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LINDSAY CORP (LNN)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 FY2024 revenue fell 15% to $139.2M, but diluted EPS rose 21% YoY to $1.85, aided by a $4.8M Brazil income tax credit; operating margin was 14.3% versus 16.4% last year . Infrastructure strength (revenue +11% to $24.4M; operating margin 25.8%) helped offset irrigation softness .
  • Backlog surged to $246.9M (from $94.5M YoY), driven by a >$100M multi‑year MENA irrigation project; revenue recognition begins in Q4 FY2024 and extends through Q1 FY2026, providing multi‑quarter visibility .
  • North America irrigation demand was tempered by wet Midwest conditions and insurance delays that pushed storm‑related replacement demand into Q4; Brazil remained constrained by lower commodity prices and tight credit .
  • Capital deployment: $17.9M of share repurchases completed in Q3 and quarterly dividend raised to $0.36 (+3%) post‑quarter, signaling confidence and balanced capital allocation .
  • Wall Street consensus estimates via S&P Global were unavailable at time of analysis; beat/miss vs estimates cannot be assessed.

What Went Well and What Went Wrong

What Went Well

  • Infrastructure momentum and margin mix: Road Zipper project sales and lease revenue increased, lifting segment operating margin to 25.8% (vs 16.2% YoY). “The growth and margin expansion we achieved in our infrastructure business for the quarter helped to offset some of the softness in the irrigation business.” — Randy Wood, CEO .
  • Strategic win: Secured Lindsay’s largest irrigation project (> $100M) in MENA using Zimmatic and FieldNET, expanding backlog and multi‑quarter revenue visibility .
  • Balance sheet strength and capital returns: Liquidity of ~$202.7M at Q3 with $152.7M in cash/securities and $50M revolver; $17.9M buyback completed and dividend increased to $0.36 per share .

What Went Wrong

  • Irrigation volume decline: North America irrigation revenue fell 9% (to $68.2M) driven by lower equipment and parts volumes; international irrigation fell 31% (to $46.6M), primarily Brazil and Latin America .
  • Deleverage hit margins and operating income: Consolidated operating income dropped 26% YoY to $19.9M; irrigation operating margin fell to 17.0% (from 21.6%) on lower revenues and fixed cost deleverage .
  • Near‑term Brazil demand headwinds: Lower commodity prices and constrained credit reduced grower investment capacity; aggressive pricing appears in large Brazilian projects, pressuring international margins .

Financial Results

Consolidated Results

MetricQ3 2023Q1 2024Q2 2024Q3 2024
Revenue ($USD Millions)$164.6 $161.4 $151.5 $139.2
Operating Income ($USD Millions)$27.0 $21.1 $22.1 $19.9
Operating Margin (%)16.4% 13.1% 14.6% 14.3%
Net Earnings ($USD Millions)$16.9 $15.0 $18.1 $20.4
Diluted EPS ($USD)$1.53 $1.36 $1.64 $1.85

Notes:

  • Q3 EPS benefited from a one‑time Brazil tax credit of $4.8M (~$0.44 per share) .
  • S&P Global Wall Street consensus estimates were unavailable; estimate comparisons omitted.

Segment Breakdown

MetricQ3 2023Q2 2024Q3 2024
Irrigation Revenue ($USD Millions)$142.6 $133.0 $114.8
- North America ($USD Millions)$75.0 $82.8 $68.2
- International ($USD Millions)$67.5 $50.2 $46.6
Irrigation Operating Income ($USD Millions)$30.7 $25.6 $19.5
Irrigation Operating Margin (%)21.6% 19.3% 17.0%
Infrastructure Revenue ($USD Millions)$22.0 $18.5 $24.4
Infrastructure Operating Income ($USD Millions)$3.6 $3.5 $6.3
Infrastructure Operating Margin (%)16.2% 19.0% 25.8%

KPIs and Balance Sheet Highlights

KPIQ3 2023Q3 2024
Backlog ($USD Millions)$94.5 $246.9 (incl. $62.0M beyond 12 months)
Liquidity ($USD Millions)—$202.7 (Cash/securities $152.7 + Revolver $50)
Share Repurchases ($USD Millions)—$17.9 in Q3
Cash & Cash Equivalents ($USD Millions)$131.6 (May 31, 2023) $140.2 (May 31, 2024)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Capital ExpendituresFY2024$35–$40M (Q2 slides) ~$30M (Q3 slides) Lowered
Dividend (Quarterly)Next Payable Aug 30, 2024$0.35 $0.36 Raised
Road Zipper Lease RevenueFY2024Expect growth (Q2 outlook) Expect continued growth (Q3 outlook) Maintained (qualitative)
MENA Irrigation Project Revenue RecognitionQ4 FY2024–Q1 FY2026N/ABegin in Q4 FY2024; continue through Q1 FY2026 New (timing specified)
Tax RateFY2024N/AOne‑time Brazil tax credit in Q3; future tax benefit on Turkey‑origin project (tax‑free zone) likely; no numeric guidance Qualitative update

