Q1 2024 Franklin Electric Co Inc Earnings Call
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Operator: Hello, and welcome to the Franklin Electric Report's First Quarter 2024 Sales and Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press Star-11 on your telephone. You will then hear an automated message advising that your hand has been raised. To withdraw your question, please press Star-11 again. Please be advised that today's conference call is being recorded. It is now my pleasure to introduce Chief Financial Officer Jeff Taylor.
Speaker Change: Hello, and welcome to the Franklin Electric reports first quarter 2020 for sales and earnings conference call.
Speaker Change: This time, all participants are in a listen only mode.
Speaker Change: After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone.
Speaker Change: Didn't hear an automated message advising that your hand had been raised.
Speaker Change: Withdraw your question. Please press star one one again please.
Speaker Change: Please be advised that today's conference call is being recorded it is now my pleasure to introduce Chief Financial Officer, Jeff Taylor.
Jeffery L. Taylor: Thank you, Andrew. And good morning, everyone. Welcome to Franklin Electric's first quarter 2024 earnings conference call. With me today is Gregg Sengstack, its chairperson and chief executive officer. On today's call, Gregg will review our first quarter business highlights, then I will provide additional details on our financial performance, and we will then take questions. Before we begin, let me remind you that as we conduct this call, we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Jeffery L. Taylor: Thank you Andrew and good morning, everyone and welcome to Franklin Electrics first quarter 2024 earnings Conference call.
Jeffery L. Taylor: With me today is Greg things back or chairperson and Chief Executive Officer.
Jeffery L. Taylor: On today's call Gregg will review, our first quarter business highlights and I will provide additional details on our financial performance. We will then take questions.
Jeffery L. Taylor: Before we begin let me remind you that as we conduct this call we will be making forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Jeffery L. Taylor: These statements are subject to various risks and uncertainties, many of which could cause actual results to differ materially from such forward-looking statements. A discussion of these factors may be found in the company's annual report on Form 10-K and today's Arrangement. All forward-looking statements made during this call are based on information currently available, and, except as required by law, the company assumes no obligation to update any forward-looking statement. With that said, I will now turn the call over to Gregg Sengstack.
Jeffery L. Taylor: These statements are subject to various risks and uncertainties many of which could cause actual results to differ materially from such forward looking statements.
Jeffery L. Taylor: A discussion of these factors may be found in the company's interim report on Form 10-K, and today's earnings release.
Jeffery L. Taylor: All forward looking statements made during this call are based on information currently available and except as required by law. The company assumes no obligation to update any forward looking statements.
Speaker Change: I will now turn the call over to break things down.
Gregg C. Sengstack: Thank you, Jeff, and thank you all for joining us. Our first quarter results were slightly below our expectations, while the business generally performed as expected. The Franklin team executed well and managed costs during the quarter despite much wetter weather than expected and continuing commodity price volatility. As we have previously communicated, the first quarter is seasonally our slowest quarter as it relates to demand.
Speaker Change: You, Jeff and thank you all for joining us.
Jeffery L. Taylor: Our first quarter results were slightly below our expectations, while the business generally performed as expected.
Jeffery L. Taylor: And frankly, the team executed well and manage costs during the quarter, despite much wetter weather unexpected and continuing commodity price pressures.
Speaker Change: As we have previously communicated in the first quarter is seasonally our slowest quarter as it relates to demand.
Gregg C. Sengstack: However, underlying activity in our core markets remains healthy, compared to our record first quarter of 2023, net sales were down $24 million, or 5%. We had an exceptional start in 2023, particularly for large e-watering equipment and fueling systems, which made for a tougher year-over-year comparison. The largest contributing factors were the decrease in large Q order equipment sales in the U.S. to our fleet rental customers, which accounted for approximately two-thirds of the decrease, and lower sales in fueling systems as demand and order patterns have normalized.
Jeffery L. Taylor: However, underlying activity in our core markets remains healthy.
Jeffery L. Taylor: Compared to our record first quarter 2023, net sales were down $24 million were 5%.
Jeffery L. Taylor: We had an exceptional start to 2023, particularly for larger water equipment, and fueling systems, which made for a tougher year over year comparison.
Jeffery L. Taylor: Largest contributing factors for the decrease in large dewatering equipment sales in the U S where fleet rental customers, which accounted for approximately two thirds of the decrease and lower sales in Chile systems as demand and order patterns have normalized.
Gregg C. Sengstack: Even with more moderate demand, we delivered improved gross margin versus the prior year driven by favorable mix and continued cost savings. As expected, SG&A expenses were higher than the prior year due to inflationary pressure, investments in recent water treatment and distribution acquisitions, and the addition of new distribution branch locations. Turning to our segments, water systems' first quarter sales and operating income declined 7% and 4%, respectively. As I previously mentioned, volumes were lower in large dewatering equipment, creating a difficult year-over-year comparison against the first quarter record sales in 2020. Additionally, demand in the U.S. for our groundwater pumping systems was impacted by continued unfavorable weather patterns.
Jeffery L. Taylor: Even with more moderate demand, we delivered improved gross margin versus the prior year driven by favorable mix and continued cost control.
Jeffery L. Taylor: As expected SG&A expenses were higher than prior year due to inflationary pressure.
Jeffery L. Taylor: <unk> and recent warrant treatment of distribution acquisitions, and the addition of new distribution French locations.
Jeffery L. Taylor: Turning to our segments water Systems' first quarter sales and operating income declined 7% and 4% respectively.
Jeffery L. Taylor: As I previously mentioned volumes were lower in large dewatering equipment, creating a difficult year over year comparison against the first quarter record sales in 2023.
Jeffery L. Taylor: Additionally, demand in the U S for our groundwater pumping systems was impacted by continued unfavorable weather patterns.
Gregg C. Sengstack: Operating margin improved to 16.4%, 40 basis points versus prior year and 60 basis points versus the fourth quarter of 2023. This was driven by a favorable product mix and lower freight expenses. Fueling system sales and operating income decreased 15% and 10%, respectively, versus the prior year. However, we are encouraged to see that the de-stocking activity which impacted the business in the back half of last year has mostly diminished at this point. As with large seawater equipment, the fueling system's record first quarter of fiscal 23 created a difficult year-over-year comparison.
Jeffery L. Taylor: Operating margin improved to 16, 4% and 40 basis points versus prior year, and 60 basis points versus the fourth quarter of 2023.
Jeffery L. Taylor: This was driven by favorable product mix and lower freight expenses.
Jeffery L. Taylor: Fueling systems sales and operating income decreased 15% and 10% respectively versus the prior year.
Jeffery L. Taylor: We are encouraged to see that the destocking activity, which impacted the business in the back half of last year has mostly diminished at this point in time.
Jeffery L. Taylor: As with large dewatering equipment fueling systems record first quarter fiscal 'twenty three create a difficult year over year comparison.
Gregg C. Sengstack: That said, Fueling Systems' first quarter operating margin came in at 30.3 percent, an increase of 170 basis points compared to the prior year. The improved margin was a result of favorable product mix and operating expense management. Sales in the distribution business increased 3% from the prior year, primarily due to the incremental sales impact from our 2023 acquisition. However, the business, similar to the water systems, was negatively impacted by unfavorable weather across many parts of the United States, delaying the start of contractor installation.
