Participants

Randy Wood; President, Chief Executive Officer, Director; Lindsay Corp.

Brian Ketcham; Chief Financial Officer, Senior Vice President; Lindsay Corp.

Brian Drab; Analyst; William Blair & Company

Ryan Connors; Analyst; Northcoast Research

Adam Farley; Analyst; Stifel Nicolaus & Co., Inc.

Presentation

Operator

Good day and welcome to the Lindsay Corporation fiscal second-quarter 2025 earnings conference call. (Operator Instructions) Please note, this event is being recorded.
I would now like to turn the conference over to Randy Wood, President and CEO. Please go ahead.

Randy Wood

Thank you and good morning, everyone. Welcome to our fiscal 2025 second quarter earnings call. With me today is Brian Ketcham, our Chief Financial Officer.
I'm extremely proud of our team and their execution during the second quarter as our results reflect record quarterly net earnings supported by revenue growth in both business segments. These results demonstrate our commitment to deliver on our long-term goals despite market headwinds in our key irrigation markets. Our irrigation business delivered year-over-yearrevenue growth, led by strength in our international markets; while the domestic irrigation market has continued to perform in line with our expectations.
We continue to deliver the large project in the MENA region and also saw growth in other non-project business in this part of the world. We're encouraged by the recent improvement in market conditions in Brazil with unit sales volumes returning to levels comparable to prior year.
Turning to our Infrastructure segment. Our team delivered very strong results this quarter as they completed the Road Zipper project in the Northeast valued at over $20 million that we mentioned during our first quarter call. We remain optimistic in our Road Zipper project sales pipeline. However, the timing on large projects such as this one remains challenging to predict. Our leasing revenues and unit sales of road safety products were slightly lower compared to prior year. However, as we've mentioned on prior calls, we remain focused on growing our Road Zipper system leasing business over the long term as this supports a higher and more stable margin profile for the segment and our overall results.
We were also pleased to receive FHWA approval on our new TAU-XR express repair crash cushion in the quarter. This product is designed for high-frequency impact locations, improving safety for motorists and ease of maintenance for work crews. This product ships fully assembled and can be repaired in less than 30 minutes after a head-on or side impact.
Shifting gears to our market outlook. In North America, we don't expect meaningful improvement in market conditions in the near term. While the USDA is forecasting a 29% increase in net farm income for 2025, this increase is primarily due to higher government support payments while crop receipts are projected to be slightly lower compared to last year. We anticipate demand for irrigation equipment in the second half of our fiscal 2025 will be stable relative to prior year pending any significant storm damage activity.
In our international irrigation markets, particularly the developing regions, we expect to see continued growth driven by project activity as these countries continue to prioritize food security and water resource conservation. In Brazil, we are encouraged to see some improvement in commodity prices, supporting increased customer sentiment. However, rising interest rates and a more challenging credit environment does provide a headwind that can temper demand.
Regarding Infrastructure, our strong year-to-date performance sets us up for full-year growth in fiscal 2025. Our Road Zipper sales funnel continues to be strong. And while additional project sales are on the horizon, the timing of these more complex sales remains uncertain. For the second half of the year, we expect overall activity to be comparable with last year.
Before I turn the call over to Brian, I would like to outline our approach to addressing the tariff plan released by the White House yesterday. We've already implemented a comprehensive action plan that includes supplier negotiation, strategic inventory placement, and other supply chain initiatives to manage potential cost impacts to our business. We anticipate the impact of the proposed tariffs to result in marginal increase to our cost of goods which we will pass through in increased pricing.
We are also evaluating the potential impact of additional or retaliatory tariffs. While the situation remains fluid, we have the structure in place to react quickly and plan to utilize our global footprint and supply chain to minimize the potential impact of these actions on our business and our customers.
I'd now like to turn the call over to Brian to discuss our second quarter financial results. Brian?

