Q2 2022 Franklin Electric Co Inc Earnings Call
The conference will begin shortly. To raise your hand during Q&A, you can dial star 11.
To ask a question during the session, you will need to press star 1 1 on your telephone.
It is now my pleasure to introduce Chief Financial Officer Jeff Taylor.
Thank you Andrew, and welcome everyone to Franklin Electric's second quarter, 2022, earnings conference call. With me today is Greg Sinstack, Chairperson and CEO .
On today's call, Greg will review our second quarter business highlights, and I will review our second quarter financial performance in more detail.
We will have time for questions and answers.
Before we begin, let me remind you that as we conduct this call, we'll be making forward-looking statements within the meaning of the Private Security's litigation and reform act of 1995. These statements are subject to various risk and uncertainties, many of which could cause actual results to differ materially from thus forward-looking statements. will deal with driver consideration of your unelected erester place to differ materially from thus forward-looking statements.
A discussion of these factors may be found in our company's annual report on Form 10K and then today's earnings release.
All forward-licking statements made during this call are based on information currently available, and except as required by law, the company assumes no obligation to update forward-licking statements.
With that, I will now turn the call over to our chairperson and CEO Greg Sinstead.
Thank you Jeff, and thank you all for joining us.
We gain momentum in the second quarter, leveraging strong demand around the globe and a normal sea and old uptick, resulting in record results, including the highest keeps all day in their shells.
Operating income and EPS for any quarter from tranquil electric harm issues,
It requires tremendous teamwork and commitment to deliver these results, and I want to thank our global team whose execution and dedication grow these results.
Let me cover a few highlights for the quarter before I talk about each business segment.
First, demand remains strong across the company's markets, with all three businesses experiencing strong, double digit top line growth organically, which reflects the growing need for our water and the future of the products. And the future of the products.
Our backlog has remained elevated at approximately $290 million, essentially flat for the fire wound.
Another bright spot this quarter, and a testament to our team's discipline, was the sequential margin improvement we delivered with operating margins expanding in all three businesses as a result of price catching up with inflation. Improved operating leverage, and a team's relentless focus on the cost controls, especially in the S-GNA.
Precast low improved during the second quarter driven primarily by higher net income as working capital stabilizes.
As mentioned in previous calls, we are purposely carrying higher levels of inventory to mitigate ongoing supply issues and longer read times.
We're planning to reduce our inventory levels by year end, and building a greater task conversion in the back half of the years. We're building a greater task conversion in the back half of the years.
Turning to our segments.
In water systems, we experienced overall revenue growth of 26%.
operating income growth of 42%, and operating margin of 15.8% for the second quarter.
Organic growth was 27% led by pricing actions and strong end-market demand across all major product lines of groundwater pumping, surface pumping, water equipment, and water treatment.
In the US, organic growth for water systems was 30%.
Outside the U.S. water system's organic growth was 23 percent, with strong growth in all regions of the world.
End markets for water systems remain strong, driven by strong commodity and crop prices, dry weather in the United States and other regions of the globe, food scarcity driving growth in agriculture, and a secular trend created from the population migration to rural areas within the U.S.
We have not experienced a noticeable decline in US residential demand to date, the rear monitoring and market closed. We have not experienced a noticeable decline in US We have not experienced a noticeable decline in US
We believe these positive trends combined with the stability of water systems due to the high level replacement demand will continue to drive the business going forward.
We reached the one year anniversary of the Chironics and AquaSystem acquisitions in the water treatment during the second quarter.
Our integration activities are going well.
We have successfully integrated our U.S. water treatment business on our common ERP system.
Operational Integrations Activities Continue on Schedule.
The performance of the Laraque of Business is exceeding our expectations and there is more opportunity to grow and optimize this business. The performance of the Laraque of Business is exceeding our expectations and there is more opportunity to grow and optimize this business. The performance of the Laraque of Business is exceeding our expectations and there is more
Our fueling systems business also had a solid quarter producing overall revenue growth of $40.7 million. Operating income growth of 41% and operating margin of 30.3%.
For Gatwick Girls' 21% due in part to robust demand for infrastructure build out in the US. For Gatwick Girls' 21% due in part to robust demand
Looking forward, we expect continuous strong demand in the US as major markers invest in new locations and industry consolidation progresses.
Outside the US, we expect future investment new locations to develop agreements, as well as a greater focus on vapor recovery, environmental management and modern.
