Q2 2025 Franklin Electric Co Inc Earnings Call
Operator: Sales and Earnings Conference At this time, all participants are in a listen only After the speaker presentation, there will be a question and answer session.
Hello and welcome to the Franklin. Electric reports, second quarter, 2025 sales and earnings conference call.
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At this time, all participants are in listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *1 on your telephone. You will then hear an automated message advising you that your hand has been raised.
Jennifer Wolfenbarger: advise that today's conference is being It is now my pleasure to introduce Chief Financial Officer, Jennifer. Thank you, Andrew, and welcome everyone to Franklin Electric's second quarter 2025 earnings conference call.
To withdraw your question. Please press star 1 1 again.
Please be advised that today's conference is being recorded.
It is now my pleasure to introduce Chief Financial Officer. Jennifer wolfenbarger
thank you, Andrew, and welcome everyone to
Jennifer Wolfenbarger: Joining me today is Joe Ruzynski, our chief executive officer, and for Q&A section, Russ Fleeger, our water system CFO. On today's call, Joe will review our second quarter business highlights, and 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.
Order 2020.
Earnings conference call joining me today is Joe rosinski, our chief executive officer and for Q&A section Russ Swagger our water system CFO.
Jennifer Wolfenbarger: We will then take questions.
Jennifer Wolfenbarger: 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 1990. 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 earnings release.
On today's call, Joe will review our second quarter business highlights and 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'll 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.
Jennifer Wolfenbarger: 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.
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 earnings release.
Jennifer Wolfenbarger: Earlier today, we published a slide deck to accompany our prepared remarks. The slides can be found in the investor relations section of our corporate website at www.franklin-electric.com.
All forward-looking statements made during this, call are based on information currently available and accept as to be as required by law. The company assumes, no obligation to update any forward-looking statements.
Joseph Ruzynski: With that, I will now turn the call over to Joe. Joe.
Joseph Ruzynski: Thank you, Jennifer. And good morning, everyone. Thank you for joining today's call.
Joseph Ruzynski: Let me start our call today by highlighting our team's strong results in the second quarter on slide three. It reflects our adaptability, commitment to our employees and customers and strategic execution. As I finished my first year as CEO, and I've seen the great work that our Franklin team is doing to serve, innovate and grow, I'm proud of the progress we've made and how we've responded to change in a challenging external environment. All three segments saw organic growth with a good mix of price and volume. Overall, we've set new high marks for revenue, income, and earnings per share.
Earlier today we published a slide deck to accompany our prepared remarks. The slides can be found in the investor relations section of our corporate website at www.franke.com. Thank you, Jennifer and good morning everyone. Thank you for joining today's call.
Let me start our call today by highlighting our team's strong results in the second quarter on slide 3.
It reflects our adaptability commitment to our employees and customers, and strategic execution.
I finished my first year as CEO, and I've seen the great work that our pricing team is doing to serve, innovate, and grow. I'm proud of the progress we've made and how we've responded to change and the challenging external environment.
All three segments are organic growth with a good mix of price and volume.
Joseph Ruzynski: We delivered a sales record in our water and distribution segments and record operating income in our energy sector. Overall, end market demand is mixed globally and has remained relatively stable. We continue to see encouraging order trends as we exit the quarter, and our healthy backlog gives us confidence in our ability to sustain this momentum as we move forward. Weather conditions were largely neutral overall, existing home sales and housing starts remained soft, but our ability to add new customers, deliver the best service in our industry and bring new products to market and helped us find good paths to enable growth.
Overall, we've set new high marks for revenue income and earnings per share.
We delivered a sales record in our water and distribution segments and record operating income in our energy segment.
Overall and market demand is mixed globally and has remained relatively stable.
We continue to see encouraging order Trends, as we exit the quarter, and our healthy backlog gives us confidence in our ability to sustain this momentum as we move forward.
weather conditions were largely neutral overall,
Joseph Ruzynski: Importantly, our pricing actions have been successful, helping us protect margins during the recent tariff-driven volatility in the market. Our strong top line results and operational execution helped offset some of our hyperinflationary regional markets and several one-time costs, mostly expenses related to recent acquisitions, which are integrating wealth. We also continue to execute our long-term strategy, focusing on faster-growing markets, capitalizing on our healthy balance sheet, driving efficiency in our global operation, and building processes and teams while continuing to deliver great service to our customers.
Existing home sales and housing starts remain soft, but our ability to add new customers, deliver the best service in our industry and bring new products to Market and help us find good paths to enable growth.
Importantly, our pricing actions have been successful, helping us protect margins during the recent tariff driven volatility in the market.
Our strong Topline results and operational execution, helped to offset some of our hyperinflationary regional markets and several 1-time costs. Most of the expenses related to recent acquisitions which are integrating well.
We also continue to execute our long-term strategy focusing on focusing on faster. Growing markets capitalizing on our healthy balance sheet driving efficiency in our Global operation.
Joseph Ruzynski: While the global markets remain uncertain in the face of tariffs and commodity inflation, we've been disciplined in our plans and response and are poised to execute in the second half.
And building processes and teams while continuing to deliver great service to our customers.
Joseph Ruzynski: Moving to page four.
While the global markets remain uncertain in the face of tariffs and commodity inflation, we've been disciplined in our plans and response, and are poised to execute in the second half.
Joseph Ruzynski: I'd like to take a moment to touch on the incredible team and culture we're building here at Franklin. Culture has been a strength of Franklin in our storied history, and we're excited to build on this strong foundation. One of our key tenants is being a great place to work and attracting the best talent.
Moving to page 4.
I'd like to take a moment to touch on the incredible team and culture we're building here. At Franklin culture has been a strength of Franklin and our story history, and we're excited to build on this strong Foundation.
Joseph Ruzynski: With that, I'm excited to welcome Jennifer Wolfenbarger as our new CFO. Jennifer joins us with extensive financial leadership experience in global operations, most recently serving as chief financial officer for the insulation business at Owens Corning. She brings deep expertise in financial planning and analysis, accounting, operational finance, and strategic business partnerships. and she has led finance teams supporting complex global business. We're confident that her strong leadership and her global perspective will be a tremendous asset to Franklin Electric as we continue to execute our growth strategy.
1 of our key. Tenants is being a great place to work and attracting the best talent with that. I'm excited to welcome Jennifer Jennifer wolf and Barger is our new CFO.
Business, that Owens Corning.
She brings deep expertise in financial planning and analysis, accounting operations, finance, and strategic business partnerships.
She has led Finance teams supporting compact complex, Global businesses.
Joseph Ruzynski: I would also like to extend my sincere thanks to Russ Fleeger for stepping in as Interim CFO over the past several months. Russ will return to his role as our Water Systems Segment CFO, where his leadership continues to drive meaningful impact.
We're confident that her strong leadership and our global perspective will be a tremendous asset to Franklin Electric as we continue to execute our growth strategy.
I would also like to extend my sincere. Thanks to rust Lear for stepping in as interim, CFO over the past several months,
Joseph Ruzynski: Additionally, I'm thrilled to welcome Daniella Williams as our new Chief Human Resources Officer. Daniela's deep expertise in HR technology, talent development, analytics, and global workforce strategy will be instrumental in ensuring that we're well positioned to support our employees and customers well into the future.
