LNN - Earnings call transcript Q2 2019

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Operator

Good morning. My name is Chad, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lindsay Corporation Second Quarter 2019 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. this being note Please Instructions] event recorded. is [Operator

industry make that which results. are this economic management's call, to statements may management circumstances, future of uncertainties, During subject and forward-looking risks beliefs, estimates company conditions, performance current financial reflect and

statements by possible assumed or may, words; outlook, of information including future those statements should concerning company could, expressions. of the the and the or preceded include results Forward-looking or operations by, similar followed expectation,

of the Reform For Harbor we I these Tim the protection and Executive the the Litigation statements, statements Hassinger, forward-looking Securities would turn Chief in Mr. Officer. Act Safe contained over to claim for XXXX. to Please conference President sir. now go Private like of ahead,

Tim Hassinger

thank on discuss for two With Chief Chief you Brian Ketcham, Accounting call. our this today's to our of Officer; objective is call and and Zarkowski, me Financial joining is Officer. quarter Good Lori our call morning results. The

irrigation that a prices quarter and were environment the sentiment Before market the market DTN, meant our A versus commodity by very harvest. lower in overview, quarter confidence year. we that to farmer versus downturn best a the continued compared saw I’ll quarter recent challenging past chart prior comments. sales go few The decreased market produced this sudden make dramatic and same worsening quarter, to view we given this conditions ag prior reduction introductory farmer of reflects as the past and showed prior post our in it farmer This year. a sentiment

foundation Last This well for quarter meaningful challenging fact earnings, yet enough projects duplicated have far Zipper and of to were along the System overall expectations. our business, that included contributions short record growth sales our been results higher year to Zipper that infrastructure Road fell sales For generate environment were for initiatives a our not lower the not fiscal year. than prior was Road year this large year. meant that the margin

do in the impact objective results disappointing margin not our trough improve of two operating to Our quarter market. the

Our the based on XXXX of fiscal margin objective our market. trough year operating view the represented XX% XXXX the to of that was XX%

conditions do have trade believe a tariffs sustained this While by environment. and current unresolved negatively conflicts, been impacted not market market we is

when line We Of where our resolved. remain course, Page that is to slide goal margin of XXX to the improvement and points, improving by the operating be to challenge of our timing factors sight knowing delivered committed these X to will by of provides is the of expected XXX basis deck workstream. performance the be

growth Lindsay. for creating to foundation is for progress change Our positive and continues initiative

taken ago. meeting are I laid We simplifying most simplify, We’ve have our milestones last spent one the call, at than direction In to we the we out calendar grow. organization. more then the of the on XXXX that focused year referred earnings year

We our area these have and topic, position. you've achieved we technology growth, put to in grow very to goals. these towards Zipper differentiation market. given say the in and pleased FieldNET intent discuss more leadership On have how specifically, on heard quarter achieving I'm a position lot made Advisor a this we our us me and strengthen focus past this that Road this actions in progress to their

Remote enable that These help Advisor, increase the Ag a leverage agricultural The improve Corporation, solutions, strategy with with and and Lindsay largest FieldNET Nutrien use platform, will establish provider Corporation two Climate’s that to Climate Lindsay platform. Ag leading of data to between partnership supplement aligned crop agreements, crop to consultants, inputs announced Management Solutions’ Solutions, a with demand and digital in and digital partnerships Solutions’ our Ag Irrigation offer FieldNET subsidiary the connectivity X,XXX, platform For a will announced that the agronomic Climate space agreement Nutrien capabilities. offers. FieldNET which platform we services, Solutions are announced Ag world's creation Nutrien number of FieldView and Corporation Nutrien Lindsay's and commercial of our companies Lindsay’s to Scheduling over Advisor. Bayer

Regarding Road Zipper, we business. need address recognized the lumpiness this of the to

get Our This by more encouraged taken Zipper Action of strategy. System. need software of position Road signs grow our between total can and success our measure and to matched agreement early with planning is that Iteris identify this be Lindsay resulting increase increasing differentiation. desire congestion the the in and well to By impact These analytics Zipper the more agreement and was growing Iteris’ the of Road is it's I'm announced. to utilized. to projects that we being potentially action Lindsay. and recently of address where to initiatives create the to business the is innovation involved stage this utilizing the this issues percent shift-left change capability, at capability taken strategy is sales. represent through design the the business from leasing is An our occurring more have utilizing

