2026 Q1 Earnings Call Contradictions: MENA Margins, Irrigation Outlook, and CapEx Timelines

Financials Results

• Revenue: $155.8 million, a decrease of 6% compared to $166.3 million in the same quarter last year
• EPS: $1.54 per diluted share, a slight decline compared to $1.57 per diluted share in the first quarter of last year
• Operating Margin: 12.6%, consistent with the prior year

Guidance:

• In North America, softer market conditions are expected to persist in the near term, with no significant incremental demand from the announced Farmer Bridge Assistance Package in the short term.
• For the Infrastructure segment, a large Road Zipper project is not expected to exit the funnel in fiscal year '26, creating a difficult comparison in Q2, but incremental opportunities for smaller projects and other growth are anticipated, with the majority coming in the second half.
• Long-term growth opportunities for Road Zipper are seen, with the leasing model gaining traction.
• International market outlook remains encouraged, particularly in Latin America, though near-term equipment investment is tempered by elevated interest rates and credit constraints.
• Overall business resilience is anticipated despite soft near-term irrigation market conditions.

Business Commentary:

• Revenue Decline in Irrigation Segment:
• Lindsay Corporation reported total revenues of $155.8 million for the first quarter of fiscal 2026, a 6% decrease compared to $166.3 million in the same quarter last year.

• The decline was primarily driven by lower volumes in the Irrigation segment due to ongoing trade uncertainty, low commodity prices, and high input costs affecting customer profitability and sentiment in North America.

• International Growth and Project Opportunities:

• Despite a 9% decrease in International irrigation revenues to $59.1 million, the company secured a significant supply agreement worth approximately $80 million in the MENA region, with $70 million expected in revenue this fiscal year.

• This reflects strong project market opportunities and Lindsay's role as a trusted partner in advancing sustainable agriculture, although revenue timing was impacted by project negotiations and credit constraints.

• Infrastructure Segment Performance:

• The Infrastructure segment reported a 17% increase in revenues to $22.4 million compared to $19.2 million in the prior year.

• Growth was driven by increased road construction activity and interest in Road Zipper solutions, although no large Road Zipper project is expected to exit the funnel in fiscal year '26.

• North America Irrigation Market Outlook:

• North America irrigation revenues decreased by 4% to $74.3 million, with customers delaying large capital purchases due to high input costs and low profitability.

• Market conditions are expected to remain soft until there is greater clarity on trade impacts and an improvement in customer profitability, although the company anticipates resilience in the down cycle market.

• Capital Expenditures and Future Efficiency:

• Elevated capital expenditures were noted in fiscal '25 and are planned for fiscal '26, focusing on facility upgrades in Lindsay, Nebraska, and a galvanizing plant.
• These investments aim to improve safety, efficiency, and productivity, with expected long-term benefits, although short-term margin impacts are anticipated due to incremental depreciation offsetting productivity gains at current demand levels.

Sentiment Analysis:

Overall Tone: Neutral

• Management notes 'external headwinds' and 'soft' market conditions, but highlights 'solid profitability,' 'strong financial position,' and 'encouraging' international opportunities. The tone is measured, focusing on execution and cost management while acknowledging persistent challenges without extreme optimism or pessimism.

Q&A:

• Question from Nathan Jones (Stifel): Is the North America irrigation market reaching a trough, or could it take another leg down? Are external headwinds as bad as they can get?
  Response: Management agrees the market is 'bouncing along the bottom of the trough,' with no expectation of improvement until there is greater clarity on trade impacts and customer profitability, but does not anticipate it getting progressively worse.

• Question from Nathan Jones (Stifel): Regarding the new $80 million MENA project, are there more opportunities in the pipeline from new or existing customers?
  Response: The funnel is robust with a multiyear runway, including both repeat business and new clients, but the timing of project realization remains uncertain due to the complex negotiation process.

• Question from Nathan Jones (Stifel): How is the capital expenditure upgrade program progressing, and what impact will it have on profitability and efficiency?
  Response: The upgrades are progressing well, with one facility nearing full production. In the short term, incremental depreciation will offset productivity gains, but margin improvements are expected from operating leverage as demand increases.

• Question from Brian Drab (William Blair): Is the new $80 million MENA project with the same customer and in the same country as the prior $100 million project?
  Response: Yes, it is with a repeat customer in the same part of the world.

• Question from Brian Drab (William Blair): What margin profile is expected for the new MENA project?
  Response: Project margins are expected to be slightly below segment average, but as good as or better than the prior project.

• Question from Brian Drab (William Blair): Did the Big Beautiful Bill (accelerated depreciation) drive any demand?
  Response: No significant impact was seen, as negative macro drivers overwhelmed any potential benefit from the bill.

• Question from Ryan Connors (Northcoast Research): Should the Q1 4% decline in North America irrigation be considered a reasonable run rate for the balance of the year?
  Response: Management expects North America to be flat to down for the full year, with the Q1 run rate a good starting point, though it may vary with storm volume.

• Question from Ryan Connors (Northcoast Research): Can you unpack the Q1 North America irrigation results on a price versus volume basis?
  Response: Average selling prices were up, and pricing, along with cost management and productivity gains, helped maintain solid margins despite lower volumes.

• Question from Ryan Connors (Northcoast Research): What drove the higher interest and other income in Q1, and should it continue?
  Response: The increase was driven by the regional mix of funds and interest rates; specifics cannot be detailed, but the improvement was notable for Q1.

• Question from Ryan Connors (Northcoast Research): Is the lull in Road Zipper activity indicative of plucked low-hanging fruit, or just normal lumpiness?
  Response: It is a lumpy project business; the market is not fundamentally different, and long-term growth opportunities are seen, with larger projects expected in future fiscal years.

