FELE - Earnings call 3 2023 | Franklin Electric Co., Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the Franklin Electric Reports Third Quarter 2023 Sales and Earnings Conference Call. [Operator Instructions] please be advised that today's conference is being recorded.

I would now like to hand the conference over to Vice President of Investor Relations, Sandy Statzer. Please go ahead.

Sandy Statzer

Thank you, Abigail, and welcome, everyone, to Franklin Electric's Third Quarter 2023 Earnings Conference Call. Gregg Jeff Chair and Taylor, Officer. is Executive and Chief today and Officer; our me Sengstack, person our Chief Financial With Vice President

today's financial performance. quarter our will On an will then provide our highlights, Jeff third of overview Gregg call, business review

take will then questions. We

various call, the Act Before begin, to meaning statements. cause of are Private Litigation Reform this of XXXX. many remind be These making subject as we you differ the and we will that forward-looking of which statements results me actual forward-looking conduct materially let uncertainties, we risks statements within Securities such from will to

discussion A assumes call no on by forward-looking information and factors XX-K today's company in found earnings except any statements. law, currently release. the available are the based and statements be as this company's of All required obligation report during Form these annual update on forward-looking to may made

now that, turn the will to over call With I Gregg.

Gregg Sengstack

Thank you, Sandy.

is our commodity destocking price we during our seasonally the demand additional had reflecting The than quarter. third business and results distribution one anticipated challenging the with quarter, strongest a pressure quarter more of impacting which with but solid further periods in

strength as business product records projects. for impacted destocking Fueling and business by large destocking. quarter inventory third lines rightsizing geographic and systems, Systems station in set impacted breadth by dewatering offsetting The product reach, new sales markers income and Conversely, as most in line well delay more our continued with by was build with than our operating Water

levels, availability when are higher performance, rates our more remain confidence times and have and customers delivery costs, as they higher with in in with lead markets interest While demand the well. them products core improved underlying sensitive need of to inventory we trading solid

well us, customers. reducing are delivering focused the external these factors, like levels. team result, our a inventory Despite and just executed on As they for

Distribution while manufacturing We strong and operating in operating generated maintain the delivered a margins cash margin in with the Disciplined market products. businesses allowed healthy in to us commodity management challenged period a flow cost our solid of year-to-date. deflation

Our inventory our to last cash decreasing I'm excellence. million and as flow year. and by quarter, converted to million the We by shipments commitment during $XX incredibly operational $XXX backlog $XX the million driving Franklin reducing approximately improved for accelerated of backlog proud team sequentially. their compared by

A by Water segments. foreign quarter and the excluding little impact Systems on America third Latin year-over-year robust X% operating This translation, on also were top and increasing more our our sales by XX%, of growth a with was by and Internationally, year-over-year growth products growth regions. currency EMEA of in principally both of large the sales a XXXX, groundwater third revenue of income records. dewatering delivered in our basis on increasing X% quarter pumps, strong color of reported driven and strong. U.S. sales the

recently participated However, for unfavorable and unfavorable demand annual believe remains and Chicago, where healthy. foreign market in customer in surface We the offset Conference I the strong pumping groundwater healthy in supported We end this underlying results. exchange our mentioned, along previously the U.S. belief weather demand these equipment environment. in destocking feedback WefTec with

management. Franklin's quarter margin prior year was the and a to margin results income basis income expansion over respectively, strong gross XX%, sales increased period, quarter. by on reported points and growth, focused Fueling operating and leverage and record of the Systems Water year XXX any prior year-over-year reflect tough in compared cost Overall, These and revenue for revenue decreased XX% Systems history. operating operating lapping comparison to

along compared increase period, high-margin and cost by XX.X%, globally. third an Higher asset solution the demand destocking management in continued fueling caused volume XXX continued interest builds products, Systems by new well. by team this with year basis in lower systems disciplined operating of driven monitoring, along delays grid as to Our fuel margin station labor our Fueling fueling results rates inventory points critical was market. were as with driven for constraints management prior the quarter

broader our and a timing to expect macroeconomic with them We higher products new including continue and and the providing our we our on builds systems. Nevertheless, availability labor with convenience and focus construction XXXX. of rates on invest weigh interest continue will marketers to station into innovative to in relationships

by line in in investment products robust underlying well, invest for product is to Grid driving electrical Distribution contractor prior We than delaying as installations from sales monitoring price grid demand across States. remains primarily pricing, our continue on products. United decreased lower our the documented the and X% the as of expected critical much grid our weather well driven accelerated asset commodity wetter year Solutions period, continued stressed

