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Date
Tuesday, July 29, 2025 at 1:00 p.m. ET
Call participants
Chief Executive Officer — Joe Ruzynski
Chief Financial Officer — Jennifer Wolfenbarger
Interim Chief Financial Officer, Water Systems Segment — Russ Pfleger
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Takeaways
Consolidated sales: $587.4 million in consolidated sales for Q2 2025, an 8% year-over-year increase, with gains across all segments.
Fully diluted earnings per share: GAAP diluted earnings per share were $1.31 for Q2 2025, up 6¢ year-over-year, reflecting a 6% improvement in Energy segment sales.
Gross profit margin: 36.1% gross profit margin for Q2 2025, declining by 70 basis points, attributed to mix and acquisition effects.
Operating margin: 15%, rising 40 basis points year over year due to SG&A efficiency despite higher acquisition costs.
Water Systems segment sales: Grew 8% year-over-year in Q2 2025, with U.S. and Canada up 5% and global ex-U.S./Canada sales up 12%; large dewatering sales rose 20%, water treatment sales increased 7% compared to Q2 2024, other surface pumping gained 2%, while groundwater pumping fell 4% compared to Q2 2024.
Water Systems operating income margin: 18.1% operating income margin for Water Systems in Q2 2025, down 160 basis points year-over-year, pressured by product mix, acquisition expenses, and forex.
Distribution segment sales: $200 million for Q2 2025, a 5% gain in Distribution segment sales, with operating income margin up 300 basis points to 8.1% from cost actions and volume increases.
Energy segment sales: $77.5 million for Q2 2025, up 6% year-over-year in Energy segment sales; operating income margin reached 37.5% for Q2 2025, improving 190 basis points, primarily on international grid project strength.
SG&A expense: $123.5 million for Q2 2025, a $2.9 million rise year over year, mostly from acquisitions; underlying SG&A fell by $2.3 million year over year, excluding acquisition impact.
Share repurchases: 1.4 million shares bought for $120 million in Q2 2025, including approximately 1.2 million shares from Shaper Trust for roughly $104 million.
Book-to-bill ratio: Remained above one in all segments; overall backlog increased in the low double digits.
Dividend: Quarterly cash dividend declared at $0.265 per share, payable August 21, with a record date of August 7.
2025 guidance: Sales outlook reaffirmed at $2.09 billion–$2.15 billion for full year 2025; GAAP EPS range maintained at $3.95–$4.25 for full year 2025; anticipated $1/share non-cash pension impact noted for Q3 2025, excluded from guidance.
Major operational investments: Accelerated capital spending planned for new facilities in Turkey and India, tied to supply chain and nearshoring initiatives.
Summary
Franklin Electric(FELE 0.66%) delivered record consolidated sales and operating income for Q2 2025, driven by pricing actions and successful integration of recent acquisitions. Management reports balanced price and volume contributions across all segments, with energy and distribution units achieving substantial operating margin expansion. Exposure to tariffs and currency headwinds was mitigated through cost management and productivity, enabling maintenance of full-year financial guidance. Book-to-bill ratio remained above one in all segments; overall backlog increased in the low double digits, with management emphasizing ongoing capital deployment for supply chain optimization and facility investments. A significant share repurchase was executed during the quarter.
Jennifer Wolfenbarger highlighted, "Absent acquisition-related SG&A, the company experienced a year-over-year decrease in SG&A expense of approximately $2.3 million in Q2 2025."
Joe Ruzynski reiterated that "Book to bill is over one for all three segments." supporting confidence in near-term order momentum.
The upcoming U.S. pension termination will have a non-cash EPS impact of approximately $1 per share in Q3 2025, which is not reflected in existing EPS guidance.
Leadership transitions were completed with new CFO and Chief Human Resources Officer appointments, aligned with strategic growth and operational priorities.
New product launches and channel expansion were cited as key to offsetting weak residential and construction markets.
Industry glossary
Book-to-bill ratio: The ratio of new orders received (booked) to units shipped (billed), indicating future demand strength when above one.