Jeffery L. Taylor: That said fueling systems first quarter operating margin came in at 33% an increase of 170 basis points compared with prior year.
Jeffery L. Taylor: The improved margin was the result of favorable product mix and operating expense management.
Jeffery L. Taylor: Sales in the distribution business increased 3% from the prior year, primarily due to the incremental sales impact from our 2023 acquisition.
Jeffery L. Taylor: The business similar to the water systems was negatively impacted by unfavorable weather across many parts of United States delay to start a contractor installations.
Gregg C. Sengstack: Operating margin was 1.2%, a 210 basis point decline versus the prior year due to lower margins on commodity-based products, as well as increased operating expenses from continued investment and growth via the recent acquisition at new branch locations announced in 2023. Considering the impact of these investments, we are encouraged to have achieved a 50 basis point sequential improvement in operating margins for distribution for the fourth quarter of 2023 on seasonally lower sales.
Jeffery L. Taylor: Operating margin was one 2% a 210 basis point decline versus the prior year due to lower margins on commodity based products as well as increased operating expenses from continued investment in growth you had a recent acquisition and new branch locations announced in 2023.
Jeffery L. Taylor: Considering the impact of these investments we are encourage you achieved a 50 basis point sequential improvement in operating margins for distribution for the fourth quarter of 2023 and seasonally lower sales.
Gregg C. Sengstack: Our sales team maintains a line of sight to our contractors, customers, and project pipelines. As a result, we are confident we will see improving performance in sales and margin as weather improves as we enter the groundwater growing season. Our continued focus on the management of working capital has resulted in more normalized inventory levels, with our March inventory balance at $532 million, close to $70 million lower than the same period in the prior year, although up from the end of the year in anticipation of normal seasonal demand.
Jeffery L. Taylor: Our sales team maintains line of sight toward contractors customers project pipelines. As a result, we are confident we will see improving performance in sales and margin as weather improves as we enter the groundwater growing seasons.
Jeffery L. Taylor: Okay.
Jeffery L. Taylor: Our continued focus on the management of working capital has resulted in more normalized inventory levels with our March inventory balance at $532 million versus $70 million lower than the same period in the prior year.
Jeffery L. Taylor: Although up from the end of the year in anticipation of normal seasonal demand.
Gregg C. Sengstack: Consequently, our cash flow improved by approximately $10 million in the first quarter of 2024 compared to the prior year. We remain committed to a balanced capital allocation strategy. We continue to make internal investments focused on bringing additional production in-house, enhancing the integrity of our supply chain. We are also actively monitoring the M&A environment, where we have seen an uptick in activity. We've invested approximately half a billion dollars since 2017 to build our distribution business and our water treatment plant.
Jeffery L. Taylor: Sequentially, our cash flow improved approximately $10 million in the first quarter 2024 compared to the prior year.
Jeffery L. Taylor: We remain committed to a balanced capital allocation strategy, we continue to make internal investments focused on bringing additional production in house enhancing the integrity of our supply chain.
Jeffery L. Taylor: We are also actively monitoring the M&A environment. So we have seen an uptick in activity.
Jeffery L. Taylor: We've invested approximately $5 billion since 2017 to build out our distribution business and our water treatment platform.
Gregg C. Sengstack: We will continue to build these businesses through bolt-on acquisitions, while we are actively looking to grow in a couple of other areas. The first is manufacturers of larger pumping systems with a focus on commercial industrial end markets globally.
Jeffery L. Taylor: We will continue to build these businesses through bolt on acquisitions, while we are actively looking to grow in a couple of other areas.
Jeffery L. Taylor: First as manufacturers of larger pumping systems with a focus on commercial and industrial end markets globally. The second is to add to our critical asset monitoring capabilities in the grid business and the demand for electricity continues to grow.
Gregg C. Sengstack: The second is to add to our critical asset monitoring capabilities in the grid business as the demand for electricity continues to grow. With effectively no net debt, we are well positioned to take advantage of opportunities that present themselves. Finally, I remain committed to returning capital to our shareholders through regular dividends and opportunistic share recirculation. Looking ahead to the remainder of this year, we are mindful of the continued macroeconomic and geopolitical pressures we have to contend with.
Jeffery L. Taylor: With effectively no net debt, we are well positioned to take advantage of opportunities as they present themselves. Finally, we remain committed to returning capital to our shareholders through regular dividends and opportunistic share repurchases.
Jeffery L. Taylor: Looking ahead to the remainder of this year, we are mindful of the continued macroeconomic and geopolitical pressures we have to contend with however, given the results in the first quarter and our current outlook. We are maintaining our full year 2024 sales guidance to be in the range of $2 1 billion to $1 $7 billion in sales in our EPS guidance remains between four.
Gregg C. Sengstack: However, given the results in the first quarter and our current outlook, we are maintaining our full year 2024 sales guidance to be in the range of $2.1 billion to $2.17 billion in sales, and our EPS guidance remained between $4.22 and $4.47.
Jeffery L. Taylor: Dollars 20 to $4 46.
Gregg C. Sengstack: Before turning the call back over to Jeff, I'd like to take a moment to recognize Franklin Electric and our employees for being named on Newsweek's 2024 list of America's Most Trustworthy Companies for the third consecutive year. I would also like to refer you to our recently published 2024 sustainability report detailing the company's efforts to positively and responsibly impact our communities over the past year. The work that we do is essential to people's lives, advances global access to clean water, and improves the safety and availability of energy worldwide. I'm also proud of the culture this management team has stewarded, one that balances focus on efficiency, sustainability, and reliability with the well-being of our employees. I will now turn the call back over to Jeff.
Speaker Change: Before turning the call back over to Jeff I'd like to take a moment to recognize Franklin electric and our employees for being named in Newsweek's 2024 list of America's most trustworthy companies for the third consecutive year.
Jeffery L. Taylor: I would also like to refer you to our recently published 2020 for sustainability report detailing the company's efforts to positively and responsibly impact our communities over the past year.
Jeffery L. Taylor: The work that we do is essential to People's lives against this global access to clean water and improves the safety and availability of energy worldwide.
Jeffery L. Taylor: I'm also proud of the culture of this management team has started when it bounces focus across efficiency sustainability and reliability with the wellbeing of our employees.
Jeffery L. Taylor: I'll now turn the call back over to Jeff Jeff.
Jeffery L. Taylor: Thanks, Greg.
Jeffery L. Taylor: Overall, our first quarter was largely in line with our expectations as Greg highlighted.
Jeffery L. Taylor: While we started off the first quarter with sales down from our record levels last year, the Franklin team executed well with a focus on delivering for our customers and cost management, which resulted in an improvement in our gross profit margins.
Jeffery L. Taylor: Overall, our first quarter was largely in line with their expectations, as Gregg highlighted. While we started off the first quarter with sales down from record levels last year, the Franklin team executed well with a focus on delivering for our customers in cost management, which resulted in an improvement in our gross profit margin. Our fully diluted earnings per share were $0.70 for the first quarter of 2024 versus $0.79 for the first quarter of 2023.
