Good morning, and welcome to the Zurn Elkay Water Solutions Corporation Second Quarter 2022 Earnings Results Conference 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 Elkay Water Solutions. This call is being recorded and will be available for one week. The phone numbers for the replay can be found in the earnings release the company filed in the 8-K with the SEC yesterday, July 26. At this time, for opening remarks and introduction, I will turn the call over to Dave Pauli. Good morning, everyone, and thanks for joining 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 contained in the press release that we issued yesterday afternoon, as well as in our filings with the SEC. In addition, some comparisons will refer to non-GAAP measures. Our earnings release and SEC filings contain additional information about these non-GAAP measures, why we use them, and why we believe they are helpful to investors, and contain reconciliations to the corresponding GAAP information. Consistent with prior 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, and we encourage you to review the GAAP information in our earnings release and in our SEC filings. One final reminder, we closed the Elkay transaction on July first, so our second quarter results that we'll be walking through today do not include the impact from Elkay. We will start reporting a combined Zurn Elkay with our third quarter results. With that, I'll turn the call over to Todd Adams, Chairman and CEO of Zurn Elkay Water Solutions. Well, thanks, Dave. For everyone out there, just recognize Dave's a brand new dad three weeks ago. He and his wife, Laura, had a new son, Nolan. When you call in, be sure to congratulate him. He's burning both ends of the candle here, so thanks Dave for everything and congratulations. So well, good morning, everyone, and hopefully everyone had a chance to read through the earnings release last night, and we do certainly appreciate everyone taking the time to join the call this morning. As Dave said, the merger was completed on July 1, and we've been working really closely together the last few months in preparation of bringing these two businesses together. You know, the strategic logic around the transaction continues to be exceptional. Complementary North American water quality, safety, flow control, conservation, and hydration products and solutions, serving the same end markets and the same customers with both significant operational and commercial synergies. I'm really pleased where we are with respect to the integration, probably three-six months ahead of where I thought we'd be at this point because we've got a lot of important things already behind us in the few short weeks since we've closed. We've aligned the sales and marketing organizations into a single team just last week, and we've already made or decided upon essentially all of the third-party rep changes that we want as a single business. In doing so, we've established a single go-to-market, and we'll be leveraging our proven demand creation capability, which is super important. Doing it right away will help us build the kind of momentum we want heading into fiscal year 2023, as opposed to dealing with that much change to start our full fiscal year as a combined business that maybe we contemplated originally. We're also working through the change curve with the legacy Elkay team while teaching and fostering a common language we're going to use to run our business, the Zurn Elkay Business System. In many, many ways, this transaction reminds me of when the old Rexnord combined with the Zurn business. We found a business with tremendous people, a great culture, fantastic products that could be better and go faster than even the Zurn team at that time thought. The really important difference is we've got 15 more years of experience leveraging the business system to develop and deploy a strategy, significantly more talent across the board to execute, and an even clearer vision of what we can turn the combined business into. Because the only thing we're focused on is being the very best pure play water solutions business in the market, and one that's a monster in both the marketplace and produces superior financial results. In terms of the second quarter, which as Dave said, will be the last standalone quarter for the legacy Zurn business, in short, was really good. Sales growth of 17% with 15% core growth and segment margins of 25.1%. Free cash flow was $41 million and leverage dipped to 1.9. When you look ahead to the end of 2022 and to start fiscal year 2023, leverage will be just above 1x. We also announced an increase to the dividend last week to $0.07 a quarter, consistent with what we communicated back in February with the announcement of the Elkay transaction. Before I turn it over to Mark, I wanna touch on everyone's favorite topic of conversation the last 24 months: supply chain. Taken as a whole, we've managed the unprecedented environment extraordinarily well, really for some time, dating back to the onset of tariffs, through the pandemic disruption, and then the follow-on freight and logistics challenges that we've all dealt with. And doing all of that while growing at a double-digit top-line rate. Consistent with what we said the last three quarters, we're continuing to see our supply chain normalizing back to 2019 levels. Just for some context, from the time we order things to the time we receive, convert, and ship them, it used to take about 70-80 days. Obviously, just a proxy for the total, but think of it as our end-to-end supply chain loop. You have to back that into best-in-class availability and lead times with share gain-driven double-digit growth and some