Good morning, and welcome to the Zurn Elkay Water Solutions Corporation third 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 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 an 8-K with the SEC yesterday, October thirty-first. At this time, for opening remarks and introduction, I'll turn it over to Dave Pauli. Good morning, everyone. 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 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're helpful to investors, and contain reconciliations to the corresponding GAAP information. Consistent with prior quarters, we will speak to certain non-GAAP metrics as we feel they provide a better understanding of our operating results. These measures are not a substitute for GAAP, and we encourage you to review the GAAP information in our earnings release and in our SEC filings. With that, I'll turn the call over to Todd Adams, Chairman and CEO of Zurn Elkay. Thanks, Dave, and good morning, everyone. Thanks for taking the time to join us this morning. To jump right to it, we had a really strong Q3 operating performance. Margins improved to 24.1%, up 410 basis points over the prior year. We also delivered record free cash flow in the quarter of almost $100 million, bought back another 445,000 shares, and increased our dividend 14%. As we highlighted in our earnings release, one year into the Elkay--Zurn Elkay combination, we're really hitting our stride in terms of the benefits from the transaction, both from a synergy savings as well as capturing the enormous secular growth opportunity we see in clean, filtered drinking water. Over the next 12 months, we will be introducing more new products in the drinking water category than at any point since Elkay developed the category just over a decade ago. This is both on the filler side as well as the filtration side. All this is happening as we see continued positive momentum on the legislative front, as well as traction from the significant internal investments we've made to drive growth, to grow the overall category. One year in, we've accelerated the growth rate of drinking water and now expect mid-teens organic growth for drinking water in 2023. In terms of the underlying market, while we grew in line with our Q3 guidance, we were expecting a little better internally after a pretty good start to July and August, which was offset by a so-so September. I'll dive into what we're seeing from a market perspective a little bit later, but as we look at how the years unfolded, it's not hard to see from all the external data, as well as our internal data, that the market has more uncertainty in it than any point in over the last year. What I'll also cover is we don't believe that this is some sort of apocalyptic issue for 2024 and 2025. Now I'll turn it over to Mark. Thanks, Todd. Please turn to slide 4. Our third quarter sales were $398 million, and on a pro forma basis, increased 100 basis points year-over-year. As we discussed during our last quarter, our year-over-year third quarter core sales growth was impacted by the timing of orders and shipments in the prior year as we were working down an elevated backlog in the third quarter of 2022. Breaking down our pro forma core sales growth percentage a bit, a mid-single-digit increase in core sales growth to our non-residential end markets was partially offset by a mid-teens decline in sales growth to our residential end market. With respect to orders, our pro forma orders increased high single digits year-over-year. Non-residential order growth was above the fleet average, with balanced growth across drinking water, flow control, water safety and control, and hygienic and environmental, while year-over-year order growth in our residential end market was below the fleet average. Turning to profitability, our third quarter Adjusted EBITDA increased 15% from the prior year third quarter to $96 million, and our Adjusted EBITDA margin expanded 410 basis points year-over-year to 24.1% in the quarter. Looking at our margins sequentially, we stepped up 250 basis points from the second quarter of 2023. As we have been discussing all year, the benefits of our price realization and our productivity initiatives, inclusive of the cost synergies that are a little over $6 million each quarter in calendar year 2023, fully read through in the third quarter, with the impact of the sell-through of higher cost inventory completely behind us. 