Jeffery L. Taylor: Our fully diluted earnings per share were <unk> 70 for the first quarter 2024 versus 79 for the first quarter 2023.
Jeffery L. Taylor: First quarter 2024, consolidated sales were $460 9 million a year over year decrease of 5%.
Jeffery L. Taylor: The benefit to sales from our 2023 acquisitions were more than offset by lower volumes in water systems and fueling systems.
Jeffery L. Taylor: Water systems sales in the U S and Canada were down 12% compared to the first quarter of 2023 due to volume declines.
Jeffery L. Taylor: First quarter 2024 consolidated sales were $460.9 million, a year-over-year decrease of 5%. The benefit to sales from our 2023 acquisitions was more than offset by lower volumes in water systems and fueling systems. Water system sales in the US and Canada were down 12% compared to the first quarter of 2023 due to volume. Sales of large dewatering equipment decreased 50% compared to record quarterly sales in the prior year quarter, and sales of groundwater pumping equipment decreased 8%. These sales declines were partially offset by the incremental sales impact from a recent water treatment acquisition. Sales of all other surface pumping equipment were flat compared to the first quarter of 2023.
Jeffery L. Taylor: Sales of large dewatering equipment decreased 50% compared to record quarterly sales in the prior year quarter and sales of groundwater pumping equipment decreased 8%.
Jeffery L. Taylor: These sales declines were partially offset by the incremental sales impact from our recent water treatment acquisition.
Jeffery L. Taylor: Sales of all other surface pumping equipment were flat compared to the first quarter 2023.
Jeffery L. Taylor: Water systems sales in markets outside the U S and Canada increased by 4% overall sales increased in all major markets Latin America, EMEA and Asia Pacific.
Jeffery L. Taylor: Water systems operating income was $47 1 million in the first quarter 2024 down $1 9 million or 4% versus the first quarter of 2023.
Jeffery L. Taylor: Operating income margin was 16, 4% a year over year increase of 40 basis points.
Jeffery L. Taylor: Water system sales and markets outside the US and Canada increased by 4% overall as sales increased in all major markets, Latin America, EMEA, and Asia Pacific. Water Systems operating income was $47.1 million in the first quarter 2024, down $1.9 million or 4% versus the first quarter 2023. Operating income margin was 16.4%, a year-over-year increase of 40 basis points. The decrease in operating income was primarily due to lower sales. Operating income margin improved due to favorable product makeshifts and lower credit. Distribution's first quarter sales were $147 million versus the first quarter 2023 sales of $143 million, a 3% increase.
Jeffery L. Taylor: The decrease in operating income was primarily due to lower sales.
Jeffery L. Taylor: Operating income margin improved due to favorable product mix shifts and lower freight expenses.
Jeffery L. Taylor: Distributions first quarter sales were $147 million versus the first quarter 2023 sales of $143 million a 3% increase.
Jeffery L. Taylor: The distribution segment's operating income was $1 8 million for the first quarter of year over year decrease of $2 9 million.
Jeffery L. Taylor: Operating income margin was one 2% of sales in the first quarter of 2024 versus three 3% in the prior year.
Jeffery L. Taylor: Income was negatively impacted by margin compression from continued lower pricing on commodity based products.
Jeffery L. Taylor: And investments in new branch locations.
Jeffery L. Taylor: The distribution segment's operating income was $1.8 million for the first quarter, a year-over-year decrease of $2.9 million. Operating income margin was 1.2% of sales in the first quarter of 2024 versus 3.3% in the prior year. Income was negatively impacted by margin compression from continued lower pricing on commodity-based products and investments in new branch locations. Viewing system sales in the first quarter of 2024 were $62.1 million. Sales decreased $10.6 million, or 15%, compared to the prior year.
Jeffery L. Taylor: Fueling systems sales in the first quarter of 2024 were $62 1 million sales decreased $10 6 million or 15% compared to the prior year.
Jeffery L. Taylor: Fueling systems sales in the U S and Canada decreased 11% compared to the first quarter 2023.
Jeffery L. Taylor: The decrease was across all product lines as customer buying patterns have normalized after a record first quarter sales in 2023.
Jeffery L. Taylor: Outside the U S and Canada fueling systems sales decreased 16% due primarily to lower sales in Asia Pacific.
Jeffery L. Taylor: Fueling systems operating income was $18 8 million compared to $20 8 million in the first quarter of 2023.
Jeffery L. Taylor: The first quarter 2024, operating income margin was 33% compared to 28, 6% of net sales in the prior year.
Jeffery L. Taylor: Fueling system sales in the US and Canada decreased 11% compared to the first quarter of 2023. The decrease was across all product lines as customer buying patterns normalized after record first quarter sales in 2023. Outside the US and Canada, fueling system sales decreased 16% due primarily to lower sales in Asia Pacific.
Jeffery L. Taylor: Operating income margin increased primarily due to price realization lower freight costs and a favorable product sales mix shift.
Jeffery L. Taylor: Franklin Electric's consolidated gross profit was $163 6 million for the first quarter 2024, 1% year over year increase.
Jeffery L. Taylor: Fueling Systems operating income was $18.8 million compared to $20.8 million in the first quarter of 2023. The first quarter 2024 operating income margin was 30.3% compared to 28.6% of net sales in the prior year. Operating income margin increased primarily due to price realization, lower freight costs, and a favorable product sales mix shift. Franklin Electric's consolidated gross profit was $163.6 million for the first quarter of 2024, a 1% year-over-year increase. The gross profit as a percentage of net sales was 35.5% in the first quarter of 2024, up 200 basis points versus 33.5% in the prior year.
Jeffery L. Taylor: Gross profit as a percentage of net sales was 35, 5% in the first quarter 2024.
Jeffery L. Taylor: 200 basis points versus 33, 9% in the prior year.
Jeffery L. Taylor: Gross profit margin was favorably impacted in 2024 by product mix and lower freight cost in water systems, and fueling systems, partially offset by margin compression from unfavorable pricing of commodity based products.
Jeffery L. Taylor: The distribution business.
Jeffery L. Taylor: Selling general and administrative or SG&A expenses were $115 6 million in the first quarter of 2024 compared to $109 5 million in the first quarter of 2023.
Jeffery L. Taylor: The increase in SG&A expenses were due to the incremental expense from recent acquisitions, new branch locations and distribution and higher compensation costs.
Jeffery L. Taylor: The gross profit margin was favorably impacted in 2024 by product mix and lower freight costs in water systems and fueling systems, partially offset by margin compression from unfavorable pricing of commodity-based products from distribution. Selling General and Administrative, or SG&A, expenses were $115.6 million in the first quarter of 2024 compared to $109.5 million in the first quarter of 2023. The increase in SG&A expenses was due to the incremental expense from recent acquisitions, new branch locations, and distribution, and higher compensation.
Jeffery L. Taylor: Consolidated operating income was $47 9 million in the first quarter 2024 down $4 7 million or 9% from $52 6 million in the first quarter of 2020 through the.
Jeffery L. Taylor: The decrease in operating income was primarily due to lower sales.
