Good day, and welcome to the Franklin Electric Reports Third Quarter 2025 Sales and Earnings Conference Call. Please be advised that today's conference is being recorded. It is now my pleasure to introduce CFO, Jennifer Wolfenbarger.

Thank you, Andrew, and welcome, everyone, to Franklin Electric's Third Quarter 2025 Earnings Conference Call. Joining me today is Joe Ruzynski, our Chief Executive Officer. On today's call, Joe will review our third 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 Joe. Joe?

Thank you, Jennifer, and good morning, everyone. Thank you for joining today's call. Before we delve into the details, I would like to highlight a few key takeaways from the quarter. Franklin Electric achieved another strong performance, aligning with our expectations. The quarter experienced growth across our end markets, disciplined execution, effective integration of acquisitions, and ongoing investment in our long-term growth objectives. Despite a challenging operating environment, our teams delivered solid organic sales through both volume and price, expanded margins, and generated strong cash flow. These results reflect the strength of our channel partners, our commitment to exceptional service, and the diversified global portfolio that our customers rely on. Quarter three has demonstrated our capacity to navigate various macro conditions and drive profitable growth. Our teams managed to overcome challenging weather, regional headwinds, slow existing home sales, and relatively few housing starts to ultimately achieve solid results. Our resilience can largely be attributed to ongoing pricing and cost strategies, which have proven effective. We also maintained strong cost discipline throughout the quarter, with SG&A improving as a percentage of sales despite several one-time acquisition-related costs. As we move forward, we remain focused on our strategic priorities, advancing several key initiatives this quarter, accelerating innovation, and concluding several capacity expansion projects that will benefit us in the future. With our global presence, robust balance sheet, and operational excellence, we are cultivating lasting advantages that set our business apart and facilitate long-term value creation. Next, I want to express my gratitude to our Global Franklin team for their dedication to our customers and one another. My first year has brought changes, a growth and innovation agenda, and challenging market conditions that make strong results difficult to achieve. We have welcomed two new officers in the third quarter, and our team has done a commendable job integrating them into our Franklin family. Our culture remains strong, and our team is continually becoming stronger. I genuinely appreciate our Global Franklin Electric team. Now turning to our results, consolidated sales for the quarter reached $582 million, an increase of over 9% year-over-year, with robust organic contributions. Notably, pricing remained positive as we worked to counter tariff impacts and manage inflation through disciplined pricing strategies. Gross margins increased by 20 basis points, and operating margins grew by 80 basis points, showcasing effective execution, cost control, and volume leverage. Regarding our business segments, Water Systems sales grew by 11% year-over-year, bolstered by pricing, volume, and acquisitions. Our capability to achieve both price and volume growth this quarter reinforces our competitive strength and indicates that our pricing strategies are holding firm in the market. Performance was strong across different regions, especially in Europe, the U.S., and Canada. The U.S. and Canadian markets continue to perform well despite a slowdown in housing starts, highlighting our resilience and our ability to capture market share even in difficult conditions. We’re also encouraged by several key product line results, with groundwater gaining momentum and water treatment continually growing throughout the year. In Energy Systems, sales rose nearly 15% year-over-year, reflecting notable growth in the U.S., Europe, and India. As mentioned last quarter, Q2 typically represents a seasonal peak for this business, and we anticipated a slowdown in Q3 due to timing, product mix, and tariff impacts. Ongoing pricing strategies are set to take effect in the coming months, which should help alleviate the tariff pressures experienced in Q3 and maintain margins as we approach 2026. Order intake remains strong with an increasing backlog, and we observe steady demand across end markets. Our critical asset monitoring business continued to thrive this quarter thanks to rising customer adoption and channel expansion. In distribution, sales increased by 3.4%, driven by both price and volume, marking the best pricing performance we've observed in this sector for over two years, reflecting the success of our self-help initiatives. Our channel inventory has decreased slightly year-over-year and remains healthy, primarily due to improved supply chain performance and reduced lead times throughout our value chain. From a broader perspective, conditions remain fluctuating, and residential construction activity continues to be subdued, prompting us to maintain a focus on disciplined execution in this environment. We continue to outperform relative to the market, backed by strength in key product categories and solid channel relationships. Our extensive portfolio and strong customer connections provide vital earnings stability amid changing market conditions. With that, I'll hand the call back to Jennifer to discuss the financial results in more detail.