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 1.2 times, inclusive of deploying $100 million of cash to repurchase common stock during the first nine months of 2023. In early October, we paid down $60 million of our term loan, eliminating all future required principal payments and generating approximately $4.5 million of annual interest expense savings going forward. Given the balance sheet position and our strong free cash flow generation, we have good capital allocation optionality going forward. I'll turn the call back to Todd. Thanks, Mark, and I'm on page six. Our ability to deliver tangible results that have an impact on the environment continues to compound as we execute our fundamental business strategy, which happens to have amazing symmetry with what our customers' goals are: to do the right thing for the environment as well as human health and safety. Benefits like 14 billion single-use plastic water bottles avoided through the use of our Elkay bottle fillers. This is up 8% over the past year and will easily be up double digits next year, as well as 23 billion gallons of water saved through our Zurn products, like low-flow flushers, fixtures, and sensors. The rating agencies around sustainability have also taken notice of the meaningful improvements, and it shows in their most recent ratings of our overall profile. Sustainalytics ranks Zurn Elkay sustainability program in the top 3% of our industry and the top 7% of the more than 15,000 companies they rank each year. With MSCI, we have a double A rating, which puts us in the top 10% of our industry. And lastly, S&P Global has rated us in the top 8% of our industry. When you step back from it, the one thing to take away from all of this is that our core, or in this case, 84% of our total revenues, is that we really attack the climate risk of water scarcity. Whether that's low water consumption valves or providing point-of-use filtered drinking water, our products protect, conserve, and manage the water we all depend on. The world faces an array of climate and water-related crises, including flooding and drought events driven and exacerbated by climate change, water pollution, and its impact on biodiversity and human health, and aging infrastructure that can contaminate water supplies. Our continued investment in engineering and R&D allows us to focus on addressing these crises, which are central to sustainability and an essential part of how we drive our business forward. I'll move to page seven. We're seeing serious momentum on the filtration side of our business as our installed base of filtered-enabled drinking water dispensers continues to grow as customers shift more and more to filtered solutions, combined with an increase in filter replacement rates, as awareness around the dangers of lead and other harmful contaminants in drinking water continues to build, coupled with legislation and regulatory requirements that are beginning to be implemented. Not only are we seeing legislation pass in Michigan related to Filter First, we're launching new products that continue to increase the contaminants our filters are certified to reduce, ultimately protecting students, patients, and the overall public against ingesting more potentially harmful contaminants by providing continuous, safe, clean drinking water with our filtration solutions. Today, we're announcing the launch of our very first PFAS filter on the market that's integrated into bottle fillers and drinking water dispensers. This filter will continue to do what our filters do today in filtering out lead and other contaminants, but now adds the two most prevalent PFAS contaminants to what it effectively filters. PFAS consumption has been linked to a number of serious health concerns, which makes effective filtration from drinking water a big deal and something we're excited about to be the first to market in offering our customers and users. Our solution utilizes highly engineered activated carbon, which absorbs these contaminants. This technology is the most water-efficient solution in effectively filtering PFAS and is done in Elkay's proprietary filter footprint, which is the smallest footprint on the market. To give you some sense of how difficult it is to launch a filter like this, these filters have to reduce the PFAS chemicals down to a concentration that is 250 times less than with lead. We expect regulations will continue to evolve as the public learns more about PFAS, but by being first in providing effective and certified filtration against these two most prevalent PFAS chemicals, we believe we've provided a great upgrade to schools, universities, and even homes in our never-ending pursuit to provide, provide the safest and cleanest drinking water for everyone. The Elkay, the Elkay filtration line of products is truly market-leading, with the longest lasting lead filter on the market, certified to 6,000 gallons, along with the most comprehensive contaminants claims on the market. The beauty of our filtration business is that it will continue to compound well into the future as we continue to build the installed base while capturing an increasing level of replacement. I'll move on to page 8. There's been a lot of discussion throughout the year related to the non-residential construction market and its imminent demise. I'm joking a bit, but I think it's important to understand a little bit of how we look at it in total beyond the headline numbers. On this chart, on the upper left, is actual and projected institutional starts on a square footage basis. Below is the same for commercial starts. A couple of things to point out. Roughly 50% of our total business is leveraged to the institutional end markets and verticals, specifically education and healthcare. Generally, institutional starts average somewhere in the neighborhood of 80-90 million sq ft per quarter over the past five years. Another thing to point out is that generally speaking, this