What Russ will return to his role as a water system, segments? CFO? Where his leadership continues to drive meaningful impact?
Additionally, I'm thrilled to welcome Danielle Williams as our new Chief Human Resources Officer.
Joseph Ruzynski: Thank you to our Global Franklin team and welcome to our new leaders.
Danielle is deep expertise in HR technology, Talent Development analytics and Global Workforce strategy will be instrumental in showing that we're well positioned to support our employees and customers well into the future.
Jennifer Wolfenbarger: Turning to results on slide five. Overall, we delivered strong consolidated sales growth of 8% with growth across all segments. While gross margin was down slightly, consolidated operating margins reached 15%, driven by strong execution and improved SG&A in our energy and distribution segment.
Thank you to our Global Franklin team and Welcome to our new leaders.
Turning to results on slide 5.
Overall we delivered a we delivered strong Consolidated, sales growth of 8% with growth across all segments.
Jennifer Wolfenbarger: Despite the continued macro uncertainty related to tariffs and several one-time acquisition-related costs in the quarter, I'm impressed with our team's response and our ability to drive growth in this area. Looking at our segment results in more detail, water systems delivered a solid sales result of 8% year-over-year, benefiting from favorable pricing, volume, and recent acquisitions. Similar to last quarter, the groundwater market remains steady, where we captured strong price utilization in the U.S. We've lapped the difficult, difficult comparable period in our U.S. fleet business. and the business exhibited strong growth in the second quarter. The segment did, however, see a drag on margins as a result of mix stemming from sales related to large dewatering products and the recent acquisition related costs.
While gross margin was down slightly Consolidated operating. Margins reached. 15% driven by strong execution and improved sgna and our energy and distribution segments.
Despite the continued macro uncertainty related to tariffs and several 1-time acquisition related costs in the quarter, I'm impressed with our team's response and our ability to drive growth in this environment.
Looking at our segment results in more detail. Water Systems, delivered, a solid sales. Result of 8% year-over-year, benefiting from favorable pricing volume and recent acquisitions.
Similar to last quarter, the ground, the groundwater Market remains steady where we captured strong price realization in the US.
We've left the difficult difficult comparable period in our us, Fleet business.
Jennifer Wolfenbarger: Energy delivered 6% sales growth, driven by favorable volume and price as international markets and our grid business picked up steam. As we look toward the second half of the year, we're excited about upcoming projects in places like India and Saudi Arabia. The segment also had strong operating income and operating income margins, with margins improving by 200. While margins have expanded materially in recent quarters, we expect to remain comfortably around this range in the near term. We're optimistic about our grid and asset monitoring business as it's rebounded nicely and is benefiting from expanded channels and new customer acquisitions.
And the business, exhibited strong growth in the second quarter. The segment did however, see a dragon margins, as a result of mixed stemming from sales related to large de water and products, and the recent acquisition related costs,
Energy delivered, 6% sales growth driven by favorable volume and price in as International markets and our grid business picked up scenes.
As we look toward the second half of the Year, we're excited about upcoming projects and places like India and Saudi Arabia.
The second also had strong operating income and operating income margin. But margins improving by 200 basis points.
Jennifer Wolfenbarger: Distribution also delivered a strong quarter with record sale, despite some negative impact of storms and another wet year. The segment recorded 5% growth driven largely by higher volumes. Operating margins improved by 300 basis points. supported by Strong Operational Execution. an improved pricing environment and the stabilization of commodity prices. This is an encouraging trend for this business.
While margins have expanded materially in recent quarters, we expect to remain comfortably around this range in the near term. We're optimistic about our grid and asset monitoring business, as it has rebounded nicely and is benefiting from expanded channels and new customer acquisitions.
Distribution also delivered a strong quarter with record sales, despite some negative impacts of storms in another.
the segment recorded, 5% growth, driven largely by higher volumes, operating margins, improved by 300 basis points, supported by strong operational execution,
Jennifer Wolfenbarger: I'm now going to hand the call over to Jennifer to review our financials in more detail. Thank you, Joe. Our fully diluted earnings per share were $1.31 for the second quarter 2025 versus $1.26 for the second quarter 2025, up six cents from the prior year. Moving to slide six, second quarter 2025 consolidated sales were $587.4 million, a year-over-year increase of 8%. The sales increase in the second quarter was due to the incremental sales impact from recent acquisitions and higher volume and price in all three segments, partially offset by the negative impact of foreign currency translation, primarily due to the Brazilian reality.
And improved pricing environment and the stabilization of commodity prices. This is an encouraging trend for this business.
I'm now going to hand the call over to Jennifer to review our financials in more detail.
Thank you, Joe.
Our fully diluted earnings per share were 1.31 cents for the second quarter of 2025 versus 1.26 cents for the second quarter of 2024, up 6 cents from the prior year.
Moving to slide 6. Second quarter, 2025 Consolidated sales for 587.4 million a year over year increase of 8%.
Jennifer Wolfenbarger: Franklin Electric's consolidated gross profit was $211.8 million for the second quarter 2025, up from the prior year's gross profit of $199.8 million. The gross profit as a percentage of net sales was 36.1% in the second quarter 2025, a decrease of 70 basis points compared to the prior year. Moving on to SG&A expense, we've seen 120 basis point improvement in our SG&A as a percent of sales metric for the year over year as a result of cost improvement actions taken in the last year. SG&A expenses were $123.5 million in the second quarter of 2025, compared to $120.6 million in the prior year.
The sales increase in the second quarter was due to the incremental sales impact from recent acquisitions and higher volume and price. In all 3 segments, partially offset by the negative impact of foreign currency translation primarily due to the Brazilian real.
Franklin Electric's Consolidated. Gross profit was 211.8 Million for the second quarter, 2025 up from the prior Year's gross profit of 199.8 million. The gross profit is a percent of the percentage of net sales was 36.1% in the second quarter, 2025 a decrease of 70 basis points compared to the prior year.
Moving on to SG&A expense, we've seen a 120 basis point improvement in our SG&A as a percent of sales metrics for the year-over-year, as a result of cost improvement actions taken in the last year.
Jennifer Wolfenbarger: The increase in SG&A expense was primarily due to the additional expense impact of our 2025 acquisitions, including various deal-related costs. Absent acquisition related SG&A the company experienced a decrease in SG&A expense year rear of approximately 2.3 million dollars as a result of actions taken in Q4 of 2024. Consolidated operating income was $88.1 million in the quarter, up $9 million or 11% from $79.1 million in the prior year. The increase in operating income was primarily due to higher sales and cost management. Operating income margin is 15%, up from 14.6% year over year.
for $123.5 million in the second quarter of 2025 compared to 120.6%.
The increase in SG&A expense was primarily due to the additional expense impact of our 2025 acquisitions, including various deal-related costs.
Absent acquisition related sgna the company. Experienced a decrease in, estimated expense your rear of approximately 2.3 million as a result of actions taken in Q4 of 2024.
Consolidated, operating income was 88.1 million in the quarter of 9 million or 11% from 79.1 million in the prior year.
The increase in operating income was primarily due to higher sales and cost management.
