Earnings Call Transcript - FELE Q2 2025

Operator, Operator

Hello, and welcome to the Franklin Electric Reports Second Quarter 2025 Sales and Earnings Conference Call. Please be advised that today's conference is being recorded. It is now my pleasure to introduce Chief Financial Officer, Jennifer Wolfenbarger.

Jennifer Wolfenbarger, CFO

Thank you, Andrew, and welcome, everyone, to Franklin Electric's Second Quarter 2025 Earnings Conference Call. Joining me today is Joe Ruzynski, our Chief Executive Officer; and for Q&A section, Russ Fleeger, our 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-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?

Joseph A. Ruzynski, CEO

Thank you, Jennifer, and good morning, everyone. Thank you for joining today's call. I want to start by highlighting our team's strong results for the second quarter, which showcase our adaptability, commitment to our employees and customers, and effective strategic execution. As I conclude my first year as CEO, I am proud of the progress we've made and our response to changes in a challenging external environment. All three segments experienced organic growth with a strong combination of price and volume. We achieved new record highs in revenue, income, and earnings per share. Our Water and Distribution segment saw sales records, and there was record operating income in our Energy segment. End market demand globally has been mixed but has generally remained stable. We are observing positive order trends as we finish the quarter, and our healthy backlog boosts our confidence to maintain this momentum going forward. Weather conditions were mostly neutral. Existing home sales and housing starts have been soft, but our ability to attract new customers, provide top-notch service in our industry, and introduce new products has enabled us to find paths for growth. Our pricing strategies have effectively protected our margins amid recent tariff-driven market volatility. Our solid revenue and operational performance have helped mitigate some impacts from hyperinflationary regional markets and various one-time costs primarily linked to recent acquisitions, which are integrating smoothly. We remain committed to our long-term strategy of focusing on faster-growing markets, leveraging our strong balance sheet, enhancing efficiency across our global operations, and building robust teams and processes while consistently delivering excellent service to our customers. Despite the global market uncertainties caused by tariffs and commodity inflation, we are disciplined in our plans and responses and are prepared to execute our strategies in the second half of the year. Now, I want to acknowledge the remarkable team and culture we are cultivating at Franklin. Our culture has been a defining strength throughout our history, and we are eager to continue building on this foundation. A key aspect of our commitment is to be a great workplace and attract top talent. With that, I am pleased to announce the appointment of Jennifer Wolfenbarger as our new CFO. Jennifer brings extensive financial leadership experience in global operations, most recently serving as CFO for the Insulation business at Owens Corning. Her expertise in financial planning and analysis, accounting, operational finance, and strategic business partnerships will be invaluable as we pursue our growth strategy. I would also like to sincerely thank Russ Fleeger for his role as interim CFO over the past several months. Russ will resume his responsibilities as CFO of our Water Systems segment, where he has had a significant positive impact. Additionally, I'm excited to welcome Daniela Williams as our new Chief Human Resources Officer. Her expertise in HR technology, talent development, analytics, and global workforce strategy will be crucial in ensuring that we are equipped to support our employees and customers for years to come. Thank you to our global Franklin team, and a warm welcome to our new leaders. Looking at our results, we achieved strong consolidated sales growth of 8% across all segments. Although gross margin decreased slightly, consolidated operating margins reached 15%, supported by strong execution and improved SG&A in our Energy and Distribution segments. In light of ongoing macro uncertainties related to tariffs and acquisition costs, I am impressed with our team’s ability to drive growth in this environment. Examining our segment results in detail, Water Systems experienced solid sales growth of 8% year-over-year, benefiting from favorable pricing, volume, and recent acquisitions. The groundwater market remained steady, leading to strong price realization in the U.S. We have surpassed the typical comparable period in our U.S. fleet business, marking significant growth in the second quarter. However, margins were impacted by the sales mix related to large dewatering products and recent acquisition costs. Energy posted 6% sales growth, driven by favorable volume and pricing as international markets and our grid business gained momentum. We are optimistic about upcoming projects in locations like India and Saudi Arabia. The segment also reported strong operating income and an improved operating income margin, with margins up by 200 basis points. While margins have significantly expanded in recent quarters, we expect to maintain this comfortable range in the near term. We're optimistic about the rebound in our grid and asset monitoring business, which benefits from expanded channels and new customer acquisition. Distribution had a strong quarter with record sales despite some negative impacts from storms in another wet year, reporting a 5% growth driven largely by increased volumes. Operating margins improved by 300 basis points, thanks to strong operational execution, a better pricing environment, and stabilized commodity prices. This trend is encouraging for our business. Now, I will hand the call over to Jennifer for a more detailed review of our financials.