segment hasn't been particularly interest rate sensitive, at least historically. What's been grabbing a lot of the headlines in the commercial part of non-residential construction, which by order of magnitude from a square footage perspective, is 3-4 times bigger than institutional, but represents only about 30% of our business. What's happening here is the massive build-out of warehouse space and some automotive expansions is creating large downdrafts in the overall actual and projected starts on a square footage basis throughout 2023 and into 2024. As an aside, our best estimate is that warehouse represents less than 5% of our overall sales, meaning we've not really benefited much from that massive buildup, nor will it be devastating if it's down a bunch. Again, not the greatest of news, but the downside is capped, and we have plenty of areas to find growth. On the upper right is the average non-residential backlog, non-residential construction backlog for only the commercial and institutional end markets. This excludes infrastructure, which can skew the backlog significantly. As you see, the backlog for commercial and institutional has been relatively steady in terms of months at about 9. Below is the Dodge Momentum Index, which is a monthly measure in dollars of the initial report of non-residential building projects and planning, and is a leading indicator for construction spending approximately one year out. The reason to take everyone through this is to highlight there are a ton of facets to understand the underlying non-residential construction market in the U.S.. On top of this, we also have access to and leverage internal bid and buy quote information across our own portfolio, as well as some of our large wholesale partners. Finally, I think it's incredibly important to understand how hyperlocal it is. What's happening or not happening in the Bay Area can be totally different than what's happening in the Carolinas, particularly when the build cycle typically spreads over the course of 12-18 months. Lastly, it's important to recognize that new construction represents about 55% of our overall business, with 45% happening outside of what we see on this page in the somewhat orderly retrofit replacement and break-fix market. The vast majority of questions we've got over the course of the year have been about the market, our exposures, and what it means to growth going forward. We're not trying to guide for 2024 at this point, but we wanted to provide a little bit more context as we all sort through how to think about the economy and where it's headed. Before I turn it over to Mark, I'll make just a few quick points on page nine. Taking into account everything I just talked about, here's a look at our ten-year core growth profile at 6% compounded. I'll also point out that over the course of the last 51 quarters, that's 12 years and three quarters, we've only had 4 negative core growth quarters, with the largest coming in June of 2020, which was down 5%. With all the bumps in the road and challenges over the past 10 years, hopefully, you can see how the mosaic of the realities of the end market dynamics I went through on the prior slide, coupled with our historical growth algorithm of market plus price, plus share, translate into a more resilient scenario than meets the eye, and this backtested against our results that you see here. That doesn't mean the scenario we face today with interest rates and the types of uncertainties that are out there are exactly the same as any point in the last 10 years. But what also is different is that our growth algorithm now includes market, price, share, and category growth in drinking water and filtration, which is something we saw in Elkay, and it's why we've attacked the opportunity so aggressively over the past year. Last couple of points for me are on ZEBS and our fundamental business model. From a business perspective, we're in a terrific place. We see a clear path to profit and margin expansion in an uncertain environment with the incremental $25 million of synergies we'll be delivering throughout 2024. The momentum around filtered drinking water breakthroughs will only gain momentum over the next 12 months, and it provides an idiosyncratic growth driver that is new to us and still very early in its runway. Our business system and relentless focus on simplification and continuous improvement give us a ton of confidence that we can continue to create margins and cash flow to invest back into growth. And finally, we've cultivated and created a business model built to be agile, with a highly variable cost structure, low CapEx, that generates consistently high free cash flow year in and year out. That, coupled with a great balance sheet, gives us considerable optionality to drive shareholder value over the coming years. And with that, I'll turn it back to Mark. Thanks, Todd. Please turn to slide number 10, and I'll cover the highlights of our outlook for the fourth quarter. For the fourth quarter of 2023, we are projecting sales to be around $351 million, which gets you to the end point of our initial outlook for the year at $1.525 billion. We anticipate our Adjusted EBITDA