Franklin Electric Co., Inc. (NASDAQ:FELE) reported its first-quarter results for 2024, indicating a mixed performance with net sales down by 5% compared to the previous year. The company's sales decline was primarily attributed to lower sales in large dewatering equipment and fueling systems. Despite this, Franklin Electric improved gross margins and managed costs effectively. The company remains optimistic about meeting its full-year sales guidance of $2.1 billion to $2.17 billion and EPS guidance of $4.22 to $4.40, while also focusing on internal investments, acquisitions, and shareholder returns.
Key Takeaways
- Franklin Electric's net sales decreased by 5% year-over-year.
- Gross margins improved, and costs were well controlled.
- Full-year sales guidance is maintained at $2.1 billion to $2.17 billion.
- EPS guidance for the full year remains at $4.22 to $4.40.
- The company repurchased 78,000 shares and announced a quarterly cash dividend.
- Increased demand is expected in the agricultural sector with improving weather.
Company Outlook
- Franklin Electric is confident in achieving its full-year sales and EPS guidance.
- The company expects a normal seasonal pickup in business during the second quarter.
- A focus on internal investments and potential acquisitions is a priority, along with returning capital to shareholders.
Bearish Highlights
- Water Systems and Fueling Systems both saw declines in sales and operating income.
- The company experienced margin compression in certain segments due to unfavorable pricing and higher freight costs.
- Consolidated operating income decreased by 9% from the first quarter of the previous year.
- The large dewatering pumps business is expected to be down in the mid-teens for the full year.
Bullish Highlights
- Distribution business saw a 3% increase in sales.
- Interest expenses decreased slightly, benefiting earnings per share.
- The company anticipates improvement in the fueling business as the destocking phase concludes.
- Inventory levels in the water channel are appropriate, and demand in the agricultural sector is likely to increase.
Misses
- Sales and margin compression in certain segments due to unfavorable pricing and higher freight costs.
- Increased selling, general, and administrative expenses from recent acquisitions and higher compensation costs.
- Higher foreign exchange expenses were incurred due to hyperinflation in Argentina and Turkey.
Q&A Highlights
- CEO Gregg Sengstack discussed pricing dynamics, indicating that pricing is similar to pre-COVID levels with increased promotional activity in groundwater.
- Inventory levels in the water side of the business have been adjusted to appropriate levels compared to last year.
- Jeff Taylor, another executive, provided insights into organic growth expectations for water distribution and fueling.
- Residential market in the U.S. and Canada was down slightly in Q1, while agriculture was down more significantly.
- Large dewatering pumps business is expected to see a global decline of 40% for the first quarter and mid-teens decline for the full year.
Franklin Electric remains committed to its strategy of growth through internal investments, potential acquisitions, and capital returns to shareholders. The company's executives provided a clear outlook for the remainder of the year, emphasizing confidence in their ability to meet the set financial targets despite the current challenges. The next earnings call is scheduled for July, where the company will discuss its second-quarter results.
InvestingPro Insights
Franklin Electric Co., Inc. (FELE) has demonstrated resilience by maintaining its full-year sales and EPS guidance despite a challenging quarter. The company's commitment to shareholder returns is underscored by its impressive track record of raising its dividend for 31 consecutive years, reflecting a stable and investor-friendly policy. Additionally, the company's adept management of its financials is evident through its ability to cover interest payments with existing cash flows and maintain a moderate level of debt.
InvestingPro Tips for Franklin Electric highlight several key strengths of the company:
- Franklin Electric has a strong history of dividend reliability, having maintained dividend payments for 32 consecutive years, which may appeal to income-focused investors.
- Analysts predict the company will be profitable this year, supported by the fact that it has been profitable over the last twelve months.
InvestingPro Data metrics provide further insight into the company's financial health and performance:
- With a market capitalization of $4.44 billion, the company holds a significant position in its industry.
- The P/E ratio stands at 23.23, which suggests that the company is trading at a premium relative to its earnings.
