Zurn Elkay Water Solutions Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
April 26, 2023

There are 9 speakers on the call.

Operator

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 1 week. The phone numbers for the replay can be found in the earnings release the company filed in an 8 ks with the SEC yesterday, April 25. At this time, for opening remarks and introduction, I'll turn the call over to Dave Polly.

Speaker 1

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 the Safe Harbor language 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 quarters, we will speak to certain non GAAP metrics as we feel they provide a better understanding of our operating results.

Speaker 1

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 Zurnalkay Water

Speaker 2

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 2022. Against the plans that we had developed throughout 2022. If you look at our Q1 results, it's simply a down payment on what we said we were going to do.

Speaker 2

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 form a core sales were up 5% and pro form a EBITDA margins were up 2 80 basis points over the prior year to 19.5%. As we discussed in February and will reiterate this morning, we have high confidence that our margins will continue to ramp throughout the year based on the current cost profile we've locked in And the benefit of the $25,000,000 of L. K. Synergies that will continue to roll into the results for the balance of the year.

Speaker 2

What that means is second half margins will improve at least 2 50 basis points relative to the first half. Next, we repurchased an additional 37,000,000 or 1,700,000 shares against our anticipated minimum $100,000,000 of repurchases this year and have continued to do so to begin the 2nd 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 the national campaign to bring awareness to the problems with lead in drinking water, particularly in K-twelve 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.

Speaker 2

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 eightytwenty simplification work behind us. So we were able to work on the FK integration efforts and executing on the strategic growth plan we've developed. We remain highly confident in the 2023 cost synergies from LK Reading through this year, while we continue to do the work to get the incremental $25,000,000 benefit next year. With that, I'll turn it over to Mark on Page 4 to take you through some financial details on Q1.

Speaker 3

Thanks, Todd. Please turn to Slide number 4. On a year over year basis, our Q1 sales increased 55% to $372,000,000 The LK merger contributed 53% year over year growth, while foreign currency translation reduced sales by 100 basis points from the prior year And core sales increased 300 basis points. On a pro form a basis, including Elkay in the prior year Q1 And adjusting for the product line exits that we outlined during last quarter's earnings call, core sales expanded 5% year over year. Breaking down that pro form a core growth, Sales to our residential end markets were a bit better than we anticipated as the mid teens year over year decline was partially offset by a few last time buys for certain SKUs we exited, Resulting in a non recurring sales of approximately $7,000,000 in the quarter.

Speaker 3

Sales to our non residential end markets were also ahead of our outlook for the quarter And increased mid single digits year over year with balanced growth across flow management and control, water safety and control, hygienic environmental and drinking water. With respect to our Alky related product line exit work, we completed the exits in the Q1 as planned. As you will see on our outlook slide later in the call, Both exits will have a year over year sales impact of $29,000,000 in the 2nd quarter and the $90,000,000 we have been highlighting for calendar year 2023. Turning to profitability, our adjusted EBITDA totaled $72,000,000 in the quarter and our adjusted EBITDA margin was at the high end of our outlook for the quarter at 19.5%. This compares to $52,000,000 21.7 percent in the prior year's Q1.

Speaker 3

The benefits of price realization and our productivity initiatives inclusive of the cost synergies that will benefit earnings by a little over $6,000,000 each quarter in calendar year 2023, was more than offset by Sell through of higher cost inventory purchased last year, investments in our growth and supply chain initiatives as well as the impact of the LK merger. Please turn to Slide 5 and I'll touch on some balance sheet and leverage highlights. With respect to our net debt leverage, we ended the quarter with leverage at 1.6 times, Inclusive of approximately $37,000,000 of cash used to repurchase common stock in the quarter. We have purchased another $17,000,000 worth of stock through the first Part of the Q2, bringing our total share repurchase to just under $80,000,000 from the Q4 of 2022 through yesterday. In February, our Board of Directors approved an increase in our share repurchase program to $500,000,000 And as we highlighted on our earnings call last quarter, We intend to utilize at least $100,000,000 of our free cash flow in 2023 to continue to execute our share repurchase plan, While targeting a net debt leverage ratio in the 1 to 2 times range over time.

