Good morning. My name is Matt and I will be your conference operator today. At this time, I'd like to welcome everybody to the Lindsay Corporation First Quarter Fiscal Year 2021 Earnings Call. All participants today will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. During this call, management may make forward-looking statements that are subject to risks and uncertainties, which reflect management's current beliefs, estimates of future economic circumstances, industry conditions, company performance and financial results. Forward-looking statements include the information concerning possible or assumed future results of operations of the company and those statements preceded by, followed by or including the words expectation, outlook, could, may, should or similar expressions. For these statements, we claim the protection of the Safe Harbor forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. I'd like now to turn the call over to Mr. Randy Wood, President and Chief Executive Officer.

Thank you and good morning everyone. I appreciate you joining us. With me on today's call is Brian Ketcham, our Chief Financial Officer. Before Brian gets into the details of our first quarter results, I do want to share some opening comments. We announced our CEO transition plan in November and I am pleased to confirm that Tim Hassinger and I have now fully completed the transition and it's my pleasure to join you this morning as President and CEO of Lindsay Corporation. I want to acknowledge and thank Jim for his full support not only during the transition but for the key role he played in the transformation of our company. It truly is a pleasure and an honor to lead this great organization and continue our path forward. We continue to follow our CDC safety protocols at all of our facilities as part of our pandemic response plan. Our businesses are classified as essential and all nine plants are operational and running. We're also maintaining our work from home option for roles that can be performed remotely. Safety is a non-negotiable expectation for us and we'll continue to make decisions that keep our employees safe. Turning to the business environment, conditions in the North American irrigation market improved rapidly during the quarter. Commodity prices strengthened significantly due to an improvement in both supply and demand fundamentals including an increase in exports linked to the Phase 1 China trade deal. Record government support helped offset the ongoing impact of the coronavirus and trade disputes which grew throughout the year, supporting positive customer sentiment and improvements in grower profitability. USGA projections now show a 0.2% increase in 2020 net farm income on a year-over-year basis. In late December, the President's direct aid package allocated $13 billion to the sector, and we expect that aid to provide supplemental support for the corn, soybean, livestock, and dairy sectors. These positive market drivers led to a stronger than expected flow in the second half of the quarter in North America, resulting in higher equipment sales and a large order backlog at the end of the quarter. We also saw a rapid escalation of input costs, primarily steel during the quarter, along with some transportation disruptions that resulted in higher export prices. A large influx of orders coupled with increased costs put short-term pressure on margins. Price increases have been passed through the market and we expect to see margin pressures subside as the year progresses. International irrigation showed solid results year-over-year with unit volume growth across most regions. The market continued to perform well due to strong farm income, favorable currency for exports, and record soybean yields. Government-subsidized financing continues to support market growth and we're seeing an expansion in private banking options as well. In technology and innovation, we were pleased to announce our partnership with Trends, the market leader in high-resolution economic imagery and Microsoft which will allow us to deploy machine learning and artificial intelligence to create an advanced combination of economics and machine health monitoring within the integrated platform, marking an industry first and further strengthening our position as the innovation leader in mechanized irrigation. Moving to infrastructure, we continue to focus our Road Zipper business by executing our shift-left strategy, increasing our goal penetration and growing the lease business. We saw an increase in Road Zipper lease revenue in the quarter and our Road Zipper sales funnel continues to improve year-over-year. However, the timing of projects remains challenging to predict, particularly in this current pandemic environment. Both road safety and Road Zipper projects faced short-term headwinds as governments delayed construction projects while managing their pandemic response. The recent COVID relief package provided additional funding to the states but we expect it to be beneficial for spring projects. President Biden has also expressed a desire to support infrastructure spending shortly after resuming office, so we do see potential for supportive news later in the year. The Road Zipper project with Highways England is now fully deployed and operating well and we expect this to become a great case study that supports further penetration of Road Zipper and similar applications. Now I'll turn the call over to Brian to review our first quarter financial results.