Specifically, our revenue in India is growing with what we believe will be a multi-year vapor recovery and fuel station infrastructure.
that. Global age geopolitical tensions have highlighted the need for expansion of agriculture, mining and energy infrastructure, as pressures arise from recent conflicts have impact on food, material and energy supplies.
As a result, we believe in the opportunity to be strong with both our water and fuel in seconds. Please draw a man within both our water and fuel in seconds.
Our US distribution business delivered another strong quarter with overall revenue growth of 32%. The US distribution business delivered another strong quarter with overall revenue growth
Operating income growth of 46% and operating margin of 12.2%.
driven by solid demand in the U.S. groundwater market, price realization, and the acquisition of Blake Equipment at the beginning of the year.
The distribution team continues to deliver security results, underscoring the segments for all of the major growth of our company.
Our capital allocation strategy remains unchanged. We will continue to invest in our business organically and inorganically while the same time returning cash shareholders for charity purchases and dividends. We will continue to invest in our business organically
However, given we are always actively looking for strategic targets, the sprinkling US dollar may make investments opportunities outside the US more attractive.
We'll continue to remain brutal and efficient in our approach to capital outpatient. We'll stay focused on driving returns for our shareholders.
The operating environment for our company remains stable during the second quarter, not much better and not much worse, but continues to offer challenges from a supply perspective. The operating environment for our company remains stable during the second quarter, not much better and not much worse, but continues to offer challenges from a supply perspective. The operating environment for our company remains stable during the second quarter,
Additionally, inflationary costs pressure is persisted and a team is actively managing all of these.
We foresee these headwinds continuing at some level throughout the year depending on material input and geography. We see these headwinds continuing at some level throughout the year depending on material
However, we expect the supply chain to begin to improve the backup gear.
Thank you.
Turning now to our outlook.
We expect a curative momentum from our strong first half to the second half of the year.
Our open order balance for backlog remains high and we continue to experience strong demand globally in our core markets.
As a result, we are updating and raising our 2022 Revenue and Earnings for Sure guidance.
Our new 2022 full year revenue guidance is $2 billion to $2.15 billion. Our new earnings per share before restructure is in a range of $4 to $4.20 per share, reflecting an increase in the midpoint or choir range of $3.63.
for a current range of the midpoint of $4.10.
I will now turn the call back over to Jeff.
Thanks, Greg.
Overall, it was a record second quarter for the company and our operating segments.
We have established new quarterly company records for consolidated revenue, operating income, intermains for share.
I fully diluted earnings per share for a record for any quarter in the company's history and a dollar twenty six cents for the second quarter of 2022.
versus 83 cents for the second quarter 2021.
Consolidated sales were a record $551.1 million compared to 2021 second-quarter sales of $437.3 million, an increase of 26%.
The increase from acquisition-related sales was 34.4 million, while organic growth contributed 23%. The increase from acquisition-related sales was 33.4 million,
Sales revenue was negatively impacted by 19.4 million or about 4% in the second quarter 2022 due to foreign currency translation.
Water system sales in the US and Canada were up about 38% compared to the second quarter of 2021 due to acquisition related sales, price and volume.
In the second quarter of 2022, sales from businesses acquired since the second quarter of 2021 were 12.9 million.
Water system sails in the US and came to the groove 30% organically in the second quarter.
Sales of groundwater pumping equipment increased by about 38% sales of all surface pumping equipment increased by about 22% percent
All due to strong in market demand.
Water system sales and markets outside the U.S. and Canada increased by about 9% overall.
Sales revenue decreased by $17.1 million for about 16% in the second quarter of 2022 due to foreign currency translation.
Outside the US and Canada, water systems organic sales increased about 23% driven primarily by higher sales in the Europe , Italy and Africa markets.
The company also had higher sales in the Latin America and Asia-Pacific market.
Water systems record operating income was $49 million in the second quarter of 2022, up $14.4 million, or about 42% versus the second quarter of 2021.
And operating income margin was 15.8% and increased to 180 basis points.
The increase in operating income was primarily due to higher sales.
Operating income margins improved due to leverage on fixed costs from higher sales.
price reorganization and cost management.
Distribution achieved record second quarter sales of $191.1 million this quarter versus second quarter 2021 sales of $144.89.
In the second quarter of 2022, fails from business as acquired since the second quarter of 2021, or 18.6 million.
The distribution segment organic sales increased 18% compared to the second quarter 2021.
Revenue was from higher selling prices, and strong demand in all regions and product categories. It...)
The distribution segment operating income was a record for the second quarter at 23.3 million compared to the second quarter, 2021 operating income of 16 million.
