Yahoo Finance Lindsay Corporation (NYSE:LNN) Q3 2024 Earnings Call Transcript
Lindsay Corporation (NYSE:LNN) Q3 2024 Earnings Call Transcript June 27, 2024
Lindsay Corporation beats earnings expectations. Reported EPS is $1.41, expectations were $1.25.
Operator: Hello, and welcome to the Lindsay Corporation Fiscal Third Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] As a reminder, this event is being recorded. I would now like to turn the conference over to Randy Wood, President and CEO of Lindsay Corporation. Please go ahead.
Randy Wood: Thank you, and good morning, everyone. Welcome to our fiscal 2024 third quarter earnings call. With me today is Brian Ketcham, our Chief Financial Officer. Our fiscal third quarter was highlighted by steady execution, which resulted in strong operational performance, despite market headwinds that impacted topline revenue. We announced a key project win in irrigation and continue to be pleased with the growth of our Road Zipper sales and lease business in infrastructure. I'm proud of our teams and their execution. Turning to our key end markets. In North America irrigation, market conditions continue to weigh on farmer sentiment, resulting in overall demand softness. High precipitation levels and wet field conditions across the mid-west contributed to lower year-over-year sales of irrigation equipment and replacement parts in that region while we experienced volume growth in the west and northeast regions.
We did see higher-than-expected storm damage activity that hit the Midwest in late April and early May. However, delays in insurance approvals and wet field conditions shifted most of that demand into our fiscal fourth quarter. In international irrigation, we've continued to see a decline in Brazil due to suppressed commodity prices and limited access to capital, ultimately tempering overall demand in the short term. Tragic flooding in the south has also hindered order activity in that region. We did see strong customer turn-out and quotation activity at recent farm shows and expect to see this year's crop plant in early July, that will set funding levels and finance rates for this coming season. Brazil and other key South American agriculture markets remain dramatically underpenetrated from mechanized irrigation and the value created by irrigated agriculture will support long-term growth in this region.
We are pleased to host a delegation of farmers and government officials from Mato Grosso state in the quarter. They're one of several regions in the country that continue to investigate ways to improve production and efficiency with center pivot irrigation and irrigation technologies like FieldNET. In the Mideast and North Africa region, we were pleased to announce we've been awarded a contract valued at over $100 million, the largest in our company's history. This will provide efficient water management and technology solutions that maximize production, conserve valuable and scarce resources, and expand the region's potential. This project executed with the repeat customer, builds upon our track record in the region and serves as a great example of Lindsay's ability to execute large scale and complex projects that address the critical needs of our customers.
While timing is difficult to predict, we're still managing an active funnel of opportunities and expect these types of projects will be an important part of our growth strategy moving forward. Moving to infrastructure. As I mentioned in my opening remarks, we are encouraged by the growing strength and momentum in this business. Our overall profitability continues to benefit from the strong growth of our Road Zipper System sales and leasing revenues, a positive outcome resulting from our shift left strategy. As discussed previously, we anticipate our infrastructure business will benefit over time as U.S. infrastructure spending increases under the Infrastructure Investments and Jobs Act. We've only recently seen this funding flow to the market and believe we're in the early stages of a multi-year growth trajectory for domestic infrastructure spending with additional promising opportunities globally.
Turning to innovation and technology. In May, we released significant enhancements to our industry-leading FieldNET. Our global voice of the customer process was used to collect feedback on features and the customer experience. This resulted in an upgraded platform that provides growers with additional insights to optimize their planning and conserve energy and water resources while maximizing yield. We were also pleased to be part of a generative AI pilot developed by Bayer. This will allow growers to seamlessly integrate their data from FieldNET with the Bayer platform. The pilot also accelerates the development of digital tools that can serve water resources and highlights the importance of including water management in these AI-driven agronomic tools.
I'm very proud of our team's efforts to support more sustainable farming practices by enhancing our capabilities and expanding our partnerships to maximize the value of our mechanized irrigation solutions. Shifting to our operational footprint. Earlier this year, we announced our intentions to invest over $50 million to modernize our facility in Lindsay, Nebraska as part of our operational excellence strategy. That work has started and we look forward to updating you on our continued progress. I'd now like to turn the call over to Brian to discuss our third quarter financial results. Brian?
Brian Ketcham: Thank you, Randy, and good morning, everyone. Consolidated revenues for the third quarter of fiscal 2024 were $139.2 million, a decrease of 15% compared to $164.6 million in the prior year third quarter. An increase in infrastructure segment revenues was more than offset by lower irrigation segment revenues. Net earnings for the quarter were $20.4 million or $1.85 per diluted share compared to net earnings of $16.9 million or $1.53 per diluted share in the prior year. The impact of lower revenues and lower operating income was favorably offset by an increase in interest income and favorable foreign currency translation results compared to the prior year, along with the recognition of an income tax credit in Brazil of $4.8 million in the current year.
Turning to our segment results. Irrigation segment revenues for the quarter were $114.8 million, a decrease of 19% compared to $142.6 million in the prior year. North America irrigation revenues of $68.2 million decreased 9% compared to $75 million in the prior year. The decrease resulted from a combination of lower unit sales volume of irrigation equipment, lower sales of replacement parts, and a slightly lower average selling price compared to the prior year. In international irrigation markets, revenues of $46.6 million decreased 31% compared to revenues of $67.5 million in the prior year. The decrease resulted primarily from lower revenues in Brazil and other Latin American markets, while demand in other international markets remained stable overall compared to the prior year.
In Brazil, order activity remains constrained due to the impact of lower commodity -- due to the impact lower commodity prices have on grower profitability and available liquidity, which is reducing growers' ability to invest in irrigation equipment in the near term. Irrigation segment operating income for the quarter was $19.5 million, a decrease of 36% compared to the prior year, and operating margin was 17% of sales compared to 21.6% of sales in the prior year. Lower operating income and operating margin resulted mainly from lower revenues and the resulting impact of -- from deleverage of fixed operating expenses. Infrastructure segment revenues for the quarter were $24.4 million, an increase of 11% compared to $22 million in the prior year.
The increase resulted from higher Road Zipper System sales and higher lease revenues compared to the prior year. The impact of higher sales of road safety products in the U.S. was offset by lower sales in international markets compared to the prior year. Infrastructure segment operating income for the quarter was $6.3 million, an increase of 76% compared to $3.6 million in the prior year. Infrastructure operating margin for the quarter was 25.8% of sales compared to 16.2% of sales in the prior year. The increase in operating income and operating margin resulted from higher revenues and a more favorable margin mix of revenues with higher Road Zipper System sales and lease revenues compared to the prior year. Turning to the balance sheet and liquidity.
Our total available liquidity at the end of the third quarter was $202.7 million, which includes $152.7 million in cash, cash equivalents, and marketable securities and $50 million available under our revolving credit facility. Our strong balance sheet and our ample access to liquid capital resources continue to serve as a strategic asset for Lindsay as we execute our capital allocation strategy to create enhanced and sustained value for our shareholders. During the quarter, we completed share repurchases of $17.9 million. Going forward, we will continue to be opportunistic in regard to capital deployment, balancing organic and inorganic investments along with returning capital to our shareholders. This concludes my remarks. And at this time, I'll turn the call over to the operator to take your questions.
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