Zurn Elkay Water Solutions Corporation

Good morning and welcome to the Zurn LK Water Solutions Corporation's second quarter 2024 earnings results conference call with Todd Adams, Chairman and Chief Executive Officer, David Pauley, Chief Financial Officer, and Brian Wendland, Director of FP&A for Zurn LK Water Solutions. A replay of the conference call will be available as a webcast on the company's investor relations website. At this time, for opening remarks and introduction, I'll turn the call over to Brian Winland.

Good morning, everyone, and thanks for joining the call today. Before we begin, I'd like to remind everyone that this call contains certain war-looking statements that are subject to the Safe Harbor language contained in the press release that we issued yesterday afternoon, as well as in our findings 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're helpful to investors and contain reconciliations to the corresponding GAAP information. Consistent with prior quarters, 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. 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, Brian, and good morning, everyone. Thank you for taking the time to call in this morning. So I'll start on page three. We turned in what we believe is a pretty solid quarter and are again raising our outlook for the year. We leveraged core growth of 3% into 20% adjusted EBITDA growth, which drove margins to 25.3%, equating to 370 basis points of margin expansion year over year. Free cash flow in the quarter was $80 million, and we deployed $60 million to repurchase almost 2 million shares in the quarter. For the first half of the year, in dollar terms, EBITDA is up $35 million, and free cash flow is up $50 million over last year's first half, and we continue to expect a nice second half from a cash flow perspective. Qualitatively, our underlying markets continue to match our views coming into the year, and we're making steady progress on our growth initiatives and breakthroughs. Hopefully, our results over the last 12 months have answered the question on whether or not we'd achieve the $50 million plus in synergies from the LK transaction, given where our consolidated EBITDA margins now sit. Our story at this point is really quite simple. We have what we believe is the premier water solutions business in North America, with best-in-class financial performance and a business system and culture that underpins our confidence in being able to perform at a very high level, regardless of the macro environment. We have a balance sheet and cash flow profile that puts us in a position to reliably and increasingly return capital to shareholders while executing on proprietary M&A opportunities moving forward. I now have the privilege of turning the call over to our newly minted CFO, Mr. Dave Pawley. At the same time, I'd like to say good morning to our former CFO and now Chief Administrative Officer, Mark Peterson, who's listening in as he's driving to work and certainly not missing having to get here early for this call.

Dave. Thanks, Todd. Please turn to slide number four. Our second quarter sales totaled 412 million and increased 300 basis points year over year on a pro forma core basis. Mid single digit core sales growth in our non-residential end markets and initiatives was partially offset by flattish year over year sales to our residential end markets and pockets of the commercial segment within non-residential. With respect to demand in the quarter, year over year order growth was in line with our sales growth as our book to bill ratio was just above one in the quarter. End market trends continue to align with our expectations and our growth initiatives drove the sales performance to the higher end of the outlook we provided 90 days ago. Turning to profitability, our second quarter adjusted EBITDA increased 20% from the prior year second quarter to $104 million and our adjusted EBITDA margin expanded 370 basis points year-over-year to 25.3% in the quarter. At 25.3%, our second quarter adjusted EBITDA margin is the highest consolidated margin since the LK merger two years ago. The strong margin and year-over-year expansion was driven by the benefits of our productivity initiatives inclusive of cost synergies plus the lower material and transportation costs compared to one year ago. For calendar year 2024, we believe our year-over-year margin expansion will be a bit better than what we discussed 90 days ago, and we are again raising our expectation for full-year EBITDA margin. We will cover that in more detail later in the call. Please turn to slide five, and I'll touch on some of the balance sheet and leverage highlights. With respect to our net debt leverage, we ended the quarter with $333 million of net debt and leverage continued below one at .9 times. Our .9 times leverage is inclusive of the $61 million we deployed to repurchase shares in the quarter. On a year-to-date basis, we have now deployed $80 million to share repurchases and $28 million to dividends. We continue to have excellent capital allocation optionality And as we have discussed, we will remain focused on a balanced capital allocation strategy going forward. I'll turn the call back to Todd.