Jennifer Wolfenbarger, CFO

Thank you, Joe. Our fully diluted earnings per share were $1.31 for the second quarter 2025 versus $1.26 for the second quarter of 2024, up $0.06 from the prior year. Moving to Slide 6. 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's consolidated gross profit was $211.8 million for the second quarter 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've seen a 120 basis point improvement in our SG&A as a percent of sales metric for the year-over-year as a result of cost improvement actions taken in the last year. SG&A expenses were $123.5 million in the second quarter of 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 Q4 of 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 7. Water Systems sales in the U.S. and Canada were up 5% compared to the second quarter of 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 Systems 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 the second quarter of 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 $0.5 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 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 $6.3 million. 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 Systems sales were $77.5 million, an increase of $4.4 million or 6% compared to the second quarter of 2024. Energy Systems sales in the U.S. and Canada increased 6% year-over-year. Outside the U.S. and Canada, Energy Systems sales increased 14%, 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. Operating income margin increased primarily due to the favorable geographic mix of sales as well as price realization and the benefit of cost management actions taken in the last year. 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 $0.03. Moving to the balance sheet and cash flows on Slide 8. The company ended the second quarter of 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 Pat Schaefer Trust for roughly $104 million. As of the end of the second quarter 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 $0.265. This dividend will be payable August 21 to shareholders of record on August 7. Moving to Slide 9. 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 noncash 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 the second half of 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 guide. Now I will turn the call back to Joe for some additional comments.

Joseph A. Ruzynski, CEO

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 have focused on synergies as we've grown acquiescent these past years, supporting our ongoing operational efficiency efforts and 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're 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'd like to give a quick highlight on innovation. An excellent example of our drive to listen to 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 30-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 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'll return for closing remarks.

Operator, Operator

Our question comes from Bryan Blair with Oppenheimer.

Bryan Francis Blair, Analyst

A solid quarter.

Joseph A. Ruzynski, CEO

Thank you.

Jennifer Wolfenbarger, CFO

Thanks, Dan.

Bryan Francis Blair, Analyst

To level set, did Q2 benefit from a pull forward of orders, at least any notable degree? I know that wasn't the case in Q1.

Joseph A. Ruzynski, CEO

Really no change in terms of kind 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 Francis Blair, Analyst

Okay. That's good to hear. And it was great to see distribution margin back in 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?

Joseph A. Ruzynski, CEO

Yes. At the start of the year, we anticipated that this segment would show the most margin improvement, and that has unfolded as we expected. Cost actions have contributed about one-third or slightly more to that benefit. What excites us is how our team is integrating the distribution network after years of acquisitions, focusing on operational efficiency in terms of purchasing and customer service. We are also strengthening our technology capabilities to provide real-time visibility for customers regarding their orders and our products. Several factors are at play here, including operational execution and efficiency achieved through building a more streamlined business, alongside some cost actions implemented at the beginning of this year. For the latter half, we expect margins in Q3 to remain in that range, though we anticipate a seasonal decline in Q4. Nevertheless, year-over-year, we expect to see substantial improvement in the last two quarters of this year as well.

Jennifer Wolfenbarger, CFO

Let me just add to that, yes, I would agree that one-third of that was really from the cost improvements. The team did a really good job executing on volume, and we were able to gain some market share in that business during the quarter. Many of the actions the team has taken in terms of cross-pollination have really benefited us in this quarter. I am very proud of the team.

Bryan Francis Blair, Analyst

I appreciate the color. And perhaps to offer a quick update on integration at PumpEng and Barnes. Joe, you noted that the deals are tracking well. I'm particularly interested in Barnes and how your team has to date and how you're thinking about leveraging the foundry capacity and capabilities there?

Joseph A. Ruzynski, CEO

Yes. No, it's a great question. We had a good integration review down in Bogotá, one and a half months ago. And I think what impressed me is probably two things. One is our global team and our North America team was there as well. And some of their products, when we look at growth synergies, which is really the driver behind that acquisition, we're getting a lot of return on our existing and mature channels and how we bring those products to end markets, both in South America and in North America. So we're seeing that run a little bit faster than we thought. From a foundry standpoint, we know that being in region-for-region is the right way to serve our customers. And Jennifer just talked about our ability to respond to volume. I think it really sets us apart. The foundry is performing well, and we're actually working on expanding the current footprint. We had some of that optionality as we acquired the company. So we're 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's some work to do there. That's some of the investment that Jennifer called out in terms of we want to accelerate that here in the back half. There's some capital and expense to do that. But we've got good line of sight. The foundry is performing well, and the teams are executing tremendously. So a good start.

