Franklin Electric Co., Inc.

Hello, and welcome to the Franklin Electric Report's fourth quarter and full year 2024 results conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand has been raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. It is now my pleasure to introduce Chief Financial Officer Jeff Taylor.

Thank you, Andrew, and welcome everyone to Franklin Electric's fourth quarter and full year 2024 earnings conference call. With me today is Joe Rosinski, our Chief Executive Officer. On today's call, Joe will review our fourth quarter business highlights, Then I will provide additional details on our financial performance, and Joe will make some additional comments related to our key growth and value drivers, along with our outlook. We will then take questions. Before we begin, let me remind you that as we conduct this call, we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties. many of which could cause actual results to differ materially from such forward-looking statements. A discussion of these factors may be found in the company's annual report on Form 10-K and today's earnings release. All forward-looking statements made during this call are based on information currently available and, except as required by law, the company assumes no obligation to update any forward-looking statements. Earlier today, we published a slide deck to accompany our prepared remarks. The slides can be found in the investor relations section of our corporate website at www.franklin-electric.com. With that, I will now turn the call over to Jeff.

Thanks, Jeff. Good morning, everyone, and thank you for joining today's call. I'm pleased to share that the Franklin team delivered a solid close to a challenging year. We worked through some restructuring, focused our efforts on some faster-growing markets, and saw the breadth of our global portfolio help us grow our international business. This, coupled with the team's strong execution, proved resilient in a year marked by macroeconomic uncertainty. Order volumes continue to improve throughout the back half of the year, and we're excited about the opportunity that lies ahead in 2025. Before we jump into the quarter, I would like to briefly point out that we've transitioned the name of our fueling systems segment to energy systems. The product portfolio within energy systems remains unchanged along with our reporting structure, so this transition is in name only. Over time, we've launched several energy-related products, such as our critical asset monitoring and grid solutions offerings, which now make up about 25% of the segment's revenues. we see the need growing for smart products in this segment, both in our base business serving major marketers and wider power applications in utilities, data centers, and grid strengthening. While our historical fueling products remain core to our strategy and have a positive outlook, we believe this change more closely aligns with the nature of the business today and our long-term goals. Moving to page four on the slide deck, I want to highlight some of the recognition our team has achieved this past year We believe a company starts with its people and its promise. We take great pride in our culture and our commitment to our customers and the problems we help solve. I want to thank our team for all of their hard work this past year. Now, turning to our results on slide five, consolidated fourth quarter sales totaled $486 million, up 3% over the prior year period. Growth in our distribution and energy system segments drove this performance, while the water systems business remained flat. Operating margins for the quarter were 9%, and this was down from the prior year. This reflects a more challenging global FX headwind, continued pricing pressure, unfavorable geographic and product mix in the water system segment, and over $3 million of restructuring charges, which we mentioned last quarter. This was partially offset by notable margin improvements in energy systems, where strong U.S. sales, disciplined cost management, and streamlined operations supported results. We expect our productivity actions implemented in 2024 to benefit us as we enter 2025. Looking at full year 2024, we face a challenging macroeconomic environment. Housing starts have yet to rebound and interest rates remain high. Having worked through elevated post-COVID backlogs, we experienced a normalization of demand paired with net neutral impact from weather. I'm proud of our team's efforts in capturing growth throughout various parts of our business, despite a softer demand environment. Our global footprint is a key differentiator of our business, and it can provide important insulation against the challenging environment. Growth in Europe, Latin America, and APAC regions remain strong throughout the year, reinforcing the value of our diversified international presence. While foreign currency translations continues to present headwinds, our book-to-bill ratio is favorable, and with healthy order trends, we're looking forward to capitalizing on opportunities in 2025. Now let's take a closer look at our segment's performance for the quarter and the full year on slide six. The water system segment delivered flat sales for the fourth quarter compared to the prior year. Favorable volumes and contributions from acquisitions were offset by negative impacts from foreign exchange, as underlying demand remains healthy. In the U.S. and Canada, groundwater sales were up year over year, and bright spots within our small surface pumps and large dewatering pumps were encouraging. Outside the U.S., performance was robust across most regions. The challenges in Argentina, driven by the devaluation of the Argentine peso, impacted results. For the full year, the water segment was solid, despite a pullback in our US fleet business for large dewatering products, as we lapped a comparable year of strong sales from pent-up demand and higher backlogs stemming from supply chain constraints. Momentum improved towards the end of the year, and we expect more normal growth as we progress through 2025. I would also like to call out a strategic acquisition that we completed this month. A water systems business in Australia specializing in submersible pumps for the mining and industrial sector that complements our existing portfolio, aligns well with our growth framework, and underscores our commitment to identifying and executing on opportunities that strengthen our overall business. We've also recently signed a definitive agreement for a company in Latin America with a projected close in early March. Barnes de Columbia will bring a very complimentary set of products and a vertically integrated operating footprint to help us grow our strong position in Latin America and beyond. In the energy system segment, sales for the fourth quarter were up mid-single digits, driven by both favorable pricing and higher volumes. Performance was particularly strong in the U.S., where demand remained resilient. Looking at the full year, While the energy segment delivered a strong fourth quarter, sales were down 8% as a result through the first three quarters as they were up against a challenging year-over-year comparison due to elevated backlogs and a slower start to the year with new investments. Nonetheless, the segment achieved a record operating margin for 2024, reflecting our disciplined approach to cost management and operational efficiency. The distribution segment grew mid-single digits in the fourth quarter, with increase driven by favorable volumes and contributions from an acquisition earlier in 2024. Margin declined during the quarter as we worked through cost reduction actions and the sequential lower volume in the fourth quarter from normal seasonality, which impacted the operating leverage. Distribution's full year performance was driven by similar factors, in addition to commodity pricing pressure on results throughout the year. The trend in price decline lasted longer than the historical norm, and we expect to see stabilization in the coming year. While we have little control over commodity pricing environment, we will focus on streamlining our operations, bringing new value-added products to our customers, and driving structural margin improvements to ensure we continue to deliver profitability irrespective of pricing trends. I'm now going to hand the call back to Jeff to review our financials in more detail.