Jennifer Wolfenbarger: Moving to segment results on slide 7, water system sales in the U.S. and Canada were up 5% compared to the second quarter of 2024. At a product level, sales of large dewatering equipment increased 20%. Sales of water treatment products increased 7% driven by the strong addition of dealers to our customer base, and sales of all other surface pumping equipment increased 2%. While sales of groundwater pumping equipment decreased 4% as compared to Q2 2024.
Operating income margin was 15%, up from 14.6% year-over-year.
To segment results on slide 7 water system sales in the US and Canada were up 5% compared to the second quarter of 2024.
at a product level sales of large dewatering equipment, increased 20%,
Sales of water treatment products increase 7% driven by the the strong addition of dealers to our customer base and sales of all other surface pumping equipment, increased 2%.
Jennifer Wolfenbarger: water system water system sales and markets outside the US and Canada increased 12% overall. Foreign currency translation decreased sales by 1% and recent acquisitions added roughly 11% to sales. Excluding the impact of acquisitions and foreign currency translation, sales in the second quarter of 2025 increased high single digits in Asia Pacific, low single digits in Latin America, and were relatively flat in the US.
While sales of groundwater pumping equipment, decreased 4% is compared to Q2 2024.
water system, water system sales and markets outside the US and Canada increased 12% overall
Foreign currency translation, decreased sales by 1% and recent acquisitions added roughly, 11% to sales.
Jennifer Wolfenbarger: Water systems operating income was $61.8 million, down a half a million versus the prior year. The decrease was primarily due to lower growth margin and higher SG&A costs primarily related to our recent acquisitions. Sales mix impact due to higher large dewatering sales in the quarter, as well as negative impact of foreign exchange partially offset by better volume and price.
Excluding the impact of Acquisitions and foreign currency translation sales in the second quarter of 2025 increased High single digits in Asia, Pacific. Low single digits in Latin America and were relatively flat in Amia.
Water Systems: Operating income was $61.8 million, down half a million versus the prior year.
Jennifer Wolfenbarger: Operating income margin was 18.1%, a year-over-year decrease of 160 basis Distribution second quarter sales were $200 million versus second quarter 2024 sales of $190.5 million, an increase of five The distribution segment sales increase was primarily due to higher volumes as a result of share gain and on-site inventory placement projects.
The decrease was primarily due to lower growth margins and higher sgna costs, primarily related to our recent acquisitions sales, mix impacts due to higher large dewatering sales in the quarter as well as negative impact of Foreign Exchange partially offset by better volume and price.
Operating income margin was 18.1% a year-over-year. Decrease of 160 basis points.
Distribution. Second quarter sales were 200 million versus second quarter 2024 sales of 190.5 million an increase of 5%
Jennifer Wolfenbarger: The distribution segment's operating income was $16.1 million for the second quarter, a year-over-year increase of $6.3 million. Operating income margin was 8.1 percent of sales in the second quarter, an improvement of 300 basis points versus the prior year, driven by higher volumes and improved margins as a result of margin improvement actions taken in the last.
The distribution segment sales increase was primarily due to higher volumes as a result of sheer gain and on-site inventory placement projects.
The distribution segments. Operating income was 16.1 million for the second quarter, a year-over-year increase of 6.3 million,
Jennifer Wolfenbarger: Energy system sales were $77.5 million, an increase of $4.4 million, or 6% compared to second quarter of 2024. Energy system sales in the U.S. and Canada increased 6% year over year. Outside the U.S.
Operating income margin was 8.1% of sales in the second quarter, an improvement of 300 basis points versus the prior year, driven by higher volumes and improved margins as a result of margin improvement actions taken in the last year.
Energy System, sales were 77.5 million and increase of 4.4 million or 6% compared to second quarter of 2024.
Jennifer Wolfenbarger: and Canada, energy system sales increased 14 percent led by increased sales in India and strong grid growth. Energy Systems operating income of $29.1 million compared to $26 million in 2024. Operating income margin was 37.5% compared to 35.6% in the prior year, an improvement of 190 bases. Operating income margin increased primarily due to the favorable geographic mix of sales, as well as price realization and the benefit of cost management actions taken in the last year.
Energy System sales in the US and Canada. Increased 6% year-over-year.
by the US and Canada Energy System, sales, increased 14% led by increased sales in India and strong grid growth
Energy Systems' operating income was $29.1 million compared to $26 million in 2024.
Operating income margin was 37.5% compared to 35.6% in the prior year and Improvement of 190 basis points.
Jennifer Wolfenbarger: The effective tax rate was 25% for the quarter compared to 23% in the prior year quarter.
Aubry and income margin increased primarily, due to the favorable, Geographic mix of sales, as well as price realization and the benefit of cost management actions taken in the last year.
Jennifer Wolfenbarger: The change in the effective tax rate was driven by an increase in foreign earnings, tax rates higher than the U.S. rate, as well as less favorable discrete items, which had an EPS impact of approximately 3%.
The effective tax rate was 25% for the quarter compared to 23% in the prior year quarter.
Jennifer Wolfenbarger: Moving to the balance sheet and cash flows on slide eight. The company ended the second quarter of 2025 with a cash balance of $104.6 million and with $186 million outstanding under its revolving credit agreement. We generated $52 million in net cash flows from our operating activities during the second quarter compared to $36 million in 2024.
The change in the effective tax rate, was driven by an increase in foreign earnings tax rates higher than the US rate as well as less favorable discrete items which had an EPS impact of approximately 3 cents.
Moving to the balance sheet and cash flows on slide 8.
Company ended the second quarter of 2025 with a cash balance of 104.6 million and width 186 million outstanding under its revolving credit agreement.
Jennifer Wolfenbarger: In Q2, the company purchased a total of roughly 1.4 million shares of its common stock for approximately $120 million. Approximately 1.2 million of these shares were purchased from the Past Shaper Trust for roughly $104 million. As of the end of second quarter of 2025, the remaining authorized shares that may be repurchased is about 1.1 million shares.
2024.
In Q2 the company, purchased a total of roughly 1.4 million shares of its common stock for approximately 120 million.
Approximately 1.2 million of these shares were purchased from the past shaper trust for roughly $104 million.
Jennifer Wolfenbarger: Yesterday, the company announced a quarterly cash dividend of $0.265. This dividend will be payable August 21st to shareholders of record on August 7th.
As of the end of second quarter of 2025, the remaining authorized shares that may be repurchased. Is about 1.1 million shares,
Yesterday, the company announced a quarterly cash dividend of 26.5 cents.
Jennifer Wolfenbarger: moving to slide nine. We are holding our full year sales expectations of $2.09 billion to $2.15 billion and maintaining our gap EPS range of $3.95 per share to $4.25 per share.
This dividend will be payable, August 21st to shareholders of record on August 7th.
Moving to slide 9.
Jennifer Wolfenbarger: During the third quarter, the company expects to terminate its U.S. pension, which will have a non-cash EPS impact of approximately $1 per share. This impact is not included in our current guidance.
We are holding our full year sales, expectations of 2.09 billion to 2.15 billion and maintaining our gaap EPS range of 3.95 cents per share to $4.25 per share.
During the third quarter, the company expects to terminate its U.S. pension, which will have a non-cash EPS impact of approximately $1 per share.
Jennifer Wolfenbarger: While we remain confident in our backlog and our ability to execute, we foresee opportunity in the second half of 2025 to accelerate further investment in the optimization of our supply chain, execute select restructuring, and invest in growth. Therefore, we are maintaining our previous guide.