Thanks, Dave. I'm on page six. Here you can see our year-to-date sustainability impact and progress towards our targets. We continue to see sustainability as both a core part of and natural byproduct of our business. The vast majority of our sales in the quarter came from products that deliver sustainable attributes to our customers, products that reduce water consumption, protect The potable water supply in buildings reduce energy or GHG consumption or are made of high levels of recycled content. Whether it's reducing water usage, filtering out contaminants from water, or eliminating single-use plastic bottles, we continue to innovate to address water-related challenges to public health and conservation. We'd run our business the same way even if there wasn't anyone looking, because the essence of what we do is to help our customers with their water challenges. But since people do keep score, I think it's important to note that across the main agencies that rate us on our own sustainability efforts, we are either in the top 3%, top 8%, or top 10% rated across the broad university of companies rated by these agencies. We approach sustainability with the power of the and, delivering great results and helping our customers meet their challenges and doing the right thing for the environment, our associates, and shareholders. I'll leave everyone with just a few thoughts on page seven. Halfway through 2024, we've raised our outlook for the year twice. If you look at a longer timeframe, we're growing at about only half of our 10 year CAGR. This is because of the highly publicized demise of the commercial end market in non-residential construction. I say that a little sarcastically, but there have of course been, and in the near term will continue to be some headwinds from the commercial end market and also a bit of a flattish residential market. Despite this, we are still growing and generating exceptional margins and free cash flow through a combination of our unique competitive advantages. To name a few, our end market exposures, specifications, portfolio breadth, new versus retrofit balance, and differentiated secular growth opportunities like drinking water. And perhaps most importantly, the deployment of the Zurn LK business system. Dave gave me the updated statistic yesterday about our core growth track record. over the past 54 quarters. That's 13 and a half years if you're playing along at home. We've had exactly four quarters we did not grow organically, which I think is a pretty decent sample size to evaluate our track record. Also of note, the largest decline in any one of those four quarters was down 5% in the pandemic quarter of June 2020. During this current period, I'll say of undergrowth we're in, To me, the silver lining is that our new baseline of margins and cash flow is materially higher than at any point over the past 10 plus years. We're returning more money to shareholders than ever, and we continue to have ample capacity to do the right M&A while keeping the balance sheet in great shape. Which brings me to the last point I'll make before turning it over to Dave. The thing that people either underestimate or don't understand about Zurn is the culture, or really how foundational our business system is to our success. The pillars of people, plan, process, performance, and purpose aren't just things we throw on a chart to talk about with people. It's deeply rooted in how we run our business and grounded in the spirit of relentless, continuous improvement. Over the last few weeks, we've gotten some questions regarding Dave's promotion and Mark's new role, all with a hint of what's the story behind the story? The answer lies in how we actually deploy and do the real work around the first pillar of the Zearn LK business system, which is people. By truly recruiting, developing, and retaining the best talent, it requires an intention, discipline, and selfless perspective to do what's right for the business and the individuals to create long-term sustainability. And when I say sustainability, I mean it in the context of the ability of continuing to perform at a high level without any decline in quality. And that's exactly the situation we have with Dave and Mark. We've promoted an extraordinarily talented guy to CFO who was ready, 42 years old, been here for 12 years, knows the business inside and out, and has tremendous runway. And we get to leverage Mark's talent, experience, and understanding of the business system into a bunch of new areas after having been here for 18 years, including 13 as CFO. We're in an enviable position to have affected this kind of organizational maneuver

it wasn't on accident it's just how we approach things so mark i'll see you in about 15 minutes dave congratulations and well earned go ahead and hit the outlook on page eight thanks dad please turn to slide eight and i'll cover our outlook for the third quarter and update to our high level guidepost for calendar year 24. for the third quarter we are projecting year-over-year pro forma core sales growth to be in the low single digits and we anticipate our adjusted EBITDA margin to be approximately 25% for the quarter, which represents an approximate 90 basis point margin expansion over the prior year. Taken as a whole, Q3 will look a lot like our second quarter we just finished. For the full year, we are seeing no changes to the sales assumptions we outlined at the beginning of the year and still believe we will generate positive pro forma core sales growth year over year. With respect to our adjusted EBITDA margin, we are again raising our outlook and now expect adjusted EBITDA margin expansion to be between 200 and approximately 250 basis points year over year. Our free cash flow expectation has also improved as we are now expecting cash flow to exceed 250 million. Before we open the call for questions, just a reminder that we have included On page 8 are third quarter assumptions for interest expense, non-cash stock compensation expense, depreciation and amortization, adjusted tax rate, and diluted shares outstanding. In addition, we have included the prior year third quarter sales adjusted for the executed 8020 product line exits to calculate pro forma core sales growth in 2024. The third quarter is the last quarter that we will have an impact from the previously announced product line exits. We will now open the call up for questions.

