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spk02: Ladies and gentlemen, thank you for standing by. My name is Brent and I will be your conference operator today. At this time, I would like to welcome everyone to the Watts Water Technologies second quarter 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, simply press star followed by number one on your telephone keypad. If you would like to withdraw your question, again, press star 1. Thank you. I will now turn today's call over to Diane McClintock, Senior Vice President, Financial Planning Analysis and Investor Relations. Please go ahead.
spk00: Thank you and good morning, everyone. Welcome to our second quarter earnings conference call. Joining me today are Bob Pagano, President and CEO, and Shashank Patel, our CFO. During today's call, Bob will provide an overview of the second quarter and discuss the current state of the markets and our operations. He will also update you on our smart and connected product initiatives and our sustainability efforts. Shashank will discuss the details of our second quarter performance and provide our outlook for the third quarter and for the full year. Following our remarks, we will address questions related to the information covered during the call. Today's webcast is accompanied by a presentation, which can be found in the Investor Relations section of our website. We will reference this presentation throughout our prepared remarks. Any reference to non-GAAP financial information is reconciled in the appendix to the presentation. Before we begin, I'd like to remind everyone that during this call, we may be making certain comments that constitute forward-looking statements. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially. For information concerning these risks, see Watt's publicly available filings with the SEC. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. With that, I will turn the call over to Bob.
spk06: Thank you, Diane, and good morning, everyone. Please turn to slide three and I'll provide an overview of the quarter. First, I'd like to thank the entire Watts team for their hard work and dedication to diligently serving our customers worldwide. Together, we delivered another better than expected quarter, despite tough comparisons to a very strong second quarter in 2022. We finished the quarter with record sales, operating margin, and earnings per share, leading to the decision to raise our full year 2023 outlook. The Europe and APMEA regions were resilient as organic sales grew at a mid single digit pace, primarily due to price. Sales in the Americas region were down low single digits as we expected due to a tough comparison to a very strong second quarter in 2022 where organic sales were up 22%. Strong growth in our non-residential core valve products was more than offset by double digit declines in our gas connectors, radiant heating applications, and commercial marine instrumentation. Adjusted operating margin exceeded expectations supported by solid price realization, favorable mix in productivity, which more than offset inflation, lower volume, and incremental investments. Year-to-date free cash flow has been strong and has added to the strength of our balance sheet. We expect to generate strong free cash flow into the second half of 2023, which will afford us ongoing flexibility in our balanced capital allocation strategy. To that end, our Board approved a new $150 million share repurchase program. This program will follow on our existing plan as stock repurchases remain an important part of our capital allocation strategy. As a reminder, stock buybacks, along with high ROI CapEx investments, competitive dividends, and strategic M&A, such as our recent NWARE acquisition, remain our top capital allocation priorities. Moving to operations, the integration of our NWARE acquisition is going well and cost actions are ahead of schedule. By leveraging our one-watch performance system and collaborating with the NWARE team, we have been able to seamlessly integrate and align the organization and efficiently streamline operations. We are excited about the future of NWARE as we continue to scale our operations in Australia. While inflation is moderating, it is still above normal historical levels. We continue to assess our price-cost relationship and will address price increases as needed. Automation is a big focus for our capital spending and is necessary to offset labor shortages and drive productivity. We expect to continue these investments to enhance productivity in our factories. Next, I'd like to provide an update on our end markets. While GDP is down compared to 2022, it remains positive in our key markets and is contributing to continued repair and replacement activity. Europe remains solid in the quarter as growth continued in Germany, France, and Benelux. However, we do expect softening marketing additions in the second half of the year, driven by a slower residential market, declining Eurozone PMI, and the potential impact of changes to the energy incentive program in Italy. In the Americas, new residential single-family construction appears to have bottomed out and multifamily new construction is holding up. Non-residential new construction indicators are mixed, but have shown recent resilience. After multiple readings below 50 dating back to the fall of last year, the May and June ABI index readings bounced back above 50, indicating expansion. The Dodge Momentum Index is still suggesting that growth in non-residential projects will continue. the institutional industrial verticals have remained solid year-to-date, and we expect this to continue through 2023. In the Asia-Pacific region, growth in China has decelerated in recent months. We are seeing strengthening markets in the Middle East due to continued higher oil prices. Australian markets remain resilient despite continued interest rate increases, and our recent NWARE