FELE - Earnings call 4 2023 | Franklin Electric Co., Inc.

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Operator

Hello, and welcome to the Franklin Electric Reports Fourth Quarter 2023 and Full Year 2023 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. It is now my pleasure to introduce Vice President of Finance and Investor Relations, Sandy Statzer.

Sandy Statzer

Thank you, Andrew, and welcome, everyone, to Franklin Electric's Fourth Quarter and Full Year 2023 Earnings Call. With me today is Gregg Sengstack, our Chairperson and Chief Executive Officer; and Jeff Taylor, our Chief Financial Officer. will results fourth XXXX. along Gregg year and call, business XXXX with today's review quarter our full On guidance for will on detail provide performance. Jeff our financial additional

questions. We then take will

statements. that to uncertainties, we statements to as results will discussion update Before law, in information on release. this cause are materially on making within company the Securities forward-looking and forward-looking subject A the statements many various may such during any could meaning forward-looking me of be actual obligation of Litigation by let remind statements. based Reform earnings be the Form we currently assumes these this no found available today's Act of call, All factors made from are begin, which conduct report differ we of Private forward-looking and statements and the company's risks except to you annual call XXXX. These required XX-K as

today's on being measures business to performance. non-GAAP on comparable I Gregg. which the ongoing of non-GAAP the accompanying included In financial reconciliation over is now today call that, available Electric's investor used measures to measures the financial will to investors is GAAP the Franklin A our addition, in call, website. With discussed help understand financial will presentation, be turn

Gregg Sengstack

pricing from water million were the a Even in with driven fueling X%, in lower in pricing. the degree finished Fueling commodity quarter. we solid experienced partially Thank continue demand, Systems favorable to a conditions impact and you, our market by destocking by and to sales And $XX U.S. delivered down in From million delivered $XX or distribution and foreign offset XXXX. mainly Sandy, and more same Europe. we quarter and weather thank pressure Overall, solid QX of you sequentially, soft margins business. all the volume We operating for joining lesser with continued a and negative us. in customer QX exchange, weather, reported experience for

controls. Our manufacturing margins remained healthy throughout cost XXXX, by continued driven

XXXX, the X% water foreign For sales and in Fueling pricing, income strong year the of performance and delivered by expanded to fueling XXX negative in lower partially within products Systems. Operating fueling and volumes due the systems margins in of grew growth over across exchange also full our year monitoring company. improvement X% management by we driven offset asset basis business respectively. cost points Operating and Sales full with set water XXX XXXX, record. a critical of our

negatively activity. business distribution pressure Our was destocking impacted commodity by and pricing

working cash year. focus the both capital of strong Our and in translated flow quarter continued into management full on generation fourth the the

used to and reduce Our We completed to approximately several $XXX resulting small operating cash cash as XXX%. compared of our dividends through cash cash Free X-year increased cash by above and $XXX our improved average by acquisitions shareholders flow of flow free outstanding debt conversion XXXX, million conversion repurchases. well was return flow in to stock over XXX%. this million,

XX we Our in on commitment basis for capital Franklin an team operational points. I a invested XX.X%, step-up debt zero, of return incredibly our near the to and increase driving is net excellence. of am proud delivered to nice their

We America's climate most be consecutive of America's for one recognized Newsweek's X We of as in were trustworthy TODAY companies proud responsible and USA for named are list by years. leaders to XXXX. also

segments. our to Turning

pumping in a growth weather with continued systems customer by full Water in products a currency XX% was and impacted Demand than brown X%, overcoming the Systems the demand growth record foreign was large declined record U.S. in destocking. X% quarter the strong, quarterly of and U.S. patterns dewatering unfavorable for our headwind. sales for year setting XX%. For less Western U.S. water

