Lindsay Corp (LNN)

Lindsay Corporation is a global leader in providing proprietary water management and road infrastructure products and services, operating through two reporting segments: Irrigation and Infrastructure. The Irrigation segment manufactures and markets center pivot, lateral move, and hose reel irrigation systems used principally in the agricultural industry to increase or stabilize crop production while conserving water, energy, and labor. The Infrastructure segment manufactures and markets moveable barriers, specialty barriers and crash cushions, road marking and road safety equipment, and railroad signals and structures. The fundamental factors governing demand for center pivot and lateral move systems are determined by whether the value of increased crop production and cost savings exceeds the costs of purchasing, installing, and operating the equipment, reflecting the profitability of agricultural production determined primarily by agricultural commodity prices and other farming input costs. Demand for infrastructure products depends largely on government spending for road construction and improvements, with much of the U.S. highway infrastructure market driven by government spending programs such as the Federal Highway Trust Fund Program.

Four manufacturers control a substantial majority of the U.S. center pivot irrigation system market, and the international irrigation market includes participation and competition by leading U.S. manufacturers as well as various regional manufacturers. The Company competes by continuously improving its products through ongoing research and development activities, channel improvement initiatives, and operational strategies, as well as through the acquisition of products and services that allow a more comprehensive solution to growers' needs. Competition also occurs in areas of price and seasonal programs, product quality, durability, controls, product characteristics, retention and reputation of local dealers, customer service, and availability of systems and delivery time. In the Infrastructure segment, the Company competes in certain product lines with several manufacturers but has limited competition in its moveable barrier line, though its barrier product does compete with traditional safety-shaped concrete barriers and other safety barriers.

The Company generates revenue through the manufacture and marketing of irrigation systems and infrastructure products. In the Irrigation segment, revenue is derived from the sale of center pivot, lateral move, and hose reel irrigation systems, repair and replacement parts, large diameter steel tubing, and proprietary technology solutions including remote monitoring and automation technology sold on a subscription basis under the brand names FieldNET and FieldWise. In the Infrastructure segment, revenue is generated from the sale of moveable barrier systems, crash cushions, specialty barriers, road marking and road safety equipment, and railroad signals and structures, as well as equipment lease options for Road Zipper Systems and Barrier Transfer Machines. The vast majority of revenues relate to the sale of physical goods where control generally transfers to the customer based on shipping terms, with revenue recognized at a point in time, while revenue recognized over time is primarily derived from remote monitoring subscription services and custom and contract manufactured products. The Company also leases certain infrastructure property to customers, with lease revenue recognized on a straight-line basis over the lease term.

The Irrigation segment manufactures and markets center pivot and lateral move irrigation systems under the Zimmatic brand and hose reel travelers under the Perrot brand, along with chemical injection systems, variable rate irrigation systems, flow meters, weather stations, soil moisture sensors, and remote monitoring and control systems. The segment also produces IIOT technology solutions, data acquisition and management systems, and custom electronic equipment under the Elecsys brand. The Company markets proprietary remote monitoring and automation technology under FieldNET and FieldWise, and patented technology under FieldNET Advisor which delivers irrigation recommendations combining crop and irrigation science with cloud computing and machine learning. Through a strategic partnership with Pessl Instruments, the Company incorporates data from METOS weather stations and soil moisture probes. Irrigation segment revenues were $568.0 million ¹ in fiscal 2025, with international sales accounting for approximately 52 percent ² of total irrigation segment revenues. Irrigation segment gross profit was $165.9 million ³ with a gross margin of 29.2 percent ⁴, and operating income was $97.0 million ⁵ with an operating margin of 17.1 percent ⁶.

The Infrastructure segment manufactures the Quickchange Moveable Barrier system, commonly known as the Road Zipper System, composed of T-shaped concrete and steel barriers, a Barrier Transfer Machine, and variable length barriers. The segment offers a complete line of redirective and non-redirective crash cushions under brand names including TAU, Universal TAU-II, ABSORB 350, and others, as well as specialty barrier products such as SAB, ArmorGuard, PaveGuard, and DR46 portable barrier systems. The segment also offers preformed tape for temporary markings, road safety accessory products, and designs and manufactures railroad signals, structures, foundations, junction boxes, and signs. The Company manages an ISO 17025 certified testing laboratory that performs full-scale impact testing of highway safety products. Infrastructure segment revenues were $108.4 million ⁷ in fiscal 2025, with gross profit of $44.9 million ⁸ and a gross margin of 41.4 percent ⁹, and operating income of $26.3 million ¹⁰ with an operating margin of 24.3 percent ¹¹.

