Zurn Elkay Water Solutions Corp
F:4RX0
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Zurn Elkay Water Solutions Corp
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Good morning and welcome to Zurn Water Solutions Corporation, First 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 Water Solutions. This call is being recorded and will be available for replay for a period of two weeks. The phone numbers for the replay can be found in the earnings release for the company filed in the 8-K with the SEC yesterday, April 26, as in time for opening remarks and introductions. I will turn the call over to Dave Pauli.
Good morning, everyone and thanks for joining the call today. Before we begin, I'd 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 SEC filings. 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 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 Water Solutions.
Thanks, Dave. And good morning, everyone. Hopefully everyone had a chance to read through our earnings release last night, and we certainly appreciate everyone taking the time to join the call this morning. I guess it's only been about 70 days since we last updated everyone about the LJ -- LK transaction. We've made terrific progress towards the close in bringing the two businesses together. All the regulatory things are behind us, really without a hitch. The S-4 became effective this week. And we'll have the shareholder vote towards the end of May. I think we're going to target a clean closing right at the end of the second quarter. So as we announced our Q2 earnings in July, we'll be in a position to talk about what a combined second half will look like for the new Zurn LK Water Solutions business. I'll talk more later about some of the joint preparation we've been doing. But it's been really rewarding to see the teams engage with one another and begin to build action plans to execute the opportunities in front of us as we get to the closing.
Moving onto the first-quarter results, in a nutshell. It feels like a pretty decent start to 2022. Obviously, there has been a lot of moving parts in the world the last 10 to 12 weeks. But the benefit of being a focused pure-play water solutions business and the combination of a clear strategic plan around driving share gains in our core business, coupled with the Zurn Business System that underpins our strategic and operational execution, provides us great balance to some of the macro uncertainty out there. As we talked about last quarter, we're not immune from the supply chain transportation material challenges almost everyone is facing, but taken as a whole this quarter again feels better than the last. There were, are and will of course, be spot challenges. But our teams continue to navigate retire risk. Will also having to look forward to continue to support what has really good growth for us. There are few things in the quarter didn't go our way. But we had a good plan and executed well, and that's simply what it takes to perform at a high level in the type of environment we're in.
As far as the quarter sales were up 17% year-over-year, 15% organically, and again, this is against the first quarter last year we grew 12% and 4% organically. Our segment margins in the quarter were 24.5%, very much in line to slightly ahead of our expectations and our preformed leverage was 2.1 times exactly what it was at the end of December. Mark will cover some additional details on the financials. But a couple of points that I think are incrementally positive to the quarter are we saw a really strong order growth across all categories, considerably above our sales growth rate.
And secondly, we're seeing great traction to our BrightShield offering and seeing the market take to it and this integrated solution we've developed ahead of what will be a busy new construction season in North America over the next six or seven months, as well as what will be the first traditional school MRO cycle in over two years. I'll move on to Slide 4. As we've discussed in the past, there are a lot of inherent barriers to entry in our business. It's a complex path to win consistently and scale. Set another way, building a sustainable competitive advantage of something that's very difficult to, and in our case, across the broadest portfolio in the industry, which is only further enhanced with our transaction with Elkay.
Many of you already know this, but as a refresher, building codes, regulatory approvals, reliability, quality, service level, and innovation really, really matter. And only with great innovation can you drive high levels of specification share. And then there are the countless relationships at the owner, engineer, architect, general mechanical contractor level that need to be cultivated both nationally and in local trade areas. The final mile is having the best strongest local representation, as well as strong strategically aligned relationships with leading wholesalers. You've got that, you're in the game. In our case, there's no one that comes close to delivering the content per square foot we can deliver to an opportunity, which makes us the default lowest total cost of ownership. Some of the newer realities in our business, our sustainability, labor shortages, value engineered solutions, pod construction, connected products and things like the well 2.0 Building Standard. Providing safe public and private spaces to students, patients and patrons will only be a bigger differentiator moving forward. And these are in the thrust of our strategic plan in the last several years.