This impact is not included in our current guidance.
Joseph Ruzynski: Now, I will turn the call back to Joe for some additional comments. Joe?
While we remain confident in our backlog, and our ability to execute, we foresee opportunity in the second half of 2025, to accelerate further investment in the optimization of our supply chain, execute, select, restructuring and invest in growth. Therefore, we are maintaining our previous guide.
Joseph Ruzynski: Thanks, Jennifer.
Joseph Ruzynski: Turning to slide 10 to bring back our value creation framework, our long-term strategy is anchored in how we drive growth, execute and transform operationally, deploy capital, and maintain industry-leading talent. To drive growth, we continue to focus on innovation, global portfolio expansion, and strengthening our leadership position across key markets. We have focused on synergies as we've grown acquisitively these past years, supporting our ongoing operational efficiency efforts and driving improved standardization across our business. Our recent acquisitions are performing well, and the collective Franklin team is energized by new opportunities from these investments. At the same time, we're also deeply committed to returning capital to shareholders.
Now, I will turn the call back to Joe for some additional comments. Joe, thanks Jennifer.
Turning the slide, 10 to bring back our value. Creation framework. Our long-term strategy Is Anchored In how we drive growth executed and transform operationally, deploy, capital and maintain industry-leading talent to drive growth. We continue to focus on Innovation Global portfolio, expansion and strengthening our leadership position across key markets.
We have focused on synergies as we've grown inquisitively. These past years, supporting our ongoing operational efficiency efforts and driving improved standardization across our business.
Joseph Ruzynski: as evidenced by our completion of over a hundred million dollars in share buybacks this quarter.
Our recent acquisitions are performing well, and the collective Franklin team is energized by new opportunities from these investments. At the same time, we're also deeply committed to returning capital to shareholders.
Joseph Ruzynski: Finally, we continue to attract top talent, as seen with the additions of Jennifer and Daniela to the team, among many others, all of whom will help support our ambitious growth agenda. Ultimately, we believe these priorities position us to deliver consistent long-term shareholder value.
As evidenced by our completion of over 100 million dollars in share BuyBacks, this quarter.
Finally, we we continue to attract top talent as seen with the additions of, Jennifer and Daniela to the team. Among many others, all of whom will help support our ambitious growth agenda.
Joseph Ruzynski: On slide 11, I'd like to give a quick highlight on innovation. An excellent example of our drive to listen to market and our customers needs, then bring leading innovation and solutions to our end markets is our new Evo One fuel monitoring solution. Tens of thousands of convenience store owners now face a major cost and operational challenge. They rely on outdated fuel monitoring systems that utilize 30 plus year old technology. Upgrading just the control console leaves most of the aging components in place. This means owners are likely to face future unanticipated downtime coming at a dramatically higher cost as the rest of the system components reach the end of their service life.
Ultimately, we believe these priorities position us to deliver consistent, long-term shareholder value.
On slide 11. I'd like to give a quick highlight on innovation.
And excellent example of our drive to listen to Market and our customers needs, then bring leading Innovation and solutions to our end markets is our new Evo 1, fuel monitoring solution.
Joseph Ruzynski: With Evo 1, Franklin has provided an ideal path to upgrade the entire monitoring system, utilizing the latest Evo technology perfected for the world's leading convenience store companies at a price comparable to replacing just the traditional console.
Tens of thousands of convenience store owners. Now face to face a major costs and operational challenge. They rely on outdated fuel monitoring systems that utilize 30 plus year old technology, upgrading just the control console leaves. Most of the Aging components in place. This means owners are likely to face future unanticipated, downtime coming at a dramatically higher cost as the rest of the system components, reach the end of their service life.
Andrew: We will now turn the call over to Andrew for questions.
With EVO, 1 Franklin has provided an ideal path to upgrade the entire monitoring system, utilizing the latest Evo technology. Perfected, for the world's leading convenience store, companies at a price comparable to replacing, just the traditional console
Andrew: After Q&A, we'll return for closing remarks.
Andrew: Andrew? Thank you.
Andrew: As a reminder, to ask a ques- Star 1-1 on your television. for your name to be announced.
We will now turn the call over to Andrew for questions. After Q&A, we'll return for closed for closing remarks, Andrew
This is a reminder to ask a question.
Please press star, 1, 1 on your telephone and wait for your name to be announced.
Bryan Blair: And our first question comes from the line of Bryan Blair with Oppenheimer. Thank you. Corey Brown, Solid Quarter. Thank you. Thanks Bryan.
To withdraw your question. Please press star 1 1 again.
And our first question comes from the line of Brian Blair with Oppenheimer.
Thank you, Brian solid quarter.
Bryan Blair: That's a level set.
Joseph Ruzynski: Did Q2 benefit from pull forward of orders, at least to any notable degree? I know that that wasn't the case. Really no change in terms of kind of our traditional order pattern. So at the end of Q2, I would say it was business as usual, really no significant pull forward from Q3 to Q2. Okay, that's good to hear.
Thank you. Thanks d.
That's a level set. The Q2 benefit from uh pull forward orders. At least any notable degree. I know that that wasn't the case in q1.
Uh, really no no change in terms of kind of our traditional order pattern. So, um, at the end of Q2, I would say it was business as usual, really, no significant pull forward, um, from Q3 to Q2
Joseph Ruzynski: And it was great to see distribution margin, you know, back in, you know, kind of high single digit territory.
Okay, that's good to hear.
Joseph Ruzynski: How much did cost actions contribute to the 300 basis points margin expansion? And given current visibility, how is your team thinking about distribution profitability through the back end? Yeah, you know, I think as we started the year, you know, we said our expectation is you're going to see the most margin improvement in that segment. And you know, it's reading out as we expected, cost actions contributed probably, you know, a third or a little bit more of that benefit. But I think what what we're excited about is, you know, and I mentioned this in my prepared remarks, you know, following years of acquisition, we're really proud of how that team is bringing that that distribution network together focused on operational efficiency, both inbound, how we purchase how we serve customers, and then building really a strong technology base to be able to give good real time visibility, how customers order how they can see our product.
Did cost actions contributed to the 300 basis points. Margin expansion and given current visibility. How's your team thinking about distribution profitability through the back half?
Joseph Ruzynski: So it's a number of things. But I would say, you know, some leverage some of that operational execution and efficiency just based on really building a more efficient business. And then of course, some of the cost actions that we took, you know, coming into this year. We expect margins in Q3 to be around that range, and then of course seasonally in Q4 it sequentially will go down, but from a year-over-year standpoint, we expect to see nice improvement in the last two quarters of this year as well. I mean, to add on to that, just, you know, yeah, I would agree that there's a third of that was really from the cost improvements.
Yeah, you know, I think as we started the year, you know, we said our expectation is, you're going to see the most margin Improvement in that segment and you know, it's it's reading out as we expected cost actions contributed probably, you know, a third or a little bit more of that benefit. But I think what what we're excited about is, you know, and and I'm I mentioned this in my prepared rewards. You know, following years of acquisition, we're really proud of how that team is bringing that that distribution Network together focused on operational, efficiency, both inbound, how we purchase, how we serve customers, and then building really a strong technology base to be able to, to give good real time visibility how customers order how they can see our our products. So it's a number of things, but I would say, you know, some leverage, some of that operational execution and efficiency just based on really building a a more efficient business and then of course some of the the cost actions that we took, you know, coming into this year.
