $5 million, an increase of 74% compared to $2 million in the prior year.
Brian L. Ketcham: Infrastructure operating margin for the quarter was 19% of sales compared to 10.9% of sales in the prior year. The increase in operating income and operating margin resulted from a more favorable revenue mix of revenues with higher road zipper system lease revenues compared to the prior year second quarter. Turning to the balance sheet and liquidity, our total available liquidity at the end of the second quarter was $200.6 million, which included $150.6 million in cash, cash equivalents, and marketable securities and $50 million available under our revolving credit facility.
Brian L. Ketcham: Infrastructure operating margin for the quarter was 19% of sales compared to 10, 9% of sales in the prior year.
Brian L. Ketcham: The increase in operating income and operating margin resulted from a more favorable margin mix of revenues with higher road zipper system lease revenues compared to the prior year second quarter.
Brian L. Ketcham: Turning to the balance sheet and liquidity, our total available liquidity at the end of the second quarter was $206 million, which includes $156 million in cash cash equivalents in marketable securities and $50 million available under our revolving credit facility.
Brian L. Ketcham: Year-to-date cash generated from operating activities has increased compared to the prior year. However, our free cash flow is being impacted by the increase in capital spending relating to the investments being made in our Lindsay, Nebraska, operation. Our balance sheet remains strong, and with ample access to liquid capital resources, we continue to be well positioned to execute our capital allocation strategy to create enhanced and sustained value for our shareholders. This concludes my remarks, and at this time, I'll turn the call over to the operator to take your questions. Thank you very much. We will now begin the question and answer session. To ask a question, you may press the star, then 1 on your telephone keypad.
Brian L. Ketcham: Year to date cash generated from operating activities has increased compared to the prior year. However, our free cash flow is being impacted by the increase in capital spending relating to the investments being made in our Lindsay Nebraska operation.
Brian L. Ketcham: Our balance sheet remains strong and with ample access to liquid capital resources, we continue to be well positioned to execute our capital allocation strategy to create enhanced and sustained value for our shareholders.
None: This concludes my remarks and at this time I'll turn the call over to the operator to take your questions.
None: Thank you very much we will now begin the question and answer session.
None: Ask a question you May press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
Operator: If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. We will pause momentarily to assemble our roster. Today's first question comes from Ryan Connors with North Coast Research. Please go ahead. Hey, good morning. Thanks for taking my questions. I have got a few.
None: We will pause momentarily to assemble our roster.
None: Today's first question comes from Ryan Connors with Northcoast Research. Please go ahead.
Ryan Michael Connors: Hey, good morning, Thanks for taking my questions.
Ryan Michael Connors: Got a few.
Ryan Michael Connors: The first is, you made some comments regarding pricing and some softness there. Can you elaborate on that at all, Randy, in terms of either quantification or any additional color you can give us on where that is and the magnitude of that, and how you expect, you know, how that's trended kind of as we move into the third quarter here? Yeah, Ryan.
Ryan Michael Connors: First is you made some comments regarding.
Ryan Michael Connors: Pricing and some softness there.
Ryan Michael Connors: You elaborate on that at all Randy in terms of either.
Ryan Michael Connors: Quantification or any additional color you can give us on where that is and magnitude of that and how you expect.
Ryan Michael Connors: How that's trended kind of as we move into the third quarter here.
Randy A. Wood: Yes, Ryan.
Randy A. Wood: This is Brian Ketcham I'll take that one.
Brian L. Ketcham: I'll take that one. You know, as I mentioned in my remarks, I think what we've seen during the quarter is, I'd say it's more regional, some selective discounting that we've seen, and when it affects us, we've said before that we'll protect our market share and match that on an as-need basis, but I would say overall, we haven't been able to do that. I would say, in the U.S., when you look at just the North America margins, I'd say a minimal impact overall on revenues. Got it.
As I mentioned in my remarks, I think what we've seen during the quarter.
Brian L. Ketcham: I'd say, it's more regional.
Ryan Michael Connors: Yeah, some selective discounting that we've seen and you know when it affects.
Brian L. Ketcham: Protecting our market share. We've we've said before that will protect our market share in and matched.
Match that on a you know as need basis, but I would say overall, we haven't.