acquisition gives us confidence that we'll continue to grow in Australia. Now, an update on our outlook for the third quarter and the remainder of the year. Due to challenging comps as a result of a strong third quarter 2022, we expect our third quarter organic sales growth to be lower versus prior year. We also anticipate declining operating margins due to normal seasonality, incremental investments, and volume deleverage. While we expect difficult comps in Q3, we are increasing our full year outlook due to a strong first half performance as well as better-than-expected price and favorable mix. We expect America's non-residential business to remain solid but be offset by weak single-family residential and continued softness in certain specialty channel products. We also anticipate the second half to be softer in Europe due to weakening macros. Inflated interest rates and lending tightening may also have an impact on new construction. In addition, we are accelerating $3 million of investments into 2023 and increasing our full-year investments to $23 million from the $20 million previously communicated to fund new product development, including smart and connected enabled products. On slide four, I'd like to update you on our smart and connected offerings. Year-to-date, the percentage of smart and connected enabled product sales to total sales reached 23%. Our goal has been to achieve 25% of sales from smart and connected-enabled products by the end of 2023, and we expect to meet that goal. I would also like to share with you one of the new smart and connected products that was developed by the team at Enware. The SmartFlow Meter Risk Management System incorporates a smart thermostatic mixing valve, tapware, and other hardware to provide monitoring and flow management capability. The SmartFlow platform serves the healthcare vertical and provides visibility into water system delivery that will enhance asset performance and longevity, reduce operating costs, and help proactively manage bacterial and scalding risk while ensuring a more comfortable patient experience. We are excited about the SmartFlow and other new products as we continue to grow our smart and connected product offering. On slide five, I'd like to comment on our most recent sustainability report. In May, we published our 2022 Sustainability Report, which highlights the accomplishments and the progress we've made within our four ESG pillars, footprint, handprint, social responsibility, and corporate governance. Our focus on our sustainability triple play, safety and regulation, energy efficiency, and water conservation, has allowed us to deliver tremendous value to our customers as we continue to enhance efficiency, and transform traditional products into our smart and connected solutions. Our focus on social responsibility reflects our people-first approach and commitment to making people and communities safer, healthier, and stronger. Sustainability is a core commitment at Watts that extends into all aspects of our business. I'm proud of the progress our global team has made and invite you to read more about it in our sustainability report which can be downloaded from our investor relations website. With that, let me turn the call over to Shashank, who will address our second quarter results and our third quarter and revised full year outlook. Shashank.
spk09: Thanks, Bob, and good morning, everyone. Please turn to slide six, and I will review the second quarter's consolidated results. Sales of $533 million were up 1% on a reported basis and flat organically. Mid single-digit organic growth in Europe and apnea were offset by a low single-digit organic decline in the Americas. Sales from our indoor acquisition totaled approximately $8 million and are reported within the apnea region. Unfavorable foreign exchange movements had an immaterial impact in the quarter. Adjusted operating profit was $104 million, up 7% compared to last year, and adjusted EPS was up 11% to $2.34. Adjusted operating margin of 19.5% was up 100 basis points as price, mix, and productivity more than offset inflation, lower volume, and incremental investments. We were able to deliver 100 basis points of margin expansion despite a tough comparison to the second quarter of 2022, which benefited from approximately $7 million of one-time price cost favorability and the dilution of the Enver acquisition in the quarter. The adjusted effective tax rate was 24.7%, 130 basis points favorable to the second quarter of 2022. The decrease relates primarily to the reduction of foreign taxes associated with the repatriation of funds. Our free cash flow year-to-date was $89 million as compared to $33 million in the first six months of last year. The cash flow increase was primarily due to higher net income and a lower amount of working capital investment. We expect sequential improvement in our free cash flow, and our full-year goal is to achieve free cash flow conversion of 100% or more of net income as previously communicated. During the quarter, we repurchased approximately 24,000 shares of our Class A common stock for $4 million, and year-to-date, we have repurchased approximately 47,000 shares of our Class A common stock for $8 million. There's approximately $20 million remaining under the current stock repurchase program that was authorized in 2019. As Bob mentioned, we just announced a new $150 million stock repurchase program that'll provide us with hospitality as part of our balanced capital allocation strategy. Furthermore, the 20% dividend increase that we announced in early May demonstrates our continued focus on returning capital to shareholders. Please turn to slide seven and let me provide a few comments on the regional results. America's organic sales were down 2% as we expected due to a tough prior year comparison. As a reminder, America's grew 22% in the second quarter of 2022. Strong growth in our non-residential