Essentially, leveraging our competitive advantage today while skating to where the pack is going. Here's just a simple example of leveraging innovation into a competitive advantage today and one that will absolutely be lasting going forward. PRVs, pressure relief valves, this is a market that we size around $120 million. These valves are integral to regulating water pressure inside a building for both portable and fire protection systems. Depending on the size and the location of the building, there are dozens of these. Our new products in the category, really across all six typical sizes is a new patented solution that's built with event valve designed to handle high pressure rates while providing industry best flow performance. It allows for both horizontal and vertical installation options, making it quicker and easier.
The shortest lay link in the industry means to every opening in the market, we can provide a valve. Some competitors, products simply aren't economic. And the combination of the stainless steel interior and composite cartridge has extended the life of the valve and it uses 60% less material than competitive PRVs. And finally, [Indiscernible] will integrate into Zurn's remote pressure monitoring system to easily monitor building water pressure. I share this example not because I'm trying to sell you one, although we'd be happy to, but highlight how we segment, target, and go after opportunities embedded in our strategic plan, and this replica -- replicates itself dozens, even hundreds of times across categories and compounds over years. In this case, our new innovation gives us a chance to top grade specs, change codes while opening up a new category that will turn into meaningful organic growth for us. And this is against the competitor with an inferior design, with a bunch of attributes not suited to how future buildings are going to be built.
Next on Page 5. When we shared the news of the Elkay transaction, we expect the people and industry to be excited. The feedback from the marketplace and our customers has exceeded all of our expectations. And the unique nature of the transaction and true partnership has created a great dynamic and foundation for all of the integration planning. While we continue to operate and make decisions as independent companies, we found plenty of opportunity to introduce our teams, hold joint meetings, and do some planning sessions.
Just this week, we're doing all of the diagnostic work for our 80-20 implementation with a broad team of both Zurn and Elkay associates, while also holding our initial Zurn Business System leadership training session. 10 weeks post the announcement, and about 10 weeks until we close, the resounded view is that the strategic logic is probably even more sound than we thought when we announced it. A sociology between the two organizations has been really, really good. And finally, our confidence in delivering the financial synergies is exactly where we had hoped it to be.
Just one more thing for me on page 6 before I turn it over to Mark, was having published our Sustainability report a few weeks ago hopefully many of you have had a chance to check it out. We've made ESG leadership a priority, and that's only enhanced without the clear leader in drinking water for public and private spaces in North America, which also gratifying as all the progress around ESG is manifesting itself in some recognition. And while we're not big on talking about it or advertising and it's great to see, and we're actually seeing some strategic advantage from our ESG leadership, attracting and retaining talent being sought after as a thought leader on sustainable buildings are all things that help reinforce that by integrated ESG into our strategic priorities. It's helping us grow and building onto the competitive advantages he has already built.
So with that, I'll turn it over to Mark to walk you through some additional details on our performance and provide some color on our Q2 outlook.
Great. Thanks, Todd. Please turn to Slide number 7, so on a year-over-year basis, our first-quarter sales increased 17% to $240 million. On November 2021, Wade Drains acquisition accounted for 2% of the year-over-year growth and the core business drove 15% of growth with solid core sales across our water safety and control, hygienic and Environmental and flow control product categories. With respect to profitability, our adjusted EBITDA, excluding corporate costs, cold $59 million in the quarter and our adjusted EBITDA margin was at the high end of our expectations at 24.5%, an improved 50 basis points sequentially from our fourth quarter of 2021 as the incremental margin on the sequential sales were consistent with 40% 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, we communicated over the past several quarters that with our transition to a standalone during business, we're anticipating annual corporate expenses to be approximately $20 million in terms of adjusted EBITDA on annual run rate in $22 million in calendar year 2022. With the February announcement of the merger with LK, which we expect to close in early part of the third quarter of 2022. As Tom mentioned earlier, we now anticipate us cooperate expenses to be approximately $27 million in calendar year 2022. Please turn to slide 8, and I'll touch on some balance sheet and leverage highlights.
