Lindsay Corporation Stock

Good morning, and welcome to the Lindsay Corporation Fiscal Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Randy Wood, President and CEO. Please go ahead.

Thank you, and good morning, everyone. Welcome to our fiscal 2026 third quarter earnings call. With me today is Sam Hinrichsen, our Chief Financial Officer.

Starting with our third quarter results. I'm proud of our team's continued execution and resilience through what's been a difficult environment amid a cyclical bottom in agricultural markets. Trade uncertainty, high input costs and weak farmer sentiment continue to weigh on our business. We remained focused on the levers within our control, including pricing, cost management and operational efficiency while continuing to invest strategically to position the business for long-term growth.

In North America, our irrigation customers continue to delay large capital purchases given current farm economics, which resulted in lower unit sales volumes in the quarter. Demand remained soft, consistent with our expectations. While commodity prices showed some improvement and government support programs have provided modest relief to growers, neither has significantly impacted demand.

In our international business, revenues were down slightly year-over-year, driven by lower sales volumes in Brazil due to the high interest rate environment and limited access to credit, which continues to constrain growers' ability to finance capital equipment purchases. Our infrastructure business continued to grow year-over-year.

Third quarter revenues increased 8%, driven by higher road safety product revenues, marking 3 consecutive quarters of growth. Road Zipper lease revenues were similar to the prior year. As we said previously, we don't anticipate a large Road Zipper project this fiscal year. Turning to our market outlook. The U.S. irrigation market remains soft as growers await further trade certainty and improvement in profitability.

Current USDA projections indicate cost of production will exceed commodity prices for several key commodities this year, a continuation of a multiyear trend. We do expect a meaningful -- we do not expect a meaningful near-term recovery in North American demand until these economics improve. In Brazil, we continue to view the market as one of the most attractive long-term growth opportunities in global irrigation. Customer engagement at recent agricultural trade shows, including Agrishow, was encouraging with strong traffic, high levels of grower interest and robust quoting activity.

These interactions reinforce our view that growers increasingly recognize the productivity, water efficiency and profitability benefits that mechanized irrigation can deliver. These underlying demand drivers in Brazil remain compelling, including the ability to increase yields, improve crop consistency and support multiyear growing cycles per year.

We are also pleased to see the FINAME financing rate under Brazil's 2026, 2027 crop plan decline from 12.5% to 11.5%. Lower financing costs are a positive development for growers and should improve the affordability and return on investment of irrigation systems. This rate certainty should drive customers who have been taking a wait-and-see approach to enter the market.

Historically, access to attractive financing programs has been an important catalyst for irrigation adoption and the reduction in rates is directionally supportive for future demand. At the same time, we believe it's important to remain measured in our outlook. While financing rates improved, the total funding allocated to irrigation within the FINAME program has been reduced from approximately BRL 2.75 billion to BRL 1.7 billion.

As a result, the availability of credit remains a constraint and could limit the pace of market expansion in the near term. In our view, the lower interest rate improves the economics of irrigation investments, but the reduced size of the funding pool effectively places a ceiling on near-term market growth and tempers our enthusiasm for rapid recovery in demand. This dynamic is consistent with what we've been discussing for several quarters where strong customer interest has been offset by credit availability and financing constraints.

As a result, we remain cautiously optimistic in the short term while maintaining a high degree of confidence in the long-term growth opportunity in Brazil. In the MENA region, we will continue delivery of the large irrigation project through our fiscal fourth quarter, and we remain encouraged by the overall outlook for future growth in our international markets, particularly in regions focused on improving food security and water resource management.

As always, the timing of project wins and deliveries is difficult to predict, but our proven track record on project execution, technology strength and local presence positions us well in the region. Our leadership position in irrigation technology and innovation continues to accelerate adoption across our FieldNet and FieldWise platforms, reinforcing the strength of our connected equipment strategy.

Our new TowerWatch feature within the SmartPivot platform is improving machine diagnostics and reducing downtime, directly enhancing grower economics and increasing the stickiness of our technology. This performance further validates our view that technology is a core competitive advantage, expanding our recurring revenue base, improving margin mix and strengthening long-term customer retention. We expect these dynamics to support sustained double-digit technology revenue growth in fiscal 2026.

In infrastructure, we anticipate continued growth in road safety product sales globally. The Road Zipper pipeline remains strong. And while we continue to actively manage a robust set of opportunities, the timing of these projects is difficult to predict. The House Transportation and Infrastructure Committee has advanced the BUILD America 250 Act, a bipartisan 5-year reauthorization totaling $580 billion, establishing a framework ahead of the September 2026 deadline.

The bill prioritizes core highway and bridge investments, strengthens funding to states and introduces new highway trust fund revenue, providing long-term funding stability. Operationally, our new tube mill has been successfully commissioned and is now in full production in Lindsay, Nebraska. This is a core operation for us, and we now have industry-leading automation and technology that increases safety, efficiency and throughput.

It also gives us the ability to rapidly respond to short-term shifts in demand, ultimately preparing us to operate successfully through the market cycles. As we've discussed in the past, we will need market recovery in order to fully capture the impact of the productivity gains. Our new galvanizing facility remains on schedule, and we expect that to be turned over to production in early 2027.

This will further expand our galvanizing capabilities while improving quality and opening new opportunities for growth. While market conditions across portions of our agricultural end markets remain challenging, we believe it's important to position the business for the realities of the current cycle while preserving the capability to capitalize on future growth opportunities.

We have taken the initiative to restructure and rightsize portions of our organization and optimize our operating cost structure. These actions are focused on improving efficiency, eliminating complexity and better aligning resources with anticipated market demand. This initiative is about creating a stronger and more agile company in support of our long-term strategy.

Importantly, this initiative does not alter our commitment to investing in our core strategic priorities, including innovation, digital solutions, manufacturing capabilities and growth opportunities across our businesses. We expect savings to begin in fiscal 2027.

I'd like to now turn the call over to Sam to discuss our fiscal third quarter financial results. Sam?

Thank you, Randy, and good morning, everyone. Total revenues for the third quarter of fiscal 2026 were $160.8 million, a decrease of 5% compared to $169.5 million in the prior year. Decline in revenues reflects continued softness in our Irrigation segment, consistent with the challenging agricultural environment we have been navigating this fiscal year.

This was partially offset by growth in our Infrastructure segment. Operating income for the third quarter was $18.5 million compared to $23.8 million in the prior year, and operating margin was 11.5% of sales compared to 14% of sales last year. The decrease in operating income was mainly driven by lower revenues and the impact of fixed cost deleverage in the Irrigation segment.

It was partially offset by growth in the Infrastructure segment and a reduction of corporate expenses. Despite the challenging environment, we delivered double-digit operating margins. Third quarter results include a onetime benefit related to tariff refunds. This represents a partial reversal of tariff costs incurred to date. We have seen input cost escalate during the fiscal year and our pricing actions still need to catch up.

Net earnings for the quarter were $15.8 million or $1.53 per diluted share compared to $19.5 million or $1.78 per diluted share in the prior year. The year-over-year decrease reflected the impact of lower operating income, which was partially offset by an increase in other income and a lower effective tax rate.

Turning to segment results. Irrigation segment revenues for the third quarter were $133 million, a decrease of 7% compared to $143.7 million in the prior year. Results were largely in line with our expectations given the challenging environment. North America irrigation revenues were $61.3 million, a decrease of 11% compared to $69.1 million in the prior year. The decrease resulted primarily from lower unit sales volume, which was partially offset by higher average selling prices.

International irrigation revenues were $71.7 million, a decrease of 4% compared to $74.7 million in the prior year. The decrease was driven by lower sales volume in Brazil, which was partially offset by growth in other international markets. Irrigation segment operating income for the quarter was $20.3 million compared to $27.2 million in the prior year, and operating margin was 15.3% of sales compared to 18.9% of sales last year.

The decrease in operating income was due to lower unit sales volume, higher input costs and the impact of fixed cost deleverage. In our Infrastructure segment, revenues for the quarter increased 8% to $27.7 million compared to $25.7 million in the prior year. The increase was driven by higher road safety product revenues, while Road Zipper revenues were below the prior year.

Infrastructure segment operating income was $5.4 million comparable to the prior year, and operating margin was 19.5% of sales compared to 21.1% of sales last year. The decrease in operating margin was a result of less favorable mix due to lower Road Zipper revenues.

Turning to the balance sheet and liquidity. At the end of the third quarter, our total available liquidity was $204.8 million, which includes $154.8 million in cash and cash equivalents and $50 million available under our revolving credit facility. Capital expenditures for the first 9 months of the fiscal year were $35.5 million, reflecting our ongoing strategic investments at the Lindsay, Nebraska site.

We continue to execute against our capital allocation priorities and deployed $25.2 million towards share repurchases during the quarter. During the first 9 months of the fiscal year, we have returned $80.7 million to shareholders through share repurchases. We remain confident in the strength of our balance sheet and our ability to prepare the business for future profitable growth.

This concludes my remarks. At this time, I will turn the call over to the operator to take your questions.

[Operator Instructions] Our first question today is from Ryan Connors with Northcoast Research.

Yes, I wanted to start on the Middle East project. Great news that the major order was not disrupted by the conflict. But Randy, could you kind of expand on the outlook there and the project cadence going forward? Has there been any sign of that, that impacts the pipeline going forward? Obviously, this big order will be completing mostly this year, as you noted. So any update on kind of the pipeline in the Middle East would be helpful.

Yes. The pipeline, Ryan, when you look at all of the public proclamations that Egypt has made specifically, but not only in Egypt. If you look at Northern Africa and across the Middle East, I think there's a lot of very public statements from leaders looking to continue investing in domestic ag production for food security purposes.

And we haven't seen any significant shift in the total market opportunity. There's still, in our view, a lot more business out there. We're in the early innings. I think we are watching how quickly water infrastructure is developed, the electrical infrastructure is developed. Some of those things could speed up or slow down over time. But when we look at kind of a macro level, there still is a lot more opportunity there. And I'd say we're in the early to mid-innings with more growth to come.

Got it. And then just a housekeeping on that specific project, the $80 million. You mentioned in release $70 million in the current fiscal year. Are we to presume that the remaining $10 million is in the first quarter of fiscal '27?