margin to be in the range of 23%-23.5% for the quarter, which translates to approximately $336 million-$338 million for the year. With respect to free cash flow, we're increasing our full-year outlook to approximately $230 million from the $250 million we highlighted ninety days ago. A few highlights related to our outlook. First, our fourth quarter outlook reflects our best cut at the market based on what we saw later in the third quarter and into October, as well as the traditional seasonal decline in sales in the fourth quarter and fewer shipping days in the fourth quarter compared to the third quarter. Next, we recently concluded a product line review with a residential sink customer, and after extensive negotiations, the level of profitability was not going to be acceptable to us, so we decided to phase out our supply of certain residential sinks to this customer. As a result, our fourth quarter sales will be impacted by approximately $3 million-$4 million, with really no impact on our earnings. Finally, given the momentum we have with our filtered drinking water growth initiative, coupled with the launch of our new PFAS filter and the recent passing of the Michigan Filter First legislation, which requires all K-12 schools and childcare facilities in Michigan to provide filtered drinking water to students, we have accelerated a few million dollars of drinking water growth investments into our fourth quarter. Before we open the call for questions, just a reminder that we have included on page 10 our fourth quarter outlook assumptions for sales growth for our non-residential and residential product categories, interest expense, non-cash stock compensation expense, depreciation and amortization, adjusted tax rate, and diluted shares outstanding. We'll now open the call up for questions. If you would like to ask a question, press star, then one on your telephone keypad. Our first question comes from the line of Bryan Blair with Oppenheimer. Your line is open. Thank you. Good morning, guys. Hey, Bryan. Good morning, Bryan. It's encouraging to hear about the, you know, mid-teens core growth in drinking water for the year. As we look to 2024 and, you know, the less certain, you know, market environment overall, is there anything you're seeing that would prevent continued growth there? And given, you know, the growth that you have achieved this year, I assume momentum into next year, more favorable cost position. What is the run rate margin for drinking water? And as we, you know, look forward, and include the ramp of filtration sales, which I assume will be margin accretive in time, where should that margin profile be over the coming years? Yeah, I mean, to, to sort of take it piece by piece, I, I don't think that there is anything that we see that would, arrest or slow down the, the growth in drinking water. In fact, you know, I think that, you know, all the work we've done and the investments we're making, give us, I think, high confidence that we can continue to grow at a, at a very high clip, in drinking water next year. You know, obviously, the, the algorithm around more units, higher attachment rate, you know, that's all beneficial and, and compounds over time, Bryan. So that, that is one that we feel really good about. As it relates to the margins, obviously above the fleet average, we're, we're not gonna, decipher exactly what that, that is, but above the fleet average. I don't think that, you know, we see any challenge or risk to that either. So I think we feel really good about, you know, the last 12 months. As I mentioned, you know, we've got a pipeline of new products over the next 12 months that is gonna dwarf anything that we've ever done from an introduction standpoint. So that's where, you know, we've spent the last year, and I think it's reading out in the first year nicely. I think that we have strong momentum heading into 2024 and beyond. That's helpful. Thank you. And you walked through your, you know, portfolio exposures and the, the resilience you've had historically, you know, confidence looking forward. I was hoping you could offer a little, a little more detail, some finer points on, you know, how your team is thinking about the, you know, the puts and takes of, you know, institutional versus commercial non-res exposures, resi positioning, price cost, follow on synergies, as we think about 2024 and, you know, the prospects for earnings growth. Yeah. I mean, you know, we've highlighted, I think, a compelling case around the drinking water growth for next year at very high margins. We have $25 million of synergies that we'll read through. You know, I think in terms of commercial, I think it's clear to us that it's gonna be down a little bit. We don't think that it's huge, but it'll be down. You know, that's on the new construction side. Break fix, we think is, you know, sort of plus or minus a little bit, because a lot of that is actually planned retrofit, replace, and/or just simply break fix. And then, you know, I, I'm guessing, you know, we probably thought that resi was gonna inflect a little bit earlier this year than it has. It's not getting worse, but it hasn't improved a whole lot. So I