seasonality. Our supply chain ballooned to about 160-170 days over the last 12-18 months. Through a bunch of effort and strategic changes to our supply chain sourcing and SIOP processes, along with some 80/20 work we've been doing, what we're seeing today is that that's back in the 80-90 day range with further improvements through the fourth quarter and into fiscal year 2023. The punchline is that you should expect to see a sizable inventory reduction for us over the second half of the year, and also what looks like a more favorable commodity and freight cost environment as we start fiscal year 2023. With that, Mark's gonna take you through some financial details, and I'll come back and cover a few details on the integration. Thanks, Todd. Let's turn to slide number four. On our year-over-year basis, our second quarter sales increased 17% to $284 million. The November 2021 Wade Drains acquisition accounted for 2% of the year-over-year growth, and the core business drove 15% on growth, with generally balanced core sales growth across our Water Safety & Control, Hygienic & Environmental, and flow control product categories. With respect to profitability, our adjusted EBITDA, excluding corporate costs, totaled $71 million in the quarter, and our adjusted EBITDA margin was just over the high end of our expectations for the quarter at 25.1% and improved 60 basis points sequentially from our first quarter of 2022. On a year-over-year basis, the benefits of the sales growth, inclusive of price realization and our productivity actions, was partially offset by the increase in material and transportation costs, as well as our investments in our growth and supply chain initiatives. With respect to our corporate costs, they totaled $7 million in the quarter as we had expected, and they should remain at that approximate level per quarter for the balance of the year. Please turn to slide number 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 in line with our expectations at 1.9x pro forma for the adjusted annual corporate expense run rate I just discussed. With the inclusion of Elkay, our leverage will continue to decline, and by the end of the third quarter, will be at a level that will trigger a 25 basis point reduction in our base term loan rates. As we look to the end of the year, we continue to anticipate ending the year in the low 1x range. With that, I'll turn the call back to Todd to cover some highlights on the Zurn Elkay combination. Thanks, Mark. I think I'm on slide six. On this page, this is what constitutes the new Zurn Elkay in terms of the sectors of the water solutions market we serve. In drinking water, the legacy Elkay brand is the gold standard for providing clean drinking water in public and private spaces. In terms of relative market share and specification rates, nobody comes close. The fundamental growth drivers in drinking water are really twofold, access to clean filtered drinking water, coupled with the sustainability aspect of eliminating plastic bottles into landfills, where we save billions of water bottles annually. The second growth driver is the retrofit/replace market of the traditional drinking fountain. With over 8 million of these installed and only about 1.4 million bottle fillers installed, we see significant runway as we drive conversion in key institutional end markets while building an even larger installed base. We also see path to add on and build the filtration aspect of the product and category, leveraging our connected capabilities for seamless monitoring and also signaling the replacement event. In Water Safety & Control, where we've seen significant share gains in the last several years, we provide backflow prevention, pressure relief valves, irrigation valves, as well as all the valves required in a quench fire protection system. Superior flow curves, ease of installation, and by far the lowest total cost of ownership puts us in the driver's seat from an industry perspective trend as labor savings and availability become huge factors in decisions that customers make. The amount of patented third-party approved innovation in this category is critical, and we believe that we have the number one single brand in the backflow market. The hygienic and environmental sector is essentially everything required to create a safe, hygienic space inside of a commercial restroom, along with the connected capabilities to improve maintenance effectiveness, eliminate outages and damage to buildings done in flood or leak events. Touchless sensor products, sinks for restrooms, labs, healthcare facilities, and food processing, along with partitions and hand dryers. In this category, we're leveraging our unparalleled solution set under the BrightShield umbrella to provide real value to high-traffic institutional and commercial customers who are migrating their environments to meet the WELL v2 standard. Finally, in flow systems, this is where we have the most comprehensive product portfolio in the industry, essentially providing a solution everywhere water needs to be controlled and moved efficiently and effectively throughout a building. Whether that's a roof, floor, runway, highway, or even internal to the building, the Zurn spec rate is exceptional, and we've compounded that with also owning the Wade brand of drainage products. At a high level, 55% of the business is new construction and 45% a combination of retrofit/replace along with repair parts as that happen as part of a regular MRO event. This is true across essentially every core category, with the exception of flow system, which is primarily new construction. From an end market perspective, we're over 70% institutional and commercial. Within