Brian Ketcham

Thank you, Randy. And good morning, everyone. Consolidated revenues for the second quarter of fiscal 2025 increased 23% to $187.1 million, compared to $151.5 million in the prior year. Revenue growth in international irrigation and infrastructure was partially offset by lower North America irrigation revenues compared to the prior year. Net earnings for the quarter increased 47% to $26.6 million or $2.44 per diluted share, compared to net earnings of $18.1 million or $1.64 per diluted share in the prior year. As Randy mentioned, these results represent the highest quarterly net earnings and earnings per share in the company's history.
Turning to our segment results, Irrigation segment revenues for the quarter increased 11% to $148.1 million, compared to $133 million in the prior year. North America irrigation revenues of $77.1 million decreased 7% compared to the prior year. The decrease resulted primarily from lower unit sales volume of irrigation equipment, slightly lower average selling prices, and lower sales of replacement parts, compared to the prior year. This decline in unit sales volume was slightly less than expected as we did see year-over-year growth in certain regions of the U.S.
In international irrigation markets, revenues of $71 million increased 42% compared to the prior year. The increase resulted from revenues related to our large project in the MENA region, along with higher sales in other parts of this region compared to the prior year. This increase was partially offset by lower revenue in other international markets and by the unfavorable effects of foreign currency translation of approximately $4.7 million compared to the prior year. As Randy mentioned, the Brazil market showed signs of improvement during the quarter with unit sales volume being comparable to the prior year.
Irrigation segment operating income for the quarter of $27.4 million increased 7% compared to the prior year, while operating margin was 18.5% of sales compared to 19.3% of sales in the prior year. Operating income increased due to higher revenues, while a larger percentage of project revenues resulted in some dilution to operating margin compared to the prior year.
Infrastructure segment revenues for the quarter of $38.9 million more than doubled compared to revenues of $18.5 million in the prior year. The increase resulted primarily from the completion of a large Road Zipper system project valued at over $20 million that was delivered during the quarter, while roads that released revenue and sales of road safety products were slightly lower compared to the prior year.
Infrastructure segment operating income for the quarter of $13.3 million more than tripled compared to $3.5 million in the prior year. Infrastructure operating margin for the quarter was 34.1% of sales compared to 19% of sales in the prior year. The increase in operating income and operating margin resulted primarily from higher revenues and a more favorable margin mix of revenues as Road Zipper system sales represented a higher percentage of revenues compared to the prior year.
Turning to the balance sheet and liquidity, our total available liquidity at the end of the second quarter was $236.7 million, which includes $186.7 million in cash equivalents and marketable securities, and $50 million available under our revolving credit facility. The strength of our balance sheet and 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.
This concludes my remarks. And at this time, I'll turn the call over to the operator to take your questions.

Question and Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions)
Brian Drab, William Blair.

Brian Drab

Good morning. Thanks for taking my questions. The first one that we wanted to ask was on the international side ahead of our expectation by quite a bit for the quarter in terms of revenue. Jjust wondering if you could dig in a little deeper of how revenue is being recognized. Was any of it maybe pulled forward or maybe a little heavier than expected in the second quarter? And what should we expect from that region over the next few quarters?

Brian Ketcham

Sure, Brian. This is Brian Ketcham. I will say, in the quarter, we did ship a little bit more of the large project than what we had originally anticipated. I think we had indicated roughly $20 million a quarter. We were a little bit above that during the second quarter, but I don't think that affects our expectations for third and fourth which there'll be kind of back to that cadence that we originally planned on. As mentioned in our comments too, we did see revenue growth in other parts of the MENA region as well that were non-project related, compared to the prior year.
Brazil, we had mentioned unit volume was flat, the currency impact that we talked about was primarily related to Brazil and the difference in the real. And then other parts of the market, not huge differences, but Western Europe and Australi, both being down slightly compared to last year.

Brian Drab

Okay. All right. Thanks. And then, someone's going to ask you to dig into the tariff situation more on the levers you can pull, so I'll just be the one to do that. But can you just elaborate on, where your most significant exposures are? And really, what other actions are you going to have to take besides just, I guess, passing on, you said, price to the consumers. And really, I guess the main focus here is on the irrigation side, but I think, on the infrastructure side, spending situation has been under pressure in part because prices are higher and the projects are more expensive. Can you just talk about how it affects both businesses a little bit more and and what you can do to offset that?

Brian Ketcham

You're right. The biggest impact is going to be on our Irrigation business. And we've been anticipating, at least the China, Mexico, Canada tariffs for some time now. But yesterday, with the additional tariffs, I think, pull in from our standpoint, Taiwan and Korea where we do source some products. But I think that on the cost side, the other thing, we source our steel all domestically, but we have seen steel prices going up, steel coil prices going up. A lot of that's been driven by I think companies building inventories in anticipation of tarrif impact. We don't necessarily consider that to be a long term increase.
But I think, to your question, in terms of what we've been doing, some of it has been, some inventory build. We've had shifted some suppliers around a little bit already. But I would say, when you look at it in total, Randy mentioned a marginal increase in our cost of goods. If we were to quantify it today, ballpark, it'd probably be like mid single digit kind of an impact on our cost of goods.

Brian Drab

Okay. And then just one more quick follow-up. When you talk about moving around some of the suppliers, what are we talking about there, like circuit boards, controls, or what kind of imports do you have the most exposure to, if you could just remind me.

Brian Ketcham

I think electrical components would be one. And some of this had already been addressed as we're considering potential China-Taiwan conflict, things like that. Ve do have an operation in China and a fair amount of our internal components come from China. Some of the supply chain stuff has been in the works for a while.

Brian Drab

Understood. Okay. Thank you very much.

Operator

Ryan Connors, Northcoast Research Partners.

Ryan Connors

Thanks for taking my questions. First, on irrigation, I wanted to come at that from the angle of margin. It seems like the margins seem to hold up there better than we had expected with the big jump in international project. So a little bit of a decline year-over-year. But it seemed like a pretty solid margin there given the contribution from international which, typically you've said in the past carries a lower margin. So anything you can drill down on us there? How the margin managed to hold up so well with North America down like it was and in that big order contributing like that.

