Executive Summary / Key Takeaways

• Lindsay Corporation delivered robust financial performance in the first nine months of fiscal 2025, with consolidated operating revenues increasing 16% year-over-year, driven by significant growth in both its International Irrigation and Infrastructure segments.
• International Irrigation revenue surged 46% year-to-date, primarily fueled by large project deliveries in the Middle East and North Africa (MENA) region and higher sales in Brazil and other parts of South America, offsetting tempered demand in North America.
• The Infrastructure segment saw a 31% revenue increase year-to-date, bolstered by the delivery of a large Road Zipper System project and higher road safety product sales, contributing to substantial operating income and margin expansion in the segment.
• Strategic investments in technology, including the acquisition of a minority interest in Pessl Instruments, are expanding the company's connected device base to over 240,000, enhancing precision agriculture capabilities, driving cross-selling opportunities, and supporting long-term growth in annual recurring revenue.
• Despite market headwinds in mature irrigation markets and potential impacts from tariffs and fluctuating commodity prices, a strong balance sheet, robust cash flow generation, and a strategic capital allocation plan position Lindsay to invest in growth, return capital to shareholders (including a recent dividend increase), and manage operational costs effectively.

Setting the Scene: Water, Roads, and Technology

Lindsay Corporation stands at the intersection of two critical global needs: efficient water management for agriculture and robust infrastructure for transportation safety. Operating through its Irrigation and Infrastructure segments, the company provides essential equipment and technology that address the growing demands of a rising global population and the need for sustainable resource use and safer roadways.

The Irrigation segment is a key player in the global effort to enhance food production and conserve water. With global population growth driving the need for expanded food output, efficient irrigation becomes paramount, especially in regions facing water scarcity. The segment's offerings, including center pivot and lateral move systems, are fundamental tools for modern farming. Complementing this hardware is a suite of innovative technology solutions, such as GPS positioning, variable rate irrigation, and remote management platforms. These technologies are increasingly vital as farmers seek to optimize yields while minimizing water and energy consumption. The broader market is influenced by factors like agricultural commodity prices, net farm income, weather patterns (particularly drought), and governmental policies, including farm subsidies and biofuel mandates. For instance, proposed EPA volume requirements for biofuels in 2026 and 2027 represent increases of approximately 8% and 10% respectively over 2025, signaling continued demand for irrigated crops like corn and soybeans.

The Infrastructure segment focuses on transportation safety, providing products like movable barriers, crash cushions, and road marking equipment. Demand in this segment is largely tied to government spending on road construction and improvements. The U.S. market, in particular, has seen significant potential tailwinds from the Infrastructure Investment and Jobs Act (IIJA), enacted in November 2021, which allocated $110 billion in incremental federal funding for transportation projects through September 2026, with funding anticipated to extend up to two years beyond. While cost inflation has partially offset the full benefit of this funding, it continues to underpin demand for the company's products.

Lindsay's overarching strategy balances investment in organic growth, including facility modernization and international market expansion, with synergistic acquisitions and returning capital to shareholders through dividends and share repurchases. This strategy is supported by a history shaped by adapting to legislative changes, navigating market cycles, and addressing product-specific legal and environmental challenges, such as ongoing product liability lawsuits related to its X-Lite end terminal and environmental remediation efforts at its Lindsay, Nebraska facility.

Technological Differentiation: The Edge in Efficiency and Connectivity

A cornerstone of Lindsay's strategy and a key competitive differentiator lies in its technological capabilities, particularly within its irrigation offerings. The company's FieldNET and FieldWise platforms provide advanced remote irrigation management and scheduling. These systems offer tangible benefits to growers, enabling more precise application of water and inputs, which translates directly into improved efficiency and resource conservation.