Thank you, Joe. Moving to Slide 6, our fully diluted earnings per share was $0.37 for the third quarter 2025 versus $1.17 for the third quarter 2024. The company terminated its U.S. pension plan for approximately $55.3 million pretax and an estimated EPS impact of approximately $0.93 per share. Our adjusted fully diluted earnings per share was $1.30 for the third quarter 2025 versus $1.17 for the third quarter of 2024, up 11% versus prior year. Moving to Slide 7, third quarter 2025 consolidated sales were $581.7 million, an increase year-over-year of 9%. The sales increase in the third quarter was due to the incremental sales impact from recent acquisitions and higher volume and price in all 3 segments. Franklin Electric's consolidated gross profit was $208.7 million for the third quarter 2025 up from the prior year's gross profit of $189.7 million. The gross profit as a percentage of net sales was 35.9% in the third quarter of 2025, an increase of 20 basis points compared to the prior year. Moving on to SG&A expenses, we have seen a 60 basis point improvement in our SG&A as a percentage of sales metric as a result of cost improvement actions taken in the last year. SG&A expenses were $123.5 million in the third quarter of 2025 compared to $116 million in the prior year. The increase in SG&A expenses was primarily due to additional expense impact of our 2025 acquisitions, including various onetime deal-related costs. Absent acquisition-related SG&A expenses, the company experienced an increase in SG&A expense year-over-year of approximately $2 million or 2%, primarily driven by compensation. Consolidated operating income was $85.1 million in the quarter, up $11.6 million or 16% from $73.5 million in the prior year. The increase in operating income was primarily due to volume pull-through, price and cost management. Operating income margin was 14.6%, up from 13.8% in the prior year. Moving to segment results on Slide 8, Water Systems sales in the U.S. and Canada were up 9% compared to the third quarter 2024. At a product level, sales of large dewatering equipment increased 38%. Sales of water treatment products increased 9%. Sales of all other surface pumping equipment increased 4% and sales of groundwater pumping equipment were flat compared to Q3 2024. Water Systems sales in markets outside the U.S. and Canada increased 15% overall. Foreign currency translation increased sales by 1% and recent acquisitions added roughly 13% to sales. Excluding the impact of acquisitions and foreign currency translation, sales in the third quarter of 2025 increased 1%, led by higher sales in Europe, partially offset by sales declines in Latin America. Water Systems operating income was $60.2 million, up $7.4 million or 14% versus the prior year. The increase in operating income was primarily due to higher sales and price offsetting inflation. The third quarter operating margin was 17.9%, an increase of 40 basis points from 17.5% in the third quarter of the prior year. Distribution third quarter sales were $197.3 million versus third quarter sales in 2024 of $190.8 million, an increase of 3%. The Distribution segment sales increase was primarily due to higher volumes and price realization. The Distribution segment's operating income was $16.3 million for the third quarter, a year-over-year increase of $4.1 million or 34%. Operating income margin was 8.3% in the third quarter, an improvement of 190 basis points versus the prior year, driven by higher volume, positive price realization and improved margins as a result of margin and structural cost improvement actions taken in the last year. Energy Systems sales were $80 million, an increase of $10.3 million or 15% compared to third quarter 2024. Energy Systems sales in the U.S. and Canada increased 11% year-over-year. The increase was broad-based and across all product lines, led by fuel pumping systems. Outside the U.S. and Canada, Energy Systems sales increased 26%, led by increased sales in India and our European markets. Energy Systems operating income was $25.4 million compared to $24.1 million in 2024. Operating income margin was 31.8% compared to 34.6% in the prior year, a decline of 280 basis points. Operating income margins decreased primarily due to unfavorable geographic mix and sales, increased tariff impact and a challenging comparable in 2024. The effective tax rate was 27% for the quarter compared to 24% in the prior year quarter. The change in the effective tax rate was driven by an increase in foreign earnings taxed at rates higher than the U.S. rate as well as less favorable discrete items. Moving to the balance sheet and cash flows on Slide 9, the company ended the third quarter of 2025 with a cash balance of $102.9 million and with $66 million outstanding under its revolving credit agreement. We generated $135 million in net cash flows from operating activities during the third quarter compared to $151 million in 2024. The company did not engage in stock repurchases in Q3 of this year. Year-to-date, we have repurchased approximately 1.4 million shares from shareholders. As of the end of the third quarter of 2025, the total remaining authorized shares that may be repurchased is approximately 1.1 million shares. Yesterday, the company announced a quarterly cash dividend of $0.265. The dividend will be payable November 20 to shareholders of record on November 6. Moving to Slide 10, we are holding our full year expectations of $2.09 billion to $2.15 billion and tightening the range of our EPS guidance. We are maintaining the midpoint of our GAAP EPS guidance, targeting a range of $4 per share to $4.20 per share, adjusted to remove the impact of the termination of our U.S. pension program. Now I will turn the call back to Joe for some additional comments.