So now, let's move to our QX results.

turn For over to call Brian. the that, I'll

Brian Ketcham

million Foundation Tim, everyone. To were stage. reported begin, that expense. performance-based in represents were for are the which corporate implementation fees Growth $X.X Total quarter, fees. through Thank morning, to I incurred process to costs correspond good costs advanced professional would second related gate $X.X have the stage million and cover quarter the and in a initiative to These workstream like consulting you, incurred of to of in the pre-tax our which projects

projects $XXX.X my were per to announced during advance process million, over or XXXX of the second result the quarter earnings in same for last are business share, the based Irrigation divestitures, of of quarter of while or shared the diluted Approximately Growth year. of the $X.XX same were detailed to a last release. earnings minimal. same quarter per comparison $XXX,XXX, G of press Foundation million a the results, $XX.X revenues at decrease quarter year. comments diluted or million earnings disclosure to end for We the to second million, these decrease $X.XX related which in were XX% expect of compared $XX.X the centralization the the net XX%, revenues Total regarding are the The previously related on is activities. the impact of in the Other the were severance approximately the $XX.X to $XXX,XXX remainder $XX.X Net $X year-over-year quarter a net on quarter Regulation incur for was last the costs divestitures million of adjusted compared of in second million third share revenues year. for fiscal of costs or decline the additional consulting through quarter segment implementation. quarter quarter services to additional fees our as

lower Excluding Irrigation the the were impact the divestitures, cost equipment to pass-through toward volume higher to revenue average sales sentiment by sales further customers. compared the trade prior lower in America expected during the of a unresolved impact Irrigation Average of was of of decline project prices decreased because higher offset partially from declined North lower year. to the selling selling services. dispute US-China quarter, steel investment. The engineering X%, as prices or revenues million than farmer $X.X contributed and

services to irrigation the converting to compared quarter row development the irrigation a engineering foreign they higher In to in Northwest to compared or increased last the are the crops. currency differences remain timberland Pacific new year. compared same Higher $X.X project $X.X impacted in quarter However, rates Revenues markets, the quarter. international second prior revenues negatively connected translation project to last million revenue in from by XX% were from year’s year. million

international million warranty was in was year, and million revenues income the negatively from quarter international inefficiencies. impacted of compared the were to the comparison. lower by relatively the year. of margin Total higher negative primarily Operating markets while sales of Excluding for prior quarter second prior revenues was last slightly Road a XX% Infrastructure the in second sales And Irrigation of higher million equipment lower level volumes segment operating prior increase mix $X.X year. margin for America, revenues a road compared lower project in the established costs in resulted foreign XX.X% impact decrease XX% along $XX.X the in quarter flat in same developing primarily irrigation to $XX.X operating million to compared from overall currency quarter The to the compared increased markets products. decrease from X.X% North year. safety $X.X The or sales in resulted year. to operational margin compared prior the translation, $X.X were Zipper with or million, segment System sales

operating $X.X the without loss large the compared year. the seasonal lowest With to the year million benefit segment equivalents incurred $XXX,XXX prior Infrastructure income quarter an project, quarter of the being the in Zipper in the the million the cash operating as Road of quarter at capital and of end million repurchases of capital the second Cash and were share and compared fund at the as utilized $XXX.X $XXX.X quarter working of well prior expenditures payments. during increases in was year. fiscal were the Cash the dividend of No made end quarter. to to the quarter

At available this remains operator to to repurchase to authorization. would over your questions. share turn our the million call $XX.X under time, of total take I a However, the like

Operator

to begin this Thank instructions] momentarily [Operator pause question-and-answer session. roaster. the now At you, we'll we'll time, the assemble

Nathan from Jones question with Stifel. First Please today ahead. will go come

Adam Farley

Adam Farley on for this Yes, Nathan. hi. morning, Good

my lower the pass-through, said, very color question costs. in irrigation selling could, would for There bucket that the most pieces, first is warranty maybe volumes if wondering, came important highlight on just So some of rest kind prices also year? North about of mix, you steel is you margins. for down a as moving bunch think was or helpful? I we be on know what's America, sales so of average I maybe

Brian Ketcham

is this Yes, Brian.