Foundry: A manufacturing facility dedicated to casting metal components—critical for in-region production and cost control.
Full Conference Call Transcript
Jennifer Wolfenbarger: Thank you, Andrew, and welcome everyone to Franklin Electric Co., Inc.'s Second Quarter 2025 Earnings Conference Call. Joining me today is Joe Ruzynski, our Chief Executive Officer for the Q&A section, and Russ Pfleger, Water Systems CFO. On today's call, Joe will review our second quarter business highlights, and 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-Ks 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.franklinelectric.com. With that, I will now turn the call over to Joe. Joe?
Joe Ruzynski: Thank you, Jennifer, and good morning, everyone. Thank you for joining today's call. Let me start our call today by highlighting our team's strong results for the second quarter on Slide three. It reflects our adaptability, commitment to our employees and customers, and strategic execution. As I finished my first year as CEO and have seen the great work that our team is doing to serve, innovate, and grow, I am proud of the progress we have made and how we have responded to change in a challenging external environment. All three segments saw organic growth with a good mix of price and volume. Overall, we have set new high marks for revenue, income, and earnings per share.
We delivered sales records in our water and distribution segments, and record operating income in our energy segment. Overall, end market demand is mixed globally and has remained relatively stable. We continue to see encouraging order trends as we exit the quarter, and our healthy backlog gives us confidence in our ability to sustain this momentum as we move forward. Weather conditions were largely neutral overall. Existing home sales and housing starts remained soft, but our ability to add new customers, deliver the best service in our industry, and bring new products to market has helped us find a good path to enable growth.
Importantly, our pricing actions have been successful, helping us protect margins during the recent tariff-driven volatility in the market. Our strong top-line results and operational execution helped to offset some of our hyperinflationary regional markets and several one-time costs, mostly expenses related to recent acquisitions, which are integrating well. We also continue to execute our long-term strategy, focusing on faster-growing markets, capitalizing on our healthy balance sheet, driving efficiency in our global operation, and building processes and teams while continuing to deliver great service to our customers. While the global markets remain uncertain in the face of tariffs and commodity inflation, we have been disciplined in our plans and response and are poised to continue in the second half.
Moving to page four, I would like to take a moment to touch on the incredible team and culture we are building here at Franklin Electric Co., Inc. Culture has been a strength of Franklin in our storied history, and we are excited to build on this strong foundation. One of our key tenets is being a great place to work and attracting the best talent. With that, I am excited to welcome Jennifer Wolfenbarger as our new CFO. Jennifer joins us with extensive financial leadership experience in global operations, most recently serving as Chief Financial Officer for the Insulation business at Owens Corning.
She brings deep expertise in financial planning and analysis, accounting, operational finance, and strategic business partnerships, and she has led finance teams supporting complex global businesses. We are confident that her strong leadership and her global perspective will be a tremendous asset to Franklin Electric Co., Inc. as we continue to execute our growth strategy. I would also like to extend my sincere thanks to Russ Pfleger for stepping in as interim CFO over the past several months. Russ will return to his role as a Water System Segment CFO, where his leadership continues to drive meaningful impact. Additionally, I am thrilled to welcome Daniela Williams as our new Chief Human Resources Officer.
Daniela's deep expertise in HR technology, talent development, analytics, and global workforce strategy will be instrumental in ensuring that we are well-positioned to support our employees and customers well into the future. Thank you to our Global Franklin team, and welcome to our new leaders. Turning to results on Slide five, overall, we delivered strong consolidated sales growth of 8% with growth across all segments. While gross margin was down slightly, consolidated operating margins reached 15%, driven by strong execution and improved SG&A in our Energy and Distribution segments.
Despite the continued macro uncertainty related to tariffs and several one-time acquisition-related costs in the quarter, I am impressed with our team's response and our ability to drive growth in this environment. Looking at our segment results in more detail, Water Systems delivered a solid sales result, up 8% year over year, benefiting from favorable pricing, volume, and recent acquisitions. Similar to last quarter, the groundwater market remained steady, where we captured strong price realization in the U.S. We have lapped the difficult comparable period in our U.S. fleet business, and the business exhibited strong growth in the second quarter.