Thanks, Jennifer. Turning to Slide 11 and our value creation framework centered on 4 key pillars that guide everything we do at Franklin Electric, growth acceleration, resilient margins, strategic investments and top-tier talent. This quarter, we made great progress toward our growth and investment objectives. This past year, we've added great talent. We've improved our integrated operating model, made 2 important acquisitions and saw our focused margin efforts in water treatment and distribution gain momentum. Moving to Slide 12, innovation is core to our growth strategy. As several of our legacy markets are more mature, we are sharpening our focus on customer feedback, aligning our priorities with their evolving needs and leveraging the strength of our channel partners. By delivering targeted solutions, we continue to drive meaningful growth across our business. I'd like to highlight our new pressure boosting platform, which enhances efficiency and reliability for homeowners, businesses and contractors. Three new products we are launching this year, the VR SpecPAK, which was built to bring a wide range of features in an industry-leading footprint, the in-line SpecPAK designed for an efficient footprint with minimal noise and our VersaBoost Pro, which is easy to use and solves your residential pressure challenges in an elegant and compact design. These products are seeing strong interest and early adoption and all the quality and service expected from a Franklin product line. The pressure boosting market is a growing one and shows our commitment to migrate to faster-growing applications in our markets. And now on to Slide 13, we also made meaningful progress in our global capacity expansion with a new factory on our campus in Izmir, Turkey, the latest addition. We are a global company and growing our capabilities close to our growing customer needs in Eastern Europe and the Middle East are critical for our growth. We had the chance to review this progress during a recent visit and are pleased to start production in Q1. We will now turn the call over to Andrew for questions. After Q&A, we'll return for closing remarks. Andrew?

Our first question comes from Mike Halloran with Baird.

So can you just give some thoughts on how you see the end markets playing out as we move into next year? Probably a bigger focus on the water markets as you sit here today. Maybe just puts and takes in how you see the sequential trends playing out. Sequential trends imply growth next year on a volume basis. Is volume growth something you're planning for in some of those core water markets next year? Or is it mostly going to be led by price? Just kind of understand how those puts and takes are playing out as we sit here today.

