Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lindsay Corp (LNN, Financial) reported a positive response to its new TAU XR express repair cushion, which has received state approvals and is awaiting federal highway administration approval.
- The company anticipates an increase in US infrastructure spending in fiscal 2025, driven by the Infrastructure Investments and Jobs Act.
- Lindsay Corp (LNN) achieved a 28% growth rate in annual recurring revenue from device subscriptions, supporting its overall margin profile.
- The company is progressing on a $50 million investment at its Nebraska facility to better manage variable costs and improve efficiencies.
- Lindsay Corp (LNN) has a robust project funnel in the MENA region, with continued shipping expected through fiscal year 2025.
Negative Points
- Total revenues for the fourth quarter decreased by 7% compared to the previous year, with net earnings also declining.
- International irrigation revenues decreased by 23%, primarily due to lower revenues in Brazil and other Latin American markets.
- Operating income and margin in the irrigation segment decreased significantly due to lower international revenues and deleveraging of fixed operating expenses.
- The company faces major headwinds in the cropping segment of its irrigation business, with customer sentiment surveys indicating low ratings.
- Lindsay Corp (LNN) expects continued tempered demand in Brazil and Latin America until farm profitability and credit availability improve.
Q & A Highlights
Q: Can you explain the high decremental margins observed this year and in the quarter, particularly in relation to Brazil's profitability?
A: Brian Ketcham, CFO, explained that the decremental margins were primarily due to the international irrigation business, particularly in Brazil. Last year was a record year for Brazil, and the decrease in volume this year led to significant deleveraging. Additionally, the mix shift from Brazil to project business, which has slightly lower margins, contributed to the margin decline.
Q: Could you provide details on the Middle East project that began shipping in the fourth quarter and its impact on margins for 2025?
A: Brian Ketcham stated that approximately $14 million of the project shipped in the fourth quarter, with an expected $80 million to ship in 2025. The project is slightly dilutive to margins, with an anticipated 100 basis points of dilution to operating margin for the full year.
Q: What are the expectations for Brazil's market performance in 2025, and how might it impact margins?
A: Brian Ketcham noted that Brazil is expected to see another decline in the first half of 2025, with a potential low double-digit decrease for the full year. However, the market may stabilize in the latter half of the year.
Q: Can you discuss the SG&A cost increases and their impact on margins?
A: Brian Ketcham attributed the SG&A increase to sales commissions from project businesses, investments in R&D and technology, and additional resources for the MENA region projects. Despite these increases, cost reduction actions have been taken, with more impact expected in 2025.
Q: How is the Road Zipper funnel progressing, and what are the growth expectations for infrastructure projects?
A: Randy Wood, CEO, highlighted that the Road Zipper funnel is building momentum, supported by post-COVID face-to-face sales processes and infrastructure funding. Growth is expected primarily in the U.S., with global opportunities also being pursued.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