Speaker 3

I'll turn the call back to Todd.

Speaker 2

Thanks, Mark. I'm on Page 6. Over the next couple of slides, I want to share a few positive developments on various legislation and other things we're doing to drive outsized growth from our safe water drinking platform. Because there are no safe levels of lead in drinking water, especially when it comes to kids, we were pleased to see the Michigan Senate passed filter first water safety legislation last week. This legislation is intended to protect children from lead in drinking water by requiring all child care centers and schools to implement a drinking water management plan, Install filtered bottle filling stations or filtered faucets on outlets designated for drinking water and test the filtered water to ensure that the filters are installed And operating properly.

Speaker 2

This legislation now heads to the Michigan State House of Representatives for consideration and has widespread support from health and environmental experts because it is more cost effective than requiring repeated testing at every school. While we view Michigan's legislation as the gold standard, There is growing awareness and more legislation developing in other states across the country, including California, Texas and Massachusetts, as you can see here. And this is all just within the last 3 months. We've been actively supporting this legislation as well as others and believe the most proactive and protective solution to kids getting exposed to lead through school and childcare drinking water is to place filters at the point of use. And for about $2 per student per year, Schools can accomplish that with our filtration solution.

Speaker 2

Moving to Page 7. We're also doing our part to bring greater Awareness and understanding about the importance of safer drinking water and healthy hydration through a broad awareness campaign. We started with a video series that launched across social media, connected streaming and video on demand services and supported that with an entire toolkit of information and resources. In addition, we launched a dedicated section of lk.com with information designed specifically for parents, teachers, administrators and facility managers. The content ranges from letters parents can send to school administrators, maps indicating where water quality is most at risk for school boards and administrators, curriculum for students and teachers, plus where to buy and how to change our filters for facility managers.

Speaker 2

We know awareness drives action and when parents, teachers and the community call attention to their drinking water problems, the issue cannot be ignored. Moving to Page 8. It's just the fact that some school districts have more resources than others. However, all children deserve clean, safe water in the places where they're learning and growing every day. That's why we created our Fountains for Youth program in 2019, providing filtered bottle filling stations, filters, installation grants or a combination of all of these The program assesses donation needs based on several criteria, including water quality issues and the ages of students attending the school with a preference given to schools in early education in elementary schools where lead has the greatest impact on developing minds and bodies.

Speaker 2

The program has benefited dozens of schools across the country with our most recent efforts focused on Los Angeles, Benton Harbor, Michigan and Milwaukee. We have plans to roll this out to even more schools across the country this year in places like Jackson, Mississippi and others. This program is just a piece of our overall ESG efforts and a nice segue to the last one for me on Page 9. We continue to make strides in our ESG efforts in Clean Water mission overall. In addition to our 2022 sustainability report issued in February And our UN Global Compact communication on progress that we'll issue next month, we also wanted to share our Q1 progress against key targets to provide additional transparency and accountability on our ESG journey.

Speaker 2

Developing clean technology water solutions that help our customers meet their water challenges and goals is core to our sustainability strategy with 74% of our revenue coming from products with sustainable attributes during the quarter. Our commitment to clean technology innovation and continuous improvements keeps us focused on expanding our line of products that can serve water, To a cleaner environment, protect human health and hydration, save energy and reduce the use of plastics and other nonrenewable resources. Zurn Elkay products save an estimated 8,000,000,000 gallons of water during the quarter and our goal is to reach 40,000,000,000 gallons of water saved annually by 2024. Additionally, LK Water Bottle Fillers have prevented the use of more than 4,000,000,000 single use plastic water bottles, Well on our way to the target of preventing $15,000,000,000 annually. Within our own operations, we identified and are launching 8 new projects To reduce our energy usage and greenhouse gas emissions and we have fully defined path to meet targets for both.

Speaker 2

Collectively for the quarter, Our philanthropic donations, in kind gifts and associated volunteer time exceeded $1,000,000 In March, we announced Emma McTigue joined our Board of Directors. With the addition of Emma, our Board now has 9 independent directors, 3 of whom are women. Overall, continued strong progress with our ESG efforts. And now I'll turn it back over to Mark to take you through our outlook.