Thank you, Mike. Looking ahead to next year, we expect market conditions in the U.S. and Canada to be similar to this year, with a subdued and flat market, though we do anticipate volume growth. Over the past few quarters, our focus has been on increasing volume in markets that aren't showing significant growth. Despite housing starts and interest rates, we remain optimistic about volume expansion. One reason we like to conclude our discussions with innovation is our intent to carve out our own market space. Strong relationships with channel partners and the introduction of new products are integral to our strategy. This applies to distribution and our Water Systems business, as well as expanding our dealer network in water treatment, which has allowed us to create some of our own opportunity even in mature markets. Outside the U.S., we are more hopeful about general market growth for water. Our strong position in Latin America has begun to demonstrate synergies from our recent acquisition. In large dewatering, we are observing trends in mining, requiring significant water movement, and we are focused on delivering our products to markets in Brazil, South Africa, and others. While early signs are modest, they are positive. Regarding capacity expansion, we aim to be positioned to address anticipated growth. We have discussed opportunities in India, the Middle East, Turkey, and Eastern Europe, with our foothold in Southeast Europe proving beneficial. Thus, we feel more confident about market growth outside the U.S. While the U.S. market remains flat, we do expect volume growth, although we anticipate that pricing opportunities will be more moderate, but we will expect to see some price realization next year as well.

Part of that price is related to the carryover work that you've completed this year into next year. So the pricing comment suggests that the incremental price from what you've already announced is more subdued.

Exactly. I think you're going to see price carryover in that 1% to 2% range based on what we've done thus far. But our expectation is there'll be some more price. I think Jennifer alluded to this, but we set price in some of our segments here going into next year. The Energy segment is an example. So we do expect incremental price next year as well.

And last question. Just maybe help with the Energy Systems margin profile. Obviously, variability as you work through this year, mix, I'm assuming is a big component of that. What's the baseline that we should be thinking about for this year as we move into next year? In other words, how do you expect that to play out? And what's kind of the base we should be building off of?

Yes. I'll make a comment and Jennifer can add some color to it. I think we've kind of set the table that as we grow internationally, you're going to see a slight moderation based on mix. And that growth is starting to read out. Middle East, India, we called those out specifically. From a tariff standpoint, we knew that Q3 would be the most pressure. And part of that is due to that onetime April big lift on some of those input costs coming from China. So one is we're working to normalize that supply chain and make sure that we're prepared for next year. But two is that's my comment on incremental price. Maybe Jennifer wants to talk about our thoughts on margin as we go into next year for that Energy segment.

Yes, I think we're well positioned. As Joe mentioned, we did announce a price increase for the Energy Systems business in September that will kick in, in December. That will help as well as we continue to moderate additional tariffs or the tariffs that we're experiencing. In Q2, we did call out, we shared that, that was a little bit of an anomaly. And Joe mentioned that we were in the high 30s in our operating margin. That was a little bit of an anomaly given the outsized mix that we saw in the quarter. Where we ended this quarter, we're very pleased in the low 30s. We'll continue to see that play out through the balance of the year.

Yes. That low to mid-30s kind of expecting further income growth next year is the expectation we would set. But we feel good about the strength of that portfolio. It's going to grow well outside the U.S., but the U.S. growth for next year in that segment looks strong as well.

And our next question comes from the line of Bryan Blair with Oppenheimer.

The value prop of the water pressure boosting line, that's pretty clear. We saw some of the technology at WEFTEC, it's impressive. I was wondering if you're willing to speak to your team's opportunity there a bit more. What's the current TAM of the pressure boosting vertical? And what kind of share capture do you think is realistic over, say, the medium term?

Yes. We believe the total addressable market is in the high hundreds of millions of dollars that we currently have access to. What we appreciate about this application is that it's a growing market. We expect this market to continue expanding. With further development in suburbs, cities, and residential buildings, the demand for pressure boosting is increasing, particularly as hotels and businesses are established. Our opportunities span commercial, industrial, and residential sectors, which is why we showcased a variety of products. You may have noticed some of the SpecPAK products. Customers are very specific in their requests; they want to implement these solutions in existing buildings, and we need to meet those requirements. They are seeking a diverse range of solutions. All components of these products are designed in-house at Franklin, including software, hardware, panels, pumps, etc. Additionally, customers want the ability to fit these into compact spaces within legacy footprints. We've received positive feedback on these products, and we anticipate continued growth as urbanization progresses not only in the U.S. but also in Latin America, the Middle East, and beyond. We're also excited about the elegant residential solutions we've been developing, and the response to our three product launches in the second half of this year has been very encouraging.