Thank you, Randy, and good morning, everyone. Total revenues for the first quarter of fiscal 2021 were $108.5 million compared to $109.4 million in the same quarter last year. Net earnings for the quarter were $7.1 million or $0.65 per diluted share compared to net earnings of $8.3 million or $0.77 per diluted share in the prior year. Net earnings for the quarter included an income tax benefit of approximately $1.7 million or $0.16 per diluted share related to the release of evaluation amounts in the foreign tax jurisdiction. Irrigation segment revenues of $87.4 million for the first quarter increased $4.1 million or 5% compared to $83.3 million in the same quarter last year. North American irrigation revenues were $52.8 million compared to $53.6 million in the same quarter last year. The decrease was primarily due to lower engineering services revenue related to a project in the prior year that did not repeat, partially offset by higher irrigation equipment unit volume. In the international irrigation markets, revenues of $34.6 million increased $4.8 million or 16% compared to $29.7 million in the same quarter last year. The increase was due to higher unit sales volumes in several regions, which were partially offset by the unfavorable effects of differences in foreign currency translation rates compared to the prior year, totaling approximately $2.4 million. Total irrigation segment operating income for the first quarter was $10.6 million, an increase of 9% compared to $9.8 million in the same quarter last year. Operating margin improved to 12.2% of sales compared to 11.7% in the prior year. Improved margins were supported by higher irrigation equipment sales volume; however, this improvement was tempered somewhat by the impact of higher raw material costs and increased freight costs resulting from reduced availability of commercial trucking resources. Market prices for all types of steel products began to rise rapidly during the quarter, with steel coil prices increasing over 70% from September to the end of December. While we have implemented pricing actions to pass through these cost increases, a large number of irrigation equipment orders were received before these actions took effect. We expect to see some margin headwinds in our second quarter as the backlog of orders received prior to price increases are shipped. Infrastructure segment revenues for the first quarter were $21.1 million compared to $26.1 million in the same quarter last year. The decrease was primarily due to a large Road Zipper system order delivered in the prior year that did not repeat, along with lower road construction activity in the current year. Infrastructure segment operating income for the first quarter was $4.3 million compared to $8.7 million in the same quarter last year. Infrastructure operating margin for the quarter was 20.1% of sales compared to 33.5% in the prior year. This decrease is mainly due to lower revenue and higher-margin product lines, which was also impacted by an increase in raw material and other costs compared to the prior year. Turning to balance sheet performance and liquidity; during the quarter we generated nearly $10 million in free cash flow, representing 138% of net earnings. Our total available liquidity at the end of the first quarter was $196.4 million, with $146.4 million in cash and marketable securities and $50 million available under our revolving credit facility. Our total debt was $115.9 million at the end of the first quarter, almost all of which matures in 2030. Additionally, at the end of the quarter, we were well within the financial covenants of our borrowing facilities, including a funded debt to EBITDA leverage ratio of 1.5 compared to a covenant limit of 3.0. At this time, I would like to turn the call back to the operator to take your questions.

[Operator instructions] Our first question comes from Brian Drab with William Blair. Please go ahead.

First question is just on the Road Zipper pipeline. So in the last fiscal year, large projects totaled over $50 million in revenue. I'm wondering if you can give us your latest update as you look out to the next fiscal year, the potential for large project revenue this year, what's the latest estimate?

Yeah, Brian. Thanks for the question. We expect clear visibility this year to several mid to large projects. You mentioned last year we had $50 million or slightly over in Road Zipper projects, with $27 million of that being a Highways England project. I think our visibility right now indicates that we would likely cover about half of that Highways England project with the current visibility we have.

Okay. Do you think overall for the year that it could be $25 million or $30 million plus large project revenue available in total for any projects that you have or is it going to be just below that range?

I think right now, depending on the timing, it would book above that $30 million.

Okay. Great, thanks. As you take that into account, it sounds like there will be solid large project revenue but somewhat down from last year and then on the positive side, pretty good outlook here for irrigation and good leverage in that business. Overall, what direction do you think gross margin goes in the next fiscal year?

I think two things on that point. Obviously, the irrigation outlook has much improved compared to last year and we had a record year in infrastructure, which I expect will replicate. So the mix of businesses will lower operating margin on the irrigation side, but with an increase in volume, it leverages pretty well on the irrigation side. I think, if conditions remain where they are today from a total profitability standpoint, we can replicate last year's margin. The operating margin percentage could be a little bit lower, but total profitability could be at or above last year.

So total operating margin could be consolidated operating margin you're saying could be a little bit lower than it was in fiscal '20?

Yeah, just because of the change in mix.

Right, I understand. Just want to make sure I heard it correctly. Okay, thanks very much.

Our next question will come from Nathan Jones with Stifel. Please go ahead.

Just follow up on Brian's last question for clarification. Brian, you said operating margin percentage could be down a bit but the operating income could be higher than last year.

Yes, Nathan, I predicated that if agriculture conditions remain stable through the year—which we have no reason to believe they won’t—irrigation having a solid year, we can definitely get to that point.

I wanted to talk a little bit about raw material prices and their impact on margins. You really saw steel prices start to spike up four or five months ago, which if I recall correctly is how long it takes you to run it through your inventory. I wouldn't have thought you should be really recognizing any of that increase in steel pricing in the fiscal first quarter. Can you talk about how that plays out in terms of the increased raw material prices you've already recognized? I would have thought pricing would be getting a little bit worse as we go forward here over the next quarter or two. And then also how that plays off with the price increases that you put in place. Have you put in enough price increases to cover all of the increase in raw materials, or do we need to go back to the market with more price increases?