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 FY2024)Current Period (Q3 FY2024)Trend
AI/Technology InitiativesQ1: FieldWise integration; first RoadConnect sale . Q2: Next‑gen FieldNET; investment in Pessl (49.9%) to deepen IoT/data analytics .FieldNET enhancements; Generative AI pilot with Bayer integrating FieldNET data .Expanding partnerships/use cases; strengthening digital water management.
Macro: US Farm Income & Commodity PricesQ2 slides: US net farm income projected −26% YoY; corn −35%, soy −25% vs prior year .Q3 slides: Corn −24%, soy −7% YoY; tempered North America demand .Still a headwind; some stabilization vs Q2.
Brazil Market ConditionsQ1/Q2: Lower prices, constrained credit, FINAME timing disruption .Continued constraints; flooding in south; more aggressive pricing on large projects .Persistent near‑term headwind; pricing pressure on large bids.
Infrastructure Funding (IIJA)Q1/Q2: Early IIJA benefits; lease mix accretive .IIJA funding visibly flowing; inflation absorbs some impact; lease growth supports margins .Multi‑year tailwind; lease mix enhances margins.
Regional TrendsQ1: North America broadly stronger; Great Lakes supplemental irrigation growth . Q2: Road Zipper international timing/weather; Europe winter impact .Midwest wet weather; storm damage demand delayed to Q4; strong MENA project funnel .US timing shifts into Q4; international projects active.
Operational Footprint & CapexQ1/Q2: $50M modernization in Lindsay, NE; Industry 4.0, automation .Near‑term margin pressure during implementation; mid‑term margin stabilization; more flexibility with lower labor reliance .Execution phase; productivity benefits later.

Management Commentary

  • “We remain encouraged by the growing strength and momentum in our infrastructure business, supported by new project sales and momentum in leasing revenues of our Road Zipper System™.” — Randy Wood, CEO .
  • “We were pleased to announce a contract valued at over $100 million… the largest in our company’s history.” — Randy Wood, CEO .
  • “Our total available liquidity at the end of the third quarter was $202.7 million… $152.7 million in cash, cash equivalents and marketable securities and $50 million available under our revolving credit facility.” — Brian Ketcham, CFO .
  • “A large project like the one we announced is generally going to be dilutive to margins… the project business would have some [dilution].” — Brian Ketcham, CFO .
  • “This project… coming out of our facility in Turkey, which is in a tax‑free zone. So that definitely benefits the tax rate.” — Brian Ketcham, CFO .

Q&A Highlights

  • Irrigation volume vs pricing: NA decline mainly volume/mix (7–8 pts volumes, remainder price/mix); Brazil largely volume with more aggressive pricing on larger projects; no list price cuts .
  • Operational modernization impact: Next 12–18 months likely margin pressure during capex implementation; mid‑term margin stabilization with automation reducing labor reliance .
  • Tax credit nature: Brazil tax credit was a retroactive, one‑time benefit; not recurring .
  • Road Zipper pipeline: Better line of sight; expect projects exiting the funnel over next 3–4 quarters .
  • North America storm activity: Late April/early May storms increased damage; insurance delays pushed demand into Q4 .
  • FieldNET attachment: 100% of new domestic pivots ship FieldNET‑ready; retention north of 97%; international projects increasingly include FieldNET/Advisor .

Estimates Context

  • S&P Global Wall Street consensus revenue and EPS estimates were unavailable at time of analysis; as a result, we cannot assess beat/miss versus consensus for Q3 FY2024.
  • Implications: Analysts may raise infrastructure margin expectations (lease/project mix), incorporate backlog timing from MENA (> $100M; recognition Q4 FY2024–Q1 FY2026), and adjust tax rate assumptions given the Turkey tax‑free zone and Q3 one‑time Brazil tax credit .

Key Takeaways for Investors

  • Infrastructure is the near‑term earnings anchor: Lease/project mix drove a 25.8% segment margin, supporting consolidated margins despite irrigation softness; continued IIJA tailwinds make this durable .
  • Irrigation demand remains cyclical and weather‑sensitive: Wet Midwest conditions and insurance timing pushed Q3 demand into Q4; monitor storm‑related replacements and normalized order patterns in Q4 .
  • International pipeline and backlog expand multi‑quarter visibility: > $100M MENA project lifts backlog to $246.9M; revenue recognition starts Q4 FY2024—watch execution cadence and margin effects (project dilution) .
  • Margin trajectory: Expect short‑term margin pressure from plant modernization; mid‑term stabilization with automation, and infrastructure mix supporting consolidated margins .
  • Tax considerations: Q3 EPS was boosted by a one‑time Brazil tax credit; future tax rate may benefit from Turkey tax‑free zone project revenues—model accordingly .
  • Capital allocation: Dividend increased to $0.36 and $17.9M buybacks in Q3 signal balanced returns and confidence; liquidity of ~$202.7M provides flexibility for organic/inorganic investments .
  • Trading implications: Near term, focus on Q4 storm‑related irrigation demand recovery, Road Zipper project conversions, and initial MENA revenue recognition; medium term, watch tech/AI integration (FieldNET/Bayer, Pessl) as drivers of differentiation and ARR uplift .