Brian L. Ketcham: Reduced our overall prices are general prices remain steady I would say looking outside the U S and Brazil with the softness that we've seen in that market I would say the competitive.
Brian L. Ketcham: Pricing pressures there have probably been while they have been more significant than what we've seen in the U S. But I would say in the U S.
Ryan Michael Connors: Okay. I appreciate that, Brian. And then another one on the P&L there, the gross margin really held up pretty well here, I think, despite, you know, we're stacking two years of double-digit negatives, revenue declines now. It seems like the gross margins have held up pretty well. What's your view there?
Brian L. Ketcham: When you look at just the North American margins I'd say minimal impact overall on the revenue.
None: Got it okay I appreciate that Brian and then.
Another one on the P&L there the gross margin.
None: Really held up pretty well here I think despite.
None: We're stacking two years of double digit negative.
None: Revenue declines now it seems like the gross margins have held up pretty well.
None: Whats the view there is are we sort of at a new normal I know you've done some.
Brian L. Ketcham: Are we sort of in a new normal? I know you've done some things on the manufacturing side, efficiencies, and so forth. Is this sort of a new level that we're going to be at, you know, kind of regardless of what happens in the top line, you know, revenue situation going forward? I would say when you look at it overall, obviously there's some benefit that we got on the infrastructure side. North America irrigation gross margins, I would say, were at or even slightly above last year in the second quarter. I think where we're seeing some of the gross margin pressure is in international, with the decline that we've seen in volume, particularly in Brazil, that's having a de-leverage impact there. I think some of the things that we've done over the last couple of years from a price management standpoint as well as just operational efficiencies that we've gained both in the U.S. and internationally, I think to your point, I think we do feel like we've got a more stable gross margin environment going forward that's sustainable. Obviously, you know, you're going to have the impact of, you know, the volume leverage and de- Last couple of months, steel has softened just a bit, but we view raw materials to be stable going forward, so I think that supports, you know, where we're at from a margin. Got it. And then I would like to try one last one, if I could.
None: Some things on the manufacturing side efficiencies and so forth.
None: Is this sort of a new level that we're going to be at kind of regardless of what happens.
None: In the top line revenue situation going forward.
None: Yes, I would say you know when you look at overall, obviously there is some benefit that we got from <unk>.
None: The infrastructure side.
None: North America irrigation gross margins I would say, we're at or even slightly above last year through in the second quarter I think what we're seeing.
None: Some of that gross margin pressures in international with the decline that we've seen in in volume, particularly in Brazil.
None: <unk>.
None: Leverage impact there, but I think some of the things that we've done over the last couple of years with from a price management standpoint, as well as just operational efficiencies that we've gained both in the U S and internationally I think to your <unk>.
None: I think we.
None: We do feel like we've got a more stable gross margin.
None: Environment going forward.
None: Sustainable obviously, you know youre going to have the impact of.
None: The volume leverage and deleverage and.
None: At the present time, I think pricing is holding up raw material costs. If anything have stabilized last couple of months steel has softened just a bit but we view.
None: Raw materials to be stable going forward, so I think that supports.
None: Where we're at from a margin level.
None: Got it and then one last one if I could.
Ryan Michael Connors: Smaller item on the P&L, but I was a little surprised to see R&D declined year over year by almost 15% and dipped below 4 million for the first time in a while. Because I know that's an area that, you know, you've been focused on on the precision technology side. And what are we to read into that? Is that just some efficiencies, like some synergies from field-wise, or why would we be seeing a decline there? Yeah, good morning, Ryan. This is Randy.
None: Smaller item on the P&L, but I was little surprised to see.
None: R&D.
None: Declined year over year by almost 15% and dip below $4 million for the first time in a while.
None: I know thats, an area that you've been focused on our precision technology side and what are we to read into that was that is that just some some efficiencies like some synergies from field wise or why would we be seeing a decline there.
Randy A. Wood: I'll take that one. And there aren't any substantial shifts. I think, obviously, we're being cautious with spending. But in the areas of technology and innovation, in particular, we continue to invest. So what you see there is really just timing and not a strategic shift or drop in big-picture spending. We have a lot of, you know, testing expenses in the infrastructure business that come when we conduct those tests. So it's, it's really again, just timing.