You're right, Ryan. So $70 million is still the expectation to be recognized in fiscal '26. The remaining $10 million will spill into 2027. There could be minor timing changes, but it's going to be early in the fiscal year.

Got it. Okay. And then just switching gears to the capital projects. Randy, you mentioned the galvanizing facility is going to be up and running, but you said 2027. Just to clarify, were you referring to fiscal '27 or calendar '27 when that will go live?

That will be calendar '27, Ryan. Thanks for the clarity.

Calendar '27. Okay. And then just on that, so in terms of what that will do to the cadence of the CapEx as we -- once that goes live, if I'm recalling correctly, that's really the last of the major projects, no? And so we should see a down step in CapEx once that project goes live?

That is correct, Ryan. So this is the final step of our strategic investments. Once the galvanizing goes live, you will see a return to normalized capital levels comprised of, of course, maintenance capital and investments in organic growth that have strong business cases behind them.

Yes, yes. And then just one last one on the big picture side. We're hearing a lot about AI in agriculture. But mostly, we're seeing cool stuff like targeted herbicides that can spray weeds, the AI sees what's the weed and what's not and things like drones and whatnot. But specifically to irrigation, is there anything exciting going on in terms of using AI to improve the capabilities of FieldNet? Just curious on the big picture AI impacts on the product set and the technology side.

Yes. It's an area that we're pretty excited about, and it's an area that we continue to put resources behind because we do see the potential impact on the profitability of our customers. And when you look at customers right now selling commodities for less than it costs them to grow them, we've got to find ways to enhance our profitability wherever we can.

And with FieldNet Advisor specifically, we've really been deploying a lot of AI models to help with irrigation scheduling. And that generally is proven agronomic science. It just hasn't been simple. It hasn't been easy to deploy. So we're putting all of that intelligence in the pocket of our customers, and they can wake up every morning and know exactly what water is required where based on historical weather, predicted weather, crop growth stage, soil type. So that tool from our view, is starting to get a lot of traction in the market because it makes it easier for customers to plan their water, sustain their energy use and really impacting the bottom line.

The other side that I think is really interesting, and this, again, is kind of innovation and development is the SmartPivot platform where things like machine learning can allow us to pre-diagnose failures. And if you think about whether it's center drives or gearboxes, other mechanical portions of the machine, when they are approaching the point of imminent failure, they'll demonstrate characteristics that you can measure.

And if you have machine learning capabilities to recognize what normal looks like, you can calculate what abnormal looks like and again, pre-diagnose some of those failures. So AI, again, very early innings, I think, in terms of how it applies to our equipment, but we do see some pretty exciting opportunities to once again change how customers interact and operate their mechanized irrigation equipment.

The next question is from Brian Drab with William Blair.

In the press release, you mentioned that you expect Brazil to return to growth. In the transcript or in the prepared remarks here on the call, it sounded a little bit more cautious than that. So I'm wondering, can you just elaborate on that you expect to return to growth, the timing and given it's still a challenging environment, obviously, at the moment?

Yes, you bet, Brian. So in Brazil, the release of the program, any program, we view it as good news. We know firsthand that there's a lot of customers working on specific projects just waiting to see what the program was going to offer for them. So I think the market expectation locally was probably in high single digits. So the 11.5% is not as aggressive maybe as the market wanted, but it did go from a 12.5% to 11.5%, and they have a program that they can jump on.

So we would look at, call them, shovel-ready type projects are probably going to start working their way through the system now. We wouldn't expect a significant impact on our fourth quarter, which is going to end August 31, but some of those initial projects that will get through the funding mechanism that will get approved that will roll out, we could see some of those early in first quarter fiscal year '27.

The fact that the total program volume is a little lower than last year, I mean, a 38% reduction in total funding available, the good news is they hadn't fully appropriated 100% of the program funds in the past. So it does sound like a significant headwind maybe initially when you read the headline, but if they haven't allocated 100% of the money, a 38% reduction is probably going to be a little easier for the market to absorb. So we don't see an immediate spike and jump in Brazil, but we do know some of those projects that had been on hold are now going to progress through the system, and we'd hope to get our fair share of those, likely not seeing that until first quarter of our next fiscal year.

Okay. And then just in general, on the irrigation business in terms of seasonality and how that impacts the revenue in the fourth quarter typically. And I don't know if you commented, but any comment on what you're expecting in terms of any abnormalities related to seasonality in the fourth quarter?

So the fourth quarter historically, obviously, is the lowest volume quarter for us. It's the one where we have the lowest amount of fixed overhead absorption. It had been generally a very light storm season. We did see the last week of May in the Midwest, a little bit of activity, but I would say that's down from previous years. So we aren't currently projecting a lot of optimism relative to volume in the fourth quarter. It should look typical to down relative to prior periods.

Okay. And year-over-year, are you making any comment on the fourth quarter? Or should we just see it down from the third quarter is what I would expect to seeing...

It's certainly down from the third quarter. And the storm volume is the one thing that we often talk about as that moves the needle up or down in Q4. And right now, I would say softer storm volume than we've seen in previous years.

Okay. That's helpful. And then if I could just ask one more. Can you add any color around expectations for gross margin? You had in fiscal '25, there's some good Road Zipper sales and tailwind to gross margin as a result of that. And just so many different dynamics, it's hard for us to forecast or what we should be thinking about for gross margin going into next year, next fiscal year, too. The movement in steel is dramatic and a lot of other factors.

So what I would say is initially in Q4, of course, you will see the impact of more unfavorable absorption or less absorption just given the seasonality. We can't opine on the inflation from a raw material perspective, but we are prepared to continue to face cost escalation, and we'll pull all the levers to address those. But I think other than normal seasonality and of course, the timing of projects, there's too many variables to be very discrete on the expectations.

The next question is from Nathan Jones with Stifel.

This is Adam Farley on for Nathan. Maybe one more on domestic irrigation. Can you provide an update on drought conditions in primary irrigation regions, just how the season is shaping up so far?

Yes. When you look at year-over-year drought, we are seeing at a national level, a substantial increase this year, and we kind of use the drought monitor that's published. If you look at that severe drought to exceptional drought, kind of that D2 to D4, a year ago, we saw about 15% of the country in that status. And this year, it's over 1/3 of the country in that status. And more importantly, if we look at the core irrigation states in the Midwest, Nebraska right now, I would say the western half to Western 2/3 is really in that extreme drought.

I know I've talked to several customers and dealers in that part of the country, and they're concerned about their ability to finish a crop in some of those markets because they're not going to have enough water to bring a crop to maturity. You get further west into Colorado, the Panhandle of Oklahoma, Panhandle of Texas, I mean, it's a pretty tough environment. And one thing it does do, and we said this consistently, drought is generally good for business until it isn't. And when you get to that extreme drought category where customers may not have the water they need, that's when it starts to be negative to the business.

But in a lot of these areas today, it's promoting efficient use of water. It's promoting the utilization of tools like FieldNet Advisor to maximize application of water when it's going to contribute the most to yield. But I would say we're watching a lot of these areas pretty closely. And if it continues to accelerate to this level of impact, then at least we'd say the western portion of the Corn Belt, we could start to see some of that negative yield impact, which ironically could decrease supply and maybe provide some pricing support at some point.

That's really helpful detail. Maybe just shifting over to the planned restructuring actions in fiscal '27. Maybe just a little more color on what the actions are that you're contemplating? How much do you think these will cost to implement and then expected savings from these actions?

Yes. I think we'll probably wait until we get through the full quarter before we get a little more specific on some of the numbers you're asking about, Adam. But I can say, as we did in the prepared comments, this is about organization structure, efficiency, finding ways to do work differently, leveraging tools like AI to change how we work. But clearly also want to make sure we can continue to invest in the long-term growth priorities, the strategic priorities of the business. And I think our leadership team worked effectively well, very collaboratively to make sure we recognize how to run this company in the down cycle, which we've done before without impacting our ability to respond when the market does recover.

The next question is from Jon Braatz with Kansas City Capital.

Randy, could you speak a little bit about the pricing environment domestically? What are you seeing in the irrigation segment?

Well, I'm sure it wouldn't be a surprise, Jon, that when the market softens like this and volume for the whole industry drops off, it does get a lot more competitive. And I think it's still rational that we don't see irrational behavior now, but it is getting more competitive, and we are seeing it in targeted regions. And our approach in this environment is the same as it has been. We want to make sure we protect customer relationships where they matter to us.

We want to make sure we protect our dealers in regions where things might be getting more aggressive and allow them to compete and win for their fair share of the business. We're never going to use pricing to drive volume. We're never going to use pricing to try and grow market share. We want to be protective of the business that we think is ours. But certainly, I think it's fair to say a more competitive environment.

And when you combine the cost -- the uncertainty that we're seeing and some of the cost increases with the competitive pricing environment, it can obviously create a little bit of pinch on margins. And I think we're seeing some of that. But we are doing everything we can to control the things we can control and working closely with our commercial teams and dealers to make sure we're maximizing pricing where we can, but recognizing also we've got to protect volume and protect some of those key relationships.

Sure. The next year's selling season is a ways away. But given what we're seeing at the moment and if the market continues to be soft, would you think incrementally you might see additional competitive pressures, pricing pressures?

I think it's natural to assume if the competitive environment intensifies that pricing could become more competitive. And I'd say at this point, it's probably too early. We have to get through fall harvest and full year profitability. And we know the data on profitability this year really correlates well to sales volume next year. So I think it's a little too early to make that assumption. But I think if the competitive environment stays stable, then I would predict that the pricing environment probably remains stable. If the volumes continues to drop and the market gets more competitive, then I would probably predict that pricing could also get a little more competitive.

Okay. One last question. Sam, when you look at the segment results, your unallocated corporate expenses are down -- will be down, I don't know, about $4 million this year, it looks like. Where are these savings coming from? And it's possible that you could -- we could see more next year?

So the savings you've seen to date, that's really a function of our teams managing everything from discretionary spending to timing of expenses very wisely. Then of course, we talked about the restructuring actions. Those will not have impact in Q4, but they will yield savings in our fiscal 2027.

[Operator Instructions] The next question is from Brett Kearney with American Rebirth Opportunity Partners.