- Despite a slight decline in revenue growth over the last quarter, Franklin Electric's gross profit margin remains robust at 33.75%, indicating efficient cost management.
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Full transcript - Franklin Electric (FELE) Q1 2024:
Operator: Hello, and welcome to the Franklin Electric Report's First Quarter 2024 Sales and Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference call is being recorded. It is now my pleasure to introduce Chief Financial Officer, Jeff Taylor.
Jeff Taylor: Thank you, Andrew, and good morning, everyone. Welcome to Franklin Electric's first quarter 2024 earnings conference call. With me today is Gregg Sengstack, our Chairperson and Chief Executive Officer. On today's call, Gregg will review the first quarter business highlights, and I will provide additional details on our financial performance. 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. With that, I will now turn the call over to Gregg Sengstack.
Gregg Sengstack: Thank you, Jeff, and thank you all for joining us. Our first quarter results were slightly below our expectations, while the business generally performed as expected. The Franklin team executed well and managed costs during the quarter, despite much wetter weather and expected and continuing commodity price pressures. As we have previously communicated, the first quarter is seasonally our slowest quarter as it relates to demand. However, underlying activity in our core markets remains healthy. Compared to our record first quarter of 2023, net sales were down $24 million, or 5%. We had an exceptional start in 2023, particularly for large dewatering equipment and Fueling Systems, which made for a tougher year-over-year comparison. Largest contributing factors were the decrease in large dewatering equipment sales in the U.S. to our fleet rental customers, which accounted for approximately two-thirds of the decrease and lower sales in Fueling Systems as demand and order patterns have normalized. Even with more moderate demand, we delivered improved gross margin versus the prior year driven by favorable mix and continued cost control. As expected, SG&A expenses were higher than prior year due to inflationary pressure, investments in recent water treatment and distribution acquisitions, and the addition of new distribution branch locations. Turning to our segments, Water Systems first quarter sales and operating income declined 7% and 4%, respectively. As I previously mentioned, volumes were lower in large dewatering equipment, creating a difficult year-over-year comparison against the first quarter record sales in 2023. Additionally, demand in the U.S. for our groundwater pumping systems was impacted by continued unfavorable weather patterns. Operating margin improved to 16.4%, up 40 basis points versus prior year at 60 basis points versus the fourth quarter of 2023. This was driven by a favorable product mix and lower freight expenses. Fueling system sales and operating income decreased 15% and 10%, respectively, versus the prior year. We are encouraged to see that the destocking activity which impacted the business in the back half of last year has mostly diminished at this point in time. As with large dewatering equipment, Fueling Systems record first quarter fiscal '23 created a difficult year-over-year comparison. That said, Fueling Systems first quarter operating margin came in at 30.3%, an increase of 170 basis points compared to the prior year. Improved margin was a result of favorable product mix and operating expense management. Sales in the distribution business increased 3% from the prior year primarily due to the incremental sales impact from our 2023 acquisition. The business, similar to the Water Systems, was negatively impacted by unfavorable weather across many parts of the United States, delaying the start of contractor installations. Operating margin was 1.2%, a 210 basis point decline versus the prior year due to lower margins on commodity-based products as well as increased operating expenses from continued investment and growth via the recent acquisition of new branch locations announced in 2023. Considering the impact of these investments, we are encouraged to have achieved a 50 basis point sequential improvement in operating margins for distribution for the fourth quarter of 2023 on seasonally lower sales. Our sales team maintains line of sight to our contractors, customers' project pipelines and as a result, we are confident we will see improving performance in sales and margin as weather improves as we enter the groundwater drilling season. Our continued focus on the management of working capital has resulted in more normalized inventory levels with our March inventory balance at $532 million, close to $70 million lower than the same period in the prior year, although up from the end of the year in anticipation of normal seasonal demand. Consequently, our cash flow improved approximately $10 million in the first quarter of 2024 compared to the prior year. We remain committed