think we probably transitioned to flattish into next year, and then, you know, we'll, we'll see around waterworks, which is only 7% or 8%. But, you know, I, I, I think there is a path to growth for sure, and a path for significant margin expansion, again, as we look at, as we look at 2024. But, you know, I think, as we look at the market, you know, September, while still growing, was less than what we thought. October, you know, was probably a bit ahead of, of what we baked into our quarter. But I think there's room for some uncertainty as you head into November and December and, and January. So I think we're trying to be cautious with the way we're providing, you know, the outlook. But I think the profitability and the cash flows are gonna be exceptional. And I think the resilience of the portfolio, you know, has proven itself over time. And we just have to continue to invest in our key breakthroughs. I mean, that's really the game. So I think we feel pretty good about where we're at, one year into the combination, and we'll see what 2024 looks like when we get there. But you know, taken as a whole, I think we feel pretty good about where we're at. Again, very helpful color. I will leave it there, guys. Thanks. The next question comes from the line of Jeffrey Hammond with KeyBanc Capital Markets. Your line is open. Hey, good morning, everyone. Morning. Morning, Jeff. Hey, just on maybe on September, you know, coming in below where, you know, maybe unpack that a little more and what — where you're seeing maybe some softness relative to what you thought. Yeah, I think, you know, I think when we look at it, we look at it, you know, a number of different ways, Jeff. But I think if I had to distill it down, it was probably more of the flow business, you know, sort of the retrofit, replace, ordinary course, break, fix stuff, specifically in the Northwest and a little bit across New England. And I think when we look at that, you know, in aggregate, it was probably, you know, $3 million-$5 million less than maybe what we had targeted, you know, heading into the quarter. And obviously, you know, I think we had a view that, we started to see resi deteriorate, you know, towards the end of last year, and we sort of had to assume that, you know, that would begin to inflect up a little bit. It really hasn't inflected up, maybe to the degree that, that we had, we had thought, given how sharply it fell last year. But I, I would say that, you know, I think taken as a whole, none of these things are falling knives by any stretch of the imagination. And the reality is, when you look at our Q4, you know, we're seeing 6% pro forma core organic growth. So maybe just a little bit less than what we were assuming, but taken as a whole, still pretty good. Okay, that's great color. Just on the puts and takes on the profit side in, into, you know, 2024, I guess you feel pretty good about the 25 incremental synergies. I think you got $10 million-$15 million absence of kind of higher cost inventory. Any, you know, other, you know, tailwinds or headwinds to think about as you, you think about that profit bridge, you know, obviously outside of, you know, what the growth might be? No, I think that, you know, when you take a look at the overall model, it's highly variable, so we're capturing all the benefit of lower input costs. We only have 2,441 employees, so from a wage inflation perspective, we're well insulated. And so, you know, I think that we're in a great place. We'll capture, you know, any sort of deflation. We think that there is some modest price opportunities in certain categories, specifically in and around drinking water. And so no big, big moving parts in 2024 as it relates to our cost structure. I think that one that, you know, is emerging is, you know, we see some significant supply chain opportunities that we'll be working on over the course of 2024, that are probably worth, you know, in excess of $10 million into 2025. So I think that, you know, we've got a good path for margin expansion in 2024, and we've got some follow-on that, you know, gives us a little more tailwind into 2025. So nothing unusual in terms of tailwinds or headwinds beyond what we've talked about. Okay. And then last one, you know, cash flow has been great. You know, I know it was supply chain, kind of working capital was a big, you know, use, you know, kind of through that supply chain tightness, and it seems to be coming back in balance. But I'm just wondering kind of where you think working capital is in terms of, you know, quote, "normal," and whether you see that as a, you know, another big tailwind into 2024, you know, back to neutral? I don't know that it's a big tailwind into 2024. I just think that our, our working capital, you know, will, will continue to be very efficient. You know, I think that, you know, some of the costs saved that, that I highlight in 2025 comes with incremental benefit to working capital by collapsing, you know, the length of the overall supply chain. So, you know, I think we'll continue to be efficient users there. But again, you know, I think that, you know, from where lead times are, where service levels are, where cost is, where