10-Q: Lindsay Corporation Reports Strong Revenue Growth Driven by International Irrigation and Infrastructure Projects

Lindsay Corporation announced a significant increase in operating revenues and net earnings for the nine months ended May 31, 2025, primarily fueled by robust international irrigation sales and a large infrastructure project, despite a slight dip in quarterly net earnings due to a prior-year one-time tax benefit.

Summary

• Operating revenues for the three months ended May 31, 2025, increased 22% to $169.5 million, up from $139.2 million in the prior year.
• Net earnings for the three months ended May 31, 2025, were $19.5 million ($1.78 per diluted share), a 4% decrease from $20.4 million ($1.85 per diluted share) in the prior year, primarily due to a non-recurring $4.8 million income tax credit in the prior period.
• For the nine months ended May 31, 2025, operating revenues increased 16% to $522.8 million, compared to $452.1 million in the prior year.
• Net earnings for the nine months ended May 31, 2025, rose 18% to $63.2 million ($5.79 per diluted share), up from $53.5 million ($4.84 per diluted share) in the prior year.
• The Irrigation segment's international revenues for the three months increased 60% to $74.7 million, largely due to a multi-year project in the Middle East and North Africa (MENA) region valued at over $100 million.
• The Infrastructure segment's revenues for the nine months increased 31% to $83.8 million, driven by a large Road Zipper System project valued at over $20 million.
• Cash and cash equivalents totaled $196.1 million at May 31, 2025, up from $140.2 million at May 31, 2024.
• Net cash provided by operating activities for the nine months ended May 31, 2025, was $68.9 million, a significant increase from $42.7 million in the prior year period.
• The backlog of unshipped orders at May 31, 2025, was $117.1 million, down from $205.9 million at May 31, 2024, primarily due to deliveries for the large MENA irrigation project.

Sentiment

Score: 7

Explanation: The company demonstrated strong revenue and operating income growth across both segments, particularly in international irrigation and infrastructure. While quarterly net earnings were down due to a non-recurring tax benefit in the prior year, the nine-month performance was robust. Cash flow from operations improved significantly, and the company is actively investing in growth and returning capital to shareholders. Ongoing legal proceedings and headwinds in North American agricultural commodity prices are noted, but management does not expect them to have a material adverse effect.

Positives

• Overall operating revenues increased significantly by 22% for the quarter and 16% for the nine-month period, demonstrating strong top-line growth.
• International irrigation revenues surged by 60% for the quarter and 46% for the nine-month period, driven by a large project in the MENA region and higher sales in Brazil and South America.
• Infrastructure segment revenues grew by 6% for the quarter and 31% for the nine-month period, boosted by higher road safety product sales and a major Road Zipper System project.
• Operating income increased by 19% for the quarter and 22% for the nine-month period, indicating improved operational efficiency and profitability.
• Net earnings for the nine-month period increased by 18%, reflecting strong underlying business performance.
• Cash provided by operating activities significantly improved to $68.9 million for the nine months, indicating strong cash generation.
• The company maintains a healthy cash and marketable securities balance of $210.8 million, providing strong liquidity.
• The company continues to return capital to shareholders through dividends, which increased to $0.36 per share in Q3 FY2025, and share repurchases, with $38.8 million remaining in authorization.
• The acquisition of a 49.9% interest in Pessl Instruments GmbH for $7.5 million expands the company's agricultural technology solutions.

Negatives

• Net earnings for the three months ended May 31, 2025, decreased by 4% compared to the prior year, primarily due to a non-recurring $4.8 million income tax credit recognized in the prior year period.
• Gross margin decreased to 31.6% for the quarter and 31.8% for the nine months, primarily due to a higher percentage of lower-margin international project revenue in the irrigation segment.
• North America irrigation revenues decreased by 7% for the nine-month period, primarily due to lower unit sales volume, a less favorable mix of shorter machines, and slightly lower average selling prices.
• U.S. corn prices decreased approximately 1% and U.S. soybean prices decreased approximately 15% from May 2024 to May 2025, which could negatively impact demand for irrigation equipment.
• The forecasted increase in 2025 U.S. net farm income is primarily from government support payments, with cash receipts from crops expected to decrease 2%, suggesting limited positive impact on irrigation equipment demand.
• The backlog of unshipped orders decreased significantly to $117.1 million from $205.9 million year-over-year, although this is attributed to the completion of deliveries for a large project.

Risks

• Fluctuations in agricultural commodity prices (e.g., corn, soybeans) can negatively affect demand for irrigation equipment.
• Changes in U.S. net farm income, particularly if driven by government support rather than crop receipts, may not translate into increased demand for irrigation equipment.
• Adverse weather conditions, while sometimes increasing demand for replacement parts, can also negatively affect demand for new irrigation equipment during periods of abundant natural precipitation.
• Governmental actions, such as tariffs, could result in increased costs of goods, which the company expects to pass through to the market, potentially impacting competitiveness.
• The phasing out of Section 179 income tax deduction and Section 168 bonus depreciation (from 100% to 40% in 2025 and 20% in 2026) could reduce incentives for equipment purchases.
• Regional political and economic factors, including armed conflict and currency conditions, can create challenging environments in international irrigation markets.
• The value of the U.S. dollar strengthening against foreign currencies could increase the cost of U.S. exported products and reduce the U.S. dollar value of international sales.
• The company is defending multiple product liability lawsuits related to its X-Lite end terminal, including new qui tam lawsuits in Tennessee and California, and a lawsuit by the Missouri Highways and Transportation Commission.
• Environmental remediation costs at the Lindsay, Nebraska facility could exceed current accruals due to factors like EPA input, refinement of cost estimates, technology effectiveness, and unforeseen circumstances.