The recent acquisition of a 49.9% minority interest in Pessl Instruments GmbH significantly enhances this technological moat. By integrating Pessl's infield environmental sensors, such as weather stations and soil moisture probes, with FieldNET Advisor, Lindsay is providing customers with more precise and real-time agronomic insights. This integrated approach is explicitly stated to drive growth in cross-selling opportunities and deepen the company's expertise in data-driven agronomic decision support. Quantifiably, this partnership expands Lindsay's access to connected devices to over 240,000, a critical mass that supports long-term growth in annual recurring revenue (ARR) from subscriptions. While specific percentage improvements in water yield or cost reduction directly attributable to this integration are not provided, the strategic intent is clear: to advance Lindsay's position as a leader in precision irrigation by offering a more comprehensive, data-rich solution that enables more accurate irrigation scheduling decisions.

In the Infrastructure segment, technology also plays a differentiating role. The new TAO XR Express Repair crash cushion, which recently received FHWA approval, exemplifies this. Designed for high-frequency impact locations, its key benefit is rapid repairability – it can be repaired in less than 30 minutes after a head-on or side impact. This tangible operational advantage improves safety for motorists and significantly reduces maintenance downtime and costs for road work groups. The Impact Alert product also contributes to the technology portfolio, providing data on barrier impacts.

For investors, these technological advancements are crucial. They contribute to Lindsay's competitive moat by offering differentiated solutions that provide quantifiable benefits to customers (efficiency, reduced costs, improved safety). This allows the company to potentially command higher pricing or maintain market share even in competitive environments. The growth in connected devices and associated ARR also provides a more stable, recurring revenue stream, enhancing the overall margin profile and reducing reliance on cyclical equipment sales. Continued investment in R&D and strategic technology partnerships like Pessl are central to maintaining this competitive edge and driving future growth.

Competitive Landscape: Niche Strength Against Scale

Lindsay operates in competitive markets with both large, diversified players and more specialized companies. In the agricultural equipment space, competitors like AGCO Corporation (AGCO) offer a broad range of machinery, including irrigation systems. While AGCO benefits from a larger scale and potentially lower per-unit manufacturing costs due to economies of scale, Lindsay differentiates itself through its specialized focus on irrigation and its advanced IoT and precision technology. Lindsay's systems are noted for offering greater water efficiency and faster data processing compared to some alternatives, allowing it to target sustainability-focused customers and potentially command higher pricing in these niches. However, Lindsay's smaller scale can result in higher per-unit costs compared to larger rivals, impacting margins in price-sensitive segments.

In water technology and infrastructure, companies like Xylem Inc. (XYL) and Pentair Plc (PNR) are significant players. Xylem focuses broadly on water technology for utilities and industry, while Pentair provides water and fluid solutions. Lindsay's overlap is primarily in water management for agricultural and some infrastructure applications. While Xylem and Pentair may have stronger R&D budgets and broader market access, Lindsay's integrated approach, combining irrigation equipment with advanced software and sensors, provides a unique value proposition in precision farming. Furthermore, Lindsay's Infrastructure segment, particularly its Road Zipper Systems, offers a distinct product line that competitors like Xylem and Pentair do not replicate, providing diversification and a unique competitive advantage in the transportation safety market. The Road Zipper System's ability to reduce setup time and enhance safety differentiates it from more traditional barrier solutions.

Lindsay's competitive positioning is characterized by strength in specialized niches, leveraging technology for efficiency and differentiation, particularly in precision irrigation and movable barriers. While it faces challenges from larger competitors with greater scale and financial depth, its focus on innovation, integrated solutions, and a growing recurring revenue base from connected devices helps to build a competitive moat. The company's ability to pass through anticipated tariff-related cost increases, as noted by management, suggests a degree of pricing power relative to competitors facing similar cost pressures. However, the competitive nature of large international projects requires competitive pricing, which can be dilutive to overall segment margins.

Financial Performance: Project-Driven Growth and Margin Dynamics

Lindsay's financial performance in the first nine months of fiscal 2025 demonstrates resilience and growth, particularly when viewed through the lens of its strategic focus areas. Consolidated operating revenues reached $522.8 million, a 16% increase compared to $452.1 million in the prior year period. This growth was broad-based, with both segments contributing positively.