Operating income margin was 12.2% of sales in distribution, primarily because of revenue growth.
Fuel made system sales were a record 86 million in the second quarter, 2022, and increased 19% versus the second quarter 2021. And increased 19% versus the second quarter 2021.
Sales revenue decreased by 1.5 million, or about 2%, in the second quarter due to foreign currency translation.
Fueling system sales in the U.S. and Canada increased by about 20% compared to the second quarter 2021.
The increase was primarily in pumping systems and piping.
Outside the US and Canada, fueling systems revenues decreased by about 6%.
As sales increased to the 3% in the rest of the world outside of China, we're not offset by lower sales in China. We're not offset by lower sales in China.
We're not enough to offset lower sales in China.
Fueling Systems operating income in the second quarter was $26.1 million, a new quarterly record, compared to $18.5 million in the second quarter of 2021.
Driven by higher sales.
The second quarter 2022 operating income margin was 30.3% compared to 25.6% of net sales in the prior year.
The increase in operating income was primarily due to higher sales.
Operating income margin improved the delivery on fixed costs from higher sales, price realization and cost management. Operating income margin improved the delivery on fixed costs from higher sales,
The company's consolidated gross profit was $189.3 million for the second quarter of 2022.
an increase from the second quarter 2021 gross profit of $152.2 million.
Gross profit is a percentage of net sales was 34.3% in the second quarter 2022 versus 34.8% in the second quarter 2021. In the second quarter 2021.
The gross profit increase was primarily due to higher sales.
In the second quarter of 2022, the gross profit margin percent was nearly flat, down 50 basis points. Is real life price actions are more than offsetting inflationary costs increases.
However, supply disruptions are causing higher transportation and manufacturing cost.
Selling General and Administrative Expenses were 108.3 million in the second quarter of 2022, compared to 100.5 million in the second quarter of 2021. Selling General and Administrative Expenses
SGA expenses from acquired businesses were about $7.6 million.
Excluding acquisitions, FDMA expenses were basically flat the last year.
S-GNA expenses a percentage of sales is lower by 330 basis points due to great cross-control across the company.
In the second quarter of 2022, we have unfavorable discrete events of about 2.5 million.
reducing income below operating income.
These events primarily related to an indirect tax dispute settlement in a foreign jurisdiction.
and a change in income tax rate for local jurisdiction.
The effective income tax rate for the second quarter, 2022, was about 22%.
and before the impact of discrete events was about 21%.
The effective tax rate for the second quarter 2021 was about 19%.
and before the impact of discrete events was about 20%.
The increase in the effective tax rate was primarily a result of that unsavable dispute events. The increase in the effective tax rate was primarily a result of that unsavable dispute events. The increase in the effective tax rate
Recorded in the second quarter is compared to that favorable discrete events reported in the prior year quarter, primarily from tax benefits.
I'm sure base compensation.
The effective tax rate for the full year 2022 is projected to be about 21%.
before the impact of discrete event.
We recognize the majority of our peer companies report adjusted earnings while we continue to report the earnings before and after restructuring expense as defined by gap.
However, as our annual mod cache amortization has increased significantly, the recent years did the increased level of intangible assets coming mostly from our acquisitions in the water treatment space.
We're providing additional information on this incremental expense.
For 2022, Mount Cache Amortization of Acquisition Related Intangibles is approximately 17 million or 4.3 million per quarter.
Moving to return of capital to shareholders, yesterday the company announced a quarterly cash dividend of 19.5 cents that will be paid August 18th to shareholders of record on August 4th.
Additionally, the company purchased about 130,000 shares of its common stock in the open market for about $9.8 million during the second quarter 2022. The company purchased about $9.8 million during the second quarter 2022.
At the end of the quarter, the total remaining authorized shares that may be re-purchased is approximately 424,000. The total amount of shares that may be re-purchased is approximately 424,000. The total amount of shares that may be re-purchased is approximately 424,000.
This concludes our prepared remarks. We will now turn the call back to Andrew for questions. We will now turn the call back to Andrew for questions.
Thank you.
As a reminder, to ask a question, you will need to press star 1 1 on your telephone.
Please stand by while we compile the Q&A roster.
And our first question comes from the line of Matt Somerville with DA Davidson.
Thanks, good morning. Maybe first, Jeff Greg, organic growth across each of the three businesses, obviously very impressive. I was hoping maybe you could parse out a little bit when you look across the three, how much is being driven by volume and price, and then whether or not in the second quarter, you were in parity with sort of price cost with whether maybe you actually had begun to realize the fake or not.
hold.