Future Outlook

The company anticipates continued growth opportunities in international irrigation markets, driven by food security, water scarcity, and population growth, despite regional political and economic challenges. The multi-year supply agreement for a large project in the MENA region is expected to continue equipment deliveries through fiscal 2025 and into the first quarter of fiscal 2026. The infrastructure business is expected to benefit from government spending on road construction and improvements, particularly from the Infrastructure Investment and Jobs Act (IIJA) funding through September 2026 and potentially two years beyond. Capital expenditures for fiscal 2025 are projected to be between $35.0 million and $40.0 million, focusing on modernization, productivity improvements, new product development, and commercial growth. The company expects to continue increasing dividends over time and pursue synergistic acquisitions and opportunistic share repurchases.

Management Comments

• "The year-over-year decrease in net earnings resulted primarily from the recognition of a one-time income tax credit in the prior year period of $4.8 million, or $0.44 per diluted share."
• "The 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 crop receipts are expected to be slightly lower compared to the prior year."
• "Severe drought conditions are beginning to develop in certain parts of the Midwest which could provide a catalyst for incremental sales of replacement parts in the near term."
• "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."
• "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."
• "The infrastructure business continues to be driven by the Company's transportation safety products, the demand for which largely depends on government spending for road construction and improvements."
• "The Company believes it has meritorious factual and legal defenses to each of the lawsuits discussed above and is prepared to vigorously defend its interests."
• "The Company does not expect that these lawsuits will have a material adverse effect on its business or its consolidated financial statements."
• "The Company believes its current cash resources, investments in marketable securities, projected operating cash flow, and remaining capacity under its continuing bank lines of credit are sufficient to cover all its expected working capital needs, planned capital expenditures and dividends."
• "The Company may require additional borrowings to fund potential acquisitions in the future."

Industry Context

The company operates in the agricultural irrigation and infrastructure safety sectors. The agricultural segment is influenced by fluctuating commodity prices (e.g., corn, soybeans), U.S. net farm income (which is currently boosted by government support rather than crop receipts), and weather patterns. The infrastructure segment is heavily reliant on government spending for road construction and improvements, benefiting from initiatives like the Infrastructure Investment and Jobs Act (IIJA). The company's focus on international expansion in irrigation aligns with global trends of increasing food security concerns and water scarcity, particularly in less developed irrigation markets. The acquisition of a stake in Pessl Instruments reflects a broader industry trend towards integrating agricultural technology (AgTech) solutions like field monitoring and IIoT to enhance efficiency and sustainability in farming.

Legal Proceedings

• The company is defending multiple product liability lawsuits arising from vehicle collisions with highway barriers incorporating its X-Lite end terminal.
• A qui tam lawsuit (FCA Lawsuit) filed in March 2019 was dismissed on October 26, 2023, by the U.S. District Court.
• Following the dismissal of the FCA Lawsuit, the Relator filed new qui tam lawsuits under seal in Tennessee (served June 2024) and California (served June 2025) with substantially similar allegations regarding the X-Lite end terminal and potential violations of state Fraud Against Taxpayers Acts.
• The company, certain subsidiaries, and third parties are named in a lawsuit filed on June 9, 2020, by the Missouri Highways and Transportation Commission (MHTC), alleging defective design, failure to warn, negligence, breach of warranties, fraud, and public nuisance related to the X-Lite end terminal.

Stakeholder Impact

• Shareholders: Impacted by increased dividends, ongoing share repurchase program, and overall strong financial performance leading to increased shareholder equity.
• Employees: Affected by higher sales commissions and incentive compensation expense, partially offset by lower salary and wage expense.
• Customers (Irrigation): Demand influenced by agricultural commodity prices, net farm income, weather conditions, and governmental policies (e.g., Farm Bill, tax incentives, biofuel mandates).
• Customers (Infrastructure): Demand influenced by government spending on road construction and improvements (e.g., IIJA funding).
• Suppliers: Impacted by the company's comprehensive action plan to manage potential cost impacts from U.S. tariffs, including supplier negotiation.
• Regulatory Authorities (EPA, NDEE): Engaged with the company on environmental remediation plans for the Lindsay, Nebraska facility.
• Legal System: Involved in ongoing product liability lawsuits and new qui tam lawsuits related to the X-Lite end terminal.

Next Steps

• Continue equipment deliveries for the large MENA region irrigation project throughout fiscal 2025 and into the first quarter of fiscal 2026.
• Utilize IIJA federal funding for transportation projects to support demand for infrastructure products through September 2026 and potentially two years beyond.
• Implement a comprehensive action plan including supplier negotiation, strategic inventory placement, and supply chain initiatives to manage potential cost impacts from U.S. tariffs.
• Continue to work with the EPA and NDEE on finalizing proposed environmental remediation plans for the Lindsay, Nebraska site.
• Invest between $35.0 million and $40.0 million in capital expenditures for fiscal 2025, focusing on modernization, productivity improvements, new product development, and commercial growth.
• Continue to increase dividends to stockholders over time as part of the capital allocation plan.
• Pursue synergistic acquisitions that provide attractive returns to stockholders.
• Engage in opportunistic share repurchases under the authorized program, with $38.8 million remaining available.

Key Dates

Recommendation

Keywords

Irrigation systems, Infrastructure products, Road safety equipment, Center pivot irrigation, Movable barriers, Agricultural technology, SEC filing, Quarterly report, Financial performance, Revenue growth, Net earnings, Cash flow, Share repurchase, Dividends, Pessl Instruments, MENA project, Road Zipper System, Farm Bill, Tax incentives, Environmental remediation, Product liability