Water U.S., starts quarter was treatment and challenged while the flat. Operating Outside were Systems had for Latin EMEA margin with Our and XX.X%, in lines housing flat relatively Pacific soft by Asia income home demand were product solid essentially water the the existing America, year. sales. prior

year. offset continued the year, of driving inflationary Fueling an operating challenges, and income XXXX. For quarter XX%, decreased management than a actions income XX% fourth the operating Systems basis increase and margin sales compared an more last income full quarter, improvement of in pricing record XX.X%, and difficult points year-over-year fourth of in cost respectively, XXX to lapping a and revenue in comparison operating

contributed by station Fueling caused continuation volumes. delays healthy, new lower Favorable customer impacted XXXX. to prior of move margin some operating While stocking increase interest the and points containment to an Systems year. compared was end XX.X%, Fueling Higher to rates, market Systems price cost driving permitting inventory basis a overall demand constraints of remains and negatively labor plans to build of fourth quarter XXX

approximately while margins. QX distribution to weather These seasonal, strong volatility operating commodity points more Sales our in continue We reminder with to X%, for the income to distribution decreased use. Overall, year prior XXX unfavorable operating while that segment seasonality, managing maintain Systems -- to reduced more are to and by decreased continued Fueling margin the our which continued was of an in normal see asset record excellent earnings segment operating monitoring demand. pressure. products, volume a The income customers results our closed impacted growth compared manufacturing and job that critical our has of The costs delivering is margin did quarter. out basis decreased by by segments. U.S. pricing X.X% lower our XX% destocking team due a

the we part of serve our large expand on-site OSI mentioned is continue for investments containers contractors. deployed better quarter, making an and integral where available by are we As country, needed. our strategy inventory products last key more to which across or to make Year-over-year, they customers when on-site have XX% to inventory

For with margin delivered Distribution the year, and operating demand income. even our segment X.X% challenges, the

segment of range X% recall may income XXXX, business in and we when between anticipated this You would that the that X%. stated operating this established we

midpoint last of the around Over it averaged X X%. years, the has

of mature, We is treatment acquisitions December, small systems are efficiencies business wholesale a we sales in for now in operations to to Action Inc., Action we and we product Carolina. footprint the able acquired raise a fourth producer line technology, Systems within with $XXX acquisition, X North conditioning, our to approaching this water with aeration Supply, our operating expectations residential assets In the Manufacturing look part million and year. and completed early Water quarter. outdoor segment. gain our and water water distributor and our of are product Manufacturing As continues treatment filtration or the Florida Including our income.

also distributor Waterworks, Waterworks pumps professional our expand to our Springfield, focus groundwater we located colleagues acquired a distribution continued family. in our the markets. reach With Franklin -- from Midwest focus growth the and welcome in new Action We segment, Missouri in

zero, to net capital to acquire While near to acquisitions. leverage strategy ratio further growth structure. our to execute are both we invest strategic well continue a businesses conservative also positioned The and on growth, and we maintain we continue and organic

XXXX anticipate and as like start year. Turning XXXX we much to our move to improve ended XXXX We outlook. the through

activities, a and in pump housing home Our U.S., and outlook improved normalizing anticipates XXXX continued destocking from record sales lower a levels reduction weather existing starts conditions performance, volume large pressure. dewatering the pricing in of

our confidence across foresee and mining a segment. industrial the times, and of concentration large to benefit We U.S. rates a We benefit housing of agricultural, business groundwater favorable construction and distribution new only to demand exposure in activity similarly markets the modest market. this our chain to in greater improvements lower also from We to inflation improvements. anticipate pumps continued replacement productivity demand look lead supply continue of for

earnings for segment, to products enter that, now financials we going with share. I'm momentum in exposure We new Pacific our business levels experience to see headwinds full to Fueling $X.X and our Europe robust stabilize billion, to diluted Labor look the several permit XXXX, XXXX have activity existing maintain to lines to in billion a on and through In per gain also their are expect they U.S. home and EPS In home $X.X hand especially between to to we Asia the marketers product fewer investment our to in as our in acquisition. we guidance specialty normal. and year business or and share albeit South XXXX. With starts improved signaled stabilize normalized pressures, a to $X.XX pipe expected and pumps over Latin to and initiating return years. year ease per be major are plan the review build sales. sales pricing we recent to Outside business, after detail. to Commodity should from water the expected residential constraints treatment our America recovery. U.S. meaningful Jeff? Distribution and plans $X.XX to U.S., to call between face America be expect Jeff more