None: Yeah. Good morning, Ryan This is Randy I'll take that one and there isn't any substantial shifts I think obviously, we're being cautious with spending but in the areas of technology and innovation in particular, we continue to invest so what you see there is really just timing and not a strategic shift or drop in big picture spending we have a lot of testing expenses.
Randy A. Wood: In the infrastructure business that hate when we conduct those tests. So it's really again just timing.
Ryan Michael Connors: Got it. Thanks for your time. Thank you. The next question is from Brian Drab with William Blair. Please go ahead. Hey, good morning. This is Tyler Hutin. I'm on behalf of Brian.
None: Got it thanks for your time.
None: Thanks. Thank you. The next question is from Brian Drab with William Blair. Please go ahead.
Brian Paul Drab: Hey, good morning, this is probably the wrong things.
Brian Paul Drab: Thanks for taking my question. It was mentioned that about $20 million worth of orders in your backlog are not expected to be fulfilled within the next 12 months. I'm just wondering what those orders are mostly related to. Yeah, I'd say the increase year-over-year in that category is roughly $15 million, and that is primarily related to a multi-year lease that we've signed on the roads at Versailles. The renewal of a lease that we had in Texas, which is a multi-year lease.
Brian Paul Drab: Austin.
Brian Paul Drab: You mentioned about $40 million worth of orders and your backlog.
Brian Paul Drab: Within the next 12 months I'm, just wondering what those orders are mostly related to <unk>.
Yes, I'd say the increase year over year and that cash.
Brian Paul Drab: Categories, roughly $15 million and that is primarily related to a.
Brian Paul Drab: Multi year lease that we've signed positive first side the.
Brian Paul Drab: The renewal of the lease that we've had in Texas.
Brian Paul Drab: And there's a multiyear lease.
Brian Paul Drab: Yeah.
Brian L. Ketcham: Okay, thank you. And what's driving the lower sales of road safety products in the international market? That's really, you know, again, in Europe, being the winter months, things like weather can impact the timing of that.
Brian Paul Drab: Okay.
Brian Paul Drab: And what's driving the lower road safety products in the international market.
Brian Paul Drab: That's really.
Brian Paul Drab: You know again in Europe being the winter months.
Brian Paul Drab: Things like weather can impact the timing of that we did see an increase in <unk> in the U S and again supported by additional federal funding in U S Road construction, we expect it to see road safety products grow in the U S, but that I would say more or less in the in Europe in the quarter. It was more timing and weather relate.
Brian L. Ketcham: We did see an increase in the U.S., and again, supported by additional federal funding and U.S. road construction. We expected to see road safety products grow in the U.S., but that, I would say, more or less in Europe in the quarter, it was more timing and weather-related. Got it. And, uh, just a couple more. I understand the timing of the Road Zipper System project.
Brian Paul Drab: Good.
Brian Paul Drab: Okay.
Just a couple more.
Brian Paul Drab: Timing.
None: Oh, yes.
Brian L. Ketcham: Do you just have any details on how that pipeline is evolving? Yeah, I do think as we've moved into the fiscal year now, we do have an improved line of sight to projects moving forward in that funnel, and we do feel good that we'll see some projects recognized in fiscal 2024, most likely in Q4 at this point. I think timing will dictate how much of that gets into our fiscal 2024 versus how much spills into 2025, but as Randy mentioned in his comments, we feel good about the growth prospects for this year and the next few years based on our project sales funnel. Thank you. And then lastly, just in the tough environment, kind of following on from one of the previous questions. So you had an operating margin of above 14% in the quarter.
Do you just have any details on how that pipeline is evolving.
Okay.
None: Yeah, I do think as we've moved into the fiscal year now we do have.
None: <unk> line of sight to projects moving forward in that funnel and we do.
None: So good that we will see some projects recognized in fiscal 2020 for.
None: Most likely in Q4 at this point.
None: Timing will dictate how much of that gets into our fiscal 2024 versus how much spills into 2025.
None: As Randy mentioned in his comments, we feel good about the growth prospects for this year, but also the next few years based on our project sales funnel.
None: Thank you.
None: When you're talking about.
None: Okay.
None: Yeah.
None: And above 14% in the quarter.