core valve products was more than offset by declines in gas connectors, radiant heating applications, and commercial marine instrumentation. In addition to the tough comps, weakness in single-family residential new construction was a contributing factor. Adjusted operating profit increased by 7%, and adjusted operating margins increased by 210 basis points. The margin expansion was driven by price, mix in productivity, which more than offset volume declines, inflation, and incremental investments. Europe demonstrated resiliency with organic sales up approximately 5%. Reported sales were positively impacted by 1% from favorable foreign exchange movements. Growth was primarily due to price with growth in Germany, driven by our OEM business, and in France and Benelux by solid wholesale activity. The growth was partly offset by declines in Scandinavia and Italy where the reduction of government subsidies had an unfavorable impact. Operating margin declined by 10 basis points as price and productivity were unable to offset inflation investments and volume deleverage. APMIA also had a solid quarter, delivering 6% organic growth. Reported sales growth of 33% was negatively impacted by 6% from unfavorable foreign exchange movements and favorably impacted by 33% or $8 million of acquired and or sales. China's organic sales grew low single digits while organic sales outside China were up by double digits with growth in Australia and in the Middle East partially offset by a decline in New Zealand due to the after effects of the historic flooding. Adjusted operating margins increased 250 basis points due to higher third-party sales volume affiliated volume, price and productivity, which more than offset inflation investments and the dilutive effect of the inward acquisition. Slide eight provides our assumptions about our third quarter and full year operating outlook. First, let's cover the third quarter outlook. As Bob mentioned, we'll have a very tough comparison to a strong third quarter in 2022. We estimate consolidated organic sales may be up by 1% to down by 3%, with Americas in Europe being flat to a low single-digit decline, offset partly by low single-digit growth in apnea. This moderation in growth rates is due to anticipated softening underlying market conditions in Europe. As previously mentioned in the Americas, we expect continued weakness in gas connectors, radiant heating applications, and commercial marine instrumentation. We also anticipate continued weakness in single-family residential new construction. In APMIA, the acquisition of end wear is expected to contribute $8 million of sales. We estimate our adjusted operating margin could range from 16% to 16.5% for the third quarter, down 30 basis points to 80 basis points versus prior year. The decline versus prior year is due to the reduced volume, incremental investments of approximately $7 million, and the one-time price-cost benefit of $6 million we spoke about in the third quarter of 2022. The sequential decline in operating margin from Q2 is driven primarily by the impact of volume deleverage, incremental investments, and typical seasonality. In addition, we expect the inward acquisition to be dilutive to operating margin as we continue to adjust the cost structure. Corporate costs should be approximately $14 million and interest expense net of interest income should be approximately half a million dollars in the third quarter. The adjusted effective tax rate should be approximately 25%. We are assuming a 1.10 average Euro-US dollar effects rate for Q3 versus the average rate of 1.01 in the third quarter of 2022. This implies a Q3 increase of 8% year-over-year, which equates to an increase of approximately $8 million in sales and 2 cents a share in EPS versus the prior year. Now let's cover the updated full-year outlook. For the full year 2023, we are increasing our organic sales growth outlook to a range from minus 2% to plus 2%. Our previous guide was from a range of minus 5% to plus 2%. In effect, this raises the bottom of our range by 3% and the midpoint by 2% based on our stronger than expected start in the first half of the year and our expected third quarter outlook. We now expect approximately $24 million of sales from the acquisition of NWARE. We are also increasing our full year adjusted operating margin expansion to a range of plus 30 basis points to plus 90 basis points compared to our previous outlook of minus 10 basis points to minus 70 basis points. This represents an increase of 100 basis points to our previous guidance. We now expect our 2023 operating margins to be between 16.7 and 17.3%. We expect our solid first half will partially mitigate the lower margins in the second half due to seasonality, volume deleverage, incremental investments, and the dilutive impact of the annual acquisition. As a reminder, we are also increasing our full-year investments from $20 million to $23 million. Our free cash flow expectations are anticipated to be in line with our previous outlook and should meet or exceed 100% of net income. We are assuming a 1.09 average Euro-US dollar FX rate for the full year versus the average rate of Euro 1.05 in 2022. This would imply an increase of 4% in sales year-over-year and equates to an increase of $12 million in sales and 4 cents a share in EPS for the full year versus the prior year. Regarding other key inputs for the full year, we expect corporate costs to be approximately $54 million for the full year. Interest expense, net of interest income, should now be approximately $3 million for the full year. Our estimated adjusted effective tax rate for 2023 should be approximately 25%. Capital spending is expected to be approximately $35 million. Depreciation and amortization should be approximately $42 million for the year. We expect our share count to be approximately 33.5 million for the year. Now let me turn the call back over to Bob before we begin Q&A.