Jeffery Taylor

Thanks, decrease Fourth X%. sales Gregg, a $XXX.X million, and good day, XXXX consolidated quarter everyone. year-over-year were of

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

$X.XX Our for fourth versus quarter fully for $X.XX XXXX. diluted the fourth the were quarter earnings per share XXXX

don't primarily higher devaluation, per in peso. year-over-year foreign we earnings highlight the earnings, $X.XX $X.X I Argentine quarter. operating foreign expense the currency expense do adjusted impact expense While or the exchange to FX related want income report share to The million below would by

X% of the groundwater Canada due X%. to U.S. to in some Pro parts equipment. sales pumping Water groundwater sales decline volumes. the was and across in up were Canada weather lower outside the due Systems U.S. and and sales Moving channel Wet led XXXX, Water markets primarily compared the on sales. and of the in fourth down lower were U.S. in Canada the U.S. sales to U.S. Systems primarily quarter The destocking lower to

Canada Foreign currency and XX%. outside the translation U.S. decreased sales

$XX.X segment X% was fourth year-over-year the was distribution for sales was quarter distribution the with a by weather, by versus year. of prior from decrease. million fourth Systems in segment's sales XXXX the quarter, to million, negatively Income $X.X were in compared was business. fourth sales X.X% a operating The both income XX% versus quarter through the operating fourth was down foreign XXXX, $X.X million, of income or single-digit Excluding fourth quarter in increase the double-digit XXXX The year. income down to and Asia EMEA $XX.X versus operating sales quarter XX.X%, exchange, and income Latin America XXXX. Operating was X.X% higher operating sales impacted was prior income market. points $XX.X commodity-based in quarter of in increases sales Distribution's of versus negatively fourth million a income primarily due sales the $XXX.X Systems margin The of decrease. fourth million Fueling -- X% million. Operating products $X fourth margin comments. Water expenses. a Pacific decrease XXXX impacted last of sold basis XXXX lower of the were pricing and the impact lower compression XX $XXX.X decrease with on were margin million consistent in in the adverse led in quarter million also our

As the $XX.X in fourth to Fueling was XXXX prior XX% XXXX income net Fueling fourth represented U.S. Pacific of $XXX.X the million tough million operating the fourth in $XX.X income to lower to fourth lower in the comparison to quarter decreased to margin million to outstanding increased current volume, quarter quarter XX%, of XXXX. compared mix, fourth more operating cost primarily normal management. the Franklin in to The in cash XXXX, quarter margin or fourth levels debt versus last to fourth profit quarter from quarter predominantly SG&A improved of a tax expansion supply and compared $XXX.X $XX.X levels, $XX.X year XXXX times due company $XXX.X fourth and share XX.X%, of for of $XX lower decreased XXXX, in open XXXX, prior of approximately the was cash was from million. in we quarter cash the the a XXXX. levels quarter repurchases. $XXX approximately compared $XXX cash year's end the in XX% general of profit The XX, in SG&A XXX,XXX fourth shareholders. This of was declines to million in repurchase consecutive which million the to quarter compensation XXXX, company leading $X.X to Distribution Systems was Systems XX.X% purchased repay of cash flow to the and used approximately compared compared chain of in for XXnd return the increase sales percentage XX% common shares. effective The for At both Asia the XX% XX.X% generated of to has profit reminder, flow increased fourth flow. remaining January million net administrative year-over-year that in million an gross of to XX.X% U.S. quarter as fourth in a discussed. Operating flow year working and XXXX, XXXX. the is fourth of and the the fourth of Systems the announced Due and in gross Fueling and expenses largely of of the of the In Franklin dividends availability. the all-time operating sales Canada previously expense sales or year. Selling, described shares XXXX. the fourth decrease of million the $XXX.X million to prepared marks the while our was the gross sales income XXX,XXX conditions million XXXX in the compared a XXXX, net was was have million its for capital of We The company Systems represents of from quarter as in down inter-based and XXXX. The share operating inventory our Electric's XXXX Outside Fueling percent operating over as capital higher cash of supply quarter an consolidated down $XXX during XXXX margin XX.X% dividend rate. concludes as quarter authorization at primarily quarter year, call paid a end We'll quarter returned the region. turn the XXXX. Consolidated In approximately million Systems decreased the our improvement debt for XXXX in dividend the $XX income to fourth product income has end fourth expense quarter was quarter fourth Andrew quarter. questions. for quarter We about $XXX The was approximately quarter stock XXXX. XXXX working in percentage capital, net due Fueling margin gross remarks. fourth in due At of the XX.X% down XXXX XX% year. invested rate and operating generated favorable Canada, via higher in XXXX, of to XXXX. a quarter On increased SG&A comments. by fourth the now in cost million to longer the the of decrease sales to in as compensate million. due primarily in market shareholders sales XX.X% his lead fourth Gregg from

