Q1 2025 Franklin Electric Co Inc Earnings Call
Yeah.
Speaker Change: Hello, and welcome to the Franklin Electric reports first quarter 2025 sales and earnings conference call.
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Speaker Change: It is now my pleasure to introduce interim Chief Financial Officer Russ.
Russ: Thank you Andrew.
Russ: And welcome everyone to Franklin Electrics first quarter 2025 earnings conference call joining.
Russ: Joining me today is Joe Rozanski, our Chief Executive Officer.
Russ: On todays call ill review, our first quarter business highlights then I will provide additional details on our financial performance and Joe will make some additional comments related to our key growth and value drivers along with our outlook. We will then take questions.
Speaker Change: 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.
Speaker Change: These statements are subject to various risks and uncertainties many of which could cause actual results to differ materially from such forward looking statements.
Speaker Change: A discussion of these factors may be found in the company's annual report on Form 10-K, and today's earnings release.
Speaker Change: All forward looking statements made during this call are based on information currently available and except as required by law.
Speaker Change: The company assumes no obligation to update any forward looking statements.
Speaker Change: Earlier today, we published a slide deck to accompany our prepared remarks.
Speaker Change: <unk> titled Q1, 2025 earnings presentation can be found in the Investor Relations section of our corporate website at Www Dot Franklin electric Dot com with that I will now turn the call over to Joe.
Joe Rozanski: Alright, good morning, everyone and thank you for joining today's call.
Joe Rozanski: Before we begin I'd like to take a moment to welcome Russ Leaguer, who recently took on the role of interim Chief Financial Officer, and will report our financials today.
Joe Rozanski: <unk> has been with Franklin electrics since 2023, serving as CFO of our water systems segment and brings more than 20 years of financial leadership experience to the company.
Joe Rozanski: We thank Russ for his commitment and stepping into this role and I look forward to continuing our partnership.
Joe Rozanski: With that.
Joe Rozanski: I would like to begin my thoughts on the first quarter on slide three.
Joe Rozanski: Underlying business performed in line with expectations, while we work through some weather related challenges earlier in the quarter, our distribution and our distribution business. The positive order trend from last year carried into the first quarter supporting a robust backlog in Q1, and giving us confidence as we look ahead.
Joe Rozanski: As we execute our strategy, we're focused on faster growing markets, making great use of our healthy balance sheet driving efficiency in our operations and building processes and teams to continue to deliver great service to our customers.
Joe Rozanski: We're pleased with our two acquisitions completed in the first quarter, bringing two great businesses and strong products into our portfolio.
Joe Rozanski: We expect integration to be well executed for these businesses to deliver great value to our customers.
Joe Rozanski: Touch on these topics later in the presentation.
Joe Rozanski: Our energy systems segment delivered strong results, which helped to offset the slower start in our distribution business demonstrating the strength of our diversified global portfolio.
Joe Rozanski: Several one time costs were a drag on first quarter results, namely expenses related to an executive transition and recent acquisitions. However, our core business fundamentals remained strong and I'm pleased with the response from our global teams to the uncertainty surrounding the tariff environment.
Joe Rozanski: Moving to page slide moving to page four on the slide deck I'd like to take a moment to thank our global Franklin electric team, our commitment to serving customers, bringing great products to market and leading in a difficult environment is showing great momentum.
Joe Rozanski: Past few months have been challenging as we navigate tariffs acquisitions accelerating our strategy. While my first few quarters that brought some change to our structure and focus the response dedication leadership and support from our global team it's been amazing.
Joe Rozanski: We will continue to build on our great history and reputation as we grow in 2025.
Joe Rozanski: Turning to results on slide five.
Joe Rozanski: Consolidated sales were down slightly as growth in our water systems and energy systems segment were offset by a decline in our distribution segment.
Joe Rozanski: Gross margin was up slightly for the quarter at 36% showing an underlying operating strength, even as we navigated two acquisitions, some FX headwind and a slower market.
Joe Rozanski: Operating margins for the quarter were 10% down slightly year over year as we absorbed onetime SG&A costs tied to an executive transition and acquisition related expenses. Excluding these items, which totaled about seven cents of EPS SG&A costs were favorable as compared to the prior year as we realize the benefit of our restructuring actions from.