up the address our selling to quarter up mid-single-digits we spoke being for were to when at quarter we compared selling prices last Just year-over-year prices, about average call mid-teens. of the probably average

second Obviously spoke three compared we we to we or that. our it being last four along average would selling say, prices. down how of I our and So America to passed Also the volume prices in a years. gives down last highest come of teens very last year, steel that North about, was market in how the have quarter conditions part in second a strong upper quarter, year. The had you sense

for So competitive. Getting planned fairly sales and the higher selling inefficiencies there's year-over-year volume remained well think to gotten stronger the as operationally the incrementally drop, well of from were big the reduce bit more we it. as stable, being that equipment comparison the adapt sales, experienced as costs drop say quick a a as to in volume we with North margins aspect had operating has although would engineering lower a the I warranty margins, as of America pricing the with a to in I replaced able international But a the the little not margins overall of to of part some quarter these enough environment. cost and that mix

Adam Farley

Systems to the movement Okay, Is the weather that's to Was right maybe Rafael that? any the just helpful. Road that San there any affected quickly. project? Then maybe turning in to there there Zipper related

Brian Ketcham

No, this fourth towards is Zipper that's in some driven bridge. now quarter. deploy to the on that We readiness our the to Road is the quarter. of again. in Brian our majority left more San still have recorded record customer that Rafael, first And really we’ve

Operator

Brian will Please The from Drab Blair. William next with come ahead. go question

Joe Aiken

was for on International wondering you've Good there? the past. on morning. Aiken What This showing in Joe Brazil Brian if areas strength I are you segment. touch Drab the talked could know I is about Irrigation today. just actually

And could if you on a on you something if is little able in Middle you like the potentially. project also expand the there? might touch the was to on? environment wondering maybe, East be last So mentioned I call that is

Tim Hassinger

Tim. is This Joe. Yes,

on me very let the Brazil. me and the at on let then overview So then just an international give end you focus

in prior a order our will for for the that granted market, your size large of that on project year. that. revenue were point in increased Those us quarter. we Given sales the last international this versus have been we realized quarter's into a East. we detail call go the To market, Overall, Middle mentioned little more

with The in projects say continue are to finalize of well Lindsay key has deals I makers identified. met cases, all the these leadership The projects. of can these efforts for We to decision good opportunities have are underway. those needed a pipeline in place.

to continue update that's progressing. will how So we you on

that say On sentiment. traditional our that negatively the severe would saw we in the farmer driven impacted markets, heavily in a Australia business flat. was overall, drought APAC decrease by We a was region

and food Union specifically, there years security drought the irrigation infrastructure good the seen has Brazil been going Soviet favorable developing Europe year-over-year, come directly being see I'll this Western which a second markets, and being helped Brazil the we linked demand back -- era the are situation. being limit driven investments in late we’ve believe in to farmer to On region. losses. season positive back continue that in frame. the CIS prices we we early Western where On side, growth in a made impacted soybean describe other that place sentiment the to demand yield, actually talked about time more Brazil, the many rains that was has here. the Europe up region some I’d but the just commodity was strong as to In rehabilitate to

estimate to production the approximately X% So to the prior right would drop align the versus that year. expected now is we

So sentiment. way any it hasn't really farmers’ significant impacted in

corn harvest. early planted due to soybean early crop, second safrinha, an was The

XX% they the between December-February be infra the there a some is season. delays of seem did up So, frame time prior which but remains we the through are We environment know approval see program they important irrigation very year for favorable versus all now. for is all described to to sales. area growing up financing Applications modern cleared off for In February. irrigation financing, positive

growth US-China that is we to can the a the on fact have for manufacturing be continue from we given market. We dispute. benefiting optimistic there ourselves occur side, This And there. positioned this well market the from consider Lindsay locally trade that

what hopefully at business. of give seeing least across we're the you So little color a international helps

Joe Aiken

- to Thank I sentiment, you. I turning is the have to do it to potentially -- that's farmer able great. or to was term right turn quickly with being at farm income you has Yes, to you And XX% just the then expect in domestic. forecasted in wondering near just net you seen think think increase turn now, that on soon? do sentiment that farmer all, see potential XXXX,