The segment did, however, see a drag on margins as a result of mix stemming from sales related to large dewatering products and the recent acquisition-related costs. Energy delivered 6% sales growth, driven by favorable volume and price as international markets and our grid business picked up steam. As we look toward the second half of the year, we are excited about upcoming projects in places like India and Saudi Arabia. The segment also had strong operating income and operating income margin, with margins improving by 200 basis points. While margins have expanded materially in recent quarters, we expect to remain comfortably around this range in the near term.
We are optimistic about our grid and asset monitoring business as it has rebounded nicely and is benefiting from expanded channels and new customer acquisition. Distribution also delivered a strong quarter with record sales despite some negative impacts of storms in another wet year. The segment reported 5% growth driven largely by higher volumes. Operating margins improved by 300 basis points, supported by strong operational execution, an improved pricing environment, and the stabilization of commodity prices. This is an encouraging trend for this business. I am now going to hand the call over to Jennifer to review our financials in more detail.
Jennifer Wolfenbarger: Thank you, Joe. Our fully diluted earnings per share were $1.31 for the second quarter of 2025 versus $1.26 in the second quarter of 2024, up 6¢ from the prior year. Moving to slide six, second quarter 2025 consolidated sales were $587.4 million, a year-over-year increase of 8%. The sales increase in the second quarter was due to the incremental sales impact from recent acquisitions and higher volume and price in all three segments, partially offset by the negative impact of foreign currency translation, primarily due to the Brazilian real. Franklin Electric Co., Inc.'s consolidated gross profit was $211.8 million for the second quarter of 2025, up from the prior year's gross profit of $199.8 million.
The gross profit as a percentage of net sales was 36.1% in the second quarter of 2025, a decrease of 70 basis points compared to the prior year. Moving on to SG&A expense, we have seen a 120 basis point improvement in our SG&A as a percent of sales metric year over year as a result of cost improvement actions taken in the last year. SG&A expenses were $123.5 million in 2025, compared to $120.6 million in the prior year. The increase in SG&A expense was primarily due to the additional expense impact of our 2025 acquisitions, including various deal-related costs.
Absent acquisition-related SG&A, the company experienced a decrease in SG&A expense year over year of approximately $2.3 million as a result of actions taken in 2024. Consolidated operating income was $88.1 million in the quarter, up $9 million or 11% from $79.1 million in the prior year. The increase in operating income was primarily due to higher sales and cost management. Operating income margin was 15%, up from 14.6% year over year. Moving to segment results on Slide seven, Water System sales in the U.S. and Canada were up 5% compared to 2024. At a product level, sales of large dewatering equipment increased 20%.
Sales of water treatment products increased 7%, driven by the strong addition of dealers to our customer base, and sales of all other surface pumping equipment increased 2%, while sales of groundwater pumping equipment decreased 4% as compared to Q2 2024. Water System sales in markets outside the U.S. and Canada increased 12% overall. Foreign currency translation decreased sales by 1%, and recent acquisitions added roughly 11% to sales. Excluding the impact of acquisitions and foreign currency translation, sales in 2025 increased high single digits in Asia Pacific, low single digits in Latin America, and were relatively flat in EMEA. Water Systems operating income was $61.8 million, down half a million versus the prior year.
The decrease was primarily due to lower gross margin and higher SG&A costs primarily related to our recent acquisitions, sales mix impact due to higher large dewatering sales in the quarter, as well as the negative impact of foreign exchange, partially offset by better volume and price. Operating income margin was 18.1%, a year-over-year decrease of 160 basis points. Distribution second quarter sales were $200 million versus second quarter 2024 sales of $190.5 million, an increase of 5%. The Distribution segment sales increase was primarily due to higher volumes as a result of share gain and on-site inventory placement projects. The Distribution segment's operating income was $16.1 million for the second quarter, a year-over-year increase of $300,000.
