Hello, and welcome to the Lindsay Corporation Fourth Quarter 2023 Earnings Conference Call. 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 earnings call. With me today is Brian Ketcham, our Chief Financial Officer. Fiscal 2023 marked a year of significant achievements for Lindsay. Our teams executed extremely well across both of our business segments, which helped deliver record full year net earnings and earnings per share results. Fourth quarter performance was highlighted by strong irrigation results, specifically in Brazil, which recorded record levels of revenue and operating income. Our commercial efforts, including price management, coupled with the efficiency initiatives and organic growth in our international regions helped drive record operating income and operating margins within our irrigation business. These strong income results were achieved despite difficult year-over-year comparisons and a lower top line when compared to 2022. Turning to market outlook. Similar to the comments I made last quarter, our market outlook for Lindsay's business segments and key end markets remains positive in the near term. As it relates to our North American irrigation end markets, current commodity prices and U.S. net farm income projections should continue to support healthy demand as we begin our fiscal 2024. While income for growers dipped slightly when compared to the record levels we saw, growers will be profitable this year. While customers did take a wait-and-see approach this spring, we're seeing evidence of a strong fall selling season based on year-over-year order trends. Within our international irrigation markets, we experienced strong growth during the fourth quarter, particularly across Brazil and South America. We expect international sales volume levels to remain robust in fiscal 2024 and supported by strong fundamentals in the mature markets and the continued expansion and project potential in the emerging and developing markets where irrigation presents significant opportunities for yield enhancement to address food security and weather uncertainty. Turning to infrastructure. We continue to see positive near-term and long-term market opportunities driven by federal funding provided by the Infrastructure Investments and Jobs Act in the United States. This funding as it continues to be distributed will support necessary investments in roadway infrastructure, and we believe this will ultimately broaden our infrastructure sales and leasing pipeline. While comparisons were difficult relative to the prior year, where we benefited from a number of non-repetitive Road Zipper project wins, our focus on funnel management did generate leasing growth in 2023. Going forward, we see secular demand strength to both sales and leasing for Road Zipper and expect solid earnings support from our line of road safety products. Moving to innovation and technology. Our team continues their deliberate focus on delivering customer-first innovation, which will continue to strengthen our growth profile and projections. We were pleased to complete our acquisition of FieldWise during the fourth quarter of this year. FieldWise is a market leader in agricultural technology products with a focus on subscription-based precision irrigation solutions. This allows Lindsay to reach an expanded set of irrigation technology customers while accessing previously untapped growth markets and sales channels. Opportunities like FieldWise strengthen Lindsay's irrigation market position but also advance our integrated technology capabilities and overall ability to reach a broader set of customers and service providers globally. In the area of sustainability, we were pleased to release the fifth edition of our annual ESG report in our fourth quarter. This highlights our continued progress on our environmental, social, and governance goals contributing to our mission of conserving natural resources, expanding our world's potential, and enhancing quality of life. I'd like to thank our employees and team members for their ongoing hard work and dedication to advancing our vision to become the innovation and market leader in our core irrigation and infrastructure segments. I'd also like to thank our loyal customers and dedicated dealers around the world. Without their trust, we wouldn't be able to achieve the record results we've delivered. I'd like to now turn the call over to Brian to discuss our fourth quarter and full year financial results. Brian?