Speaker 3

Thanks, Todd. Please turn to Slide 10 and I'll cover the highlights of our outlook. As you saw in the press release we issued yesterday, for 2023, we are going to continue to take a view on our external outlook that encompasses a broader range of volatility than we have in the past couple of years. Our outlook for calendar year 2023 remains unchanged with sales in the range of $1,500,000,000 to $1,550,000,000 And our consolidated adjusted EBITDA in the range of $325,000,000 to $345,000,000 resulting in year over year margin expansion of at least 110 basis points Up to 170 basis points. Similar to last quarter, to help better understand the growth trends in the business in 2023, On the right side of the chart, we have presented Zurn LK pro form a 2022 sales for the Q2, which takes reported sales for 2022 Plus LK sales for the Q2 of 2022, less the year over year impact of the eightytwenty product line exits we have executed.

Speaker 3

For the Q2 of 2023, we are projecting sales to be in the range of $385,000,000 to $395,000,000 And our adjusted EBITDA margin to be in the range of 21% to 21.5%, which is a 150 basis points to 200 basis points step up from the Q1. With respect to the sales outlook, you can see on the page our assumptions for year over year growth in our nonresidential and residential product groups, Which are impacted by the timing of shipments last year as we began working down an elevated backlog in the Q2 of 2022. We anticipate pro form a orders in the Q2 to expand low to mid single digits year over year with mid to high single digit growth in our non residential end markets, Partially offset by mid teens decline in our residential end market. Turning to profitability, our 2nd quarter margin is expanding 150 to 200 basis sequentially from the Q1 of 2023 as the sell through of the higher cost inventory we purchased in 2022 will be complete in the 1st part of the quarter and Our margin will begin to benefit from the lower commodity and transportation costs in the back half of the second quarter and into the second half of twenty twenty three, We anticipate another margin step up from the Q2.

Speaker 3

Our synergy savings related to the Elkay merger will continue to deliver just over $6,000,000 a quarter and $25,000,000 for the full year in 2023. Before we open the call for questions, just a reminder that we have included on Page 10 Our 2nd quarter outlook assumptions for interest expense, non cash stock comp expense, depreciation and amortization, our adjusted tax rate and diluted shares outstanding. We'll now open the call up for questions.

Operator

Our first question will come from the line of Brian Blair with Oppenheimer. Please go ahead.

Speaker 4

Thank you. Good morning, guys.

Speaker 2

Good morning, Brian.

Speaker 4

I believe you said that Resi was down mid teens with roughly $7,000,000 of unanticipated sales that While being unwound, they stayed in the quarter. Just to clarify, what was the margin on the 7,000,000

Speaker 3

The margin of $7,000,000 was I'd say about the fleet average what we had for the quarter. So we did a little better on that given the fact that last And by it's below what you'd normally anticipate, but it didn't materially impact the overall EBITDA margin in the quarter, Brian.

Speaker 4

Okay, understood. And maybe offer a little more color on year on year backlog dynamics impacting Q2. Any additional insight you can offer there in terms of how much of a headwind that is and how we should think about the phasing And an extension, the progression of growth rates into the back half for non res in particular, But also your resi sales obviously easier comps as the year progresses.

Speaker 2

Yes. Specifically as it relates to Q2, there's a A sizable headwind in Q2 from a backlog reduction. So we built backlog in Q1, Reduced it significantly in Q2 and Q3. So, if you look at our order rates relative to the prior year In Q2, they're actually going to be up nicely. So the sales growth is clearly impacted as a result of the backlog reduction in Q2 Reasonably acutely and also Q3.

Speaker 2

So we are seeing the trajectory of year on year order rates continue to Stabilize and be positive as we go throughout the year. But the phenomenon that you talked about, Brian, is impacting what We're talking about in terms of sales growth for the quarter, it's not what we would characterize as the underlying demand or market growth.