Joe Rozanski: Previous quarters considering.
Joe Rozanski: The challenging macroeconomic environment and onetime costs, we are pleased with our performance and view this quarter as a productive start to the year.
Joe Rozanski: Before I turn the call over to Russ to discuss the financials in detail I'd like to give an overview of our segment performance, where we've seen some momentum.
Joe Rozanski: Water systems segments segment delivered flat sales for the first quarter in line with our expectations as unfavorable volumes were offset by strong pricing actions. Additionally, negative impact from foreign currency translation was mostly offset by incremental sales from our recent acquisitions. We also lapped, but we anticipated to be the final quarter.
Joe Rozanski: A difficult comparable period as a reminder, we capitalized on the pent up demand of our U S fleet business for large dewatering products during the prior year period and water treatment. We continued continue to see strength. Despite a weaker housing environment in the U S groundwater market remains healthy outs.
Joe Rozanski: Outside the U S performance was solid despite some currency related headwinds in South America and Turkey.
Joe Rozanski: Energy systems delivered another strong quarter with sales up 8%.
Joe Rozanski: Reflecting both positive market dynamics and solid execution by the team as both pricing and volumes were favorable we recorded growth across key product lines supported by robust demand in the U S energy sector.
Joe Rozanski: While our critical asset monitoring business had a slightly slower start to the year. We feel good about this activity in this space and expect to ramp up in the coming quarters.
Joe Rozanski: Energy systems continues to demonstrate our ability to execute and drive productivity and deliver great New solutions.
Joe Rozanski: The segment operating margins increased by 250 basis points in the quarter.
Joe Rozanski: Our distribution business faced some short term weather related disruption, particularly in the U S Midwest, where road restrictions due to frost impacted field installations for several weeks. However, we are encouraged by the team's ability to hold margin. Despite these challenges and softer sales. The fundamentals of this business remains solid and the market has improved throughout the quarter.
Joe Rozanski: We're committed to delivering premier customer service driving margin efficiencies through our recent cost actions and process improvements along with maintaining pricing discipline.
Joe Rozanski: Taken together the performances across our segments highlight the resilience and diversity of our portfolio and our adaptability to a changing changing conditions, while we continue to invest in long term growth.
Now I'm going to hand, the call over to Russ to review our financials in more detail.
Russ Leaguer: Thanks, Jeff.
Russ Leaguer: Our fully diluted earnings per share were <unk> 67 for the first quarter of 2025.
Russ Leaguer: <unk> 70 for the first quarter of 2024, while down from the prior year. We were pleased with the results from our base business.
Russ Leaguer: Moving to slide six.
Russ Leaguer: First quarter 2025, consolidated sales were $455 2 million a year.
Russ Leaguer: Year over year decrease of 1%.
Russ Leaguer: Sales decreased in the first quarter was primarily due to the negative impact of foreign currency translation and lower volumes in the distribution and water systems segments, partially offset by the incremental sales impact from recent acquisitions as well as favorable favorable results in the energy systems segment.
Russ Leaguer: Franklin Electric's consolidated gross profit was $163 9 million for the first quarter.
Russ Leaguer: Up from prior year's gross profit of $163 6 million.
Russ Leaguer: Gross profit as a percentage of sales was 36% in the first quarter, an improvement of 50 basis points compared to prior year.
Russ Leaguer: Selling general and administrative expenses were $119 6 million in the first quarter of 'twenty five.
Russ Leaguer: Turning to a $115 6 million in the first quarter of 'twenty for the increase in SG&A expenses was primarily due to employee separation costs related to an executive transition and the additional expense of our 2025 acquisitions, including various deal related costs.
Russ Leaguer: Consolidated operating income was $44 1 million in the first quarter of 2025% down $3 8 million or 8% from $47 9 million in the first quarter 2024.
Russ Leaguer: The decrease in operating income was primarily due to the higher SG&A costs previous previously mentioned.
Russ Leaguer: The first quarter of 2025 operating income margin was nine 7%.
Russ Leaguer: It is 10, 4% in the first quarter of 2004.
Russ Leaguer: Moving to segment results on slide seven.
Russ Leaguer: Water systems sales in the U S and Canada were up 2% compared to the first quarter of 'twenty four.