Operator

Davidson. from D.A. our of Instructions] line comes the And first Summerville [Operator question with Matt

Matt Summerville

of levels, you're segments channel fully A the normalized? your then or inventory and follow-up. how of about questions. And out needs think you to own couple inventory on a have X be come kind across you can business where talk much own Maybe the inventories of I how about comment still your feeling to

Jeffery Taylor

give inventory of And comments as by about you don't Yes, -- terms inventory. we high-level at finished Matt, segment. inventory some reduction, this finished But last at disclose We $XXX in we million. year we million. know, $XXX overall year I'll

So the we the full -- reduction nice That for the business for into year. a about X.X translates had company for year-over-year. turns

X to to turns. drive Our that closer goal is

normalizing where terms so X And When that's made want I levels have look supply inventory the in in continued improved. their inventory go. we of all driving terms think X the as nice segments we we're reduction, and direction of progress segments, across conditions to

we has job pulling across of basis. down what year-over-year has what inventories is as as this done has through a managed their pulled seeing and a place forward business then be and point, that the down. good uptick in so that on then then as nice water levels taken in demand inventory their we XXXX. others inventory slowed They're how destocking channel And reflective the of has inventory has in done team down us their in anybody happening And our really for think business has Distribution businesses, that to certainly we indicator a X levels look all would to of believe And XXXX. good and the given their an in fueling most pull to channel.

X -- made across disclosing how all And numbers. without the of it meaningful board, businesses so in improvement terms they the manage hard

Matt Summerville

Gregg, went the factors in you it. Got number year. a of And then impacting through think, the remarks, your of prepared end business as [Indiscernible] the we move I towards through

then kind That's I could in the back of XX% of was about the first a And about You this should of referenced XX% if year, looked. factors pressure. you back a average, Jeff, in finer year, every little but we point I thumb, and of put half, the year? that. not talked maybe, of I'm if first all guys that the you went to on second cadence rule price half, And be on half. wondering EPS thinking how kind the in do about, pointing just general half Gregg kind normal given

Gregg Sengstack

Yes.

So Matt, you're in that like the that I is market. promotional more say pandemic. before would And was where behaving the activity is it getting pricing the

principally Canada. and or the North Now U.S. principally in I'm talking America groundwater

pointed conditions it's input so normal degree the distribution. less inflation maybe slowing. and as costs at excess still of manufacturers the more channel And of out, some with Jeff inventory on kind there's Again, in

in you're use this So a into that get earnings, can hand-to-hand that. Jeff then the combat terminology yes, correct, on and more case. we're about -- I'll detail And seeing as for of more spread