We expect I'm sorry in the in the back half. Um, you know, we expect margins in in Q3 to be around that range. And then, of course, seasonally in Q4, um, you know, it it sequentially will go down. But from a year-over-year standpoint we expect to see nice Improvement in the last 2 quarters of this year as well.
Joseph Ruzynski: And the team did a really good job in terms of executing on volume, and we're able to pick up some share in that business in the quarter. And, you know, a lot of the actions and so forth that the team has taken in terms of cross pollination have really played out in the quarter.
Joseph Ruzynski: I'm really proud of the team.
Alan to that, um, just, you know, yeah, I would agree the third, a third of that was really from the cost improvements and the team did a really good job in terms of executing on volume. And we were able to pick up some share in that business, uh, in the quarter and, you know, a lot of the, the actions and and so forth that the team has taken in terms of cross. Pollination have really played out in the quarter.
Bryan Blair: appreciate the color and perhaps offer a quick update on integration at Pump Engine and Barnes. Joe, you noted that the new deals are tracking well, I'm particularly interested in Barnes and how your team has to date and how you're thinking about leveraging the foundry, new capacity and capability.
Really proud of the team.
Joseph Ruzynski: Yeah, no, it's a great question. You know, we had a good integration review down in Bogota a month and a half ago. And I think what what impressed me is, you know, probably two things. One is our global team, and our North America team was there as well. And some of their products, you know, when we look at growth synergies, which is really the driver behind that acquisition, we're getting a lot of return on our existing and mature channels, and how we bring those products to markets both in South America and in North America. So we're seeing that run a little bit faster than we thought, from a foundry standpoint.
I appreciate the Killer and perhaps to offer a quick update on integration at pump engine and Barnes. Uh, Joey noted that the, you know, the deals are are tracking well and particularly interested in Barnes and uh how your team has to date and how you're thinking about leveraging The Foundry, you know, capacity and capabilities. There
Joseph Ruzynski: You know, we know that that being in region for region is the right way to serve our customers. And, you know, Jennifer just talked about our ability to respond to volume. I think it really sets us apart.
Yeah, no it's a great question. Uh you know, we had a good integration review down in Bogota uh a month and a half ago. And I think what what impressed me is, you know, probably 2 things 1 is our Global team uh, and our, our North American team was there as well and some of their products, you know, when we look at growth synergies which is really the driver behind that acquisition. Um, we're getting a lot of return on our existing and mature channels and how we bring those products to end markets, both in South America and in North America. So, we're seeing that run a little bit faster than we thought from a Foundry standpoint. Um,
Joseph Ruzynski: The Foundry is performing well, and we're actually working on expanding the current footprint. We had some of that optionality as we acquired the company. So we're going forward with those investments. And I think it'll be two things. One is to support the additional volume growth based on that traditional set of products serving now a wider customer base. But also, I think I mentioned this last quarter, looking at at bringing some of the tools that may have been in Southeast Asia or in China back here closer to our customers is a real opportunity for us. So there's some work to do there.
You know, we know that that being in Region 4 region is the right way to serve our customers. And I, you know, Jennifer just talked about our ability to respond to volume. Um, I think it it really sets us apart The Foundry is performing well um and we're actually working on expanding the current footprint, we had some of that optionality um as we acquired the company. So we're going forward with those Investments and I think it'll be 2 things 1 is to support the additional volume growth, based on that traditional set of products serving over now, a wider customer base
Joseph Ruzynski: That's some of the investment that Jennifer called out in terms of we want to accelerate that here in the back half. There's some capital and expense to do that. But we've got good line of sight. The foundry is performing well and the teams are executing tremendously. So good start. Very encouraging.
Bryan Blair: Thanks, Ken. Thank you, Bryan.
But also, I think I mentioned this last quarter looking at at uh, bringing some of the tools that may have been in Southeast Asia, or in China back here closer to our customers is a real opportunity for us. So there's some work to do there, that's some of the investment that Jennifer called out in terms of we want to accelerate that here in the back half. There's some capital and expense to do that but we've got good line of sight that boundaries performing well and the teams are executing uh tremendously so uh good start.
Very encouraging. Thanks again.
Ryan Connors: And our next question comes from the line of Ryan Connors. Good morning. Thanks, Joe.
Thanks Brian.
Ryan Connors: And welcome, Jennifer. Thank you.
Thank you. And our next question comes from the line of Brian Connors with North Coast research.
Ryan Connors: Yeah, I wanted to jump into the water side in a little more detail, specifically on mix. You mentioned their kind of large dewatering and the mixed components there in the water segment. Is that all product-driven mix or is there some geographic mixed impacts there as well?
Good morning. Thanks Joe and welcome Jennifer.
Thank you.
Joseph Ruzynski: And then based on the order boards and the backlog today, how does that mix element shape up for water in the back half? Most of it is really product-driven mix, and I can let Russ and Jennifer add to this. But that dewatering business, as you know, is a cyclical business. It kind of has this three-year run from peak to drop. We saw that business hit its peak in the back half of 2023 and then sequentially get softer last year. I know we talked about this a few times. So we see a strong order book and backlog in that business.
Yeah, I wanted to, um, jump into the the water side in a little more detail. Specifically, on mix you mentioned, um, they're kind of large dewatering, uh, and, and the mixed components there. And, and the water segment is that all product driven mix, or is there see some Geographic, uh, mixed impacts there as well. And then based on the order boards and the backlog today, how does that mix element shape up for water in the back half?
Russ Fleeger: There will be some mixed pressure that we see in that business, but most of it is product mix versus geog. The geog is read out largely as we expect.
Russ Fleeger: I would just add, yeah, both groundwater and dewatering, solid, very healthy volumes, just saw a little bit of that product mix play out. Book-to-bill, very healthy, above one. It varies across geographies a little bit, but all really healthy above one with strong backlog.
2023. And then, and then sequentially gets gets softer last year, I know we we talked about this a few times, so we see a strong order book and backlog in that business. Uh, there will be some mixed pressure, you know that we see in that business but um, most of it is, is product mix versus versus geog. The geog read out largely as we expected
I would just add. Yeah, the
Russ Fleeger: I see, I think Ryan, you'll see less pressure from a margin standpoint.
Both groundwater and and do watering solid very healthy. Um, volumes just all a little bit of that product um product mix Play Out book to Bill, very healthy above 1, it varies across uh geographies a little bit but all really healthy above above 1, with strong backlogs.
Russ Fleeger: So that mix is kind of hard to pull out, because we definitely, as we accelerate that acquisition, we still are seeing some of those acquisition related costs in Q2, which diminished through the back half of the year. Got it, okay.
Ryan Connors: And then secondly, just talk about Rezzy for a minute. I know it's an important market, and it seems like everyone's waiting on a potential for a rate cut and maybe lower mortgage rates to drive that. I mean, is that the only catalyst that we're banking on here? Or are there other potential catalysts that can drive some more volume growth in that side of the business? Or is that really the catalyst that we're waiting on?
I see, I think Ryan, what you'll see less pressure from a margin standpoint. So that mix is kind of hard to pull out because we definitely, um, as we accelerate that acquisition, we still are seeing some of those acquisition related costs in in Q2 which which diminished through the back half of the year.