Price is certainly the bigger factor there. And I would say it's in that 60, 40 price volume to 2, 3rd, 1, 3rd price volume in general.
So, price is leading the way, but we have strong volume growth.
as well.
And then Jeff, I had a second part to that question, whether or not it's disappointing in the second quarter. You are Franklin, sort of in price cost parity, or whether maybe you now begin to realize a favorable spread there.
Yeah, man, I think in the second quarter we actually gained some ground on the price versus cost equation. It fluctuates a little bit quarter to quarter. As you know, we were a little bit behind in the first quarter. I think we caught some up in the second quarter on our price versus our inflationary cost overall for the company.
gained a little ground.
Matt, the suggests earlier prepared remarks. We saw the suggests point of where price got ahead of a trill in the cost. The suggests point was that the first time we saw the suggests point of the trill in the cost. The suggests point was that the first time we saw the suggests point was that the second time we saw the the
But relative to the logistics cost and operational cost of having interruptions at the factory due to supply chain issues, those costs have not been covered yet. We're covering that through the strong growth and operating leverage we're getting, both above and below the gross margin line.
got it. And then I think Greg, you may be mentioning your prepared remarks that you can some of the supply chain issues you've been dealing with maybe start to get better in the second half of the year. Can you talk about what year you're maybe seeing kind of day to day that's leading you to that conclusion? Thank you.
Yeah, we have this backlog, which again, and historically up till a year ago, really didn't talk about backlog. We've talked more about open orders again in the court, but we also have what we're tracking past due. And we also have what we're tracking past due.
of that backlog, which is a sizable portion of it. And we're seeing where the past due is peaked out in say the May timeframe, June , and we're beginning to see some positive, directionally positive move on our past due. And I think that's some indication that we're beginning to get critical components that we can build out products. You know, we've got 99 and 100 pieces you need for a particular product, and we're getting, starting to get that 100 piece.
So that gives us, you know, caused roughness. Yeah, we're all so mindful of that. And I think maybe this where you might be headed is that, you know, we talk about the availability of electronic components and the other good news is that we're now down to only 50 week lead times. So I mean, it's still tremendously times on some key components. And that's gonna, you know, carry into it. It's 50 week lead times. It's going to carry into 2023. But we generally are seeing, yeah, you.
little bit more positive negative surprises coming out of supply chain at this point.
Let me just ask a little bit there in terms of, it's an opportunity to give some credit to our operations and supply chain teams and the work that they're really doing to manage through all of these issues that are rising on a daily or weekly basis. This shines on one particular smoother open angle, you
And really, they've been working to build resiliency in the supply chain. They've been working on securing supply with existing suppliers. We've been qualifying second suppliers in some cases for critical materials. And all of that effort is over time working to hopefully improve our situation in the supply chain business.
It's really a lot of hard work and effort that's being put in by those operations and supply chain teams to get that accomplished. And that doesn't mean that we're still not without risk in the second half of the year. We still have areas where we need improvement, but we're working on those very aggressively as well. But we're working on those very aggressively as well.
Understood. Thank you guys.
Thank you.
And our next question comes from the line of Mike Halloran with Baird.
Hey, good morning guys, it's Peson from Ike.
Good morning. Good morning.
Quickly I was hoping we could die.
double click in on water systems. Could you maybe talk about the trends separately across groundwater, surface pumps, sub pump and treatment please?
Yeah, I think you heard in our prepared remarks that we have very strong growth in groundwater. We've seen that continue not only in the second quarter but in the first half.
I would tell you that we're seeing that in all the keys and markets there, residential continues to be strong and agricultural continues to be strong. I wore my shirt here, either along the battlefield.
in the groundwater space. On the surface pumping space, I'm going to include our large dewatering pioneer pumps in that. We've seen very strong demand in large surface pumps in the first half of this year. That continues. The backlog for our pioneer business increased in the second quarter over the first quarter. So, that's certainly a strong driver there as we also see strong demand in other surface pumps.
In the sump sewage and effluent, some of the condensate pumps, those have been challenged from a supply chain perspective. They continue to be strong. In-demand continues to be strong. We're working through improvement on our supply issues there to improve that overall.
Excellent. That's really helpful. Maybe lastly, just a quick note on treatment.
The
Again, the water treatment, which we've stood up all the US businesses on our Common ERP platform, that gives us our team great visibility across the area. We can do better analytics. We can do better analytics.