Russ Leaguer: At a product level sales of groundwater pumping equipment increased 6% and sales of water treatment products increased 7%.
Russ Leaguer: Sales of large dewatering equipment decreased 8% and sales of all other surface pumping equipment decreased 7% when compared to Q1 2024.
Russ Leaguer: Acquisitions contributed a 1% increase in sales and were offset by the negative impact of foreign currency translation.
Russ Leaguer: Water systems sales in markets outside the U S and Canada decreased 2% overall.
Russ Leaguer: Foreign currency translation decreased sales by 5% and recent acquisitions added roughly 4%.
Russ Leaguer: Excluding the impact of acquisitions and foreign currency translation sales in the first quarter of 2025 increased low single digits and EMEA were roughly flat in Asia Pacific and were down low single digits in Latin America.
Russ Leaguer: Water systems operating income was $43 4 million down $3 7 million versus the first quarter of 2020 for.
Russ Leaguer: The decrease was primarily due to lower gross margin and higher SG&A costs, primarily related to our recent acquisitions as well as the negative impact of foreign exchange.
Russ Leaguer: The operating income margin was 15, 1% a year over year decrease of 130 basis points.
Russ Leaguer: Distributions first quarter sales were $141 9 million versus first quarter of 2024 sales of $147 million a decrease of 3%.
Russ Leaguer: The distribution segment sales decrease was primarily due to lower volumes and the negative impact of commodity price declines.
Russ Leaguer: Distribution segment operating income was $2 1 million for the first quarter a year over year increase of <unk> 3 million operating income margin was one 5% of sales in the first quarter, an improvement of 30 basis points.
Russ Leaguer: First the prior year.
Russ Leaguer: Energy system sales in the first quarter were $66 8 million, an increase of $4 7 million or 8% compared to the first quarter of 24.
Russ Leaguer: Energy system sales in the U S and Canada increased 10% compared to the first quarter outside the U S and Canada energy system sales decreased 6%.
Russ Leaguer: Energy systems operating income was $21 9 million compared to $18 8 million in the first quarter of 2024.
Russ Leaguer: The first quarter of 2025 operating income margin was 32, 8% compared to 33% in the prior year, an improvement of 250 basis points.
Russ Leaguer: Operating income margin increased primarily due to favorable geographic mix of sales as well as price realization and cost management.
Russ Leaguer: The effective tax rate was 25% for the quarter compared to 22% in the prior year quarter. This change in the effective tax rate was driven by an increase in foreign earnings taxed at rates higher than the U S and less favorable discrete items and had an impact on EPS of approximately <unk> <unk>.
Russ Leaguer: Moving to the balance sheet and cash flows on slide eight.
Russ Leaguer: The company ended the first quarter of 2025 with a cash balance of $84 million.
Russ Leaguer: And with a $64 million.
Russ Leaguer: Outstanding under its revolving credit agreement.
Russ Leaguer: We used $19 5 million in net cash flows from operating activities during the first quarter compared to $1 4 million in first quarter of 2024, as we invested in higher inventory levels to get ahead of potential tariffs.
Russ Leaguer: We also invested $110 million for the bonds and pump and acquisitions during the quarter.
Russ Leaguer: The company purchased about 56000 shares of its common stock for approximately $5 4 million in the open market during the first quarter of 2025.
Russ Leaguer: As of the end of the first quarter of 2025. The total remaining authorized shares that may be repurchased is about $1 3 million.
Russ Leaguer: Yesterday, the company announced a quarterly cash dividend of <unk> 26 five.
Russ Leaguer: The dividend will be payable may 20 to shareholders of record on May eight.
Russ Leaguer: Moving to slide nine.
Russ Leaguer: While our underlying demand remained strong and plan to manage the tariff environment are in place. We are adjusting the lower end of our EPS guidance by <unk> 10.
Russ Leaguer: We are holding our full year sales expectations at 2.09 to 215 billion, but adjusting our GAAP EPS to a range of $3 95.
Russ Leaguer: The $4 25.
Russ Leaguer: While we have price and mitigation plans to account for the tariffs. This range reflects some further restructuring and growth investments we plan to take in 25 <unk>.
Russ Leaguer: Uncertainty in the market and some added expense in accelerating adjustments to our supply chain.
Joe Rozanski: Now I will turn the call back to Joe for some additional comments.