That's very encouraging. I appreciate the color. If I ask a finer point on energy margin, just to level set there, are you willing to parse out the impact of geographic mix versus tariffs in Q3?

Yes. I would say, and we're looking year-over-year, the majority of that impact is going to be tariffs. I would say probably more than 2/3 of the impact you're seeing on the variance year-over-year. The balance is going to be really mix, yes, primarily mix.

Okay. Understood. And one last one, if I may. Obviously, you have a lot of balance sheet capacity and your team seems quite keen on deploying your balance sheet going forward. How are you feeling about the deal environment now? You've obviously transacted a couple of high-stakes deals. And I'll reiterate, there's a ton of capacity there. So curious what you're seeing, the opportunity set, actionability, etc.

Yes. We think that space is getting a little bit more active. I'll just put it that way. We saw a little bit of a pause in the first half of the year as people were trying to sort out what tariff impacts would be and what the supply chains of these companies look like. But definitely, there's more activity there. We're seeing and hearing more things. I'd say more than that, though, Bryan, is we've built a biz dev team to really focus on putting our eyes on markets that we like more and making sure that we're being proactive as well in terms of how we look at those markets and what further products could bring to us. I think a nice advantage of Franklin is just our commitment to global growth doesn't limit us to just the companies in the U.S. The markets inside and the outside U.S. in terms of what's available and the prices you pay for them are very different. So similar to your reference to our deals in Q1, we cast a global net. And if you look at our funnel, it's a good mixture of companies inside and outside the U.S. So we're feeling good about it. I think we want to put that balance sheet to good use next year. And we feel better about it coming into '26 than we did as we came into 2025.

And our next question comes from the line of Matt Summerville with D.A. Davidson.

I want to talk a little bit more about energy. You mentioned seeing some nice backlog sort of growth there. If you can maybe touch on that a little bit. And then where are we from a cycle standpoint with respect to ongoing investments in fuel and infrastructure and what kind of informs you of that view?

Yes, I have a few thoughts. Starting with our core market in the U.S., the outlook for 2026 looks positive. We have a clearer view of our backlog in this sector compared to others, and it's showing a nice year-over-year increase. The revenue trend we experienced at the beginning of this year is expected to persist for a while. Growth prospects for major marketers and convenience store investments continue to look promising for next year. We're also excited about the growth we see outside the U.S., where positive trends are emerging. Some of this growth is driven by regulations, and we're well-positioned to support infrastructure improvements in regions like the Middle East. Additionally, we are enhancing our ability to serve customers in emerging markets that are experiencing growth in vehicle demand and regulatory needs, particularly in India and Latin America. We anticipate this trend to continue, making next year look promising in the energy sector.

And then I apologize if I missed it, could you give a little bit more granularity as to groundwater performance, in particular, what you saw in North America across resi and ag and maybe what your high-level thinking is for next year in those key markets?

Yes, the groundwater market in the U.S. was relatively flat this year. We believe our volume growth is somewhat of an exception in our industry. Looking ahead, the outlook for next year appears similar, with the market remaining flat. It's important to note that Franklin benefits from a high replacement rate in the groundwater sector, both agricultural and residential, which is over 70%. This stability allows us to carve out our own market space. However, we expect the U.S. market to experience low single-digit growth, partially driven by market share gains and additional efforts we need to undertake. Next year does not appear to offer a strong agricultural market, resembling this year's conditions. However, we feel well-prepared to serve that market and continue to achieve some volume growth.

And our next question comes from the line of Ryan Connors with Northcoast Research.