We have our Canadian operation yet to do. Of course, we got slowed down like COVID, but now that's open up because that schedule to happen in back after this year. The treatment business is doing well. It's ahead of its margin profile. As we get these businesses on a one system and we continue to grow the top line, we get that leverage that we've seen across all of our segments in the quarter. So we're very pleased with the platform, very pleased with the progress. And we look forward to continuing growth both organically and ever.
and maybe just go one step further. It sounds like with the electronics still 50 weeks out and some supply chain issues that, I guess in the back half of the year, do you get the gross margin, the gross profit margin, kind of flat year over year? And then at what point do we start seeing improvement to gross margin? Do we have to get the supply chain and logistics issues behind it?
Well, I think my first response to that is Matt, we just delivered a record quarter. It's one of the highest gross margins we've seen in the company in years. And so we want to say we want to enjoy the moment here. But certainly we look at the back half of the year and there's a lot of factors that come into play in the back half of the year. And many of those we talked about, these.
We're all built into the guidance that we gave for the for the four year, which
which really leads to the second half, but we do expect supply chains to see some slight improvement in the second half of the year.
We also expect to see strong demand continue across our businesses. We've seen very robust, broad-based demand up to this point. And we expect that that will continue. On the inflation and price side, we still have inflation coming through. As well, we have prices coming through as well that are both built into our backlog.
And you know, other factors there in the second half of the year that could come into play on the margin. And certainly there's a mixed component to it. If we see improvement on the electronic side, that should be favorable overall. There are margin profile, but the offset to that is, if the large dewatering pumps for pioneer, we'll offset that because those are generally slightly, margins are slightly below what I would call the segment average.
multiple factors playing in there we think we've...
You know, these four we are today, we've got a good view in the second half. And, you know, we're optimistic that the man's going to continue strong and we're going to deliver a strong second half in the year. We're going to deliver a strong second half in the year.
Okay, all right, great. Yeah, I wasn't trying to take away from the record results, but you know, it's a fly-chain issue and inflation, you know, that's been quite a headwind. I think it's hopefully at some point.
through the system.
You know, and so, you know, I didn't understand that demand is strong across the board, that's great. How do you, maybe I could ask you this one, how do you think about the monetary tightening that's going on and how that might impact your businesses, especially around Brazil?
You think that tightening is going to moderate some of the demand out into the future? How do you think that it will play out?
You know, Walter, not an economist, but having been around Franklin for three decades, you think about, you know, I think what you're getting at it is a new housing starts and new installations. Being mindful of that in the, in the, you know, you know, you know, you know,
in the space of round water.
If you have a, just to make the mass simple, if you have a million and a half news and housing starts. If you have a million and a half news and housing starts.
maybe you're going to get a couple hundred thousand new starts as well.
But there are 13, 14 million wells installed in the United States.
So the new start is relative to the overall installed base is 2%. So at the margin, is there definitely no question that now it's a lift. We see the housing starts going to help us and it's going to be a lift also in our residential sub-insuity business. But from a standpoint of this largest solid base, which is potentially getting utilized more actively now as people are moving into more rural settings, people are more work home, is using our systems more.
So they do wear out. I mean, they last for a long time, they do wear out. So I think that no question that if there's a slowdown, you know, we'll be effective like everybody else, but we have this resiliency because of our installed base in the US, in the residential side. And also, you know, with commodity price lift, if you expect that's gonna continue, that's gonna be good for our ag business. It's also good for mining to the degree that you're seeing.
higher sustained oil prices. There's gonna be more investment. You know, carbon is not going away. It's gonna be more investment in oil sources than try to move away from the policy out of Russia as a source for carbon. So, we see a number of offsetting lifts even if we see the slowdown in the ice case down. Again, geopolitical, we're getting caught up like everybody else, but we're in pretty resilient markets.
Probably the largely water being the most kind of capital dependent, you know, where you see capital cycles and the residential pie being the least correlated. And the residential pie being the least correlated.
Now the fueling side, we're seeing continued consolidation and investment by major marketers. Many of them are public companies, others have private equity behind them. The returns on having a C-Store with a four-quarter of gasoline, the returns are compelling and they invest in technology and that's good for us.
And then with the case of our distribution business here, which is very much the US centric, and therefore your question is very appropriate in that point of view. Certainly, our leader of distribution have looked at other areas of standing, big turf, big treatments, big waste water, and big commercial to, again, grow beyond a
residential focus at the same time and we're talking to contractors. In contractors, it's good off the heroine, you know, they'd have workout, you know, by the site for a month or two. We're talking contractors with the work committed for a year or two. for a year or two.