Distribution and but distribution we're distribution have But a manufacturing XX-XX year. better start think, getting the the to to business, well we because of kind going does were slower I QX. -- QX. a in in With a as break that's more,

do you So your to want Jeff, thoughts? give

Jeffery Taylor

company. year is for is I averaging to great a And that's the seasonally typically in years now And I as XX%. Gregg, is about in lead and Sure. is QX. the XXXX went expect we about Earnings QX. to looked the we Obviously, where ended. X full of past really at for kind start from think in, XX% percent QX a us of quarter range mention of XX% back The the lowest

as would say, the we year. to we second towards a weighted heavily year, of the And see and would through may expect this to so year, half back I that we half go more profile be similar given first that build half, certainly expect the

Operator

Our next question with Blair Oppenheimer. the Bryan from comes of line

Bryan Blair

Action manufacturing is the strikes there? for treatment $XXX water your growth? platform. is You about mentioned revenue thinking million that base, the strategically off expands the platform? Southeast how into approaching very in total for important, then of base XXXX And team What your is

Jeffery Taylor

say you asking the are Action Manufacturing? for you what's When specifically revenue

Bryan Blair

Yes.

Just what to the does that $XXX. approaching contribute

Jeffery Taylor

for It manufacturing. $XX will the million action to overall in be range $XX million

to the In margins, with terms of water business the XXXX. rest operating treatment get we line of in expect in that business

Bryan Blair

And is team Okay. treatment your How water prospects? 'XX about in? thinking revenue all growth the base

Jeffery Taylor

Yes.

we've as and plus has GDP grow be systems see the water business little there to X% kind kind We I treatment can growth. we see a continue of than that average it. to we top always think that leverage water the stronger segment said that -- of X% line plus

so Water typically think Systems. line, And for what top I expect growth we that's in

Bryan Blair

applications. team How there, is your a the or expansion into of given into or have more that look prioritizing perhaps about Understood. new 'XX in does coming place? thinking further move water and funnel deal how And and assets treatment staying to commercial technologies, your specific penetration geographic you

Gregg Sengstack

-- which into. a Florida X moving way. key markets is cover in the into Southwest, are There It's market. acquired points key other we've certainly We well. a all around There in meaningful

extension always privately to to would that is well. think it see. to reaching held size good of have as the are commercial the like be We us, people out And for complexity us I up a and into industrial, the system next opportunity companies logical which move

Bryan Blair

in can I sneak If last Understood. X one.

into the monitoring. helpful. think could if mentioned small business maybe critical relatively term, 'XX, that you're speak record what momentum there, going seeing with a understand off I and how I medium base. asset that's come from you you that large of revenue be would But

Gregg Sengstack

These growing the a Right at that north middle, that now, segment. more that the are [Indiscernible] of into And XX%. business is green you also and that transformers, of we are again, more devices grid utilities. for used relates go okay, backup crossing, getting for specked telco critical to server full-op look approaching several monitoring we're by breaker the battery to into Fueling and at major in in When about rate on We're power getting transformers call so bigger also what railroad grid, to circuit orders and base. the It's business, utilities. small farms, now off We're grew assets years mining then breakers, circuit on. the it high-voltage communities. from the systems XX% been

to to pain We across We solve We space. but help that points see in our and go-forward a electrification on name sell we as product. there challenges it's customers, we to kind more added time, So to U.S. X we're and started world the it's place pain as for we're beginning gets think we and feeling think we is about years are where listened to them only basis. the that more specification. listened is that moves And we [ like take out ] with more just recognition, of ago that many not talking like globe, many, brand problems as customers to business. we the with across hope and over started that for we And with points, pain time, time get good for we customers. their more going our where and over us their a product, the points,

Operator

Research comes with Connors Our from Ryan next of Partners. question Northcoast the line

Ryan Connors

in actually were some the them a water few that in follow-ups of actually Blair you in press the quarter. talking mention But things Q&A about treatment on Most discussed the business. was in here already. you the softness But first there business. with do have release, are you've I questions. the Mr.

in what or that or quarter specifically Curious weakness talk you that? there Is Any behind can volume price? particular So about the the was was more products? itself? markets what

Gregg Sengstack

Ryan, seeing just take into people the do a of we sell a enthusiasm or software. taking One product other lack additional is lines inventory inventories That's factors. and down. U.S. wholesale couple of in like a is in that again, for

The other thing or make more existing that install impact business is water decision treatment upgrade water treatment they related as sales well home people will is a system as when housing a because often to start move.

