Lindsay's Q1 2026 Earnings Call: Contradictions Emerge on Irrigation Revenue, CapEx Guidance, and International Growth Outlook

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 until there's greater clarity around trade impacts and an improvement in customer profitability.
• The $12 billion Farmer Bridge Assistance Package is not expected to drive significant incremental demand in the short term.
• In international markets, long-term growth outlook remains attractive, but near-term equipment investment in Latin America is tempered by elevated interest rates and credit constraints.
• In 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. Incremental opportunities for smaller projects are expected, with the majority coming in the second half of the fiscal year.
• Project margins for the new MENA project are expected to be as good as or better than the prior project, but slightly below segment average.
• No significant impact is anticipated from accelerated depreciation provisions.

Business Commentary:

• Revenue and Market Conditions:
• Lindsay Corporation reported total revenues of $155.8 million for Q1 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.

• Irrigation Segment Performance:

• The Irrigation segment revenue was $133.4 million, down 9% from $147.1 million in the prior year.

• North America irrigation revenues decreased by 4%, while international revenues were impacted by timing gaps in project revenues in the MENA region and lower sales volumes in Brazil due to elevated interest rates and credit constraints.

• Infrastructure Segment Growth:

• The Infrastructure segment achieved a revenue increase of 17% to $22.4 million compared to $19.2 million in the prior year.

• This growth was driven by higher sales of road safety products, although Road Zipper project activity is expected to be less in the current fiscal year, creating a difficult comparison.

• Capital Expenditure and Future Outlook:

• Elevated capital expenditure levels were noted, with significant investments in plant upgrades to improve safety, efficiency, and productivity.

• These investments are expected to enhance throughput and efficiency, although improvements in margins will be realized once demand increases following project completion.

• International Project Opportunities:

• A new supply agreement in the MENA region was announced, valued at approximately $80 million, with $70 million expected in revenue this fiscal year.
• This reflects the company's ability to compete in large-scale international projects and demonstrates the ongoing demand for sustainable agricultural solutions in the region.

Sentiment Analysis:

Overall Tone: Neutral

• Management acknowledges external headwinds and a soft market in North America, stating they are 'bouncing along the bottom of the trough' and not expecting improvement in the near term. However, they express optimism about international project opportunities and infrastructure long-term potential, noting 'solid profitability' and a 'robust balance sheet'.

Q&A:

• Question from Nathan Jones (Stifel): Does it feel to you like we're getting to the trough of the North America irrigation market? Are there risks of another leg down?
  Response: Management agrees they are bouncing along the trough, sees no significant upside until there is more certainty on profitability, and does not expect conditions to get progressively worse.

• Question from Nathan Jones (Stifel): Regarding the new $80 million MENA project, are there opportunities for other projects this year and are they from outside the current customer?
  Response: Management sees a robust multiyear funnel with opportunities from both repeat and new customers in the MENA region, but timing of project realization is uncertain and complex.

• Question from Nathan Jones (Stifel): Can you talk about the progress, impact, and expected benefits of the elevated CapEx on plant upgrades?
  Response: The 2 mill investment is nearing full production, expected to improve safety, efficiency, and reduce labor reliance. Margin impact is not expected until demand picks up, with improvements from operating leverage.

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

• Question from Brian Drab (William Blair): What margin is expected for the new $80 million MENA order?
  Response: Project margins are expected to be as good as or better than the prior project but slightly below segment average.

• Question from Brian Drab (William Blair): Did you see any demand related to accelerated depreciation (The Big Beautiful Bill)?
  Response: Management states the negative macro market drivers overwhelmed any potential incremental benefit from the bill, so it was not a significant contributor.

• Question from Ryan Connors (Northcoast Research): Should the 4% decline in North America irrigation in Q1 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 Q1 run rate a good starting point, though subject to storm volume variability.

• 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 margin profile despite lower volumes.

• Question from Ryan Connors (Northcoast Research): What drove the nice contribution from interest, other income, and should it continue?
  Response: Interest income is driven by regional mix of funds at interest rates; specifics not disclosed, but improvement in Q1 is noted.

• Question from Ryan Connors (Northcoast Research): Any color on the lull in Road Zipper activity and whether the low-hanging fruit is plucked?
  Response: Management sees lumpy project business continuing, with long-term growth opportunities; the lull is not indicative of market softness but reflects project timing, with more opportunities expected in future years.