Speaker 3

Yes. If you go back and just look at the backlogs, just go back to last year's Qs, it's about a $16,000,000 backlog Earned last year on the Zurn side of the core business. So that's what Todd is referring to. When you look at the order, the sales rates you got to take that into consideration. Let's start pointing out the order rates are accelerating in Q2 and we think right now we see a good second half year over year demand pattern right now.

Speaker 4

Got it. And one last one, higher level question. Just be great to hear your thoughts on non res in general. There's been a fair amount of Concern regarding the cycle that's obviously levered in recent past, like consternation related to the banking sector. Just wondering how your team feels about the backdrop overall and in which end markets or product lines you're most confident in growing through an uncertain market and where There may be a bit more risk to Zener in LK going forward.

Speaker 2

Sure. Yes, we've heard the concerns. I think qualitatively, if you look at our forecast for the remainder of the year, it's essentially unchanged From what we had developed to start the year. I think that's an important piece To take into consideration. Secondly, if you look at our overall non residential mix, 47% of that is institutional, primarily healthcare and education And some Water Works.

Speaker 2

So you get to over half of the overall revenue. If you look at the slice of commercial, Obviously, we're watching it. When we entered the year, We had obviously identified a lot of that risk in the outlook that we had provided. We're not seeing anything that Points us to being more outsized than that at this point. But again, Brian, I think our forecast for the remainder of the year is essentially unchanged.

Speaker 2

That wouldn't be reflected in sort of the consensus view of the world, but from our standpoint, very little change In the last 90 days relative to maybe the range of outcomes that we thought could happen for the year.

Speaker 3

Yes.

Speaker 4

Appreciate all the color. So let's start to the

Operator

year. Your next question comes from the line of Jeff Hammond with KeyBanc. Please go ahead.

Speaker 5

Hey, good morning guys. Good morning, Jeff.

Speaker 3

Good morning, Jeff.

Speaker 5

So, I guess just on the margin bridge first half The second half, can you just kind of remind us the moving pieces? I know you've got some certainly the higher cost inventory, the Investments in the Safe Drinking Water and then kind of the synergies, but just walk us through kind of that, I guess, a 2 50 basis point first half to second half move.

Speaker 3

Yes, Jeff. I think the synergies play out consistently across the quarter. So no H2 versus H1 benefit really from the synergies that's playing out consistent each quarter. Yes, a bit of a modest step down in some of the investments that was a little more front end weighted. But the big thing that really matters the most Is the inventory cost structure.

Speaker 3

So as we've said, we were buying inventory in 2022 at elevated levels from a cost standpoint. That worked its way through Q1. It's going to impact us a little bit in the first part of Q2, but the big difference is the back half Of Q2 and then into Q3 as well as Q4, we'll be at the lower commodity, lower transportation costs That we've been experiencing for a period of time here impacting the P and L. So that's the really that's the biggest piece of the puzzle, Jeff. And you'll really see it In the Q3, because really we're not expecting anything different in Q4.

Speaker 3

So you'll see a meaningful improvement in the Q3 margin. And then that margin will decline a bit in Q4 just based upon the seasonal reduction in sales in Q4, expect a normal decremental margin In Q4. So Q3 is at the point where you'll see that full run rate of that lower commodity and transportation costs impact in the P and L.

Speaker 5

Okay, perfect. And then just on this clean water opportunity, can you just maybe size it and what you think The funnel of opportunities is and just how important it is for additional states to kind of Drive regulation versus just more organic kind of penetration.

Speaker 2

Jeff, as it relates to our sort of regular way core new construction work, We think that that is going to continue to accelerate and grow as it has been for a long period of time. The opportunity is measured in the 100 of 1,000,000 when we look at a combination of Aftermarket retrofit replace and filtration. And obviously, we've got Some pretty targeted initiatives in key states as well as this broader awareness campaign that we're going state by state, School district by school district to begin to identify where is the problem most acute, what's installed, what can we do to replace And then obviously, how can we provide that filtration on a recurring basis. And so I think the opportunity continues To be there, I think the awareness campaign and this legislation is just bringing it into bringing it closer and closer to impact. And so we're building the funnel as we speak.

