• Fourth Quarter Revenue: $486 million, up 3% year-over-year.
• Operating Margin: 9%, down from the prior year.
• Full Year Revenue: $485.7 million, a 3% increase year-over-year.
• Gross Profit: $164.2 million for Q4, a 3% increase year-over-year.
• Gross Margin: 33.8%, flat compared to the prior year.
• SG&A Expenses: $117.8 million in Q4, up from $108.8 million the previous year.
• Restructuring Expenses: $3.4 million in Q4 2024, up from $0.4 million in 2023.
• Operating Income: $43.0 million in Q4 2024, down 15% from $50.8 million in Q4 2023.
• EPS (Earnings Per Share): $0.72 for Q4 2024, compared to $0.82 in Q4 2023.
• Cash Balance: $220.5 million at the end of Q4 2024.
• Net Cash Flows from Operations: $261.4 million for 2024.
• Free Cash Flow Conversion: 122% for the year.
• Dividend Increase: 6% increase in quarterly cash dividend.
• Water System Sales: Flat for Q4; US and Canada sales down 2%.
• Energy System Sales: $68.8 million in Q4, a 5% increase year-over-year.
• Distribution Segment Sales: $157.2 million in Q4, a 6% increase year-over-year.
• Effective Tax Rate: 15.8% for the quarter, compared to 17.6% in the prior year.

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Release Date: February 18, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Franklin Electric Co Inc (NASDAQ:FELE) reported a 3% year-over-year increase in consolidated fourth-quarter sales, driven by growth in distribution and energy system segments.
• The company completed strategic acquisitions, including a water systems business in Australia and a company in Latin America, which are expected to strengthen their market position.
• The energy systems segment achieved a record operating margin for 2024, reflecting disciplined cost management and operational efficiency.
• Franklin Electric Co Inc (NASDAQ:FELE) has a strong balance sheet with a cash balance of $220.5 million and a free cash flow conversion of 122% for the year.
• The company announced a 6% increase in its quarterly cash dividend, marking the 33rd consecutive year of dividend increases, demonstrating its commitment to returning cash to shareholders.

Negative Points

• Operating margins for the fourth quarter were down to 9% from the prior year, impacted by global FX headwinds, pricing pressure, and restructuring charges.
• The water systems segment experienced flat sales for the fourth quarter, with unfavorable geographic and product mix affecting results.
• Foreign currency translation negatively impacted sales by 6% in markets outside the US and Canada.
• The distribution segment faced margin declines due to cost reduction actions and commodity pricing pressure.
• The company's fully diluted earnings per share decreased to $0.72 for the fourth quarter of 2024, down from $0.82 in the fourth quarter of 2023.

Q & A Highlights

Q: Can you provide more color on the groundwater business in terms of expectations for residential and agricultural markets in 2025? A: Joe Ruzynski, CEO: We expect the market to be similar to 2024. Growth will be driven by product innovation and market share gains. The residential side is larger, and the replacement market remains strong. Agricultural outlook is less clear due to pricing challenges, but overall, we anticipate stable demand.

Q: How is Franklin positioned regarding tariffs, and can you break down the restructuring charges by segment? A: Joe Ruzynski, CEO: We have a dedicated team to manage tariff changes. Our global footprint allows us to adjust pricing and supply chain strategies. Jeffery Taylor, CFO: Restructuring charges were $2.3 million for water systems, $0.6 million for distribution, and $0.4 million for energy systems.

Q: Can you discuss the growth and margin profiles of the renamed Energy Systems segment? A: Joe Ruzynski, CEO: Critical asset monitoring and grid solutions picked up momentum at the end of 2024, and we expect growth in 2025. The margins for these products are strong, and we see opportunities in automated solutions as labor becomes tighter.

Q: What is the strategic fit of the Barnes acquisition, and can you provide financial details? A: Joe Ruzynski, CEO: Barnes complements our portfolio with commercial surface pumps and wastewater products, enhancing our Latin American presence. Jeffery Taylor, CFO: The combined revenue impact of recent acquisitions is approximately $50 million, with a purchase price around $125 million. Expected EPS accretion is $0.03 for the full year.

Q: How are you thinking about growth composition for 2025, including FX and organic growth? A: Jeffery Taylor, CFO: We expect FX to be a $15 to $20 million headwind. Organic growth is projected at 1% to 4%, with EPS growth of 3% to 7%. We anticipate capturing operating leverage through productivity improvements and cost management.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.