X.X%, some industry inventory operating the segment third XXX year's record below addition, points continuing chains In margin, benefits strong environment. as The channel which in destocking quarter is XXXX of from delivered an work to basis operating through improved. the last margin supply inflationary

available on-site During the contractors. to integral part customers our and an serve key deployed strategy inventory we country, customers expand made where We them. the OSI now our to across large also better containers have for need by making investments when quarter, over of XXX products our

demand products electricity, As the confident and and water, monitor systems forward core our we're our fuel, on with that markets. we look in underlying in focus move

of that to an delays some the transitory we on headwinds. well and the markets We are and the which others as also are demand cognizant as having inventory continue normalization weather-related all end during flow increased of serve of rates we experiencing, impact and interest quarter spurred we're inflection impact of

highlights. expect earnings our range are in I financial the year the XXXX Jeff $X.XX $X.XX XXXX full call be $X.XX. full to With range revising billion that, turn in As we the will sales guidance. $X.XX the a to to per We year be billion to result, of share now for to now of over and

Jeffery Taylor

was conditions. We records as operating and challenging segments. quarterly despite good new while Distribution results the Thanks, Franklin segment, our expectations Water everyone. Fueling in established morning, below a it the Electric and quarter in Gregg, the Gregg were for said, Overall, solid

sales Third X%. of were $XXX.X quarter consolidated a year-over-year million, decrease XXXX

Excluding the to were sales impact translation, foreign flat compared currency last of year.

U.S., lower dewatering the diluted $X.XX were X% were Canada per by markets destocking resulting U.S. XXXX. largely our groundwater third sales quarter across outside equipment. quarter wet sales Systems in and offset channel equipment to the of higher share in was the sales of versus the much for and quarter large of weather compared Systems which Water Canada fully XXXX, for up X%. of third from the the Water earnings down sales XXXX $X.XX of to Our and were third primarily due U.S.

more XXXX, last currency gross offset $XXX.X third million was million, management. basis from was Canada of Pacific Foreign cost operating XXXX due and of of compared XX.X%, increase Operating lower Asia decrease. margin Sales to increases sales record third million XXX Distribution's $XXX.X Water in the up the by The versus year. outside XXXX. income operating in sales in the the decreased sales $XX.X in translation expansion sales sales quarter America quarter million were a X% versus quarter margin EMEA quarter leverage the Systems points income growth, and third a income XX% primarily U.S. or region to Latin up the markets. and was $X.X than XX%. third

of Systems million. and sales XX% million sales comments in compression was sold our the prior margin of income on sales X.X% was versus the with wetter in third segment's third impacted for income by quarter, $XX.X weather, $X.X a were quarter third XXXX consistent the year-over-year was million products XXXX commodity-based operating negatively lower a $XX.X Operating business. Distribution pricing million, third Distribution decrease. margin versus in prior the the $XX.X income year. The Fueling quarter quarter from The of X.X% decrease XXXX of through segment's

the current represented Systems As tough represents an record. a all-time the for reminder, third XXXX business' a Fueling year sales quarter quarterly comparison

Fueling times Systems decreased to to of third due the Canada from lead U.S. sales destocking availability in XXXX demand and the channel improve. compared and supply lower quarter inventory XX% to and

lower our XX% systems primarily the growth However, the well Canada, as Grid Outside sales XXXX XXXX. Pacific and operating as the million Fueling Solutions tank in quarter region. income $XX.X quarter Systems due U.S. and compared divestiture we sales business Asia to of of $XX.X business our of pumping in the third the XXXX million Fueling third Systems the was in during the decreased experienced in in quarter. to fuel

sales operating XXXX prior income margin quarter was third the The compared of XX.X% year. to XX.X% in net