freight and transportation costs are, I think we're really well positioned to turn in, you know, another really, really strong cash flow year in 2024. And frankly, sort of like we always do. I mean, I think when you look over time, you know, the cash flow year in, year out, sort of always shows up just primarily because of the business model we have. So, if there's one number we're not particularly concerned about is our ability to generate really, really good free cash flow in whatever the environment. Great. Appreciate the color. Thanks, Todd. Yep. The next question comes from the line of Andrew Krill with Deutsche Bank. Your line is open. Hey, thanks. Good morning, everyone. I wanted to, I guess, circle back to, like, all of the new products. I just want. Can you quantify at all, maybe, like, how much of a tailwind you think that might be, you know, for 2024, or just in, you know, kind of the medium term, and how that compares, you know, to the prior run rate? And then if you're measuring it with things like, you know, you got new product vitality index. Yeah, I mean, I think the way to think about it, Andrew, is we're, you know, we've gone out over the course of the last year and done a ton of work on understanding, you know, what are the unmet needs of our customers, you know, and done an enormous amount of voice of the customer. And that's, you know, at a lot of levels, you know, whether that—what are elementary schools looking for? What is higher ed looking for? And in all those cases, you know, it's leading us to, you know, a lot of ideas that will only enhance the penetration rate, and increase, you know, the points of use, we hope. I don't know that we can quantify it exactly other than to say, you know, these new product launches are gonna be really spot on from what the market is wanting. You know, it's a category that's really developed over the past 10 years, but I think the next evolution of this is gonna be very much targeted at, you know, what people have learned, how the adoption of point of use and bottle fillers is really gonna be evolving based on the needs of what customers want. So I don't know that we're gonna quantify it for you. I think it's embedded in this notion of having a very high share in a category that's growing, and we're gonna continue to create opportunities for ourselves to grow that installed base. And when you do that, obviously, the filtration comes right behind it. And it's also things like, you know, improving the access and the ability to change filters and change filters more frequently, you know? So those are all things that are part of the overall trajectory and growth that we see going forward. Okay, great. And then my follow-up, just on the investments called out for the fourth quarter, just can you give a little more, you know, detail on what those were? I just. Can you, like, confirm, are they confined to the fourth quarter? And then, like, any, you know, benefits you expect from them? Thanks. Yeah, I think when we looked at, you know, what we were going to invest in, whether that's personnel, channel, some of the marketing work, some of the intel, you know, over the next year, we just took a look at it and said, "Well, let's pull some of it forward." You know, we, if we really are growing at the rate we are and believe we can continue to expand upon that, let's pull some of that into the fourth quarter so that we get the benefits sooner. The order of magnitude is, you know, ±$3 million. So not crazy, but it's really more of a pull forward than it is anything else. So, you know, we would expect to, you know, perhaps spend $3 million less next year, but over the 15 months, you know, roughly the same amount of money. All right. Thank you. Yep. Your next question comes from the line of Mike Halloran with Baird. Your line is open. Good morning, everyone. Thanks for the time. So a couple questions here. First, on slide 8, I really appreciate the context and the color there. Could you put in context what the typical lag is for you, both on the institutional side and the commercial side, versus those start numbers? In other words, you know, how far out does it take for your content to get in? And when you look back historically, what's the risk profile been for cancellations? I'm guessing not that high on the institutional side, and maybe a little more variable on the commercial side, but any help would be great. It's a good question, Mike. I think when you think about, you know, what's embedded in an institutional start, it's a school, it's a university building, it's a hospital, it's a healthcare facility. And so the build cycle from start to finish or occupancy is somewhere, on average, 12-18 months, right? Maybe some, you know, complicated hospitals or universities take a little bit longer, but I think 12-18 months is the right way to think about it. And our content is spread almost ratably, a third, a third, a third. So when you think about that, we really participate over that 12-month build cycle somewhat ratably. So if we're gonna spend—i f it's $100 of content into that, you know, a third will come in the first 3-4 months, a third will come in the second 3-4 