Lindsay Corporation Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Randy Wood highlighted strong fiscal year 2025 results with double-digit revenue and operating income growth in both Irrigation and Infrastructure segments.
• In Irrigation, international revenue grew but North America was impacted by low commodity prices and weak crop receipts. In Infrastructure, Road Zipper System revenues were lower but road safety product sales saw some growth.
• Mentioned ongoing $100 million and $20 million projects in the MENA region, expected to complete in Q1 2026 fiscal year.
• The Lindsay, Nebraska facility project is progressing with a new automated tube mill activated and a next-gen galvanizing facility under construction.
• Innovation with TowerWatch product, surpassing 150,000 connected devices and 20% year-over-year ARR growth.
• Brian Ketcham's retirement and Sam Hinrichsen's upcoming CFO transition were announced.

Segment Performance

• Irrigation Segment:
  • Fourth Quarter 2025: Revenues reached $129 million, a 3% increase compared to the prior year. North America irrigation revenues were $50 million, a 19% decrease due to lower unit sales volume though average selling prices were slightly higher. International irrigation revenues were $79 million, a 23% increase driven by growth in South America, MENA region projects, and Australia.
  • Full Fiscal Year 2025: Total Irrigation segment revenues rose 11% to $568 million. North America irrigation revenues were $273.8 million, a 9% decrease. International irrigation revenues were $294.2 million, a 39% increase.
• Infrastructure Segment:
  • Fourth Quarter 2025: Revenues were $24.5 million, a 16% decrease primarily due to lower Road Zipper System project and lease revenues.
  • Full Fiscal Year 2025: Total Infrastructure segment revenues increased 16% to $108.4 million.

Guidance

• North American irrigation headwinds to persist with demand expected to remain suppressed until commodity prices improve.
• International irrigation shows recovery signs in key markets but high interest rates and credit constraints are headwinds.
• Infrastructure segment expects growth in Road Zipper System leasing and road safety product sales due to IIJA and new products.
• Brian Ketcham stated North America irrigation volume expected to be down low to mid-single digits in 2026, but price increases and subscription revenue to offset.
• Infrastructure operating margin expected to be around 20% due to no large project in 2026, with some short-term margin pressure from additional depreciation in the Lindsay factory.

Risks

• North American irrigation affected by low commodity prices, weak crop returns, and trade disruptions.
• International markets face high interest rates and credit constraints.
• Brazil market has low government funding utilization, with customers waiting for election-related support.
• Infrastructure segment margin pressure from additional depreciation in the Lindsay factory.

Question and Answer

Q: Just understanding that there's a lot of uncertainty in your ag markets right now. I'm hoping you can outline just some of the catalysts that you're watching that are shaping your outlook for fiscal '26. And then my follow-up question is related. So just assuming that we are in this more cautious ag investment backdrop, what are the margin levers that you have at your disposal that you're thinking about for next year?

A: Randy Wood discussed global diversification and Brian Ketcham mentioned price discipline, subscription revenue as high margin.

Q: Just understanding that there's a lot of uncertainty in your ag markets right now. I'm hoping you can outline just some of the catalysts that you're watching that are shaping your outlook for fiscal '26. And then my follow-up question is related. So just assuming that we are in this more cautious ag investment backdrop, what are the margin levers that you have at your disposal that you're thinking about for next year?

A: Randy Wood discussed global diversification and Brian Ketcham mentioned price discipline, subscription revenue as high margin.

Q: Congratulations, Brian. And thank you for all the help over the years. I guess maybe just trying to set some expectations here for 2026. There's obviously some demand headwinds and some discrete comparison headwinds that you're going to have heading into 2026. We're clearly bumping along the bottom in North America. Is it your expectation for North America irrigation that will be somewhere close to flat in '26? Or should we expect to see that market be down overall given the lack of real catalysts there? I guess I'll start with that one and then I'll go to international.

A: Brian Ketcham said North America irrigation volume expected to be down low to mid-single digits in 2026, but price increases and subscription revenue to offset.

Q: Congratulations, Brian. And thank you for all the help over the years. I guess maybe just trying to set some expectations here for 2026. There's obviously some demand headwinds and some discrete comparison headwinds that you're going to have heading into 2026. We're clearly bumping along the bottom in North America. Is it your expectation for North America irrigation that will be somewhere close to flat in '26? Or should we expect to see that market be down overall given the lack of real catalysts there? I guess I'll start with that one and then I'll go to international.

A: Brian Ketcham said North America irrigation volume expected to be down low to mid-single digits in 2026, but price increases and subscription revenue to offset.

Q: Congratulations, Brian. And we'll talk more later when we're not on a public call, but congrats. I just want to follow up on Nathan's questions there and just the outlook for ag first and make sure I understood this. Your comments around volume being down low single digit to mid-single digit. Was -- that was a North America specific comment?

A: Brian Ketcham said that was North America specific.

Q: Congratulations, Brian. And we'll talk more later when we're not on a public call, but congrats. I just want to follow up on Nathan's questions there and just the outlook for ag first and make sure I understood this. Your comments around volume being down low single digit to mid-single digit. Was -- that was a North America specific comment?

A: Brian Ketcham said that was North America specific.

Q: Congratulations, Brian. I want to start on the international side specific to Brazil. Randy, you mentioned credit constraints there. And that's something I wonder if you can expand on because there was -- you had a peer company actually come out and talk about some bad debt and raising bad debt reserve in Brazil, specifically for that. So can you just expand on that comment you made among credit constraints? Is that just on the impact on actual sales? Or is there -- are you seeing any of that actual credit loss issue as well?

A: Randy Wood discussed Brazil credit constraints related to government funding utilization and customer wait-and-see approach due to election and interest rates.

Q: Congratulations, Brian. I want to start on the international side specific to Brazil. Randy, you mentioned credit constraints there. And that's something我 wonder if you can expand on because there was -- you had a peer company actually come out and talk about some bad debt and raising bad debt reserve in Brazil, specifically for that. So can you just expand on that comment you made among credit constraints? Is that just on the impact on actual sales? Or is there -- are you seeing any of that actual credit loss issue as well?

A: Randy Wood discussed Brazil credit constraints related to government funding utilization and customer wait-and-see approach due to election and interest rates.

Q: And Brian, obviously, free cash flow was very strong this year. Working capital, very good. How would you view that in 2026? Do you see that similar type of potential? Or are we going to see a little bit less in terms of free cash flow?

A: Brian Ketcham said potential free cash flow less in 2026 due to higher CapEx and inventory management.