Franklin Electric(FELE) - 2025 Q2 - Quarterly Results

Financial Performance Overview This section provides an overview of the company's strong second-quarter 2025 results, segment performance, cash flow, and updated full-year guidance Second Quarter 2025 Highlights The company reported strong growth in Q2 2025, with an 8% increase in consolidated net sales to $587.4 million and an 11% rise in operating income to $88.1 million. GAAP fully diluted EPS was $1.31, up from $1.26 in the prior year | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $587.4M | $543.3M | +8% | | Operating Income | $88.1M | $79.1M | +11% | | Operating Margin | 15.0% | 14.6% | +40 bps | | GAAP Diluted EPS | $1.31 | $1.26 | +4% | Management Commentary The CEO highlighted strong execution and momentum, with record sales in the Water and Distribution segments and record operating income in the Energy segment. The company is confident for the second half of 2025, citing a healthy backlog and positive order trends, and remains committed to returning capital to shareholders - Achieved record sales in both Water and Distribution segments[3] - The Energy segment delivered record operating income and margin performance[3] - The company is entering the second half of the year with a healthy backlog and positive order trends, reinforcing confidence in sustained performance[4] - Capital was returned to shareholders during the quarter through dividends and share repurchases[3] Segment Performance All three business segments reported year-over-year net sales growth in Q2 2025. Water Systems sales grew 8% to $340.8 million, Distribution sales increased 5% to $200.0 million, and Energy Systems sales rose 6% to $77.5 million. Operating income grew significantly in Distribution and Energy, but saw a slight decline in Water Systems | Segment | Q2 2025 Net Sales (in millions) | YoY Change | Q2 2025 Operating Income (in millions) | Q2 2024 Operating Income (in millions) | | :--- | :--- | :--- | :--- | :--- | | Water Systems | $340.8 | +8% | $61.8 | $62.3 | | Distribution | $200.0 | +5% | $16.1 | $9.8 | | Energy Systems | $77.5 | +6% | $29.1 | $26.0 | - Water Systems sales growth was driven by acquisitions, volume, and price realization, partially offset by negative foreign currency translation[5] - Distribution and Energy Systems sales increases were primarily driven by higher volumes[6][7] Cash Flow For the first six months of 2025, net cash flows from operating activities were $32.0 million, a slight decrease from $35.0 million in the same period of 2024 - Net cash flows from operating activities for the first six months of 2025 were $32.0 million, compared to $35.0 million in the prior-year period[9] 2025 Full-Year Guidance The company maintained its full-year 2025 guidance, projecting sales between $2.09 billion and $2.15 billion and EPS between $3.95 and $4.25. This guidance excludes an expected non-cash EPS impact of approximately $1.00 per share from a planned pension plan termination in Q3 | Metric | 2025 Full Year Guidance | | :--- | :--- | | Sales | $2.09B - $2.15B | | EPS | $3.95 - $4.25 | - A planned termination of the US Pension Plan in Q3 is expected to have a non-cash EPS impact of approximately $1.00 per share, which is not included in the current guidance[10] Financial Statements This section presents the condensed consolidated statements of income, balance sheets, and cash flows, detailing the company's financial position and performance Condensed Consolidated Statements of Income The income statement shows a year-over-year increase in net sales to $587.4 million and operating income to $88.1 million for the second quarter. Net income attributable to the company was $60.1 million, up from $59.1 million in Q2 2024, with diluted EPS rising to $1.31 from $1.26 | (In thousands) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net sales | $587,434 | $543,258 | | Gross profit | $211,826 | $199,797 | | Operating income | $88,141 | $79,149 | | Net income attributable to Franklin Electric | $60,140 | $59,099 | | Diluted EPS | $1.31 | $1.26 | Condensed Consolidated Balance Sheets The balance sheet as of June 30, 2025, shows total assets of $2.02 billion, an increase from $1.82 billion at the end of 2024. The growth was primarily driven by increases in receivables, inventories, and goodwill, while cash and cash equivalents decreased | (In thousands) | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $104,592 | $220,540 | | Inventories | $573,597 | $483,875 | | Total current assets | $1,036,440 | $964,191 | | Total assets | $2,017,912 | $1,820,606 | | Total current liabilities | $604,117 | $433,727 | | Total equity | $1,265,062 | $1,268,610 | Condensed Consolidated Statements of Cash Flows For the first six months of 2025, net cash from operating activities was $32.0 million. The company used $127.3 million in investing activities, mainly for acquisitions ($109.7 million), and $22.1 million in financing activities, which included $129.3 million in share repurchases and $134.9 million in net debt proceeds | (In thousands) | Six Months Ended June 30, 2025 | | :--- | :--- | | Net cash flows from operating activities | $31,997 | | Net cash flows from investing activities | ($127,321) | | Net cash flows from financing activities | ($22,112) | | Net change in cash and cash equivalents | ($115,948) | Key Performance Indicators This section provides a detailed analysis of net sales and operating income margins across business segments and geographic regions Net Sales Summary This section provides a detailed breakdown of Q2 2025 net sales by business segment and geographic region. Consolidated net sales grew 8% to $587.4 million, with Water Systems sales up 8%, Energy Systems up 6%, and Distribution up 5%. Geographically, Latin America showed strong growth of 26% in the Water segment | Q2 2025 Net Sales (in millions) | Water Systems | Energy Systems | Distribution | Consolidated | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $340.8 | $77.5 | $200.0 | $587.4 | | % YoY Change | 8% | 6% | 5% | 8% | Operating Income and Margin Summary The company's consolidated operating margin improved to 15.0% in Q2 2025 from 14.6% in Q2 2024. The Energy segment achieved the highest margin at 37.5%, up from 35.6%. The Distribution segment saw the largest margin expansion, rising from 5.1% to 8.1%, while the Water Systems margin contracted slightly from 19.7% to 18.1% | Q2 Operating Margin | 2025 | 2024 | | :--- | :--- | :--- | | Water Systems | 18.1% | 19.7% | | Energy Systems | 37.5% | 35.6% | | Distribution | 8.1% | 5.1% | | Consolidated | 15.0% | 14.6% | Other Information This section provides details on the earnings conference call, forward-looking statements, and an overview of Franklin Electric's business Earnings Conference Call The company will host a conference call at 9:00 am ET to review the quarterly results. The announcement provides links for a live webcast and for participants to register for the question-and-answer session. A replay will be available until August 5, 2025 - A conference call to review earnings is scheduled for 9:00 am ET[11] - A replay of the call will be available through 9:00 am ET on Tuesday, August 5, 2025[13] Forward-Looking Statements This section contains the standard "Safe Harbor" statement, which cautions that forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially. It directs investors to the company's SEC filings, such as the Form 10-K, for a detailed description of these risks - The report includes forward-looking statements that involve risks and uncertainties detailed in the Company's Securities and Exchange Commission filings[14][15] About Franklin Electric Franklin Electric is a global leader in systems and components for moving water and energy, serving a wide range of applications including residential, commercial, agricultural, and industrial. The company has been recognized in Newsweek's and USA Today's lists for corporate responsibility, trustworthiness, and climate leadership - Franklin Electric is a global leader in the production and marketing of systems and components for the movement of water and energy[16]