We will now begin the question and answer session. In order to ask a question, press start followed by the number one on your telephone keypad. Your first question comes from the line of Brian Blair with Oppenheimer. Please go ahead.

Thank you. Morning, guys.

Morning, Brian. Morning.

Dave, congrats on the promotion.

Thanks, Brian.

Of course, and Mark, drive safely. Hey, you guys mentioned end markets are generally tracking as expected. I was hoping you'd offer some finer points on that front, perhaps drill down on what your team is seeing across institutional versus commercial non-res verticals, the resing market, and whether you anticipate any sequential change in underlying demands through the back end.

Well, I think the perspective that I would give you, Brian, is we had a view that commercial was weak. And I'll remind everyone that it has been weak really since 2020. So we've been absorbing the news, if you will, of this headwind quarter by quarter, year by year for a while. And so I think our ability to understand how that's going to roll through our results, I think we've baked that into our perspective that we don't expect I think any sort of significant change, if you will, to our view, it may be worse sequentially. But I think from an institutional standpoint, we continue to see strength. I also think it's important to understand that inside of the commercial vertical itself, about 40% to 45% of that is actually retrofit replace break fix. So while the headline on commercial construction is bad, and I think there's a lot of reaction to that day by day, week by week, Um, you know, when you look at the pockets that we're in, um, you know, we are not big in warehouses. So that news that's rolling through the top line number, you know, has rarely little impact on us because the content that we provided to a warehousing, um, uh, building is relatively low. So you gotta look beneath the headline number and into the pockets and we do that and we do that by region. And I think we've done a pretty good job of trying to, you know, assess how that may impact our growth. And so, you know, when you take a giant step back and hopefully that 10 year chart gives you perspective, you know, there is probably a two point headwind to our overall growth because of what we're seeing and absorbing through that commercial headwind. But I don't think we're seeing anything that gives us pause that the perspective going forward is different than what we've already baked into to our thinking.

Understood. Appreciate the detail. Margin performance has been quite strong in the last four quarters. You mentioned the synergy realization is the plus of the 50 million plus. So wondering if you're willing to quantify that. And then looking forward, how should we think about normalized core incrementals? We've always thought low 30s is kind of the right range given the structurally improved profitability. of Zern LK? Is that still the right normalized incremental to think about? And then finally, we know there's a lot of supply chain action underway. Perhaps you can speak to the drop through that we may see going forward.

Yeah, I think you've you've got it all. Obviously, the 50 million plus, you know, I think is something we've we committed to two years ago. You know, the first year we spent sort of attacking some of the more addressable things and doing the work to get to that next 25, which we clearly, I think the work is done and now it's just simply going to read through the results. And so whether it's 50 or 55 or 60, I'm not sure that it matters all that much other than to know that the business is entirely integrated and we've sort of stopped keeping score on the discrete synergies because they just keep coming through as a consolidated number. In terms of what to think about as an incremental margin going forward, I would say that we've always said 30 to 35. I think that given some of the structural things that we've done and maybe some of the mixed positive attributes of drinking water, that number is probably closer to 35 than 30. And obviously, there's a handful of supply chain actions that we've been working that are essentially complete and will begin to accrue some of those benefits into next year so i would say from a from an execution standpoint in and around the lk synergies the structural changes we've made as a result of combining the two businesses and some of the prospective things we've done we feel like we're very much on track to accelerate you know margins going forward from here and the incremental the incremental earnings growth will be that 35% plus or minus.

Understood. Thanks again. Yep.

The next question comes from the line of Andrew Buscaglia with BNP Paribas. Please go ahead.

Hey, good morning, guys. Good morning. So, you know, it's along the lines of those margin comments. I'm just wondering, you know, so you guide to 25% or so in Q3 pre-BDOM margins, which would imply a little bit of a tick down. I'm just wondering, can you walk through the puts and takes there? Maybe it's seasonal, but your historicals sometimes move differently. But I'm just trying to understand why the tick down or, you know,

um behind that comment nothing i mean i think when you when you look through it you know approximately 25 is 25 3. i mean you know so i don't think we're trying to be too cute i can't i can't give you a reason why uh it goes to 25 other than you know we're trying to guide with some with less precision if that makes sense okay and and and so there's nothing discreet that that uh that I can give you to get to a lower number?