I wanted to return to one of the initial questions about the planning assumptions for 2026 and examine it from a scenario perspective. You've outlined your base case effectively, but there's considerable discussion about renewed weakness in residential, particularly concerning new lot development. However, the Fed is lowering rates, which should have a positive impact. Is there an upside scenario for 2026 where, if things go well, we could see different outcomes compared to the base case?

Ryan, I was asked a similar question last year and may not have answered it well. I expect interest rates need to rise significantly more before we see a drop in yields and its effects on housing starts and investments. Our outlook is centered around a subdued residential market. However, there are a couple of points worth noting, which we mentioned earlier. First, our water treatment business exemplifies our ability to thrive in stable markets; it has continued to grow, and we've improved our margins through customer and dealer additions. On the distribution side, both volume and price growth come from expanding products we offer in various regions. Our reach with independent distributors and our distribution arm allows us to explore additional opportunities, whether in wastewater or groundwater. This strategy has been effective, and we anticipate it will carry on into the next year even without significant growth. Lastly, regarding your question about an upside scenario, our strong customer relationships allow us to adapt quickly to emerging trends. We have a solid value chain from suppliers to factories to a robust distribution network. If favorable trends arise, we are prepared to deliver products to serve those markets. However, we don't have much of that potential accounted for in our plans for 2026.

I'll just add on to that last comment there on being well positioned and Joe touched on this from a water treatment perspective. We've added significant share in storefront there and in distribution with our on-site inventory applications and the adds that we've done in 2025 sets us up for real great success. If those macros take off, we'll capitalize on that even more. If they don't, I mean, we're going to continue to grow that. And I think the service, the quality, the lead time that we've been able to demonstrate has really helped us with gaining that share and gaining that customer loyalty. So that will continue.

Got it. The one number that really stood out was large dewatering, which is up 38%, if I heard that correctly. I understand that business can fluctuate, but that's a significant increase. I'm curious for any insights on that. Is the rental fleet involved in that growth? Should we expect anything short-term that might normalize? Or does this indicate a challenging comparison for next year? Any additional information regarding that notable increase in dewatering would be appreciated.

Yes. Starting with the fleet business, some of that is certainly related to the fleet. If you recall, last year marked the low point of a cycle that typically runs for about 18 months. We noticed an increase as we transitioned from Q1 to Q2. We expect this trend to continue into 2026, suggesting that the market will remain stable and strong. Additionally, there are other aspects of our large dewatering business that we find promising. We've made several acquisitions in recent years, including PumpEng in Australia during Q1. As we introduce those markets to our clients and expand our portfolio alongside our legacy Pioneer brand, we are uncovering good opportunities not only in the industrial and municipal sectors within the fleet business but also in mining. We believe that the dewatering business will be a strong area for us going into next year.

Got it. And then just a couple of quick additional questions. This pressure boosting product line sounds very exciting. Is there a significant retrofit opportunity there, or is it primarily focused on new buildings?

It's really a combination of both. Customers are facing challenges as they add water treatment and other applications in older multifamily apartments and hotels. We're seeing a mix of customers reaching out to us to address issues with their legacy buildings. The same situation applies to residential properties. This is a great opportunity for us to support the groundwater and water treatment sectors by addressing these problems. Generally, we believe there are more opportunities in legacy buildings compared to new constructions. We're not waiting for interest rates to decrease before pursuing these projects, as we see a strong market for retrofitting. Overall, retrofitting appears to present more opportunities than new builds.

Got it. And just a quick note for you, Jennifer. It seems like foreign exchange had nearly a $3 million negative impact year-over-year in the quarter. Do you think that will stabilize by the end of the year, or should we anticipate a reduction in the fourth quarter? Any insights on that would be appreciated.

We're not really expecting a significant improvement in the foreign exchange challenges and the issues we faced in the third quarter, which were also evident in the second quarter, particularly due to hyperinflation in countries like Turkey, Brazil, and Argentina. While I do expect some improvement, especially in Argentina, we're not relying on that at this moment.

