管理層發言
Good day, and welcome to the Lindsay Corporation Fiscal Second Quarter 2026 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Mr. Randy Wood, President and CEO. Please go ahead, sir.
Thank you, and good morning, everyone. Welcome to our fiscal 2026 second quarter earnings call. With me today is Sam Hinrichsen, our Chief Financial Officer. Before commenting on our quarterly results, I'd like to address recent developments related to the conflict in the Middle East. We are closely monitoring the situation with our top priority remaining the safety of our employees and partners in the region. The MENA market has been a strong source of growth for our International irrigation business, and deliveries tied to our most recent project are meaningful to our revenue. The project remains on schedule, and our supply chains are currently operating without disruption. Any future risk will depend on the duration of the conflict and the potential for broader geographic impact. At this time, we remain well positioned to continue supporting our customers and dealers across the region. Turning to our second quarter results, I'm very proud of our team's execution. Despite continued external headwinds in the agriculture industry, including trade uncertainty, higher input costs, and weakening sentiment, our team demonstrated strong operational discipline. We remain focused on the levers within our control, particularly pricing, cost management, and operational efficiency while continuing to invest strategically to position the business for long-term growth. In North America, our irrigation business customers continued to delay large capital purchases given current farm economics, which, as expected, resulted in lower unit sales volumes in the quarter. Demand remained soft, consistent with what we outlined last quarter. In our international business, revenues were flat to slightly down year-over-year, driven by lower sales volumes in Brazil and the timing of project revenue in the MENA region. In Brazil, high-interest rates and limited access to credit continue to constrain growers' ability to finance capital equipment purchases. Additionally, local market feedback suggests the 2026 crop plan expected to be released in July will include lower financing rates than the prior year. As a result, many customers are taking a wait-and-see approach. Our Infrastructure segment performance reflects the expected impact of a difficult comparison to the prior year, which included the delivery of a $20 million Road Zipper project, which we did not expect to repeat. Excluding the Road Zipper project, our infrastructure business grew 6%, led by higher sales in road safety products. Turning to market outlook, as we mentioned last quarter, we expect softer market conditions to persist in the near term in North America. While customer quotations are down slightly versus prior year, we are not seeing the traditional pickup in spring order volume. Current market indicators, including input costs and overall farm profitability suggest the current trough environment will continue until there's greater clarity around trade impacts, profitability, and resolution in the Middle East. In our international markets, we remain encouraged by the overall outlook for future growth, particularly in regions focused on improving food security and water resource management. Near-term recovery in Brazil will depend on grower response to the new crop plan and the availability of attractive financing. While we will closely monitor customer sentiment at the Agri Show later this month, we do not expect any meaningful market recovery until the new crop plan is released in July. We remain optimistic in Brazil and continue to see a compelling long-term secular growth opportunity in that market. Within our Infrastructure segment, we continue to see opportunities develop across the portfolio, and the Road Zipper sales funnel remains strong. We do see opportunities for continued growth in road safety products, which has provided solid support to our results this year. During the quarter, we introduced two new products at the American Traffic Safety Services Association Trade Show. The AlphaGuard channeling device delivers speed, strength, and flexibility, allowing it to be used in both emergency applications as well as everyday use. The Road Runner is a breakthrough truck-mounted attenuator that prioritizes speed of deployment and unmatched durability. The introduction of these new road safety solutions highlights our investment in innovation and the growing demand for efficient and safe roadway solutions. I'd like to now turn the call over to Sam to discuss our fiscal second quarter financial results.
