Good day. Welcome to the Lindsay Corporation's Q3 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your touchtone phone. To withdraw from the question queue, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Randy Wood, President and Chief Executive Officer. Please go ahead. Thank you and good morning, everyone. Welcome to our fiscal 2023 Q3 earnings call. With me today is Brian Ketcham, our Chief Financial Officer. I'd like to start by looking at market conditions in North American irrigation, where we're really seeing 2 themes playing off one another. Firstly, market fundamentals remain strong, and although net farm income is projected to decline versus last year, it's still well above historical averages and it will represent the 3rd highest income level over the past 10 years. Commodity prices have also seen support recently due to crop quality concerns caused by the drought. While some parts of the country have received much needed precipitation, we have seen drought spread across the Midwest, driving the USDA to announce earlier this month that 64% of the U.S. corn crop was currently impacted by drought. This market tailwind has been partially offset by tepid customer sentiment that has been driven by inflation, interest rates, general economic uncertainty, and commodity prices still below last year's highs. In our view, the short-term uncertainties have influenced customer behavior and caused an unexpected shift in seasonal order patterns. While market feedback indicated quotation volume remained generally consistent with the prior year, our order volume was impacted by customers who've taken a more cautious wait and see approach for the near term. For us, this means some of the spring volume we anticipated will shift into the fall installation season. Our operational focus, pricing discipline, and spending efficiencies in the quarter did allow us to expand operating margins and maintain business quality in spite of the deleveraging driven by lighter volumes. Moving on to international irrigation. We continue to see strong project demand connected to global food security and shifting climate patterns. We recently confirmed 250 project units in the Middle East, and there are also several additional large projects in the Europe, Middle East, and Africa region that are actively being designed and quoted. Our global footprint, differentiated technology, and strong project experience position us to be confident in our ability to identify and win these competitive projects. Brazil continues to be a strong market, and we were pleased with customer interest at the recent Agrishow, which is a large selling show in the region. This market will be further supported by an aggressive government financing program that was released this week for the upcoming season. Total program funding for irrigation investments was increased approximately 25%, making over 2.3 billion BRL available for irrigators. The interest rate on these loans was maintained at 10.5%, which makes them attractive options to support continued investment. We were also honored to host a delegation from the Mato Grosso state in our global headquarters last month. This important growing region in Brazil has over 29.6 million acres of production, but less than 1.5% of that land is irrigated, representing a significant opportunity for development. Irrigation also creates the potential to grow three crops per year, which accelerates the payback of the irrigation investment. As mentioned, we're confident in our strategic value add with growers and our ability to win competitive projects in this growth market. Turning to innovation and technology. We were pleased to announce our partnership with Pessl Instruments in the quarter. In conjunction with our FieldNET platform, growers will now be able to access Pessl field monitoring systems, including weather stations and soil moisture probes, providing real-time insights into crop water needs. Growers utilizing FieldNET Advisor will be able to utilize Pessl's field monitoring systems to enhance the predictive analytics provided by the platform. Moving to infrastructure. We continue to see positive mid and long-term market fundamentals driven by aging infrastructure and funding provided by the Infrastructure Investment and Jobs Act. This funding will support incremental investments in roadway infrastructure, like many other companies in this space, we're seeing delays in how quickly that funding is getting to the market. We believe this funding will have more significant impact in the 2024 construction season, with steady growth through 2025 and 2026. Even with the IIJA delays, overall transportation construction contract awards leading into the spring have encouragingly increased over the prior year. This serves as a leading indicator for sales activity and continues to show signs of strengthening. The Road Zipper sales funnel remains steady, and although we do not currently expect any large project will be delivered in our Q4, we do see incremental growth in our lease portfolio due to additional projects in new states. This should drive a stronger backlog going into fiscal year 2024. I'd