Operator, Operator

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

Ryan Michael Connors, Analyst

Welcome, Jennifer.

Jennifer Wolfenbarger, CFO

Thank you.

Ryan Michael Connors, Analyst

Yes. I wanted to jump into the Water side in a little more detail, specifically on mix. You mentioned there kind of large dewatering and the mix 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?

Joseph A. Ruzynski, CEO

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. It kind of has this three-year run from peak to trough. We saw that business hit its peak in the back half of 2023 and then sequentially get softer last 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 that we see in that business, but most of it is product mix versus geography. The geo has read out largely as we expected.

Jennifer Wolfenbarger, CFO

I would just add that, yes, both groundwater and dewatering, solid, 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.

Joseph A. Ruzynski, CEO

I think, Ryan, you'll notice less pressure on margins. The mix is somewhat difficult to determine since, as we expedite the acquisition, we are still incurring some acquisition-related costs in the second quarter, which will decrease in the latter half of the year.

Ryan Michael Connors, Analyst

Got it. Okay. Now let’s discuss the residential market for a moment. It’s clearly a significant area, and it appears that many are anticipating a potential rate cut, which could lead to lower mortgage rates and stimulate activity. Is that the sole factor we are focusing on, or are there additional elements that could promote greater volume growth in this segment of the business? Or is that really the main catalyst we are waiting for?

Joseph A. Ruzynski, CEO

I'll tackle that. Our business was relatively flat in Q2, and it's true that we're not getting any support from the market; we’re in the same situation as everyone else. However, there are some positives. Our high service and replacement demand is significant, as over 70 percent of our business comes from replacements. This has helped us maintain and even gain market share in some instances. We believe we are gaining ground in that area. Also, as I may have mentioned, we're launching some exciting new products aimed at the residential market, which you will hear more about in Q3. Product innovation and our responsiveness to customers are crucial in helping us mitigate the impact of weaker housing starts and sales. Additionally, I want to highlight our water treatment business, which is closely tied to housing starts and sales. The fact that this business grew in the mid-single digits underlines the effectiveness of our growth strategy, including adding dealers and building a strong network to outperform our competitors. We added a good number of dealers in Q2, as referenced by Jennifer. We believe there are strategies in place that can help counteract the sluggish residential market, and Q2 illustrated that for us.

Ryan Michael Connors, Analyst

Yes, understood. I have one more broader question. Franklin has traditionally been perceived as more focused on mining resources compared to some of its peers. Considering factors like the copper tariffs and the idea that these measures are intended to encourage domestic resource development, do you see that as a potential catalyst? Or has the portfolio evolved to a point where that's no longer a significant driver?

Joseph A. Ruzynski, CEO

If we look back over the past five years, our exposure to markets like oil and gas has significantly decreased, and we've observed a more balanced approach. Regarding mining, materials, and minerals, I see potential for us. Although we currently have limited exposure to these markets in North America, we are actively working to introduce these products following our acquisition of companies like Minetuff and PumpEng. This includes copper and other metals and materials where we anticipate ongoing growth. While this segment is relatively small for us at the moment, if the market continues to expand and demand for minerals in domestic development rises, we will be ready to engage.

Operator, Operator

And our next question comes from the line of Mike Halloran with RW Baird.

Michael Patrick Halloran, Analyst

Maybe we just start with how you're thinking about the sequential trends and what's embedded in guidance. With all the moving pieces, if you just think about it in terms of end user demand across the segments, anything unusual? Or do you think you're following a relatively normal cadence here? And 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?

Joseph A. Ruzynski, CEO

Yes, that's a good question, Mike. I'll start by saying that as we went through Q2, despite some headlines and global noise, we realized that the market has been more stable than we anticipated. We're proud of our team's execution. We observe trends continuing into the second half of the year. We're just a few weeks in, and our backlog, order trends, and order book appear strong. In some parts of our business, such as dewatering in the water space and the Energy segment, we can see positive indicators from our service partners and service stations. Given the backlog and order trends, we expect Q3 to be fairly normal. We don't foresee any major disruptions. We are monitoring interest rates and other external factors that might impact us, but we aren't banking on them. Our view for the second half is that it's primarily business as usual. So we anticipate Q3 will be similar to Q2, and while Q4 will be a step down, we expect to perform well.

Jennifer Wolfenbarger, CFO

I want to emphasize that we are proud of our supply chain's efforts to explore various strategies to mitigate tariff and copper challenges. We are confident in our ability to offset these issues for the remainder of the year, and we will continue to pursue multiple avenues for success.