Yeah, I would just say, Andrew, I think H1 and H2 margins can look a lot alike based on the guidance framework we gave. I think Q4 typically is a step down in margin from what you see in Q3, just given the seasonality and the lower sales volume in Q4. But overall, I'd say H1 and H2 can look a lot alike.

Okay.

Okay. And, you know, you talked a little bit, you know, by end market, some of the trends you're seeing. Can you talk a little bit more how, you know, how you guys would define things on the business division level with water safety, flow systems, hygienic, and drinking water? Can you talk about some of the trends you're seeing versus last quarter improving or worsening?

Yeah, I would say that there's no substantial change. I mean, when you look at When you look at our business and the revenues, I mean, we participate across the whole build cycle. So I would say each of the, you know, business segments or sectors or whatever you want to call it, you know, is performing sort of as you'd expect, given where they participate in a particular cycle and in a particular vertical. So, you know, I would say there's no change across the board. You know, there is a there's some seasonality to drinking water based on the school year. and when that work can actually be done. But aside from that, no significant change to how the business groups are performing inside of the verticals from last quarter.

Okay. All right. Thank you, guys.

The next question comes from the line of Andrew Krill with Deutsche Bank. Please go ahead.

Hey, thanks. Good morning, everyone. And congrats again to Dave. Want to circle back on the orders commentary that they were kind of off in line with the company growth this quarter. So I think that means most single digits. Just like, can you give any color on, you know, was that steady throughout the quarter? Maybe was there any changes as the month progressed? And if you're willing, like anything on July would be helpful. Thank you.

Yeah, I don't think there's anything to talk about. I think the order rates that we saw throughout the quarter were consistent. They remained consistent through July to sort of deliver the kind of guidance and outlook that we've provided. So I don't think there's anything to me that was at all surprising or different. It was very steady, has been very steady really throughout what's now the first seven months of the year.

Okay, great. That's helpful. And then on the supply chain, I think things looking ahead, I know in the past have been quantified as potentially around $10 million of a net benefit in kind of 2025. Is that still a good framework to think about those benefits or has that changed at all?

Yeah, I think that the framework is correct. I think that the only qualitative thing is the run rate is probably closer to 10. You know, I think there's a lot of moves that are, that are done there's some that are underway and obviously we've prioritized um you know the larger impact things towards the towards the front end there may be some things that take a little bit longer to work their way through but i think from a yield perspective in 2025 i think you know somewhere between five and ten is the right way to think about it okay great thank you your next question comes from the line of nathan jones

with Stiefel. Please go ahead.

Good morning, everyone. You guys are making it tough to come up with questions with strong margins and no change in any of your outlook. So I guess I'll ask a couple of questions around capital allocation. You have been fairly consistent repurchaser over the last couple of years since the deal was done. but have stepped it up in the first half of 24. Can we anticipate a continuation at this kind of run rate? Do you anticipate being a net repurchaser of shares more than offsetting dilution?

I think the way we've approached it, Nathan, is we look at the intrinsic value of what we think the company is worth. And when we feel like it's undervalued relative to that, we do a little bit more. When we think it's getting closer, you know, we do a little bit less. I think on balance, you know, we are going to be a repurchaser of shares, I think somewhat consistently moving forward. What that means in the third quarter and second half, we'll have to find out. But I think that if you look at last year, we did 125, Dave? You know, we're sitting at 80. I think it's entirely realistic to think that we get close to that, you know, this year. We'll have to take a look, but... That's how we think about it, Nathan.

I guess a follow-up question I'll ask on growth initiatives. Can you talk about the major growth initiatives that you've got going on out there? I know there's some in the drinking water business, but maybe just any commentary around growth investments, growth initiatives that you're focused on in other parts of the business.