Now, can that disappear if the economy turns short, but there's real underlying demand for their services in our products that we're seeing here, which gives us a level confidence, and again, another economist, it gives us a level confidence that, like we have in the past, that we'll weather any slowdown, or whether the slowdown, and it can be a curse in a good way.
Okay, great. Okay, thanks very much.
Thank you Walt, we appreciate your support.
Thank you.
And our next question comes from the line of conggers with North Coast Capital.
Morning, thanks for taking my question. Greg, I hate to have you keep that economist hat on because I'm certainly not one either. But I wanted to kind of follow Walt's question with the similar question more on the resource and mining side. I mean, I know you cited tailwinds there, which we're on board with that, I guess, the watering. So does see some tailwinds with the resource tightness.
Christine cycle and that some of that resource tightness is geopolitical driven and shortages and so forth, but we are kind of also at a point where the feds hiking and maybe talking recession. So it's not sort of your typical mining resource cycle from a timing standpoint. How does that impact your outlook for you know dewatering?
Yeah, Ryan, you've followed us for a number of years. And again, my view is that this is a supply. Inflation is coming as a supply constraint. Some people take an analogy back to the end of World War II when the U.S. were coming back to the United States. There just wasn't enough supply opposed to demand. And also, you go back to the OA crisis when the whole basis for the housing expansion was more financially driven, not economically driven. That was a major Screaming
But we have a real shortage in housing. And then turning to your question about resources, to the degree that we're going to be moving more to electrified world is that we're going to need more mining. And as you know, that's a real long cycle play. We saw that back in the earlier part of last decade, and we did really well in that environment. Now, when oil dropped in 2014 through the floor, so did our large water business.
and we've made some changes there to reduce our breakeven points so that we could weather the capital cycle because we were that sort of capital cycle business and we got into it when we got into the water to water and learn to deal with that, I think a little better way. But this underlying is that it's a degree that we're going to be doing, you know, less resource dependency on...
countries that are less than a favor to the West and to the degree that we're going to be investing in electrification across the globe. That's going to be mining. And I think that's a multi-year situation, irrespective of what may happen in short term in the United States with the Fed and interest rates of the end-to-one. And you come.
Got it. Okay, that's helpful. And then my other was kind of a big picture, Greg, but it has to do with your treatment business and... It has to do with your treatment business and...
You're sort of channel to market strategy. I'm just curious if you can brief us on how that's working out. I know some of the peers in that business have really talked up their partnerships with some of the big box.
you know home improvement players and so forth and and and said that that's really the key to unlock in that market Can you just talk about how you guys are going about penetrating that market and and you know any which strategy is there?
Sure, Ryan. We have a multi-channel strategy. So, one thing when you look at treatment and you look in the United States, really of the well-driller installer is the first person that's going to touch a popping system. The first person that's going to touch a popping system.
Many of them do not get into treatment. They enjoy and they realize, you know, good living off of drilling and stalling, but some have found where treatment gives them, you know, repeat revenue, because in business and the off season, it's less, maybe it's less up to noun. So they're finding that interesting and we have access to that channel. Now, you know, we have access to the channel through our distribution, through our distributors.
And our own distribution has other suppliers who are treatment products, and we respect the fact that our distribution business has to decide what's best for them. Being mindful of their own by Franklin, but on the other hand, they're gonna have other suppliers they're gonna support. So that's a channel. You have the channel too of supporting plumbers and other installers that install treatment systems, and that channel has also been established.
But then with the operating systems go to market strategies in between the idea of having the failed individual necessarily going out to your house and selling it to the system and or going to big box and then having to find somebody to install a system because I don't know about you, but I'm not maybe so inclined to try to install a more treatment system even though it's all three, four into my own home. I'm going to hire a contractor. Ocuses and make that all system seamless and very transparent. You can go, they advertise it clearly on the website, everything's right there.
You can pick and choose what you want and we make that transaction as seamless the customer is possible. That's really the niche we're operating in to the roots and niche. It's a big part of our system business. That's really what we're focused on is making it a really easy transaction for the consumer, the customer to put it in. They don't have to worry about going a big box and then finding its dollar and they don't and necessarily have to invite somebody in their home to sell systems. So that's what we have with Aqua. With Puranics, we have more of the models we're like maybe collagen or kinetic.
Ladies and gentlemen, this concludes today's call.
The current's quarter dissipating and you may now disconnect.
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