Brian L. Ketcham: Is it probably pretty safe to say that you'll finish the fiscal year above 14% despite some of the near-term headwinds and good outlook on international irrigation? Thank you. I'm not sure I understood the question completely, Tyler. Oh yeah, I'm just wondering, do you think you'll likely finish above 15% for operating margin in the fiscal year? kind of in line with your five-year average target. Yeah, I mean, quarter to quarter, there's definitely seasonality, you know, fourth quarter being our lowest in the US.
None: Probably pretty safe to say that.
None: Yeah.
None: Despite some near term headwinds in internationally.
None: Internationally.
Thank you.
None: I'm not sure I caught the question completely Tyler.
Tyler: I'm just wondering.
None: Thank you.
None: 10%.
None: Mike.
None: In line with you.
None: With the target.
Mike: Yeah, I mean, I think there is quarter to quarter, there is definitely seasonality fourth quarter being our lowest in the in the U S. So.
Brian L. Ketcham: So, you know, I think we feel good about where we're at from a margin standpoint. I think that, you know, the impact of some of the volume decreases that we've seen, particularly in Brazil, will have an impact on us, and based on our ability to react to that from a spending standpoint, our objective is to protect our operating margins, but, you know, I think we feel like we've done a pretty good job Okay, thank you. I'll pass it along.
Mike: I think we feel good about where we're at from a margin standpoint, I think that the impact of some of the volume decreases that we've seen particularly in Brazil will have an impact on us.
Mike: And based on our ability to.
Mike: React to that from a spending standpoint, I mean, our objective is to protect our our operating margins but.
Mike: No.
Mike: I think we feel like we've done a pretty good job up to this point.
None: Okay. Thank you I'll pass it along.
Jonathan Paul Braatz: Thank you very much. The next question is from John Braatz with Kansas City Capital. Please go ahead.
None: Thank you very much. The next question is from Jon Braatz with Kansas City Capital. Please go ahead.
Jonathan Paul Braatz: Morning, Randy. Good morning, Brian. Randy, on the $50 million investment that you're making in your facility, obviously, you've done a good job over the past couple years and improved margins and manufacturing margins. Incrementally, what will that $50 million get you in the years ahead? I think there are a few interesting areas that we've talked about. Obviously, we detailed some new facilities, really connected to capacity and capabilities. We're making some big investments, modernizing, galvanizing. We're increasing automation, robotics, improving material flow, and in the end, we think this is really going to position us to react faster and maybe more efficiently than we have in the past to market demand, whether that's up or down. Some of the new Industry 4.0 technologies that monitor production equipment and the way I like to think about it, we're really taking, you know, FieldNet and FieldNet Advisor and the tools that we've developed for our customers, and we're leveraging those similar types of technologies inside of our factory. So we'll have better monitoring of machine performance, stay ahead of maintenance, those types of things.
Jonathan Paul Braatz: Good morning, Randy Good morning, Brian.
Jonathan Paul Braatz: Thanks Randy.
Jonathan Paul Braatz: Dollar investment that you're making in your facility, obviously, you've done a good job over the past couple of years and improving margins and manufacture manufacturing margins.
Jonathan Paul Braatz: Incrementally what will that $50 million.
Jonathan Paul Braatz: Get you in the years ahead.
None: I think there is a few interesting areas that we've talked about obviously, we detailed some new facilities really connected the capacity and capabilities, where we're making some big investments modernizing galvanizing.
None: <unk> automation robotics, improving material flow and in the end. We think this is really going to position us to react faster and maybe more efficiently than we have in the past to market demand, whether that's up or down.
None: Some of the new industry four <unk> technologies that monitor the production of equipment and the way I like to think about it we're really taking field, Matt and feeling that advisor and the tools that we've developed for our customers and we're leveraging those similar types of technologies inside of our factories. So we'll have better monitoring of machine performance stay ahead of maintenance those types of things and of course.
Randy A. Wood: And of course, we're always, you know, very mindful of any opportunity to improve safety for employees. So I think that flexibility in automation, the modernization, leveraging some new capabilities in both data and production equipment, we're excited about the investments. And I can tell you, we had a wonderful groundbreaking ceremony last weekend, and the people inside the facility are pretty energized and excited about it too. So Randy, let's say over the cycle, your margin, and that facility is X. With this $50 million investment, what do you think you can do? How much do you think you could improve that margin over the cycle? Hey, John, this is Brian. I'll jump in on that one.