Michael Patrick Halloran, Analyst

And then just a follow-up, just an update on how you're thinking about the M&A pipeline intent actionability. I know that's part of the mandate for the team moving forward. And so just kind of any thoughts on how that's looking and where the focal points are?

Joseph A. Ruzynski, CEO

Yes. We've 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 kind of what's out there and some things that will potentially move. So we're positive about it. We've got a good and an active funnel. And I think similar to what I said last quarter, our key focus right now is what are those products that can really put us into those faster-growing markets, take advantage of secular trends, and then we can bring through our great channel. So we expect that we'll continue to be active. It's always hard to predict what happens and when it happens, but that still is the mandate to make sure that we put that strong balance sheet to use.

Operator, Operator

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

Matt J. Summerville, Analyst

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.

Joseph A. Ruzynski, CEO

Yes. Maybe I'll 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 we've 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 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 the holding guidance is giving us the room to execute. There is a small benefit we got from obviously purchasing some of those shares. But I think the fact is we feel we're undervalued. I think 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, and we want to make sure that we prepare ourselves for further supply chain disruptions. We've got a couple of bigger capital investments that we've accelerated in two examples I may have referenced these in the past. We have a factory in Turkey that we're going faster on than we originally intended. And then we have a factory that we're building in India that we want to get started and get moving. So I think it's just making sure that: one, we're predictable; two, we have room for transformation and for those key investments, we think are important. But our intent is to grow and to serve the markets that we're in, and we feel that this is the best route for us here where we sit.

Russell D. Fleeger, Water Systems CFO

Yes. I was just going to say the investments that Joe referenced are heavily back half loaded. So that does impact the go forward as well.

Matt J. Summerville, Analyst

That's helpful. As a follow-up, could you provide some quantification on how orders and backlog metrics compare to the same time last year? Also, can you discuss your price and cost situation in the second quarter and your expectations for the latter half of the year?

Joseph A. Ruzynski, CEO

Yes, I'll provide some comments. Overall, our backlogs are likely up in the low double digits, with some segments experiencing even higher growth. As you know, Matt, we operate in a shorter-cycle business for a significant portion, so we also monitor book-to-bill ratios. All three segments have a book-to-bill ratio above 1, which is a positive indicator for us. We’ve observed a nice increase in backlog, particularly in the Energy segment. Year-over-year, this gives us a solid perspective on our backlog. Additionally, in terms of book-to-bill, we analyze churn, daily orders, and activity in our shorter-cycle businesses. This helps us understand future trends, and we're feeling positive about Q3. Regarding price and cost, Jennifer can provide insights on the price-cost-volume dynamics from Q2, as I have those figures as well. Overall, it reflects a strong blend and mix.

Jennifer Wolfenbarger, CFO

Yes. Overall, from a price over cost perspective, we're in really great shape versus the prior year. From a volume perspective, we talked about that throughout our prepared remarks, seeing a bit of an uplift year-over-year from a volume perspective as we've taken share in a few places, namely Distribution, a bit in Energy, seeing really good performance in Energy with regard to international data center projects and grid growth. And then as I mentioned, price over cost, including the impact of a little bit of impact that we've seen in tariffs, we're covering that nicely.

Joseph A. Ruzynski, CEO

Yes, and I apologize for the noise in the background as we are at Fort Wayne. Price productivity has definitely more than compensated for inflation. Observing a couple of points of pricing outperforming a few points of volume is a positive sign for us to maintain that balance. One note, Matt, is that the inflation we’re experiencing is partially attributed to tariffs and some purchases we made in the second quarter. This will become a bit more pronounced in the second half of the year, bringing pricing and inflation closer together, but we anticipate a favorable outcome this year. Additionally, we were ready to enhance our productivity, manage inventory, and adjust pricing in response to the tariffs we encountered this quarter. Overall, we feel confident that we are well-positioned in the latter half of the year to effectively counter the challenges presented by tariffs and inflation.

Operator, Operator

Thank you. And I'm 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.

Joseph A. Ruzynski, CEO

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 the dedication, hard work, and unwavering commitment. We had a solid Q2 and first half with good order trends, a healthy backlog, and we expect this to continue. Holding guidance gives us the opportunity to accelerate our transformation and position us well for '26 as we continue to monitor the act and act on tariffs and other disruptions to our market. Our strategy is working. We're excited about our prospects to find the right acquisitions, bring great customer service and innovation to our markets, and to continue to build on the great team and culture Franklin is known for. Thank you for joining us, and I hope everyone has a great week.

Operator, Operator

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