Joe Rozanski: Thanks, Ross turning to slide 10, I'd like to bring back our value creation framework, which we introduced last quarter. Our framework framework is anchored on four key pillars growth acceleration resilient margin strategic investments in top tier talent.
Joe Rozanski: For growth, we're leveraging our strong customer relationships focusing on high growth high growth verticals and utilizing our global presence to introduce new innovative solutions across our various markets. Our margin integrity is supported by our efficient efficient operating system and data driven tools strategic investments, including M&A enhance our competitive <unk>.
Joe Rozanski: <unk> and our commitment to attracting developing and retaining top talent drives our value engine forward.
Joe Rozanski: Moving to slide 11, I want to highlight an increased focus on new products and innovation and the markets, we know well and the ones we feel are growing faster.
Joe Rozanski: We've launched a series of initiatives in the past year to increase our velocity focus on fewer more impactful launches.
Joe Rozanski: And use our new product development methodology to increase our speed to market we.
Joe Rozanski: We have some aggressive goals for 25 for.
Joe Rozanski: 25, and expect this trend to continue over the next few years.
Joe Rozanski: There are a few examples of exciting new products and dewatering drilling up recent acquisitions and incorporating new features to bring these products and dewatering systems to new markets.
Joe Rozanski: And two new solutions for our energy systems segment. The first our overall oversight solution is an innovative system to help our major marketers remotely monitor and recover our critical systems during power disruptions. The second our new optimizer product, which detects potential circuit breaker deficiencies and enables proactive.
Joe Rozanski: Maintenance actions.
Joe Rozanski: Moving to slide 12 <unk>.
During the quarter, we executed two strategic acquisitions pump and a dewatering pumping business focused on the mining on the mining industry and the dewatering market based in Perth, Australia, and Barnes to Colombia highlighted here.
Joe Rozanski: Real pump manufacturer based in Bogota, Colombia with assembly locations across Latin America. These.
Joe Rozanski: These two acquisitions enhance our product portfolio expand and enhance our channel reach and AD vertically integrated businesses, including good foundry capacity in regions, which Franklin electric already has a strong presence.
Joe Rozanski: Welcome to our new team members.
Joe Rozanski: Before we open it up for Q&A I want to take a moment to address the current tariff environment and how we're managing through it.
Joe Rozanski: At present, we're in a strong competitive position and we feel good about where we stand.
Joe Rozanski: We have yet to see any broad based impact to demand, though it is possible that we see some pressure as customers react to a changing trade landscape that said our business is largely in region for region and centered around replacement demand, which historically tends to be resilient, even in periods of broader economic softness.
Joe Rozanski: We continue to remain highly engaged with our supply partners and customers and we're monitoring.
Joe Rozanski: Forward indicators closely.
Joe Rozanski: While our guidance incorporates all known tariffs, we expect that we will have more visibility in the medium to long term tariff environment and we'll be prepared to talk about any future impacts when we speak again in July.
Joe Rozanski: Within our supply chain, we move selectively to position inventory for success, while a slight Q1 drag on working capital. We felt it was prudent to best position our business to mitigate potential tariff unknowns.
Joe Rozanski: We're also active on the cost and pricing front working to reduce our costs, where we can and diligently pass along cost.
Joe Rozanski: It costs where appropriate.
Joe Rozanski: Our team has historically done a fantastic job of navigating through various economic cycles and periods of uncertainty and I'm proud of their execution this quarter.
Joe Rozanski: We put our proven playbook to work and we feel we have an opportunity to gain share in regions with meaningful manufacturing footprints, we have taken thoughtful actions on inventory pricing and cost optimization and remain confident and optimistic about our competitive position.
We will now turn the call over to Andrew for questions.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.
Speaker Change: Your question. Please press Star one again, one moment please for our first question.
Ryan Connors: Our first question comes from the line of Ryan Connors with Northcoast research.
Speaker Change: Okay.
Speaker Change: Good morning, good morning, a few questions here.
Speaker Change: Yeah, So I wanted to actually start on the energy segment.
Speaker Change: Just remarkable margins there.
Speaker Change: Almost a third of the profitability really on the operating income in the quarter. So should we be extrapolating.
