• Consolidated Sales: $455.2 million, a year-over-year decrease of 1%.
• Gross Margin: 36%, an improvement of 50 basis points compared to the prior year.
• Operating Income: $44.1 million, down 8% from $47.9 million in the first quarter of 2024.
• Operating Margin: 9.7%, down from 10.4% in the first quarter of 2024.
• Earnings Per Share (EPS): $0.67, compared to $0.70 in the first quarter of 2024.
• Water Systems Sales (US and Canada): Up 2% compared to the first quarter of 2024.
• Energy Systems Sales: $66.8 million, an increase of 8% compared to the first quarter of 2024.
• Distribution Sales: $141.9 million, a decrease of 3% from the first quarter of 2024.
• Cash Balance: $84 million at the end of the first quarter of 2025.
• Net Cash Flows from Operating Activities: Used $19.5 million during the first quarter.
• Dividend: Quarterly cash dividend of $0.265 announced.
• SG&A Expenses: $119.6 million, up from $115.6 million in the first quarter of 2024.
• Effective Tax Rate: 25% for the quarter, compared to 22% in the prior year quarter.

• Warning! GuruFocus has detected 4 Warning Signs with HOUS.

Release Date: April 29, 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 strong performance in its energy systems segment, with sales up 8% and operating margins increasing by 250 basis points.
• The company completed two strategic acquisitions in the first quarter, enhancing its product portfolio and expanding its channel reach.
• Despite a challenging macroeconomic environment, Franklin Electric Co Inc (NASDAQ:FELE) maintained a robust backlog and positive order trends, supporting confidence in future performance.
• The company demonstrated resilience and adaptability by effectively managing tariff impacts and maintaining pricing discipline.
• Franklin Electric Co Inc (NASDAQ:FELE) is focused on growth acceleration, resilient margins, strategic investments, and top-tier talent, which are expected to drive long-term value creation.

Negative Points

• Consolidated sales for the first quarter decreased by 1% year-over-year, primarily due to foreign currency translation and lower volumes in certain segments.
• Operating margins were down slightly year-over-year, impacted by one-time SG&A costs related to executive transition and acquisition expenses.
• The distribution segment faced short-term weather-related disruptions, particularly in the US Midwest, affecting field installations.
• The company adjusted the lower end of its EPS guidance due to uncertainties in the market and additional restructuring and growth investments.
• Franklin Electric Co Inc (NASDAQ:FELE) experienced a decrease in operating income by 8% compared to the previous year, primarily due to higher SG&A costs.

Q & A Highlights

Q: Can you provide insights into the remarkable margins in the energy segment and whether they are sustainable? A: Joe Ruzynski, CEO: The strong margins are due to a shift towards smarter solutions and effective price and productivity management. While we expect to maintain strong margins, we do not anticipate the same growth rate seen in recent quarters.

Q: Is the order growth in the water segment organic, or is it influenced by tariff-related inventory build-up? A: Joe Ruzynski, CEO: We believe the growth is organic. We have selectively increased inventory for products most exposed to tariffs, but overall, channel inventory remains stable.

Q: Is M&A still a priority for the distribution segment, and how does the weather impact look for the second quarter? A: Joe Ruzynski, CEO: We remain open to acquisitions in the distribution space, focusing on efficiencies and market service. Weather patterns appear more favorable this year, with a shift from last year's wet conditions to a more normal pattern.

Q: What is Franklin Electric's current tariff exposure, and how is the groundwater business performing in North America? A: Joe Ruzynski, CEO: Our tariff exposure is under 10% of COGS, and we are mitigating it through pricing and productivity. The groundwater business is strong, with residential growth at 11% and agricultural growth at 3%.

Q: Can you discuss the organic book-to-bill ratio in the water segment and any updates on potential transformational M&A? A: Joe Ruzynski, CEO: The book-to-bill ratio was above 1, with backlog up mid to high single digits. We are open to strategic M&A opportunities and are actively exploring potential deals.

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