to a balanced capital allocation strategy. We continue to make internal investments focused on bringing additional production in-house and enhancing the integrity of our supply chain. We are also actively monitoring the M&A environment where we have seen an uptick in activity. We've invested approximately $0.5 billion since 2017 to build our distribution business and our water treatment platform. We will continue to build these businesses through bolt-on acquisitions, while we are actively looking to grow in a couple of other areas. The first is manufacturers of larger pumping systems where they focus on commercial and industrial end markets globally. The second is to add to our critical asset monitoring capabilities in the grid business as the demand for electricity continues to grow. With effectively no net debt, we are well positioned to take advantage of opportunities as they present themselves. Finally, we remain committed to returning capital to our shareholders through regular dividends and opportunistic share repurchases. Looking ahead to the remainder of this year, we are mindful of the continued macroeconomic and geopolitical pressures we have to contend with. However, given the results in the first quarter and our current outlook, we are maintaining our full year 2024 sales guidance to be in the range of $2.1 billion to $2.17 billion in sales and our EPS guidance to remain between $4.22 and $4.40. Before turning the call back over to Jeff, I'd like to take a moment to recognize Franklin Electric and our employees for being named in Newsweek's 2024 list of America's most trustworthy companies for the third consecutive year. I would also like to refer you to our recently published 2024 sustainability report, detailing the company's efforts to positively and responsibly impact our communities over the past year. The work that we do is essential to people's lives, advances global access to clean water and improves the safety and availability of energy worldwide. I'm also proud of the culture this management team has stewarded, one that balances focus across efficiency, sustainability and reliability with the well-being of our employees. I will now turn the call back over to Jeff. Jeff?
Jeff Taylor: Thanks, Gregg. Overall, our first quarter was largely in line with our expectations, as Gregg highlighted. While we started off the first quarter with sales down from our record levels last year, the Franklin team executed well with a focus on delivering for our customers and cost management, which resulted in an improvement in our gross profit margins. And fully diluted earnings per share were $0.70 for the first quarter 2024 versus $0.79 for the first quarter 2023. First quarter 2024 consolidated sales were $460.9 million, a year-over-year decrease of 5%. The benefit to sales from our 2023 acquisitions were more than offset by lower volumes in Water Systems and Fueling Systems. Water Systems sales in the U.S. and Canada were down 12% compared to the first quarter of 2023 due to volume declines. Sales of large dewatering equipment decreased 50% compared to record quarterly sales in the prior year quarter and sales of groundwater pumping equipment decreased 8%. These sales declines were partially offset by the incremental sales impact from our recent water treatment acquisition. Sales of all other surface pumping equipment were flat compared to the first quarter 2023. Water Systems sales in markets outside the U.S. and Canada increased by 4% overall as sales increased in all major markets; Latin America, EMEA and Asia Pacific. Water Systems operating income was 47.1 million in the first quarter of 2024, down 1.9 million or 4% versus the first quarter 2023. Operating income margin was 16.4%, a year-over-year increase of 40 basis points. The decrease in operating income was primarily due to lower sales. Operating income margin improved due to favorable product mix shifts and lower freight expenses. Distributions first quarter sales were 147 million versus the first quarter 2023 sales of 143 million, a 3% increase. The distribution segments operating income was 1.8 million for the first quarter, a year-over-year decrease of 2.9 million. Operating income margin was 1.2% of sales in the first quarter 2024 versus 3.3% in the prior year. Income was negatively impacted by margin compression from continued lower pricing on commodity-based products and investments in new branch locations. Fueling system sales in the first quarter of 2024 were $62.1 million. Sales decreased 10.6 million or 15% compared to the prior year. Fueling system sales in the U.S. and Canada decreased 11% compared to the first quarter 2023. The decrease was across all product lines as customer buying patterns have normalized after record first quarter sales in 2023. Outside the U.S. and Canada, fueling system sales decreased 16% due primarily to lower sales in Asia Pacific. Fueling systems operating income was 18.8 million compared to 20.8 million in the first quarter 2023. The first quarter 2024 operating income margin was 30.3% compared