Speaker Change: That type of margin or is that mix benefit, but really boosted it in the first quarter, which should we expect that to kind of normalize as we move into the middle part of the year.
Speaker Change: Yes, I think Ryan on that what we've said is we don't expect the same growth that you've seen over the last five or six quarters, but we do expect to hold those margins.
Speaker Change: Had a strong a strong state and really the reason there's a couple of reasons for that one is.
Speaker Change: We've migrated that business to smarter solutions for our end customers. So you'll see a general move into those products and a lift that that provides to margin so a little bit less on the commodity side more on the smarter solutions there.
Speaker Change: They also did a great job managing price managing productivity.
Speaker Change: Which contributed to their Q1 result.
Speaker Change: Expect those margins to stay strong, but not to see the continued increase that you've seen over the last four five quarters or so.
Speaker Change: Got it okay.
Speaker Change: Then.
Speaker Change: Secondly on the on the water segment, you talked about healthy order trends, which is great to hear.
Speaker Change: But you yourself also mentioned youre investing in inventory any sign that there is some kind of a tariff.
Speaker Change: Pull forward associated with that.
Speaker Change: With that order growth or do you think thats really organic.
Speaker Change: Yes.
Speaker Change: While we tend to think its organic we've looked for bullwhips in the supply chain. We've looked for people, making big pulls ahead I think related to the inventory positioning we use the term selective for a reason and that is <unk>.
Speaker Change: Products that we felt were most exposed we've got relative to some of our peers are relative small exposure to China, but we still wanted to make sure that we were positioning ourselves well and it turns out that was prudent.
Speaker Change: We when we look at our channel, we see some selective positioning and selective buildup, but it's not across the board and are in our view of inventory in the channel is that it's at a relatively stable position.
Speaker Change: So some of that increase we made sure that our channels, we're well stocked and we were prepared for it but we haven't seen a huge pull in our channels and we don't think were sitting on heavy inventory in the channels from a from a historical standpoint, as we get ready for busy season, and especially related to the tariff environment.
Speaker Change: And if I could add on that.
Speaker Change: A significant chunk of our build in inventory if you look on a.
Speaker Change: On sequential basis on a quarter over quarter and.
Speaker Change: Our over 2020 for quarter one.
Speaker Change: The two acquisitions that we made in March.
Speaker Change: And we ended 2024.
Speaker Change: The lowest level of total inventory in the last three to four years, we generally have a fairly sizable build in Q1 to get into the busy season.
Speaker Change: Now some of that season was delayed in our distribution business because of the weather that Joe spoke about.
Speaker Change: But we feel pretty good about the inventory level and where we sit right now.
Speaker Change: Got it okay.
Speaker Change: And then just a couple others on distribution.
Speaker Change: Is M&A still a priority there I know.
Speaker Change: Very active in M&A for a while it seems to have slowed down is that due to there being a lack of.
Speaker Change: Assets for sale or is it just less of a strategic priority curious on the M&A there and then also with distribution.
Speaker Change: What is the weather comp looked like in the second quarter I know, that's a headwind in <unk> just trying to get a sense of the setup for the second quarter.
Speaker Change: Yeah, we'll take those in order I think on the first one we're always still active and staying close to the market. If there is if there is a good acquisition for us in the distribution space.
Speaker Change: One thing we've been working on and I alluded it alluded to it in the script is we also feel that we've got some benefit in terms of how we serve because we've got a great footprint and bringing some of those efficiencies. After the last three or four years of acquisitions. That's a key focus for us, but we're not we're not opposed to doing another deal in that.
Speaker Change: Space I think our focus right now is serving the market building those efficiencies and making sure that we can execute kind of unparallel. So.
Speaker Change: Yes, that's where we sit right now for acquisition I think related to the wetter weather pattern in Q2.
Speaker Change: We feel we're in a better position.
Speaker Change: Then coming into last year, we've kind of seen a flip in terms of one of the wettest years last year that we've gone through in a year that looks more normal this year and we definitely see that and it gives you. If you look at the move to.
Speaker Change: While weather pattern Thats drier, we see that benefit starting to show up in some of our regions.
Speaker Change: I think the blip in the upper Midwest related to some of the Frost restrictions.
Speaker Change: Just basically due to a very very warm warm winter last year, where the restrictions came up earlier that we got that benefit in March and this year. It was pushed out three or four weeks, so but Q2.