None: We're always very mindful of any opportunity to improve safety for our for the employees. So I think that flexibility and automation that the modernization leveraging some new capabilities in both data and production equipment. We're excited about the investments and I can tell you we had a wonderful groundbreaking ceremony last weekend and the people inside the facility there.
None: Theyre pretty energized and excited about it too so Randy let's say over the cycle you're your margin.
Randy A. Wood: And that facility is X.
Randy A. Wood: With this 50 million dollar investment.
Randy A. Wood: What do you think you can.
How much do you think you can improve that margin over the cycle.
Randy A. Wood: Hey, John This is Brian I'll jump in on that one I think what it does.
Brian L. Ketcham: You know, I think what it does, and, you know, in the near term, is gives us that ability to flex up and flex down without really having to add or remove a lot of labor. Okay. And so that's, you know, a big part of it. I think I would view it as more, you know, in the near term being more stabilizing for margins. I mean, obviously, you're going to have an increase in depreciation that offsets some of the productivity savings that we have.
Brian: Near term is it gives us that.
Brian: Ability to flex up and flex down without really having to add or remove a lot of labor and so that's a big part of it I think.
Brian: Would view it as more.
Brian: In the near term being more stabilizing for margins I mean, obviously youre going to have an increase in depreciation that offset some of the productivity savings that we have but I think as you, let's say demand increases significantly like it did a couple of years ago, our ability to flex up.
Brian L. Ketcham: But I think as you, let's say, demand increases significantly, like it did a couple of years ago, our ability to flex up, you know, we should be able to pick up some margin just because of that, less reliance on having to go out and find labor, which, as you know, in Nebraska is difficult with the low unemployment rate. Okay, okay. Brian, you know, about less than two years ago, you established a relationship with Pestle. Am I pronouncing that correctly? Pestle, yeah.
Brian: We should be able to pick up some margin just because of the yes.
Brian: Less reliance on having to go out and find labor, which as you know in Nebraska as a <unk>.
Difficult with the low unemployment rate okay. Okay.
Brian.
Brian: Hum, but less than two years ago, you established a relationship with.
Brian: Purcell pronouncing that correctly, Oh, so yes, okay. What have you seen in these past two years.
Jonathan Paul Braatz: Okay. What have you seen in these past two years that resulted in you guys taking a 49.9% investment? What have you seen that has encouraged you?
Brian: That.
Brian: Uh huh.
Brian: That resulted in you guys taken a 49, 9% of investment what have you seen.
Randy A. Wood: Yeah, I'll take that one, John. This is Randy. And that relationship actually has been formalized within the last year. So it's still relatively early. But when you look at kind of the synergies of being able to move their hardware and software services through our channel, they're a global company, we're a global company, but we don't overlap in a lot of those areas. So we do see some immediate opportunities to help both companies. And I think that the exciting part is really about the data and the digital opportunities that the acquisition and the investment creates. We can improve tools like FieldNet Advisor, using input from field sensors; we can expand data analytics, the models that we have to provide better water management and guidance, and they've got over 80,000 installed devices around the world.
Brian: That.
Brian: That has encouraged you.
Brian: Yeah, I'll take that one Jon this is Randy in that relationship actually been formalized within the last year. So it's still relatively early but when you look at kind of the synergies of being able to move their hardware and software suite versus through our channel. They are a global company. We're a global company, but we don't overlap and a lot of those areas. So we do see some immediate opportunities.
Brian: To help both companies and I think the exciting part is really about the data data in the digital opportunities that are the acquisition the investment creates and we can improve tools like film and advisor using input from field sensors, we can expand data analytics and the models that we have to provide better water management and <unk>.
Brian: <unk> and they've got over 80000 installed devices.
Randy A. Wood: And that creates some tremendous revenue opportunities for annual recurring revenue and the broader, you know, integration with the FieldNet platform. So we feel we've got a great company, a great founder and ownership, and we're really going to hit the ground running. Okay, Brian, I assume it's going to be accounted for as an equity investment. Yeah, that's correct.