that 70%, our largest single exposures are within the top end markets of healthcare and education, two end markets that continue to perform nicely and where we continue to expect growth. Elkay only increases our exposure to these two end markets. The Dodge Momentum Index is an indicator of the strength of our end markets. As of June, the Momentum Index was at a 14-year high, indicating that there are a lot of economic pressures and uncertainties right now, but the non-residential construction market continues to remain strong. Our residential exposure is primarily on the LK side, and this is a category that we're still digging into and evaluating. It's my sense that as we work through the integration, you'll see us leverage our 80/20 methodology to do a little paring or trimming in areas where we don't see the opportunity to create a competitive advantage. We're delighted to have roughly 98% of our revenues in North America, a large mobile population, highly specified with code variations across every city, town, and municipality. Over 95% of our revenues come from either a number one or number two market share position. What I hope you take away from this is we built a significant, sustainable competitive advantage in a served market that's over $9 billion today. We see opportunities for growth within both our served market as well as room to continue to grow our served market as we enter into new categories. If you could move ahead just one page to slide seven. Given the highly complementary nature of the combination, products all sold to the same customer, same end markets with the same go-to-market approach, we thought there could be a significant opportunity over time to leverage the Zurn Elkay Business System to drive a broad amount of synergies. Initially targeted at $50 million across SG&A, manufacturing, and supply chain, and finally, 80/20. As we've developed our integration plans and phasing, we've placed a high priority on aligning the sales and marketing organization so that we can quickly present ourselves as one place to the marketplace and to our customers. We'll also look to combine our functional areas where it makes sense, leveraging one corporate structure and team, and then to begin to work on our purchasing, logistics, distribution, and supply chain work streams to capture the synergies of nearly a $1.7 billion business today with growth into the future. I talked earlier about 80/20, but the opportunity here is significant. The discipline of segmenting products and customers, simplifying the business is something that is new to the legacy Elkay business. As we found in Zurn, this takes a little time, but once completed and executed, the benefits will be dramatic and will allow us to focus on the critical few things and eliminate all the waste and the complexity that can build up over decades. I think the way to think about the synergy of the combination at this point is that we're highly confident in the $50 million we've outlined, and we've got a growing funnel of opportunities that we'll identify, develop, communicate, and execute over time. If you could move to page eight. Having a well-established approach to how we run our business has been a true game changer for us. For us, it's a common language and approach to the key pillars of people, plan, process, and performance that engages, prioritize, and aligns everyone around the most important things with clearly defined resources and accountability at the point of impact. Our strategy deployment process deploys our long-term strategy into action plans, KPIs, and work that happens every day with complete transparency, and we reinforce that by paying for performance. As we become a pure-play water business and now an even larger pure-play water business, we recognized and embraced our role in water stewardship, sustainability, and helping the environment. We believe in it strongly enough to actually include it, purpose, as one of the core principles of ZEBS. ESG isn't something we just talk about or report on once a year. It's integrated into the way we think about and develop our long-term strategies, how we engage our associates in understanding what we do matters. We save water, provide clean drinking water, and we realize that we have an obligation to play a role in tackling some of the world's more pressing water challenges. What's also important is that purpose really matters to our people. It aligns everyone around the same goals. Everyone in Zurn Elkay is on an annual incentive plan. Everyone at Zurn Elkay has equity in the company. Everyone gets 20 hours of paid volunteerism. It helps us attract, retain, develop, and promote highly engaged workforce, and that's really what makes the difference. Our associates have access to our WAVES Social Impact Fund, where we cultivate, fund, and deploy solutions that advance our efforts around the environment and while also having a meaningful, positive impact in the areas we live and work. The last one for me is on page nine. We strongly believe that part of creating a high-performing business and culture is clarity. This page takes what we're trying to accomplish really down just to one page. First is focus. Pure play water in categories where we can build a sustainable competitive advantage, and we work every day to build a bigger and bigger moat around our business. Next is the how and what. Leveraging ZEBS to drive growth, margins, and cash flow, both within our core business as well as with smart acquisitions. Finally, driving measured performance for our customers, shareholders, associates, and the environment. With that, I'll turn it over to Mark for the outlook. Thanks, Todd. Please turn to