Yeah Nathan, this is Brian. We really saw the steel cost increases begin in September and then really take off starting in October. When you compare that to our order flow, it started picking up in the second half of October. The automobile industry picked availability, which led to a faster increase in steel costs. Our order program extended to the end of October and our steel price increases started taking effect on November 1. So, we have implemented several price increases in the double-digit range, which should cover the steel cost increases we've seen.

Okay. Thanks, I'll pass it on.

Our next question comes from Ryan Connors with Benning and Scattergood. Please go ahead.

A couple of bigger picture questions. First, you mentioned the Biden administration and the infrastructure spending. But I wondered if you could comment on another priority they’ve mentioned, which is the equip funding—the environmental program aimed at providing low-cost funds for irrigation and other agricultural issues. Have you heard any more details on that? Do you think it’s something that’s going to be real, and whether that tilts the balance of wallet share towards irrigation even in a good ag market?

Yeah, thanks for your question, Ryan. I do think you're right. The administration will have a significant focus on the environment, sustainability, and the equip program has proven to be a very efficient means of getting capital to market where customers can use it to improve efficiency. One of the big changes in the last farm bill was the ability to fund technology investment like fuel advisors. We should see strong financial support for the equip program, aiding in conversions to efficient means of irrigation and it's exciting that it will include technology investments, allowing growers with pivots to buy into tech that saves time, water, and energy. So we see Equip as a good tailwind going forward.

Okay. And then, segueing from that, you talked about significant raw material price increases necessitating product price increases. How does that impact farmers' decisions on whether to put a new pivot in place or whether to just augment technology and fix up their older base equipment to maximize their output when it costs that much more to put a new piece of equipment in the field?

We look at the impact on pricing and maybe the elasticity of new machine purchases versus technology upgrades. Even with a double-digit increase in costs, we view it as significant over the short term. However, when looking at total acquisition costs, yield impacts, and profitability, we don’t see that driving purchase decisions toward upgrades or technology add-ons—particularly with the strength of commodity prices and net farm income. We believe customers will continue making investments that positively affect their bottom line, which will include new machines and tech add-ons.

Okay. And my last one is about infrastructure and a big picture question. You talked about the positive impact of infrastructure spending, but I saw an interesting quote from a transportation planner in Texas who said, 'it’s as if every highway in the country had a lane added to it during rush hour.' This brought to mind the Road Zipper. If we get some infrastructure spending, how does the potential for lower density on the roads impact the Road Zipper business case?

There will be many questions about what the post-pandemic environment will look like and whether we see a continuation of remote work or a hybrid environment. The volume of traffic on highways will always have a mix of commercial traffic moving goods coast to coast and people commuting for shopping. As the economy starts picking back up and life returns to a new normal, we will see traffic trends that may not fully return to pre-COVID levels. However, we know our nation's roadways are stressed, and we know we are behind on infrastructure spending, creating some pent-up demand. So I wouldn't view that as having a significant impact on our ability to continue growing the Road Zipper business.

Got it. Very helpful. Thank you. Happy New Year to everyone, and congrats on the new role.

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

You mentioned that irrigation orders picked up in the second half of the quarter. Since the end of November, grain prices have improved further; corn and soybeans are up about 16%. Did you see the pace of activity change or accelerate in December versus the second half of the quarter, or have you seen an improvement in order rates?

John, it's been a slow, steady, continuous improvement in market conditions. Tracking commodity prices, the last relief package announcement at the end of December provided positive indicators that combined together have really led to continued improvement in customer sentiment. So when we assess our order intake in irrigation, we observed similar acceleration from September, October, November through December, and those conditions maintained positive sentiment through December.

Okay. Would you disclose your backlog at the end of December versus where you were at the end of the quarter?

At the end of December, no, we won't provide that detail. However, year-over-year, we see a large increase and we're noticing more color around backlog, particularly in irrigation equipment, which is well over a 50% increase year-over-year.

And secondly, regarding the expense ratio, SG&A expense ratio was higher than I was looking for. Anything unusual? Were there any transition costs related to Tim’s retirement recorded in the quarter, anything to note on the low SG&A cost?

In terms of transition costs, nothing significant there. We did have the COO role for a quarter which we didn’t have before, but that wasn’t significant. The biggest factor was likely how we booked our incentive accrual this year compared to last. SG&A last year was low and increased along with the growth in the infrastructure business. We also had higher selling expenses in irrigation in the first quarter due to increased marketing directed toward new product launches year-over-year.

Brian, how much was the difference in the incentive accrual for the quarter?