Brian: Around the world and that creates some tremendous revenue opportunities for annual recurring revenue and the broader integration with with the field map platforms. So we feel we've got a great company, great founder and ownership and now we're really going to hit the ground running okay, Brian I assume it's going to be accounted for as an equity investment.
Brian: Yes, that's correct.
Jonathan Paul Braatz: Okay. All right. Thank you. Thank you. The next question comes from Brett Kearney with American Rebirth Opportunity Partners. Please go ahead. Hi Randy, Brian, and Alicia. Good morning.
Brian: Okay.
None: Alright, thank you.
None: Thank you. The next question comes from Brett Kearney with American Rebirth opportunity partners. Please go ahead.
Brett Kearney: Hi, Randy Bryan Alicia Good morning, Thanks for taking my question.
Brett Kearney: Thank you for taking my question. I just had a follow-up on the Petzl Instruments Agreement. Congratulations. It seems like a great way to deepen the partnership there. Just curious, geographically, you know, those 80,000 installed devices they have, would you say, given where they're based, it's more geared towards Europe, an opportunity—obviously, Lindsay's strong globally, but more you're able to bring them into your existing relationships—North America, Brazil, and they have some customers. Maybe you're not as well-penetrated in the European region? Yeah, I think their footprint And they're involved a little more in specialty crops, orchards, vineyards, fruits, and nuts, those types of things. So we might see them in different areas of North America than our current footprint.
Brett Kearney: Hey, Brett.
Brett Kearney: Hi, I just had a follow up on the peso instruments agreement congratulations on it seems like a great way to deepen the partnership there just curious geographically those 80000 installed devices. They have would you say given where theyre based it's more.
Geared towards Europe and opportunity.
None: Obviously, the Lindsay strong globally, but more youre able to bring them into your existing relationships North America, Brazil, and they have some customers, maybe youre not as well penetrated.
None: The European region.
None: Yes, I think there are footprint I would say is weighted in Europe, but when you look at the map there everywhere and they are involved a little more in the specialty crops are orchards vineyards fruits and nuts those types of things. So we see them maybe in different areas of North America than our current footprint, but their equipment their technology the ability to integrate with <unk>.
Randy A. Wood: But their equipment, their technology, the ability to integrate with FieldNet, FieldNet Advisor, and then other digital platforms, we think we can take them everywhere in the world with us, Brett. Excellent. Very helpful.
None: Net fuel net adviser and then the other digital platforms. We are we think we can take them everywhere in the world with its Brad.
Brett Kearney: Thank you, Randy. Thank you. As a reminder, to ask a question, you may press star, then 1. The next question comes from Nathan Jones with Stiefel. Please go ahead. Good morning, this is Adam Farley on behalf of Nathan Jones.
Excellent very helpful. Thank you Randy.
None: Got it.
None: Thank you as a reminder to ask a question you May Press Star then one the next question comes from Nathan Jones with Stifel. Please go ahead.
Good morning, This is Adam Farley on for Nathan.
Nathan Hardie Jones: I wanted to start on Brazil. What is your expectation for the Brazilian market over the near term? You know, should we expect Brazil to maybe get marginally worse? In our view, Adam, Brazil's tricky in the short term, and some of the factors that Brian mentioned in his notes, we view all of those really as being short-term headwinds in that market. Weather this year was tricky, depending on whether you were in the north or the south; it was too wet, it was too dry.
Adam Farley: I wanted to start on Brazil.
Adam Farley: What is your expectation for the Brazilian market over the near term.
Adam Farley: Should we expect Brazil to maybe get incrementally worse.
And our view Adam you know, Brazil is a tricky in the short term and some of the factors that Brian mentioned in his notes we view all of those really as being short term headwinds in that market.
Whether this year was tricky depending on whether you're in the north or the south it was too wet to dry.
Randy A. Wood: But a lot of what we see, again, is very short-term. So when we look at the mid- to long-term outlook for that market, it's still, in our view, going to be one of the significant growth markets in the world. And just their ability to generate three crops; we've met with a lot of state officials here in Omaha over the past several months; we've got other visits planned for the next couple of weeks. And when you see the amount of land that they have, most of these large ag production states are less than 2%, less than 4% penetrated with irrigation.