to 28.6% of net sales in the prior year. Operating income margin increased primarily due to price realization, lower freight costs and a favorable product-sales mix shift. Franklin Electric's consolidated gross profit was 163.6 million for the first quarter 2024, a 1% year-over-year increase. Gross profit as a percentage of net sales was 35.5% in the first quarter 2024, up 200 basis points versus 33.5%. In the prior year, the gross profit margin was favorably impacted in 2024 by product mix and lower freight costs in Water Systems and Fueling Systems, partially offset by margin compression from unfavorable pricing of commodity-based products from the distribution business. Selling general and administrative or SG&A expenses were 115.6 million in the first quarter 2024 compared to 109.5 million in the first quarter 2023. The increase in SG&A expenses were due to the incremental expense from recent acquisitions, new branch locations and distribution, and higher compensation costs. Consolidated operating income was 47.9 million in the first quarter 2024, down 4.7 million or 9% from 52.6 million in the first quarter 2023. The decrease in operating income was primarily due to lower sales. First quarter 2024 operating income margin was 10.4% versus 10.9% of net sales in the first quarter 2023. Below operating income, higher foreign exchange expense, primarily due to hyperinflation in Argentina and Turkey, was partially offset by lower interest expense, which equates to a decrease of approximately 0.02 in earnings per share. The effective tax rate was 22% for the quarter compared to 21% in the prior year quarter. The company purchased approximately 78,000 shares of its common stock in the open market for about 7.4 million during the first quarter 2024. At the end of the first quarter, the remaining share repurchase authorization is about 839,000 shares. Last week, the company announced a quarterly cash dividend of 0.25 that will be paid May 16th to shareholders of record as of May 2nd. This concludes our prepared remarks. We'll now turn the call over to Andrew for questions.
Operator: Thank you. [Operator Instructions]. And our first question comes from the line of Bryan Blair with Oppenheimer.
Bryan Blair: Thank you. Good morning, everyone.
Jeff Taylor: Good morning, Brian. Good morning.
Bryan Blair: I was hoping you could offer a little more color on how orders trended through the quarter and into Q2 and how your team used the relative puts and takes or upside, downside drivers versus the reiterated full year guidance at this point.
Jeff Taylor: Yes. I mean, from how it trended during the quarter, I think it trended pretty much as we would expect it with the normal seasonal profile. Typically, it's going to start slow and then build as we move through the quarter, so lower in January and then finish in stronger in March. I believe we saw that. Puts and takes there. You know, the one thing that I think impacted the business more than we had expected was the weather. We continued to see much wetter weather in the U.S., and that impacted us certainly in the western part of the U.S., and so that was a factor that was worse than we had forecast or expected. And then the other is, the commodity prices, particularly for pipe, continue to be under pressure. You know, that market has to stabilize at some point, Bryan. We've been waiting for that for a couple of quarters now, but we continue to see, pricing pressures there. And that's, you know, more than four quarters in a row that we've seen those pricing pressures on commodities. So, when you look at it from a year-over-year impact, it does have an impact.
Bryan Blair: Well understood. I appreciate the color. If we could dig into Fueling Systems trends a bit. What was the growth in critical assets monitoring in the quarter, and at this point, how mixed and creative is that build-out? Obviously, the segment margin, came in at least relative to our model, ahead of expectations, and the optics are quite favorable there.
Jeff Taylor: Yes, I would say that the grid solutions business performed pretty much in line with the way the fueling business did, in terms of it was down on a year-over-year basis. And so, while that business has been growing, strong double digits, and we expect it to continue to grow strong double digits, I think it went through some of the same dynamics that we saw on the fueling side, where people had built up inventory, restocked, and now with supply availability, lead times improved, people are waiting. They're not placing their orders as early as they did in prior year. And so, we saw a year-over-year decline in grid solutions.
Bryan Blair: Okay, understood. And one last one, if I may. Any color on the integration of action manufacturing and commentary on the M&A pipeline? It seems optimistic. Any color you can offer on the opportunities over the near-term potential actionability, whether in water treatment distribution, the typical focus areas for you, or you called out a couple of new, potential areas for investment as well.