With respect to our net debt leverage, when the quarter in line with our expectations at 2.1 times pro forma for the adjusted annual corporate expense run rate I just discussed. Over the balance of the year, our net debt leverage will decline as our free cash flow generation accelerates and our adjusted trailing 12-month EBITDA continues to increase. Please turn to Slide 9. I'll make a few comments on our outlook for the second quarter of 2022. For the second quarter of 2022, we are projecting total sales to increase year-over-year by a low to mid-teens percentage. We expect our adjusted EBITDA margin, excluding corporate costs to be between 24.5% and 25% in the quarter. We anticipate corporate costs in terms of adjusted EBITDA to be approximately $7 million in the quarter. Looking at fiscal year’20, actually with a closing early part of the third and combined results in the second half of 2022, we'll provide an outlook for the balance of the year in early August. That said, we remain confident in Zurn delivering solid double-digit reported and core growth in 2022 with sequential improvement in the adjusted EBITDA margin in the second half of the year versus the first half of the year, and strong free cash flow over the balance of this fiscal year.
Before we open the call up for questions, a few comments on our interest expense stock comp expense, depreciation, amortization, tax rates and diluted shares outstanding for the June quarter. We anticipate interest expense to be approximately $5 million. Our non-cash stock comp expense should be about $4 million in the quarter. Depreciation and amortization will come in around $5 million. Our tax rate, adjusted pre-tax earnings will be 26.5% and 27.5% in the quarter, and diluted shares outstanding will be approximately at $129 million in the quarter. With that, we'll open the call up for questions.
And as a reminder, [Operator Instructions]. We will pause for a moment to compile the Q&A roster. And our first question will come from Jeff Hammond with KeyBanc Capital. Please go ahead.
Hey, good morning, guys.
Hey good morning Jeff
I'll take two of those PRV valves. We can -- we can make the order offline.
Sounds impressive.
Pressure. Just I guess one on just supply chain, I think you said maybe a little bit better. But what's getting better or what's getting worse? What kind of informs the margin change 1Q to 2Q and the [Indiscernible] that margins tick up in the back half?
I think the supply chain piece, and Mark can take you to the margin progression, but I would say, in general, we felt like September, October last year was sort of the peak of the logistics, not -- and just gotten a little bit better each quarter every month from there. On the material side, we've been I think pretty forward-leaning on what our expected demand was. So obviously, by getting our supply chain ramp down to deliver at higher volumes towards the end of last year, that certainly helped us deliver and avoid maybe some of those more recent spot challenges.
Look, as I said in my comments, there are a million and one things that are happening. Why wouldn't [Indiscernible] pick other than it's certainly an interesting dynamic that we're all living through. But in our case, doing a lot of forward planning, diversifying our supply base and has really been a good move that our teams really looked at towards the end of last year and we made some calls, it helped us here as we entered the busy part of our year.
Yeah, on the margin question, Jeff. I think it was very similar what we talked about last quarter. Excuse me. It's does fall on the three main buckets. [Indiscernible] as the years progressing including Q2 versus Q1, no we've incremental sales volume as we hit the construction season. So just getting the leverage you'd expect on that incremental sales scope. When you look at the second half of the year versus the first half of the year, you're sequentially H1-H2. We're going to see a larger step-up in sales dollars in the back half versus the first half than what we were seeing say last year for example, is doing the demand backdrop that Todd highlighted. And the other piece of the puzzle is just price realization.
So as you know, we've been putting price in place. We've said on our recent increase has been announced. So that kind of it over the course of the year and we get more realization in the back half versus the first half, that sort of price and benefits of the margins a year [Indiscernible] just overall, our costs on productivity initiatives, and Todd mentioned earlier the issue around for planning and getting more inventory in place and rather [Indiscernible] than later, one thing we're fighting for a while is, as the demand are ramping up, for example, you may have customer may need a certain valve and we only have it in our warehouse in the East Coast with customers [Indiscernible]. You are not efficient, you're shipping, so we've improved our [Indiscernible] process and just got a little more aggressive on the demand environment that we're seeing and bringing more inventory in. That's improving our availability regionally, which is allowing us to be more efficient and reduce our overall cost as we're moving product around North America.
It really falls into those types -- of those three big buckets are the things that are benefiting margin this quarter and then more so in the back half.
Okay, great color there, I guess. You mentioned, Todd, the education market kind of not seen an MRO cycle for a couple of years. Can you just talk about 1, that opportunity, and 2, if any of those COVID kind of dollars that went to the schools would be flowing around safety hygiene?