Thank you, Randy, and good morning, everyone. Total revenues for the fourth quarter of fiscal 2023 decreased 12% to $167.1 million compared to $190.2 million in the same quarter last year. Net earnings for the quarter were $19.2 million or $1.74 per diluted share, each growing more than 7%, respectively, compared to net earnings of $17.9 million or $1.62 per diluted share in the prior year. Total revenues for the full year decreased 13% to $674.1 million compared to record revenues in the prior fiscal year of $770.7 million. Net earnings for fiscal 2023 were $72.4 million or $6.54 per diluted share compared to net earnings of $65.5 million or $5.94 per diluted share in the prior fiscal year. Performance that marked year-over-year growth of 11% and 10%, respectively. As Randy mentioned, this level of earnings is a record for the company, which is significant as efforts we've made to enhance our profitability have taken hold, irrespective of lower year-over-year top line performance. Turning to our segment results. Irrigation segment revenues for the fourth quarter decreased 5% to $143.6 million compared to $150.5 million in the same quarter last year. North America irrigation revenues of $60.2 million decreased 25% compared to last year's fourth quarter. The decrease in North America is primarily attributable to lower unit sales volumes, while average selling prices were comparable with the prior year's fourth quarter. Unit sales volumes in the prior year's fourth quarter reflected an exceptional level of storm damage replacement demand, while unit sales volumes in the current year reflected a more normal seasonal demand profile. As previously noted, the incremental revenue impact from last year's storm damage replacement demand was estimated at approximately $20 million. In international irrigation markets, revenues of $83.4 million increased 18% compared to last year's fourth quarter. The increase was primarily from higher sales volumes in Brazil, Argentina, and the Middle East compared to the prior year's fourth quarter. As we indicated on our third quarter call, we anticipated sales volumes in Brazil to increase in the fourth quarter, supported by the new government financing plan that was announced in June. Total irrigation segment operating income for the fourth quarter was $29.8 million, an increase of 23% compared to the prior year's fourth quarter, and operating margin was 20.7% of sales compared to 16.1% of sales in the prior year. The increase in operating income and operating margin resulted from gross margin expansion driven by improved price realization, reduced inflationary impact on input costs, and improved operating performance in our factories compared to the prior year fourth quarter. This record level of profitability in the fourth quarter also was bolstered by record performance in Brazil. For the full fiscal year, total irrigation segment revenues decreased 12% to $586 million compared to $665.8 million in the prior year. North America irrigation revenues of $309.5 million decreased 13% compared to the prior year and international irrigation revenues of $276.5 million decreased 11% compared to the prior year. Operating income in the Irrigation segment for the full fiscal year was $122 million, an increase of 15% compared to the prior year. Operating margin was 20.8% of sales compared to 15.9% of sales in the prior fiscal year. The increase in operating margin resulted from gross margin expansion driven by the factors noted previously as well as from a more favorable mix of international revenues compared to the prior year. Infrastructure segment revenues for the fourth quarter decreased 41% to $23.5 million compared to $39.7 million in the same quarter last year. The decrease resulted from lower Road Zipper system sales with the prior year's fourth quarter including a number of project sales that did not repeat in the current year's fourth quarter. One project in particular that was delivered in last year's fourth quarter amounted to approximately $16 million. The impact of lower project sales was partially offset by growth in Road Zipper lease revenue and higher sales of road safety products compared to the prior year's fourth quarter. Infrastructure segment operating income for the fourth quarter decreased 73% to $3.1 million compared to $11.5 million in the same quarter last year. Infrastructure operating margin for the quarter was 13.3% of sales compared to 28.8% of sales in the prior year. The decrease in operating income and margin resulted from lower revenues compared to the prior year and the resulting loss in fixed cost leverage. For the full fiscal year, infrastructure segment revenues decreased 16% to $88.1 million compared to $104.9 million in the prior year. Infrastructure operating income for the full fiscal year was $12.1 million compared to $18.3 million in the prior year. Operating margin for the year was 13.7% of sales compared to 17.5% of sales in the prior year. Turning to the balance sheet and liquidity. Our total available liquidity at the end of the fiscal year was $216 million, which includes $166 million in cash, cash equivalents, and marketable securities and $50 million available under our revolving credit facility. Our strong operating performance for the year, along with effective working capital management, resulted in free cash flow of $100.9 million or 139% of net earnings. This improved cash flow further strengthens our balance sheet and positions us well to continue executing our capital allocation strategy. In closing, I'd like to provide investors with an updated view of the company's longer-term financial goals and targets. Over the past three years, Lindsay has delivered marked growth and solid financial results across a variable macroeconomic backdrop. And we have updated our five-year financial goals as highlighted on Page 15 of the earnings presentation. Over this period, our goal for organic revenue growth is to average greater than 7% annually. Additionally, our goals are to deliver annual operating margins greater than 14%, return on invested capital greater than 12%, and earnings per share growth greater than 10%. These five-year goals are supported by the performance momentum we've been able to deliver and our alignment to positive secular growth trends across both our irrigation and infrastructure businesses. That concludes my remarks. And at this time, I'd like to turn the call over to the operator to take your questions.

Today's first question comes from Nathan Jones with Stifel.

I have a question regarding the five-year financial goals, specifically about the operating margin target of greater than 14%. It appears you achieved an operating margin of 15% for 2023. Could you elaborate on the expectations going forward and explain how you arrived at the greater than 14% target when you're already exceeding that figure?

Yes. I think when you look at where we're at today. I think this year, we did benefit from some of the raw material softening, but we also had some LIFO benefit this year that I wouldn't plan on going forward. But I guess our feeling is operating on a regular basis above 14% and then reinvesting into our business with the technology and new product development, that's kind of what our thoughts are behind the greater than 14%.

Okay. And then I guess I'll go to domestic irrigation. I mean some of your commentary was pretty bullish despite the fact that we've seen a few quarters in a row here of negative growth, fairly negative growth in domestic irrigation business. I mean you talked about strong near-term demand. You talked about positive order rates year-over-year so far this quarter. I understand there was a negative impact from storm revenue year-over-year in the fourth quarter '23. It would seem that it's likely that you're still going to have some negative comps there in the short term in domestic irrigation. But Randy, your commentary sounded maybe a bit more bullish than that. So maybe if you can just give us some more color on the near-term expectations around the domestic side of the irrigation business.

Sure, Nathan. What we've discussed today aligns with our earlier conversations this year regarding our wait-and-see strategy. We know that customers will be profitable this year, and they've shown that when they earn money, they are willing to invest. We believe we can compete for and secure that capital when they decide to improve their operations and increase yields. This spring, we experienced a shortened season, which was somewhat disappointing in terms of results, however, strong demand for quotations was evident. The challenge was that customers did not convert those quotations into orders as expected, based on the feedback we've received from our channel. When customers are profitable, they tend to invest, which gives us confidence about current order demand. This demand is driven by crops being sold and profits realized this year. Looking ahead to next season, each year presents a fresh start. Therefore, while I carry some optimism into next spring, I still believe that the benefits of yield enhancement will serve as a positive factor for us. Customers are likely to remain profitable, though perhaps not at last year's record levels. Ultimately, when customers earn money, they invest it, which reassures us in this market, Nathan.

I know you don't give guidance, but would you expect to be able to generate organic revenue growth in the domestic business in fiscal '24?

Yes, Nathan, this is Brian. I believe that is our expectation. As Randy mentioned, we have observed some demand being deferred, and it seems to be continuing into the fall. When we reach our second and third quarters, we will face easier comparisons. Therefore, it is realistic to anticipate year-over-year unit volume growth in North America.

The next question comes from Brian Wright with ROTH Capital Partners.

I just wanted to follow up on the comment in the press release about the Brazilian financing switching to quarterly allocation. And just how to think about that having any impact on seasonality in the international sales in '24?

Yes. Brian, this is Randy. I'll take that one. And this was a fundamental change in how the program is administered in Brazil. At the macro level, we did see aggressive finance rates of 10.5%. We did see a published increase in the amount of money that will go into the program. But historically, there was one tranche; it was announced in the June, July timeframe. All the applications were entered, all the money was allocated. So we saw a lot of that order backlog early, and then we generally burned it down through the remainder of the year. This year, all that money will get metered out for different times across the year. So it does change the order pattern. In our view, it is going to change backlog in Brazil. It's going to be more staged and spread out over the year. We'll have to wait and see how that really corresponds into projects being shipped and revenue being recognized. Overall, it's still very good news for the market. The government continues to invest and support in agriculture, but the timing is going to look different this year, and not having any historical reference point on how these quarterly tranches are going to work, it's tough to predict. But the strong market fundamentals there, in our view, still will generate growth in the region.

Over time, after we get through this first-year transition, do you think that it will, over the long term, actually improve your visibility on that part of the business potentially?

It could and it couldn't. I think I can't or maybe won't is when the program is administered once a year, you've kind of got immediate demand visibility of market demand. Now as these programs are administered quarterly, we're just going to see that demand for different times throughout the year as opposed to a single time in the year. So I think it's good for material planning, efficiency through the factory; I'd rather have flat volume flow month-over-month, quarter-over-quarter. We can run more efficiently that way. But it's also nice to see the backlog and know what you've got in front of you. But I think our ability to support customers, run an efficient safe factory, that’s going to be certainly a lot easier with the way the program is administered this year. But there's no guarantee that this is how the government will continue to operate it. If they like what they see, I expect they would and could. If they see other administrative issues with managing this way, I wouldn't be surprised if they went back to the old way as well.

Okay. That's really helpful for that color. Is there any way like can you help us with inventory? We've seen a nice reduction in inventory. Is that normalization pretty much complete? Or could that also be a benefit to cash flow in '24?

Yes, Brian. Yes, we had a very dedicated focus on inventory this year. And I would say it was really across the board. I mean, a lot of it came out of our U.S. plant, but we also had reduced inventories in Brazil and Turkey. And it was really reflective of during the pandemic and afterwards with supply chain issues; we all carried more inventory than we normally would. So this is primarily reflective of just getting the inventories down to a more manageable level. We think there's still opportunity there, but not to the level that we saw in 2023.

Great. Great. And one last one, if I could sneak it in. Can you just help us out with the tax rate in the quarter and how to think about tax rate for '24?