On December 19, 2024 ¹², the Company completed its acquisition of a 49.9 percent ¹³ non-controlling interest in Pessl Instruments GmbH, an Austrian company providing agricultural technology solutions focused on field monitoring systems, for $7.5 million ¹⁴ inclusive of direct transaction costs, including a call option to acquire the remainder of Pessl's outstanding shares beginning in October 2027 ¹⁵. The Company repurchased $11.5 million ¹⁶ of common stock during fiscal 2025 compared to $22.5 million ¹⁷ in the prior fiscal year. The Company's Board of Directors authorized a share repurchase program of up to $250.0 million ¹⁸ of common stock with no expiration date, with $30.0 million ¹⁹ remaining available as of August 31, 2025. The Company paid cash dividends of $1.45 ²⁰ per common share or $15.7 million ²¹ in fiscal 2025. Capital expenditures for fiscal 2025 were $42.5 million ²².

Operating revenues in fiscal 2025 were $676.4 million ²³, an 11 percent ²⁴ increase compared to $607.1 million ²⁵ in the prior year. Net earnings for fiscal 2025 increased 12 percent ²⁶ to $74.1 million ²⁷ or $6.78 ²⁸ per diluted share compared with $66.3 million ²⁹ or $6.01 ³⁰ per diluted share in the prior fiscal year. Gross profit was $210.8 million ³¹ compared to $191.1 million ³² in fiscal 2024, with gross margin of 31.2 percent ³³ versus 31.5 percent ³⁴. Operating income was $88.1 million ³⁵ compared to $76.6 million ³⁶ in the prior year, with operating margin of 13.0 percent ³⁷ versus 12.6 percent ³⁸. Cash and cash equivalents totaled $250.6 million ³⁹ at August 31, 2025 compared to $190.9 million ⁴⁰ at August 31, 2024. Net cash provided by operating activities totaled $132.9 million ⁴¹ during fiscal 2025 compared to $95.8 million ⁴² in the prior fiscal year.

Capital expenditures for fiscal 2026 are expected to range from approximately $50 million ⁴³ to $55 million ⁴⁴, including equipment replacement, productivity improvements, new product development and commercial growth investments, with an increase over recent levels relating to modernization and productivity improvements planned at certain manufacturing facilities.

The most significant opportunities for growth in irrigation sales over the next several years continue to be in international markets where irrigation use is less developed and demand is driven not only by commodity prices and net farm income, but also by food security, water scarcity, and population growth. In the fourth quarter of fiscal 2024, the Company began shipment under a multi-year supply agreement valued at over $100 million ⁴⁵ in revenue to provide irrigation systems and remote management and scheduling technology for a large project in the MENA region, with equipment deliveries occurring throughout fiscal 2025 and continuing into the first quarter of fiscal 2026 ⁴⁶. The Company continues to have an ongoing, structured acquisition process that it expects to generate additional growth opportunities throughout the world and add to its irrigation and infrastructure capabilities.

The infrastructure business continues to be driven by the Company's transportation safety products, with demand largely depending on government spending for road construction and improvements. The enactment of the Infrastructure Investment and Jobs Act in November 2021 introduced $110 billion ⁴⁷ in incremental federal funding for roads, bridges, and other transportation projects, which the Company expects will support demand for its transportation safety products as states utilize these funds in construction projects. The federal programs under the IIJA are scheduled to run through September 2026 ⁴⁸. The Company expects to continue expanding in international infrastructure markets as populations grow and markets become more established.

The Company's capital allocation plan is to continue investing in revenue and earnings growth combined with a defined process for enhancing returns to stockholders, with priorities including investment in organic growth including capital expenditures, new product development, and expansion of international markets, synergistic acquisitions, dividends to stockholders with expectations to increase dividends over time, and opportunistic share repurchases taking into account cyclical and seasonal fluctuations.

The Company's management maintains flexibility to modify the amount and timing of some planned capital expenditures in response to economic conditions. The Company believes its current cash resources, projected operating cash flow, and remaining capacity under its continuing bank lines of credit are sufficient to cover all of its expected working capital needs, planned capital expenditures, and dividends. The Company may require additional borrowings to fund potential acquisitions in the future.

The Company's Board of Directors authorized a share repurchase program of up to $250.0 million ⁴⁹ of common stock with no expiration date. The Company paid cash dividends of $1.45 ⁵⁰ per common share in fiscal 2025 and currently expects that cash dividends comparable to those paid historically will continue to be paid in the future, although there can be no assurance as to the payment of future dividends.