The Irrigation segment, the larger of the two, saw revenues climb 13% to $439.0 million year-to-date. This was primarily driven by a substantial 46% increase in International irrigation revenues, reaching $215.2 million. This international strength was largely attributed to revenues from a significant project in the MENA region, which began shipping in the prior fiscal year and continued through the current period, alongside higher sales volumes in Brazil and other South American markets. This international momentum more than offset a 7% decrease in North America irrigation revenues to $223.8 million, which experienced lower unit sales volume, a less favorable mix of shorter machines, and slightly lower average selling prices due to tempered demand influenced by lower net farm income forecasts.

The Infrastructure segment delivered even stronger relative growth, with revenues increasing 31% to $83.8 million year-to-date. This performance was significantly boosted by the delivery of a large Road Zipper System project valued at over $20 million during the nine-month period, coupled with slightly higher sales volumes of road safety products. This increase occurred despite lower leasing revenue compared to the prior year period.

Gross profit for the nine months ended May 31, 2025, increased 14% to $166.1 million. However, the consolidated gross margin slightly decreased to 31.8% from 32.2%. This margin dynamic reflects the impact of a higher percentage of international project revenue within the Irrigation segment, which, while driving top-line growth, is typically dilutive to overall gross margin. The Infrastructure segment, conversely, saw increased gross margin due to a more favorable mix of revenues, specifically higher Road Zipper System sales.

Operating expenses increased 9% year-to-date to $89.3 million, primarily due to higher sales commissions and incentive compensation expense linked to increased revenues, partially offset by lower salary and wage expense. Despite the increase in operating expenses and the slight dip in gross margin, operating income grew 22% to $76.8 million, demonstrating favorable operating leverage on the higher revenue base. The consolidated operating margin improved to 14.7% from 14.0%.

Net earnings for the nine months ended May 31, 2025, rose 18% to $63.2 million, or $5.79 per diluted share, compared to $53.5 million, or $4.84 per diluted share, in the prior year. The increase was supported by higher operating income and favorable changes in other income/expense (driven by higher interest income and lower interest expense). The effective income tax rate decreased to 21.9% year-to-date from 25.7%, primarily due to a shift in the earnings mix towards lower-tax jurisdictions, such as shipments from the company's Turkey facility to the MENA region.

Liquidity and Capital Allocation: Fueling Growth and Shareholder Returns

Lindsay maintains a strong financial position, providing ample liquidity to support its operations, strategic initiatives, and capital allocation priorities. As of May 31, 2025, total available liquidity stood at $261 million, comprising $210.8 million in cash, cash equivalents, and marketable securities, and $50 million available under its revolving credit facility. This represents a significant increase from $152.7 million in total liquidity a year prior.

The company's cash flow generation remains robust. Net cash provided by operating activities for the nine months ended May 31, 2025, totaled $68.9 million, up from $42.7 million in the prior year period. This improvement was driven by higher net earnings and a more favorable impact from changes in working capital.

Cash used in investing activities increased to $48.4 million year-to-date, compared to $32.4 million in the prior year. This included strategic investments such as the $5.8 million purchase of the minority interest in Pessl Instruments and higher capital expenditures on property, plant, and equipment, which totaled $28.3 million (up from $23.5 million). Capital expenditures for the full fiscal year 2025 are projected to be between $35 million and $40 million, reflecting investments in equipment replacement, productivity improvements, new product development, and commercial growth, including the modernization of the Lindsay, Nebraska manufacturing facility aimed at improving efficiency and managing variable costs.

Cash used in financing activities decreased significantly to $14.4 million year-to-date, down from $30.2 million in the prior year period. This was primarily due to a lower level of share repurchases, totaling $2.7 million compared to $17.9 million in the prior year. As of May 31, 2025, $38.8 million remained available under the company's share repurchase authorization.