months, and the remainder will come towards the end. So it's fairly ratable over the course of that build, that 12-18 month build cycle. And then the cancellation risk, pretty low, right, on the institutional- Yeah. - commercial, less so? Yeah. I mean, again, when you think about these things, you know, particularly in education is a perfect example, you know, that's usually some sort of referendum that, you know, virtually never gets canceled. Same is true with healthcare facilities, hospitals, things of the like. So, you know, I'd be lying to say that I can recall a scenario where something like that has been, you know, canceled once it's sort of worked its way through the start process. Yeah. As Jeff said, good cash flow, obviously strong balance sheet. How are you thinking about, you know, willingness to be more aggressive there? You've got a large authorization on the buyback side. What are your thoughts on leaning in on that a little bit more as you look to the next year? And then any thoughts on how you look at the M&A funnel and how actionable it is? Yeah, I mean, I'll hit M&A first. Obviously, we're continuing to cultivate proprietary ideas. We continue to think that, you know, we'll see some conversion, you know, over the course of the next 12 months in some things and categories that we're very close to. And as it relates to buyback, look, I think, you know, we take a pretty pragmatic approach. We take a look at what we think the intrinsic value of our projections are, and look at where the stock price is, you know, and we'll be more aggressive if we think that there's any sort of dislocation that, you know, that we want to take advantage of. And obviously, we have the cash flow and the confidence in the cash flow to do that, as well as the balance sheet. So, you know, we'll see. I think we've been—y ou know, if you look at pattern recognition, you know, when the stock was $21-$22, you know, we bought a lot. When it was $29 or $30, we bought some, but we bought a little bit less. And so I think, you know, we absolutely will continue to follow that, you know, that philosophy going forward. Thank you. Really appreciate the context. You bet. Your next question comes from the line of Nathan Jones with Stifel. Your line is open. Good morning, everyone. Morning. Morning, Nathan. I'd like to talk a little bit more about the business model and, and how that's likely to protect the margins. I think most of us are, are probably used to more heavy manufacturing companies, and your business model is, is a fair bit different here with the design source kind of business model. So could you talk about, you know, in the potential for a downturn, let's say revenue is down more than expected in 2024, what kind of variable margins, what kind of decremental margins we should expect on that, just given that that business model is more flexible for you? Yeah. I think, so in terms of, you know, as you point out, our model is highly variable. From an employee standpoint, you know, we have 2,441 employees, which is about, I think, $625,000 per employee, ±. So very productive and efficient. You know, we go to market through third-party reps that are 100% commission-based. So to the degree, you know, we see a sales decline, you know, the flex on our selling expense is perfect. And obviously, you know, I think when we see, you know, capacity requirements on the growth side, we're not spending a penny on capital. And the same is true on the downside. We're not having to flex out a whole bunch of fixed costs. So I think by design, you know, the agility that we've created and cultivated in the business model, you know, is built for a little bit of uncertainty on the upside and the downside. And so I think our decremental margins, and again, they'll depend on the product category, you know, will be very, let's just say, efficient on the downside. We obviously have high margins, you know, so that's not a... that's not something that, you know, we can avoid. But, you know, I think it'll be very efficient in the scenario where we see declines. And that's without question. Yeah, I think that's an important point to make. And then, I'd want to follow up on the comment you made about supply chain savings of up to $10 million into 2025. I think maybe there's some move to Mexico, some reshoring of supply chain. If you could, you know, provide some color on what you're looking at doing there and how those savings are to be generated. Yeah, I mean, we've been working at it now for, you know, probably 6-9 months, and we're in a position today to see the benefit, you know, in excess of $10 million, from a run rate perspective, beginning in 2025. That's a combination of, some incremental level of outsourcing in categories that we currently are more vertically integrated in, as well as some repositioning of certain suppliers, to regions that, you know, perhaps are a little bit closer from a lead time perspective, as well as favorable from a, tariff perspective. So those are, you know, I think, relatively large digital things that, that we see, that again, just go into building, you know, more resilience into, you know, our business model. So those are