Adam Farley: But a lot of what we see again, it's a very short term. So when we look at mid to long term outlook for that market. It's still in our view going to be one of the significant growth markets in the world and just their ability to generate three crops. We've met with a lot of state officials here in Omaha over the past several months. We've got other visits planned for the next couple of weeks.
Adam Farley: And when you see the amount of land that they have most of these these large egg production states are less than 2% less than 4% penetrated with with irrigation. So we do see more interest from state level governments and certainly continue to have support from from federal government. There. So we do have a we've made a lot of investments in Brazil.
Randy A. Wood: So we do see more interest from state-level governments and certainly continue to have support from the federal government there. So we do have, we've made a lot of investments in Brazil, some of our strongest team members are there, and we're bullish on Brazil in the long-term, just navigating kind of these short-term headwinds right now. All right, thank you for that color.
Adam Farley: Our strongest team members are there and were bullish on Brazil in the long term just navigating kind of these short term headwinds right.
Right now.
Alright, thank you for that color.
Randy A. Wood: You know, maybe looking outside of Brazil, could you give us an update on, on, you know, demand fundamentals for the markets outside of Brazil and South America, and maybe also the international project funnel? Sure. And then we comment on Brazil and South America because they really are the big movers now, big needle movers now when you look at international revenues. And when you go around the rest of the world, there's a lot of puts and takes, and nothing that's up significantly, nothing that's down significantly. But a lot of the other markets kind of offset the minor ups and downs.
None: Maybe looking outside of Brazil could you give us an update on the.
None: Demand fundamentals for the markets outside of Brazil, and South America, and maybe also the international project funnel.
None: Sure and then we comment on Brazil, and South America, because they they really are the big movers now when you're a big needle movers now when you look at international revenues and when you go around the rest of the world. There is a lot of puts and takes and nothing that's up significantly nothing thats down significantly, but a lot of the other markets kind of offset the minor ups and downs the project.
Randy A. Wood: The project demand, which, in our view, is still very strong, both in the near and the long term. And when we talk about project activity, we're talking about specific pieces of land, specific purchasers, specific designs that are being worked on. And depending on which project we talk about, the Middle East obviously is very strong, Eastern Europe, Northern and Sub-Saharan Africa.
None: Demand that in our view is still very strong both the near and the long term and when we talk about project activity. We're talking about specific pieces of land specific purchasers specific designs that are being worked on and depending on which projects. We talk about middle East. Obviously is very strong eastern Europe, Northern in sub Saharan Africa.
Randy A. Wood: Some of those we're actively quoting along with several competitors, depending on where we are in the world. Some of those we're working through confirmed letters of credit and arranging financing and delivery details. Same disclaimer as always on those, that timing is really tough to predict, but we do like what we see in the project funnel and both short and long-term project activity. Okay, thank you for taking my question. Too bad.
Some of those we're actively quoting along with several competitors depending on where we are in the world. Some of those we're working through confirmed letters of credits and arranging financing and delivery details same.
None: Same disclaimer as always on those the timing is really tough to predict but we do like what we see in our project funnel in both short and long term project activity.
None: Okay. Thank you for taking my questions.
None: Thanks, Adam.
Randy A. Wood: Thanks, Adam. Thank you. This concludes our question and answer session. I would like to turn the call back over to Randy Wood for closing remarks.
None: Thank you.
None: This concludes our question and answer session I would like to turn the call back over to Randy Wood for closing remarks.
Randy A. Wood: Well, thank you all for joining us today. We're very pleased with our results here to date, and I want to thank our global team for all of their efforts and accomplishments. Despite a tempered near-term outlook in a few of our international irrigation markets, we remain optimistic about the company's long-term prospects.
Randy A. Wood: Well. Thank you all for joining US today, we're very pleased with our results year to date and I want to thank our global team for all of their efforts and accomplishments. Despite a tempered near term outlook in a few of our international irrigation markets. We remain optimistic about the company's long term prospects. We appreciate your interest in Lindsey and look forward to updating you on our continued progress following the close of our fiscal two.
We appreciate your interest in Lindsay and look forward to updating you on our continued progress following the close of our fiscal 2024 third quarter. Thanks for joining us. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your line. Thanks for watching!
Randy A. Wood: 24 third quarter, thanks for joining us.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Randy A. Wood: [music].