now like to turn the call over to Brian to discuss our Q3 financial results. Brian? Thank you, Randy, and good morning, everyone. Total revenues for the Q3 of fiscal 2023 were $164.6 million, compared to $214.3 million in the same quarter last year. Most of the decline in consolidated revenues came from the irrigation segment, as infrastructure revenues were down slightly compared to the prior year. Operating income for the quarter was $27 million compared to $35.2 million in the same quarter last year. Operating margin for the quarter was 16.4% of sales, consistent with the prior year quarter. This solid operating margin performance was supported by gross margin improvement exhibited in both business segments, while operating expenses were comparable to the prior year. Net earnings for the quarter were $16.9 million, or $1.53 per diluted share, compared to net earnings of $25.1 million or $2.28 per diluted share in the prior year. Lower net earnings resulted largely from lower operating income. Earnings performance 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. This increase in the effective tax rate reflected a greater proportion of earnings in higher rate foreign jurisdictions, primarily Brazil, compared to the prior year. Moving on to the irrigation segment performance for the quarter. Irrigation segment revenues for the Q3 were $142.6 million, compared to $188.7 million in the same quarter last year. North America irrigation revenues were $75 million compared to $96.2 million in the same quarter last year. The decline in revenues resulted primarily from lower unit sales volumes, while average selling prices were comparable to the prior year. Lower unit sales volumes resulted primarily from farmers delaying capital investment decisions for the reasons Randy cited earlier. We believe this will result in farmers deferring purchases to later in the calendar year, when the profitability of the current crop year becomes more apparent. In the international irrigation markets, revenues were $67.5 million compared to $92.5 million in the same quarter last year. This decrease resulted primarily from lower sales volumes in Brazil, Australia, Ukraine and Russia compared to the prior year Q3. We expect sales volumes in Brazil to increase in the Q4, supported by the new subsidized government financing program that Randy mentioned. Total irrigation segment operating income for the Q3 was $30.7 million, compared to $39.6 million in the same quarter last year. Operating margin represented 21.6% of sales, marking an increase from 21.0% of sales in the prior year. This increase in operating margin resulted from gross margin expansion, driven by improved price realization and operating performance compared to the prior year. Moving to the infrastructure segment. Infrastructure segment revenues for the Q3 were $22 million. An increase in Road Zipper lease revenue was more than offset by lower Road Zipper project sales and lower sales of road safety products compared to the prior year. Infrastructure segment operating income for the Q3 was $3.6 million, compared to $3.8 million in the same quarter last year. Operating margin for the quarter was 16.2% of sales, which increased from 14.8% of sales in the prior year. This improved operating margin performance resulted from gross margin expansion, attributed to a more favorable margin mix of revenue and from improved price realization compared to the prior year. Turning to the balance sheet and liquidity. Our balance sheet remains very solid, our total available liquidity at the end of the quarter was $194 million, with $144 million in cash equivalents, and marketable securities, with an additional $50 million of undrawn capacity on our revolving credit facility. Through solid operating performance and effective working capital management, we expect our improved free cash flow generation to continue for the balance of fiscal 2023. This stronger cash flow will be strategically beneficial, as it will further enhance our ability to act opportunistically by investing in growth opportunities, creating meaningful value for our shareholders. At this time, I'd like to turn the call over to the operator to take your questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw from the question queue, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Nathan Jones with Stifel. Please go ahead. Good morning, everyone. Morning, Nathan. I would like to start off on the commentary that you made about farmer uncertainty shifting demand from what's normally a spring selling season into the fall. I think that's maybe the first time ever I've heard an irrigation supplier talk about demand shifting into the fall, where you're typically, you know, seeing the crop grown, people aren't out there generally installing equipment on top of that crop. Can you just give us some more detail on the dynamics around that and why it is that you think that demand shifts into the fall? I would have thought that if it was shifting, it would have probably shifted into next spring. Yeah, I can take that one, Nathan, it really comes down to what we've seen historically in terms of