slide 10, and I'll cover some of the highlights of our outlook for the third quarter. For the third quarter of 2022, we are projecting Zurn sales to increase year-over-year by a high teens percentage, and we anticipate Elkay-related sales to be between $145 million and $155 million. With respect to margins, we expect our Zurn Elkay adjusted EBITDA margin, excluding corporate costs, to be between 21% and 22% in the quarter, which results in a 100-200 basis point expansion year-over-year when you pro forma the third quarter of 2021 for Elkay. We anticipate corporate costs in terms of adjusted EBITDA to be approximately $7 million in the quarter. Before we open the call for questions, a few comments on our interest expense, stock comp expense, depreciation and amortization, tax rate, and diluted shares outstanding for the September quarter that will include the preliminary estimated impact of purchase accounting as well as the new shares issued with the merger. Please note that depreciation and amortization will most likely change as we finalize the purchase accounting over the coming quarters, but as of now, these are our best estimates. We do not expect a material deviation. We anticipate interest expense to be approximately $8 million. Our non-cash stock comp expense should be about $8 million. Depreciation and amortization will come in around $22 million, which consists of approximately $8 million of depreciation and approximately $14 million of amortization. Our tax rate on adjusted pre-tax earnings will be between 27% and 28%. Diluted shares outstanding will be approximately $179.5 million - $180.5 million in the quarter. Before we turn it over to questions, I'll just make a few final comments. Number one, I'm sure there are a lot of questions with respect to, what's Elkay, what's Zurn. I'll tell you, the businesses are coming together incredibly fast and, you know. I think we're gonna stick with our convention of guiding one quarter forward with one segment. I'll try to give you a little color in terms of how to think about both the third quarter and the full year. With respect to the third quarter, specifically around the Elkay numbers. Number one, I think we're trying to be a bit conservative. You know, this is a new acquisition. It's significant. There is a lot of change in moving parts, as I talked about in my earlier comments with respect to both, the sales organization, as well as all of our third-party reps. Some color there, you know, really would be we had roughly 40 reps between the two of us. We've migrated that down to about 30. Half of those there was really no change, where we actually shared third-party representation. Of the remaining half, you know, three-quarters of that were Elkay reps that are now becoming Zurn Elkay reps, and the remaining quarter a combination of, you know, Zurn reps or Elkay reps that are taking on the Zurn line and some changes. A lot of moving parts. The other thing to contemplate and consider is we're also getting after 80/20 right away. This number obviously assumes some level of walkaway revenue in it, and so I think it's probably a little bit inaccurate to think about this as the true underlying run rate. Nonetheless, you know, we think if we can make the changes we've made around the sales and marketing organization, get that moving at a nice clip, make the rep changes as well as get some of the 80/20 done, we think, you know, the third quarter is in a great spot and puts us on the right trajectory heading into 2023. With respect to the full year for Elkay, which we'll never report, we'll report at the second half. Fundamentally, the way to think about the first half of the year was that it was a little bit behind maybe what we would have hoped for. You know, I think there's a handful of reasons. Number one I think the legacy Elkay business was probably just a little bit behind implementing and holding the pricing that was necessary in the market given the inflationary environment. Number two, I think the team, both internally, along with all the third-party reps that, you know, were going through a bit of uncertainty, were just a touch distracted. And finally, as we dig into it, you know, post-pandemic and throughout 2021, you know, they saw a combination of demand spikes and some capacity constraints. Lead times extended, the backlog grew. When the backlog grows, people place more orders. The team did everything they could to bring that backlog down and in line to where it has been historically and sits today. As a function of that, you know, the order rates really towards the end of 2021 and the first half of 2022 are just a touch behind. All that being said, you know, the Elkay business is growing. When you adjust the backlog reduction, last year relative to the second half, we are seeing the double-digit growth that we thought. From an EBITDA perspective, you know, the run rate in the second half looks to be in the range of 85-90. I'll also remind everyone that, you know, as we think about the synergies in 2023 and 2024, you know, we've got a growing funnel of opportunity there. So you know, before we turn it over to your questions, I wanted to provide, you know, that kind of color. With that, we will take your questions. Thank you. If you'd like to ask a question, press star one on your telephone keypad. To withdraw your question, press star one again. Your first question comes from Bryan Blair from Oppenheimer. Please go ahead. Thank you. Good morning, guys. Morning, Bryan. Morning, Bryan. I'm gonna start with your core growth and dig in a little bit there. Came in, you know, ahead of our expectations in the second quarter. You have, you know, obviously strong momentum