That was when you look at corporate which was up about one million; that would account for the large majority of that, with a little bit from the irrigation side. So in total, more than half of the increase.

[Operator instructions] Our next question comes from Chris Shaw with Moness, Crespi. Please go ahead.

International irrigation was up strongly, and I think you got excited about that due to strong market conditions. How are the other international markets? I assume that COVID causes many delays in government-related or institutional markets. Is that the case? And I assume the Brazilian market is likely seasonal like the US market, or is that different there?

When we look at international markets, Chris, and separate them into mature ones, they operate fundamentally like North America, with similar supply and demand fundamentals. Countries like Brazil, Australia, New Zealand and certain parts of Western Europe have been supported by some of the same fundamentals in global commodity prices, leading to quarter-over-quarter improvement. In emerging project-oriented markets, investment surges rely on commodity price net farm income, with some financial backing from governments, resulting in increased interest. Markets facing more headwinds, such as sub-Saharan Africa and South Africa specifically, are limited due to political unrest, which affects capital investments. Overall, we see growth in many international markets. Regarding Brazil, there is some seasonality, but they benefit from multiple crops per year, with cycles of planting, growing, and harvesting—so seasonality exists but comes quicker than what we see in northern hemisphere markets where we have one growing season.

Do you handle rising fuel costs similarly in international markets as in the U.S., or is there a different negotiation process with the customers there?

It's a very similar process.

Okay. More of a practical question on U.S. irrigation regarding water restrictions. Do you have any sense whether this is a local or state-wide decision? With the Biden administration, is there a chance for a larger federal effort to develop some economic cost on water supplies for farmers?

We don't have insights or official perspectives on that. It remains to be seen. We realize there is a desire to recognize the true economic cost of water where it’s consumed, but as of now, we haven't seen any indication from the administration that could give a solid, fact-based answer.

[Operator instructions] Our next question is a follow-up from Nathan Jones with Stifel. Please go ahead.

Hey, guys. I just wanted to follow-up on the backlog increase. 50% is significant during a slow seasonal period, meaning it takes huge numbers to move backlog around. There may be timing on when the harvest happens and when the buying season starts. Were there any other factors impacting the backlog in November that are worth noting, like timing from the harvest?

Nathan, this is Brian. A few things could have influenced it, like year-end tax buying to shelter some of the farm income, although that's hard to quantify. As steel prices rose, some orders likely came in to avoid the price hikes. We're extending lead times, moving some orders into our second quarter, which may have typically been in the third quarter. While it's hard to see the full picture right now, the fundamentals mentioned by Randy are indeed the primary driver behind order flow and backlog.

Got it. You talked about putting through double-digit price increases and remarked on strong unit demand. Can you provide an idea of expected revenue growth moving forward? With significant swings in this business, are we talking mid-teens or better? How long until the double-digit price increases are reflected in the P&L?

I expect the second quarter will certainly be stronger year-over-year. For a full-year projection, I would say mid-teens is a reasonable expectation. Regarding when headwinds will diminish, I estimate about 40% of our backlog at quarter-end will have been orders received before the price increases. By the time we get through the second quarter, I believe we'll have that headwind behind us.

Excellent. Thanks very much.

Our next question comes from Bill Baldwin with Baldwin Anthony Securities. Please go ahead.

Just a couple of housekeeping questions. Do you have a projected tax rate for fiscal '21 at this time or a range?

For the balance of the year, we would expect around 23.5%, which puts us slightly over 20% for the full year.

Okay. What are your current capital expenditure projections for the full year—similar to last year or any particular projects ongoing?

Expectations would be around $20 million for the year.

Lastly, can you offer some color on your non-Road Zipper infrastructure business, like road safety products, guardrails, and end cushions? How many states are you operating in, and what are your plans for that business domestically and/or internationally?

The Road Safety products business includes crash cushions and temporary tape, which are driven by both road construction activity and replacement business. Over the last couple of years, we completed a full product refresh to meet the new MASH standard, making enhancements that have been well received. We've started to see solid growth in road safety products, though this past quarter was down slightly due to the slowdown in construction, primarily COVID-related.

Do you currently operate in most of the lower 48 states or do you have room for expansion to grow your addressable market?

Yes, we operate in key states, and while there’s always room to expand, the incremental business won't be as significant in certain states.

What percentage of your infrastructure business comes from non-Road Zipper products—road safety products specifically?

We haven't broken this out previously, but it has been more than 50% of the business has been non-Road Zipper. Last year was a very strong year for Road Zipper.

Thank you very much for your time. At this time, there appears to be no more questions. Mr. Wood, I'll turn the call back to you for closing remarks.

Thank you very much for your interest and participation today. This does conclude our first quarter earnings call. We look forward to updating you on our continued progress following the close of our fiscal '21 second quarter.

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