Yeah. With the onset of the pandemic, you -- we lost’20. There wasn't a lot happening in’21 and schools started to ramp up this year. And so there's a lot of routine maintenance and upgrades that goes on over the summer when kids aren't there. So we're sort of two years behind some of that maintenance. There's obviously a continued retrofit opportunity towards the more hygienic solution in the restroom and other parts of the school. And certainly the S-4 funding that's now flowing to the States and ultimately school districts, they have a wide [Indiscernible] what they can do with it. And certainly hygienic and environmental is part of that.
And so it's really a school district by school district and really targeting those top 400,000 school districts, driving awareness, being there, and helping them create a safer environment for their students. So it's -- everyone wants to talk about how much it is and where it is. It really is the school or things like that, but we're getting our fair share. But I think it's certainly a positive market backdrop as it relates to schools.
Okay, appreciate it, guys.
Thank you. Good morning [Indiscernible]
Hey, Brian.
Good morning, Brian.
Quick, confident in the double-digit quarter growth outlook for the year. I guess incrementally so, and you have posted one solid quarter in that front. So there's clear momentum. Todd, the last quarter you had framed kind of low-to-mid single-digit underlying market growth. Two points or so of outgrowth and then low-to-mid-single, seemingly leaning toward mid-single digit price contribution. How should we think of those buckets at this point?
I think as Mark highlighted, I think with the pricing actions that we've taken, there's probably incremental price from where we were a quarter ago. So call it seven plus or minus. I think the market maybe incrementally better by a point or so. And so, you think there's a whole, I think we've gotten I think even more confident in the double-digit growth that we'll see. We had a, I think as I highlighted, we had terrific orders.
When you think about the next six to seven months, that's the peak of the construction season in North America. And so we saw very strong orders across all categories above our growth rates. And so we think we're pretty well-positioned heading into Q2 and Q3 to drive really strong growth. Our supply chain is sort of set to deliver against that. And I think we'll have -- I think as Mark said, if we deliver our guidance, which we fully expect to do, we'll have six months in the jar and meaningfully above 10%. And then it's just a function of what can it be as we look at the second half.
That's great here. And on the margin front, mainly heavier, your Q2 guidance incremental are implied to step down a bit versus Q1 level, I guess on a sequential basis, the math is a little quick given the moving parts that you've walked through, should we expect third quarter margin, core margin that is to be flat to up year-on-year, or has the progression just given the headwinds that everyone is facing been pushed back a bit more in that sense?
The margin year-over-year, I mean, our models all along have always had the margins still stepping down a bit in the third quarter. But that gap compressing quite a bit. So as you can appreciate, now for the first, call it two to three quarters. So that price deflation costs equation is the toughest for us. It gets better as the year progresses, so then you get into the latter part of the third quarter, through into the fourth quarter, just a conscious get [Indiscernible]. The other thing too is we've talked about we've had some investment that we had started, call it midway through third quarter or clearly into the fourth quarter, around some of the growth initiatives we've been driving, as well as some of things we're doing on the supply chain.
And working more aggressively on near [Indiscernible] supply chain that we have in the past, we lap against that. So, you get an easier comp from that standpoint too. It's really a function of those two things just as the year progresses, to comps are just are just getting a bit easier right at the end of the day. So it's one of those years where does given how things have changed that that's the point your viewer's stuff just gets a little bit noisy but just all the world's transpired over the past.
Completely understood. And then a higher level one, as Zurn as navigated a lot of market turbulence over the last 10-15 years and then you've had pretty consistent performance. If we can see it near fears of 2023 recession come to pass, how should we think about the puts and takes of combined the Zurn Elkay resilient relative to your core operations?
Well, you're correct in your, I guess, history of our ability to navigate through. And look, I don't want to answer a hypothetical question around’23 other than with the combination with Elkay, over half of our business or nearly half of our business will be MRO retrofit replace. If you look at the model that we have around a design for [Indiscernible] supply chain, we've got a very flexible model there, so we won't absorb fixed cost should things slow. The vast majority of our selling effort is third-party reps, which is also all variables. I think our business model and the resilience of that has only improve if you're worried about new construction. The very variable model on the supply as well. And the reality is we're going to be in great shape. We will have essentially no debt. And so we feel like we've navigated and iterated our business model to be ready for an environment that is maybe not robust.
