Lindsay Corporation Reports Third Quarter Fiscal 2023 Results

Lindsay Corporation (NYSE: LNN), a leading global manufacturer and distributor of irrigation and infrastructure equipment and technology, today announced results for its third quarter ended on May 31, 2023.

Key Highlights

• Near record operating margin performance in irrigation as market fundamentals remain generally positive
• Revenue decline reflects investment delays for irrigation equipment and projects
• Infrastructure results supported by increased Road Zipper System^® leasing

“While agricultural market fundamentals remain positive with U.S. net farm income projected to be above historical levels, general economic uncertainty has negatively impacted farmer sentiment, tempering order activity and driving some customers to delay capital investment decisions,” said Randy Wood, President and Chief Executive Officer. "A projected year-over-year decline in U.S. net farm income, combined with high input costs and increasing interest rates, negatively impacted unit sales volume in our irrigation business. However, our operational execution and disciplined price management have helped partially offset top-line weakness and the loss of fixed cost leverage to drive strong margin capture, as evidenced by our operating margin performance. We believe current market dynamics are likely to lead to increased demand for irrigation equipment later in the calendar year as customers become better-positioned to determine their level of profitability for the current crop year. In our infrastructure business, the anticipated increase in road construction and project activity supported by higher U.S. infrastructure spending has been slower to develop due to delays in project startups, caused in part by slower-than-expected releases of public funding."

Wood continued, "I am pleased with how our teams have responded to manage costs despite softer than expected demand. Our commercial teams have demonstrated the ability to maintain pricing discipline in order to preserve strong operating margin performance, ultimately providing resilience to our operating income results. As we look ahead to the remainder of the year and fiscal 2024, we will also remain committed to continuing our growth investments in innovation and long-term shareholder value creation opportunities across both our leading irrigation and infrastructure businesses."

Third Quarter Summary

Revenues for the third quarter of fiscal 2023 were $164.6 million, a decrease of $49.7 million, or 23 percent, compared to revenues of $214.3 million in the prior year third quarter. The majority of the decrease came from the irrigation segment as infrastructure revenues were down slightly.

Operating income for the quarter was $27.0 million, a decrease of $8.2 million, or 23 percent, compared to operating income of $35.2 million in the prior year third quarter. Operating margin was 16.4 percent of sales, consistent with the prior year quarter. Operating margin performance was supported by gross margin improvement in both business segments while operating expenses were comparable to the prior year third quarter.

Net earnings for the quarter were $16.9 million, or $1.53 per diluted share, compared with net earnings of $25.1 million, or $2.28 per diluted share, for the prior year third quarter. Lower net earnings resulted largely from lower operating income and was also impacted by foreign currency transaction losses in the current year compared to gains in the prior year and from a higher effective income tax rate compared to the prior year.

Third Quarter Segment Results

Irrigation segment revenues for the third quarter of fiscal 2023 were $142.6 million, a decrease of $46.1 million, or 24 percent, compared to $188.7 million in the prior year third quarter. North America irrigation revenues of $75.0 million decreased $21.2 million, or 22 percent, compared to the prior year third quarter. The decrease resulted primarily from lower unit sales volumes while average selling prices were comparable with the prior year. Lower unit sales volumes resulted primarily from farmers delaying capital investment decisions.

International irrigation revenues of $67.5 million decreased $25.0 million, or 27 percent, compared to the prior year third quarter. The decrease resulted primarily from lower sales volumes in Brazil, Australia, Ukraine and Russia compared to the prior year third quarter. In Brazil, the delayed order activity experienced in the second quarter connected with the government transition continued in the current quarter. The current year was also impacted by the unfavorable effects of foreign currency translation of approximately $2.5 million compared to the prior year third quarter.

Irrigation segment operating income for the third quarter of fiscal 2023 was $30.7 million, a decrease of $8.9 million, or 22 percent, compared to the prior year third quarter. Operating margin was 21.6 percent of sales, compared to 21.0 percent of sales in the prior year third quarter. In spite of lower revenues, the increase in operating margin resulted from gross margin expansion driven by improved price realization and operating performance compared to the prior year third quarter.