into Q3. Are there any end markets or product lines that are, you know, really outperforming the rest of the portfolio or exposures now? And how should we think about volume versus price in your high teens guide for Q3? Yeah, I'll let Mark touch on the numbers, but fundamentally it's very consistent across really all the sectors that we serve. I wouldn't call one an outlier. I mean, we talked about really strong order rates in Hygienic & Environmental last quarter. You know, that continues. Flow systems is very good, as is Water Safety & Control. So I wouldn't say anything is an outlier relative to the 15% core sort of growth. Mark, you can cover the- Yeah. Bryan, on the price element of it, I think, you know, we've been consistent in saying we're gonna be delivering, you know, high single-digit price in the year and back half of the year. That has not changed. That's consistent with what we've expected. I think, you know, some of the incremental growth, we've done some things strategically. But it looks like some of our initiatives, I think we're just feel like we're doing a little bit better on some of the share capture than you know what we were anticipating in the first half of the year. I'd say in the back half, the market probably gives a touch better in the back half as well. I think the combination of those was driving some better projected top line growth in the third quarter from what we may have talked about in the first half of the year. Okay. Appreciate the detail there. Todd, you mentioned that Elkay growth has been a little behind what the team has had hoped coming into the close of the deal. Can you parse out growth on the drinking water side versus sinks and faucets? Well, I think the way to think about it is, you know, the elements of maybe some of the not at the same level of growth is really split between both. You know, I think the price and holding the price in an inflationary environment, that really applied to both categories. The distraction risk really with both, you know, the internal team as well as some of the third-party reps, that applies to both. And obviously the lead time is probably a little bit more weighted towards the drinking water side of things. So I wouldn't call it a meaningful difference, Bryan, but you know, I would say the lead time and then the slight air pocket from an orders perspective was really more on the drinking water side. Okay. Understood. I understand that 2023, you know, guidance is not out there yet, but Yeah You know, 2023 recession fears have gripped the market for most of this year. Given current visibility, Zurn Elkay's, you know, end market profile, product mix, are you seeing anything, you know, specific to your business right now that concerns you about a meaningful pullback going into next year? No, you know, obviously we're not guiding for 2023, and we're really not even guiding for the fourth quarter at this point. We've got some road to travel before we get there. But I do think, you know, number one, I think our proven demand creation opportunities in all sorts of markets, you know, I think gives us a ton of confidence. I don't know what the number of quarters is at this point, Dave, like 47 or 48. 48. Yeah. It's got 48 quarters. In the last 48 quarters, Zurn has had one quarter where we were down year-over-year. I think that gives us some confidence that we're gonna continue to grow. We think adding Elkay into our demand creation, you know, process and system creates a ton of upside and leverage heading into 2023. And I would just say, you know, you can find your way to a double-digit growth rate without much market growth. We've got some carryover price. We've got some share gain initiatives, and if the market and the forward look is, you know, just a touch positive, I think we've got, you know, the opportunity to do another double-digit year. And we've got several sales synergies to really work through as we head into 2023. We're obviously cautious and watching it and monitoring it, but you know, in my opening comments, we talked about you know, the forward look and I think people are still very busy. I think there's a lot of work that's gonna get done into 2023. Still early, but I think that's the way we're thinking about it. All helpful color. Thanks again, guys. Your next question comes from Nathan Jones from Stifel. Please go ahead. Good morning, everyone. Good morning. Good morning. I'm gonna start off with some questions on Elkay. Can I just get a clarification there, Todd, did you say the EBITDA run rate in the second half looks to be in the $80-$90 range? No, I said 85-90. $85-$90. Okay. Elkay here when the deal was announced was $710, and we're a little bit behind that. Do you feel like these are air pockets where you're gonna catch up back towards that run rate? Is, you know, $85-$90 on $600 million of revenue or something like that, the right base for us to look at from 2022 to forecast Elkay going into 2023? Yeah, I think that's entirely reasonable, Nathan. You know, I'll just say, you know, when we announced the deal, we probably sort of rounded the number to $700. Some people took the $700 and moved it to $750. By the time we actually aligned around a forecast, that was probably still early in the year, we were at $665. But I think, you know, if you were to use that kind of range, I think you're in a decent jumping off point to think about 2023. With the only. The only unknown at this point would be, you know, what do we see as synergy upside from the $50 that we've sort of penciled in today? We'll think through what that might look like over the next several months, but that's probably a good place to start. Probably a bit unfair to