Jeffery L. Taylor: First quarter 2024 operating income margin was 10, 4% versus 10, 9% of net sales in the first quarter 2023.
Jeffery L. Taylor: Below operating income higher foreign exchange expense, primarily due to hyperinflation in Argentina, and Turkey was partially offset by lower interest expense, which equates to a decrease of approximately <unk> <unk> in earnings per share.
Jeffery L. Taylor: Consolidated operating income was $47.9 million in the first quarter of 2024, down $4.7 million, or 9%, from $52.6 million in the first quarter of 2023. The decrease in operating income was primarily due to lower sales. First quarter 2024 operating income margin was 10.4% versus 10.9% of net sales in the first quarter 2023. Below operating income, higher foreign exchange expense, primarily due to hyperinflation in Argentina and Turkey, was partially offset by lower interest expense, which equates to a decrease of approximately two cents in earnings per share.
Jeffery L. Taylor: The effective tax rate was 22% for the quarter compared to 21% in the prior year quarter.
Jeffery L. Taylor: The company purchased approximately 78000 shares of its common stock in the open market for about $7 4 million during the first quarter of 2024.
Jeffery L. Taylor: At the end of the first quarter were remaining share repurchase authorization is about 839000 shares.
Jeffery L. Taylor: Last week, the company announced a quarterly cash dividend of <unk> 25 that will be paid may 16th to shareholders of record as of May 2nd.
Jeffery L. Taylor: This concludes our prepared remarks, we will now turn the call over to Andrew for your questions.
Andrew: Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again.
Jeffery L. Taylor: The effective tax rate was 22% for the quarter compared to 21% in the prior year quarter. The company purchased approximately 78,000 shares of its common stock in the open market for about $7.4 million during the first quarter of 2020. At the end of the first quarter, the remaining share repurchase authorization is about 839,000 shares. Last week, the company announced a quarterly cash dividend of 25 cents that will be paid on May 16th to shareholders of record as of May 2nd. This concludes our prepared remarks. We'll now turn the call over to Andrew for questions. Thank you.
Andrew: And our first question comes from the line of Bryan Blair with Oppenheimer.
Andrew: Yes.
Andrew: Thank you good morning, everyone.
Bryan Francis Blair: Good morning, Brian Good morning.
Bryan Francis Blair: Sure.
Bryan Francis Blair: I was hoping you could offer a little more color on how orders trended through the quarter and into Q2 and how your team is the relative puts and takes or upside downside drivers.
Bryan Francis Blair: First the reiterated full year guidance at this point.
Bryan Francis Blair: Yes.
Bryan Francis Blair: I mean from how it trended during the quarter I think it trended as pretty much as we had expected with the normal seasonal profile.
Bryan Francis Blair: Typically it's going to start slow and then build as we move through the quarter. So lower in January and then finishing stronger in March I believe we saw that.
Operator: Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. And our first question comes from the line of Bryan Blair with Oppenheimer.
Bryan Francis Blair: Puts and takes there the one thing that I think impacted the business more than we had expected was the weather. We continued to see much winter weather in the U S and that impacted us in certainly in the western part of the U S and so.
Bryan Francis Blair: Thank you. Good morning, everyone.
Gregg C. Sengstack: Morning, Brian. Good morning.
Bryan Francis Blair: That was a factor in that.
Bryan Francis Blair: I was hoping you could offer a little more color on how orders trended through the quarter and into Q2 and how your team views the relative puts and takes or upside, downside drivers versus the reiterated full-year guidance at this point.
Bryan Francis Blair: Was worse than we had forecast or expected.
Bryan Francis Blair: And then the other is the commodity prices, particularly for our pipe continue to be under pressure.
Bryan Francis Blair: And that market path to stabilize at some point, Brian we've been waiting for that for a couple of quarters now.
Gregg C. Sengstack: Yeah, um, from a trending perspective, I think it trended pretty much as we would expect it with the normal seasonal profile. Typically, it's going to start slow and then build as we move through the quarter. So, lower in January and then finishing stronger in March. I believe we saw that.
Bryan Francis Blair: And but we continued to see pricing pressures there.
Bryan Francis Blair: Yes.
Bryan Francis Blair: More than four quarters in a row that we've seen those pricing pressures on commodities. So when you look at it from a year over year impact it does it does.
Gregg C. Sengstack: Um, puts and takes there, you know, the one thing that I think impacted business more than we had expected was the weather. We continue to see much wetter weather in the US, and that impacted us and certainly in the western part of the US. And so that was a factor that was worse than we had forecast or expected.
Bryan Francis Blair: Does have an impact.
Brian: Thanks, Dan I appreciate the color.
Bryan Francis Blair: Okay.
Bryan Francis Blair: Hi.
Bryan Francis Blair: Again, so you're fueling systems.
Bryan Francis Blair: Trends there.
Bryan Francis Blair: What was the growth in critical asset monitoring in the quarter.
Bryan Francis Blair: At this point how mix accretive.
Gregg C. Sengstack: And then the other thing is, you know, commodity prices, particularly for pipe, continue to be under pressure. You know, that market has to stabilize at some point, Bryan; we've been waiting for that for a couple of quarters now. And we continue to see, you know, pricing pressures there. And that's, you know, more than four quarters in a row that we've seen these pricing pressures on commodities. So when you look at it from a year over year impact, it does, you know, it does have an impact.
Bryan Francis Blair: Is that build out.
Bryan Francis Blair: Obviously the segment margin.
Bryan Francis Blair: Came in at least relative to our model ahead of expectations.
Bryan Francis Blair: The optics are quite favorable.
Speaker Change: Yes, I would say that.
Bryan Francis Blair: Grid solutions business performed pretty much in line with the way the fueling business in terms of.
Bryan Francis Blair: It was down on a year over year basis, and so we.
Bryan Francis Blair: Well that business has been growing.
Bryan Francis Blair: <unk> double digits, and we expect it to continue to grow strong double digits.
Bryan Francis Blair: I appreciate the color, digging into fueling systems, you know, trends. What was the growth in critical assets monitoring in the quarter and, at this point, how mixed accretive is that build out? Obviously, the segment margin came in, at least relative to our model, ahead of expectations, and the optics are quite favorable.
Bryan Francis Blair: I think it went through some of the same dynamics that we saw on the fueling side, where people had built up inventory destock and now with supply availability lead times improve people are waiting or not placing their orders as early as they did in prior prior year end.
Bryan Francis Blair: So we.
Gregg C. Sengstack: Yeah, I would say that the grid solutions business performed pretty much in line with the way the fueling business did in terms of it was down on a year-over-year basis and so we You know, we, while that business has been growing, you know, strong double digits, and we expect it to continue to grow strong double digits, I think it went through some of the same dynamics that we saw on the fueling side, where people had built up inventory, destocked, and now with supply availability, lead times improved, people are waiting, they're not placing their orders as early as they did in prior prior year. And so we, you know, we saw a year over year decline in grid solutions.
Bryan Francis Blair: We saw a year over year decline in Greek solutions.
Speaker Change: Okay understood and one last one if I may.
Speaker Change: Any any color on the integration of action manufacturing.
