Good morning, and welcome to the Zurn Elkay Water Solutions Corporation update call with Todd Adams, Chairman and Chief Executive Officer, Mark Peterson, Senior Vice President and Chief Financial Officer, and Dave Pauli, Vice President of Investor Relations for Zurn Water Solutions. This call is being recorded and will be available on replay for a period of one week. The phone numbers for the replay can be found in the 8-K the company filed with the SEC this morning. At this time, for opening remarks and introduction, I'll turn the call over to Dave Pauli. Good morning, everyone, and thank you for joining the call this morning on short notice. While we just provided an update two weeks ago, given our announcement this morning, we wanted to take some time to walk you through the transaction and answer any questions. Before we start, I would like to remind you that this call will include certain forward-looking statements that are subject to the safe harbor language contained in the 8-K that we filed this morning, as well as in our other SEC filings. In addition, we will refer to non-GAAP measures. Our SEC filings contain additional information about these non-GAAP measures, why we use them, and why we believe they are helpful to investors. We will refer to certain non-GAAP metrics as we feel they assist in providing a better understanding of the transaction. These measures are not a substitute for GAAP, and we encourage you to review the GAAP information in our SEC filings. With that, I'll turn the call over to Todd Adams, Chairman and CEO of Zurn Elkay Water Solutions. Thanks, Dave. You know, good morning everyone. As Dave said, thanks for joining us on relatively short notice. We know the Monday after the Super Bowl, people are generally moving a little bit slow, but it's a really exciting day for us. We'll try to get through this efficiently and then take some of your questions. You know, if we could start on page one. It was almost exactly a year ago when we announced the RMT transaction of our PMC business with Regal Rexnord. The intent was to maximize shareholder value by unlocking the embedded value of PMC and by merging that with a strategic partner. Even more so, it was to create a pure play water business that we could scale and grow both organically and inorganically. The word transformative is usually just a little cliché for my liking, but in this case, I think it's fairly appropriate. We're bringing together two iconic brands that serve the same end markets with complementary products, shared values and cultures. In doing so, we create a clear leader in water solutions in North America. The synergy opportunity is relatively straightforward and achievable, and by the time we get to 2023, which will be only a few months away after this transaction closes, the new Zurn Elkay will essentially double the size of what Zurn is today with the same elite financial profile we currently have. The structure of the transaction is also very unique. Ron Katz, the majority shareholder, as well as other Elkay shareholders, are taking stock as consideration and will be long-term shareholders of the combined business. I wanna thank Ron and Tim Jahnke, the current Chairman of Elkay and former CEO, as well as the entire Elkay team, for believing in the power of what we can do together. The mantra we shared throughout this entire process of finding this deal was, together we can create a far better business. I think as you're here this morning and seeing the future, we've clearly put ourselves in a position just to do that, to do just that. Finally, I wanna welcome all the Elkay associates to the new Zurn Elkay Water Solutions. It's gonna be a lot of fun bringing our two companies together. If you could turn to page two. This page lays out the fundamental aspects of the transaction. Elkay shareholders will receive up to 52.5 million common shares upon the close of the transaction, subject to customary lockups and standstill agreements. The only way this really came together was that the current Elkay shareholders are truly long-term shareholders and believed in the long-term shareholder value creation opportunity by coming together, and frankly, weren't sellers of the business for cash. In fact, one of their core values is we're in business forever. In this scenario, they have demonstrated that value in spades by partnering with us in the way they have. From the headline valuation perspective, those shares, as of the close of Friday, were worth $1.56 billion, which implies a transaction multiple of 14.2x on 2022 EBITDA before synergies and 9.8x pro forma for the expected synergies of $50 million. As a result of the merger, we end up with an even stronger, more flexible balance sheet with leverage at approximately 1x by the end of 2022. The combined cash flow of the business will be outstanding and puts us in place to continue to invest organically, inorganically, and return cash to shareholders through a disciplined capital allocation strategy. Upon the close, we plan to significantly increase the dividend to $0.07 a quarter initially and with room to increase it over time. We'll be expanding our board to 11, adding two members from the current Elkay board, and Elkay will continue to be run by its current president, Ted Hamilton. We expect the close to be sometime in late Q2 or early Q3 of this year, and we'll reflect the significance of this transaction in our new name, Zurn Elkay Water Solutions. If