Speaker 2

We're obviously addressing these states, particularly The ones we identified first, but I think this has got a very long tail. And we would qualify it as something Measured in the 100 of 1,000,000 of dollars over the next 3 to 4 years, incremental to that core business That we continue to see nice growth from.

Speaker 5

And then you mentioned filtration. Can you just kind of as you dug in on the integration, Maybe reassess kind of where you see the filtration opportunity relative to maybe what you thought initially?

Speaker 2

Well, it's not much different than we identified. If you think about The attachment rate and you think about the ability to continually Provide this through subscription services or other things and really drive the replacement with Our filters was not a strategic focus that LK really had spent a lot of time on. We identified it through the size of the installed base, the conversion from non filtered to filtered units and then obviously ensuring that we recapture That replacement of that. And so we think this is clearly identifiable and broadly the same size we thought, But it's not crazy to think about this as $100,000,000 opportunity in the next 2 to 3 years.

Speaker 6

Okay. Thanks guys.

Operator

Your next question will come from the line of Mike Halloran with Baird. Please go ahead.

Speaker 5

Hey, good morning everyone. Following up on Brian's last question there.

Speaker 6

When you think about the guidance for the back half of the year, I certainly realize it's unchanged all else equal for the full year. But are you assuming any What is the assumption for demand relative to normal seasonality? Is it just a stable backdrop on the residential side In the non residential side, when you normalize for kind of the inventory machinations and all the other things, are you just Assuming a relatively stable demand pattern underneath or is there something different?

Speaker 3

We are. Yes, we're not assuming. I think if you go back to 90 days ago, we thought, Look, we think over the course of the year, the residential end market could get modestly better in the back half sequentially And non res pretty stable over the course of the year. And when I say modestly, not a material impact that may offset a little bit of slowdown in the Q4. But I think Everything that we see right now when you look at contractor backlogs, pulsing contractors across the regions, People still feel reasonably good about 2023 today.

Speaker 3

The visibility as you can appreciate is only so far out. But I think that we right now, from all the data points that we have with our main contractors and reps, No one has pointed to some cliff coming in the back half of the year at this point in time of what everyone can see.

Speaker 6

No, no, that makes sense. And then on the inventory side, maybe just talk how

Speaker 5

you feel about channel inventories as well as how you feel about your own inventory levels And how you see that working out through the year?

Speaker 2

Yes. I think from a wholesale channel inventory perspective, There's the right levels of inventory for the future demand that we see. We don't see it elevated in really any specific categories. So taken as a whole, I think we're sort of through the through that rightsizing more based on where our lead times are today relative to maybe where they had been Over the course of 2021 2022. So that feels very normal.

Speaker 2

In terms of our inventories, obviously, we've got An outlook on the second half, we've essentially dialed in the purchase requirements that we see that match that. And so you'll see inventory continue to come down over the course of the year as lead times from our suppliers have sort of normalized. So taken as a whole, I think the jockeying of lead times and inventory for us And our suppliers is largely behind us. So it's sort of steady state at much lower cost As Mark identified and that's where we see the margin that fits sort of spot rate current purchases that we've locked in, we feel We've got a nice cost tailwind heading into the second half.

Speaker 6

Thanks. Appreciate it, gentlemen. Have a good one.

Speaker 3

Thanks.

Operator

Your next question comes from the line of Joe Ritchie with Goldman Sachs. Please go ahead.

Speaker 7

Hey, good morning guys. Good morning. So I'm just trying to square your non res commentary. Back to the envelope, it looks like non res was probably up, I don't know, high single digits this quarter. And now we're I think it to be negative modestly in the Q2.

Speaker 7

And I'm just wondering like is this mostly channel inventory dynamics? Were there Any cancellations in your backlog? I'm just trying to understand that a little bit better.

Speaker 2

Joe, I think the We touched on it a little bit earlier. The sales growth in Q2 and Q3 would be impacted By backlog reduction last year, so not necessarily the order rates or the market. It's a function of Last year's Q2, Q3 comparable would have pretty significant backlog reduction from both Zurn and Elkay. And as a result of that, obviously, we're working through that headwind. But if we look at sort of daily order rates and what we're Projecting for Q2 and see in Q3, the order growth in non res would be positive for those two quarters.