behavior. You understand the seasonality of our business. We have installations going into spring and then season of use through summer, fall harvest, and then we have a fall selling and installation season. We really, you know, still believe firmly in the fundamentals of the ag market. If you look at net farm income, as we said in our comment, this is gonna be the 3rd highest, you know, net cash farm income in the last 10 years. There's gonna be a lot of profits in the segment, and customers in the spring were active in quoting. They were looking at specific fields, specific machines. They just weren't ready to pull the trigger, and we've confirmed that over and over again, you know, with our time in the market. Our view is there's a lot of machines in the funnel, if you will, that are ready to go. As customers wrap up harvest and they finalize, you know, their tax situation, there's gonna be more of that fall to, you know, December 31st type of business that they're gonna be willing to invest in. To me, again, when this segment is profitable, they've proven historically, they're gonna make investments, and an investment in an irrigation system is one of the best ROI investments they can make. Our belief is that business will shift to the fall. What you're saying is not that it shifts to during the growing season, you're saying it shifts to after the harvest, so late fall, kind of late in your fiscal Q1 or early into your fiscal Q2. Exactly. It would probably be in that fiscal year Q1 for us. That'll be post-harvest installations. You got it. Got it. That makes more sense. My follow-up question was on gross margins. Obviously, they've been pretty volatile over the last couple of years with all of the price changes in steel. That's started to settle down here a bit more into kind of that low 30s area. Is that an area where you think gross margins are sustainable? Does the, you know, the drop in demand here in 2023 give you any pause for concern on pricing that might put pressure on gross margin or just any more commentary you can give us around that? Yeah, Nathan, this is Brian. Yeah, I think first of all, on gross margin, it can vary quarter to quarter just due to the seasonality of the business and also can go up and down depending on the project activity. I would say over the last few quarters, as the inflationary environment has stabilized, our gross margin, we've seen an enhancement as we've gotten the full price realization. I think this most recent quarter, reflected more improvement actually in our international business as some of that price realization was a little bit later to curve than what we had seen in North America. If you look at it across the course of the year, I think, you know, gross margins in that 30%-31% range would be expected. Again, depending on level of project activity in one quarter or another. You know, if you had a project on the infrastructure side, obviously that would drive higher margins. A large project on the irrigation side might be somewhat dilutive. Yeah, makes a difference. All right, thanks very much for taking my questions. I'll pass it on. Our next question comes from Brian Drab with William Blair. Please go ahead. Hi, thanks for taking my questions. Can I just follow on to Nathan's question there on gross margin, just to be clear, the comment that you just made on gross margin, which I think you just said like 30-31 range over a year, is that something sustainable going forward, like into fiscal 2024, fiscal 2025? Is this the idea? Is that above where the street expectation is and has been? Brian, yeah, that's our expectation would be, we would be able to maintain that. I think as we've come through this inflationary environment, we have, and, you know, with demand levels picking up, as particularly internationally, we've seen the margins, improve, gross margin and operating margin. Our expectation is that would carry forward into next year. Okay. Then just on margins still, you know, you mentioned that some of the demand could end up shifting into the early fall, in the irrigation segment. You know, does that potentially help your, you know, capacity absorption in that period relative to a normal year, where margins could be supported, you know, in your fiscal Q4 as a result of that, or maybe, you know, early part of fiscal 2024? I would think from a margin standpoint, again, with our Q1 starting in September, you know, somewhat pre-harvest yet, there would be definitely some support if volumes are higher and more likely, you know, into the Q2. Okay. Then just, I mean, I guess, I guess the last question, just on the headline really here, which is that irrigation, you know, down more than 20% in the quarter. Just could you just go back. You've talked about some of the dynamics here, but could you go back just to be really clear, some of the factors and maybe rank order them for me just so I understand, like, what do you think is the biggest challenges? I'm just thinking about like, is it macro uncertainty, steel? Farmers getting late to the fields, weather conditions? you know, what's the most important factor and kind of down the list, rank