Zurn Water Solutions Corp

NYSE:ZWS

Earnings Call Transcript 2023-Q1

[Operator]

Good morning, and welcome to the Zurn Elkay Water Solutions Corporation First Quarter 2023 Earnings Results Conference Call with Todd Adams, Chairman and Chief Executive Officer; Mark Peterson, Senior Vice President and Chief Financial Officer; and Dave 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 April 25.

At this time for opening remarks and introduction, I'll turn the call over to Dave Pauli.

[Dave Pauli, Vice President-Investor Relations]

Good morning, everyone and thanks for joining us on the call today. Before we begin, I would like to remind everyone that this call contains certain forward-looking statements that are subject to the Safe Harbor language 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 Water Solutions.

[Todd Adams, Chairman & Chief Executive Officer]

Thanks, Dave. Good morning, everyone and thanks for joining the call. When we announced our Q4 earnings in early February, we talked a lot about 2023 as a year of simply executing against the plans that we had developed throughout 2022. If you look at our Q1 results it’s simply a down payment on what we said we were going to do. As you'll hear from Mark for the time being we're leaving our full year outlook unchanged, but intend to take another look at it after we deliver the Q2 that we've outlined.

Pro forma core sales were up 5% and pro forma EBITDA margins were up 280 basis points over the prior year to 19.5%. As we discussed in February and we'll reiterate this morning, we have high confidence that our margins will continue to ramp throughout the year based on the current cost profile we've locked in and the benefit of the $25 million of LK synergies that will continue to roll into the results for the balance of the year. What that means is second half margins will improve at least 250 basis points relative to the first half.

Next we repurchased an additional $37 million or 1.7 million shares against our anticipated minimum $100 million of repurchases this year and have continued to do so to begin in the second quarter. Our Q1 cash flow was even in Q1, which was ahead of our expectations and gives us even further confidence in delivering a strong full year free cash flow.

Late in the quarter we launched the national campaign to bring awareness to the problems with lead and drinking water, particularly, in K-12 schools and what we can do to help them solve this incredibly solvable problem. It's still early innings but we're seeing demand for our drinking water solutions both bottle fillers and filtration accelerate.

Taken as a whole, Q1 was pretty much down the middle with lead times back to 2019 levels no supply chain constraints and all the 80-20 simplification work behind us. So we were able to work on the Elkay integration efforts and executing on the strategic growth plan we've developed.

We remain highly confident in the 2023 cost synergies from Elkay reading through this year while we continue to do the work to get the incremental $25 million benefit next year.

With that, I'll turn it over to Mark on page 4 to take you through some financial details on Q1.

[Mark Peterson, Senior Vice President & Chief Financial Officer]

Thanks, Todd. Please turn to slide number 4. On a year-over-year basis our first quarter sales increased 55% to $372 million. The Elkay merger contributed 3% year-over-year growth, while foreign currency translation reduced sales by 100 basis points from the prior year and core sales increased 300 basis points.

On a pro forma basis including Elkay in the prior year first quarter and adjusting for the product line exits that we outlined during last quarter's earnings call, core sales expanded 5% year-over-year.

Breaking on that pro forma core growth, sales for our residential end markets were a bit better than we anticipated and the mid-teens year-over-year decline was partially offset by a few last time buys for certain SKUs we exited resulting in a non-recurring sales of approximately $7 million in the quarter.

Sales to our non-residential end markets were also ahead of our outlook for the quarter and increased mid single-digits year-over-year with balanced growth across flow management control, water safety and control hygienic environmental and drinking water.

With respect to our Elkay-related product line exit works, we've completed the exits in the first quarter as planned. As you will see on our outlook slightly later in the call those exits will have a year-over-year sales impact of $29 million in the second quarter and the $90 million we've been highlighting for calendar year 2023.

Turning to profitability. Our adjusted EBITDA totaled $72 million in the quarter and our adjusted EBITDA margin was at the high end of our outlook for the quarter at 19.5%. This compares to $52 million and 21.7% in the prior year's first quarter. The benefit of price realization and our productivity initiatives inclusive of the cost synergies that will benefit earnings by a little over $6 million each quarter in calendar year 2023, was more than offset by the sell-through of higher cost inventory versus last year, investments in our growth in supply chain initiatives as well as the impact of the Elkay merger.

Please turn to slide 5. And I’ll touch on some balance sheet and leverage highlights. With respect to our net debt leverage, we ended the quarter with leverage at 1.6 times, inclusive of approximately $37 million of cash used to repurchase common stock in the quarter. We have purchased another $17 million worth of stock through the first part of the second quarter bringing our total share repurchase to just under $80 million from the fourth quarter of 2022 through yesterday.

In February, our Board of Directors approved an increase in our share repurchase program of $500 million. And as we highlighted on our earnings call last quarter, we intend to utilize at least $100 million of our free cash flow in 2023 to continue to execute our share repurchase plan while targeting a net debt leverage ratio in the one to two times range over time.

I'll turn the call back to Todd.

[Todd Adams, Chairman & Chief Executive Officer]

Thanks Mark. I'm on page 6. Over the next couple of slides, I want to share a few positive developments on various legislation and other things we're doing to drive outsized growth from our safe water drinking platform, because there are no safe levels of lead in drinking water, especially when it comes to kids, we were pleased to see the Michigan Senate pass Filter First water safety legislation last week.

This legislation is intended to protect children from lead in drinking water by requiring all childcare centers and schools to implement a drinking water management plan install filtered bottle filling stations or filtered faucets on outlets designated for drinking water and test the filtered water to ensure that the filters are installed and operating properly.

This legislation now adds to the Michigan State House of Representatives for consideration and has widespread support from health and environmental experts, because it is more cost effective than requiring repeated testing at every school. While we view Michigan’s legislation as the gold standard, there is growing awareness and more legislation developing in other states across the country, including California, Texas and Massachusetts as you can see here. And this is all just within the last three months.

We've been actively supporting this legislation as well as others and believe the most proactive and protective solution to kids getting exposed to lead through school and child care drinking water is to place filters at the point of use. And for about $2 per student per year, schools can accomplish that with our filtration solution.

Moving to page 7. We're also doing our part to bring greater awareness and understanding about the importance of safer drinking water and healthy hydration through a broad awareness campaign. We started with a video series that launched across social media, connected streaming and video-on-demand services and supported that with an entire toolkit of information and resources.

In addition, we launched a dedicated section of Elkay.com with information designed, specifically for parents, teachers, administrators and facility managers. The content ranges from letters parents can send to school administrators, maps indicating where water quality is most at risk for school boards and administrators curriculum for students and teachers plus where to buy and how to change our filters for facility managers. We know awareness drives action and when parents teachers and the community call attention to their drinking water problems, the issue cannot be ignored.

Moving to page 8. It's just the fact that some school districts have more resources than others, however, all children deserve clean safe water in the places where they're learning and growing every day. That's why we created our Fountains for Youth program in 2019, providing filtered bottle filling stations filters installation grants or a combination of all of these to schools in need.

The program assesses donation needs based on several criteria including water quality issues and the ages of students attending the school with the preference given to schools in early education and elementary schools where lead has the greatest impact on developing minds and bodies.

The program has benefited dozens of schools across the country with our most recent efforts focused on Los Angeles, Benton Harbor Michigan and Milwaukee. We have plans to roll this out even more schools across the country this year in places like Jackson Mississippi and others.

This program is just a piece of our overall ESG efforts and a nice segue to the last one for me on page 9. We continue to make strides in our ESG efforts in Clean Water mission overall. In addition to our 2022 sustainability report issued in February and our UN Global Compact Communication on Progress that we'll issue next month we also wanted to share our first quarter progress against key targets to provide additional transparency and accountability of our ESG journey.

Developing clean technology water solutions that help our customers meet their water challenges and goals is core to our sustainability strategy with 74% of our revenue coming from products with sustainable attributes during the quarter.

Our commitment to clean technology innovation and continuous improvements keeps us focused on expanding our line of products to conserve water, contribute to a cleaner environment, protect human health and hydration and save energy and reduce the use of plastics and other non-renewable resources.

Zurn Elkay product save an estimated eight billion gallons of water during the quarter and our goal is to reach 40 billion gallons of water saved annually by 2024. Additionally, Elkay water bottle fillers have prevented the use of more than four billion single-use plastic water bottles well on our way to the target of preventing $15 billion annually.

Within our own operations we identified and are launching eight new projects to reduce our energy usage and greenhouse gas emissions and we have a clearly defined path to meet targets for both.

Collectively for the quarter our philanthropic donations in kind gifts and associate volunteer time exceeded $1 billion. In March, we announced Emma McTague, joined our Board of Directors. With the addition of Emma, our Board now has nine independent directors; three of whom are women. Overall, continued strong progress with our ESG efforts.

And now I'll turn it back over to Mark to take you through our outlook.

[Mark Peterson, Senior Vice President & Chief Financial Officer]

Thanks Todd. Please turn to slide 10 and I'll cover the highlights of our outlook. As you saw in the press release we issued yesterday, for 2023 we are going to continue to take a view on our external outlook that encompasses a broader range of volatility than we have in the past couple of years.

Our outlook for calendar year 2023 remains unchanged with sales in the range of $1.5 billion to $1.55 billion and our consolidated adjusted EBITDA in the range of $325 million to $345 million, resulting in year-over-year margin expansion of at least 110 basis points up to 170 basis points.

Similar to last quarter, to help better understand the growth trends in the business in 2023 on the right side of the chart we presented Zurn Elkay pro forma 2022 sales for the second quarter which takes reported sales for 2022, plus Elkay sales for the second quarter of 2022 less the year-over-year impact of the 80/20 product line exits we have executed.

For the second quarter of 2023, we are projecting sales to be in the range of $385 million to $395 million and our adjusted EBITDA margin to be in the range of 21% to 21.5% which is a, 150 to 200 basis points step-up from the first quarter.

With respect to the sales outlook, you can see on the page our assumptions for year-over-year growth in our non-residential and residential product groups which are impacted by the timing of shipments last year, as we began working down an elevated backlog in the second quarter of 2022.

We anticipate pro forma orders in the second quarter we expand the low-to-mid-single digits year-over-year with mid-to-high single-digit growth in our non-residential end markets partially offset by a mid-teens decline in the residential end market. Turning to profitability, our second quarter margin is expanding 150 to 200 basis points sequentially from the first quarter of 2023.

As a sell-through of the higher cost inventory we purchased in 2022, we'll be complete in the first part of the quarter and our margin will begin to benefit from the lower commodity and transportation costs in the back half of the second quarter and into the second half of 2023 where we anticipate another margin step-up in the second quarter.

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

We'll now open the call up for questions.

[Operator]

[Operator Instructions] Our first question will come from the line of Bryan Blair with Oppenheimer. Please go ahead.

[Bryan Blair, Oppenheimer]

Thank you. