Executive Summary / Key Takeaways

• Lindsay Corporation (NYSE:LNN) delivered record quarterly net earnings in Q2 FY2025, driven by strong revenue growth in both its Irrigation and Infrastructure segments, demonstrating operational execution despite challenging agricultural market conditions.
• Growth in the Irrigation segment is increasingly fueled by large international project wins, particularly in the MENA region, which are offsetting softness in North America and Brazil, highlighting the strategic importance of global market diversification.
• The Infrastructure segment is experiencing significant momentum, boosted by the delivery of large Road Zipper System projects and supported by anticipated increases in U.S. infrastructure spending under the IIJA, contributing favorably to overall margins.
• Strategic investments in technology, including the recent acquisition of a minority stake in Pessl Instruments, are expanding the company's connected device base to over 240,000, enhancing its FieldNET/FieldWise platforms, and driving growth in higher-margin annual recurring revenue.
• A strong balance sheet, ample liquidity ($236.7 million available in Q2 FY2025), and a clear capital allocation plan prioritizing organic growth, synergistic acquisitions, dividends, and opportunistic share repurchases position Lindsay (NYSE:LNN) to invest in modernization, pursue growth opportunities, and enhance shareholder returns despite market uncertainties and cost pressures from tariffs.

Setting the Scene: A Dual Mandate for Global Needs

Lindsay Corporation (NYSE:LNN) stands at the intersection of two fundamental global needs: efficient water management for food production and enhanced safety and mobility for modern transportation infrastructure. Operating through its Irrigation and Infrastructure segments, the company has built a business model centered on providing essential equipment and increasingly sophisticated technology solutions to address these critical challenges worldwide.

The Irrigation segment, historically the larger contributor, focuses on mechanized irrigation systems like center pivots and lateral moves, alongside a growing suite of technology solutions aimed at optimizing water use and maximizing crop yield. This business is intrinsically linked to global population growth, the increasing demand for food, and the imperative for sustainable water resource conservation, particularly in regions facing scarcity or seeking to improve agricultural productivity.

Complementing this, the Infrastructure segment provides transportation safety products, including the differentiated Road Zipper System, crash cushions, and road marking equipment. This segment's performance is largely tied to government spending on road construction, maintenance, and safety improvements, benefiting from initiatives like the U.S. Infrastructure Investment and Jobs Act (IIJA).

Lindsay's (NYSE:LNN) strategic journey has involved expanding its global footprint, enhancing its product portfolio through innovation and targeted acquisitions, and shifting towards higher-margin, technology-driven offerings and service models, particularly in infrastructure leasing and irrigation technology subscriptions. This evolution positions the company to capitalize on long-term secular trends in both its core markets.

Technological Leadership: The Edge in Efficiency and Safety

At the heart of Lindsay's (NYSE:LNN) strategy lies a commitment to technological differentiation, particularly evident in its irrigation management platforms and unique infrastructure solutions.

The company's FieldNET and FieldWise platforms are central to its irrigation technology offering. These systems provide growers with remote monitoring, control, and scheduling capabilities, enabling more precise application of water and other inputs. Management highlights that every new pivot shipped domestically is FieldNET-ready, with a retention rate exceeding 97% for customers who continue using the platform after the initial complimentary period. Recent enhancements to FieldNET, driven by customer feedback, aim to provide additional insights for optimizing planning, conserving energy and water resources, and maximizing yield. The integration of FieldNET data with platforms like Bayer's via generative AI pilots further underscores the potential for these tools to drive water conservation and inform AI-driven agronomic decisions.

A significant recent step in expanding this technological ecosystem was the acquisition of a 49.9% minority interest in Austria-based Pessl Instruments for $7.5 million in December 2024. Pessl provides agricultural technology solutions focused on field monitoring, such as weather stations and soil moisture probes. This investment adds incremental capabilities to the FieldNET and FieldWise platforms and, crucially, leverages Pessl's significant global installed base, providing Lindsay (NYSE:LNN) access to over 240,000 connected devices. This expanded network is expected to support long-term growth in higher-margin annual recurring revenue (ARR), building on the 28% growth rate in ARR from device subscriptions achieved in fiscal 2024.

In the Infrastructure segment, Lindsay's (NYSE:LNN) differentiated technology includes the Road Zipper System and the new TAO XR Express Repair crash cushion. The Road Zipper System is a unique moveable barrier solution that allows for rapid reconfiguration of traffic lanes, improving flow and safety during construction or peak traffic periods. Management's strategic shift to engage earlier in the design process for large roadway projects aims to leverage the value proposition of this system. The newly approved TAO XR Express Repair crash cushion is designed for high-frequency impact locations, offering improved safety and, notably, ease of maintenance. It ships fully assembled and can be repaired in less than 30 minutes after a head-on or side impact, a quantifiable operational benefit for road maintenance crews. The company also realized its first commercial sale of the Impact Alert product in fiscal 2024, further expanding its technology offerings in this segment.

These technological advancements and strategic investments are not merely product features; they are foundational to Lindsay's (NYSE:LNN) competitive moat. By offering solutions that provide tangible benefits like optimized resource use, reduced operational costs, and enhanced safety, Lindsay (NYSE:LNN) aims to differentiate itself from competitors and capture value beyond traditional equipment sales, contributing to better margins and a more stable revenue profile through recurring subscriptions and leasing.

Competitive Landscape: Navigating Diverse Markets

Lindsay (NYSE:LNN) operates within competitive landscapes that vary significantly between its two segments.

In the Irrigation segment, key publicly traded competitors include Valmont Industries (VMI), a global leader with a larger scale and broader infrastructure portfolio, and Deere & Company (DE), a dominant force in agricultural machinery with increasing focus on precision farming technology. The Toro Company (TTC) also competes in professional irrigation systems.

Compared to Valmont (VMI), Lindsay (NYSE:LNN) competes directly in mechanized irrigation systems. While Valmont's (VMI) structures may offer greater durability in certain environments, Lindsay (NYSE:LNN) differentiates through its integrated IoT solutions like FieldNET, which offer faster remote monitoring and control, potentially reducing operating costs for farmers. However, Valmont's (VMI) larger scale can provide cost efficiencies that Lindsay (NYSE:LNN) may find challenging to match across the board.

Against Deere (DE), Lindsay (NYSE:LNN) faces a competitor with immense scale, brand loyalty, and aggressive investment in digital agriculture. Deere's (DE) integrated smart farming ecosystem offers high levels of automation. Lindsay's (NYSE:LNN) competitive response in irrigation lies in its specialized focus on water management technology and its ability to offer cost-effective solutions.

The competitive environment in Brazil, a key international market for Lindsay (NYSE:LNN), has seen aggressive pricing, particularly on larger project opportunities, reflecting intense competition for market share in a challenging demand environment.

In the Infrastructure segment, competition comes from various providers of road safety equipment and construction solutions. Lindsay's (NYSE:LNN) Road Zipper System provides a distinct competitive advantage due to its unique functionality for rapid lane reconfiguration, offering deployment speed benefits over traditional methods. The focus on growing the leasing business for Road Zipper Systems is a strategic move to leverage this differentiation into a more stable, higher-margin revenue stream. The new TAO XR crash cushion also aims to differentiate through ease and speed of repair.

While precise, directly comparable market share figures for all niche competitors are not publicly detailed, Lindsay (NYSE:LNN) holds an estimated 15-20% aggregate market share across its primary markets. Its technological focus, particularly in irrigation IoT and unique infrastructure solutions, provides a basis for differentiation. However, competitors like Valmont (VMI) and Deere (DE) possess greater scale and financial resources, which can influence pricing dynamics and investment capacity. Lindsay's (NYSE:LNN) strategy involves leveraging its specific technological strengths and global presence to compete effectively in targeted markets and project opportunities.

Performance and Financial Health: Project-Driven Resilience

Lindsay's (NYSE:LNN) recent financial performance reflects a business successfully leveraging strategic strengths to offset market headwinds. For the three months ended February 28, 2025 (Q2 FY2025), the company reported operating revenues of $187.1 million, a significant 23.0% increase compared to $151.5 million in the prior year period. This growth was notably supported by a 110.0% surge in Infrastructure segment revenues to $38.9 million, primarily driven by the delivery of a large Road Zipper System project valued at over $20 million. The Irrigation segment also contributed to growth, with revenues increasing 11.0% to $148.1 million, propelled by a 42.0% increase in international irrigation revenues to $71.0 million. This international strength, particularly from the large MENA region project, more than offset a 7.0% decline in North America irrigation revenues to $77.1 million, which was impacted by lower unit sales volume and slightly lower average selling prices due to tempered demand from lower net farm income.

Consolidated gross profit increased 28.0% to $62.5 million in Q2 FY2025, resulting in a gross margin of 33.4%, up from 32.3% in the prior year. This margin expansion was primarily driven by a more favorable margin mix in the Infrastructure segment due to higher Road Zipper System sales, partially offset by lower gross margin in the Irrigation segment resulting from a higher percentage of international project revenue, which tends to be dilutive to segment margin. Operating expenses increased 13.0% to $30.4 million, mainly due to higher incentive compensation expense.

Despite the increase in operating expenses, the strong revenue and gross profit growth translated into a 45.0% increase in operating income, reaching $32.1 million, with the operating margin expanding to 17.2% from 14.6%. Net earnings saw an even more substantial 47.0% increase to $26.6 million, or $2.44 per diluted share, compared to $18.1 million, or $1.64 per diluted share, in Q2 FY2024. This was aided by favorable changes in other income/expense and a lower effective income tax rate (20.0% in Q2 FY2025 vs. 20.2% in Q2 FY2024, and 20.9% YTD FY2025 vs. 26.4% YTD FY2024), primarily reflecting a higher proportion of earnings in lower tax rate jurisdictions.

For the six months ended February 28, 2025, operating revenues increased 13.0% to $353.3 million, operating income rose 23.0% to $53.0 million, and net earnings grew 32.0% to $43.7 million, or $4.01 per diluted share.

Lindsay (NYSE:LNN) maintains a robust balance sheet and strong liquidity. As of February 28, 2025, total available liquidity stood at $236.7 million, comprising $186.7 million in cash, cash equivalents, and marketable securities, and $50 million available under its revolving credit facility. Cash provided by operating activities was $33.9 million for the six months ended February 28, 2025, a significant increase from $12.1 million in the prior year period, driven by higher net earnings and favorable working capital changes. The company's long-term debt includes $115 million in Senior Notes due in 2030 at a fixed rate of 3.82%. Management confirms compliance with all financial loan covenants.

The company's capital allocation plan prioritizes investing in organic growth, including capital expenditures expected to be between $35 million and $40 million in fiscal 2025, primarily for modernization and productivity improvements. It also includes increasing dividends (quarterly dividend raised to $0.36/share), pursuing synergistic acquisitions (like the Pessl investment), and opportunistic share repurchases ($1.4 million repurchased in Q2/YTD FY2025, with $40 million remaining authorization).

Outlook and Guidance: Building on Momentum

Management's outlook for the remainder of fiscal 2025 reflects a continuation of the trends observed in the first half, with strategic growth areas expected to counterbalance persistent softness in certain core markets.

In the Irrigation segment, demand in North America is anticipated to remain stable relative to the prior year in the second half of fiscal 2025, absent significant storm damage. While the USDA forecasts an increase in 2025 net farm income, management notes this is largely due to government support payments rather than higher crop receipts, limiting its expected positive impact on irrigation demand. International irrigation markets, particularly in developing regions, are expected to continue driving growth through project activity, fueled by ongoing priorities around food security and water conservation. The large MENA region project is expected to contribute approximately $20 million per quarter in revenue throughout fiscal 2025. The Brazil market, while showing signs of stabilization, is still tempered by rising interest rates and a challenging credit environment, though regional financing programs could offer some potential uplift.

The Infrastructure segment is poised for full-year growth in fiscal 2025, building on its strong year-to-date performance. Overall activity in the second half of the year is expected to be comparable with last year. Management remains optimistic about the Road Zipper sales pipeline, although the timing of large projects remains inherently uncertain. The strategic focus on growing the Road Zipper leasing business is expected to continue supporting a higher and more stable margin profile for the segment. Anticipated increases in U.S. infrastructure spending are viewed as a positive driver, despite some benefits being offset by cost inflation.

The company anticipates that the impact of recently announced U.S. tariffs will result in a marginal increase to its cost of goods, which it expects to pass through to the market via price increases. Management believes its global footprint and supply chain provide flexibility to minimize the impact of potential additional or retaliatory tariffs.

The effective income tax rate for the remainder of fiscal 2025 is expected to be lower than the prior year, likely in the 23-25% range, primarily due to a favorable shift in the geographic mix of earnings, particularly from the large project business shipped from the tax-free zone in Turkey.

Overall, the outlook suggests that Lindsay (NYSE:LNN) is positioned to leverage its international project execution capabilities and the momentum in its Infrastructure segment to achieve growth in fiscal 2025, while strategically managing through cyclical weakness in key agricultural markets and investing in technology and operational improvements for long-term benefit.

Risks and Challenges

Despite a positive recent performance and strategic momentum, Lindsay (NYSE:LNN) faces several notable risks and challenges that could impact its future results and the investment thesis.

Market cyclicality remains a primary risk, particularly in the Irrigation segment, where demand is highly sensitive to fluctuating agricultural commodity prices, net farm income levels, and weather patterns. Prolonged periods of low commodity prices, high input costs, or adverse weather (either drought or excessive precipitation) can significantly temper farmer sentiment and capital investment in irrigation equipment, as seen in North America and Brazil.

International markets, while offering growth opportunities, also introduce risks related to regional political and economic instability, currency fluctuations, and changes in governmental policies such as subsidies or trade barriers. Unfavorable foreign currency translation can negatively impact reported revenues and margins from international operations.

Operational risks include potential disruptions to the supply chain, particularly in the context of evolving trade policies and tariffs. While Lindsay (NYSE:LNN) has implemented mitigation plans and expects to pass through cost increases from tariffs, the potential for additional tariffs or retaliatory actions introduces uncertainty and could impact demand or profitability.

Legal and environmental liabilities, such as ongoing product liability lawsuits related to the X-Lite end terminal and environmental remediation costs at the Lindsay, Nebraska facility, pose potential financial risks. While the company believes it has meritorious defenses and adequate accruals/insurance coverage, unfavorable outcomes or unforeseen circumstances could result in material expenses.

Execution risk is associated with the successful delivery of large, complex international projects and the realization of anticipated benefits from strategic investments, such as the modernization of the Nebraska facility and the integration of Pessl Instruments. Delays, cost overruns, or failure to achieve expected synergies could impact financial performance.

Finally, the competitive landscape, characterized by large, well-resourced players like Valmont (VMI) and Deere (DE), necessitates continuous innovation and cost management to maintain market position and profitability, particularly in price-sensitive markets like Brazil.

Conclusion

Lindsay Corporation's (NYSE:LNN) recent performance underscores its resilience and strategic agility in a dynamic global environment. By successfully executing on large international irrigation projects and capitalizing on the growing momentum in its Infrastructure segment, the company has demonstrated its ability to deliver revenue growth and record profitability even as core agricultural markets face headwinds.

The company's investment thesis is increasingly underpinned by its technological leadership, particularly in precision irrigation and unique infrastructure solutions, which offer tangible benefits to customers and contribute to higher-margin revenue streams like ARR and leasing. Strategic investments, such as the Pessl acquisition and facility modernization, are aimed at strengthening this competitive position and improving operational efficiency for the long term.

While challenges persist in the form of agricultural market cyclicality, international uncertainties, and potential tariff impacts, Lindsay's (NYSE:LNN) strong balance sheet and disciplined capital allocation strategy provide a solid foundation to navigate these risks, invest in future growth, and continue returning value to shareholders. The outlook for fiscal 2025 suggests continued growth driven by strategic initiatives, making Lindsay Corporation (NYSE:LNN) a compelling case for investors seeking exposure to essential global infrastructure and agricultural technology markets.