things that, you know, we are well underway on. There's a chance we get some of it at the end of 2024, but I think the way to think about it is, you know, we've got $25 million of synergies rolling through in 2024, and we've got an incremental 10+ coming from this supply chain activity in 2025. Great, thanks for taking my questions. Yep. Your next question comes from the line of Joe Ritchie with Goldman Sachs. Your line is open. Thanks. Good morning, everyone. Morning. Morning. Can we maybe just touch on the SKU rationalization for a second? So it looks like it's gonna be about a 3-4 point impact in the fourth quarter. As you kind of think about 2024, what's kind of the right framework for, you know, that piece, you know, impacting potentially organic growth in 2024? Yeah, Joe, this is Mark. You know, I think the impact in next year will be modest. We said $3 million-$4 million this quarter. If you think about next year, it's in that $9 million-$12 million range next year. So think about it as, you know, sort of a quarter of it hitting this year and three quarters of it next year. So, you know, overall, about under a point of growth impact next year. Okay. All right, great. Thank you. And then, I guess, just my quick follow-up question. So, clearly, it seems like the water business has been growing at a nice clip for you. I think you guys are. You sound pretty happy regarding the Elkay integration at this point. I guess, can you kind of help level set for Elkay? What's the business? You know, what's kind of the revenue baseline, you know, exiting 2023? And then, how are you guys kind of thinking about, again, kind of the growth framework for Elkay in 2024? Yeah, I mean, we're obviously well past the point of being able or frankly, wanting to discreetly identify, you know, what was Elkay, what was legacy Zurn. In part because, you know, we've already done a ton of integration, particularly around the commercial sink business going forward. But suffice it to say that, you know, the margins of the Elkay piece on a standalone basis are at or above, you know, that fleet average today on the backs of, you know, a highly profitable drinking water business. And, and which is a, you know, a massive change from, you know, the roughly 13% business that it was in 2021. So when you think about, you know, in essentially 12 months of owning the business, you know, we've taken a business that was running somewhere in the 13% range on a true organic basis and turned it into something that's 24+ with, I would say, an even better growth profile as a result of the exits and the investments we've made in drinking water and the benefit of all the synergy work that we've been doing. So, you know, I don't think it... It shouldn't be lost on anybody that, you know, the acquisition at the time or the merger at the time— you know, was good. But it's for environments like this, when you have the drinking water franchise that we have and the opportunity for secular growth and category growth, that's gonna, that's gonna protect, you know, the overall top line in a, in a way that I don't think people fully realize at this point. And that's why we've been so aggressive in getting out of the things that we don't want to invest in and investing in things that can grow this category and grow our business in a, in a, in a meaningful way over time. So, didn't answer your question specifically, but I think we feel really good about it. Okay. No, that's, that's super helpful. If you mind, I, I'm gonna try to sneak one more in here. Just, just, you know, in the context of what could be a bit of a slower growth environment, one of the questions we get a lot on, you know, potentially a negative volume environment, like what does pricing do for your business next year, given what you already know, you know, and where the raw material costs are today? Would you expect to get some pricing in 2024? You know, I think that there are opportunities that we will see some price. Particularly, we have strong specifications, leading shares, innovation, new products, things like that. I don't know that it'll be a ton, but it'll be some, and I don't see a scenario where we are giving back price. I think that, you know, when you look at the overall increases that, you know, we passed along over time, they were relatively small in the grand scheme of things. You know, so if anything, our pricing, you know, from a market standpoint, is in a good place. We obviously have leadership positions and high specifications and some unique value props that are gonna allow us to take some modest price. But I don't see a scenario where we're giving back price. You know, I think it's a unique environment for sure, but I think we feel good about where we are with some incremental opportunity into 2024. Got it. Thank you. There are no further questions at this time. Dave Pauli, I'll turn the call back over to you. Thanks, everyone, for joining us on the call today. We appreciate your interest in Zurn Elkay and look forward to providing our next update when we announce our fourth quarter results in early February. Have a good day. This concludes today's conference call. You may now disconnect.