• Question from Brett Kearney (American Rivers Opportunity): What is the adoption appetite for technology like FieldNET in the international irrigation project funnel?
  Response: Customers making large-scale investments in new agricultural operations want every technological advantage, including advanced systems like FieldNET, to maximize efficiency in water and energy use.

Contradiction Point 1

MENA Project Margin Profile

This is a direct contradiction regarding the financial quality of a key revenue driver. The shift from describing new MENA project margins as "comparable" or "as good as" a prior project to explicitly labeling them as **dilutive** and below segment average represents a material downgrade in expected profitability. This impacts revenue quality assessments and future earnings forecasts.

What margin profile is expected for the new $80M MENA order? - Brian Drab (William Blair)

20260108-2026 Q1: Project margins are generally dilutive to the overall business but will be 'as good as or better than' the prior project. They are expected to be slightly below the overall Irrigation segment average. - Randy Wood(CEO)

Do the margins of the new $20 million MENA project match those of the other large MENA project? - Ryan Michael Connors (Northcoast Research Partners)

2025Q3: The new $20 million MENA project is expected to have margins comparable to the larger MENA project. - Brian L. Ketcham(CFO)

Contradiction Point 2

North America Irrigation Market Outlook and Demand

This point reveals a significant shift in the expected timeline for market recovery. The move from an outlook implying a path to **stabilization and growth** (through subscription revenue, etc.) to a description of the market **"bouncing along the bottom"** with no anticipated near-term improvement represents a material change in demand forecast and its impact on future business performance.

Is the North America irrigation market reaching its trough? Are further declines a risk? Is replacement demand at current levels? - Nathan Jones (Stifel)

20260108-2026 Q1: The market is 'bouncing along the bottom' of the trough. Conditions are not expected to get progressively worse, but significant improvement is also not anticipated in the near term... - Randy Wood(CEO)

What are the key catalysts for fiscal '26, and what are your margin levers for next year given a cautious agricultural investment environment? - Kristen Owen (Oppenheimer & Co. Inc.)

2025Q4: However, the company is globally diversified... Customer sentiment is at pandemic lows. However, the company is globally diversified... - Randy Wood(CEO)

Contradiction Point 3

International Project Pipeline and Revenue Drivers

This contradiction shows a change in the confidence and certainty surrounding a key revenue offset. The shift from stating there is **potential to replace** a major project's volume to framing a new major project as **"possible but not guaranteed"** alters the perceived stability and predictability of the international business's revenue stream.

Following the $80M MENA project win, what are other international opportunities this year and are they with new or existing customers? - Nathan Jones (Stifel)

20260108-2026 Q1: The project funnel in MENA remains robust... Another major project in 2026 is possible but not guaranteed, as these are complex, lengthy negotiations. - Randy Wood(CEO)

What's the outlook for North America irrigation demand in fiscal 2026? Can the lack of a major Middle East project in 2026 be offset? - Nathan Jones (Stifel, Nicolaus & Company, Incorporated)

2025Q4: there is potential to replace the $20 million MENA project delivered in fiscal 2025 with additional project volume from the pipeline, but timing is uncertain. The company expects more project news throughout fiscal 2026. - Randy Wood(CEO)

Contradiction Point 4

Impact of Tax Credits on Irrigation Demand

This point highlights a change in the company's assessment of a key macroeconomic catalyst. The shift from expecting tax credits to **shift the timing of demand** (a specific, actionable benefit) to concluding they had **no significant impact** due to stronger headwinds represents a material change in the perceived sensitivity of the business to policy changes.

Did the "Big Beautiful Bill" (accelerated depreciation) create demand expected to drive future demand? - Brian Drab (William Blair)

20260108-2026 Q1: No significant impact or demand was seen from the bill, as negative macroeconomic headwinds outweighed any potential benefit. - Randy Wood(CEO)

What is your demand outlook for irrigation and Road Zipper businesses if Trump-era tax incentives are reinstated? - Unidentified Analyst (on behalf of Kristen Owen, Oppenheimer)

2025Q3: Tax credits and bonus depreciation are expected to have a greater impact on the **irrigation business** than on Road Zipper. This is because the credits help farmers shelter income from taxes, which may **shift the timing** of demand (e.g., demand later this year instead of next spring) but could provide support for overall investment. - Brian L. Ketcham(CFO)

Contradiction Point 5

Capital Expenditure (CapEx) Timeline and Impact

This contradiction involves a change in the expected timeline for realizing benefits from a major capital investment. The shift from stating a project would be **completed by end of calendar 2026** (implying 2027 benefits) to stating **production starts in late 2026** with benefits contingent on post-completion demand creates uncertainty about the payoff period for the investment, impacting near-term margin forecasts.

What is the status and expected benefits of the elevated CapEx for plant upgrades in fiscal 2025/2026, and how will this impact profitability? - Nathan Jones (Stifel)

20260108-2026 Q1: A second investment in the galvanizing facility will continue through 2026, with production expected to start in late 2026.... Margin improvements are expected once demand picks up post-completion. - Randy Wood(CEO) & Samuel Hinrichsen(CFO)

Can you clarify the revenue outlook for international vs. domestic irrigation in fiscal '26? Can you provide more detail on the timing and revenue recognition for the $100 million and $20 million projects? - Ryan Connors (Northcoast Research Partners, LLC)

2025Q4: Capital expenditures for fiscal 2026 are expected to be around $50 million... The project is now anticipated to be completed by the end of calendar year 2026. - Brian Ketcham(CFO)