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

Contradiction Point 1

North America Irrigation Market Outlook and Revenue Expectations

This is a direct contradiction in a key financial forecast. The company's guidance for its core North America Irrigation segment shifts from "more flattish" to "flat to down" within consecutive quarters, indicating a worsening or revised outlook that impacts revenue projections.

Does the 4% Q1 decline in North America Irrigation represent a sustainable run rate for the year? Can you analyze the price and volume dynamics? - Ryan Connors (Northcoast Research)

20260108-2026 Q1: Full-year North America Irrigation is expected to be flat to down. - Randy Wood(CEO)

What is the revenue expectation for North America irrigation in fiscal 2026? Given headwinds, could profit improve on a flat revenue line? Can international revenue offset the lack of a major Middle East project in 2026? - Nathan Jones (Stifel, Nicolaus & Company)

2025Q4: ...leading to overall revenue that is "more flattish" for the year. - Brian Ketcham(CFO)

Contradiction Point 2

Capital Expenditure (CapEx) Guidance and Projected Impact

This represents a significant change in a communicated capital strategy and its financial impact. The guidance shifts from specifying elevated CapEx ($50M, up slightly) with an implied margin impact to stating CapEx will "return to normalized levels," creating uncertainty about future investment and its effect on profitability.

Can you update on the status, progress, and expected profitability contribution of the increased capital expenditures on plant upgrades? - Nathan Jones (Stifel)

20260108-2026 Q1: CapEx is expected to return to normalized levels afterward. - Samuel Hinrichsen(CFO)

Can you elaborate on credit constraints in Brazil? What is the updated CapEx for the Lindsay, Nebraska facility, and how could federal support for farmers benefit manufacturers? - Ryan Connors (Northcoast Research Partners)

2025Q4: CapEx for 2026 is expected to be around $50 million, up slightly from 2025 due to an expanded scope for the new galvanizing facility. - Brian Ketcham(CFO)

Contradiction Point 3

International Irrigation Revenue Growth Outlook

This is a substantive change in the forecast for a key business segment. The outlook shifts from implying more robust growth ("more project volume expected") to a much more modest "up slightly," which could significantly affect total international revenue projections for the year.

Is the volume guidance specific to North America? Will international irrigation revenue exceed domestic revenue in fiscal 2026? When will revenue from the $100M and $20M MENA projects be recognized? What is the margin outlook for the Infrastructure segment? - Brian Drab (William Blair & Company)

20260108-2026 Q1: International irrigation revenue is expected to be up slightly in 2026, replacing project volume... - Brian Ketcham(CFO)

What are the catalysts for the 2026 outlook amid ag market uncertainty? What margin levers are available in a cautious ag investment environment? - Kristen Owen (Oppenheimer & Co. Inc.)

2025Q4: ...with more project volume expected in fiscal 2026. - Randy Wood(CEO)

Contradiction Point 4

Impact of Tax Policy on Demand Timing

This reflects a change in the assessment of a significant external factor (tax policy) on business demand. The stance shifts from expecting a notable "timing shift" in demand to dismissing any "significant impact," altering the strategic importance of this policy lever in the company's planning.

Did the "Big Beautiful Bill" (accelerated depreciation proposal) stimulate demand? - Brian Drab (William Blair)

20260108-2026 Q1: No significant impact was seen or anticipated. - Randy Wood(CEO)

Can you explain how the extension of Trump tax credits and reinstatement of bonus depreciation might affect your demand outlook for Agriculture and Road Zipper businesses? - Questioner's Name (Company Name)

2025Q3: The tax credits and bonus depreciation are expected to be more impactful... likely shifting the timing of demand... - Brian L. Ketcham(CFO)

Contradiction Point 5

MENA Project Pipeline Characterization

This shows a shift in the narrative around the continuity and immediate replaceability of large project volume. Earlier commentary emphasized a pipeline "ample... to fill the gap," suggesting seamless succession. Later statements, while still positive ("robust," "multi-year runway"), are less specific about immediate volume replacement, potentially indicating a more tempered near-term outlook.

Regarding the new $80 million MENA project, are there other similar projects this year? Are these with the same client or new clients? - Nathan Jones (Stifel)

20260108-2026 Q1: The project funnel is robust with a multi-year runway across the MENA region. - Randy Wood(CEO)

Are you also cautious about Brazil's near-term outlook based on your comments and current conditions? - Questioner's Name (Company Name)

2025Q3: The pipeline is ample and diverse enough in large and medium sizes to fill the gap left by the completion of this large project. - Randy A. Wood(CEO)