Operating income margin was 8.1% of sales in the second quarter, an improvement of 300 basis points versus the prior year driven by higher volumes and improved margins as a result of margin improvement actions taken in the last year. Energy System sales were $77.5 million, an increase of $4.4 million or 6% compared to 2024. Energy System sales in the U.S. and Canada increased 6% year over year, led by increased sales in India and strong grid growth. Energy Systems operating income was $29.1 million compared to $26 million in 2024. Operating income margin was 37.5% compared to 35.6% in the prior year, an improvement of 190 basis points.
The effective tax rate was 25% for the quarter compared to 23% in the prior year quarter. The change in the effective tax rate was driven by an increase in foreign earnings, tax rates higher than the U.S. rate, as well as less favorable discrete items, which had an EPS impact of approximately 3¢. Moving to the balance sheet and cash flows on slide eight, the company ended 2025 with a cash balance of $104.6 million and with $186 million outstanding under its revolving credit agreement. We generated $52 million in net cash flows from our operating activities during the second quarter compared to $36 million in 2024.
In Q2, the company purchased a total of roughly 1.4 million shares of its common stock for approximately $120 million. Approximately 1.2 million of these shares were purchased from the past Shaper Trust for roughly $104 million. As of 2025, the remaining authorized shares that may be repurchased is about 1.1 million shares. Yesterday, the company announced a quarterly cash dividend of 26.5 cents. This dividend will be payable on August 21 to shareholders of record on August 7. Moving to slide nine, we are holding our full-year sales expectations of $2.09 billion to $2.15 billion and maintaining our GAAP EPS range of $3.95 per share to $4.25 per share.
During the third quarter, the company expects to terminate its U.S. pension, which will have a non-cash EPS impact of approximately $1 per share. This impact is not included in our current guidance. While we remain confident in our backlog and our ability to execute, we foresee opportunity in 2025 to accelerate further investment in the optimization of our supply chain, execute select restructuring, and invest in growth. Therefore, we are maintaining our previous guidance. Now I will turn the call back to Joe for some additional comments. Joe?
Joe Ruzynski: Thanks, Jennifer. Turning to slide 10 and bringing back our value creation framework, our long-term strategy is anchored in how we drive growth, execute and transform operationally, deploy capital, and maintain industry-leading talent. To drive growth, we continue to focus on innovation, global portfolio expansion, and strengthening our leadership position across key markets. We focus on synergies as we have grown acquisitively these past years, supporting our ongoing operational efficiency efforts, driving improved standardization across our business. Our recent acquisitions are performing well, and the collective Franklin team is energized by new opportunities from these investments.
At the same time, we are also deeply committed to returning capital to shareholders, as evidenced by our completion of over $100 million in share buybacks this quarter. Finally, we continue to attract top talent, as seen with the additions of Jennifer and Daniela to the team, among many others, all of whom will help support our ambitious growth agenda. Ultimately, we believe these priorities position us to deliver consistent long-term shareholder value. On slide 11, I would like to give a quick highlight on innovation. An excellent example of our drive to listen to the market and our customers' needs, then bring leading innovation and solutions to our end markets, is our new EVO ONE fuel monitoring solution.
Tens of thousands of convenience store owners now face a major cost and operational challenge. They rely on outdated fuel monitoring systems that utilize thirty-plus-year-old technology. Upgrading just the control console leaves most of the aging components in place. This means owners are likely to face future unanticipated downtime coming at a dramatically higher cost as the rest of the system components reach the end of their service life. With EVO ONE, Franklin Electric Co., Inc. has provided an ideal path to upgrade the entire monitoring system utilizing the latest EVO technology perfected for the world's leading convenience store companies at a price comparable to replacing just the traditional console.
We will now turn the call over to Andrew for questions. After Q&A, we will return for closing remarks.
Operator: Andrew? Thank you. Please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. And our first question comes from the line of Bryan Blair with Oppenheimer. Thank you. Good morning, Bryan. Solid quarter.