Speaker Change: Commentary.
Speaker Change: On the M&A pipeline.
Speaker Change: It seems it seems optimistic.
Bryan Francis Blair: Any color you can look around.
Bryan Francis Blair: The opportunities over over the near term potential action ability.
Bryan Francis Blair: So whether in water treatment distribution.
Bryan Francis Blair: Yeah.
Bryan Francis Blair: The typical focus areas for you or you called out a couple of new.
Bryan Francis Blair: Okay, understood. And one last one, if I may, any color on the integration of action manufacturing and commentary on the M&A pipeline. Seems optimistic. Any core you can offer on opportunities over the near-term potential for actionability, whether in water treatment distribution, the typical focus areas for you, or you called out a couple of new potential areas for investment as well.
Bryan Francis Blair: Yes potential.
Bryan Francis Blair: Areas for investment as well.
Brian: Yes, Brian.
Brian: On action.
Brian: The ratio has gone on schedule, we actually pulled up bring.
Brian: Bring them onto our ERP system.
Brian: We're actually doing that tomorrow.
Brian: So we are good in both distribution and in water treatment.
Brian: We're able to get businesses on versus very quickly and get them aligned and our business practices lay out to their warehouses.
Brian: Many locations.
Brian: So we improved flow actions right on plan actually little bit ahead of plan on topline and Bottomline.
Gregg C. Sengstack: Bryan, on action, integration has gone on schedule. We actually have pulled up, and brought him on to our ERP system. We're actually doing that tomorrow.
Brian: We have the platform.
Brian: We need to operate in both distribution of our treatment onward distribution of our treatment but.
Gregg C. Sengstack: So we are good at both distribution and in water treatment; we're able to get businesses on our system very quickly and get them aligned in our business practices, and then we improve flow. That action is right on plan, actually a little bit ahead of plan on top line and bottom line.
Brian: As people decide to exit the business were available to be an acquirer of that business and we will continue to do so.
Brian: We are also being more intentional now that I think.
Brian: The World is accepted higher interest rates, particularly United States and valuations that I think the sellers and buyers are getting better understanding valuations arent as new interest rate environment.
Gregg C. Sengstack: We have the platforms we need to operate in both distribution of water treatment and groundwater distribution of water treatment. But as people decide to exit the business, we're available to be an acquirer in that business, and we'll continue to do so. We are also being more intentional now that I think the world has accepted higher interest rates, particularly in the United States, and valuations that I think the sellers and buyers are getting a better understanding of what valuations are in this new interest rate environment. We're just seeing higher deal flow in manufacturing assets.
Brian: Yes.
Brian: We're just seeing higher deal flow.
Brian: In manufacturing assets and as for Franklin as a manufacturing company or a distribution decision was afforded agreement and a channel.
Brian: Yes.
Brian: We're a leader in the United States and groundwater so.
Brian: At our core we're a manufacturer at our core we're a global company and.
Brian: And so we're looking again at opportunities to acquire.
Brian: Updates companies.
Gregg C. Sengstack: And at its core, you know, Franklin's a manufacturing company. Our distribution decision was Ford integrated into a channel that We're a leader in the United States in groundwater. So at our core, we're a manufacturer. And at our core, we're a global company. And so we're looking, again, at opportunities to acquire companies that have larger pumps to augment what people recognize as us being a leader in residential and agriculture. So we want to be intentional about that. And that's where we're also seeing greater deal flow and deal activity, and also with adjacencies, and being mindful that we've grown this company over time through. [inaudible]
Brian: Yes.
Brian: Larger.
Brian: Humps.
Brian: When people recognize the us being a leader in residential and AG.
Brian: So we won't be intentional about that and that's what we're seeing.
Brian: Also greater deal flow and deal activity.
Brian: And also with Adjacencies and being mindful that we've grown this company over time.
Brian: True.
Brian: <unk> expansion in adjacent markets, but thoughtfully doing that.
Brian: In addition to make logical sense from the standpoint of either distribution cut common customers and so we're looking at that as well, but definitely we've seen just more deal flow over the last several months couple last couple of quarters than say, maybe a year ago.
Bryan Francis Blair: I appreciate all the color. Thanks, guys. Thank you, Brian.
Speaker Change: I appreciate all the color thanks, guys.
Speaker Change: Thank you Brian.
Operator: Thank you. One moment, please, for our next question. And our next question comes from the line of Walter Liptak with Seaport Research.
Speaker Change: Thank you one moment please for our next question.
Brian: And our next question comes from the line of Walter Liptak with Seaport Research.
Walter Scott Liptak: Hey, morning, guys. Thanks. So considering the, you know, the slightly weaker than expected first quarter, and you know, related to the wetter weather, you maintain the guidance for the full year. Can you talk about your confidence levels? You know, what has to go right in the second quarter in the back half to get to your guidance?
Walter Scott Liptak: Good morning.
Walter Scott Liptak: Hey, good morning, guys. Thanks, good morning all.
Walter Scott Liptak: So considering the.
Walter Scott Liptak: The slightly weaker than expected first quarter.
Walter Scott Liptak: And related to the wetter weather.
Walter Scott Liptak: You maintained the guidance for the full year can you talk about your confidence levels what has to go right.
Walter Scott Liptak: <unk> quarter in the back half to get to your guidance.
Gregg C. Sengstack: Yeah, well, I would say first of all that we maintain our guidance, and we feel confident with the guidance range that we have out there. One quarter under our belt, slightly below our expectations, but I would still say, generally in line with our expectations. So from that perspective, you know, not a major change.
Walter Scott Liptak: Yes.
Speaker Change: I would say first of all that we maintain our guidance, we feel confident with the guidance range that we have out there.
Walter Scott Liptak: One quarter under our belt slightly below our expectations, but I would still say generally in line with our expectations so from that perspective.
Walter Scott Liptak: Not not a major change I've already talked about a couple of other things that impacted us.
Walter Scott Liptak: I've already talked about a couple of the things that impacted us were, you know, a little bit of winter weather and some of the commodity prices. But, you know, we certainly expected that 2024 was really going to start much like 2023 ended. And I think we, you know, signaled that when we thought that business was going to come in early and then build as we move through the year. And I think we still see that happening.
Walter Scott Liptak: Little bit winter weather and some of the commodities pricing, but we certainly expected. The 2024 was really going to start much like 2023.
Walter Scott Liptak: Thank.
Walter Scott Liptak: So when we talk.
Walter Scott Liptak: Business was down.
Walter Scott Liptak: And to the into the year and then build as we move through the year and I think we still see that happening.
Gregg C. Sengstack: You know, overall, we don't predict the economy. We're not, we're not economists, but we've said no recession. I think we still don't see a recession coming. I do believe that, you know, we expect interest rates to stay higher for longer now. That'll have a little impact on our housing market. You know, areas like water treatment will be a little more impacted by housing.
Speaker Change: Overall, we don't predict the economy, we're not we're not economists but.
Speaker Change: We had said no recession I think we still don't see a recession coming I do believe that we expect interest rates to stay higher for longer now that'll have a little impact on our housing market.
Speaker Change: Areas like water treatment will be a little more impacted or a little more impacted by housing.