The USDA's forecasted increase in estimated 2025 net farm income is not expected to have a meaningful positive impact on demand for irrigation equipment as the increase results primarily from government support payments while income from crop receipts is expected to be slightly lower compared to the prior year. Favorable weather conditions in key U.S. markets during the growing season are expected to result in higher crop production in 2025 and increased downward pressure on commodity prices in the near term. While international irrigation markets remain active with opportunities for further development and expansion, regional political and economic factors, including armed conflict, currency conditions, and other factors can create a challenging environment, and international results are influenced by large project sales which tend to fluctuate and can be difficult to forecast accurately.

The Company's international sales and profit margins are affected by international trade barriers including governmental policies on tariffs, taxes, import or export licensing requirements, and trade sanctions. In response to U.S. tariffs on imports from Canada, Mexico, China, and other countries, the Company implemented a comprehensive action plan that included supplier negotiation, strategic inventory placement, and other supply chain initiatives to manage potential cost impacts, with the impact of tariffs resulting in a marginal increase to the Company's cost of goods which has been passed through to the market through an increase in the pricing of products. The potential impact of additional tariffs or retaliatory actions has been considered, and the Company plans to utilize its global footprint and supply chain to try to minimize the potential impact of these actions on its business and customers.

Management's message emphasizes that the global, long-term drivers of population growth, water conservation and environmental sustainability, the need for increased food production, and the need for safer, more efficient transportation solutions remain positive. The Company is committed to achieving earnings growth by global market expansion, improvements in margins, and strategic acquisitions. Management highlights that the Company continues to have an ongoing, structured acquisition process expected to generate additional growth opportunities throughout the world and add to its irrigation and infrastructure capabilities. The Company's capital allocation plan priorities include investment in organic growth including capital expenditures, new product development, and expansion of international markets, synergistic acquisitions that provide attractive returns to stockholders, dividends to stockholders along with expectations to increase dividends over time, and opportunistic share repurchases taking into account cyclical and seasonal fluctuations.

Operating revenues were $676.4 million ⁵³ in fiscal 2025 compared to $607.1 million ⁵⁴ in fiscal 2024. Net earnings were $74.1 million ⁵⁵ in fiscal 2025 compared to $66.3 million ⁵⁶ in fiscal 2024. Diluted earnings per share were $6.78 ⁵⁷ in fiscal 2025 compared to $6.01 ⁵⁸ in fiscal 2024. Gross profit was $210.8 million ⁵⁹ in fiscal 2025 compared to $191.1 million ⁶⁰ in fiscal 2024, with gross margin of 31.2 percent ⁶¹ versus 31.5 percent ⁶². Operating income was $88.1 million ⁶³ in fiscal 2025 compared to $76.6 million ⁶⁴ in fiscal 2024, with operating margin of 13.0 percent ⁶⁵ versus 12.6 percent ⁶⁶. The effective income tax rate was 21.7 percent ⁶⁷ in fiscal 2025 compared to 16.2 percent ⁶⁸ in fiscal 2024, with the prior fiscal year including discrete income tax benefits totaling $5.9 million ⁶⁹ that did not repeat. Cash and cash equivalents totaled $250.6 million ⁷⁰ at August 31, 2025 compared to $190.9 million ⁷¹ at August 31, 2024. Net cash provided by operating activities was $132.9 million ⁷² in fiscal 2025 compared to $95.8 million ⁷³ in fiscal 2024. The Irrigation segment reported revenues of $568.0 million ⁷⁴ and operating income of $97.0 million ⁷⁵, while the Infrastructure segment reported revenues of $108.4 million ⁷⁶ and operating income of $26.3 million ⁷⁷.

Changing worldwide demand for food and biofuels affects agricultural commodity prices, which directly impact demand for irrigation equipment; as commodity prices decline, the breakeven point of incremental production becomes more difficult to achieve, reducing or eliminating the profit and return on investment from purchasing the Company's products. The Company's infrastructure revenues are highly dependent on government funding of transportation projects, and if highway funding is reduced or delayed, demand for infrastructure products may decline. The Company's revenues can be highly dependent on a limited number of key customers and projects; in fiscal 2024, the Company entered into a multi-year supply agreement valued at more than $100 million ⁵¹ for a project in the MENA region, and in fiscal 2025, one customer within the irrigation segment accounted for 13 percent ⁵² of consolidated revenues. The Company's international sales and profit margins are affected by international trade barriers including tariffs, and any strengthening of the U.S. dollar can increase the cost of the Company's products in foreign markets, making them less competitive relative to local producers. The Company is currently defending a number of product liability lawsuits involving the X-Lite end terminal, and an actual or perceived issue with infrastructure products can lead to a decline in demand, removal from qualified products lists, and adverse publicity.