ask about synergies above the 50, but I did wanna ask about just philosophically your thoughts on revenue synergies here. It would seem that, you know, having more products to market to the same customers as one Zurn Elkay would give you an advantage and that there should be revenue synergies for the business here. Can you just talk about what kinds of synergy opportunities on the revenue side you think there will be? How long those things, you know, kind of take to kick in? We haven't baked any yet, and I would encourage you maybe not to bake them in yet. But I do think, you know, the overall pull-through bundle opportunity, you know, there's only upside. You know, when you think about the prior way, you know, we went to market and they went to market, you could have a scenario where, you know, a third-party rep in a relationship with an end user or a contractor or an engineer would have had Elkay and then another brand and another brand. Now we have the opportunity to, you know, pull through really all the other product categories depending, you know, where we have stronger relationships. So we think the alignment gives us a real leg up with building owners, engineers, architects, mechanical contractors, as well as with the third-party reps that we leverage and wholesalers. So I think that those are gonna be pretty evident, and they will happen. You know, I think we'll have a view on how to dimensionalize that a little bit. Suffice it to say, there's only upside from a revenue synergies, you know, as we head into 2023 and 2024. Just one more on inventory and cash flow. Mark, any color on kind of where you think inventory or how much inventory is likely to come down and what that contribution to cash flow is gonna be in the second half of the year? Yeah. I think, you know, when you look at the back half of the year, as we've talked about, we put a conscious effort in place to build our inventories up in the first half to ensure availability, and that has worked well for us. Now we're in a great spot, and I think in the back half we're looking at, you know, I'd call it ballpark, you know, $40 million ± type inventory reduction within our core business, you know, to drive the cash flow we expected for the balance of the year. Great. Thanks for taking my questions. Thanks, Nathan. Your next question comes from Jeff Hammond from KeyBanc. Please go ahead. Hey, good morning, guys. Morning, Jeff. Morning, Jeff. Just back finally on the kind of the reset on Elkay from the $665 to the $600, you know, kind of annual run rate. Is that, I mean, should we think about that as largely this water fountain air pocket? You know, 'cause you, I'm just trying to get a better sense of, you know, how much is that issue versus, you know, real demand weakness versus 80/20, you know, some of the distractions. Well, I mean, Jeff, maybe the way to think about it is the following. You know, if you think about $665 to call it $600, you know, a good portion of that variance is really first half related. The difference would be really some of the 80/20 actions that we've got dialed in in the second half that would not have been in the $665. And so you asked about, you know, the fundamental growth. If we adjust the second half last year for some of the backlog reduction, particularly in drinking water, we're seeing clear double-digit growth in drinking water in the second half. If you look at the core Zurn business, which are similar products, same customers, same end markets, we're growing in the high teens. So from our standpoint, this is really, you know, a dynamic that happens because we were a little bit behind on price in the first half. There's a whole bunch of moving parts with respect to the sales and rep organization. We've got this backlog drawdown in the second half of last year, and lead times are back to where they need to be. And from my standpoint, yes, we would've liked it to run rate a little bit higher, but the second half is sort of, I would say, very consistent with what we would've expected and will look a lot more Zurn-like in terms of its growth performance going forward after we adjust for this sort of correction that happened, you know, really before we owned the business. Okay. You talked about them being behind on price. What's their process around pricing, and you know, have they announced you know kind of additional pricing or have you guys announced additional pricing actions here to kind of catch some of that up? Yeah. I mean, you know, it's the dynamic of extending lead times and a big backlog doesn't put you in the greatest position to implement significant price. I think that, you know, Elkay was a little bit more conservative, making sure that they were reducing backlog, pulling lead times in, and maybe a little less focused on capturing all the price that they probably deserved. As that backlog has come down and lead times are back to, you know, best-in-class levels, you know, we feel the timing is right for price, and we've got that in, and that's in the second half. And then, you know, from a process standpoint, you know, we've got price and price management aligned around really one team in that sales and marketing organization that we've snapped together. So I don't think we'll have, you know, any disparities or differences in the way we go to market and how we price things really effective, you know, today. So I think that's sort of a behind us sort of issue. Okay, great. Just last one. You know, a lot of good color on kind of supply chain. I'm just wondering kind of, if you see any temporary risk around kind of China restart and, you know, kind of the supply chain getting mucked up at all around that. And just, you