Gregg C. Sengstack: But overall, I think our view there is pretty much intact for the four-year guidance. You know, there was a question last quarter about, you know, first half and second half. I think that, you know, I think we're still generally in line with how the business has performed over time in that regard. And so, you know, we feel good about the guidance that we have out there through the end of the year.
Walter Scott Liptak: But overall I think our view there is pretty much intact for the for the full year guidance.
Walter Scott Liptak: There was a question last quarter about.
Walter Scott Liptak: First half and second half I think that I think we're still generally in line with how the business has performed over time in that regard and so on.
Walter Scott Liptak: We feel good about the guidance that we have out there through the end of the year.
Walter Scott Liptak: Okay, okay, great. Thanks. And then thinking about the second quarter, you know you've talked about how the destocking in fueling seems to be behind you? Are you seeing more sell through now going into the construction season?
Speaker Change: Okay, Okay, great. Thanks, and then thinking about.
Speaker Change: The second quarter are you you've talked about how the destocking in fueling.
Speaker Change: It seems to be behind you are you seeing more sell through now going into the construction season.
Gregg C. Sengstack: Yeah, I would say we're, you know, we're right at the beginning of the groundwater drilling season. And so I think we are seeing a pickup in activity, you know, but we're on the front end of it at this point in time. And so there's still a ways to go.
Speaker Change: Yes, I would say, where we are right at the beginning of.
Speaker Change: The groundwater drilling season, and so I think we are seeing a pickup in activity.
Speaker Change: But we're on the front end of it at this point in time and so there is still a ways to go.
Gregg C. Sengstack: As we said, the first quarter was impacted by weather, you know, in some key areas, the West Coast, Texas, other parts of the US. We've started to see some improvement there, but it's hard to predict weather. And so, you know, we'll just, I mean, we take what we get when we talk about the weather impact on the business. You know, we expect a normal seasonal pickup in the second quarter, so our business is pretty consistent from that point of view.
Speaker Change: As we said first quarter was was impacted by by weather.
Speaker Change: In some key areas of West Coast, Texas other parts of the U S.
Speaker Change: We started to see some improvement there, but it's hard to predict the weather and so.
Speaker Change: Well just I mean, we take what we get when we when we're talking about the weather impact on the business overall.
Speaker Change: We expect a normal seasonal pickup in the second quarter. So our business is pretty consistent from that regard.
Walter Scott Liptak: Okay, and how about related to the fueling part of the business? Are you seeing better sell-through at the, you know, for fueling equipment now that DSTAC is over?
Speaker Change: Okay, and how about related to the fueling.
Speaker Change: Part of the business are you seeing better sell through at.
Speaker Change: For for fueling equipment.
Speaker Change: Destock is over.
Gregg C. Sengstack: Yeah, I think the conversations that we have with our customers and suppliers are indicative that, you know, they expect to have a more normal year this year. And so, you know, I think we're also on the front end of that curve as well. And so, you know, the indication at this point is that we'll see fueling pick up as we move through the middle part of the year and, and, you know, like I said, those customer conversations are positive at this point, but reflective of, you know, really a more normal, normal level, not an increase in stocking, not a, not a destocking environment. And so, you know, that's where we are in fuel Okay, great. Okay.
Speaker Change: Yes, I think the conversations that we have with our customers and fueling.
Speaker Change: Our indicative that they expect to have a more normal year this year.
Speaker Change: And so.
Speaker Change: I think we're also on the front end of that curve as well and so.
Speaker Change: The indication at this point is is that we will see.
Speaker Change: Fueling pick up as we move through the middle part of the year end.
Speaker Change: Like I said those customer conversations.
Speaker Change: Positive at this point.
Speaker Change: What reflective really of more normal normal level.
Speaker Change: Not an increase in stocking or.
Speaker Change: The destocking environment.
Speaker Change: <unk>.
Speaker Change: And that's where we are in fueling.
Walter Scott Liptak: Okay, great. Okay, thanks much.
Speaker Change: Okay, great. Okay. Thanks, so much.
Speaker Change: Youre welcome. Thank you.
Operator: Thank you. One moment, please, for our next question. And our next question comes from the line of Mike Halloran with Baird.
Speaker Change: Thank you one moment please for our next question.
Speaker Change: And our next question comes from the line of Mike Halloran with Baird.
Michael Patrick Halloran: Good morning, everyone. So, just a couple here.
Michael Patrick Halloran: Hey, good morning, everyone.
Michael Patrick Halloran: One, when you think about the pricing dynamics in the marketplace, on the water side, anything of note? I know commodity pricing was mentioned in the prepared remarks, just more thinking competitively. And similarly, any thoughts on the emissions part of this?
Michael Patrick Halloran: So just a couple here one when you think about the pricing dynamics in the marketplace.
Michael Patrick Halloran: On the water side anything of note I know the commodity pricing was mentioned in the prepared remarks, it's more thinking competitively and then similarly, I mean, similarly any thoughts on that.
Michael Patrick Halloran: Mike, the last part of your question broke up. Could you please repeat that?
Speaker Change: Youre welcome.
Mike Halloran: Mike The last part of your question broke up could you please repeat that.
Michael Patrick Halloran: Yeah, similarly, any thoughts on the inventory levels on the water side of the channel?
Michael Patrick Halloran: Similarly, any thoughts on the inventory levels on the water side of the channel.
Gregg C. Sengstack: Jeff, you can get a little more detail. I'd say that on pricing, it's more of a pre-COVID era where you're seeing a little more promotional activity in groundwater. The RSS channel, their residential pricing is, again, kind of flattish. As we commented on dewatering, I remember at our conference, your conference back in November, we talked about the durability of Franklin's business across the globe and the fact that we're in multiple channels. And the one that we still see challenges is the cyclicality of that dewatering business with the pump-run companies.
Michael Patrick Halloran: Yes, Jeff we have a little more detail I'd say that in our pricing.
Michael Patrick Halloran: More kind of pre Covid, where youre seeing a little more promotional activity in groundwater.
Michael Patrick Halloran: The Rss channel residential pricing as youre getting kind of flattish.
Gregg C. Sengstack: As we commented on dewatering I remember at our conference Your conference back in November we talked about the durability of Franklin's.
Michael Patrick Halloran: Business across the globe and in fact, we're in multiple channels.
Gregg C. Sengstack: One do we still see the.
Michael Patrick Halloran: The challenge is the cyclicality of that dewatering business with the apparel companies and so.
Gregg C. Sengstack: And so, you know, when you start seeing a slowdown in pricing action there, it gets a little competitive, but we've been able to maintain margins, as you saw in our results. And outside the United States, we're getting prices, interestingly enough, in respect to inflation. So we're getting a little price in EMEA. And, you know, in the hyperinflation markets of Turkey and Argentina, we price in dollars or price in euros.
Gregg C. Sengstack: When you start to see a slowdown in some pricing.
Jeffery Taylor: They're getting more competitive, but we've been able to maintain margins as you saw in our results.
Michael Patrick Halloran: And then on the.
Michael Patrick Halloran: And outside the United States, we're getting price interestingly enough.