you could just turn to page three. I think the headline here says it all. The combined business will have over 75% of its revenues from fairly clear number one market positions, and approximately 95% from a number one or very strong number two market position. In 2022, standalone Elkay is projected to do around $700 million in revenues with over half in clean drinking water solutions and growing as a percentage of the total. They're also the number one manufacturer of sinks in the country for both commercial and residential applications, which fits extremely well within the hygienic and environmental sector of our current portfolio. We've often discussed the importance of specification in our efforts to continue to grow Zurn spec share. Elkay has employed that same approach around product specification throughout the years and has a very strong spec share within both drinking water and sinks, making the combined Zurn Elkay a clear leader in terms of specification. The history of Elkay in many ways mirrors our own. A family business started in Chicago by Ron's father over 100 years ago, with amazing leadership positions in the marketplace, with a stellar reputation for quality, innovation, and customer service. Our shared values and cultures provide an ideal backdrop to integrate the two businesses, leveraging the Zurn Business System to create a common language and drive a philosophy of continuous improvement in every aspect of our business. As we alluded to in the release, the strategic merit of this combination is off the charts. Starting today, we'll turn our efforts to rigorously planning the integration to turn the power of this combination into a reality. I'm now on page four. Across the board, the pro forma combined business is materially larger and better, with even more room to grow and even more balance from a new construction and retrofit perspective. Our end market mix tilts more strongly to the resilient and growing institutional end market, specifically within the education and healthcare verticals, largely as a function of the Elkay Drinking Water exposure, where Elkay is clearly the market leader and without question, considered the gold standard. The benefit to the marketplace and our customers is that the specified content per square foot we can bring to the market is unparalleled. This results in us being by far a more cost-effective solution in both the new build process, as well as our ability to bring holistic solutions to manage water inside non-residential buildings. We can leverage our connected solutions more expansively to include the Elkay portfolio with our Brightshield solution and also see runway to grow the filtration aspects of the drinking water business into a larger recurring revenue opportunity. I'll move on to page five. As you see on the right, we expand into clean drinking water, and it will be approximately 21% of the combined business, and that will grow considerably as a percentage over the next few years to at least 25% of the total as it grows faster than the fleet growth rate. Elkay has seen their clean drinking water sales grow at 12% compounded over the last 10 years. Hygienic and environmental solutions will comprise about a third of the business, and this is where we still have ample room to take share, and it's frankly the area where we don't currently have the number one position in certain product categories, but have a strong true organic plan that continues to advance, and we have significant opportunities by leveraging our connected solutions. Finally, 45% of the business will be in water safety and control and flow solutions, where we have very high relative market shares and continue to expand into adjacencies. As this transaction closes, we end up covering the entire gamut of water solutions for health, human safety, and the environment within public and private spaces, advancing the ESG goals of our customers in meaningful and tangible ways. I'm now on page 6. There probably aren't too many people in the country that wouldn't recognize Elkay's presence in drinking water. The bottle filler is becoming ubiquitous in virtually every building you're in, whether it's an office building, school, healthcare facility, airport, stadium or hotel. This is a category that's simply booming, replacing traditional water fountains and water coolers on a day-to-day basis. As we say in Wisconsin, we're replacing bubblers. Water has quickly become the beverage of choice, with continuous filtered water being by far the superior choice to bottled water from both a conservation and health perspective. Since 2010, Elkay bottle fillers have saved an estimated 37 billion plastic bottles from ending up in landfills, while dispensing more than 5 billion gallons of clean drinking water. The dynamic here is there's a large, fast-growing market around water as the beverage of choice. More and more bottle fillers are being installed to meet that demand, and there's an installed base of traditional fountains and bubblers that need to be retrofit or replaced. There's a predictable 3-5-year replacement cycle for bottle fillers. On top of that, the filtration of the water is something that we believe we can capitalize in a big way over time, providing users and building owners confidence that the water people are drinking is both safe from contaminants and the right choice from both a health and environmental perspective. If you could move to page seven, please. I'll