spk06: Bob? Thanks, Yashank. Please turn to slide nine. I'd like to summarize our discussion before we address your questions. The second quarter was better than we anticipated with record sales, operating margin, and earnings per share supported by price and favorable mix. Due to our strong first half performance, we are increasing our full year outlook. We continue to monitor the slowing economic indicators in Europe and are staying close to our customers. We are confident in our ability to execute in this uncertain environment. We are prioritizing investment in our smart and connected and sustainability initiatives and are increasing our full year investments from $20 million to $23 million. We believe we are on track to hit 25% of total revenues coming from smart and connected enabled products by the end of 2023. Our strong free cash flow generation and balance sheet provides us flexibility to execute our balanced capital allocation strategy. We announced a new $150 million stock repurchase program to ensure we maintain repurchase flexibility over the coming years. With that, operator, please open the line for questions.
spk02: At this time, I would like to remind everyone, in order to ask a question, press star followed by the number one on your telephone keypad. We'll pause for just a moment to compile a Q&A roster. Your first question comes from the line of Ryan Connors with North Coast Research. Your line is open.
spk04: Good morning. Thanks for taking my question. So I want to start on the gross margin. Obviously, gross margins look really, really good. And I wanted to just kind of step back and look at the big picture on that and Can we kind of interpret that, that one of these big debates about how well would price hold relative to raw materials and would we be able to hold price and lock in some of that margin longer term as input costs moderate? I mean, is that kind of what's happening here on the gross margin line? And is that something that's going to be sustainable going forward?
spk06: Well, good morning, Ryan. The first part of that, First of all, it was favorable mix, right? Residential is down, commercials up, and our OEM business is down, which are our lower margin businesses. So that's good. That's good from a margin point of view. From a pricing point of view, we've been able to hold pricing so far. And in that backdrop, we've also seen some reductions in our input costs. So that all together, favorable mix as well as... you know, favorable cost at this point and favorable price is holding up.
spk04: And is there any sign that that's any early evidence that that's changing or is the price environment, you know, is there no real evidence of any major crack in that pricing? It looks pretty solid going forward.
spk06: Yeah, we don't comment on forward-looking price usually, but as of now, as I said, it's holding up in the quarter. It held up in the second quarter.
spk04: got it okay and then just one last one if you could just I didn't hear much from you on kind of the channel inventory situation in your prepared remarks so if you could just kind of give us an update on you know the channel inventory situation that would be helpful as well thanks yeah I think the channel inventory is healthy but we've seen some de-stocking with continued residential de-stocking with OEMs in North America and I think there's a big
spk06: focus on inventory in Europe right now from the wholesalers, which we've been seeing them starting to destock as well as the OEMs in Italy. So we're starting to see more destocking in Europe. We've seen it last year, but we're continuing to see it, especially with the order trends in Q2 in Europe.
spk04: Got it. Okay. Thanks for your time.
spk06: Thank you.
spk02: Your next question is from the line of Nathan Jones with Stiefel. Your line is open.
spk08: Good morning. This is Adam Farley on for Nathan Jones. Good morning, Adam. Hey, good morning. With global GDP still positive, should we expect repair and replace volume to be modestly positive?
spk06: Yeah, we expect that. You know, repair and replacement's been holding up. I think you've seen some, we talked about in our prepared comments that the specialty markets which was really around gas connectors, radiant heating, and then a niche of commercial instrumentation, which is really related to our ballast water. Those areas have been declining, and we expect them to continue in the third quarter that way.
spk08: Okay, that's helpful. And then looking at your non-residential businesses, Can you provide a little more color on which end markets within non-resi are still showing strength, which ones are still showing weakness? And would you expect strength and institutional to continue into 2024?
