MUELLER WATER PRODUCTS

Welcome and thank you for standing by. At this time, all participants are in a listen-only mode. During today's Q&A session, if you'd like to ask a question, please press star then 1. Today's call is also being recorded. If you have any objections, you may disconnect at this time. I would like to turn today's meeting over to your host, Mr. Whit Kincaid. Thank you. You may begin.

Good morning, everyone. Thank you for joining us on Mueller Water Products' second quarter conference call. Yesterday afternoon, we issued our press release reporting results of operations for the quarter ended March 31, 2024. We also issued a press release providing an update on our leadership team and board refreshment. Copies of the press releases are available on our website, MuellerWaterProducts.com. I'm joined this morning by Marty Zakis, our Chief Executive Officer, and Steve Heidrichs, our Chief 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 3 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 the 30th of September. A replay of this morning's call will be available for 30 days at 1-866-360-8712. The archive, webcasts, 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, Witt. Good morning, everyone. Thank you for joining our earnings call. It is an honor to continue in the role of CEO, and I thank the Board for placing its trust in me to lead Mueller at this critical juncture. Mueller plays an essential role in helping our customers deliver clean and safe drinking water to hundreds of millions of people. I get to work with the best team in the industry, and we will continue to build on the power of our industry-leading brands and deep channel and end customer relationships. I look forward to working with Paul and the rest of the team as we continue to execute on our strategy to drive shareholder returns. I'll now start with a brief overview of our second quarter performance. We had a fantastic second quarter. reflecting the progress our teams have made executing our operational and commercial initiatives to deliver long-term, sustainable growth. We achieved record quarterly net sales with a strong sequential increase in volumes, supported by our continued enhancements in customer experience. We improved gross margins 750 basis points to 36.9%, supported by continued manufacturing and supply chain efficiencies, leading to our highest quarterly gross margin in more than seven years. With a record quarter for net sales and a strong gross margin along with SG&A leverage, we delivered over 70% adjusted EBITDA growth compared to the prior year. We also achieved record quarterly adjusted net income per diluted share of 30 cents, which increased more than 100% compared to the prior year quarter. Turning to sustainability, I am pleased to report that in the second quarter, MSCI upgraded Mueller to its highest ESG rating of AAA. This rating is a great accomplishment and a testament not only to the critical products and solutions we provide for our municipal customers in their communities, but also the hard work and dedication of our team members, suppliers, and customers. We look forward to sharing our continued progress in the next annual ESG report, which will be published later this year. We are increasing our annual guidance for net sales and adjusted EBITDA. These increases reflect our strong first half performance and order activity across most product lines, as well as our belief that overall end market demand is healthy. Municipal repair and replacement activity remains very resilient, and the new residential construction end market is improving relative to a challenging 2023. We are targeting record gross margin for 2024. The significant expected increase primarily reflects benefits from the actions we have taken over the past year to drive efficiencies in our operations. At the midpoint of our updated annual guidance range for net sales and adjusted EBITDA growth, The adjusted EBITDA margin is a 420 basis points expansion, reflecting our expected improved operational performance. Our teams have worked diligently on improving lead times while controlling costs and driving manufacturing, material, and freight efficiencies. Our execution allowed us to leverage the increased volumes in the second quarter, leading to an improvement in gross margin. This strong conversion included outstanding performance at both our iron gate valve and hydrant manufacturing facilities. We also expect to have an additional tailwind in the near future from the completion of our new brass foundry project and closure of our old brass foundry by the end of calendar 2024. Our commercial teams continue to do a great job working with our customers. We were pleased to see the strong sequential increase in order activity this quarter across most product lines, which was primarily driven by favorable end market demand. We believe some of this order strength was due to the timing of our price increases and positive sentiment moving into the construction season. We believe that net sales growth in the quarter versus the prior year would have been close to flat without the pull forward. With normalized lead times, we expect this pull forward to impact our third quarter sales, which is reflected in our updated annual guidance. Our team continues to do an admirable job dealing with the impacts of the Israel-Hamas war on our repair products business while also working to satisfy customer demand. As expected during the second quarter, we experienced higher costs associated with labor, materials, and freight. Our accomplishments this quarter and through the first half of the year are a testament to the progress we've made with our transformation, especially considering the external headwinds our teams have faced. With that, I'll turn it over to Steve. Thanks, Marty, and good morning, everyone.