Michael Patrick Halloran: With respect to inflation, so you'll be getting oil price it in EMEA.
Gregg C. Sengstack: And.
Gregg C. Sengstack: And the hyperinflation markets of Turkey, and Argentina, we price in dollars or price in euros. So that's.
Gregg C. Sengstack: So they just are at spot pricing, so that kind of helps insulate us. With respect to inventory levels on the channel, we look at, you know, at headwaters being kind of an indicator of the groundwater channel. And they're bringing inventory levels down compared to last year, which we commented on our overall inventory is down, I think, $70 million. And part of that is distribution because, you know, the supply chains are better and lead times are coming down. And I think that all of the distributors in the channel are probably doing similar things.
Gregg C. Sengstack: Our spot pricing, so that kind of helps insulate us.
Gregg C. Sengstack: With respect to inventory levels in channel, we look it at headwaters being kind of an indicator of the groundwater channel. They are bringing they are bringing inventory levels down compared to last year, which we commented on our raw inventory are down I think about $70 million and part of that is distribution because.
Gregg C. Sengstack: Supply chains are better than <unk>.
Gregg C. Sengstack: Lead times are coming down and I think that all of the.
Gregg C. Sengstack: The distributors in the channel are probably doing similar things so we're probably still seeing.
Gregg C. Sengstack: So we're probably still seeing, I don't know if you want to say de-stocking, but certainly inventory is probably at appropriate levels. Jeff and I were just talking before the call that one thing we all need to be mindful of is that as the world dries out here in the United States, and we had, of 130 in a year, we actually had a wetter year, 120th this year in the first quarter of the year, than 110th or whatever last year at this time. One did not plan for that, but you can't plan for the weather; you just respond to it.
Gregg C. Sengstack: I don't know if you want to see Destocking, but certainly.
Gregg C. Sengstack: Inventory is probably at appropriate levels.
Gregg C. Sengstack: Jeff and I was talking before the call that one thing we all need to be mindful of is that as the world drives out here in United States and we add.
Gregg C. Sengstack: 130 of the year as we actually had a weather year 120 of this year than in the first half of the first quarter of the year than a 110 or whatever last year at this time and when did not plan for that but you can't plan for the west coast respond to it.
Gregg C. Sengstack: As the world drives out the likelihood.
Gregg C. Sengstack: As the world dries out, the likelihood of seeing some good demand in agriculture as we start seeing pumps getting turned on is pretty good. I think the channel inventory, to answer your question specifically, I think it's in good shape. I don't think it's overly high. I don't think it's overly low. Jeff, do you have additional color to add to that? No.
Gregg C. Sengstack: Seeing some good demand in AG.
Jeff: As we start seeing pumps getting turned on so I think the channel inventory.
Jeff: Interesting to your question, specifically I think.
Speaker Change: Good shape I don't think its overly high I don't think its overly law and Jeff you have traditional Colorado.
Jeff: I think no.
Jeffery L. Taylor: I think you hit it right on, Gregg. I mean, the business as a whole, water fueling, and distribution; we are getting positive pricing. As Gregg mentioned, in water, we're a little more favorable outside the U.S., but generally low single digits, more of a return to normal from what we saw several years ago, and less frequent price increases than when we were in the high inflation environment. Distribution is getting a good price on what I would call the core products, pumps, motors, drives, and controls. The commodity piece continues to be a negative price in the current environment, so that's what we're seeing across the business.
Jeff: I think you hit it right on Greg I mean, the business as a whole water and fueling in distribution.
Jeffery L. Taylor: We're getting positive pricing as Gregg mentioned in water, we're a little more favorable outside the U S.
Jeffery L. Taylor: Generally low single digits more of a return to normal from what we saw several years ago and less frequent price increases.
Jeffery L. Taylor: When we were in the high inflation environment.
Jeffery L. Taylor: Distribution.
Jeffery L. Taylor: It is getting good price.
Jeffery L. Taylor: I would call the core products pumps motors drives and controls the commodity piece.
Jeffery L. Taylor: As continues to be negative price in the current environment. So that's what we're seeing across the business.
Michael Patrick Halloran: Great, thanks for that. And then second, on the margins for the water side, good seasonal margins there, obviously, you mentioned in the prepared remarks that mix was a benefit. How do you think about what the run rate looks like or how to think about modeling that for the rest of the year?
Speaker Change: Great. Thanks for that and then secondly, just on the margins for the water side could seasonal margins. There. Obviously you mentioned in the prepared remarks that mix was a benefit how do you think about what the run rate looks like or how to think about modeling that for the rest of the year.
Jeffery L. Taylor: Yeah, I think we got a favorable mix, particularly from the decline in large dewatering, which is at the low end of the water systems margin range. And so, with that being a lower percentage of the overall mix, it'll be a favorable mix impact for us. We do expect large dewatering to continue to be down year over year as we move through 2024. And so, you know, I think the best way to model it, Mike, is just, you know, assume the current mix that we have and on a go forward basis, and then, you know, we'll see as it happens. I will, I will mention, though, that, you know, large dewatering is going to be lumpy this year as we move through the year. There's a lot of movement there in terms of quarter-to-quarter impact.
Speaker Change: Yes, I think the.
Jeffery L. Taylor: I mean, we got a favorable mix, particularly from the decline in large dewatering, which.
Jeffery L. Taylor: At the low end of the water systems margin range.
Jeffery L. Taylor: So with that being.
Jeffery L. Taylor: A lower percentage of the overall mix.
Jeffery L. Taylor: That will be say that'll be a favorable mix impact for us.
Jeffery L. Taylor: Do expect large dewatering that continue to be down year.
Jeffery L. Taylor: Year over year, as we move through 2024 and.
Jeffery L. Taylor: So.
Jeffery L. Taylor: I think the best way to model it Mike is.
Jeffery L. Taylor: Just assume the current mix that we have in and on a go forward basis, and then we will see as it happens I will mention though that large dewatering is going to be lumpy. This year as we move through the year.
Jeffery L. Taylor: Yes.
Jeffery L. Taylor: There's a lot of movement, there in terms of quarter to quarter impact.
Michael Patrick Halloran: Thank you. I appreciate it, gentlemen.
Speaker Change: Thank you I appreciate it gentlemen.
Speaker Change: Thanks, Mike.
Operator: Thank you. One moment, please, for our next question. And our next question comes from the line of Matt Summerville, 58, Davidson.
Speaker Change: Thank you one moment please for our next question.
Operator: And our next question comes from the line of Matt Summerville with D. A Davidson.
Matt J. Summerville: Yeah, thanks, morning. Can you maybe talk about, kind of embedded in your guidance for the year, what sort of organic outlook you're assuming for water distribution and fueling in 24 relative to 23, just maybe a little bit more?
Operator: Yes.
Matt J. Summerville: Good morning.
Matt J. Summerville: Can you maybe talk about kind of embedded in your guidance for the year, what sort of organic outlook, you're assuming for water distribution and fueling in 'twenty four relative to 'twenty three just maybe a little bit more segment granularity there and then as a follow up.