million. due last in of sales, the for XXXX as of were Selling, $XXX.X XX.X% management. third while profit million XXXX in quarter sales third quarter compared gross the $XXX.X decreased percentage third gross gross quarter increased SG&A The the the third XXXX, profit $XXX.X a gross XX.X% a or the mix, from to margin and prior percentage was $XXX.X XXXX. down cost and the quarter Operating of of margin general net favorable primarily million of profit was of million year. expansion in in year's consolidated to administrative Franklin product to Electric's quarter lower third income due expenses versus

in in of from decrease of SG&A a XXXX, in to incentive-based due and XXXX, $XX.X million third The third lower cost translational of in or and operating unfavorable XX.X% quarter. quarter prior cost the lower percent net quarter was year million XXXX to income as an in expense $XX.X SG&A compensation Consolidated foreign with in third the of the X% line quarter. was was headwind. expenses $X.X exchange million quarter sales sales the and largely down management due

quarter XXXX year months the of cash of The cash compared effective first in $XXX million income million. XXXX, flow first operating the third was XX.X% $XXX months $X XXXX We of quarter generated quarter. approximately of the flow third in to was the million The X XXXX. operating for XX.X%, X to prior operating of an in compared tax of improvement to flat the rate margin quarter XX%

shareholders to and quarter open in At improved the of leading quarter approximately remarks. flows. prepared for million the about XX be of announced In our capital purchased X. of is a support third higher to cash X.X in of XXXX, has will capital levels, In And invested $X.XXX million normal more yesterday, record the $X November authorization common working company November levels The to shares. working share our growth. paid This concludes end as XXXX, XXXX, market the of shares XXXX remaining the company during XXXX. approximately to returned of the cash dividend that quarterly XX,XXX third we of repurchase stock

We will questions. back call the for over to now Abigail turn

Operator

question Our from comes Matt D.A. Summerville Instructions] with first Davidson. [Operator

Matt Summerville

A couple of questions.

with X level Systems have I delivered, that's years. respect first XX.X%, in maybe guys margins, to the you highest Water Just believe,

a factors were then drove little bit time third the XXXX. I code impact in the up how last of and factors think you a you about the follow-up. of that normal ZIP the performance seasonal quarter of think And you have the business? that Can kind more about net I that talk that was sustainability

Jeffery Taylor

Yes. operating income. operating for the pointed And Water have Matt, margins and they thanks sales had record as strong Systems record quarter. in the really question. out, you

very So parts that products business -- comments, had line, and business we good it's in quarter. cost diverse of global a certainly mentioned But strong very a Gregg in different as delivery business. the I good and very we his top during management, performed think well. of And the business overall, it's a strength had

a little overall on on providing like in good little copper line well gross flow-through and as bit just business. as as mix margin seeing a steel margin slowly retreat are well commodity line the prices the an of bit improvement and as that's our We of

second the think part I regarding question was seasonality... of your

Matt Summerville

Yes.

and Just how environment the your based have cadence follow-up. go-forward stronger about quarters the think the sustainability. the we is level should be lower way seasonally typically think the and the how are in new think a similarly, period? seasonally margins about high XQ price And period? where go-forward And XX.X% XQ an should kind margin appropriate to commodity we of then I during then should on about

Jeffery Taylor

we XX% Systems operating Matt, Water to in Yes, XX% range. guide margin typically the

you and very very, them. for the quarter solid, strong. we It in to record And impact a fourth and seasonality had through. volumes third see strong a the and lower typically, so really was couple normal on of of during the quarter as cost a there I does leverage slow those that quarters for lower a slower bit be And come expect margin fixed little They was XX.X% quarter, think quarter. first down business get will Seasonally, us.

XX% So XX% we go-forward to margins, see right would happen. range normal think I that in very to expect that now, but But a operating on basis. strong they're

Gregg Sengstack

that. also we about back to more may run, think days there we by the had we recall operations production also cost But in that. when 'XX, and margins international basis done structure we've high of recall pumping systems But the range. Halcyon 'XX above large the That's, then course, XX% and [indiscernible] improve annual margins groundwater may centric our were and we of with you and in that Matt, standardizing a the waters lot much back from in on you an plant. in some had XX% of to our our

that's also So several our improving us in years. margins, for noted last you've structurally aided what the

say, we want to to they tend So we we're not talk deliver as about -- necessarily, we and it.