order? Yeah, Brian, I can take that one. I think the headline is really about customer sentiment and profit certainty. I think a lot of the customers, and I've, I spent a lot of time with them this growing season, you know, the sentiment is: You know what? I'm pretty sure I'm gonna be profitable this year. I'm not sure how profitable, and I won't know more until I, you know, lock in more of my crop. I get closer to fall harvest and see what yields are gonna do. You know, this drought that's kind of moving into Iowa, Illinois, the Eastern Corn Belt right now, that provided some, you know, strong short-term support for pricing. If it rains or has rained, you know, the market responds, and you lose a little bit of price. If it gets dry again, you're gonna gain a bit of price. There's so many moving pieces right now if you're a grower, figuring out how to market and sell your crop and what your ultimate profitability is gonna be. I think in that environment, those are the big drivers. I think interest rates, general economic concern, either there's a lot of other noise in the market that I don't think contributes directly to the decision, but it's more about that profitability. I'll wait until the fall when I know I've got my grain sold, I know what my financial position is gonna be. I maybe even completed my taxes and know I've got some room to make investments. That's really what we believe we're seeing. Mm-hmm. Okay, thanks very much. You bet. The next question comes from Ryan Connors with Northcoast Research Partners. Please go ahead. Good morning. Thanks for taking the call. Good morning. My question was on the issue of, can you frame for us the issue of price relative to volume, and to what extent they're a function of one another? In other words, you know, I understand your desire to want to maintain the pricing discipline, but do you think, you know, maintaining price as the environment gets more uncertain, you know, contributes to maybe some volume pressure, or just curious your take on that? Yeah, this is Brian. I would say in the market environment that we're in today, you know, price has not been the main point of discussion. As Randy mentioned, a lot of the, just, the uncertainty in the environment, you know, lowering price isn't gonna convince a farmer to buy right now. So we've been disciplined on that. You know, when you look at Brazil and the delay that we've seen there with the government transition, a lot of that was tied to waiting for this new financing program to be announced. Again, you know, lowering price is not gonna drive volume in that situation. They're gonna wait until they know what the financing program is all about, because that's, you know, a lot of the purchases are highly dependent on that. In this environment, you know, it's not been a price, environment that's going to drive additional volume, so we've been disciplined on maintaining our prices. I think there, you know, another thing that could contribute to the wait-and-see approach is just, you know, maybe prices will fall in, you know, if steel costs soften, but that's not our view today either, as we've seen the steel, mills really be disciplined on their capacity. We're not expecting any, you know, precipitous drop in steel costs going forward either. Got it. Okay. I take from that, Brian, that's that you're not aware of any others that have not taken the same approach to maintain discipline on pricing. In other words, if that's not gonna be an effective strategy, I assume the whole market's been. Yeah, no, that's. Acting rationally in terms of that. We're not getting any feedback from our dealers or regional salespeople that we're losing, you know, orders based on price. Got it. Okay. Would have the ability to respond if that were the case, but that's not been the case. Got it. Okay. My other one just was a quick one on infrastructure. You know, I see the leasing revenue again, you know, sort of outpacing the actual product sales. Is leasing just the future for Road Zipper now? Is that just the model that seems to be really gaining traction with more customers, or is that more of a, you know, is that something that'll ebb and flow going forward? Hey, Ryan, this is Randy. I'll take that one. There is going to be some ebb and flow, and we've really had a focused effort on lease, because lease can be a little more predictable in terms of revenue stream. When we work on those large sales projects, for permanent installation on a bridge, like Golden Gate as an example, there's a pretty long gestation period there. Leasing is really connected to the construction season. It's gonna come every summer in markets where we can start to develop those leasing programs. I think in terms of revenue mix, we're going to see more opportunities and growth in that lease funnel. It's been a very specific area of strategic focus for us, and we do expect that to continue growing. Again, quarter to quarter, period to period, we could see more of that mix one way or the other, depending on, you know, what's exiting the funnel at any given time. Leasing should certainly make it a little more smoothen out and make it a little more