We tried to cover a few of those last quarter. some substantial growth runway in our commercial brass business. So think about sensor products that would go and compete against somebody like a Sloan. We've got a number of growth initiatives there, a combination of new products and penetration with some critical key customers and verticals. That's moving along quite well. We have an initiative on our flow systems side where we've developed a bunch of new products over the course of the last two or three years, driven the specification, and we're now seeing those commercialized. So that's gotten nice momentum this year and doing quite well. And then obviously the drinking water thing, and I'll let Dave talk a little bit about the drinking water thing, but that is going to be, for us, the most important thing that you hear from us over the next couple of years. And obviously the amount of time and effort we're putting into both the new product development that will occur later in this year, in the first part of next year, and the commercialization through K-12 schools and health care will be a big deal. And a lot of it is legislation-driven. And Dave's been, I would say, in lockstep with that part of the business. So I'll let him talk about it.

Yeah, so maybe a couple of comments on drinking water, Nathan. You know, in the quarter, we continue to see double digit growth within the installed base of filtered units here in the US. So for us and our team, the focus is really on increasing the number of filtered units and then increasing the attachment rate of filters to those units. From a legislative perspective, you know, we've talked about Michigan having passed the filter first legislation requiring all K through 12 schools and daycare facilities. To have filtered water available that was passed into law last October, Michigan still in the process of rolling out just how schools get funding the bills funded by the state of Michigan. And then there's also three other states that currently have legislation that was proposed either late in 23 or early in 24 that looks a lot like the Michigan filter first legislation and those three states being Wisconsin, Minnesota and Pennsylvania.

Thanks very much for taking the questions.

Question comes from the line of Mike Halloran. Liz Baird, please go ahead.

Good morning, guys. So first question, just on, you know, you counted on the stability on the aftermarket side, the MRO side of the portfolio. Are you seeing much of a trend difference between the MRO side right now and the original equipment side on the portfolio?

Well, when you say original equipment, I'm guessing you mean new build. New build, sorry.

Yeah, new build construction. Mm-hmm.

I think it depends by vertical. You know, I think when we look through the retrofit, replace or break, fix part of our business, that's pretty steady all the time. I think when you go to the new build side of life, obviously institutional is stronger than commercial and residential. So I think it's sort of you have to unpack it by by that, Mike, and I don't think there's any change to that. I would say that an aggregate at present retrofit replace is growing less than new build institutional, but more than commercial new build and probably a touch better than residential. So that's, you know, 45% of the business is retrofit replace growing steadily in the low single digit range.

Makes sense. And then kind of a The growth algorithm question, if you think longer term now that you've more or less gotten through all the product rationalizations, you've had Alcanda portfolio for a while now, how do you think about what your market outgrowth looks like? Is this a few points per year, given all the initiatives you have relative to what the end markets are growing? And maybe just unpack that a little bit.

Well, if you look back over those 10 years and probably even a longer timeframe, the growth algorithm has been know a couple points of market a couple points of price and a couple points of outgrowth taken as a whole and i think when the when you roll that through the the various cycles um between institutional commercial uh residential they'll each have their own um what's the right word way to say it institution will be a little stronger at times commercial will be a little bit stronger at times, residential will be a little bit stronger at times, and parts of the cycle, one will be stronger or weaker. And so the blended way to think about this is it's a country of 330 million people that are moving and value education and healthcare. So that's sort of a steadying force, and there's a massive installed base of things that need to be replaced on a somewhat regular basis or break and need to be repaired. And so when you roll that through, that's two points of market, two points of price, a couple points of outgrowth. I don't think anything has changed. If anything, longer term, the drinking water part of our portfolio should grow faster than the market. And it will grow faster, as Dave pointed out. That's been something that's been true for a long time. And with the amount of effort and innovation we've been putting into it, I think I'm confident to say that I think it changes and probably gets a little bit better. So the current 3%, you know, we're undergrowing by by 3%. A lot of that is, you know, we're not as we haven't been as aggressive on price in the moment. And, you know, we're absorbing some of the commercial headwinds, but still growing at 3%. And so I think we see the opportunity to migrate back to that, you know, mid single digit growth with with with with everything I see and you know, the addition of drinking water.

Great. Appreciate it, Todd. Thanks.

Yep.

The next question comes from the line of Jeff Hammond with KeyBank Capital Markets.

Please go ahead. Hey, good morning, guys. Just a couple cleanups here. In the queue, I think you break down commercial, institutional, all other, and all other I think was down eight. I think you said Rezzy was flat, so I just wanted to understand what the pressure was within that all other. And then just on the CAO move, congrats to Dave and Mark on the new roles. Maybe just speak to some of the things Mark's going to really be focused on in that new role.