Speaker Change: From what we can see right now we feel good about the weather pattern, obviously hard to predict but.
Speaker Change: Kind of where we sit right now.
Speaker Change: Okay.
Speaker Change: Super Thanks for your time this morning.
Speaker Change: Brian Thank you.
Speaker Change: Thank you and our next question comes from the line of Matt Summerville with D. A Davidson.
Speaker Change: Good morning, guys.
Speaker Change: Good morning.
Speaker Change: Couple questions I, just want to make sure I understand the tariff exposure, while youre seemingly able to mitigate it I guess I wanted to understand if it were to go on mitigated what would your current tariff exposure look like.
Speaker Change: <unk>.
Speaker Change: Help me help me sort of understand.
Speaker Change: The groundwater business was performing in North America.
Speaker Change: Think about it in terms of the residential side of it.
Speaker Change: AG side, and then I may have a follow up.
Speaker Change: Sounds good I'll take the I'll take the tariff overview, and then I'll turn it over to Russ who can give you some more detail on groundwater.
Speaker Change: The tariffs obviously have been in place for the last few years, so coming into this year as we do every year is to make sure that we're more than accounting price price plus productivity to offset inflation and we had a good start to the year we added.
Speaker Change: Not quite $60 million of exposure over the course of.
Speaker Change: Liberation day, and some of the other tariffs that were put on so so that is that was the target for us to make sure that we mitigated and offset and we've had a series of increases. We've we've tried to be thoughtful and measured in terms of what we can account for internally and what we need to pass along and most of those actions have been taken.
Speaker Change: Clearly, it's hard to predict exactly what's going to happen with tariffs as you know Matt.
Speaker Change: On these calls here in the last few weeks, what we wanted to do is to make sure that we kind of played forward a few different scenarios for what could happen and I feel we're in a we're in a strong position this year to do that so so again <unk>.
Speaker Change: <unk> offset for this year, we feel we're in a healthy spot. In addition, we're looking to take some other actions to make a few other changes to our footprint and supply chain just to make sure. We're in a better spot to serve customers as we go forward.
Russ Leaguer: Russ do you want to cover groundwater yes.
Russ Leaguer: Thank you your question on growth and groundwater so on the residential side in the first quarter.
Russ Leaguer: Resi was up about 11%.
Russ Leaguer: <unk> was up about 3% now I will caution that residential number does include.
Russ Leaguer: Sales to our distribution partners that headwater that.
Russ Leaguer: We will see in the eliminations.
Russ Leaguer: But the.
Russ Leaguer: That aside the market was strong for us and mid single digit growth.
Russ Leaguer: So pretty strong there and the order book is largely held up as well.
Russ Leaguer: Sure.
Russ Leaguer: Thanks.
Russ Leaguer: Just just as a follow up.
Russ Leaguer: Question on the order book can you maybe talk about what your organic book to Bill look like in water in Q1.
Speaker Change: From an M&A standpoint, Joe I think you indicated in the past, maybe a willingness to explore something a bit more transformational for Franklin maybe just an update on your thought there and how that.
Speaker Change: Final may be developing for you guys yes.
Matt: Yeah, I'll start with that with that last question. It's a good good question Matt.
Matt: As I, probably have told you before as a CEO in its first year, there's a lot of good ideas that come our way in.
Speaker Change: And myself with John brand and our counsel and his team.
Speaker Change: Staying very close to what we think is going to be a nice funnel and some good opportunities.
Speaker Change: I think we've got opportunities in two spaces, obviously some of the strategic bolt ons that put us in a strong position around the world you saw that in Q1, we will continue to look for for those those deals I think related to something thats more strategic yes, we are open to it I think.
Speaker Change: Our position with a healthy balance sheet and the ability to be smart about these deals puts us in a nice spot. So we're working on on networking, we're working with our partners to make sure that we've got good visibility to what may be coming up and yes, we're still positive about that.
Speaker Change: Some of the noise and some of the disruption here over the last 60 days.
Speaker Change: We're making sure that we're prudent with capital, but I still think that there's going to be opportunities to do something more strategic and we're keeping our ears to the ground.
Speaker Change: And then any quantification you have on the organic book to Bill in water in the quarter. Thank you yeah sure.