predictable. Got it. Thanks for your time. Thanks, Ryan. Our next question comes from Brian Wright with ROTH Capital Partners. Please go ahead. Thanks, thanks for the question. Wanted to know, you mentioned again about the investment opportunity and the capital position and, you know, just kind of given the current environment is that creating maybe more opportunity as far as, sellers and buyers kind of getting closer to pricing kind of levels? We're still in the earlier stages of, you know, just. looking at the landscape of what's out there? This is Brian. I'll take that. You know, I don't, I don't think it's having necessarily an impact on, you know, valuations or purchasing. You know, we've indicated before, we've, you know, we see a lot of opportunities in this environment, just coming off of, you know, a couple of strong years in the ag market. You know, where we're focused on is in the area of technology and, you know, areas that we can continue to build on our capabilities with our technology and, increase, you know, market penetration of our technology. I, you know, and the increased level of focus that we've put on it with having Brian Magnusson move into a full-time role in this area, I think that's what creates optimism from our standpoint, that, you know, that we'll see some activity in that area. Great. Thanks so much. Again, if you'd like to ask a question, please press star then one at this time. Our next question comes from Brett Kearney with Gabelli Funds. Please go ahead. Hi, guys. Good morning. Thanks for taking the question. Morning, Brett. You guys, touched on this a bit already, but just curious, you know, the latest update on how the drought conditions, particularly in North America, are kind of impacting, and your expectations going forward. You know, customers thinking opportunities, I guess, on that scale of, it's an incremental opportunity for Lindsay versus, getting to the level where potentially too severe going forward? Sure, Brett, I'll take that one. This is Randy. If you look at the drought maps, you really see, you know, eastern Nebraska, Kansas, just lit up with extreme drought. There's pockets in Iowa and heading now into Illinois, Indiana. You know, we don't have a large install base in that Eastern Corn Belt. It's a market that, you know, traditionally gets timely precipitation. We do have some seed corn growers that are mandated to have irrigation we see there. The bigger impact is likely on supply disruption, and when we see supply disruption, then we'll see, you know, commodity price support. If you're an irrigator, you've got good yields because you know you've been able to water when you needed it. Now you've got good price support. In general, what we're seeing now in terms of drought is, in our view, going to be supportive for the business, because it's going to be supportive of price. I don't know, in my view, that I would predict that Eastern Corn Belt market, you know, heats up for us. We did see some of that business back in that 12, 13 period during that historic drought in that part of the world. I'm not sure that it's going to get severe enough that it'll drive results in the short term, but I correlate it back to strong commodity prices. Irrigators are going to have strong yields. That combination is going to prop up farm income, and we feel could be very supportive for the business. Excellent. Maybe if I could just sneak in one additional one on the infrastructure side. Yeah, definitely have heard from a number of other folks on kind of the various constraints that, you know, transportation projects have had kind of moving forward. I know you guys interact at a few levels with, you know, states, departments, transportation. Just curious, kind of, you know, the data points you're hearing and the feedback, whether it's labor or, you know, construction crews, materials are kind of what's some of the major bottlenecks. Sure On the road safety product side. Yeah, I think the ones you've mentioned, we've heard about. You know, inflation early on really impacted project flow, then some projects had to get requoted and rebid because the cost they were quoted under had moved due to inflationary concerns. Access to labor, access to equipment, we've heard both of those things and the ability to kind of get this money to the road. I think most recently, it's really more about administration and just the paper flow and approval flow to get this money into the bank account so it can be spent. It's a combination of factors, but like you, Brett, we're following, you know, some of the public companies in this space, and we're hearing a lot of consistent stories, working with, you know, listening to the Association of Equipment Manufacturers, AED, those organizations. This does appear to be an industry phenomenon. The good news is, and we'll talk a lot about, you know, any additional funding is supportive for strong markets, and we're okay being patient, and we do see, again, some longer term potential going as far out as 2026, where we think we'll have some long-term stability and benefit here. Excellent. Very helpful. Thanks so much, Randy. Thank