know, on the core, how you think about the margin trajectory in the second half versus kind of how you were thinking about it, you know, 90 days ago. You know, I think from a supply chain standpoint, there's always the potential for things to happen. from what's in our control, I think my comments, you know, would support our belief that we're in a really good shape. I mean, if I look at what we've got, you know, sort of in flight or in process for the fourth quarter, I don't think we've ever had, you know, more visibility to how we deliver the second half with the supply chain we have. that feels really good. I think in terms of the margin progression, I think it's very much on track with what we talked about 90 days ago. Obviously, as we merge these businesses together and blend everything from, you know, corporate functions to sales and marketing to reps and rebates and everything else, you know, we're already seeing 100- 200 basis point pro forma expansion in the third quarter. I would say that really wouldn't have much of any synergy in it. As we think about the second half, you know, beginning with the third quarter into the fourth quarter and then the trajectory into 2023, I think we're very much confident that, you know, price is holding. There's a likelihood that commodities and freight costs are lower into next year. So you know, I think from a margin perspective, it's shaping up, you know. I would say on track to maybe a little bit better than maybe what we would've thought maybe. Setting up a strong 2023 90 days ago. Yeah. Setting up a really strong 2023. Yeah. Okay. Thanks, guys. Thanks. Thanks, Jeff. Your next question comes from Mike Halloran from Baird. Please go ahead. Hey, morning everyone. Hey, Mike. First on the balance sheet side, just obviously Elkay now closed. You guys got a lot of heavy lifting there. Any restrictions from your perspective on going out and seeing what that pipeline can bring in and maybe some thoughts on how that pipeline looks right now? Mike, you know, we do have a terrific balance sheet. You know, we continually cultivate things that fit into the, you know, pure-play water solutions, sort of, mold. There aren't any restrictions on really what we can or can't do. I think our view has always been, you know, invest the time, stay away from, you know, auction processes and cultivate really good ideas that we can, you know, leverage. None of that's changed. I think the pipeline is, I would say very active. But I also think we have the opportunity to be patient. You know, our priorities are, you know, deliver a terrific second half, generate a ton of cash flow, position ourselves to capture the synergy savings into 2023 and beyond. Hopefully that's a little bit more. Also we do have the management capacity to do more. So I think from our standpoint, nothing has changed. I would say if anything, the richness of the conversations, you know, really over the past year plus is far better than it had been. So we're still in the game. Makes sense. On the synergy side there, obviously in your prepared remarks you talked about where the focus has been, you know, sales and marketing, rep network, things like that. When you think about the core synergies, the sourcing and the other three pieces you kind of laid out in that $50 million, have you started work on that or is that something that's still on the come? How are you managing kind of that cumulative process from a cadencing perspective? Yeah. We've absolutely started it. You know, we've mapped what we're planning to do, how we're gonna do it, when we're gonna do it. And you know, some of those work streams are already in flight. It's not we're gonna pick it up on 1/1/2023. I would say, you know, I'm optimistic that, you know, now that we've got a lot of the sales and marketing and corporate stuff behind us, you know, there's an opportunity to perhaps accelerate some of that in the back and get more done in the back half than maybe we would've contemplated. It's not like we're three-six months ahead and we're gonna take a break. There's a reasonable chance that we continue to pull stuff forward. Thanks for that. Appreciate it. Thanks, Mike. Thanks, Mike. Your next question comes from Joe Ritchie from Goldman Sachs. Please go ahead. Thanks. This is Vivek Srivastava on for Joe Ritchie. My first question is on the education vertical. This is a pretty big end market for you guys. Can you provide an update on the conversations you're having within this vertical with your customers? And especially for the Elkay business, are you seeing some faster sales conversions, especially given like there's conversion going on from fountains to bottle filling stations and schools have a pretty significant stimulus funding right now? Well, I think on the you know, an education vertical is, you know, is a big vertical for us. I think the combination of this business, these businesses, that was one of the big pluses for us when you think about, you know, the bottle filling stations combined with the what we built out in BrightShield, a big opportunity going forward. I would say the first part of your question, the richness of the conversations. They are only getting stronger. That's, you know, one of the reasons why we've, as Todd mentioned earlier, we've really pushed hard to get the commercial front end integrated as soon as possible to get alignment. 