Got it, okay.
And then, secondly, just talk about resi for a minute. I know it's an important market. And it seems like, you know, everyone's waiting on a, on a, on a potential for a rate cut and and maybe lower mortgage rates to drive that, I mean, is that the only
Joseph Ruzynski: Well, I'll take a stab at that. But, you know, that that business was flattish for us, obviously, in Q2. I think to say that we're getting no help from kind of the the market is true. You know, we're in the same boat as everyone else. A couple good things about our business, you know, when we talk about other things we look at one is, given our high service and replacements and buyer, you know, demand, you know, that business is, you know, 70 plus percent replacement for us, our ability to serve that market has held us to hold and even take share in some cases, you know, we believe that we're taking share there.
Catalyst that we're banking on here or or are there other potential analysts that can drive some more volume growth in, in that side of the business? Or or we just sort of is that really the Catalyst that we're waiting on
Joseph Ruzynski: I also think, and I think I mentioned one example, and if I didn't, you're going to hear more about it here in Q3, some really exciting new products that that attend to that resume market that that we're just launching right now. So I think new products, innovation, being able to respond to our customers, all of those things help us to offset offset that that weaker housing starts and housing sales. You know, one thing that that I point out, too, is, and I think we commented on this, if you look at our water treatment business, which is probably, you know, has a more direct correlation to housing starts and sales and others, the fact that that business grew, you know, mid plus single digits, I think, is a testament to just that growth strategy, which is dealer ads, building a strong network, outserving our peers.
Well I'll I'll take a stab at that but you know, that that business was flattish for us obviously in Q2 I I think to say that we're getting no help from kind of the, the, the market is is true, you know, we're in the same boat as everyone else. A couple good things about our business, you know, we talk about other things. We look at 1 is given our high service and Replacements, Environ. You know, demand, you know, that business is, you know, 70 plus percent replacement for us, our ability to serve that market is held us to hold and even take share in some cases. You know, we believe that we're taking share their
I also think, um, and I think I mentioned 1 example, and if I didn't, um, you're you're going to hear more about it here in Q3 some really exciting new products that that attend to that resi market, that that were just launching right now. So I think new products, Innovation, um, being able to respond to our customers. All of those things help us to offset offset that that weaker housing starts and housing sales. You know, 1 thing that that I'd point out too is and I think we, we commented on this. If you look at our water treatment business, which is probably, you know, has a has a more direct correlation to housing starts and sales and others. The fact that that business grew, you know, mid plus single digits I think is a test.
Ryan Connors: So we had a nice, a nice set of dealer ads as well, again, in Q2, I think Jennifer referenced. So we think that there's some self help there that can offset that soft resume market and Q2 demonstrated that growth. Yep, got it.
Ryan Connors: And then one last one, kind of a bigger picture question, you know, the through the dewatering business and otherwise, you know, Franklin long been seen as somewhat more mining resource driven than maybe some of the peers. When you look at some of the things happening, like the copper tariffs, and the supposedly, you know, the method of madness there being to bring more resource development back domestic. Do you view that as a catalyst? Or has the portfolio changed to the point where that's not, you know, the driver that it once was? Well, I think if you go back, you know, five plus years, we actually were more exposed to markets like oil and gas and other things.
Estimate to just that growth strategy, which is dealer ads, building a strong network out, serving our peers. So we had a nice set of dealer ads as well. Again, in Q2, I think Jennifer referenced. So, um, we think that there's some self-help there that can offset that soft residential market, and Q2 demonstrated that for us.
Yep, got it. And then 1 1 last 1 kind of a bigger picture question you know, the the through the dewatering business and otherwise you know, Franklin long been seen as somewhat more mining resource driven than maybe some of the peers when you look at some of the things happening like the copper tariffs and the the supposedly, you know, the method to the madness, their being to bring more resource development.
Back domestic. Um, do you view that as a catalyst, or has a portfolio?
changed to the point where that's not, you know, the driver that it once was
Joseph Ruzynski: So that has come way down. And, you know, we've seen that balance. I think just in general, if we look at mining, you know, if you look at materials and minerals, I think there's an opportunity there for us. We don't have a huge exposure to it in North America, you know, as you referenced before, but we're working on bringing those products into North America, you know, post-acquisition of companies like MineTuff and PumpEng. And it's copper. It's, you know, there's other metals and materials where we see continued growth. So I think that's an opportunity for us.
Well I think if you go back, you know 5 plus years, we actually were more exploit exposed to markets like oil and gas and other things. So that is that is come way down and and you know we've seen that balance I think just in general if we look at at mining, you know, if you look at at, you know, materials and minerals, um, I I think there's an opportunity there for us. We don't have a huge exposure to it in North America, you know, as you reference um before, but we're working on bringing those products into North America, you know, post acquisition of companies like muff and pump Edge, um and it's it's cost.
Joseph Ruzynski: You know, it's relatively small for us today. But if that market continues to grow and if you see the need for minerals and the domestic development continue to increase, we'll be prepared for it. Got it.
Ryan Connors: Thanks for your time this morning. Yeah, thank you.
It's it's you know, there's there's other metals and materials where we see um continued growth. Um so I think I think that's an opportunity for us you know it's it's relatively small for us today. But if that market continues to grow and if you see the need for minerals and the domestic development continued to increase, we'll be prepared for that.
Got it. Okay. Thanks for your time this morning.
Mike Halloran: And our next question comes from the line of Mike Halloran with RW. Hey, good morning, everyone. What do you mind?
Yeah, thank you.
Thank you.
And our next question comes from the line of Mike Howerin with RW Baird.
Mike Halloran: Maybe we just start with how you're thinking about the sequential trends and what's embedded in guidance. You know, with all the moving pieces, if you just think about it in terms of end user demand across the segments, anything unusual, do you think you're following a relatively normal cadence here? And if I think about what the guide for the back half of the year implies. It doesn't imply normal seasonality from here, normal sequentials, or is there any kind of variance as you think about it, whether in the quarter or in embedded? Yeah, it's a good question, Mike.
Hey, good morning, everyone.
What's embedded in guidance. Um, you know, with all the movie pieces, if you just think about it in terms of end user demand across the segments and anything unusual, and you think you're following a relatively normal Cadence here. And if I think about what the guide for the back half of the year, uh, implies it doesn't imply normal seasonality from here, normal sequential or is there any kind of variances you think about it? Um, whether in the quarter or in embedded in the guide,
Joseph Ruzynski: Maybe I'll start with, you know, coming into and as we went through Q2, which, you know, if you look at headlines, if you look at tariffs, if you look at the noise globally, normal, we didn't think we'd use that term normal in terms of, obviously, we executed well, we're really proud of what the team has done. But you know, it was a more normal market than we had thought. We see those trends continuing here into the back half, you know, we're a couple weeks in. The backlog, the order trends, the order book look good. Parts of our business that we can see further out, you know, we talked about dewatering, that's one example in the water space.