spk06: Yeah, I think similar to the first quarter, you know, the commercial market's been holding in there. Strength and institutional has been there. And I think the normal, you know, offices, you know, hospitality, but hospitality is coming back a little bit. albeit off of really low comps from last year. So in general, it's holding up at this point in time. And as in my prepared remarks, we talked about the Dodge and ABI index is also supporting that. So, you know, so far, so good. And it's holding in there. But as you can imagine, we're watching that very carefully. And again, we have some tough comps we're comparing against in the second half of this year.
spk08: Okay, thank you for taking my questions.
spk06: Thank you.
spk02: Your next question comes from the line of Jeff Hammond with KBank Capital Markets. Your line is open.
spk01: Hey, good morning, guys. Good morning, Jeff. Hey, just wanted to unpack the, you know, the decrementals, I guess, first half to second half. I mean, I understand there's some seasonality in there. Um, but, uh, you know, and, and maybe you can quantify the incremental investments and if there's anything else you're on mix or otherwise that, uh, that would be impacting that.
spk09: Yeah. So Jeff, uh, part of it is seasonality, right? Typically first half, second half, we see, uh, a decline of a hundred, 150 bps first half to second half. The other part, the other part this year, we got some volume D leverage, right? So the volume D leverage affects not only at the standard margin line, but you got some, you know, absorption impacts as well there. The third thing is the incremental investments. We have about $5 million of incremental investments, H2 versus H1. And lastly, NWARE is diluted by about 20 bits. And then the other point Bob had talked about, which is Europe. We've got negative growth in Europe. And with our high fixed cost base, we see some deleveraging there.
spk01: OK, great. Have you guys seen any destocking in boilers? I don't know if you mentioned that, but one of the competitors had called that out. And then can you just clarify what the specialty channel is? Is that DIY or something else?
spk06: Yeah, I think our HHW heating and hot water platform is holding up. I think there might have been some destocking in the commercial water heater side of that business. But overall, that team's doing a nice job. The specialty channel is a combination of, we call it in residential, our gas connectors and radiant heating in particular. So those are gas connectors and grills, generators, et cetera. So that's being impacted by that part of the market, which is residential, same with radiant heating. And we had some tough comps last year in that area. So again, the specialty channel, we also have what we call our commercial marine instrumentation, which is our ballast water, where, you know, there was a movement over the last several years to have all of the ships, the large ships, measure their ballast water. And there was that requirement. All the ships got pretty much done by the end of last year, probably a year earlier than we expected. And we're seeing that tail off. But again, all of that, you know, our specialty product is less than 10% of our overall business. But some of this we expected, obviously, with the residential side of this decreasing. And a big part of that gas also goes through OEMs.
spk01: And then just finally on Europe, I guess the moving pieces are you're starting to see D-stock and that's showing up in orders. I think you mentioned in Italy, you know, regulatory change, dynamic. You know, but that's a business that I think you've been worried about for some time but continues to kind of put up. you know, better growth?
spk06: Yeah, I mean, it surprised us both in the first quarter and second quarter. It's held up. But as expected, given the leading economic indicators and some concerns, especially in the residential side of that market, we are starting to see that tip over a little bit. But we were expecting that. It just happened a little later than we expected. So the team's done a nice job of getting more than our fair share of the market there. and I expect them to continue to do that.
spk01: Okay, thanks. Thank you.
spk02: Your next question comes from the line of Mike Halloran with PAIRD. Your line is open.
spk07: Hey, thanks. Morning, everyone.
spk02: Morning.
spk07: So a couple questions. First, on the non-res side of things, maybe, Bob, could you talk to the project funnel or the funnel, the backfield, some of the projects out there? I know in the past we've talked about, you know, working off of what was a backlog of activity. I'm curious what you guys are seeing as far as, you know, replenishing that funnel and replenishing that opportunity out there and any level of variance as you look across some of the sub-verticals within that non-res space.
spk06: As I've said in the prior quarter, institutional is still holding up, as well as like data centers and some of that area has been holding up strong. Our teams are out in the field. It depends on which country or part of the country, like anything. But in general, I would say it's still healthy backlog out there. And I think some of it continues to be a result of the shortage of labor inside of those markets. And there was some backlog there. out there. So, again, we're cautiously optimistic, but we're watching it closely.