Thank you, Randy, and good morning, everyone. Total revenues for the second quarter of fiscal 2026 were $157.7 million, a decrease of 16% compared to $187.1 million in the prior year. The decline in our consolidated top line was driven by lower revenues in both of our segments. The year-over-year decrease in the infrastructure business reflects the absence of the $20 million Road Zipper project that was delivered in the prior year, which, as Randy mentioned, we did not expect to repeat. Operating income for the second quarter was $13 million compared to $32.1 million in the prior year, and operating margin was 8.3% of sales compared to 17.2% of sales last year. The decrease in operating income was driven by lower revenues, with the most significant driver being the previously mentioned lower Road Zipper project revenues. Net earnings for the quarter were $12.0 million or $1.15 per diluted share compared to $26.6 million or $2.44 per diluted share in the prior year. The year-over-year decrease in net earnings reflected the impact of lower operating income and a higher effective tax rate. Turning to operating segment results. Irrigation segment revenues for the second quarter were $141.2 million, a decrease of 5% compared to the $148.1 million in the prior year. Results were largely in line with our expectations against the backdrop of a continued challenging agricultural environment. North America irrigation revenues were $71 million, down 8% from the previous year, as lower unit sales volume was partially offset by higher average selling prices. Demand in North America continued to be impacted by low commodity prices and overall tempered farmer sentiment. International irrigation revenues were $70.2 million compared to $71 million in the prior year. The marginal decrease was driven by lower sales volume in Brazil and MENA project timing, which was partially offset by growth in other international markets. Irrigation segment operating income for the quarter was $19.5 million compared to $27.4 million in the prior year, and operating margin represented 13.8% of sales compared to 18.5% of sales last year. The compression in operating income was mainly a result of lower sales volume in North America, unfavorable regional mix, and the impact of fixed cost deleverage. In our Infrastructure segment, revenues for the second quarter were $16.5 million compared to $38.9 million in the prior year. As expected, the year-over-year decrease was attributable to the absence of the $20 million Road Zipper project that was delivered in the prior year period. Excluding the Road Zipper project, revenues were up 6%, driven by continued growth in road safety products. Infrastructure operating income for the quarter was $1.2 million, down compared to $13.3 million in the prior year, and operating margin was 7.1% of sales compared to 34.1% of sales in the prior year. The decrease in operating income and margin was mainly driven by lower Road Zipper project revenues, which resulted in a less favorable mix. Turning to the balance sheet and liquidity, at the end of the second quarter, our total available liquidity was $236.1 million, which includes $186.1 million in cash and cash equivalents and $50 million available under our current revolving credit facility. During the quarter, we continued to execute against our capital allocation priorities, returned cash to shareholders by completing $25 million of share repurchases and made progress on key strategic investments. We remain confident in the strength of our balance sheet and our ability to continue investing in the business to support future growth and drive productivity while returning capital to shareholders. This concludes my remarks. At this time, I will turn the call over to the operator to take your questions.
分析師問答
And our first question for today will come from Nathan Jones with Stifel.
I guess I'll just start with margins. The irrigation margins were a bit low even on the volume that we had there, I think. The incrementals were over 100%, not a big number on the revenue change. Can you just talk about what the inputs there are, maybe some more color on the soft margin in irrigation, if you're seeing any increased pricing pressure from competitors? Or just what's going on there, please?
Sure, Nathan. So if you think about the volume drop, particularly North America year-over-year, coming from an even lower base from last year, that will continue to drive fixed cost deleverage. So that's the main driver of that margin compression. Regional mix was slightly unfavorable due to the fact that we ship more internationally. But I would also just say the margin pressure from the overall competitive environment from input price inflation really globally has impacted margins. So it's really a combination of those factors.
You mentioned the competitive environment there. Are you seeing more intense price competition from competitors as the volume is fairly low here?
Nathan, this is Randy. I'll take that one. And I think what you generally see in these soft markets, there's more propensity maybe from the smaller privately-held family businesses, whether it's in North America, Western Europe, you certainly see a more competitive environment kind of ratchet up the pricing intensity. We would still say a rational pricing environment in general, and our approach is very strategic. So we might want to identify specific customer relationships that we know we have to protect. We're not going to use pricing as a method to drive market share increases. We certainly want to preserve the quality of the business. But for us, it's a strategic approach. But certainly, when volumes are tight, you do see that competitiveness ratchet up.
And just one on the MENA project. I think you manufactured that in Turkey. You said that it's on schedule at the moment. Do you expect it to stay that way? Or does it stretch out? Does the war in Iran kind of delay any potential contract awards in that area as people wait and see how things are going to play out there? Just any comments you can give us on that?
Yes. You have hit on a couple of things. And we would say, certainly, there could be short-term delays in some of the other business in the region, whether it's project business or just regular retail business. I think everybody in the region is kind of on the edge of their seats waiting to see what happens. Specific to the MENA project, we're delivering now, a lot depends on the length of the conflict. If this is another 3 to 4 weeks, 5 to 6 weeks, our view would be everything looks to be on track. We've confirmed with our logistics providers. We've confirmed with our supply chain on the inbound side. For us, it looks safe. And as predicted and as projected, provided this is not a prolonged conflict. If this goes months or several quarters, then we may have a different answer for you. But right now, based on what we see and the communication we've had with all of our suppliers, things look to be on track and proceeding as planned.
