MUELLER WATER PRODUCTS

Welcome and thank you for standing by. At this time, all participants are in a listen-only mode until the question and answer session of today's conference. At that time, you may press star 1 on your phone to ask a question. I would like to inform all parties that today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the conference over to Whit Kincaid. Thank you. You may begin.

Good morning, everyone. Thank you for joining us on Mueller Water Products' fourth quarter and fiscal 2023 conference call. Yesterday afternoon, we issued our press release reporting results of operations for the quarter and year-ended September 30th, 2023. A copy of the press release is available on our website, MuellerWaterProducts.com. I'm joined this morning by Marty Zakis, our Chief Executive Officer, and Steve Heinrichs, our Financial Officer and Chief Legal Officer. Following our prepared remarks, we will address questions related to the information covered on the call. As a reminder, please keep to one question and a follow-up, and then return to the queue. This morning's call is being recorded and webcast live on the Internet. We have also posted slides on our website to accompany today's discussion. They also address forward-looking statements and our non-GAAP disclosure requirements. At this time, please refer to slide two. This slide identifies non-GAAP financial measures referenced in our press release, on our slides, and on this call. It discloses the reasons why we believe that these measures provide useful information to investors. Reconciliations between non-GAAP and GAAP financial measures are included in the supplemental information within our press release and on our website. Slide three addresses forward-looking statements made on this call. This slide includes cautionary information identifying important factors that could cause actual results to differ materially from those included in forward-looking statements. Please review slides two and three in their entirety. During this call, all references to a specific year or quarter, unless specified otherwise, refer to our fiscal year, which ends 30th of September. A replay of this morning's call will be available for 30 days at 1-800 819-5743. The archived webcast and corresponding slides will be available for at least 90 days on the investor relations section of our website. I'll now turn the call over to Marty.

Thanks, Whit. Good morning, everyone. Thank you for joining us for our fourth quarter earnings call. I'll start with a brief overview of our fourth quarter and fiscal 2023 performance. We executed well to finish the year despite a challenging external environment. While our fourth quarter net sales exceeded expectations, we experienced a mid-teens year-over-year decrease in volumes. As a reminder, this decrease was due to the ongoing channel in customer inventory destocking reflecting normalized lead time, mainly for iron gate valves and hydrants. Additionally, higher interest rates slowed new residential construction activity, especially land development. Continued benefits from price realization and improved execution by our operations and supply chain teams led to higher gross margins compared with the prior year. This includes strong margin improvements for both segments on lower volumes. Our supply chain team helped drive productivity improvements in the quarter, including reductions in outsourcing and freight costs. Waterflow Solutions specialty valve operations had an outstanding quarter, reflecting the successful ramp-up of our new manufacturing facility in Kimball, Tennessee. Improved production for service brass products and better flow-through for our iron gate valves also contributed. Water Management Solutions' improved execution helped offset lower volumes and a warranty charge in the quarter. Lower SG&A spending, which includes benefits from our previously announced cost actions helped increase our adjusted EBITDA margin to 18.4% for the quarter. This EBITDA margin is the highest quarterly margin since the third quarter of 2021. We are on track to deliver the remaining portion of the $25 million cost savings program in 2024. Our free cash flow improved by more than $60 million in 2023, exceeding our expectations as inventories declined sequentially and we normalized our capital spending. I'll now provide an update on the cybersecurity incident announced on October 28th. We have made substantial progress in recovering from the incident. Team members across the organization have worked tirelessly to support our customers and restore operations. Our incident response teams quickly took action to implement response and containment protocols. With the help of leading third-party cybersecurity specialists, we have largely restored the impacted applications and systems. All of our facilities are operational, and the unauthorized activity has been contained. The company's investigation and remediation efforts remain ongoing, including the analysis of data accessed, exfiltrated, or otherwise impacted. Our teams continue to focus on closing the gap on our ongoing business processes while also addressing additional work associated with the incident. We continue to evaluate the business, financial, and related impacts of the incident. We have worked closely with our customers, vendors, and employees throughout this process and have been able to take orders and ship products. Therefore, we expect a minor impact on our consolidated net sales in the first quarter. We appreciate the patience and understanding of our customers and vendors as we have worked through the restoration process and, of course, that of the investment community as we're having this call later than usual. As we enter the new year, we will continue to focus on delivering the benefits from our strategic capital investments in specialty and large gate valves and service brass products. These products are poised to benefit from the increased federal infrastructure funding beyond fiscal 2024. We believe our transformational, state-of-the-art brass foundry, with its sustainable lead-free alloy, will set a new standard for utilities and the communities we serve. We continue to make progress on the ramp-up of the new brass foundry again this quarter. We expect to install the remaining foundry pouring equipment over the coming months, which will allow us to complete the new tooling while ramping up the volume of finished parts. At the end of the year, we still had an elevated backlog for service brass products. With channel partners and end customers our highest priority, we will continue to utilize both brass foundries throughout the year. This will also allow us to improve lead time, maintain customer service, and reduce our backlog while ensuring we complete the ramp up of the new foundry by the end of calendar 2024. As we move forward, we will focus on minimizing the impact of the duplicative costs of running two foundries. Following this transition, we believe that we'll be well positioned to increase gross margins beyond pre-pandemic levels. Looking ahead, we believe there remains a meaningful level of uncertainty in the macroeconomic environment with our end users as they continue to adjust to higher interest rates and elevated project costs. We also anticipate that the Israel-Hamas war will create headwinds for the global supply chain. We have operations in Israel through our cross-repair products business. While repair products account for slightly less than 10% of our consolidated sales, this is a headwind for one of our fastest-growing product lines. Over the last several months, we have worked closely with our teams and experts to ensure first the safety of our employees and to continue operations effectively. We have normally carried an elevated level of finished goods inventory for repair products. Due to the extent of the war, we have made incremental operational investments to continue to help ensure we meet customer demand. The cost of these investments will impact the company's first quarter results and are likely to continue for the foreseeable future. Before turning it over to Steve, I want to say how grateful I am for all of our team members around the world. Their dedication to and passion for the business is inspirational. I thank them for helping us to deliver results quarter after quarter as we focus on continuing to improve our productivity and efficiency while strengthening our customer relationships. On to you, Steve.