spk07: And how should I think about the North America margins from here? I mean, it feels like every quarter there's a new high that you're reaching. I certainly understand a lot of Schenck's commentary on Knicks and other wins as you look at a few things sequentially in the back half. But when we're thinking on a little longer horizon, what's that right base to build off of for that segment? I mean, it feels like you've just established a new high here.
spk09: Yeah, I would say so. So beyond the mix, which was very favorable in the second quarter, and obviously the mix adjusts over time. But our goal, as we've talked about before, is long term to continue expanding that in the 30 to 50 basis point range going forward, including in the Americas, because that's, you know, 70 percent of our business.
spk00: Mike, do you have any other questions?
spk07: Oh, I'm good. I said thanks. I might have been on mute. I apologize for that. Oh, okay. Appreciate it. Okay, thank you.
spk02: Your next question comes from a line of Joe Giordano with Cowan & Company. Your line is open.
spk03: Good morning. This is Michael on for Joe. Good morning. Apologies. I joined the call late, so apologies if this has already been asked, but Previously, you mentioned OEM-related sales, or roughly a third of European business. So, I was just curious on how this is trended in the first half, and what are your thoughts sequentially for OEMs on a global basis? And then, if you have any margin color there, it would be very helpful. Thank you.
spk06: Yeah. I mean, OEM business, which usually is really tied to the residential markets, both in North America and Europe, has continued to be soft, and we've continued to see destocking in that area. given the residential nature of that business. So we're expecting that to continue through the rest of this year. And as you can imagine, OEM business is our lowest margin business. So with that being down, that obviously helps our margins in total from a mixed point of view. So again, our guidance assumes that that will continue in the third quarter. Great. Thank you. Thank you.
spk02: Again, if you would like to ask a question, press star, followed by the number one on your telephone keypad. Your next question comes from the line of Walt Liptak with Seaport Global. Your line is open.
spk05: Thank you. Good morning, guys. Morning, Walt. I wanted to ask about the incremental spend on the new products. And, you know, I want to make sure that we're not, like, underappreciating you know, what you're doing with smart products. And so I wonder if you could help us maybe with some data points about how many products you've developed, you know, what the categories might be, you know, a product that might be a bestseller, you know, the kind of incremental growth that you might be getting from these investments.
spk06: Yeah, so we talked in 2022 that we developed 20 new product developments in Smart and Connected, and we're continuing on that journey to get that 25% of our products smart and connected. So that's a key initiative for us. We continue to highlight those products. It's nice to see Enware also is in that overall quest to be smart and connected. So we'll continue to invest in there. We believe that's the future of all of our products into the future. And we'll continue to invest in those differentiated products for the marketplace.
spk05: Okay, great. Are these going through, do they require more training or are they going through the same channels as you're doing now? Like, you know, how's the commercialization of them going?
spk06: Yeah, they definitely require both training from a customer point of view, as well as our rep network and our channels. So we continue that training. Our Watts Works training initiative, as you know, is very strong. We continue to grow that and we'll continue to do that. So, you know, what we always say is we have to make sure that we're easy to do business with in regards to smart and connected, how it's connected, the data it produces, et cetera. So those are key areas. Training is a key part of that. But it's a shift, and I think everybody's realizing the shift is here. And I think during the COVID outbreak, everybody realizes that it's an important part of the future of plumbing.
spk05: Okay, yeah, it seems very excited. It seems like an obvious progression for your products. Are you able to measure yet how much? I guess I'm sure you do. You measure the incremental sales, but at what point do you think it's going to, or maybe it's showing up already, at what point do you think it's quantifiable, what it's adding to your revenue?
spk06: So we are taking our existing products and cannibalizing them, right? and making them smart and connected. So, you know, it's, you know, I would just say in general, I think we're growing faster than the market. And I think having new products that are smart and connected gives us a continued differentiation that we're still capitalizing on. So, yeah, that's how we see it. Okay. Okay, great. Thank you. Thank you.
spk02: There are no further questions at this time. I will now turn the call back over to Bob Picano.
spk06: Thank you for taking the time to join us today. We appreciate your continued interest in Watts and look forward to speaking with you again at our third quarter earnings call in early November. Have a good day and stay safe.
spk02: Ladies and gentlemen, thank you for participating. This concludes today's conference call. You may now disconnect.
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