you, Brett. Our next question comes from Bill Baldwin with Baldwin Anthony Securities. Please go ahead. Yes, good morning, and thanks for taking my questions. Initially, I was going to see what you're thinking now about the level of capital expenditures here in 2023. If you can, what's kind of the nature of the projects that are being focused on in that area? Yeah, Bill, this is Brian. You know, for the for 2023, we're probably gonna end up, you know, in that $15 million-$20 million range. I think we've been looking across our manufacturing footprint to, you know, look at where we can add productivity type investments. You know, you look at a market like Brazil and our facility in Turkey, where there could be a need for additional capacity expansion. I would say as we go- into 2024, the level of CapEx could pick up, as we look at ways to continue to improve our overall efficiency and, but, you know, this year, we should end up in that $15 million-$20 million range. Okay. Thank you. On the infrastructure side, I know you've gone into this previously, but it's been a while since I've had any commentary on it. Can you kind of give us a little bit of overview or specifics on where the project Road Zippers primarily fit into the infrastructure programs? Are those into the, where you get into early design of transportation systems, where they're gonna be used on a permanent, continuous basis? Exactly, you know, what is the nature of the primary usage on buying the Road Zippers? Yeah, no, that's a great question, because Road Zipper can be used in a variety of different ways. You know, we talked about the leasing being up, that's generally going to be used during a construction program. It's a way that, you know, construction programs can be facilitated, provides worker safety during the project. We're seeing an uptick in that's kind of an early indicator of some of the money coming through with the IIJA funding, too, is you'll see that first as the road construction starts. When it comes to, you know, a permanent installation, a couple of different things that we think, you know, we'll also see opportunities in as more substantial projects get planned with, you know, expanding roadways. Especially going in and out of a city where you've got the flow traffic, you could use Road Zipper in a permanent installation to provide flexible lanes. That's an option. Then, the other one has been solving existing congestion issues, and the best example is on a bridge that's going into a city. Those are a few examples, and this is a global solution. We've had success in various countries around the world and continue to see opportunities. Are you finding yourselves able to get in on the early design stage of these permanent projects, these projects that we're talking about here of a more permanent nature? I know that was one of your focuses, is to try to get in on the early design, where you get Road Zipper design into the project itself. Yeah, that was really part of that shift left strategy we implemented, 3 years ago or so. Right. Is really getting a seat at the table so that we could explain how, Road Zipper can be used in a variety of different applications. Is that working well? Is that working for you? Yeah, we're definitely seeing some traction from that. Super. Okay, very good. Lastly, just kind of a members question here. Can you provide any insight into the delta on the year-over-year on Russia and Ukraine as far as revenue decline? Yeah, I think. How much of the revenue decline came out of that, those two areas? We've talked about it in the last couple of quarters. You know, in the Q3, last year, we completed, you know, the backlog of orders that we had. You know, if you look at it on a just on a year-to-date basis, through the 1st 3 quarter, it's probably approaching, you know, $20 million. Okay. Thank you very much. All right. Thanks, Bill. Again, if you'd like to ask a question, please press star then 1 at this time. Showing no further questions, I would like to turn the conference back over to Randy Wood for any closing remarks. Great, thank you for your interest and participation in today's conference call. As mentioned, we're pleased with the underlying fundamentals of our irrigation segment, although the spring season did not materialize as projected, our business continues to demonstrate resiliency, as shown by our strong operating margins during the quarter. International project interest remains high, we're actively quoting several of these opportunities in various regions around the world. We continue to create value with our technology partnership strategy, we're very excited to see the value of the collaboration with Pessl flow through to our joint customers. The infrastructure segment is also supported by strong market fundamentals and the incremental funding available through the IIJA. As that funding is released to the market, we believe we're well positioned to capitalize on market growth. This concludes our Q3 earnings call. We look forward to updating you on our continued progress at the end of our fiscal year. Thanks for joining us. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.