I was just going to ask for a quick update on some of your new product introductions. I think we already partially covered iterations on the ag tech side, but I know you also had some new products in the market on the road safety aspect as well. So I just want to hear how the traction is going in the marketplace there.

I think the most recent introductions, I think, have created a lot of market interest. We had a lot of discussions at trade shows. I do know we are working on kind of late stages of approvals through the appropriate organizations here. So I can't comment on kind of early penetration and sales volume, Brett. But I would say that the -- based on the market excitement that we've seen, once we get through final testing and release, we do have, we think, pretty good outlook on some -- continuing the growth trend for the road safety products.

This concludes our question-and-answer session. I would like to turn the conference back over to Randy Wood for any closing remarks.

Thank you. While current market conditions continue to present near-term challenges, we remain confident in our strategy and our ability to execute effectively while positioning the business for sustainable, long-term success. Our experienced leadership team remains focused on disciplined execution, carefully managing costs through the cycle while directing capital towards opportunities that support our long-term strategic objectives. Above all, we remain focused on creating lasting value for our shareholders and appreciate your continued support. We look forward to updating you on our progress during our fourth quarter earnings call. Thanks for joining us, and have a great holiday.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Lindsay Corporation Fiscal Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Mr. Randy Wood, President and CEO. Please go ahead, sir.

Thank you, and good morning, everyone. Welcome to our fiscal 2026 second quarter earnings call. With me today is Sam Hinrichsen, our Chief Financial Officer.

Before commenting on our quarterly results, I'd like to address recent developments related to the conflict in the Middle East. We are closely monitoring the situation with our top priority remaining the safety of our employees and partners in the region. The MENA market has been a strong source of growth for our International irrigation business and deliveries tied to our most recent project are meaningful to our revenue. The project remains on schedule, and our supply chains are currently operating without disruption. Any future risk will depend on the duration of the conflict and the potential for broader geographic impact. At this time, we remain well positioned to continue supporting our customers and dealers across the region.

Turning to our second quarter results. I'm very proud of our team's execution. Despite continued external headwinds in the agriculture industry, including trade uncertainty, higher input costs and weakening sentiment, our team demonstrated strong operational discipline. We remain focused on the levers within our control, particularly pricing, cost management and operational efficiency while continuing to invest strategically to position the business for long-term growth.

In North America, our irrigation business customers continued to delay large capital purchases given current farm economics, which, as expected, resulted in lower unit sales volumes in the quarter. Demand remained soft, consistent with what we outlined last quarter.

In our international business, revenues were flat to slightly down year-over-year, driven by lower sales volumes in Brazil and the timing of project revenue in the MENA region. In Brazil, high interest rates and limited access to credit continue to constrain growers' ability to finance capital equipment purchases. Additionally, local market feedback suggests the 2026 crop plan expected to be released in July will include lower financing rates than the prior year. As a result, many customers are taking a wait-and-see approach.

Our Infrastructure segment performance reflects the expected impact of a difficult comparison to the prior year, which included the delivery of a $20 million Road Zipper project, which we did not expect to repeat. Excluding the Road Zipper project, our infrastructure business grew 6%, led by higher sales in road safety products.

Turning to market outlook. As we mentioned last quarter, we expect softer market conditions to persist in the near term in North America. While customer quotations are down slightly versus prior year, we are not seeing the traditional pickup in spring order volume. Current market indicators, including input costs and overall farm profitability suggest the current trough environment will continue until there's greater clarity around trade impacts, profitability and resolution in the Middle East.

In our international markets, we remain encouraged by the overall outlook for future growth, particularly in regions focused on improving food security and water resource management. Near-term recovery in Brazil will depend on grower response to the new crop plan and the availability of attractive financing. While we will closely monitor customer sentiment at the Agri Show later this month, we do not expect any meaningful market recovery until the new crop plan is released in July. We remain optimistic in Brazil and continue to see a compelling long-term secular growth opportunity in that market.

Within our Infrastructure segment, we continue to see opportunities develop across the portfolio and the Road Zipper sales funnel remains strong. We do see opportunities for continued growth in road safety products, which has provided solid support to our results this year. During the quarter, we introduced 2 new products at the American Traffic Safety Services Association Trade Show. The AlphaGuard channeling device delivers speed, strength and flexibility, allowing it to be used in both emergency applications as well as everyday use. The Road Runner is a breakthrough truck-mounted attenuator that prioritizes speed of deployment and unmatched durability. The introduction of these new road safety solutions highlights our investment in innovation and the growing demand for efficient and safe roadway solutions.

I'd like to now turn the call over to Sam to discuss our fiscal second quarter financial results. Sam?

Thank you, Randy, and good morning, everyone. Total revenues for the second quarter of fiscal 2026 were $157.7 million, a decrease of 16% compared to $187.1 million in the prior year. The decline in our consolidated top line was driven by lower revenues in both of our segments. The year-over-year decrease in the infrastructure business reflects the absence of the $20 million Road Zipper project that was delivered in the prior year, which, as Randy mentioned, we did not expect to repeat.

Operating income for the second quarter was $13 million compared to $32.1 million in the prior year, and operating margin was 8.3% of sales compared to 17.2% of sales last year. The decrease in operating income was driven by lower revenues, with the most significant driver being the previously mentioned lower Road Zipper project revenues.

Net earnings for the quarter were $12.0 million or $1.15 per diluted share compared to $26.6 million or $2.44 per diluted share in the prior year. The year-over-year decrease in net earnings reflected the impact of lower operating income and a higher effective tax rate.

Turning to operating segment results. Irrigation segment revenues for the second quarter, were $141.2 million, a decrease of 5% compared to the $148.1 million in the prior year. Results were largely in line with our expectations against the backdrop of a continued challenging agricultural environment. North America irrigation revenues were $71 million, down 8% from the previous year, as lower unit sales volume was partially offset by higher average selling prices. Demand in North America continued to be impacted by low commodity prices and overall tempered farmer sentiment.

International irrigation revenues were $70.2 million compared to $71 million in the prior year. The marginal decrease was driven by lower sales volume in Brazil and MENA project timing which was partially offset by growth in other international markets. Irrigation segment operating income for the quarter was $19.5 million compared to $27.4 million in the prior year, and operating margin represented 13.8% of sales compared to 18.5% of sales last year. The compression in operating income was mainly a result of lower sales volume in North America, unfavorable regional mix and the impact of fixed cost deleverage.

In our Infrastructure segment, revenues for the second quarter were $16.5 million compared to $38.9 million in the prior year. As expected, the year-over-year decrease was attributable to the absence of the $20 million Road Zipper project that was delivered in the prior year period. Excluding the Road Zipper project, revenues were up 6%, driven by continued growth in road safety products.

Infrastructure operating income for the quarter was $1.2 million, down compared to $13.3 million in the prior year, and operating margin was 7.1% of sales compared to 34.1% of sales in the prior year. The decrease in operating income and margin was mainly driven by lower Road Zipper project revenues, which resulted in less favorable mix.

Turning to the balance sheet and liquidity. At the end of the second quarter, our total available liquidity was $236.1 million, which includes $186.1 million in cash and cash equivalents and $50 million available under our current revolving credit facility. During the quarter, we continued to execute against our capital allocation priorities, returned cash to shareholders by completing $25 million of share repurchases and made progress on key strategic investments. We remain confident in the strength of our balance sheet and our ability to continue investing in the business to support future growth and drive productivity while returning capital to shareholders.

This concludes my remarks. And at this time, I will turn the call over to the operator to take your questions.

[Operator Instructions] And our first question for today will come from Nathan Jones with Stifel.

I guess I'll just start with margins. The irrigation margins were a bit low even on the volume that we had there, I think. The incrementals were over 100%, not a big number on the revenue change. Can you just talk about what the inputs there, maybe some more color on the soft margin in irrigation, if you're seeing any increased pricing pressure from competitors? Or just what's going on there, please?

Sure, Nathan. So if you think about the volume drop, particularly North America year-over-year, coming from an even lower base from last year, that will continue to drive fixed cost deleverage. So that's the main driver of that margin compression. Regional mix was slightly unfavorable due to the fact that we ship more internationally. But I would also just say the margin pressure from the overall competitive environment from input price inflation really globally has impacted margins. So it's really a combination of those factors.

You mentioned the competitive environment there. Are you seeing more intense price competition from competitors as the volume is fairly low here?

Nathan, this is Randy. I'll take that one. And I think what you generally see in these soft markets, there's more propensity maybe from the smaller privately held family businesses, whether it's in North America, Western Europe, you certainly see a more competitive environment kind of ratchets up the pricing intensity. We would still say a rational pricing environment in general, and our approach is very strategic. So we might want to identify specific customer relationships that we know we have to protect. We're not going to use pricing as a method to drive market share increases. We certainly want to preserve the quality of the business. But for us, it's a strategic approach. But certainly, when volumes are tight, you do see that competitiveness ratchet up.

And just one on the MENA project. I think you manufactured that in Turkey. You said that it's on schedule at the moment. Do you expect it to stay that way? Or do you -- does it stretch out? Does the war in Iran kind of delay any potential contract awards in that area as people wait and see how things are going to play out there? Just any comments you can give us on that?

Yes. You have hit on a couple of things. And we would say, certainly, there could be short-term delays in some of the other business in the region, whether it's project business or just regular retail business. I think everybody in the region is kind of on the edge of their seats waiting to see what happened. And specific to the MENA project, we're delivering now a lot depends on the length of the conflict. And if this is another 3 to 4 weeks, 5 to 6 weeks, and our view would be everything looks to be on track. We've confirmed with our logistics providers. We've confirmed with our supply chain on the inbound side. For us, it looks safe. And as predicted and as projected, provided this is not a prolonged conflict. If this goes months or several quarters, then we may have a different answer for you. But right now, based on what we see and the communication we've had with all of our suppliers, things look to be on track and proceeding as planned.

Your next question will come from Ryan Connors with Northcoast Research.

I wanted to actually go back and revisit the topic on pricing, because if I'm reading in the press release, you actually mentioned higher average selling prices as an offsetting tailwind to some of the headwinds in irrigation. So I'm reading that the pricing was actually positive. So I just wanted to kind of see -- should I interpret then the comments a minute ago, to say that you're holding up on your price and maybe walking away from some business where you feel it's not business you feel is priced appropriately?