Jeffery L. Taylor: Yeah, a little more organic outlook. I mean, I think on the overall guidance for the next four years, we're kind of low to mid single digits top line growth. In water systems, you know, I think we expect pretty normal organic growth for the business, excluding the impact of large dewatering, which we know is going to be down. And so that'll, you know, that'll be in that, you know, normal range that we talked about, you know, in that three to 5% range.
Jeffery L. Taylor: Yeah, a little more organic outlook I mean I think.
Jeffery L. Taylor: <unk>.
Jeffery L. Taylor: Yes.
Jeffery L. Taylor: For the guidance overall on a full year basis, we're kind of low to mid single digits topline growth.
Jeffery L. Taylor: In water systems.
Jeffery L. Taylor: I think we expect pretty normal organic growth for the business, excluding the impact from large dewatering, which we know is going to be down on a year over year basis, and so that'll that'll be in that.
Jeffery L. Taylor: Normal range that we talked about.
Jeffery L. Taylor: And that 3% to 5% range.
Jeffery L. Taylor: Fueling, I think fueling will be slightly lower this year, you know, still net positive overall, but they've come off of a really strong year in 2023, and we're seeing a bit of a normalization in terms of demand in that market. So still positive overall. And then distribution, distribution on an organic basis, I think similar to what we see in water systems and, you know, possibly some upside in distribution as the market picks up as we come into season and the market picks up.
Jeffery L. Taylor: Fueling I think fueling there'll be slightly lower than this year.
Jeffery L. Taylor: Still net positive overall, but they've.
Jeffery L. Taylor: They've come off of a really strong year in 2023, and we're seeing it.
Jeffery L. Taylor: Bit of a normalization and certainly in terms of demand in that market. So.
Jeffery L. Taylor: Still positive overall, and then distribution distribution on an organic basis I think similar to what we see in water systems.
Jeffery L. Taylor: And.
Jeffery L. Taylor: Possibly some upside in distribution.
Jeffery L. Taylor: As the market is weak.
Jeffery L. Taylor: Come into season, when the market picks up.
Matt J. Summerville: Got it. And then just a follow-up on water and distribution. If you look at the US and Canada, how did your business perform in terms of residential versus ag? And how are you thinking about, you know, the organic outlooks there for 24 relative to 25?
Matt J. Summerville: Got it and then just a follow up on kind of water and distribution. If you look at U S. Canada, how did your business perform in terms of residential versus AG and how are you thinking about.
Matt J. Summerville: Organic outlooks, there for 24 relative to 'twenty three.
Jeffery L. Taylor: Yeah, um... Interesting, interesting question: in the first quarter, on a year over year basis, residential was down slightly, I would say low single digits. And that's, you know, that's reflective of, you know, our groundwater business, which was somewhat impacted by weather during the quarter. Ag was down a little more in the quarter, ag was down mid-single digits for the quarter on a year-over-year basis, and I also believe weather was a factor that impacted ag overall.
Jeffery L. Taylor: Yeah.
Jeffery L. Taylor: Yes.
Jeffery L. Taylor: Interesting interesting question in the first quarter on a year over year basis residential was down slightly I would say low single digits.
Jeffery L. Taylor: And Thats thats reflective of.
Jeffery L. Taylor: In our groundwater business.
Jeffery L. Taylor: Which was somewhat impacted by weather during the quarter and was down a little more in the quarter AG was down mid single digits for the quarter on a year over year basis, and I also believe weather was a factor that impacted AG overall.
Gregg C. Sengstack: And then Matt, you know, our other residential surface pump business is essentially flat.
Gregg C. Sengstack: And then Matt or other residential surface pump business was essentially flat right.
Gregg C. Sengstack: Okay.
Matt J. Summerville: Okay, with respect to dewatering, given that business is coming off of a record year in 23, and it is going to be a top line, top line headwind this year. How much of a decline do you expect in large dewatering pumps on a revenue basis in 24 relative to 23 as we kind of think about modeling that in with Jeff's comments on the overall organic outlook for water? Yeah, Matt, so there's a, let me unpack that.
Matt: Okay. So those products.
Matt J. Summerville: <unk>.
Matt J. Summerville: With respect to dewatering, given I think that business is coming off of a record year in 'twenty three and it is going to be a top line and top line headwind. This year, how much of a decline do you expect in large dewatering pumps on a revenue basis and 24 relative to 'twenty three as we kind of think about.
Matt J. Summerville: Modeling that in with Jeff's comments.
Matt J. Summerville: Overall organic outlook for water expert business.
Speaker Change: Yes, Matt So let me unpack that a little bit there is a couple of pieces there. So.
Jeffery L. Taylor: Yeah, Matt, so let me unpack that a little bit. There's a couple of pieces there.
Speaker Change: When we talk about large dewatering, we have a large dewatering business.
Jeffery L. Taylor: So when we talk about large dewatering, we have a large dewatering business that is global, and then we have a piece of it that is primarily US and Canada, which is selling to the fleet rental company. And so we are seeing in the business to fleet rental companies, primarily in the US, where we saw a significant pullback on a year over year basis of about, you know, 50% in the first quarter.
Jeffery L. Taylor: Is it global and then we have a piece of it that is primarily U S, Canada, which is selling to the fleet rental companies.
Jeffery L. Taylor: And so we are seeing the business to the fleet rental companies primarily in the U S.
Jeffery L. Taylor: Where we saw the significant pullback on a year over year basis of about 50% in the first quarter.
Jeffery L. Taylor: Our business globally for the first quarter was down 50% in the U.S. and Canada, but it was actually up 10% outside of the U.S. And so that gets us to a global year-over-year decline of about 40%. So it's really the large fleet rental business in the US and Canada where we're seeing the pressure this year. You know, I think our business overall, we would expect it to be down in the mid teens for the full year, coming off of, you know, a record year in 2023 globally of about $200 million.
Jeffery L. Taylor: And our business globally for the first quarter was down 50% in the U S. Canada was actually up 10% outside of the U S and Canada, and so that gets us to the global year over year.
Jeffery L. Taylor: Decline of about 40%.
Jeffery L. Taylor: So it's really the large fleet rental business in the U S and Canada, where we're seeing the pressure in this year.
Jeffery L. Taylor: I think of our business overall, we would expect it to be down in the mid teens for the full year coming off of a record year in 2023 globally of about $200 million of sales.
Jeffery L. Taylor: Yeah.
Speaker Change: Perfect. Thanks, Jeff.
Gregg C. Sengstack: Thank you. I will now turn the call back over to CEO Gregg Sengstack for any closing remarks.
Speaker Change: Youre welcome.
Gregg C. Sengstack: Thank you I will now turn the call back over to CEO, Greg <unk> for any closing remarks.
Operator: Thank you for joining us this morning on our conference call, and we look forward to speaking to you in July with our second quarter results. Have a good one.
Gregg C. Sengstack: We thank you for joining us this morning on our conference call and we look forward to speaking to you in July with our second quarter results have a good week.
Operator: Ladies and gentlemen, thank you for participating. This does conclude today's program, and you may now disconnect.
Speaker Change: Ladies and gentlemen, thank you for participating this does conclude today's program and you may now disconnect.
Operator: Okay.
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