And so they with talked of existing home pressure lowest put dramatic XX we're years, when starts that. being it's rather do has been kind than level We moved that business. think interest at certainly lapping that in as about, the on rates downward kind on well of that

seeing to a beginning bit. little rates up You're seeing starts come a coming We're down home bit. interest

we're half. [Indiscernible] So the in I many again, of but the easier half companies the like why that's it's back in optimistic going 'XX, in think comparables little front about to more 'XX, be the will

Ryan Connors

this made Okay. inventory Good. discussion Gregg, comfortable the you over side reconciling with comments to channel with that of demand then destocking, And still regarding being intact. get on underlying the regarding -- the growth fueling and to trying we're

base down. times us, persist this destocking So just But your you shine that Obviously, that course. to if of out timing at why lead and some come have through. will growth the be you Can start point, still about effect that dynamic we demand talk what case is as would we there underneath robust discuss for expect when specifically seeing it. is run levels fueling can long where kind to the for in

Gregg Sengstack

it's QX. destocking [Indiscernible] we've you're about like, we were surprised talking Ryan, of kind now the others, little many a over, it's I'd lack say appetite that and like at now been okay, in of extend. over,

So A marketers. we've major of couple with public. talked again them are

we marketers, And with like the [Indiscernible] have their or bid to And they so putting schedules. a again, do. schedules commitment they're the build public out major street

get And visibility some the things move so right. of firms, to you kind private the of that with

times, when again, if about in think starts the that and the with you're and tight with schedule got you schedule. product lead that really, relatively because in build it, to station so you've that fueling And available to they're space, distribution build have improved

And setup year-end buy now -- didn't many or hitting see in really in hit We they going end of people very year. you're little that levels appetite. There little the activity had levels. the rebate to ahead. distributors normal interest is with to kind at So very times of see lead rebate the we would low the improving,

-- XXX,XXX major stores are operate replaced of and or that why again, the again, major being station are So call by going that at of in or to kind major encouraged And But them, that 'XX, last it, at we're or certainly we with customers in of -- good all of that investment kind with restart through the builds we're lack fourth are we're the the think at I years. we've said, with by, like, they're what there a the to looking number to going to our think operators of XXXX, refresh." a markets we maybe being builds the marketers to with they that and were schedule I think XXX,XXX bought the like kind those challenges. surprised people less. the the focused quarter. up 'XX. spec, us that's United good appetite go out have XXXX the spec XX to reasonable are on year going because, say that's of to States, little COVID They're us But said, we're consolidating even telling is you companies more the why gaining again, But marketers. bit from stations XXXX going with example, look let "Look, in have -- and we're feel kind There's climbing. Those the But a X/X us levels, a there which build in down of couple stations, little seen. the for station that I even we're a marketers are that

Ryan Connors

That's as that in thorough. did issue one, you them I very the us just it. might. these have the in for a And and X if Can commodity-oriented price This products, unpack Got I business. I last distribution of call detail. destocking appreciate little bit. you

to additional are Some of here? we as Just scale it mentioned about you expect card on for talking the color that us. also progresses. for of what the total line kind And year that then proportion you Headwaters abate

additional So of sequencing there as well. be any helpful kind color would

Gregg Sengstack

Ryan. Sure,

pipe, handled. so to a -- plastic maybe channel the the it, steel, and groundwater in ways. call that, in plastic half So to capacity the what shift is called is online came particular half, but big XX% certainly around of of want we with in were really that And 'XX both that which commodity-type products are portion manufacturers seeing product large in the and