I would say, yes, we certainly have a walkaway plan on anything, Ryan, whether it's a project sale or just a retail sale. But I think there's always two parts of the equation. I think pricing year-over-year was favorable, but you have to factor cost into it as well. And cost, in our view, exceeded the pricing opportunities we were able to get in the market, and that's resulting in the margin compression that you're seeing, a portion of it.

Got it. Okay. Got it. And then one more on irrigation and then a quick one on infrastructure. There's been a lot of talk about significant shifting of acreage from corn to soybeans in North America given the economics. Does that impact you at all? Or are you sort of indifferent between those two?

I think we're largely indifferent in terms of what it means for direct machine sales, whether a customer grows one or the other in our regions. It's -- and there's a need for irrigation. It really doesn't matter. We'll apply both in the same way. But the bigger macro market impact could start to shift acres, could start to impact price, could start to impact farmer profitability. So I think right now, you see a small decrease in corn, a slight increase in soybeans. If you look historically, I mean, the June report is going to give us better data. Generally, we see corn acres increase between now and June and then soybean acres decrease. So I think a lot of the customers that we've talked to are kind of locked in on their inputs and their planting intentions. I don't know that there'll be a lot of significant shifts between now and when they get into the fields. But either way, from a direct sales perspective, no impact, but we will watch how it impacts the macro and the pricing on those commodities -- that could start to move the needle one way or the other.

Got it. Very helpful. And then lastly, on infrastructure. It did seem that to us, the deleveraging on the margins did kind of catch us by surprise in infrastructure. Is there anything special that's dragging that down in the quarter? Or is that -- is this sort of the margin run rate that we should think about when we don't have the Road Zipper project of scale flowing through?

So if you think about the Road Zipper, that, of course, just the sheer magnitude is the biggest single driver for the margin compression. And frankly, cost absorption, deleverage is a big chunk of this. So you're taking that significant product out of the results compared to last year. If you think about the Road Safety Products business, that's doing really well. That business is the smaller piece, of course, of our overall infrastructure business. So even that growth is a partial offset, but it can't offset the full impact from the Road Zipper project.

So if you think about the other components in infrastructure, there are what I would call non-Road Zipper project components. They will continue to impact results. So there are more components than just road safety products and Road Zipper. So as you think of margin profile, of course, in the essence of a big project, it's going to be closer to what we've seen right now.

Got it. Okay. And then I sneak one more in. On the -- any update quickly on the Nebraska capital investments, where we're at there and what the kind of margin impacts for not only '26, but as we move to FY '27?

Yes. I can say from a time line perspective, the weather was very cooperative in support of this winter. So our tube mill is up and running and turned over to full production. Construction of the new galvanizing facility is on track, on plan, and we would expect that to come online near the end of the calendar year, sometime in the first portion of our fiscal 2027 year.

In terms of the depreciation impact, the efficiency gains, I think we've been pretty consistent that initially, it does appear that a lot of those efficiency gains we're going to have are going to be eaten up by the incremental depreciation that we're going to see on that investment and really for us to get the leverage and growth and profitability out of that investment, we are going to have to see some market recovery to support that. So to me, the similar answers we provided over previous quarters and no significant shifts in project timing.

Your next question will come from Trevor Sahr with William Blair. And we'll move on. Our next question will come from Brett Kearney with American Rebirth Opportunity.

I think you've done a good job discussing status of your Middle East, North Africa project in the context of the current environment. Obviously, you guys are on top of risks that could materialize there. But I wanted to talk about potentially on the opportunity side. About 4 years ago, today, when we saw -- the Russia-Ukraine conflict materialize. Subsequent to that was when you guys ultimately were able to experience a number of these international food security projects. Now this one has a different texture. It's not in the global grain production region, primarily centered on fertilizers. But as you look 12, 24 months from now, how are you seeing potential additional waves of food security projects in, call it, Africa, Central, South and Southeast Asia and your ability to potentially capture opportunities that might arise there?

Yes. I think it's an interesting observation, Brett. And you're right. If you go back to 2022, when the Russia-Ukraine conflict hit, we did see a surge in energy prices. We saw a corresponding surge in commodity prices. And I think you hit on one big difference this time around is that Iran is not a big grain producer. They're not a big exporter of grains. And I think that's one thing that probably changes the model going forward just a little bit. Certainly, the fuel cost, the fertilizer costs going through the Strait of Hormuz, that certainly has some short-term impact. Long term, it really depends how long this thing goes. And if we're still talking about it, and we're still dealing with the conflict 12 to 24 months from now, I think a lot of things can change. But in the near term, I don't know that this changes our long-term view of this market. We are still going to see some of the same countries interested in investing in food security, investing in GDP diversification for their local economies. So again, it comes back to duration. And right now, our plan would be faster resolution over the next several weeks, not something that's going to last several quarters for us. And we're still active in the region, still able to run the facility, keep our people safe. And I guess that bodes well for us competitively in the region as well.

Next question will come from Trevor Sahr with William Blair.

Could you guys hear me?

We got you.

Okay. Sorry about that. I just wanted to ask quickly on Brazil, maybe just some more thoughts there, how the outlook might have changed throughout the quarter? And Randy, you mentioned that the upcoming crop plan in July, I believe you said it is expected to have lower interest rates for ag equipment. Is that something that's just expected? Or is that a hard kind of guarantee? Like how can we think about Brazil in the second half of your fiscal year here?

Sure. And I'll maybe start by saying long-term Brazil is still a very attractive market. Low penetration in terms of irrigation. Three crops a year really accelerates the payback. So we're still very, very bullish on Brazil. And what we're dealing with in the near term is credit, and that's been the narrative for the past several quarters. The feedback that we've got locally, I would say in Brazil, nothing is guaranteed. This is an election year, which can sometimes change and shift timing on some of the things that are shared verbally in the markets. But that crop plan last year was about 12.5%. And this year, the projections are it's going to be well under that. And how far under that, no guarantees until the plan is released. We are seeing some market movement in interest rates there. I think the Selic rate nationally was just lowered by 0.25 point just within the last couple of weeks. So there is indications locally that financing rates are going to come down.

And when customers see that, they kind of wait and customers might think I could use a pivot today. But you know what, I can put a pivot on my next crop. If I can get a better interest rate, my payback is going to be much better. So the environment we're in, there's no certainty, but the prevailing attitude locally is rates are going to get better, and that's got customers kind of sitting on the sidelines.

We did mention in our prepared comments, the Agri Show is the end of this month, and that generally is the largest show. It's a selling show where dealers and customers are working on designs, putting quotations together. So we're very anxious to see what customer sentiment is like at that show. I suspect we could come out of that with some very good feedback on customers ready to reenter the market. But until that crop plan is released and that money and funding is available in July, we could be in the same position through our third quarter that we've been in our second quarter.

That's great. Very helpful there. Finally, I just wanted to ask quickly on gross margin. I wanted to see if there was anything you wanted to call out besides weaker top line performance that resulted in the margin hit this quarter. And then additionally, any more clarity you can provide on margin for the latest international irrigation project would be helpful as well.

As far as overall gross margins are concerned, again, the fixed cost deleverage at these current demand levels, that is a key driver. You think about the international mix, we don't expect that mix to fundamentally change in the second half compared to where we were in Q2. And of course, there's risk from an input price perspective and the timing of pricing actions. You think about the Iran situation, that is a fluid situation. If it drags on, if it has continued impact from an input price perspective, there could be challenges there. But I think those are the key drivers there. And -- sorry, what was your second question, the outlook for the second half?

Yes. Any comment on the second half? And then maybe if there's any update or more clarity on the margin of the MENA international project?

Yes. Again, for the second half based on what Randy discussed, the overall outlook for specifically North America and Brazil is not a big change versus Q2. So we'd expect, especially the cost deleverage to continue. From a MENA project perspective, again, we're executing the project according to plan. Those margins are comparable to the previous year project. Of course, there are timing differences as we ramp up the project. But there's really no change there compared to what we had discussed before.

Your next question will come from Jon Braatz with Kansas City Capital.

Randy, just want to return to the capital investments you've been making. Back in 2024, you initiated Project Fortify spending $50 million on, I guess, in the Nebraska facility. And I guess I would have maybe expected a little bit of better margins in this downturn. And I guess my question is, how far along are you in beginning to accrue those a return on that investment? And are we near the -- are we going to begin to see those -- that return on investment shortly?

Yes. I think as I said earlier, Jon, we have now turned over the tube mills specifically, and that was the first tranche of the big investments. And it was designed to improve safety for our operators, improve efficiency and throughput but also to reduce our reliance on labor. And as you know, in Lindsay, Nebraska, if we had to bring in another 100 labors to respond to some upside in demand, that would be tough, that would be a stretch. So our plan was automate the equipment so that when we do have to respond to an upswing in the market or downswing in the market, we're not taking our labor headcount up and down as we maybe have in previous history when we had more labor-intensive labor practices.

So right now, I think I said earlier in the call, we do need to see some market recovery to get the volume leverage on that investment. That will sustain itself as we launch the new galvanizing facility in early 2027. At current volumes, it's going to be tough to generate and see those incremental margins and those returns just because of the deleverage on a big investment and the depreciation that we'll see.

Now when we get into the next up cycle as we grow and reach the peak of the market, I think that's when we're really going to be able to capitalize on it and identify it. But in the near term here, I think most of those savings are going to get diluted by the incremental impact of the depreciation.

Okay. So basically, what remains is the galvanizing facility for 2027?

You got it. And that one won't be turned over in this fiscal year, so we won't see that incremental depreciation until we get into Q1 of '27.

And this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Randy Wood for any closing remarks. Please go ahead.

Thank you. Overall, near-term market conditions remain challenging, but we are confident in our ability to execute and position the business for long-term growth. We will continue delivering the large MENA project throughout the third and fourth quarters, while advancing planned investments in our Lindsay, Nebraska facility, including the new galvanizing operation expected to come online in early 2027.