That being said, when you look at where things are in terms of their progression through a business cycle, none construction is sort of like at the starting line right now. So I think we've got what we've talked. But should we find ourselves in a maybe a less favorable environment, I think we're fully, fully ready and willing to go through that and we'll perform extraordinarily well.
Yes, I appreciate that and I thought it's network. Hey [Indiscernible] thank you.
[Indiscernible]
[Indiscernible]
Just a reminder [Operator Instruction] and our next question will come from Joe Ritchie with Goldman Sachs. Please go ahead.
Thank you. Good morning, everybody.
Morning Joe.
As you said comment on the margins. So yes, I think we're modeling it the same way down year-over-year through 3Q. I'm just curious. Are you guys still looking to hold margins ex corporate, flattish year-over-year or has some of the kind of the inflationary pressures that is that going to have some type of like impact, at least at a margin rate level for the year.
Going into this year our goal was to try to hold margins generally line with the prior year that manages exactly, what did we do last year 25-8 could be 25-5 could be having this is generally in that category. We're not looking to scenario where we think margins are going to fall off too. 24 or 24.5, right? All the things that we have line of sight to the actions that we're taking. Big keep -- it keeps us [Indiscernible] what we're going to be generally close to where we were last year from an overall segment margin standpoint within Zorn. Obviously, when you bring the Elkay business in, we know that certain of the larger -- a lower margin profile, so that will merge in the waters, but talking just about Zurn, that's what we've been working towards all year. Given the bias, obviously through -- let's just say through April is double-digit growth will creep past 10.
Yeah.
And as that migrates up, we've got I think a better chance of getting to where those margins are. And I think Mark talked through the comparable issue relative to the prior year. And once we lap that by Q3, I don't think there's any question that the momentum in Q4 and into’23 with a combined Zurn allocate. And then, on top of that, the synergy realization in Year 1 puts us in a great place. So I mean, growing at the rates we're growing at the margins for growing in that despite some of the comparable headwinds, I think by the time we get to September, October with what's in front of us with Elkay, I think it's going to be a great dynamic and a powerful earnings story.
Yeah. That makes sense. Adams, since we're talking about Elkay, I appreciate you guys snapping the line at the end of the quarter, makes things easier for us as well. I'm curious as your kind of think about the synergies. I think you guys call back $50 million. Can you start to realize some of the synergies or you expect to realize some of those synergies in this calendar year. If in fact you do close by the end of 2Q?
Yeah. Look, I think that there may be some, but probably offset with some investment. So consistent with what we said 10 weeks ago, the synergies that we're going to sort of sign-up for really began in’23. Will there be some? Of course. But I wouldn't potentially as anything meaningfully. We're going to close. We're going to go through a strategic plan. We're going to get the [Indiscernible] rolling and aligned around a long-term strategic plan. We're going to make some investment in certain areas where we get after some of the low-hanging [Indiscernible]. But I think very much consistent with what we said at’23.’23 is the year to start thinking about accruing those to the bottom line.
Okay. Got it. That makes sense a lot. And last one for you guys. Just clearly like the China situation devolving, shutdowns are continuing, can you just give us an update on any supply chain issues, particularly out of China that you're seeing with any of your suppliers?
Joe, how much time do you have? I mean, the reality is --
I'll take as much color as you give me.
You have a global supply chain with 100s of critical suppliers. I think we've prioritized the ones that are in like and we've got plans in place to move supply. We're necessarily, we've got some in transit, we've got some consigned here. And so it really is a pretty complex. On any given day, there is something that is new news and different than, then maybe what we thought. So you've got to plan around a variety of contingencies. I think our teams have done a terrific job with that.
I don't know that it's going to go away anytime soon. So we've just got to keep thinking ahead, managing forward. And are there things that didn't go our way in the quarter, you bet. There were small components that had they arrived shipments could've been greater. They did, but we still delivered a really strong quarter. We've got a great -- great backlog heading into what's a very busy season for us. We've got to stay in front of and I think that's just the reality of the world right now. But there's nothing that I can point to that as sort of below the water line issue from what we can see.
That makes a lot of sense. Thank you both.
And our final question will come from Brett Linzey with Mizuho. Please go ahead.
Good morning, guys.
Morning, Brett.
Morning.
Hey, so it sounds like a very solid as demand pulse across most of your markets. I was hoping you could maybe put a finer point on the magnitude of the order increase or book-to-bill or some measure to help frame the momentum here?