Your next question will come from Ryan Connors with Northcoast Research.
I wanted to revisit the topic of pricing, because according to the press release, you mentioned that higher average selling prices are helping to counteract some of the challenges in irrigation. This indicates that pricing has been a positive factor. Should I understand your earlier comments to mean that you are maintaining your prices and possibly turning down some business that isn’t priced appropriately?
I would say, yes, we certainly have a walkaway plan on anything, Ryan, whether it's a project sale or just a retail sale. But I think there's always two parts of the equation. I think pricing year-over-year was favorable, but you have to factor cost into it as well. And cost, in our view, exceeded the pricing opportunities we were able to get in the market, and that's resulting in the margin compression that you're seeing, a portion of it.
Got it. Okay. Got it. And then one more on irrigation and then a quick one on infrastructure. There's been a lot of talk about significant shifting of acreage from corn to soybeans in North America given the economics. Does that impact you at all? Or are you sort of indifferent between those two?
I think we are mostly indifferent regarding the impact of customer growth in our regions for direct machine sales. The need for irrigation is present, but it really makes no difference to us. We will apply both in a similar manner. However, the broader market could start shifting acreage, affecting prices and farmer profitability. Currently, we see a small decline in corn and a slight rise in soybeans. Historically, the June report provides better data, and we typically see an increase in corn acres and a decrease in soybean acres from now until June. Many customers are already committed to their inputs and planting plans, so I don’t anticipate significant changes before they start planting. Regardless, there will be no direct sales impact on our end, but we will monitor how these changes affect the macro environment and pricing of commodities that could influence outcomes.
Got it. Very helpful. Lastly, regarding infrastructure, it seemed that the decrease in margins caught us off guard. Is there anything specific that is causing this decline this quarter? Or should we consider this as the typical margin rate when the Road Zipper project is not contributing significantly?
So if you think about the Road Zipper, that, of course, just the sheer magnitude is the biggest single driver for the margin compression. And frankly, cost absorption, deleverage is a big chunk of this. You're taking that significant product out of the results compared to last year. If you think about the Road Safety Products business, that's doing really well. That business is a smaller piece, of course, of our overall infrastructure business. So even that growth is a partial offset, but it can't offset the full impact from the Road Zipper project. So if you think about the other components in infrastructure, there are what I would call non-Road Zipper project components. They will continue to impact results. So there are more components than just road safety products and Road Zipper. So as you think of margin profile, of course, in the essence of a big project, it's going to be closer to what we've seen right now.
Got it. Okay. And can you provide a quick update on the Nebraska capital investments, including our current status and the expected margin impacts for both 2026 and as we move into fiscal year 2027?
Yes. I can say from a timeline perspective, the weather was very cooperative in support of this winter. So our tube mill is up and running and turned over to full production. Construction of the new galvanizing facility is on track, on plan, and we would expect that to come online near the end of the calendar year, sometime in the first portion of our fiscal 2027 year. In terms of the depreciation impact, the efficiency gains, I think we've been pretty consistent that initially, it does appear that a lot of those efficiency gains we're going to have are going to be eaten up by the incremental depreciation that we're going to see on that investment. And really for us to get the leverage and growth and profitability out of that investment, we are going to have to see some market recovery to support that. So to me, the similar answers we provided over previous quarters and no significant shifts in project timing.
Your next question will come from Trevor Sahr with William Blair.
Could you guys hear me?
We got you.
Okay. Sorry about that. I just wanted to ask quickly on Brazil, maybe just some more thoughts there, how the outlook might have changed throughout the quarter? And Randy, you mentioned that the upcoming crop plan in July, I believe you said it is expected to have lower interest rates for ag equipment. Is that something that's just expected? Or is that a hard kind of guarantee? Like how can we think about Brazil in the second half of your fiscal year here?