a So price it a bit began war. of

year. so you basis and on this quarter Jeff, where down a we squeezed. The during think, decline basis on anything got were to overall the as basis, results from And held And basis I up point if the a fourth about become is last compared relative the an fourth had quarter it disappointing XXX hand worth points, absolute less year. on XXX

to margins be seems a seems on pressure it be bit. of to abating be margin to sort pressure slowing -- So seems or and

again, tough groundwater always did has one and the as Matt the but And got inventories demand, to big weather, of We kind the the well pricing QX months it's somebody's tend we so in year. documented the sale the in California, What wet snowstorm. matched in These responding normal of, to mention through said, things I you business. more to we have of We're more the there, see again, a was I supply that, been of promos, in will as think one-offs, threat. systems I Coast, groundwater I But January, earlier environment. again and see pumping specials, should or East got competitive competitive think that year, the go the in channel. impact in start know, as you're normal expecting as West, as we've threat normalized flooding responding pumps a

the before or -- more pandemic. normal you indicative that's behavior see more So of of kind

Operator

next Research. our question One please. Walter question line moment, with from comes next Liptak of Seaport Our the

Walter Liptak

year it actions wanted the ask and timing maybe are kind And looking any about pricing magnitude what of what's you if for to more Just is and a inflation, pricing. at? for normal

Jeffery Taylor

terms to it years been increases. more in well. certainly ago the water has price industry, We see pricing in business, but the as fueling of more had annual becoming certainly Yes. They several extent like some

I that see on just happening price so where in stay late that environment more monthly 'XX we doing there. to quarterly the were really think 'XX and of was increases inflation normal versus out returning to top or we And

check Typically, we'll So the them. we off. return manage manage through it we're we'll that kicks in and get business in to normal. our again, inflation our want inflation of margins. think, at frequency that more a recover to price, normalized that is X% going X% maintain than our more work level. if assuming Obviously, to will, X% certainly And up price, to costs We and

the in business. on it where global depends And have world. but a are And we we so --

the outside devaluation the is as we currency that devaluation are of digits. going and our so the inside inflation pricing. there different really managing out in of a some of double job or recovering about nice in terms through and U.S. those teams and do numbers much cases, high business sales impact of double But digits parts We're environment America, the And U.S., currency outside we well, where and are what inflation lost than environments our North much of to U.S. talk tend more inside frequently. see the

So your answers hopefully, that question.

Walter Liptak

Okay. balance sheet shape. is anything the capital about I that looking and structure you're M&A -- the And to else at Balance talk there wonder do? increase number could that that you utilize in of Is then Yes, going flow on you something great if looks try great. and sheet? maybe cash can great. the your you deals? just that's to Are

Jeffery Taylor

Yes.

Net is capital debt have our So leverage X.Xx. First no of balance all, really structure, leverage structure, like sheet. capital I on We Walt. effectively the

gives a company. so that And in of us flexibility lot the

cash at pretty the and saw that really free so flow cash we happy that, with that with the And strong XXX%, in conversion We're flow we're pleased that. very year excited generation certainly over north was And free cash certainly year I target of north full $XXX we XXX% flow of say EBITDA. what every we year it, of EBITDA was conversion. but mention didn't well million

be it think was $XXX to exact. I million

and cash flow the here balance as we generated the performance So comment But for our a cash from sheet can obviously, strong great, perspective company. great from history. perspective Gregg well. flow throughout

We we're advantage themselves. -- continue opportunities of present to a expect take they to do positioned that. that great And to gives as well us

commitment deal that more to excess and deploy think, growth but [ as cash, the evaluate those that repurchase maintain they continue also And organic business, continue as focus opportunities our have shareholders shares and shareholders make be a board acquisition sense attention Obviously, as makes excess deals continue a terms for can how move we growing we history in can grow makes the that of we're an us through cash front. dividend a where of the more excited increasing we've as the area extent and and to want team, -- and M&A and got the certainly, it's increased business XX dividend certainly I accretive, paying sense to well some of it that's for going forward. The for on it's active discipline reasonable board that in paying got that overall. we lot sure then dividend. hopefully the and invest would we ] we that extent we to long be And the see have. decision. opportunities. we And we to to management our To to that of good flow, we our think we've on for and but those a years. make our We've the I

Operator

Halloran comes of question Michael next line with from the Our Baird.