Lindsay's capital allocation plan prioritizes investing in organic growth, increasing dividends over time, pursuing synergistic acquisitions, and opportunistic share repurchases. The company demonstrated its commitment to returning capital by increasing its quarterly cash dividend to $0.37 per share, announced on June 27, 2025. The strong balance sheet and consistent cash flow generation provide the flexibility to execute this plan and fund potential future acquisitions. The company was in compliance with all financial loan covenants as of May 31, 2025.

Outlook and Risks: Balancing Opportunity and Uncertainty

Management's outlook for the remainder of fiscal 2025 and beyond reflects a nuanced view of market conditions and the opportunities presented by strategic initiatives. In North America Irrigation, demand is expected to remain tempered in the near term, influenced by low commodity prices and high input costs, despite USDA forecasts for increased net farm income (which is largely driven by government payments rather than crop receipts). Softer demand relative to the prior year is anticipated heading into the fiscal fourth quarter.

Conversely, the International Irrigation segment is expected to continue driving growth. The large MENA project is anticipated to continue shipping, with approximately $16 million expected in the fiscal fourth quarter of 2025 and another $15 million to $16 million rolling into the first quarter of fiscal 2026. A newly secured project in the MENA region, valued at over $20 million, will begin shipping in the fiscal fourth quarter of 2025 and extend into the first quarter of fiscal 2026, providing further international tailwinds. Management is encouraged by improving market conditions in Brazil and sees a strong project funnel in the MENA region driven by food security and water conservation priorities.

The Infrastructure segment is positioned for full-year growth in fiscal 2025, supported by steady U.S. infrastructure funding and a robust Road Zipper System sales funnel. While additional project sales are on the horizon, management notes that the timing of these complex sales remains uncertain, which can lead to quarter-to-quarter fluctuations despite a positive overall outlook. The focus on growing the Road Zipper leasing business is expected to contribute to a more stable revenue and margin profile over the long term.

Key risks to the outlook include the volatility of agricultural commodity prices and net farm income, which directly impact farmer purchasing decisions. Weather conditions, while potentially driving near-term parts sales in drought-affected areas, can also negatively impact equipment demand if precipitation is abundant. Evolving tariff policies and potential retaliatory actions could impact costs and demand, although the company has implemented strategies to mitigate these effects and pass through cost increases. Regional political and economic factors, including armed conflict and currency fluctuations, can create challenging environments in international markets. Legal proceedings, particularly the product liability lawsuits related to the X-Lite end terminal, and the potential for changes in estimated environmental remediation costs at the Lindsay, Nebraska facility, represent ongoing contingent liabilities, although the company believes it has meritorious defenses and insurance coverage to mitigate material adverse effects. The phasing out of U.S. bonus depreciation tax incentives could also influence equipment purchase timing.

Conclusion

Lindsay Corporation's performance in the first nine months of fiscal 2025 underscores the strength of its diversified business model and the impact of its strategic focus on international growth and infrastructure opportunities. Despite facing headwinds in mature North American irrigation markets, the company has successfully leveraged large international projects and growing demand in regions prioritizing food security and water conservation to drive significant top-line expansion. Simultaneously, the Infrastructure segment has benefited from increased government spending and the successful delivery of key projects, contributing substantially to profitability.

The company's investment thesis is further supported by its commitment to technological differentiation, particularly in precision irrigation and transportation safety, which enhances its competitive positioning and fosters the growth of valuable recurring revenue streams. A strong balance sheet and robust cash flow generation provide the financial flexibility to continue investing in these strategic areas, modernize operations, and return capital to shareholders. While external factors like commodity prices, weather, and geopolitical risks introduce uncertainty, Lindsay's operational execution, technological capabilities, and strategic capital allocation position it to capitalize on global growth drivers and navigate market cycles. Investors should monitor the progress of international project deliveries, the development of the Road Zipper leasing business, and the impact of technology adoption on recurring revenue and operational efficiency as key indicators of the company's ability to sustain its positive momentum.