Our leadership teams remain disciplined and experienced in managing through the cycles, and we will continue to closely manage spending while aligning investments with our strategic growth priorities. In addition, we see continued opportunity in our road safety business, and we remain focused on introducing new products into attractive end markets. We remain committed to creating long-term value for shareholders and look forward to updating you on our third quarter earnings call. Thanks for joining us.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Lindsay Corporation Fiscal First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Randy Wood, President and CEO. Please go ahead.

Thank you, and good morning, everyone. Welcome to our fiscal 2026 first quarter earnings call. With me today is Sam Hinrichsen, our Chief Financial Officer.

Once again, I'm very proud of our team's execution in the quarter despite external headwinds impacting our business. While ongoing trade uncertainty, low commodity prices and high input costs have negatively impacted customer profitability and sentiment our team's focus on price and cost management and operational efficiencies gained through our diversified global footprint helped us deliver solid profitability and maintain earnings quality in the quarter.

In our domestic U.S. irrigation business, customers continue to delay large capital purchases due to high input costs and low profitability. In our international business, we're encouraged by the strength and opportunities in the project market, including the Middle East and North Africa. Our ability to help growers globally improve productivity and optimize resources remains a key differentiator for Lindsay and has supported performance in a challenging macroeconomic environment.

Subsequent to the end of our fiscal first quarter, we announced a supply agreement to provide thematic irrigation systems and FieldNET remote management and scheduling technology in the MENA region. This project is valued at approximately $80 million in total revenue with approximately $70 million of revenue realization this fiscal year. This announcement reflects our ability to compete and win large-scale projects globally, but also demonstrates Lindsay's role as a trusted partner in advancing sustainable agriculture, while supporting localized production and enhancing food security. We're very proud of our team's commitment to delivering transformative projects in our international markets and look forward to executing this important project in the region.

Our Infrastructure segment delivered solid performance in the first quarter, with total revenues up 17% year-over-year. Increased road construction activity supported segment performance in the quarter, and we continue to see solid interest in our Road Zipper solutions product. Moving forward, we expect further momentum as infrastructure funding and road project activity advance.

Turning to our market outlook. As we mentioned last quarter, in North America, we expect softer market conditions to persist in the near term. Market indicators suggest the current trough environment will persist until there's greater clarity around international data impacts and an improvement in customer profitability. The U.S. administration has announced a $12 billion Farmer Bridge Assistance Package designed to offset trade-related pressures on U.S. farmers. The program includes onetime payments of approximately $44 per acre for corn and $31 per acre for soybeans. While this support will be appreciated by growers, we don't expect it to drive significant incremental demand in the short term.

Within our international markets, we remain encouraged by the overall outlook for future growth and market fundamentals in Latin America, including Brazil. Elevated interest rates and ongoing constraints on credit access for growers continue to weigh on near-term equipment investment in the region, tempering what otherwise remains an attractive long-term growth opportunity.

Within our Infrastructure segment, we continue to see opportunities develop across systems, sales, leasing and road safety products and our sales funnel remains strong. As previously communicated, we do not see a large Road Zipper project exiting the funnel in fiscal year '26. This creates a difficult comparison, particularly in Q2, where we shipped a large $20 million project last year. We do have incremental opportunities for smaller projects and other segment growth to offset half of that total, with the majority coming in the second half of the fiscal year.

Road safety funding in the United States remains steady, and we remain very excited by the long-term potential of our Road Zipper leasing model, which continues to gain traction and supports a more stable and balanced margin profile over time.

With that, I'd like to now turn the call over to Sam to discuss our fiscal first quarter financial results. Sam?

Thank you, Randy, and good morning, everyone. It is a privilege to join you today for my first earnings call as Chief Financial Officer at Lindsay Corporation. I'm excited to continue partnering with this talented team as we drive our strategy forward, deliver on key initiatives and create meaningful long-term value for our shareholders. I look forward to building on the strong foundation already in place.

Now let me walk you through our financial results for the quarter. Total revenues for the first quarter of fiscal 2026 were $155.8 million, a decrease of 6% compared to revenues of $166.3 million, in the same quarter last year. The decline in revenue was driven by lower volumes in our Irrigation segment as continued uncertainty around trade, lower commodity prices and higher input costs continue to weigh on farmer sentiment. Lower volume in irrigation was partially offset by year-over-year growth in our Infrastructure segment.

Operating income for the quarter was $19.6 million, a decrease of 6% compared to $20.9 million in the prior year period. Operating margin for the quarter was 12.6%, consistent with the prior year. Despite a lower revenue base, our solid operating margin performance for the quarter reflects continued execution of our operational strategy, coupled with effective cost and pricing management. While near-term irrigation market conditions in North America are expected to remain soft, we anticipate that our business will continue to show resilience.

Net earnings results for the quarter were $16.5 million or $1.54 of net earnings per diluted share, marking a slight decline compared to net earnings of $17.2 million. or $1.57 per diluted share in the first quarter of last year. The difference in net earnings when compared to the prior year period was largely attributable to lower operating income and a slightly higher effective tax rate. These were partially offset by an increase in other income.

Turning to our segment results. Irrigation segment revenue for the first quarter were $133.4 million, a decrease of 9% compared to segment revenues of $147.1 million in the prior year. North America irrigation revenues of $74.3 million decreased by 4% compared to $77.7 million in the prior year. Within our North American markets, the impact of lower overall unit sales volume was partially offset by higher average selling prices compared to prior year.

In international irrigation markets, we delivered revenues of $59.1 million compared to $69.4 million in the first quarter last year. The decrease was primarily attributable to 2 factors: first, the timing of project revenues in the MENA region is difficult to predict. First quarter results were impacted by the timing gap between last year's project and the recently awarded new project in the region. Secondly, sales volumes in Brazil were lower than anticipated as this key market continues to be constrained by elevated interest rates and an unfavorable credit environment, which is weighing on investor activity for growers in the region. These declines were partially offset by approximately $1.5 million of favorable effects of foreign currency translation compared to the prior year.

Total Irrigation segment operating income for the first quarter was $23 million, a decrease of $1.8 million compared to $24.7 million in the first quarter last year. Segment operating margins of 17.2% of sales grew compared to 16.8% of sales in the first quarter of last year. Despite lower segment revenues, our irrigation margin profile continues to reflect resilience in the down cycle market.

In our Infrastructure segment, revenues for the first quarter increased 17% to $22.4 million compared to $19.2 million in the prior year. The increase was driven by higher sales of road safety products by Road Zipper System revenues were similar compared to the prior year. Infrastructure segment operating income for the first quarter increased 9% and to $4.5 million compared to $4.1 million in the prior year. Infrastructure segment operating margin for the quarter was 20.1% of sales compared to 21.5% of sales last year, as revenue growth was offset by higher operating expenses.

Turning to the balance sheet and liquidity. Our total available liquidity at the end of the first quarter was $249.6 million, which includes $199.6 million in cash and cash equivalents and $50 million available under our revolving credit facility. Free cash flow for the quarter was impacted by an increase in working capital to support business growth and elevated capital expenditure levels. We also utilized our strong free cash flow conversion to opportunistically buy back shares in the open market.

In the first quarter, we deployed $30.3 million into share repurchases exhausting our original authorization. During the quarter, we were pleased to announce the authorization of a new share repurchase program of up to $150 million. Our team have strategically maintained a very robust balance sheet and this authorization provides us with the ongoing flexibility to continue returning capital to our shareholders.

We are pleased with our strong financial position and balance sheet, which enable us to deliver shareholder returns while continuing to invest in future growth opportunities and innovation. This concludes my remarks. And at this time, I will turn the call over to the operator to take your questions.

[Operator Instructions] Our first question comes from Nathan Jones with Stifel.

I guess I'll start with North America irrigation, still down a little bit, but it seems to be bottoming out here. Does it feel to you like were getting to the trough of the market here? Are there risks that we could take another leg down here? Or I know [ Valmont's ] commented that they kind of think we're at replacement level. Is that kind of your feeling about the market where -- I mean, obviously, there's a lot of external headwinds that you can't control. But they think they'll be lining up about as bad as they could get at the moment, which is probably a good thing in itself that if it can't get any worse. Just any commentary you might have about how you're thinking about the domestic irrigation market here?

Yes, this is Randy. I'll take that one. And we would agree that we are bouncing along the trough here and there's been some announcements on incremental funding that's always good news, not enough to move the needle. And I don't think when we talk to customers that they see a lot of upside until there's more certainty on profitability. So in the near, near term, we don't see it getting progressively better, but I would say also we don't see it get progressively worse. So I do believe bouncing along the bottom of the trough here is how we'd characterize it.

I guess the pipeline on international projects here, nice to see the $80 million -- can you talk about opportunities for other projects -- could we see some more of those come through this year? I think they've been -- most of the ones you've done over the last few years have been with 1 customer. Are there opportunities outside of that? Are there things in the funnel that are coming from outside of that? Just any commentary around that, please?

Yes. I would say in the region, we have had some repeat business, which we view as a good thing. If you execute well, you get the opportunity for that repeat business. But we've also attracted new clients in the region. So it's a combination of recurring business with repeat customers and some new customers that we've pulled in as well. And I think the language around projects is the same as it's been for the past couple of years. We do see a robust funnel. We see a multiyear runway on projects like this 1 in this part of the world and not all of them are in the same country or the same part of the country.

We see a broad spectrum of opportunities across the MENA region for the same drivers around food security, and stability for those countries in that part of the world. So we do see a good runway here, Nathan. And whether there's another one in 2026 is up in the air. I think the same caveat always applies. These are complex, large, difficult negotiations when you have a deal, you move into credit logistics. So it's never easy. It's never quick. But I would say there are more opportunities in the market. And again, our track record is a good one. So we'll fight and win for the ones that we want to pull across the finish line. And when we are in a position that the project locked in, credit secured, that's when you'll hear us talk more about it until that time. We'll continue to comment on the positive elements of the funnel and the long-term growth potential in that part of the world.

And I guess one more for me. You guys have had elevated CapEx in fiscal '25 and planned again in fiscal '26 as you're doing a lot of upgrades in Lindsay and around some of your plants. Can you talk about how that's gone, where you are in that process? What contribution that's already generating to profitability and how we should think about the improved throughput improved efficiency that you'll gain from that this year and as we head into next fiscal year as well?