Yeah, it's a good good question, Mike. Maybe I'll start with, uh, you know, coming into and and as we went through Q2, which, you know, if you look at headlines, if you look at tariffs, if you look at the noise globally, um, normal. We didn't think we'd use that term normal in terms of, obviously, we executed, well, we're really proud of what the team has done, but, you know, um, it was a more normal Market than than we had thought we see those Trends continuing here into the back half, you know, we're, we're a couple weeks in
Joseph Ruzynski: But in the energy segment, you know, where we can see further out there in terms of our service partners and the service stations, everything looks positive. So based on backlog, order trends, and kind of, you know, a snippet here as we get into Q3, we expect, you know, to be fairly normal, just to use that word. So we don't expect any major disruption. You know, I think to the other questions, obviously, we watch interest rates, we watch some of those other externalities that could provide a lift to us. Not baked in, no expectation, you know, our sense is, it's kind of business as usual in the back half.
Um, the the backlog, the order Trends, the order book looked good parts of our business that we can see further out. You know, we talked about dewatering that's 1 of the example in the water space. Um, but in the in the energy segment you know, where we can see further out there in terms of our our, our Service Partners, and our and and and the service stations, um everything looks looks positive. So based on backlog order, Trends and kind of a, you know, a snippet here, as we get into 2 3, we expect, you know, to be fairly normal just to use that word. So we don't expect any major disruption.
Joseph Ruzynski: So yes to normal, and yes to kind of the seasonal sequential. So Q3 looks, you know, looks similar to Q2. And then Q4, the sequential, you know, it's obviously a step down, but we expect to perform well. Matt said, from a tariff and from a copper perspective, you know, I think we're really proud of, we're really proud of the work that our supply chain has done to look for various levers of pull to mitigate that. And we continue to remain confident in our ability to offset with the balance of the year. So, and that holds true from a tariff perspective, from a copper perspective, we'll continue to look at multiple paths to win.
You know, I think to to the other questions obviously we watch interest rates. We watch some of those other externalities that could could provide a list to us not baked in no expectation. You know our our our sense is it's kind of business as usual in the back half so yes to normal and yes to kind of the seasonal sequential. So Q3 looks, you know, looks similar to Q2. And then Q4 this, the sequential, you know it's obviously a a step down but we expect to perform well.
Mike Halloran: Thanks for that.
From a Terrace, and from a copper perspective, you know, I think we're really proud of, we're really proud of the work that our supply chain has done to look for various levers to pull to mitigate that. And we can continue to to remain confident and our ability to offset for the balance of the year. So, um, and that holds true for Matera perspective, from a copper perspective, we'll continue to look at multiple paths to, um, uh, to win.
Mike Halloran: And just to follow up.
Mike Halloran: Just an update on how you're thinking about the M&A Pipeline, Kent. Actionability. I know that's part of the mandate for the team moving forward. And so just kind of any thoughts on on how that's looking and where the focal points are. Thank you. Really appreciate it.
Thanks for that. And and then just to follow up. Um,
Just an update on how you're thinking about.
The m&a pipeline intent.
Actionability. Um, I know that's part of the
Mandate um for the team moving forward. And so just kind of any thoughts on on on how that's looking and and where the focal points are
yeah, you know, we've made um,
Some, some really fun Investments and had a specific Focus here over the last 3 quarters to make sure that the pipeline is, is robust that our team is ready to execute. Um, and the 1 1, nice thing, Mike in the last couple months is, you definitely see a little bit more activity in terms of, you know, kind of what what's out there and and some things that will potentially move. So we're positive about it. Um, we've got a, we've got a good and inactive funnel. Um, you know, and I think similar to what I said, last quarter are, are kind of our key Focus right now is what are those products that can really put us into those faster growing markets? You know, take advantage of secular Trends and then we can bring through our great channel. So, um, we expect, you know, that that will continue to be active. It's always hard to predict what happens and when it happens, but, um, you know, that still is the mandate to make sure that we put that uh, that strong balance sheet to use.
Mike Halloran: Thanks, Mike. Thank.
Thank you. Really appreciate it.
Thanks Mike.
Matt Summerville: And our next question comes from the line of Matt Summerville with D.A. Davis.
Matt Summerville: Morning, Matt. Public Washington morning, and I apologize. I apologize if you already addressed this.
Thank you. And our next question comes from the line of Matt Somerville with da Davidson.
Morning, Matt.
Matt Summerville: I missed some of the prepared remarks, but you reiterated your EPS guide for the year yet you bought back, you know, 1.2 million shares of stock from one of Franklin's founding daughters.
Joseph Ruzynski: Can you sort of articulate maybe why not raise the bar from a guidance standpoint? And then I have a follow Yeah, maybe I'll start and then and then Russ and Jennifer can add to that. I think, you know, one is, as you know, we had a slower start to the year. Two is, you know, we've got a fairly ambitious agenda in terms of accelerating our transformation, making some of those investments. I referred to just some examples in terms of of nearshoring, you know, tools in our supply chain. I mean, this is a big focus and we want to go faster to control our destiny.
Come according to the morning, and I apologize if you already addressed this; I missed some of the prepared remarks. But you reiterated your EPS guide for the year, yet you bought back, you know, 1.2 million shares of stock from one of Franklin's founding daughters. Can you sort of articulate maybe why not raise the bar from the guidance standpoint? And then I have a follow-up.
Jennifer Wolfenbarger: So I think part of the holding guidance is giving us the room to execute. There is a small benefit we got from, you know, obviously purchasing some of those shares. But I think the fact is we feel, you know, we're undervalued. I think, you know, our execution in Q2 is a good example of what we expect and hope to see going forward. But we also are focused highly on predictability, and we want to make sure that we prepare ourselves for further supply chain disruptions. We've got a couple of bigger capital investments that we've accelerated, you know, two examples.
Joseph Ruzynski: I may have referenced these in the past. We have a factory in Turkey that we're going faster on that we originally intended. And then we have a factory that we're building in India that we want to get started and get moving. So I think it's just making sure that, one, we're predictable. Two, we have room for transformation and for those key investments we think are important. You know, but our intent is to grow it to serve the markets that we're in, and we feel that this is the best route for us here where we stand.
Jennifer Wolfenbarger: Thank you for that. Yeah, I was gonna say the ref, the investments that that Joe referenced are heavily back half loaded. So that that does impact the go forward as That's helpful.
Part of the holding guidance is giving us the room to execute their, there is a small, a small benefit, we got from, you know, obviously purchasing some of those shares but I think the fact is we feel, you know, we're undervalued. I think, you know, our execution in Q2 is a good example of what we expect and hope to see going forward. Um, but we also are focused, highly on predictability, and we want to make sure that we we prepare ourselves for further supply chain disruptions. We've got a couple, a couple bigger Capital Investments that we've accelerated, you know, to examples that may have referenced these in the past. Um, we have a factory in in turkey that we're going faster on that we originally intended. And then we have a factory that we're building in India that that we want to get started and get moving. So I think it's it's just making sure that 1 we're predictable too. We have room for transformation and for those key Investments we think are important, you know, but our intent is to grow and to serve the markets that we're in, and we feel that this is the best route for us here. Uh, where we should
Thank you for that. Yeah, I was...
sure.
Yeah, I was just going to say, if the rep, the Investments, that that Joe referenced are, uh, heavily back half loaded so that that does impact the the go forward as well.
Matt Summerville: Thank you.
Joseph Ruzynski: And then just as a follow up, can you, you know, you talk about, you know, strength in orders and backlog, can you maybe give a little bit of quantification around how those metrics look now versus this time, this time last year? And can you review where you were at from a price cost standpoint in the second quarter and what you expect in the back half in that regard? Thank you.