Tim Hassinger

of key the trade We the around and for to more others believing as almost commodity waiting many and farmers Well so domestic see that's market. for continued also And increase sentiment the estimate this Actually, an their We down mid upper surrounding farmer overall when steel the certainty have calendar turn, commodity decrease estimate. come really driven title going attitude for irrigation. going tariffs that -- industry. same was we The downward agreements, pressure this this my the will are prices I describe standpoint, describe war that and the put trade but from agricultural couldn't in at wouldn't wanting not steel we're conflict. saw call come commodity worse give morning to have quarter the the environment year. one a trade on, trade an far for is, conflicts To would our in the year. obviously some all would there, continuing prior prices on or with to see US-China see quarter down buying the some did the hoping the point what uncertainty see I costs purchase, lower the being we by quarter and time you through just did lower attention teens sign the a same see seen the domestic that I this that the versus we prices to the so your wait before happen in article market, this caught spring. market delaying

Operator

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

Jon Braatz

on operating might the you some touched that, significant irrigation Brian, some Brian. Was margin, impacting warranty you Tim, factors that as the of it? mentioned there morning, legs have anything costs. Good to anything to

Brian Ketcham

say would I limited certain weren't was to that -- identified expectations. the was number this were that of customer Jon, it components a performing machines

was limited, replaced and was components. those the the we of went expensive. cost pretty ahead so It And components but

too care last issue, taken period. we've year that and cost we part but the We won't we same addressed in that satisfaction comparison others -- think year-over-year the But it that wouldn't of the low of that the the I address. customer it any is so warranty versus believe So pretty pop-up that them think we’ve quarter. I there's say can't consider -- believe we needed again for don't all to

Jon Braatz

flooding. all The at are tough the your I was other the the you a impact -- Lindsay. did second so that? seen But all, with in facing of there farmer. far of at versus sentiment at sense of guess this And a a the it issues you quarter the obviously the question is, it's lot lot headwinds question has of change US because flooding, flooding to have I quarter difficult March is, of worsened know the my farmer And month project third get here

Tim Hassinger

and Tim, in is at impacted at whether the just spring it the take this degree the -- around on Jon, you? There's terms shot that, I'll seen of we So a of the depends of you're obvious where is some corner. answers course it, have sentiment?

So before but were out of if you're that doing time. running purchase you delaying planning were you on planning, purchase

placement replacement entire require We talk damage tornado see let's part One that. as there's often here is example. result flooding. we a lot often there's thing discussion that's flooding, floods dynamic. of a an of the as would machine the critical that as expect you and a So do of a see typically in a that around about do But not been because

that with here primary panels this that would to thing acres be Specifically to is going are that and need be seeing many planted the may The this are year. not recent you significant anticipate we're motors parts flood is replaced.

that occur timeframe will case, likely that those that the will acres, an planted. of on be most some that that in over fact acres machines for needed not given the So are repairs extended these

downside last in that increase will areas So before occur get course, we the think gets part on additional here sales and actually those seeing in see the able acres. were about pivot a of in that still plan, a to impacted rains concerned of the better. as comment we'll And worse same short-term, be by an we're we conditions but coming sales in forecast is flooding. what And the it we're

and flooding it. we're to that's right seeing we're at where So the related now how

Jon Braatz

resolution a It's and closing other let’s next on. be your down. or too if -- over trade assessment? have What too so concerns, selling is the Yes. a were season week really late, these say fair of late of and much issues some tariffs really the so, that there impact to of Would as an it's resolved

Tim Hassinger

open, the the Yes, the window corner. closing I still is but -- point, just with window is your it’s planting rapidly around mean to

So, outward immediate would I’d been a that. than would But help, I welcome opposed it farmer a on is say would looking believe our and heavier the more as we it have even your obviously weighing tariffs conflict rate would sentiment bring. trade Jon to the is view and for point, welcome at just it year that ago. a

Jon Braatz

One fourth question you forward, that see Brian, quarter for quarter? and Foundation Okay. third the Growth how cost going last in

Brian Ketchan

that that phase level process, into similar probably would of of have additional now have project quarter. realization working a to would through third as I quarter third try complete the that the we’d the in pipeline our through and the got Jon we stage If in phase. gets up we the process objective -- Yea, fees what move consulting wrap we and of more the gate is initiatives that implementation have to the in

Operator

Mr. to questions. I'll you turn closing time, [Operator instructions]. Hassinger, remarks. At to this call appears for no any the more there back be

Tim Hassinger

and joining. and quarter our on fiscal for forward for participation Well, call today's in quarter ‘XX our second you progress concludes call. thank to you call. continued our updating This interest you look earnings in three Thank

Operator

The conference for you today’s is presentation. attending now concluded. Thank

You may now disconnect.

Lindsay (LNN) 9 Apr 192019 Q2 Earnings call transcript