Speaker Change: On the book to Bill book to Bill was above one for the quarter our backlog.
Yes.
Speaker Change: I will caution again backlog incorporate some of our.
Speaker Change: Industrial business with fleet.
Speaker Change: But it was up.
Speaker Change: Mid to high single digits in the quarter.
Speaker Change: Got it thanks guys.
Speaker Change: Yes, Thank you Matt.
Speaker Change: Thank you and.
Speaker Change: And our next question comes from the line of Walter Liptak with Seaport Research.
Speaker Change: Yes.
Walter Liptak: Hi, Thanks, Good morning, guys good morning.
Speaker Change: A couple of follow ups first on the.
Speaker Change: The tariffs I'm wondering if you could.
Speaker Change: You could help us understand the supply chain that you have.
Speaker Change: From from China.
Speaker Change: Any percentages that you could give us some cost of goods sold things like that do you still have ample supply and it sounds like you can you can pass along any kind of tariff related pricing.
Speaker Change: The correct way to think about it.
Speaker Change: Yes, that's correct.
Speaker Change: Our overall percentage of Cogs from China is under 10%. So we're not we're not hugely exposed there.
Speaker Change: And some of some of our opportunity or some of that exposure I would say.
Is it a couple of product areas that we work to try to mitigate before coming into the second quarter, Hence our comment on some inventory Paul.
Speaker Change: And I think there is further opportunity to do that I referenced the Barnes deal.
Speaker Change: One of the things that we love about the Barnes deal is giving us added foundry capacity in the Americas.
Speaker Change: We can we can take our tools and look at repositioning. So we're continuing to do that we're going to make some investments to go faster and we feel good about about that that ability to protect ourselves from any future noise or disruption there specifically to China. So yeah. That's that's that's.
Speaker Change: That's the view on China, and our exposure in some actions there.
Speaker Change: Was there another question I'm, Okay, Yes, yes, and then just.
Speaker Change: A follow on to the sectors.
Speaker Change: I Wonder if you could talk a little bit about just.
Speaker Change: The rest of it sounds like it's.
Speaker Change: Why why do you think youre seeing better growth.
Speaker Change: This year, maybe talk a little bit about how April is going and then.
Speaker Change: With the groundwater in AG.
Speaker Change: How is it seems like it's a lot hotter and dryer this year.
Speaker Change: <unk> com.
Speaker Change: How is the visibility as youre getting into the second quarter.
Speaker Change: Yes, maybe just start on resi and and we can then give a couple of comments on.
Speaker Change: Groundwater Nag overall, but resi, obviously housing starts and sales arent arent arent the driver for that growth for us so.
Speaker Change: What we've done here over the last few years in the water treatment business and then in the water business is really to focus on.
Speaker Change: How we serve on making sure that we've got the right footprint and putting ourselves in a good position to grow. So we view that as we're taking some share in that <unk> space, but all of our indicators were positive in Q1 and continue to be positive in April so.
Speaker Change: Any boost any help anything that comes our way from a from an overall macro standpoint would be would be in addition to that but we feel good about about our position. Thus far in resi continues to stay strong I think your question back to my weather comments earlier.
Speaker Change: Groundwater and general municipal AG et cetera, we think is at least from a weather standpoint, it's a more supportive environment. This year than it was last year. So.
Speaker Change: Those are.
Speaker Change: Trends that we're looking out for on on a daily and weekly basis here, but from what we see right now hotter and dryer.
Speaker Change: As an accurate representation.
Speaker Change: Okay, great. Okay. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you and our next question comes from the line of Mike Halloran with RW Baird.
Speaker Change: Hey, good morning, guys. Good morning, good morning, Mike.
Speaker Change: Just wanted to clarify the guidance as you think about the year from two respects first.
Speaker Change: <unk>.
Speaker Change: Are we implicitly saying pricing up some organic demand down some to kind of hold that revenue range.
Speaker Change: Or are we just saying we don't totally know yet so keeping it as an offset against each other it's fair.
Speaker Change: Then secondarily, maybe just some thoughts on how you're expecting the cadence seem to play out through the year.
Speaker Change: It's just relatively normal seasonality based on what we know right now and then we will adjust as we.