Yes. I'll start on kind of the narrative on what we're doing and where we are and then Sam can comment more specifically on how that might impact some of your models make them. But -- we, in Lindsay, Nebraska right now have activated our large 2 mill investment. This is a world-class 2 mill improving safety, efficiency, productivity testing has gone extremely well. And then I expect in the next 30 days, we'll turn that over to full production once we get certification from our vendors. That project has gone extremely well and will change the way that we produce tubing and really decrease our reliance on labor, which was a key part of some of these investments.

We have a second investment in our galvanizing facility that will completely reengineer that process for us, make it safer, more efficient or environmentally friendly. And that investment will continue to make throughout this calendar year, and we would expect around the end of calendar 2026, we would see that operation potentially kicking off and going into production, and turn it over to Sam for a little more narrative on numbers.

Yes. So if you think about margins, this is an ongoing project. It's not been finalized. So there's no impact from a margin perspective in the first quarter. And as Randy alluded in the short term, once completed, is incremental depreciation will offset productivity gains at the current demand level. We expect to see improvements in margins from operating leverage once demand picks up following the completion of the project. And then following, again, the installation, we also expect to get back to our normalized capital spending levels.

Our next question comes from Brian Drab with William Blair.

I wanted to ask maybe a similar question to what Nathan was getting at. But can I ask if this new $80 million MENA project is with the same customer in the same country as the June 2024 $100 million project announcement?

We would acknowledge, Brian, that this is a repeat customer in the same part of the world.

Okay. And then can you comment, Randy, at all on the margin that you're expecting with this new $80 million order?

I would say, overall, we would acknowledge project margins generally are going to be dilutive to the overall business. It does create a lot of operational efficiencies and absorption through the facility. So if we characterize it, the margin profile in this project will be as good as or better than the prior project. I think that's about as directional as we'd want to get, Brian.

Okay. But a little bit below segment average or overall irrigation margin?

Slightly below, correct. And that's in the system with these projects of this size.

Got it. Yes, understood. Just wanted to check on this one specifically. Okay. And then just I'm curious if The Big Beautiful Bill, I think you mentioned in the slides, I'm not sure there was a lot of commentary in the prepared remarks, but I'm just wondering did you see any demand related to accelerated depreciation? Is that a narrative that you're hearing from the customer base? And do you expect that to drive any demand going forward?

We -- I would say we didn't see a lot of significant impact, and we didn't anticipate it. I think some of the negative macro market drivers just overwhelmed a little bit of potential incremental benefit from the bill on accelerated depreciation. So not a significant contributor.

Our next question comes from Ryan Connors with Northcoast Research.

I wanted to -- you talked about the cycle earlier in North America in the first question there from Nathan, but I wanted to kind of come back to that and look at it from a bit of a different angle. So we were down 4% irrigation in North America in the first fiscal quarter here. Is that kind of reflective of how we should maybe be thinking of a reasonable run rate for the balance of the year? Or do things get better or worse? Just kind of curious how you think that the 1Q print on North America, what that tells us about the balance of the year, specifically? And then also if you could maybe unpack that on a price versus volume basis as well that might be helpful.

You bet, Ryan. I'll cover the first part and kind of turn it over to Sam for the second part. And I think we'd characterize North America as flat to down on a full year basis, and whether that 4% carries forward or degrade slightly, improved slightly. As you know, the tricky part for us in Q4 is going to be storm volume. And last year was a relatively light storm volume year before that was relatively high. So if we kind of split the difference, I think the run rate that we saw through Q1 could be pretty consistent with what we see the rest of the year. So we're planning for flat to down in our spending, our inventory, our supply chain, and we'll react up or down if we have to. But I think that's probably a good starting point. I'll let Sam...

And then -- yes, on the price versus volume?

Yes. So again, if you think about pricing -- we called out that average selling prices in North America were up during the first quarter. We have a history of price stewardship, and we expect to be able to continue maintaining solid margins. Pricing is 1 key contributor -- in addition, of course, there's cost management, there's productivity gains across the organization that are contributing to maintaining this margin profile despite the current top end situation.

Yes. Okay. And then kind of maybe while I have use there, Sam, it's a bit of a below the line item. Pretty nice contribution from the interest, other income line, as you mentioned. Is there any color you can give us around what drove that and how we should think about modeling that line over the balance of the year? Is that something that should continue? Or are we going to kind of revert back to normal there?

So I can't go into the very specific details, but I would say interest income, of course, is driven by the regional mix of funds at the interest rates in various regions. And that's where we have seen an increase year-over-year in Q1. I'm not going to speculate on the interest rate environment, but what's the key driver for this improvement in Q1.

Got it. Okay. And then lastly, we haven't really talked much about infrastructure here in the Q&A. And I wonder, Randy, if you can kind of unpack for us this lull in Road Zipper, I mean, obviously, it's a lumpy business, and there are lulls from time to time. But is there anything we should read into that in terms of -- are we -- are the -- is the low-hanging fruit plucked to any degree in terms of the TAM there? Or just any color you can give us on how you're thinking about the fact that we're into a pretty light heat year it looks like on Road Zipper?

Yes. And I don't think we're anywhere near plucking all of the easy to pick fruit or addressing the cap on the TAM. This is a lumpy project-oriented business. And I think just like the Irrigation business, the good news for us is we're at the table. We're engaged with our sales funnel. We're talking to specific customers about specific bridges, about specific project sites, where Road Zipper is going to allow them to solve a problem better than any other option in the market. It just takes time.

So this is a very different type of business. And I think as you model it out, you look at the historical lumpiness, some of the big projects that we've dumped in to prior fiscal periods, we love them. when they hit it, it just creates a really difficult comp the next year because they're not, we can't calendarize 1 every second quarter, every fiscal year. So this is us being transparent, I believe, and what we think we see in the market. And as we start to get better clarity on fiscal '27, fiscal '28, that's where we see more of these Road Zipper projects landing right now.

And if that changes, where we see some accelerating because incremental funding is available, we'll certainly be transparent and clear with you. But I think the narrative we've shared indicates what we see this year, but it's not an indication that the market is any better, any worse, any softer than it has been. It has been lumpy project business. It's continued to be lumpy project business. Again, the good news is with our shift left strategy, we've got better visibility, both short and long term. And I think that's where we're willing to be more transparent and open with you guys, so you can kind of work that into your models as well. But we see long-term growth opportunities for Road Zipper well into the future.

Our next question comes from Brett Kearney with [ American Rivers Opportunity ].

I know the most recent project win you have Middle East North Africa includes your FieldNET capabilities. Obviously, I think those are incorporated in all the Pivot sales you make in North America at this point. But just curious what you're seeing as you look to the international irrigation project funnel today, what kind of adoption appetite there is an opportunity for you all with some of your technology offerings in some of these regions?

I'd characterize it this way, that when you're making these significant investments, these are huge agro operations where there has been basically nothing. And in the Mid East, it's essentially desert that they're converting to be these highly productive, highly efficient farms. And with the size of investments they're making, they want every piece of technology that's available to them. And this isn't a normal technology adoption curve, where you start with small equipment and you migrate towards large equipment. They're starting with the biggest tractors, the biggest planters, the biggest combines, and they want every technological advantage that they can find to be as efficient as they can be in their production and their consumption of water and energy.

So I think this has really been a shift in the last 5 to 10 years, where the technology has proven itself where it brings real value to our customers. And again, at these investment levels, I think the customers are intelligent. They're smart, and they want every advantage that they can bring to the table and certainly field and then fill that adviser and the advantage that it creates for growers is an important part of that mix.

This concludes our question-and-answer session. I would like to turn the conference back over to Randy Wood for any closing remarks.

Thank you all again for joining us today. We appreciate your ongoing support, and we look forward to updating you on our second quarter earnings call. Thanks for joining us.

Thank you for attending today's presentation. The conference has now concluded. You may now disconnect.

Good day, and welcome to the Lindsay Corporation Fiscal Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Randy Wood, President and CEO. Please go ahead.

Thank you, and good morning, everyone. Welcome to our fourth quarter and full year 2025 earnings call. With me today is Brian Ketcham, our Chief Financial Officer. I'm extremely pleased with our fiscal year 2025 results. I'm proud of our team for demonstrating resilience in the face of challenging market fundamentals and a volatile macroeconomic environment. Double-digit revenue and operating income growth in both our businesses, combined with execution of our key strategic initiatives, enabled us to achieve record earnings and earnings per share for the year.

Our fourth quarter performance was marked by revenue growth in our Irrigation segment, driven by double-digit increases in our international Irrigation business as South America, the Middle East, North Africa and Australia all delivered strong results. In North America, low commodity prices and weak crop receipts continue to negatively impact demand. We also saw a large reduction in storm damage volume versus prior year, impacting whole goods orders and aftermarket revenues in the quarter.

We also dealt with the wet summer that impacted our run time hours. PIVOT analytics data indicates irrigated hours across the core Midwest markets of Nebraska, Oklahoma and Texas were down over 20% versus prior year. Our Global Road Safety Products business delivered strong results, underscoring the resilience and demand in this segment. However, this performance was offset by lower sales and a decline in global leases within our Road Zipper business.

Turning to our outlook. We expect North American irrigation headwinds to persist. Near-record yields will be offset by low commodity prices and weak crop returns, and the effect of trade disruptions will continue to weigh on customer sentiment. Increased government support may create a safety net, but we don't expect this to drive significant market activity. We anticipate demand for irrigation equipment in North America to remain suppressed until the outlook for commodity prices and overall net farm income meaningfully improves. Internationally, we're encouraged by the early signs of recovery we're seeing across several key growth markets, particularly Brazil, where demand for irrigation equipment remains stable. However, high interest rates and ongoing credit constraints will continue to present market headwinds in the near term.

We continue to execute international irrigation projects during the quarter including the $100 million project in the Mid East, North Africa region that we expect to complete in our first quarter of our 2026 fiscal year. During the fourth quarter, we also began delivery of an additional $20 million project in the region which we also expect to complete in the first quarter of fiscal 2026. Looking ahead, we continue to see other compelling opportunities within our project pipeline, particularly in the MENA and other developing regions. These project opportunities remain a long-term growth opportunity for our business as the region continues to adopt mechanized irrigation to address food security and GDP diversification. We are pleased at the momentum we have been able to generate and expect to realize additional project volume during fiscal 2026.