Joseph Ruzynski: Yeah, maybe just a comment. I'll refer to Jennifer on some of this. But from a backlog standpoint, backlogs are probably up overall, you know, in the in the low double digits, some of some of the segments, they're up more than that. As you know, Matt, we're a shorter cycle business for a good portion. So we look at book to bill as well. Book to bill is over one for all three segments. I think that's, that's one of our better indicator, where we can see out further. You know, we definitely have seen a nice, a nice upward lift in backlog, the energy segment, I referred to that.
That's helpful. Thank you. Um, and then just is a follow-up. Can you? You know, you talked about, you know, strength and orders and backlog. Can you maybe give a little bit of quantification around how those metrics look now versus this time. Um, this time last year and can you review where you were at from a price cost standpoint in the second quarter and what you expect in the back, half in in that regard? Thank you.
Jennifer Wolfenbarger: So from a year over year standpoint, as we give those reference points for backlog, that's kind of a good year over year view. And then from a book to bill standpoint, this is just we look at the churn, we look at our daily orders, we look at what's happening, even for our shorter cycle businesses. And it gives us it gives us really a good pattern and understanding of kind of, you know, what's going to happen here, at least in the near term, which says Q3, you know, we feel we feel pretty good about.
Jennifer Wolfenbarger: Um, From a price-cost standpoint, yeah, we can give you, maybe Jennifer, if you want to just talk about price-cost volume here in Q2. I think I have those numbers here as well, but it was a good blend and a good mix. Yeah, overall, from the price-cost perspective, we were in really great shape versus the prior year. From a volume perspective, we talked about that through our prepared remarks, seeing a bit of an uplift year-over-year from a volume perspective as we've taken share in a few places, namely distribution, a bit in energy, seeing really good performance in energy with regard to international data-centric projects and grid growth.
Yeah, maybe just a comment. I'll, I'll refer to Jennifer on some of this, but from a backlog standpoint, backlogs are probably up. Overall, you know, in the, in the low double digits, some of some of the segments that are up more than that, as, you know, Matt, we're a shorter cycle business for a good portion. Um, so we look at book to Bill as well book to bill is over 1 for all 3 segments. I think that's, that's 1 of our better indicators, um, where we can see out further. Um, you know, we definitely have seen a nice, a nice uplifted backlog, the energy segment, I referred to that. So from a year-over-year standpoint, as we give those reference points for backlog, that's kind of a good year-over-year view. Um, and then from a book to Bill standpoint. This is just we look at the churn we look at our daily orders. We look at what's happening even for our shorter cycle businesses and it gives us, it gives us really a good pattern. And understanding of kind of, uh, you know, what's going to happen here at least in the near term, which says, Q3, you know, we built we feel pretty good about, um,
Jennifer Wolfenbarger: And then, as I mentioned, price-over-cost, including the little bit of impact that we've seen in tariffs, we're covering that nicely. Yeah, and sorry for the F-16 noise in the background here in Fort William, but yeah, price productivity definitely more than offset inflation. And I think, you know, seeing a couple of points of pricing, you know, more than a few points of volume. I mean, those are those are good indicators for us to see that balance. What one thing you'll see, Matt, is is are the inflation, you know, some of this due to tariffs and the purchases that we had to make in Q2.
From a price cost standpoint? Yeah, we can give you, maybe Jennifer if you want to just talk about, uh, price cost volume here in Q2. I think I have those numbers here as well, but it was a good, a good blend, and a good mix. Yeah. Overall, from the price of a cost perspective, we were in in, uh, in really great shape, uh, versus the prior year. Uh, from a volume perspective, we talked about that through our about, our Premier prepared remarks, uh, seeing a bit of an uplift year over year, um, from a volume perspective as we've taken care of in a in a few uh places namely distribution. Uh, a bit in energy, um seeing really good, um performance in, in energy, with regard to International uh data center projects, and grid growth. Uh, and then, as I mentioned price over costs, including the impact of a little bit of impact that we've seen as tariffs. We're covering that nicely.
Yeah, and sorry for the, uh, F-16 noises in the background.
Jennifer Wolfenbarger: Some of this will read out a little more strongly in the back half. So they'll be a little a little closer in terms of the price and the inflation. But we expect it to be a positive story this year. You know, I would add to that that some of the tariffs that could have been or that we saw throughout the quarter, we were prepared to do more in terms of our productivity, inventory and price action. I think where we ended up in the quarter is we feel we're pretty good. We're pretty well positioned here in the back half to more than offset tariffs, inflation, etc.
Here in Fort Wayne but um, yeah, price productivity definitely more than offset inflation. And I think, you know, seeing a couple points of pricing, you know, more than a few points in volume. I mean those are those are good indicators for us to see that balance. What 1 thing you'll see Matt is is our the inflation, you know and some of this due to tariffs and the purchases that we had to make in Q2 some of this will read out a little you know more strongly in the back half so there'll be a little a little closer in terms of the price and the and the inflation. But we expect it to be a positive.
Story this year. I, you know, I would add to that um that some of the tariffs that could have been or that we saw throughout the quarter. Uh we were prepared to do more in terms of our productivity inventory and price action. You know I think where where we ended up in the quarters we feel we're pretty good we're pretty well positioned here in the back half to to more than offset tariffs inflation Etc.
Joseph Ruzynski: Thank you, guys. Thanks, guys. Thank you.
Thank you guys.
Operator: And I'm showing no further questions.
Thanks man.
Joseph Ruzynski: With that, I'd like to hand the call back over to CEO Joe Ruzynski.
Joseph Ruzynski: for any close Thanks, Andrew. And we really appreciate the questions.
Joseph Ruzynski: As we close out our Q2 2025 earnings call, I want to extend my sincere thanks and gratitude to our employees and stakeholders for the dedication, hard work and unwavering commitment. We had a solid Q2 and first half. With good order trends and healthy backlogs, we expect this to continue. Holding guidance gives us the opportunity to accelerate our transformation and position us well for 26 as we continue to monitor the act and act on tariffs and other disruptions to our market. Our strategy is working. We're excited about our prospects to find the right acquisitions, bring great customer service and innovation to our markets, and to continue to build on the great team and culture Franklin is known for.
Thanks Andrew. And and we really appreciate the questions as we close out, our 2, 2 22, 2025 earnings call. I want to extend my sincere. Thanks and, and gratitude to our employees and stakeholders for the dedication hard work. And unwavering commitment, we had a solid Q2 and first half with good order Trends, a healthy backlog, we expected to continue holding guidance gives us the opportunity to accelerate our transformation and position us. Well for 26, as we continue to monitor the ACT.
Operator: Thank you for joining us, and I hope everyone has a great week.
Operator: Ladies and gentlemen, thank you for participating.
And act on tariffs and other disruptions to our market. Our strategy is working. We're excited about our prospects to find the right acquisitions, bring great customer service and innovation to our markets, and to continue to build on the great team and culture. Franklin is known for. Thank you for joining us, and I hope everyone has a great week.
Operator: This does conclude today's program, and you may now disconnect. Thanks for watching!
Ladies and gentlemen, thank you for participating. This does conclude today's program and you may now disconnect