Speaker Change: The uncertainty does or does not hit.
Speaker Change: With the P&L.
Speaker Change: Yeah.
Speaker Change: To your first question, Mike that's a good assumption youre, making which is pricing will be up but we expect for some pockets of our products that that would push down some of the organic growth.
Speaker Change: So that is that is roughly the offset that you see which is why we are holding sales because there'll be some lift to price, but obviously some pressure on volume and that pressure.
Speaker Change: Comes in a couple of very specific segments. So we're keeping a close eye on that but that is the offset that we have.
Speaker Change: We have made as we as we put that guidance together in terms of the cadence.
Speaker Change: Yes, some seasonality in distribution in quarter one.
Speaker Change: The busy season as we see it right now our indicators are it looks it looks generally positive. So so we see.
Speaker Change: Momentum as I mentioned before as we kind of exited the quarter, we see order rates largely in line with what we expected as we get into.
Speaker Change: And to the end of April here.
Speaker Change: I think the back half for US is obviously a lot can change the world isn't moving place here, but for the most part we feel good about our plans, where we can see a little further out in terms of backlog take for an example, the energy business.
Speaker Change: Strong backlogs and feel relatively good about about.
Speaker Change: About the next couple of quarters I think it is harder for us to see in that distribution business, where it's obviously shorter cycle.
Speaker Change: But what we tend to look there is that short cycle trends, obviously, leading indicators, we talked to and put.
Speaker Change: The heat map together for our major customers the drillers.
Speaker Change: Et cetera and.
Speaker Change: There is a general confidence there in terms of the outlook and in terms of the order book.
Speaker Change: And two more just related to that remind me what the percentage of replacement is for your distribution and your water businesses on the more.
Speaker Change: Submersible side of things.
Speaker Change: It's north of 70% 75%.
Speaker Change: Okay.
Speaker Change: And then lastly, just.
Speaker Change: In light of all the tariffs maybe just thoughts from your perspective on how your footprint is positioned competitively.
Speaker Change: All else equal.
Speaker Change: Yes.
Speaker Change: One is.
Speaker Change: As we are.
Speaker Change: Comment on in region for region, it's important for US we've never been a big build a huge factory across the world and then move products. So so labor arbitrage and really chasing that product has never been as never been Franklin key focus.
Speaker Change: We worked on putting manufacturing footprint close to where we serve now that's not that's not pure perfect, but in general that's been part of our strategy.
Speaker Change: When I look at some of our investments and Russ alluded to a few investments that we want to accelerate and make sure that we get well executed this year.
Speaker Change: We're expanding our manufacturing footprint in Turkey, our expanding our manufacturing footprint in India.
Speaker Change: Both of those are largely to serve those regions in some cases, it's to serve the middle east and to serve a few other places.
Speaker Change: In addition, when we looked at Barnes, we looked at that vertical capability and how we would make good use of that foundry not only for what is now a very nice sizable market for us in Latin America, but obviously to serve Mexico, Northern Latin America and the U S.
Speaker Change: So those are in process right now and we're working on taking advantage of that I think from a footprint standpoint. Those are those are some.
Speaker Change: Strategic advantages that we have we've also looked at I know as other companies have in terms of what makes sense to move or the shift for us it's more about assembly and supply chain not a major shift in our manufacturing strategy overall.
Speaker Change: Great I appreciate it thanks.
Thank you.
Speaker Change: Thank you and I'm showing no further questions at this time, so with that I'll hand, the call back over to Chief Executive Officer.
Speaker Change: The remarks.
Speaker Change: Yes.
Speaker Change: Thank you very much and thank you everyone for joining us today I'd like to close out by sharing that I'm very pleased with our team's hard work and execution. During this very busy first quarter, we feel good about our start to the year and how we're positioned as we enter the second quarter.
Speaker Change: We are widening our guidance on the low end of EPS, but have plans in place to address address tariffs solve problems and serve our customers every day.
Speaker Change: We feel good about our strategy, it's the right one and we're focused on improving our margins finding the next best acquisition and delivering great new products to our customers. Our expectation is for a great year of progress and strong performance.
Speaker Change: Thank you, everyone and have a great week.
Speaker Change: Ladies and gentlemen, thank you for participating this does conclude today's program and you may now disconnect.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Yes.