In our infrastructure business, we expect to see growth in Road Zipper System leasing and road safety product sales this fiscal year due to ongoing implementation of the IIJ and the introduction of new products. The Road Zipper System project sales fund remains active but we do not anticipate a large project will exit the funnel in 2026 to offset the $20 million project delivered in fiscal 2025. We do see the potential for several smaller projects to fill a portion of this gap. The large capital project at our Lindsay, Nebraska facility is going well, and we've activated our new state-of-the-art automated tube mill, providing increased safety, efficiency and throughput.

We recently began construction of our next-generation galvanizing facility, which will provide us with industry-leading capabilities and increase capacity. Our initial plans, anticipated completion of this contract by the end of the calendar year However, with the expanded galvanizing scope, we anticipate this work will be completed by the end of calendar year 2026. Innovation leadership continues to be a strategic priority and a core piece of our growth strategy. During the quarter, we advanced our position as a leader in precision irrigation with the introduction of Tower Watch. This is the first new product introduction on our Smart Pivot platform that allows customers to diagnose machine falls at individual towers. In testing, this reduced troubleshooting time by up to 75%, enabling growers to save time and maximize yields and profitability. This solution is a direct response to voice of the customer feedback we've received and helps our growers make faster decisions, strengthening their field net user experience.

We continue to leverage capabilities like the new tower watch to differentiate and increase penetration of our technology portfolio. This has allowed us to surpass 150,000 total connected devices while delivering 20% year-over-year growth in annual recurring revenue. Entering fiscal 2026, we remain dedicated to investing in opportunities and technology advancements that will continue to drive growth and extend our leadership position.

Before I turn the call over to Brian, I'd like to take a moment to acknowledge his upcoming retirement. Since joining Lindsay in 2016, Brian has played a pivotal role in strengthening our financial foundation, promoting transparency and shaping an organization that's become recognized for excellence. Under his leadership, we've achieved record earnings performance, maintained a consistently strong balance sheet and laid the groundwork for continued growth across our businesses. While this retirement marks a significant transition, we're pleased that he'll continue to serve as a consultant through 2026, helping ensure a smooth transition.

On a more personal note, I'm deeply grateful for Brian's partnership and friendship. On behalf of all of us at Lindsay, thank you, Brian. We wish you the very best in your well-earned retirement. I'm also pleased to formally welcome Sam Hinrichsen, who will join us in November and transition to the CFO role with Brian's departure in January. Sam brings strong financial leadership experience, investor engagement and will be instrumental in continuing our focus on disciplined execution and creating value for our shareholders.

Now I'll turn the call over to Brian for a review of our financial results. Brian?

Thank you, Randy, and good morning, everyone. Total revenues for the fourth quarter of fiscal 2025 were $153.6 million, a decrease of 1% compared to the fourth quarter last year. Net earnings for the quarter were $10.8 million or $0.99 per diluted share compared to net earnings of $12.7 million or $1.17 per diluted share in the fourth quarter last year. Total revenues for the full year increased 11% to $676.4 million and net earnings increased 12% to $74.1 million and earnings per share increased 13% to $6.78. These record results were driven by double-digit revenue growth and operating income growth in both irrigation and infrastructure for the year.

Turning to our segment results. Irrigation segment revenues for the fourth quarter increased 3% to $129 million compared to the prior year. North America irrigation revenues for the fourth quarter decreased 19% to $50 million. The decrease in revenues resulted primarily from lower unit sales volume while average selling prices were up slightly compared to the prior year. Lower unit sales volume was due primarily to less storm damage replacement demand compared to the prior year, along with soft market conditions. Higher selling prices reflected the pass-through of tariff-related raw material cost increases. In international irrigation markets, revenues for the fourth quarter increased 23% to $79 million.

The increase resulted primarily from higher sales volume in South America, increased project sales in the MENA region and higher sales volume in Australia. Markets in South America are benefiting from increased exports of agricultural products to China. In the MENA region, as Randy mentioned, we continued delivery of a $100 million project and began delivering a separate $20 million project during the quarter. Total irrigation segment operating income for the fourth quarter was $17.7 million, an increase of 4% compared to last year. and operating margin was 13.7% of sales compared to 13.6% of sales last year. For the full fiscal year, total irrigation segment revenues increased 11% and to $568 million.

North America irrigation revenues of $273.8 million decreased 9%, primarily due to lower unit sales volume compared to the prior year. International Irrigation revenues of $294.2 million increased 39%, primarily due to project sales in the MENA region and supported by higher sales volume in Brazil and other parts of South America. The unfavorable impact of foreign currency translation was approximately $9.5 million compared to the prior year. This marks the first time in company history that international irrigation revenues were greater than North America revenues in a fiscal year, highlighting the value of our geographical diversification. Operating income for the Irrigation segment for the full fiscal year was $97 million, an increase of 11% compared to the prior year and operating margin of 17.1% of sales was similar to the prior year.

Infrastructure segment revenues for the fourth quarter decreased 16% to $24.5 million. The decrease in revenues resulted primarily from lower Road Zipper System project sales and lease revenues, while sales of road safety products were slightly higher compared to the prior year. The prior year fourth quarter included Road Zipper project sales that did not repeat in the current year. Infrastructure segment operating income for the fourth quarter decreased 37% to $3.5 million and Infrastructure operating margin for the quarter was 14.4% of sales compared to 19.2% of sales in the fourth quarter last year. Lower operating income and operating margin resulted from lower revenues and a less favorable margin mix of revenues compared to the prior year.

For the full fiscal year, Infrastructure segment revenues increased 16% to $108.4 million. The increase was primarily due to higher Road Zipper System project sales and higher sales of road safety products while Road Zipper lease revenues were slightly lower compared to the prior year. Infrastructure operating income for the full fiscal year increased 39% to $26.3 million. Operating margin for the year was 24.3% of sales compared to 20.4% of sales in the prior year. Increased operating income and operating margin resulted from higher revenues and a more favorable margin mix of revenues compared to the prior year.

Turning to the balance sheet and liquidity. Our total available liquidity at the end of the fourth quarter was just over $300 million, which included $250 million in cash and cash equivalents and $50 million available under our revolving credit facility. Our record earnings performance for the year, along with active working capital management, resulted in free cash flow of 122% of net earnings and included capital expenditures of $42.5 million. Our demonstrated cash flow generation further strengthens our balance sheet and positions us well to continue executing on our capital allocation priorities of investing in the business, balancing organic and inorganic investments and returning capital to our shareholders. During the quarter, we completed share repurchases of $8.8 million, bringing the total share repurchases to $11.5 million for the year.

As I conclude my remarks, I would like to say that it has been a tremendous experience to serve as CFO of Lindsay. I'm deeply grateful for the talented colleagues. I've had the honor of working alongside and proud of all that we've accomplished together. I'm confident in Lindsay's continued success and in the team that we have built and I look forward to working with Sam Hinrichsen on the CFO transition over the next couple of months. And now with that, I will turn the call over to the operator to take your questions.

[Operator Instructions] Our first question comes from Kristen Owen with Oppenheimer.

Just understanding that there's a lot of uncertainty in your ag markets right now. I'm hoping you can outline just some of the catalysts that you're watching that are shaping your outlook for fiscal '26. And then my follow-up question is related. So just assuming that we are in this more cautious ag investment backdrop, what are the margin levers that you have at your disposal that you're thinking about for next year?

This is Randy. I'll take the first part and then have Brian cover the cost levers that we're actively managing. And from a market perspective, it really depends where you are. In Brian's comments, he talked about the geographic diversity of our business. And when you look at North America, obviously, anybody providing a narrative or commentary on North American market conditions, there's not a lot of tailwinds there right now. And we've been here before. We know how to manage through these cycles. And again, Brian will comment on some of that.

But I think we're blessed right now to be a global company. And we're going to see half -- more than half of our revenues come from outside of the U.S. this year. So I think we've gotten on the hatches. We manage responsibly in North America and the catalyst that we look for some of those customer sent indicators right now are approaching lows that we haven't seen since the pandemic. farm income, there's not a lot of positive upside in trade or demand side of the equation to drive pricing. We do see some potential government support, which to me, as I've said, is a bit of a safety net that bridges guide to next year, but they're not going to invest that money like they would crop receipts and profits that they get from growing marketing and selling a crop.

So in 2026, North American expectations are not for significant growth. We will probably bounce along the bottom of the trough. And again, we know how to do that. Internationally, Brazil is stable and maybe not at all-time highs, but still a very strong business for us. The project business continues to deliver. And as we've stated, 2026, should see us realize more project opportunity. Australia, New Zealand, the Asia Pacific region, we see some signs of a strong recovery there. So I think when you separate the mature versus the project business, we see 2 different narratives, Kristen. And right now, I think we're well positioned to manage through the trough conditions here and capitalize on the growth opportunities in those international markets. And again, ask Brian to comment on some of those cost levers.

Yes. Kristen, on the margin side, obviously, North America is softer, that's going to pressure margins. Raw material cost increases that we've seen. We always try to get out ahead of that when it comes to price, but maintaining pricing discipline going forward is going to be key to maintaining margins, managing the costs, as Randy has said. And then the other thing that is supportive of margins, we saw that in the last couple of quarters, and we expect to see that continue into 2026 is just the growth in our recurring subscription revenue, and that's high margin revenue, and it's really cycle proof.

It's not -- farmers aren't going to decide not to invest when the market is down. It's something that is going to continue to grow. So those are A couple of things related to North America, primarily. And then in Brazil, we've seen as that volume is picking up we've seen some margin improvement happening in that market.

Our next question comes from Nathan Jones with Stifel.

Congratulations, Brian. And thank you for all the help over the years. I guess maybe just trying to set some expectations here for 2026. There's obviously some demand headwinds and some discrete comparison headwinds that you're going to have heading into 2026. We're clearly bumping along the bottom in North America. Is it your expectation for North America irrigation that will be somewhere close to flat in 26%? Or should we expect to see that market be down overall given the lack of real catalysts there. I guess I'll start with that one and then I'll go to international.