Yeah, maybe I'll take the first part of your question, Jeff, just on the all others. What you're seeing in the 10Q is the GAAP reported number. So you've got to remember there's the skew rationalization that's impacting that number. And that's what's causing that to be down.

Yeah. So with respect to Mark, obviously, you know, Mark and I have worked together for more than 20 years. He's been here 18, CFO for 13. And as you reminded me yesterday, did 50 earnings calls. So the nice thing about Mark is he understands our business inside and out. And he is a tremendous resource to both Dave and I and the broader company as we think about growing the business going forward. So one of his biggest focus areas is going to be on the continued org and talent development process that we have. And it's working effectively. But I think we think about it as how much more can we do because obviously as we acquire and grow we're going to need more talent and so the ability to do that organically will be really important for us and particularly when you get into a situation like an LK where you know the reality is it requires a lot of resource and talent from the Zern side to get to the synergies the pivot to make some tough choices And we want to be in a position to do that. And Mark is going to be at the forefront of that. And so, you know, and when you think about an integration of a larger, more significant business down the road, you know, he's someone who could step in day one, be ready to communicate, you know, how we do things, bring people along in terms of implementing the business system and things like that. So that's where his focus is going to be. And, you know, The three of us sit approximately eight feet apart, so it's nice to have Mark in the fold doing some really important things for us for the future.

Okay, thanks. The next question comes from the line of Brett Lindsey with Mizuho.

Please go ahead.

Hey, good morning, and congrats to Dave and Mark. I wanted to follow up on the margin outperformance. So above the high end of the guidance range, was hoping you could dimension the positive variances versus the internal forecast for the second quarter. And then thinking about the forward guide, so you're betting some continued margin expansion in Q3, looks like it flattens out in Q4. Is that simply just reflective of the tougher sales comparison? Is there conservatism? Any color would be great.

Well, Brett, I think we... We tried to communicate that, look, what's driving the margin performance, I think, are a lot of the structural things that we've talked about that are rolling through. And I also think that the continuous improvement that we are doing. So when we measure the number of continuous improvement activities we're doing, and we don't measure it to measure it, we measure it to deliver better earnings, better cash flow, improved lead times, and things like that. And so sitting here today through the first half, the number of continuous improvement activities are up 42% year over year. So there's not one big thing, but that compounding benefit of our 2,400 people getting up every day and doing just something just a little bit better is what is driving the outperformance. I think it's not like we got surprised and bought materials that a whole lot cheaper than we thought going into the quarter. You can't turn it off. It's just sort of that constant engine that's creating more and more productivity and cost savings. And so that's, to me, the biggest reconciling item that we think about because up 42% in a lot of small things adds up. And so I don't think it's going to slow down in the third quarter. I don't think it's going to slow down in the fourth quarter. I don't think it slows down in 25. But I don't think that there's anything that we're going to give you that's going to answer the question other than it's just relentless continuous improvement across the board.

That's great. No, appreciate the color. And then just one follow up on tariffs is certainly more topical given the political landscape. Could you just level set us on your sourcing exposure to China and Mexico specifically? And is there more work to do and how can you modulate if the tariffs you know, do step up here, you know, post-November?

Yeah, I think one of the big things to recall is, you know, back in 2016 when the tariff situation all began, you know, we took the position of, you know, the long-term position of trying to find a supply chain for us that vastly de-emphasized China. And we've been working at that continuously for, I would call it eight years. And so we feel like our supply chain, with the work we've done over that time frame, and it's been a terrific job by our team, puts us in a spot to, I don't want to say skate around, but clearly become more advantaged than we are today with respect to tariffs. And that's in China and Mexico. So I think we feel like we're well positioned to absorb what may or could happen. If it's different than that, we'll have to manage through it. But I think we're in a terrific spot to begin to reap some of the benefits of the supply chains we've altered over the last, you know, really eight years.

All right. Got it. Congrats on the quarter again.

Yep. Thanks.

I will now turn the call back over to Brian Wendland for closing remarks. Please go ahead.

Thanks, everyone, for joining us on the call today. We appreciate your interest in Zurn LK Water Solutions, and we look forward to providing our next update when we announce our third quarter results in late October. Have a good day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.