Brian Ketcham

I think starting with North America, I would say, margins comparable to last year. So from a pricing standpoint, we've maintained our pricing, we've seen some cost, a little bit of cost softness on steel earlier in the quarter. But I think on the international side, we've had pressure in Brazil over the last few quarters just with the demand coming down there, so there's been some margin pressure in Brazil. We saw that stabilize in the second quarter. And then, I think the volume leverage that we're getting from that project on the international side is definitely helping to offset, the gross margin dilution on the large project.

Ryan Connors

Got it. Very helpful. And then the other one was just on the tariff side, very much appreciate your comments about what you're doing and what you can control within the business, but I think what the other concern is what the tariffs will mean for the agricultural economy given the different tariffs on different exports from the U.S. corn belt and things like that. Obviously you don't have a crystal ball. But any thoughts on that issue like how this could impact the demand and potential recovery from the tougher market we've been in the U.S.

Randy Wood

Good morning, Ryan. This is Randy. I'll take that one. I think obviously when you look at $27 billion's worth of U.S. egg exports going out into the world, if any of that is in jeopardy, then you have a disruption on the demand side of the equation that I think is going to have to have and will have some impact on the pricing side of the equation. I know that the government's working aggressively to develop new markets in parts of the world where maybe we haven't exported grain. If you look at the (inaudible) forecast, it's roughly 16% of the corn this year demand is export demand. And if that goes away, I think there is going to have some impact.
I would say if we look at a historical perspective when we've had issues like this in the past, whether it's trade, we've seen the government step up to support the American Farmers. and we've just had roughly $30 billion, rolled out here in the past several months. And then again when we've had historic trade disruption like this. A potential that we see today that the government has stepped in. So I'm not sure there's going to be a natural market demand driver that's going to open up a lot of new markets to offset what we might lose. And again this is we might lose. We don't know with certainty what the retaliatory tariffs are going to look like. I think we've got some measure of confidence that we're we're going to see some additional support if and when the American farmers need it. But certainly, the element of uncertainty, I don't think is going to help customer sentiment, and it's not going to make, customers more eager to go out and get loans or take on additional capital investments. So something we're watching closely and you're right to highlight that this is really twofold for us, what it does on the COGS side and what it might do for the end markets as well.

Ryan Connors

Got it. Thanks for your time this morning.

Operator

(Operator Instructions)
Nathan Jones, Stifel.

Adam Farley

Good morning. This is Adam Farley, on for Nathan. I wanted to follow up on that last question. If so, what is your expectation on pricing to the domestic irrigation market? Do you think farmers could bear another round of price increases in response to tariffs?

Brian Ketcham

Yeah, Adam. This is Brian. We have already taken some pricing actions based on the increase in steel costs that we have seen in the market. And as we demonstrated a couple of years ago when steel was going up pretty dramatically, I mean, we were able to pass that along. I think, as I mentioned too, right now, we're looking at the cost impact being mid-single-digit kind of increase. We're not in any different situation than our competitors, so we feel like we would have that ability to pass that along. I think the other thing to mention, the timing of all of this, we're coming to the end of our spring selling season here, so the demand is going to drop off seasonally also. But we've already taken some action and depending on where all of this settles off or settles out, it will depend on what other actions that we need to take.

Adam Farley

Okay. Thanks for that. And then this is a hypothetical, but if the trade war continues to ramp up and if the U.S. is hit with retaliatory tariffs, could that potentially be a benefit for investment in Brazil if some of the production shifts around?

Randy Wood

We've certainly seen that in the past, Adam, and I don't know that the global demand for grain is going to change at all just because we have these trade wars. So I think that demand is going to shift around and the supply side then goes into different countries, whether it's Brazil or Argentina or other parts of the world. Demand is going to be pretty stable and demand is going to continue to grow.
So with a global company like ours, we're able to react quickly in Brazil. We've got the capacity there. If we start to see an expansion of that market, we're going to be able to react to that very, very quickly. So again, when we look globally, I think we're positioned very well and uniquely to take advantage of any incremental increase in demand on the grain side in any of our facilities around the world.

Adam Farley

Thank you for taking my questions.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Randy Wood for any closing remarks.

Randy Wood

Thank you all for joining us today. We're very pleased with our year-to-date results and our record second quarter performance. Our teams continue to execute well, and we're positioned to manage through the market headwinds in our North American irrigation market while leveraging opportunities in the expanding international irrigation regions. Our Road Zipper funnel will continue to drive long-term growth, and our global footprint and supply chain will allow us to effectively manage through tariff uncertainty.
This concludes our second quarter earnings call. We look forward to updating you on our continued progress following the close of our fiscal 2025 third quarter. Thanks for joining us.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.