Speaker 2

Remember last year in the Q1, Lead times were extended, supply chains were long. And so we built backlog and then spent Q2 and Q3 reducing that. So I wouldn't say that our outlook on the market is really any different from Q1 to Q2. It's more a function of The comparable last year as we reduced backlog.

Speaker 7

Okay. Got it. That's helpful. And I guess maybe just as we're progressing through the year, I know you've given a Color at this point on the margins improving, particularly in the Q3. I guess, I know that you guys We don't give pricing, but I'm just curious, you're seeing across the sector some really good tailwinds from price cost.

Speaker 7

And I'm wondering if you can at least give us maybe some quantification on with lower cost inventories Going through your P and L, what does that ultimately mean from a dollar standpoint? Just trying to understand the impact that we should see in the second half.

Speaker 8

Yes. I think we're not

Speaker 3

going to get into giving the actual dollars for the Q3. We'll get to the outlook at the end of our at the end of this quarter when we report again in July. But If you think about pricing and cost, we've been talking about getting effectively a low single digit price realization on Year over year basis this year that's been sticking. There's been no price walking back at all as We anticipated and we think that continues for the balance of the year. From a cost standpoint, we said there's about a 250 basis point headwind In year over year in the Q1 that moves up down to close to 100 basis points in the second quarter, then obviously that headwind Disappears.

Speaker 3

So the benefit really is that we get to that lower cost structure we've been talking about, Yes, the price stays in place in the back half and you will see that standout in the Q3 margin where we give our outlook 90 days from now.

Speaker 6

Okay. Thank you.

Operator

Your next question comes from the line of Nathan Jones with Stifel. Please go ahead.

Speaker 8

Good morning, everyone.

Speaker 3

Good morning,

Speaker 8

Todd. I wanted to maybe take a look a little further into the future. You guys I've talked about some of these new non res projects that you're aware of, you track for up to 2 years Before they turn into revenue, which gives you some visibility not only into 2024, but maybe even out into 2025, which I think is probably where people are more concerned on the at least the commercial side of non res construction. Can you talk about that sales funnel that you track further out into the future and whether you're seeing much change in that More distant kind of opportunity.

Speaker 2

Yes. I think it's way too early, Nathan. The short answer would be, it would be unidentifiable for us to look at 2024 and 2025 and notice a meaningful change as a result of What's happened in the last 90 days. So there's been no significant adds beyond what we would normally expect or cancellations. And so taken as a whole, The market and the level of project activity that we're seeing, particularly on the institutional side is not changing dramatically 1 year, 2 year out as a function of where interest rates are or the banking crisis.

Speaker 2

I would say, When you look at our commercial exposure, it's a mix of retail office, warehouse, hospitality and other things. And so I think it'd be disingenuous to say that we've seen any change in our project outlook beyond qualitatively saying, Hey, it's probably not going to be as good in 2024 as 2025 as a function of where rates are today. But I don't think that we could identify anything specific that would maybe answer what you're trying to get at.

Speaker 8

Okay, fair enough. Maybe just on the share repurchase, higher than the average for the Q1, you talked about having done more in the Q2 here. Is that is how much you execute on the share repurchase in 2023 dependent on share price Opportunities you find for other capital deployment bolt ons anything like that. Just any more color on where that number might end up for the year?

Speaker 2

Well, I think, obviously, we communicated at a minimum of 100,000,000 We're off to a very strong start on free cash flow. We're executing against the projections that we had. The stock prices Has been obviously a little bit lower than maybe we would all like. And so I think that there's upside to that 100,000,000 And we'll just continue to work at identifying how much we do and how we execute it throughout the year.

Speaker 7

Okay. Thanks for taking

Speaker 8

my questions. I'll pass it on.

Operator

I will now turn the call back over to Dave for any further remarks.

Speaker 1

Thanks Thanks everyone for joining us on our call today. We appreciate your interest in Zurn Elkay and we look forward to providing our next update when we announce our June quarter results in late July. Have a good day everyone.

Operator

Ladies and gentlemen, that will conclude today's meeting. Thank you all for joining. You may now disconnect.

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