touch briefly on the synergies we expect from the combination. We're targeting $50 million initially, with half in the first full year of 2023 and the remainder in 2024. These are cost synergies alone, and we believe the sales synergies will be on top of this. We're not gonna talk about that now, but suffice it to say, we certainly expect this transaction to be accretive to our individual growth rates. If you look at it from a quantitative perspective, Zurn's standalone EBITDA margins in 2021 were 25.8% at the segment level. In 2022, we expect Zurn Elkay margins to be in the 16% range. If you were to apply all the synergies to Elkay, which won't be the case, but for simplicity's sake, let's use that, pro forma margins in 2022 go to 23%. Clearly well within something we've achieved and very much in line with what you'd expect by putting these two highly complementary businesses together. What that translates to from a return on invested capital perspective is that this transaction delivers a 10% return on invested capital by the end of 2025, which is essentially the first full year three. The reality of these two highly complementary businesses that serve the same end markets, coupled with leveraging the Zurn business system to drive a combined strategic plan, leverage proven processes across a larger platform, and drive superior customer satisfaction and associate engagement, give us a lot of confidence that the synergy benefits we've outlined will accrue to the bottom line and make this transaction a home run from a financial perspective. Just quickly on page eight. Doubling the business with a similar financial profile we have today is something we felt was very achievable over a few years when we announced the RMP just a year ago. The reality is it's gonna come a little quicker than maybe even we anticipated. If you follow the way we've chosen to grow our business, which is to continually cultivate proprietary opportunities while executing a long-term organic strategic plan, things don't always happen on the exact timeline of our choosing. The thing that's so compelling about this combination and ability to create value for shareholders is that it's truly core to what we do today. It's focused in and around what we do. It's highly complementary from a product perspective, and we go to market in similar ways. When you pair that with the talent, culture, and values of the combined organization and the power of leveraging ZBS, we're truly building something special and unique, and all of us can't wait to get started on the integration. I'm moving to the last page, and then I'll stop talking. Everything we've done and do is to create a sustainable competitive advantage to drive shareholder value, delight our customers, create an environment for our associates to thrive and grow, and do it in a way that promotes ESG stewardship for our customers while accomplishing our own ESG goals and objectives. The concepts around ESG are nothing new to Elkay. We, even as a private company, have a well-established ESG program with targets around analyzing and reducing greenhouse gas emissions, enhancing product transparency, improving diversity and inclusion, and protecting and improving the health and safety of our employees. The momentum around ESG that Elkay has built will only help further the ESG-related initiatives we've been driving within Zurn. The combination of Elkay accentuates each and every one of those areas in both tangible and intangible ways. It's been beyond rewarding to find another company and family that sees things the same way and is willing to believe in it enough to become long-term shareholders. It's a testament to Ron, Tim, and the entire Elkay family for walking the talk and coming together to create a bigger, stronger business in Zurn Elkay Water Solutions. There's clearly work to do to get to the close, which we hope is sometime late Q2 or early Q3. What I hope you should take away from this morning is that it's gonna be worth the wait, and we're excited to get started. We'll turn it back to the operator and take a few questions. Thank you. If you'd like to ask a question at this time, please press star then one on your telephone keypad. Our first question is from Jeff Hammond with KeyBanc Capital Markets. Your line is open. Hey, good morning, guys. Good morning, Jeff. If the Packers were in the Super Bowl, we'd be talking about this on Wednesday, or? That's a big if. All right, just a couple here, you know, on the deal. One, do you anticipate any regulatory issues where, you know, your overlap's high? I know you had done like the Just deal, where I think there's some overlap. Just on the shares, I think you say up to 52.5. I just wanted to understand better, you know, is there something, you know, that drives variability in that share count, you know, when the deal closes? Thanks. Yeah, I mean, with respect to any antitrust, we're obviously gonna follow the process. From our research, you know, we don't feel like there's any significant risk to that. Again, we're just gonna let the process, you know, play out and do all the regulatory filings, but don't anticipate any significant issues. Then with respect to the up to $52.5 million, obviously, to the degree there's any net debt, the adjustment, you know, will come in the form of some shares not being issued, to the degree that there's net debt on the balance sheet at the time of the ultimate close. $52.5 million is sort of the top, and we'll see where all the net debt like items play out from now until the close. Okay, great. You mentioned, I think 12% growth over the last 10 years for Elkay. Is there much difference in the growth rate between the drinking fountain and the sinks and faucets? Just as you think about revenue synergy opportunities, where's kinda the where are some of the most obvious revenue synergy opportunities? Thanks. Yeah. The growth rates have been, I would say, relatively close together between the two categories over that timeframe. In terms of synergies, obviously, you know, the ability to drive spec share within key verticals, you know, is going to be the key. Obviously leveraging some of these products into the BrightShield solution will also be very important. When you think about it's really more deeply penetrating certain verticals, driving higher levels of specification, leveraging the portfolio and further connected products. Then there's a few more that, you know, I think we'll save as we get towards the close and we actually come together. Okay. Congrats, guys. Thanks. Thanks. Again, please press star one if you'd like to ask a question. The next question is from Bryan Blair with Oppenheimer. Your line is open. Thank you. Morning, guys. Morning, Bryan. It looks like a great fit overall for a form of balance of new construction and retrofit going forward, certainly attractive. In terms of the conversion from, you know, water fountains and coolers to bottle filling stations, we've obviously, you know, seen that take place and then accelerate over recent years. Where are we in that process? You know, the- The 3- to 5-year replacement cycle that's referenced, I assume that's more of a normalized basis, and we have, you know, a multi-year period of, you know, a surge or however you would wanna term that, in replacement that we're in right now. It seems to me to kind of mirror the story with your touchless sensor portfolio. Yeah. The 3- to 5-year replacement cycle, Bryan, is on sort of bottle fillers as a standalone category. When you think about the installed base of water fountains and things like that, bubblers, as we say, that's about 8 million. I would say we're frankly very early in the overall conversion cycle when you really step back. Even though, you know, you tend to think about seeing these virtually everywhere, I would say that the installed base of those traditional water fountains, you know, in schools, in commercial buildings and things of the like, is still very early in the overall conversion. There's millions, 8 million of these, you know, installed base that, you know, we'll have the opportunity to retrofit over time. That's exciting. In terms of the portfolio, you know, you called out the growth rate with drinking water. How much overlap is there with Zurn's existing portfolio within hygienic and environmental on the sink side? It's frankly surprisingly low. I think you know, in addition to having clean drinking water, you know, Elkay is the clear number one in commercial sink applications along with commercial faucets. There's very little in terms of overlap with our existing business. Very little. Okay, understood. Is there a meaningful delta in, you know, run rate margin between the drinking water and sinks and faucets side of Elkay? Say that again. Is there a meaningful difference in the margin, you know, run rate margin between the drinking water and the sinks and faucet side of the Elkay portfolio? There is. Drinking water is, you know, at a level that looks a little bit closer to the current Zurn fleet, and the remainder is below. I think that's where we're gonna, you know, look to, you know, leverage the Zurn Business System to think about 80/20 in a pretty serious way. Clearly, you know, from a manufacturing and brand and share perspective, you know, they have a great position. We think that, you know, there's an opportunity to take the margins of that part of the business up while continuing to grow the margins on the drinking water side and then leveraging, you know, the shared synergies, I'll say, between the current Zurn business and the Elkay business in things like, you know, the way we go to market, our rep networks, our functional areas, and all those different things. It's really sort of a threefold view of what we think we can do together. You know, something that we think when you take a giant step back, and as I said in my remarks, you know, if you were to apply all the synergies to the current run rate of 16%, you know, you get to sort of 23% versus the 25%-26% that we do today. It will all come, you know, in that form or fashion. Just from a does it pass the giggle test, I think the answer is it absolutely does. Got it. All makes sense. If I can sneak in one more, what should we expect in terms of reporting structure once the deal's closed? Yeah, I think we'll get more clarity on that as we get closer, but you know, that's something that we'll have to sort through. You know, I think that'll sort of be dictated and driven by you know, the integration planning that we go through between now and the close. Obviously, you know, we're gonna. If you think about sort of end of Q2, Q3, you know, a way to think about this is the run rate of everything really starts in 2023, which will only be a few months, you know, after we close. We'll sort all that out as we get closer. Okay. Understood. Thanks again. Our next question is from Nathan Jones with Baird. Your