Unknown Analyst

You have Pes on for Mike.

were I wanted light there quarter? versus tunnel much declines headwind at you that shoots specifically. destocking So size of any how destocking And fueling again. take look the green the there's you're within seeing fueling a the to is in then at perhaps the pushouts on in a Can of the end

Jeffery Taylor

think the let short this. Yes, on no, but probably take an me I is answer attempt

market that discussions of there, in destocking we've pullback that volume largest sell the is that's at seen is driving certainly if terms we the and having factor And who we the in fueling, look with business customers our volume. our and that that In decrease that's terms on believe based team talked have we to in through this interest pushouts, been delays. continue in and as more about There rates. the of there get that sophisticated. are that sell grow distributors to marketers higher major that major as marketers as know there. the But have in out earlier they Gregg been we also well the they size,

supply And financing to cost understand it ability higher levels they've that. carry their And pulled of factor that all as and certainly big improved, back that have in times lead inventory, and impacts so high certainly, they well. on played as availability a

shut factors. So there with some recall, there demand years, the pandemic certainly the right, fueling I in the most several We XXXX impacted that marketers. let during unpack was you capital you think major a are if the recovery got down because fueling those pandemic, And in out is normalizing. and of coming talk was last replay big if for because second about the maybe me XXXX just quick

buildup reset But through but was strong this XXXX and think came in came more And for there happened was we And in big big that But was there of business stacking we see demand. level demand buildup that when of patients. the did inventory was than upgrades also this that so always the factor that when clearly maybe And in channel. XXXX. the we happening. is this solid for I XXXX, hindsight it then today fueling of inventory back, was in new-to-industry existing some but XXXX, the in in was there XXXX. installations, of recovery know replacement obviously, for that and

And great sale. marketers so best. with are a not really lowest is The it that that end terms in great in customers not and the support major that back right? strong XXXX. They're demand that cost -- think but market do the still continuing our product ownership of in into drove great them going discussions the of safety grow. buildup into XXXX, that see where that industry, marketers, them healthy. have business based And them normalizing we to going as supplying record the the we The total the But to deliver we inventory normalize job we it's a the bringing continue to solid. to sales to sales we saw major of our XXXX, move on going we was we is It's after and is to in

XXXX for fueling. high see that's So where we level

Unknown Analyst

at of No, the the we demand we maybe that takes consider increment here? there considerations should from the on Is and margin impressive robust that's super puts answer. thinking despite feel we very mix volume helpful side Or an it. need of? XXXX, Maybe normal do fueling, Maybe kind and relatively margin as mindful levels color like is I any of there can any about we normalizes? margins obviously, be levels. in appreciate to

Jeffery Taylor

that margin. is Yes. now. XX% this way to income mean quarters operating several We've business past for XX% I historically we've been said

margin in critical out. over not range, is in a some to the our But the be and predicting the depending say the And that as us from solutions that back our to XXs going XX possibly on products, come high would XX% and certainly expect so It's certainly, operating products grid to margins. we'll going in things end down. that margin going business range mix, is to not perspective. as keep going high they we're be touch the at of that play mix I asset fueling how I shift that core our monitoring of increase and go to I'm to starts higher. if back helps

Operator

Gregg Chairperson for any I and call back will Sengstack to CEO, now over the remarks. closing hand

Gregg Sengstack

morning Please us call. joining safe to speaking forward this we'll quarter the have with our Well, first thank all to look first a for this you and after and quarter you for results. week,

Operator

participating. for you conclude This today's now you thank and does may you, program, disconnect. Thank and

Franklin Electric (FELE) 13 Feb 242023 Q4 Earnings call transcript