Zurn Elkay Water Solutions Corporation

Good morning and welcome to the Zurn LK Water Solutions Corporation first quarter 2023 earnings results conference call with Todd Adams, Chairman and Chief Executive Officer, Mark Peterson, Senior Vice President and Chief Financial Officer, and Dave Pauley, Vice President of Investor Relations for Zurn LK Water Solutions. This call is being recorded and will be available for one week. The phone numbers for the replay can be found in the earnings release the company filed in an 8K with the SEC yesterday, April 25th. At this time, for opening remarks and introduction, I'll turn the call over to Dave Pawley.

Good morning, everyone, and thanks for joining us on the call today. Before we begin, I would like to remind everyone that this call contains certain forward-looking statements that are subject to safe harbor language contained in the press release that we issued yesterday afternoon. as well as in our filings with the SEC. In addition, some comparisons will refer to non-GAAP measures. Our earnings release and SEC filings contain additional information about these non-GAAP measures, why we use them, and why we believe they are helpful to investors, and contain reconciliations to the corresponding GAAP information. Consistent with prior orders, we will speak to certain non-GAAP metrics as we feel they provide a better understanding of our operating results. These measures are not a substitute for GAAP, and we encourage you to review the GAAP information in our earnings release and in our SEC filings. With that, I'll turn the call over to Todd Adams, Chairman and CEO of Zurn LK Water Solutions.

Thanks, Dave. Good morning, everyone, and thanks for joining the call. When we announced our Q4 earnings in early February, we talked a lot about 2023 as a year of simply executing against the plans that we had developed throughout 22. If you look at our Q1 results, it's simply a down payment on what we said we were going to do. As you'll hear from Mark, for the time being, we're leaving our full year outlook unchanged, but intend to take another look at it after we deliver the Q2 that we've outlined. Pro forma core sales were up 5%, and pro forma EBITDA margins were up 280 basis points over the prior year to 19.5%. As we discussed in February, and we'll reiterate this morning, We have high confidence that our margins will continue to ramp throughout the year based on the current cross profile we've locked in and the benefit of the 25 million of LK synergies that will continue to roll into the results for the balance of the year. What that means is second half margins will improve at least 250 basis points relative to the first half. Next, we repurchased an additional 37 million or 1.7 million shares against our anticipated minimum 100 million of repurchases this year. and have continued to do so to begin the second quarter. Our Q1 cash flow was even in Q1, which was ahead of our expectations and gives us even further confidence in delivering a strong full-year free cash flow. Late in the quarter, we launched a national campaign to bring awareness to the problems with lead in drinking water, particularly in K-12 schools, and what we can do to help them solve this incredibly solvable problem. It's still early innings, but we're seeing demand for our drinking water solutions, both bottle fillers and filtration, accelerate. Taken as a whole, Q1 was pretty much down the middle, with lead times back to 2019 levels, no supply chain constraints, and all the 80-20 simplification work behind us. So we were able to work on the LK integration efforts and executing on the strategic growth plan we've developed. We remain highly confident in the 2023 cost energies from LK reading through this year, while we continue to do the work to get the incremental $25 million benefit next year. With that, I'll turn it over to Mark on page four to take you through some financial details on Q1.