Yeah. We try to generally stay away from backlog. But if you think about a 15% core number, it was 4, 5, 6 points of that from an order rate perspective year-over-year.
With a book-to-bill above one.
Yes.
Yes. Clearly.
Okay. Great. And then maybe just a finer point on the individual verticals via healthcare K312 Universities, where you're seeing that strength or is it broad-based? Any color would be great.
It's broad based. Obviously, healthcare and education are two single largest verticals we're seeing really good activity there. I think hospitality is improving things like municipal buildings, stadiums are all positive. But I think the encouraging part for us was really broad-based across a lot of categories and verticals, so nothing outsized. It wasn't like a unique one-time thing. It's really just, I think the water levels just fundamentally higher across a lot of -- And I think we're winning though. I think the integrated solution around BrightShield has gotten great traction. We saw significant growth there this quarter, energetically environmental.
And so, the gestation period of that really coming to market, us getting out and working with building owners, engineers, architects introduced solution. And we're winning and upgrades and retrofit opportunities, which is great news too. So it's broad-based. And I sort of give you the magnitude relative to sales growth.
And I appreciate your framing that. And then maybe just sticking with BrightShield, obviously, the viruses episodic and we're going to be living with it, but of COVID cases really a gating factor that drives customer urgency on the hygienic retrofit opportunities? Or do you think that customer conversations are pointing to sustainability here and really the focus on safer cleaner washrooms is here to stay?
I think it depends on the person. I don't think COVID cases at a discrete way is driving our decision-making. I think it's around sustainability. I think we've I think come to acknowledge that hand washing and keeping yourself clean is a great way to avoid spreading the virus. And so I think those two are sort of universally true and I don't think that case count is really driving any of the decision-making, at least from my vantage.
There's just more general awareness about hygiene --
Yes.
--in general.
Now makes sense. And then maybe just one follow-up, maybe the last one. On the Q2 supply chain situation, obviously, very complex. I know you've taken various mitigating actions, some near shorting, and so on. But is there more to do there as you try to wean some of the over reliance on particular regions where your supply is coming from? And the Q2 revenue visibility, how many containers have landed that give you a comfort that the framework you put in place is achievable here, even given the supply chain issues?
Well, I would -- I think we've got a geographically dispersed supply chain. I think we're going to continue to minimize risk where we believe we still may have some. So that's going to be an ongoing process for and I think it'll be a lot of activity really up next year to continue to do that and maybe a more scaled way. But I wouldn't say we're over reliant upon at particular region or supply. In terms of the other question you have?
Reliance and then how many visibilities on Q2 revenue?
[Indiscernible] last month.
Yeah. I mean we import hundreds of containers. And so at this point, everything that we see looks like it's going to arrive on time based on our SIOP when we wanted it, when we ordered it, when it's picked up. We're tracking all these sort of that supplier by supplier, container by container level, and so I'm on been many issues and I'm not going to project issues. I think our guidance embed [Indiscernible]. And so if we miss a container or two, I wouldn't suspect us coming back to you and talking about it.
It's just a rolling series of a dance that has to happen, and so far, it's gone, I would say, extraordinarily well given the complexity and some of the challenges in the world. It's an estimate to, I think, our team and digging in and doing the work and really getting ahead of it [Indiscernible] but more in a more acute way, really towards the middle part and the part last year, looking ahead into’22 and’23 and making some decisions and communicating and procuring the right material, the subcomponents, and getting into [Indiscernible]. And now it's this function of delivering inside of that demand.
That's great. And then, just last one. Any expected change in the adjusted tax rate once Elkay closes?
Elkay generally from where we sit today from an overall North America tax rate on adjusted basis. In future, we have kind of gotten to the full year to model out the inclusive Elkay. I think if you'll be fine.
Okay. Great. I appreciate all the color. Thanks a lot.
And now, we'll conclude today's question-and-answer session. I would now like to turn the call back over to Dave Pauli for any additional closing remarks.
Thanks, everyone, for joining us on the call today. We appreciate your interest in Zurn Water Solutions and we look forward to providing our next update when we announce our June quarter results in August. Have a good day, everyone.
And that will conclude today's conference. Thank you for your participation. And you may now disconnect.