'Cause one of our key growth initiatives and have a team built collectively across the organization is around the education vertical to drive that opportunity. So I think, for us, we feel really good about it. We're bullish on it. We haven't changed our stance. I think over time, when we think about the sales synergies of the organization, that's a huge piece of the puzzle for us. Having that team aligned early, having the reps aligned early, getting people marching toward that strategic initiative sooner rather than later only benefits us as we go into 2023 and into 2024. Thanks. That's helpful. Just one more on free cash flow. On the Elkay free cash flow side, as you have had more time to spend with the Elkay team, can you share some of the opportunities which are there within the Elkay business in terms of free cash flow improvement and any color you can provide on the timeline of driving those improvements? Yeah. A couple things from a cash flow standpoint. I think, you know, over time, we will manage, I think, the working capital a bit tighter than how the business managed it. I think there's definitely going to be working capital opportunity more the later part of this year and into 2023. It takes a little bit of time, but definitely an opportunity. The other piece of the puzzle is CapEx. You know, they are more vertically integrated than us, so obviously their CapEx run rate, so it is gonna be a bit higher. As we think through some of the things we're gonna do around 80/20, some of the simplification and just a bit of a different mindset around capital, we think there's an opportunity to reduce the capital intensity of the business going forward. Those would be the two areas as we look to 2023 and beyond, where we see the opportunity to improve cash flow run rate in the business where it may have been for the past several years. Great. Thank you. Again, if you'd like to ask a question, press star one on the telephone keypad. Your next question comes from Brett Linzey from Mizuho. Please go ahead. Hey, good morning, everybody. Morning, Brett. Hey, just wanted to come back to a couple of your comments, Todd, on the more favorable freight and cost environment. Yeah. Let's just assume that these supply chain issues and inflation, you know, issues begin to resolve in some of the areas you talked about. How are you thinking about those tailwinds into 2023? I think you mentioned 100-200 basis points in the second half. Is it, you know, fair to think about a similar, you know, magnitude of tailwind as we're looking into 2023 here too? Well, we're not, I wouldn't spend them yet, Brett, but yeah, I think that that's totally reasonable. I mean, if you look at the cost of a container, if you look at some of the input commodities that they're significant portions of our products, they're all down considerably over the last six months. We'll see if that holds or not. You know, I think my view, our view would be, you know, container costs are gonna, you know, sort of moderate to levels that are where they are today or perhaps a little bit lower. I think commodities for the most part, you know, have been really volatile. If they stay where they are, you know, there's a sizable upside. So I think don't spend it yet, but I think that there's a good chance that as we get through the fall here and in the next year, I think it's highly likely that we're gonna see a more favorable, you know, cost environment than what we've seen certainly in the last two years. Okay. Great. Yeah. Thanks. Just to follow up on that supply chain, I mean, you guys have done a lot of work. Could you just level set us on some of your regional concentration, you know, China versus Mexico, Indonesia, and you know, with the Elkay close, I mean, are you know, thinking that might continue to evolve or, you know, how are you running that playbook? I mean, the supply chain will absolutely continue to evolve. I think we're gonna end up, you know, when you look at it in aggregate, China will be less than 40%. And so you know, that was upwards of 75%, five years ago. I think the migration to regions and some of which you talked about, some of which you didn't, you know, will continue really over the second half of this year as well as into 2023. So you know, our view is then how do we create the lowest total cost supply chain with the most amount of flexibility? I think the work that our teams have done, and now that, you know, we're combined with Elkay, will continue to evolve and, you know, really pleased with where we sit today and the work we've done to navigate through what's been a wild three or four years. It feels like it's much more stable, resilient, and de-risked relative to where we were a while ago. Yeah. That's great. Just one clarification on the synergies. I imagine there'll be cost to achieve. How are you thinking about, you know, the reporting mechanics of that? Are you gonna call those out as non-recurring and exclude them from results? Or are those gonna be embedded? If you could just size them too, that'd be great. Yeah. The cost to achieve will primarily be spiked out. So a lot of it, you know, as you can appreciate when it's tied to headcount changes or, you know, cost if you're moving facilities and whatnot, the majority of it will be spiked out. There'll be some that will just be inherent in the run rate, but I think I'd call that part immaterial. Like, the material component of it, we will be calling out so people have visibility to the numbers without that baked into it. Got it. All right. Thanks for the color. Thanks, Brett. There are no further questions at this time. I will turn the call back over to the presenters for closing remarks. Thanks everyone for joining us on the call today. We appreciate your interest in Zurn Elkay Water Solutions, and we look forward to providing our next update when we announce our September quarter results in late October. Have a good day, everyone. This concludes today's conference call. You may now disconnect.