Bryan Blair: Thank you. Thanks, Dan. To level set, did Q2 benefit from pull-forward orders, at least to any notable degree? I know that was not the case in Q1.
Joe Ruzynski: Really, no change in terms of our traditional order pattern. So at the end of Q2, I would say it was business as usual, really no significant pull-forward from Q3 to Q2.
Bryan Blair: Okay. That is good to hear. And it was great to see distribution margin, you know, back in, you know, kind of high single-digit territory. How much did cost actions contribute to the 300 basis points margin expansion, and given current visibility, how is your team thinking about distribution profitability through the back half?
Joe Ruzynski: Yeah, you know, I think as we started the year, you know, we said our expectation is you are going to see the most margin improvement in that segment. And, you know, it is reading out as we expected. Cost actions contributed probably, you know, a third or a little bit more of that benefit.
But I think what we are excited about is, you know, and I mentioned this in my prepared remarks, you know, following years of acquisition, we are really proud of how that team is bringing that distribution network together, focused on operational efficiency, both inbound, how we purchase, how we serve customers, and then building really a strong technology base to be able to give good real-time visibility on how customers order, how they can see our products. So it is a number of things. But I would say, you know, some leverage, some of that operational execution and efficiency just based on really building a more efficient business.
And then, of course, some of the cost actions that we took, you know, coming into this year. Sequentially, it will go down. But from a year-over-year standpoint, we expect to see nice improvement in the last two quarters of this year as well.
Jennifer Wolfenbarger: I mean, just to add on to that, just, you know, just yeah. I would agree a third of that was really from the cost improvement. The team did a really good job in terms of executing on volume and able to pick up some share in that business in the quarter. And a lot of the actions and so forth that the team has taken in terms of cross-pollination have really played out in the quarter. Really proud of the team.
Bryan Blair: I appreciate the color. And perhaps offer a quick update on integration at Pump Engine and Barnes. Joe, you noted that the deals are tracking well. I am particularly interested in Barnes and how your team has to date and how you are thinking about leveraging the foundry capacity and capabilities there?
Joe Ruzynski: Yeah. No. It is a great question. You know, we had a good integration review down in Bogota a month and a half ago. And I think what impressed me is, you know, probably two things. One is our global team and our North American team was there as well. And some of their products, you know, when we look at growth synergies, which is really the driver behind that acquisition, we are getting a lot of return on our existing and mature channels and how we bring those products to end markets in South America and in North America. So we are seeing that run a little bit faster than we thought.
From a foundry standpoint, you know, we know that being in region, for region, is the right way to serve our customers. And I, you know, Jennifer just talked about the ability to respond to volume. I think it really sets us apart. The foundry is performing well, and we are actually working on expanding the current footprint. We had some of that optionality as we acquired the company, so we are going forward with those investments. And I think it will be two things. One is to support the additional volume growth based on that traditional set of products serving now a wider customer base.
But, also, I think I mentioned this last quarter, looking at bringing some of the tools that may have been in Southeast Asia or in China back here closer to our customers is a real opportunity for us. So there is some work to do there. That is some of the investments that Jennifer called out in terms of who want to accelerate that here in the back half. There is some capital and expense to do that. But we have got good line of sight. The Foundry is performing well. The teams are executing tremendously. So good start. Very encouraging. Thanks again.
Bryan Blair: Thanks, Joe.
Operator: Thank you. And our next question comes from the line of Ryan Connors with Northcoast Research.
Ryan Connors: Good morning. Thanks, Joe, and welcome, Jennifer.
Joe Ruzynski: Hey, Ryan. Good morning.
Ryan Connors: Yeah. I wanted to jump into the water side in a little more detail, specifically on mix. You mentioned their kind of large dewatering. And the mixed components there in the water segment. Is that all product-driven mix, or is there some geographic mix impacts there as well? And then based on the order boards and the backlog today, how does that mix element shape up for water in the back half?