Yes. Good question. In the quarter, we had a change in U.S. tax regulations that took place during the quarter that now allows foreign tax credit for earnings in Brazil. Prior to that, the U.S. was going to disallow the foreign tax credit. That got changed in the fourth quarter. So it’s a cumulative adjustment for the year, taking into account that we can take that tax credit now. So it’s a little over 22% for the quarter. Going forward, our expectation is it's probably going to be around 29% for the year.

The next question comes from Brian Drab with William Blair.

I wanted to begin by discussing fiscal 2024 and the operating margin, particularly regarding the long-term goal of over 14%. What are your near-term expectations? I understand you mentioned that the LIFO benefit was significant recently. Is it possible that the operating margin could decline in 2024?

No, we wouldn't expect that to be the case, Brian. Let me just also state in 2023, there really wasn't any significant project volume either in irrigation or in infrastructure. That operating margin where we're at today is independent of large projects. We've said on the irrigation side, some of those projects can be dilutive on the infrastructure side; some of those projects are generally going to be accretive. So it can vary depending on what kind of project business we have. But no, we are comfortable with being able to operate at this level. Obviously, having the opportunity to reinvest money in R&D and new product development and those kinds of things.

I'm considering the long-term guidance and my main question is about your potential for organic revenue growth of around 7% and whether the operating margin will remain flat or trend slightly above 14% as suggested by your guidance. How does this confidence translate into a model that indicates more than 10% EPS growth?

Well, I think combining the revenue growth, and the incremental margin that comes from that, and then the other aspect of that could potentially be share repurchase, if again, following our capital allocation policy, if that comes into play, that's another thing that would influence the EPS.

Yes, sure. Okay. And I guess, maybe just one more for now. You talked about Brazil in terms of strong international regions. Where else is some relative strength internationally in the irrigation business?

I'll take that one, Brian. I think in the notes we discussed the Middle East as another area where we're experiencing growth. Some of that growth is from large military contracts, but we’re also seeing it in smaller projects. In Sub-Saharan Africa, we continue to see smaller projects reaching completion. Overall, there are many opportunities present. This connects back to food security, yield improvements, and unpredictable weather; all these elements support strong growth in project-oriented markets. However, these opportunities will not materialize all at once; they may be somewhat uneven and take longer to complete, requiring appropriate financing and credit assessments. Nevertheless, we have a robust pipeline of these opportunities across various regions, which gives us confidence.

Great. And then just quickly on FieldWise, I'm looking at my notes; I can't remember, did that deal close? And can you give us any sense for what revenue that brings so we can model inorganic and organic revenue?

Yes, this is Brian. We haven't disclosed the revenue. It's small, but it's been growing rapidly. It's accretive to margins, fairly significantly. It's more the traditional SaaS-type margins, but it's a smaller business, and we haven't disclosed what the revenue is for competitive reasons.

The next question comes from Brett Kearney with Gabelli Funds. Yes, this is Brian. We haven't disclosed the revenue. It's small, but it's been growing rapidly. It's accretive to margins, fairly significantly. It's more the traditional SaaS-type margins, but it's a smaller business, and we haven't disclosed what the revenue is for competitive reasons.

With this supportive outlook over the next five years, I guess, how do you guys think about the cash that the business will generate? Brian, I know you mentioned opportunities continue to invest in new product development and technology. Just anything you can elaborate on that front, I guess, organically and inorganically.

Yes. Yes. So it starts with supporting our organic growth opportunities. And we've talked about capital being part of that, potentially capacity expansion in places like Brazil and Turkey. I think we're also looking at really globally modernizing investments in modernization, Industry 4.0, and productivity improvements in our factories. So we are anticipating in 2024 that we're going to increase our capital expenditures. Right now, we're estimating between $30 million and $35 million for CapEx. Then longer-term, as things settle down in Ukraine, Russia, as an example, there are opportunities for geographic expansion. From there, M&A is clearly a priority, and FieldWise is a small example of that. We're actively looking at opportunities where we can leverage our capabilities and increase shareholder value through M&A, increasing our annual dividend, and then share repurchase is kind of the order that we go through when we look at capital allocation.

This concludes our question-and-answer session. I would now like to hand the call back to Mr. Randy Wood for closing remarks.

Thank you all for joining today's conference call. I'm proud of our performance for the quarter and full fiscal year, particularly our demonstrated ability to execute both operationally and commercially to deliver improved returns and strong profitability despite softer top line revenues. However, I'm more excited about the opportunities that lie ahead for Lindsay. Our leadership in irrigation technology, including our established and growing installed base and the expanding infrastructure opportunity, both domestically and globally, provide us with a unique competitive advantage as we look to capitalize on multiple sustainable growth opportunities. We look forward to updating you on our progress at the end of our fiscal '24 first quarter. Thank you.

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