Gregg Sengstack: Yes, Bryan, on action, integration has gone on schedule. We actually have pulled up, bring them onto our ERP system. We're actually doing that tomorrow. So, we are good in both distribution and in water treatment. We're able to get businesses on to our system very quickly and get them aligned in our business practices layout to their warehouses and their assembly locations. And so, we improved flow. And action's right on plan, actually, a little bit ahead of plan on top line and bottom line. We have the platforms we need to operate in both distribution and water treatment, groundwater distribution and water treatment. But as people decide to exit the business, we're available to be an acquirer in that business and we'll continue to do so. We are also being more intentional now that I think, the world's accepted higher interest rates, particularly in the United States, and valuations that I think the sellers and buyers are getting a better understanding of what valuations are in this new interest rate environment. We're just seeing higher deal flow in manufacturing assets. And at its core, you know, Franklin's a manufacturing company. Our distribution decision was afforded a great – and a channel that we're a leader in the United States in groundwater. So, at their core, we're a manufacturer. At our core, we're a global company. And so, we're looking, again, at opportunities to acquire, companies that, have larger pumps to augment what people recognize as us being a leader in residential and Ag. So, we want to be intentional about that. And that's where we're seeing also greater deal flow and deal activity. And also, with adjacencies and being mindful that, we've grown this company over time through intentional expansion of adjacent markets, but thoughtfully doing that so that they're adjacent to make logical sense from the standpoint of either distribution, common customers. And so, we're looking at that as well. But definitely, we've seen just more deal flow over the last several months, last couple quarters than, say, maybe a year ago.
Bryan Blair: Appreciate all the color. Thank you.
Gregg Sengstack: Thank you, Bryan.
Operator: Thank you. One moment, please, for our next question. And our next question comes from the line of Walter Liptak with Seaport Research.
Walter Liptak: Hi, good morning, guys. Thanks.
Jeff Taylor: Good morning, Walt.
Walter Liptak: So, considering the slightly weaker than expected first quarter and, related to the wetter weather, you maintain the guidance for the full year. Can you talk about, your confidence levels, what has to go right second quarter and the back half to get to your guidance?
Jeff Taylor: Yes. Well, I mean, I would say, first of all, that, we maintain our guidance. We feel confident with the guidance range that we have out there. One quarter under our belt, slightly below our expectations, but I would still say generally in line with our expectations. So, from that perspective, not a major change. I've already talked about a couple of the things that impacted us were, a little bit wetter weather and some of the commodities pricings. But we certainly expected that 2024 was really going to start much like 2023 ended. And I think we, signaled that when we thought that the business was going to, come into the year and then build as we move through the year. And I think we still see that happening. Overall, we don't predict the economy. We're not economists, but, we've said no recession. I think we still don't see a recession coming. I do believe that, we expect interest rates to stay higher for longer now. That will have a little impact on our housing market. In areas like water treatment will be a little more impacted, are a little more impacted by housing. But overall, I think our view there is pretty much intact for the full year guidance. There was a question last quarter about, first half and second half. I think that I think we're still generally in line with how the business has performed over time in that regard. And so, we feel good about the guidance that we have out there through the end of the year.
Walter Liptak: Okay, great. Thanks. And then thinking about second quarter, are you -- you talked about how the destocking in fueling seems to be behind you. Are you seeing more sell-through now going into the construction season?
Jeff Taylor: Yes, I would say we're right at the beginning of the groundwater drilling season, and so I think we are seeing a pickup in activity. But we're on the front end of it at this point in time, and so there's still a ways to go. As we said, first quarter was impacted by weather in some key areas, the West Coast, Texas, other parts of the U.S. We've started to see some improvement there, but it's hard to predict the weather, and so, we'll just -- I mean, we take what we get when we talk about the weather impact on the business overall. But we expect a normal seasonal pickup in the second quarter, so our business is pretty consistent from that regard.