Joe Ruzynski: Most of it is really product-driven mix. And I can let Russ and Jennifer add to this. But that dewatering business, as you know, is a cyclical business, kind of has this three-year run from peak to trough. You know, we saw that business hit its peak in 2023 and then sequentially get softer year. I know we talked about this a few times. So we see a strong order book and backlog in that business. There will be some mix pressure, you know, that we see in that business, but most of it is product mix versus geographic. The geographic has read out largely as we expected.
Jennifer Wolfenbarger: I would just add that, yeah, both groundwater and dewatering saw very healthy volumes. Just saw a little bit of that product mix play out. Book to bill, very healthy, above one. It varies across geographies a little bit, but all really healthy above one with strong backlogs.
Joe Ruzynski: I see. I think, Ryan, what you will see is less pressure from a margin standpoint. So that mix is kind of hard to pull out because we definitely, as we accelerate that acquisition, we still are seeing some of those acquisition-related costs in Q2, which will diminish through the back half of the year.
Ryan Connors: Got it. Okay. And then secondly, just talk about resi for a minute. I know it is an important market, and it seems like everyone is waiting on a potential for a rate cut and maybe lower mortgage rates to drive that. I mean, is that the only catalyst that we are banking on here? Or are there other potential catalysts that can drive some more volume growth in that side of the business? Or are we just sort of is that really the catalyst that we are waiting on?
Joe Ruzynski: Well, I will take a stab at that. But you know, that business was flattish for us, obviously, in Q2. I think to say that we are getting no help from kind of the market is true. You know, we are in the same boat as everyone else. A couple of good things about our business, you know, when we talk about other things we look at. One is given our high service and replacement environment, you know, demand, you know, that business is, you know, 70 plus percent replacement for us. Our ability to serve that market has held us to hold and even take share in some cases. You know, we believe that we are taking share there.
I also think and I think I mentioned one example, and if I did not, you are going to hear more about it here in Q3. Some really exciting new products that attend to that resi market that we are just launching right now. So think new products, innovation, being able to respond to our customers, all of those things help us to offset that weaker housing starts and housing sales. You know, one thing that I would point out too is and I think we commented on this.
If you look at our water treatment business, which is probably, you know, has a more direct correlation to housing starts and sales than others, the fact that business grew, you know, mid plus single digits, I think, is a testament to just that growth strategy, which is dealer ads building a strong network, out serving our peers. So we had a nice set of dealer ads as well, again, in Q2. I think Jennifer referenced. So, we think that there is some self-help there that can offset that soft resi and Q2 demonstrated that for us.
Ryan Connors: Yep. Got it. And then one last one. Kind of a bigger picture question. Through the dewatering business and otherwise, Franklin has long been seen as somewhat more mining resource-driven than maybe some of the peers. You look at some of the things happening like the copper tariffs and the supposedly, you know, the method of madness there being to bring more resource development back domestic. Do you view that as a catalyst, or has the portfolio changed to the point where that is not, you know, the driver that it once was?
Joe Ruzynski: Well, I think if you go back, you know, five plus years, we actually were more exposed to markets like oil and gas and other things. So that has come way down, and we have seen that balance. I think just in general, if we look at mining, you know, if you look at materials and minerals, I think there is an opportunity there for us. We do not have a huge exposure to it in North America, you know, as you referenced before, but we are working on bringing those products into North America, you know, post-acquisition of companies like MindTap and PumpEdge. And it is copper.
It is, you know, there are other metals and materials where we see continued growth. So I think that is an opportunity for us. You know, it is relatively small for us today. But if that market continues to grow and if you see the need for minerals in the domestic development, continue to increase, we will be prepared for that.
Ryan Connors: Got it. Great. Thanks for your time this morning.
Joe Ruzynski: Yeah. Thank you, Ryan.
Operator: Thank you. And our next question comes from the line of Michael Halloran with R. W. Baird.
Michael Halloran: Hey, good morning, everyone.
Joe Ruzynski: Morning, Mike.