onetime years a than a prove a But But to it at are the couple years over margin right certainly we than thing. seeking we couple rather can of of directionally of out profile moving in different period talking we're way. just sure we So back. about a want clearly, make a we're

Matt Summerville

then And it. to maybe over kind negative just the of flip impacting Got things to the business.

destocking, about done about pushouts. Gregg, talked you you this talked project a of You decades. number for

So it you're to pertains seeing drawing of phenomenon Water the how on of destocking you the kind as think experience, as do side on persist the well down can both project long Fueling. what and cycle in as sort your

Gregg Sengstack

back Matt, lead pre-COVID Yes, the I our and normal seasonal would -- say, we this think with with the of QX. are the get looking experience, smarter with through But at we're and -- over who people that my -- and I time. think of was I thought I kind customers, I were times, were interest in rate owns to and we through we -- our Northern And including just Hemisphere. ability you

that the And so to let I'll the I are [indiscernible]. saying, to need carry look, don't customers stock. I take think need I don't stock. manufacturers the

more the product, carried supplier case, a reliant in rather as saying, upstream. even us supply look, own I'd then on our being our the And distribution because a X/X of about have

end that there's a so through pipe I through business, of availability which out a that pandemic think and the certainly, plastic large -- steel getting applaud. of the year, and of also as it tight the was portion the resident Distribution came through So a we're that kind the and pipe, then is maybe acutely

us I 'XX competitors rates interest probably think the into so year-end. the in Distribution. here, And having coming exacerbated that's, discipline into I relative our But think, of maybe situation that higher again, to will help

talked early of in right. build they companies to they the to the help said Relative in pushed build marketers to just think to talked sort and August, late to of seemingly -- and I build I normally again, push-outs, things think here their or Fueling progress, the July they continue the programs, and we out of trouble stay [indiscernible] some getting major these have went contracting they close it was came to contact and kind business were we projects. about I hit still how having with

So since kind everything a down bit. little of that I slowed think

Fueling see steadily business we'll be half in an will the kind better 'XX. in back certainly. of that get the comp It think easier I

'XX the got was had Pioneer other that on we've customers systems, oil in a to large it customer or The saw thing to think world. And our it to pumping the for I a slow took chin the a large [indiscernible] we and growing rental again, with when is that brand. on We others done back down exposure business. a collapsed, prices recognition in lot 'XX diversify 'XX We've we've but 'XX, the base.

a and and there then can given that catching we're underlying we're again adjusted going the feeling carry of to be kind we but of United and maybe slow fleet of next -- industrial that. in customers conferences, So the of States feeling we're strength positive now we norm, positioned quarters the through it part economy, generally that space. other that, may a rental kind to there as we new while slow It of well comments, little couple kind in up get the is are expected the WefTec

really of came rain overall maybe record water, the impacts a for of the good is certainly, then it Midwest, in and of in normal we years. remember, the and quarter. groundwater have decent it -- And space, got rain short couple more in We in hit us, But kind we quarter demand which we a then thing. more of California off was got certainly finally, record droughts on And as lots third weather as a a so well now year. East dry Coast term and the with the

lot So it demand. of didn't a drive just

So we've kind of that. cycled through

I expect normal be year, a of And so next maybe that we'll respect. in for coming a so off year, little of bit comp be an -- that's will easier it

States, the United we're South seeing America. outside in then some And [indiscernible]

going for tough -- I mean, post-COVID ] I as is I [ of the Asia a through we'll little us likely Asia and through see challenging been their through think And situation. kind has of challenging Europe winter to that think get they well, be bottom. pros [indiscernible] as improvement kind the the off is summer

response. give your I answer So a very long-winded comprehensive a but that's thought to I'd question, you

Operator

further showing the to I call at Sengstack this back to closing like I'm for Gregg time. would remarks. turn no questions

Gregg Sengstack

our We have full the our a year joining company appreciate your the Thank for We and on everybody, look us week. you to call. great following joining results. us. with the first of to after year speaking forward today And you

Operator

your for Thank This participation conclude program. the does you in today's conference.

disconnect. now may You

Franklin Electric (FELE) 24 Oct 232023 Q3 Earnings call transcript