Walter Liptak: Okay. And how about related to the fueling part of the business? Are you seeing better sell-through at the -- for fueling equipment now that the destock is over?
Jeff Taylor: Yeah, I think the conversations that we have with our customers in fueling are indicative that they expect to have a more normal year this year. And so I think we're also on the front end of that curve as well. And so the indication at this point is that we'll see fueling pickup as we move through the middle part of the year. And like I said, those customer conversations are positive at this point, but reflective of really a more normal level, not an increase in stocking, not a destocking environment. And so that's where we are in fueling.
Walter Liptak: Okay. Great. Okay. Thanks much.
Jeff Taylor: You're welcome. Thank you.
Operator: Thank you. One moment, please, for our next question. And our next question comes from the line of Mike Halloran with Baird.
Mike Halloran: Hi. Good morning, everyone.
Jeff Taylor: Hi, Mike.
Mike Halloran: Good morning, everyone. So, just a couple here. One, when you think about the pricing dynamics in the marketplace on the water side, anything of note I know the commodity pricing was mentioned in the prepared remarks just more thinking competitively and similarly any thoughts on the inventory level?
Gregg Sengstack: Michael, the last part of your question broke up. Could you please repeat that?
Mike Halloran: Yes. Similarly, any thoughts on the inventory levels on the water side of the channel?
Gregg Sengstack: Jeff can get a little more detail. I'd say that pricing, it's more kind of pre-COVID where you’re seeing a little more promotional activity in groundwater. The RSS channel, the residential pricing is again kind of flattish. As we comment on dewatering it. I remember at our conference, video conference back in November we talked about durability of Franklin's business across the globe and the fact that there were multiple channels. And the one that we still see the challenges is the cyclicality of that dewatering business with the overall company. And so that - when you start seeing a slowdown some pricing action there it gets a little competitive. But we've been able to maintain margins as you saw in our results. And then on the – and outside the United States we're getting price interestingly enough with respect to inflation. So, we're getting a little price in EMEA. And in the hyperinflation markets of Turkey and Argentina, we price in dollars or price in euros. So, that's – they just are at spot pricing. So, that kind of helps insulate us. And with respect to inventory levels in the channel we look at headwaters being kind of an indicator of the groundwater channel. And they're bringing inventory levels down compared to last year which we commented on our overall inventory are down, I think about $70 million. And part of that is distribution because the supply chains are better and lead times are coming down. And I think that all of the distributors in the channel are probably doing similar things. So, we're probably still seeing – I don't know what you want to say to be stocking, but certainly inventory is probably at appropriate levels. Jeff and I were just talking before the call that one thing we all need to be mindful of is that as the world dries out here in the United States and we had – and it's – of 130 in a year we actually had a wetter year 120th this year in the first quarter of the year than the 110th or whatever last year at this time and one did not plan for that, but you can't plan for the weather you've got to respond to it. But as the world dries out the likelihood of seeing some good demand in ag as we start seeing pumps getting turned on. So, I think the channel inventory to answer your question specifically, I think it's in good shape. I don't think it's overly high. I don't think it's overly low. Jeff, do you have additional color to add to that?
Jeff Taylor: No, I think you hit it right on, Greg, I mean, the business as a whole water fueling and distribution we aren’t getting positive pricing. As Gregg mentioned in water, we're a little more favorable outside the US, but generally low single digits, more of a return to normal from what we saw several years ago and less frequent price increases than when we were in the high inflation environment. Distribution is getting good price on what I would call the core products, pumps, motors, drives, and controls. The commodity piece continues to be negative price in the current environment. So, that's what we're seeing across the business.
Mike Halloran: Great. Thanks for that. And then, secondly, just on the margins for the water side good seasonal margins there. Obviously, you mentioned the prepared remarks that mix was a benefit. How do you think about what the run rate looks like or how to think about modeling that for the rest of the year?