line is open. Thank you. Good morning, gentlemen. Morning. I'm wondering if you can give us maybe a little more color on the replacement cycle here. You're talking about 3-5-year replacement cycle, and I'm kinda trying to understand what exactly happens here. Is it that the entire unit gets replaced, or are there just portions of the units that are sort of experiencing wear and tear that need to be replaced? You mentioned there's a consumables opportunity here too. Can we maybe flesh that out a little bit more too? Sure. Maybe it's somewhat dependent on the application, you know. Clearly, these are high-use items, and there is a demand and wear and tear on them. Depending on, you know, really the choice of the building owner at times, the whole unit is simply replaced 'cause it may be functionally easier to do from a contractor perspective, or there are a significant amount of, you know, kits that get used to replace portions of an existing unit. It's a little bit of both, and it really comes down to the preference in an application and, you know, owner choice. In terms of the recurring revenue opportunity, you know, a very high percentage of these are filtered and chilled. When you think about, you know, the filtration opportunity here, I think it's sort of in its infancy. The, you know, the Elkay business does extraordinarily well today, but if you think about a more, you know, planful way to think about what's being filtered, how is it being consumed, and how do we understand where things are in their life cycle so that we can provide maybe visibility to when the event could take place that needs to be changed or frankly even, you know, drive towards more of a subscription opportunity around the filtration. That's something that, you know, I think we're gonna jointly flesh out, but together we believe that it is clearly, you know, an opportunity that is clearly in its infancy and something that can be much larger, over the next few years. Those kinds of revenues are captured by Elkay in terms of the filtration revenue right now, right? That's- That's right. Okay. As far as the installation of all this, is it Elkay's service team that does it, or are there third parties? How does that work? In terms of the bottle filler units themselves? Yeah, yeah. They get installed just like all the other plumbing and mechanical equipment in a non-residential building. It's the same installation channel, if you will, that exists today. Understood. I wanted to ask about the international component of the business. I was just going on the website, Elkay's website this morning, and it seems like they have exposure outside of the U.S. How are you thinking about that as an opportunity more broadly for Zurn? There's also a couple of other businesses in here that look interesting, the interior systems and commercial systems. I wonder if you can talk at all about that, and do you view those businesses as again, you know, adjacencies maybe for the broader Zurn business? The interiors business is being spun out to existing Elkay shareholders, so that's not part of the transaction. Just to be clear. Obviously, that'll be an ongoing business, you know, owned by current Elkay shareholders. Your first question was regarding international. Look, I think that the international piece looks a little bit like the Zurn international piece, where we're, I think, you know, more near and dear to North America, with some opportunities outside. Clearly one area that I think that together, particularly with the clean drinking water exposure, we can grow over time. I don't know that it'll ever be, you know, a massive part of the business, but clearly there's opportunity to grow, you know, as water becomes increasingly scarce, more important, and this solves, you know, both conservation and health concerns in a meaningful way. Just to be clear, the interiors business is going to stay with existing Elkay shareholders. Understood. Last question is sort of one on the supply chain. I think this is one area where you guys have really differentiated Zurn over time, and I'm curious as to what the early learnings there are about how Elkay is set up and what you might be able to bring to the table in that regard for that business. Well, look, I think we're gonna leave no stone unturned in terms of what we explore with respect to areas to save money, reduce lead times, and make us more competitive. I will tell you that Elkay is, I would say, more vertically integrated than Zurn in a couple areas, but we believe that the competitive advantage that they have there is really the scale and the efficiency that they established. Nothing's off the table with respect to, you know, how we ultimately manage our supply chain, and maybe it's, you know, a combination of adding more components or kitting or things like that, but I think they do a really good job today. There's opportunities in the way we distribute our products, warehousing, freight. There's a lot of supply chain opportunity here, but I wouldn't rule out that, you know, we keep a lot of the manufacturing that they do today because they are, you know, at scale, highly efficient, and we think there's opportunities to build on that and, you know, certain parts of the supply chain we think combined we can certainly do better. All right. Good luck, guys. We have no further questions at this time, and this will conclude today's conference call. Thank you for participating. You may now disconnect.