Infrastructure segment revenues for the third quarter of fiscal 2023 were $22.0 million, a decrease of $3.6 million, or 14 percent, compared to $25.6 million in the prior year third quarter. An increase in Road Zipper System lease revenue was more than offset by lower Road Zipper System sales and lower sales of road safety products compared to the prior year third quarter.

Infrastructure segment operating income for the third quarter of fiscal 2023 was $3.6 million, a decrease of $0.2 million, or 6 percent, compared to the prior year third quarter. Operating margin was 16.2 percent of sales, compared to 14.8 percent of sales in the prior year third quarter. Increased operating margin resulted from a more favorable margin mix of revenue and improved price realization compared to the prior year third quarter.

The backlog of unfilled orders as of May 31, 2023, was $94.5 million compared with $98.3 million on May 31, 2022. The irrigation backlog is lower while the infrastructure backlog is higher compared to the prior year.

Outlook

Mr. Wood concluded, “As we are now in the growing season in North America, demand in our fourth quarter is expected to be driven primarily by summer crop harvest and storm damage replacement, which we are expecting to be lower than the exceptional demand we experienced in last year's strong fourth quarter. The potential impact from continuing drought conditions could provide additional demand support. We expect sales volume in Brazil to increase in the fourth quarter, supported by the new government financing program that was recently announced. Demand across other international markets continues to be supported by positive agricultural market fundamentals and continuing global concerns over food security and global grain supplies."

“The impact of increased U.S. infrastructure spending and the strength of our project sales funnel support the long-term growth outlook for our infrastructure business. The timing of project execution at the state level can be difficult to predict and, because of delayed startups we have experienced to date, we expect a limited positive impact on our fiscal 2023 results and a more meaningful positive impact in fiscal 2024 and beyond.”

Third Quarter Conference Call

Lindsay’s fiscal 2023 third quarter investor conference call is scheduled for 11:00 a.m. Eastern Time today. Interested investors may participate in the call by dialing (833) 535-2202 in the U.S., or (412) 902-6745 internationally, and requesting the Lindsay Corporation call. Additionally, the conference call will be simulcast live on the Internet and can be accessed via the investor relations section of the Company's Web site, www.lindsay.com. Replays of the conference call will remain on our Web site through the next quarterly earnings release. The Company will have a slide presentation available to augment management's formal presentation, which will also be accessible via the Company's Web site.

About the Company

Lindsay Corporation (NYSE: LNN) is a leading global manufacturer and distributor of irrigation and infrastructure equipment and technology. Established in 1955, the company has been at the forefront of research and development of innovative solutions to meet the food, fuel, fiber and transportation needs of the world’s rapidly growing population. The Lindsay family of irrigation brands includes Zimmatic^® center pivot and lateral move agricultural irrigation systems, FieldNET^® remote irrigation management and scheduling technology, and industrial IoT solutions. Also a global leader in the transportation industry, Lindsay Transportation Solutions manufactures equipment to improve road safety and keep traffic moving on the world’s roads, bridges and tunnels, through the Barrier Systems^®, Road Zipper^® and Snoline™ brands. For more information about Lindsay Corporation, visit www.lindsay.com.

Concerning Forward-looking Statements

This release contains forward-looking statements that are subject to risks and uncertainties, and which reflect management’s current beliefs and estimates of future economic circumstances, industry conditions, Company performance and financial results. You can find a discussion of many of these risks and uncertainties in the annual, quarterly and current reports that the Company files with the Securities and Exchange Commission. Forward-looking statements include information concerning possible or assumed future results of operations and planned financing of the Company and those statements preceded by, followed by or including the words “anticipate,” “estimate,” “believe,” “intend,” "expect," "outlook," "could," "may," "should," “will,” or similar expressions. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The Company undertakes no obligation to update any forward-looking information contained in this press release.