Sure. And I'll maybe start by saying long-term Brazil is still a very attractive market. Low penetration in terms of irrigation. Three crops a year really accelerates the payback. So we're still very, very bullish on Brazil. And what we're dealing with in the near term is credit, and that's been the narrative for the past several quarters. The feedback that we've got locally, I would say in Brazil, nothing is guaranteed. This is an election year, which can sometimes change and shift timing on some of the things that are shared verbally in the markets. But that crop plan last year was about 12.5%. And this year, the projections are it's going to be well under that. And how far under that, no guarantees until the plan is released. We are seeing some market movement in interest rates there. I think the Selic rate nationally was just lowered by 0.25 points within the last couple of weeks. So there are indications locally that financing rates are going to come down. And when customers see that, they kind of wait and customers might think I could use a pivot today. But you know what, I can put a pivot on my next crop. If I can get a better interest rate, my payback is going to be much better. So the environment we're in, there's no certainty, but the prevailing attitude locally is rates are going to get better, and that's got customers kind of sitting on the sidelines. We did mention in our prepared comments, the Agri Show is the end of this month, and that generally is the largest show. It's a selling show where dealers and customers are working on designs, putting quotations together. So we're very anxious to see what customer sentiment is like at that show. I suspect we could come out of that with some very good feedback on customers ready to reenter the market. But until that crop plan is released and that money and funding is available in July, we could be in the same position through our third quarter that we've been in our second quarter.
That's great. Very helpful there. Finally, I just wanted to ask quickly on gross margin. I wanted to see if there was anything you wanted to call out besides weaker top line performance that resulted in the margin hit this quarter. And then additionally, any more clarity you can provide on margin for the latest international irrigation project would be helpful as well.
Regarding overall gross margins, the fixed cost deleverage at current demand levels is a key factor. We do not anticipate a significant change in the international mix in the second half compared to Q2. Additionally, there are risks related to input prices and the timing of pricing actions. The situation in Iran remains uncertain, and if it persists, it could affect input prices and present challenges. Those are the main factors to consider. What was your second question about the outlook for the second half?
Yes. Any comment on the second half? And then maybe if there's any update or more clarity on the margin of the MENA international project?
Yes. Again, for the second half based on what Randy discussed, the overall outlook for specifically North America and Brazil is not a big change versus Q2. So we'd expect, especially the cost deleverage to continue. From a MENA project perspective, again, we're executing the project according to plan. Those margins are comparable to the previous year's project. Of course, there are timing differences as we ramp up the project. But there's really no change there compared to what we had discussed before.
Your next question will come from Jon Braatz with Kansas City Capital.
Randy, I want to go back to the capital investments you’ve made. In 2024, you started Project Fortify with an investment of $50 million in the Nebraska facility. I would have expected slightly better margins during this downturn. My question is, how far along are you in realizing a return on that investment? Are we close to seeing those returns soon?
Yes. I think as I said earlier, Jon, we have now turned over the tube mills specifically, and that was the first tranche of the big investments. It was designed to improve safety for our operators, improve efficiency and throughput, but also to reduce our reliance on labor. And as you know, in Lindsay, Nebraska, if we had to bring in another 100 laborers to respond to some upside in demand, that would be tough, that would be a stretch. So our plan was to automate the equipment so that when we do have to respond to an upswing in the market or downswing in the market, we're not taking our labor headcount up and down as we maybe have in previous history when we had more labor-intensive labor practices. So right now, I think I said earlier in the call, we do need to see some market recovery to get the volume leverage on that investment. That will sustain itself as we launch the new galvanizing facility in early 2027. At current volumes, it's going to be tough to generate and see those incremental margins and those returns just because of the deleverage on a big investment and the depreciation that we'll see. Now when we get into the next upcycle as we grow and reach the peak of the market, I think that's when we're really going to be able to capitalize on it and identify it. But in the near term here, I think most of those savings are going to get diluted by the incremental impact of the depreciation.
And this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Randy Wood for any closing remarks. Please go ahead.
Thank you. Overall, near-term market conditions remain challenging, but we are confident in our ability to execute and position the business for long-term growth. We will continue delivering the large MENA project throughout the third and fourth quarters while advancing planned investments in our Lindsay, Nebraska facility, including the new galvanizing operation expected to come online in early 2027. Our leadership teams remain disciplined and experienced in managing through the cycles, and we will continue to closely manage spending while aligning investments with our strategic growth priorities. In addition, we see continued opportunity in our road safety business, and we remain focused on introducing new products into attractive end markets. We remain committed to creating long-term value for shareholders and look forward to updating you on our third quarter earnings call. Thanks for joining us.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.