Yes, Nathan, on the North America side, our expectation is volume will be down, maybe low to mid-single digits in 2026. But offsetting that, partially offsetting that is price. We do expect that the price increases that we put in place will carry over into the first 2 or 3 quarters next year. I think the other thing that I just mentioned is subscription revenue being up. So when you balance lower volume, higher price, higher subscription revenue. I think from a revenue standpoint, we're expecting to be more flattish for '26 overall compared to 2025.

And then you probably actually with that, have some tailwinds on the margin side just in the North America business, particularly prices obviously drops through at 100% kind of margin carrying over from this year and subscription revenue is going to be higher margin. And you're going to have some benefits, I imagine from all of the upgrades that you've been doing within the manufacturing footprint. So could we expect that on a flat revenue number in North America irrigation your profit would be higher?

I would say our expectations would remaining -- having the operating margin be relatively similar to last year, we do have some additional depreciation coming on board in the Lindsay factory that in the short term, will put some pressure on margins. But as volume picks up in the future, that's where we'll see the benefit of those investments and our ability to respond quickly to market demand without adding a lot of costs. So in the short term, a little bit of a headwind on margins just because of the additional depreciation.

Fair enough. I guess I'll just slug on in on international revenue. You obviously had a large project and a smaller large project to deliver in fiscal 2025. I think that the outlook for the project business is pretty solid, but there's always timing dependency on that. I mean is it possible that you could overcome the headwind from the lack of the Middle East project in 2026? Or is the starting point assumption for that in 2026 should be that revenue will be down in international?

Nathan, this is Randy. I'll take that one. And I think you used the keyword there. The potential is there to kind of lap that project and backfill with additional project volume that could be close to that revenue. But you're absolutely right. The timing is unknown and the project funnel for us. There's lots of moving pieces in many different parts of the world. And when one pops through, we'll be very clear in how we communicate when it's going to start, when it's going to stop, the magnitude of the project. And we do expect to have more news on that as we go into fiscal year '26 and continue through the year. But that potential does exist.

Our next question comes from Brian Drab with William Blair.

Congratulations, Brian, and we'll talk more later when we're not on a public call, but congrats. I just want to follow up on Nathan's questions there and just the outlook for ag first and make sure I understood this. Your comments around volume being down low single digit to mid-single digit. Was -- that was a North America specific comment? .

Yes, that's right.

For fiscal '26.

For North America, correct.

Yes. Okay. Got it. And then I think that also I think Randy made the comment that you expect probably more revenue to come from the international business in irrigation in '26 relative to domestic? Is that -- did I hear that correctly?

Yes. That's our expectation today. We do see continuing improvement in the South America markets next year. We've seen some recovery continuing in Australia. But then as Randy referred to the project side of the business, we feel pretty confident that there's the opportunity to replace the projects that we've had in 2025. So our view right now is international revenues overall could be up slightly in 2026. We're not expecting to take a big step backwards.

Okay. Do you have to have an additional project hit in the EMEA region? In addition to the $20 million that you announced for that to happen?

I think, Brian, we would require and it doesn't have to be in the EMEA region or the MENA region. We would require some project volume coming through the funnel and starting to deliver in the year for that to grow.

Okay. And then can you put any more of a point on the revenue that you had from the $100 million project and in the quarter? And then how much of that carries over into '26? And then do you ship the whole $20 million on the additional project in the first quarter?

Yes. So on the $100 million project, we had been able to pull forward some of that into the second and third quarters of the past year. In the fourth quarter, we delivered, let's say, round numbers, roughly $10 million of that another $10 million remaining for the first quarter. And then of that $20 million project, we delivered about half that in the fourth quarter. So the remainder will be in the first quarter. So first quarter comparisons on the project side year-over-year should be fairly similar with the 2 remaining projects.

Okay. Got it. So in total, $10 million from each of those in the first quarter is a good estimate.

Yes, I'd say in round.

Okay. Got it. And then I'll just ask one more, if that's all right. On the infrastructure side, you said that the mix was weighing on margins in the near term. And I'm just wondering how do you see that mix playing out going forward and the margin dynamics related to that?

Yes. With the large project that we had in the second quarter this year, obviously, high margins drove the overall margins for the year above 24%. As Randy mentioned, we don't anticipate another $20 million project coming in 2026, but between some smaller ones and increase in leasing. We expect without the large projects, this business runs right around that 20% operating margin level. So a little bit of a step, just with -- when you have a $20 million project that doesn't be -- or doesn't get replaced but still very solid operating margin performance is what [indiscernible]

Our next question comes from Ryan Connors with Northcoast Research.

Congratulations, Brian. I want to start on the international side specific to Brazil. Randy, you mentioned credit constraints there. And that's something I wonder if you can expand on because there was -- you had a peer company actually come out and talk about some -- that's just on the impact on actual sales? Or is there -- are you seeing any of that actual credit loss issue as well?

Yes. I think our commentary wasn't connected to credit loss at all. I think we run a pretty tight ship when it comes to credit risk in Brazil. So yes, nothing newsworthy from our perspective there. I think the comments really relate to our customers' ability to access low finance rates to support irrigation and investments. And we do have the FINAME program and what we're seeing right now is total government funding for that program was up year-over-year, and that was launched in July.

But at this point, we're really seeing like mid-single-digit utilization. So that money isn't getting through the system and into the hands of the growers. If you look at the -- and that program rate is about 12.5%. If you look at just the [indiscernible] you go to the bank to get a loan for ag equipment, that rate is in that 20% range. So I think that has some customers kind of taken that wait-and-see approach. There's an election next year, if they're anticipating additional support or funding, some customer might wait for that. But we also offset that with 3 crops a year, and what we know we can generate an incremental yield and returns for irrigation.

So it creates a bit of a short-term headwind in the market, but there's still a lot of strong fundamentals for investment in irrigation. So we would still describe the market as stable, but we're not going to see some of the pop that you may expect because of the trade disruption, some of that Chinese demand may be shifting to Latin America and credit is, I would say, right now, probably the [indiscernible] for that.

Got it. Very helpful. And then one housekeeping for you, Brian, before I have a big picture question. But just you mentioned the capital project in Lindsay, extending out now towards the end of calendar '26. Can you give any update on the corresponding impact on the capital investment in dollar terms there associated with that? Or is that just the same dollars? Or are we adding dollars?

So we'll be adding dollars, Ryan. And our expectation for 2026 is CapEx of around $50 million. The scope of the project did expand and mainly due to the galvanizing investment where we've decided to increase the scope of that. So we will have elevated CapEx again next year, a little bit higher than what we had in 2026 or 2025.

Got it. Okay. And then lastly, just -- so Randy, you mentioned a few times this idea that the grower does not spend the government support money the same way as profits. But I know there's a lot of lobbying going on right now for additional federal support. Is there any way that, that could be structured that would be more beneficial to manufacturers like Lindsay anything the industry is working to include in that, that would be more beneficial? Or should we just think of any kind of federal benefits we see just don't really accrue to the company?

Yes. I think it's an insightful question, and my view would be -- and this is an opinion that it really doesn't matter how those funds are structured. I don't think it's in how they're worded or how they're administered or how you apply for them. that's not what drives the customer view on how that money is used. It's always been, from my perspective, kind of rainy day funds. That's money that we're not going to get next year. It's not part of money. I earn growing marketing and selling and shipping my grain. It's always going to have that perception that this is -- if there any day fund money.

So I don't see any administrative change in the programs that would change that customer perception. And I mean the number that we're seeing now is an incremental $10 billion I know there's been a lot of talk about American and Argentinian beef this week, in particular, creating a bit of a stir and I'm confident that there will be some for the farmers if they need it, as a result of some of the trade puts. It's just a matter of when and then how they invest it. But again, our assumption isn't that, that's going to be a windfall and that we'd see a significant change in market demand. In farm income this year, if you look at the number in around $180 billion, for both net cash from income and net farm income. $35 billion of that is what we call ad hoc government support from some of the payments and the weather-related issues last year.

So farm income being up this year, you'd expect should be supportive of the market from a fundamental perspective. And it's just not the case. And that again goes back to our view that the customers aren't going to invest those government payments the same way that they'd invest crop receipts. We continue to see that.

Our next question comes from Jon Braatz with Kansas City Capital.

And Brian, congratulations on your retirement. Wish you nothing about the best and enjoy the lake of the [indiscernible]. Randy, I just want to go back to Brazil a little bit. And maybe your view -- your commentary is it's stable, obviously facing some headwinds. Yesterday, I read where Banco Brazil in the second quarter took saw an increase in rural loan defaults and so on. How would you view Brazil at this time, sort of the downside risk in Brazil versus maybe a stable environment?

I wouldn't view the downside risk is significant. And then again, I think you kind of combined the headwinds and the tailwinds. And certainly, there's more demand going there from China, in particular. So that bodes well. There's currency overlay that's a little complex. And the credit thing. Obviously, we've talked a lot about -- creates a bit of a headwind. So stable is the best word, I think, that describes where the market is. I don't think we're going to see that huge upside from the increases in demand.

But I also don't think that market continues to decline in any significant way. So we'll watch for signs. That's a market that's a year-round market, not as seasonal as what we see in the Northern Hemisphere. So we'll know pretty quickly if things do start to turn, then we'll react to that. But right now, I don't project or foresee any significant downturn issues with the Brazil market. There's too much good news there. And again, the investments in irrigation, we know are going to support and prop up a customers' bottom line and allow them to grow more a year, those fundamental market conditions for us really gives us a bit of a parachute there.

Okay. And Brian, obviously, free cash flow was very strong this year. working capital, very good. How would you view that in 2026? Do you see that similar type of potential? Or are we going to see a little bit less in terms of free cash flow?

Yes. I think the potential is maybe a little bit less next year. I think we've done a great job, particularly in inventories, inventory management this last year and maybe not the same kind of potential there. And then as I mentioned, is going to be up close to $10 million compared to what it was this year. So probably not to -- if you look historically, we've always been around that 100% free cash flow, but the CapEx obviously makes a difference.

This concludes our question-and-answer session. I would like to turn the conference back over to Randy Wood for any closing remarks.

Thank you again for joining us today. We appreciate your interest and believe fiscal 2026 will be another strong year for Lindsay, and we look forward to updating everyone at our first quarter earnings call. Thanks for joining us.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.