Jeff Taylor: Yes, I think the, I mean, we got a favorable mix particularly from the decline in large dewatering which is at the low end of the water system's margin range and so with that being a lower percentage of the overall mix that'll be a favorable mix impact for us. We do expect large dewatering to continue to be down year over year as we move through 2024.And I think the best way to model it, Mike, is just assume the current mix that we have and on a go-forward basis. And then we'll see as it happens. I will mention, though, that large dewatering is going to be lumpy this year as we move through the year. So there's a lot of movement there in terms of quarter-to-quarter impact.
Mike Halloran: Thank you. Appreciate it, gentlemen.
Jeff Taylor: Thanks Mike.
Gregg Sengstack: Thanks Mike.
Operator: Thank you. One moment, please, for our next question. And our next question comes from the line of Matt Summerville with D.A. Davidson
Matt Summerville: Yes. Thanks. Good morning. Can you maybe talk about kind of embedded in your guidance for the year what sort of organic outlook you're assuming for water distribution and fueling in 2024 relative to 2023? Just maybe a little bit more segment granularity there, and then I'll follow up.
Jeff Taylor: Yes. A little more organic outlook. I mean, I think on for the guidance overall on a four-year basis, we're kind of low to mid-single digits top-line growth. In water systems, I think we expect pretty normal organic growth for the business, except excluding the impact from large dewatering, which we know is going to be down on a year-over-year basis. And so that'll be in that normal range that we talk about in that 3% to 5% range. Fueling, I think fueling will be slightly lower this year till net positive overall. But they've come off of a really strong year in 2023, and we're seeing a bit of a normalization in terms of demand in that market. So, still positive overall. And then distribution. Distribution on an organic basis, I think, similar to what we see in water systems. And possibly some upside in distribution as the market, as we come into season and the market picks up.
Matt Summerville: Got it. And then just a follow-up on kind of water and distribution. If you look at U.S., Canada, how did your business perform in terms of residential versus Ag? And how are you thinking about organic outlooks there for 24 relative to 23?
Jeff Taylor: Yes. Interesting question. In the first quarter on a year-over-year basis, residential was down slightly. I would say low single digits. And that's reflective of our groundwater business, which was somewhat impacted by weather during the quarter. Ag was down a little more in the quarter. Ag was down mid-single digits for the quarter on a year-over-year basis. And I also believe weather was a factor that impacted ag overall.
Gregg Sengstack: And then, Matt our other residential surface pump business was essentially flat. Right.
Matt Summerville: Okay. With respect to dewatering, given I think that business is coming off of a record year in 23, and it is going to be a top-line headwind this year, how much of a decline do you expect in large dewatering pumps on a revenue basis in 24 relative to 23, as we kind of think about modeling that in with Jeff's comments, on the overall organic outlook for WaterX that business?
Jeff Taylor: Yes. Matt, Let me unpack that a little bit. There's a couple of pieces there. So when we talk about large dewatering, we have a large dewatering business that is global. And then we have a piece of it that is primarily U.S., Canada, which is selling to the fleet rental companies. And so we are seeing the business to the fleet rental companies primarily in the U.S. is where we saw the significant pullback on a year-over-year basis of about 50% in the first quarter. Our business globally for the first quarter is down 50% in the U.S., Canada. It was actually up 10% outside of the U.S. in Canada. And so that gets us to a global year-over-year decline of about 40%. So it's really the large fleet rental business in the U.S. and Canada where we're seeing the pressure in this year. You know, I think our business overall, we would expect it to be down in the mid-teens for the full year, coming off of a record year in 2023 globally of about $200 million of sales.
Matt Summerville: Perfect. Thanks, Jeff.
Jeff Taylor: You're welcome.
Operator: Thank you. I will now turn the call back over to CEO Gregg Sangstack for any closing remarks.
Gregg Sengstack: We thank you for joining us this morning on our conference call, and we look forward to speaking to you in July with our second quarter results. Have a good week.
Operator: Ladies and gentlemen, thank you for participating. This does conclude today's program, and you may now disconnect.
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