And our next question comes from the line of Walter Liptak with Seaport Research.

I wanted to ask about the distribution business. The 8.3% margin looked pretty good. And I wonder if you could help us understand the different puts and takes there, the cost structure improvements versus mix versus anything else that went on?

Yes, I have a few thoughts to share before Jennifer adds her insights. Over the past year, we have focused intently on this business in several ways. One crucial aspect is effectively managing our input costs. This includes establishing strategic contracts upstream and exploring consignment models to better align commodity prices with our selling points. We have also evaluated the overall infrastructure of the business. As I mentioned previously, we have grown through acquisitions over the last four to five years, which presents us with an opportunity to streamline our back office. We are working to ensure that our operational structures align with market demands. Jennifer touched on this earlier when discussing our improvements in hub-and-spoke OSI, which relates to our on-site inventory management. Additionally, we have developed a robust data and technology framework that enhances our efficiency in serving end markets. We expect this momentum to persist. I’ve previously noted our belief that there is room for margin improvement, and we identified this as a key priority for this year, which will carry into next year as well. We have taken steps in recent quarters to align our costs with market conditions, focusing on better input costs, strategic pricing management, and overall efficiency along the value chain in how we handle products and serve our customers. We are enthusiastic about this journey and look forward to continuing discussions about it.

Just to pile on there, I want to take a moment just to give a shout out to our teams in the distribution space that have really worked to improve the margin and the structural cost of our business. That's really driven what you're seeing in the readout. We saw it in Q2. We saw it in Q3. Joe touched on the margin enhancement, just to maybe provide a little bit of a deeper insight. It's buying better, spending better, but also working with our customers, we had to make some tough decisions in certain SKUs and so forth to rationalize and make sure that we're not sacrificing service to our customers, providing the right products at the right price, but also ensuring we reap the respectable margin for that business. And then the structural work, really, we did much of that work back in late 2024. You're seeing that readout. We continue to make adjustments throughout our structure to make sure that we have the right structure in place, leveraging technology. We'll continue to do that as we head into 2026.

Okay. Great. Regarding the 2025 cost structure actions and profit benefits, if the market were to remain flat next year, could you anticipate profit growth?

Yes, we expect profit growth in that business for next year. So even with less help from the market. Maybe one other comment, too, just on the market, I think a big benefit that we've got from that distribution business as well is bringing new products to the end market. So again, with macro headwinds, wherever they may be, we still expect to grow volume and our margin for that business in 2026.

Okay. Great. And on the factory expansion in Izmir, Turkey, is that going to become accretive in 2026? Is there a cost that we should be modeling in?

Our expect is to start production in Q1. Clearly, any time you start a new factory, there's some costs associated with ramping that up and commissioning the equipment. So there could be some impact in the first half of next year. But I would say our expectation is to run at normalized margins as we get into the back half. And then finding ways to make that more efficient. We've got a great ops team. They know how to start this up. One beautiful thing about that factory is it's on the same campus where we have another factory. So it's not a greenfield in a new country, in a new place. So our expectation is we get to normalized margins in fairly quick order. So nothing to model at this point. I think this is work that our team needs to do. But we're excited about the start, and we're actually ahead of schedule there, too.

I'll now hand the call back over to CEO, Joe Ruzynski, for any closing remarks.

Appreciate it, Andrew. So in summary, a great quarter. We're excited about another solid quarter of both volume and profitability. We continue to execute well, invest strategically and build momentum for the future. Our team is going to innovate. We're going to focus on growth, and we're going to lead with our great products, our great people and how we serve our customers. We have more great opportunities in front of us and are pleased with the team that we're building, the strategy we've developed and the progress thus far in 2025. Our consistent performance through varied market conditions demonstrates the strength of this model and the dedication of our global team. Thank you, everyone, and have a great day.

Ladies and gentlemen, thank you for participating. This does conclude today's program, and you may now disconnect.