Michael Halloran: Maybe we just start with how you are thinking about the sequential trends and what is embedded in guidance. You know, with all the moving pieces, if you just think about it in terms of end-user demand across the segments, anything unusual? Do you think you are following a normal cadence here? If I think about what the guide for the back half of the year implies, does it imply normal seasonality from here, normal sequentials, or is there any kind of variance as you think about it? Whether in the quarter or embedded in the guide?
Joe Ruzynski: Yeah. It is a good question, Mike. Maybe I will start with, you know, coming into and as we went through Q2, which, you know, if you look at headlines, if you look at tariffs, if you look at the noise globally, normal we did not think we would use that term normal in terms of obviously, we well. We are really proud of what the team has done. But, you know, it was a more normal market than we had thought. We see those trends continuing here into the back half. You know, we are a couple of weeks in. The backlog, the order trends, the order book look good.
Parts of our business that we can see further out, you know, we talked about dewatering. That is one example in the water space. But in the energy segment, you know, where we can see further out there in terms of our service partners and the service station. Everything looks positive. So based on backlog order trends and kind of a, you know, a snippet here as we get into Q3, we expect, you know, to be fairly normal, just to use that word. So we do not expect any major disruption. You know, I think to the other questions, obviously, we watch interest rates. We watch some of those other externalities that could provide a lift to us.
Not baked in. No expectation. You know, our sense is it is kind of business as usual in the back half. So yes to normal and yes to kind of the seasonal sequential. So Q3 looks, you know, looks similar to Q2, and then Q4, this sequential, you know, it is obviously a step down, but we expect to perform well.
Jennifer Wolfenbarger: Not that. From tariff and from a copper perspective, I think we are really proud of the work that our supply chain has done to look for various levers to pull to mitigate that, and we continue to remain confident in our ability to offset for the balance of the year. So and that was true from a tariff perspective, from a copper perspective. We will continue to look at multiple paths to win.
Michael Halloran: Thanks for that. And then just as a follow-up, just an update on how you are thinking about the M&A pipeline intent actionability. I know that is part of the mandate for the team moving forward. And so kind of any thoughts on how that is looking and where the focal points are?
Joe Ruzynski: Yeah. You know, we have made some really fun investments and had a specific focus here over the last three quarters to make sure that the pipeline is robust, that our team is ready to execute. And the one nice thing, Mike, in the last couple of months is you definitely see a little bit more activity in terms of, you know, kind of what is out there and some things that will potentially move. So positive about it. We have got a good and active funnel.
You know, and I think similar to what I said last quarter, our kind of our key focus right now is what are those products that can really put us into those faster-growing markets, you know, take advantage of secular trends, then we can bring through our great channel. So we expect, you know, that we will continue to be active. It is always hard to predict what happens and when it happens, but, you know, that still is the mandate. To make sure that we put that strong balance sheet to use.
Michael Halloran: You. Really appreciate it.
Joe Ruzynski: Thanks, Mike.
Operator: Thank you. Our next question comes from the line of Matt Summerville with D. A. Davidson.
Matt Summerville: Morning. And I apologize if you already addressed this. I missed some of the prepared remarks. But you reiterated your EPS guide for the year, yet you bought back 1.2 million shares of stock from one of Franklin's founding daughters. Can you sort of articulate maybe why not raise the bar from a guidance standpoint? And then I have a follow-up.
Joe Ruzynski: Yeah. Maybe I will start, and then Russ and Jennifer can add to that. I think one is, as you know, we had a slower start to the year. Two is, you know, we have got a fairly ambitious agenda in terms of accelerating our transformation. Making some of those investments. I referred to just some examples in terms of nearshoring, you know, tools in our supply chain. I mean, this is a big focus, and we want to go faster to control our destiny. So I think part of holding guidance is giving us the room to execute, and there is a small benefit we got from, you know, obviously, purchasing some of those shares.
But I think the fact is we feel, you know, we are undervalued. I think, you know, our execution in Q2 is a good example of what we expect and hope to see going forward. But we also are focused highly on predictability. We want to make sure that we prepare ourselves for further supply chain disruptions. We have got a couple of bigger capital investments that we have accelerated, you know, in two examples that may have referenced these in the past. We have a factory in Turkey that we are going fast for on that we originally intended. Then we have a factory that we are building in India that we want to get started and get moving.
So transformation and for those key investments we think are important. You know? But our intent is to grow and to serve the markets that we are in, and we feel that this is the best route for us here where we sit.
Jennifer Wolfenbarger: Thank you for Yeah. I would just only do that. Yeah. I was going to say if the rep the investments that Joe referenced are
Matt Summerville: That's helpful. Thank you.
Joe Ruzynski: And then just as a follow-up, can you talk about, you know, strength in orders and backlog. Can you maybe give a little bit of quantification around how those metrics look now versus this time, this time last year? And can you review where you were at from a price-cost standpoint in the second quarter and what you expect in the back half in that regard? Thank you.
Joe Ruzynski: Yeah. Maybe just a comment I will refer to Jennifer on some of this. But from a backlog standpoint, backlogs are probably up overall in the low double digits. Some of the segments, they are up more than that. As you know, Matt, we are a shorter cycle business for a good portion. So we look at book to bill as well. Book to bill is over one for all three segments. I think that is one of our better indicators. From a year-over-year standpoint, as we give those reference points backlog, that is kind of a good year-over-year view. And then from a book to bill standpoint, this is just we look at the churn.
We look at our daily orders. We look at what is happening even, you know, what is going to happen here at least in the near term. From a price-cost standpoint, yeah, we can give you maybe, Jennifer, if you want to just talk about price-cost volume, here in Q2. I think I have those numbers here as well, but it was a good blend and a good mix.
Jennifer Wolfenbarger: Yeah. Overall from the price to the cost perspective, we were in really great shape versus prior year. From a volume perspective, we talked about that through our prepared remarks. Seeing a bit of an uplift year over year from a volume perspective as we have taken share of it in a few places, namely distribution, a bit in energy, seeing really good performance in energy with regard to international data-centric projects and grid growth. And then as I mentioned, price over cost, including the impact of a little bit of impact that we have seen in tariffs, we are covering that nicely.
Joe Ruzynski: Yeah. And sorry for the F-16 noise, but I here shortly. But, yeah, price productivity definitely more than inflation. And I think, you know, seeing a couple of points of pricing, you know, more than a few points of volume, I mean, those are good indicators for us to see that balance. One thing you will see, Matt, is the inflation, you know, and some of this due to tariffs and the purchases that we had to make in Q2. Some of this will read out a little, you know, more strongly in the back half.
So there will be a little closer in terms of the price and the inflation, but we expect it to be a positive story this year. I, you know, I would add to that. That some of the tariffs that could have been or that we saw throughout the quarter, we were prepared to do more in terms of our productivity inventory price action. You know, I think where we ended up in the quarter is we feel we are pretty good we are pretty well positioned here in the back half to more than offset tariffs, inflation, etcetera.
Matt Summerville: Thank you, guys.
Operator: Thank you. And I am showing no further questions at this time. So with that, I would like to hand the call back over to CEO, Joe Ruzynski, for any closing remarks.
Joe Ruzynski: Thanks, Andrew, and we really appreciate the questions. As we close out our Q2 2025 earnings call, I want to extend my sincere thanks and gratitude to our employees and stakeholders for their dedication, hard work, and unwavering commitment. We had a solid Q2 and first half. With good order trends and a healthy backlog, we expect it to continue. Holding guidance gives us the opportunity to accelerate our transformation and position us well for '26 as we continue to monitor and act on tariffs and other disruptions to our market. Our strategy is working.
We are excited about our prospects to find the right acquisition, bring great customer service and innovation to our markets, and to continue to build on the great team and culture Franklin Electric Co., Inc. is known for. Thank you for joining us, and I hope everyone has a great week.
Operator: Ladies and gentlemen, thank you for participating.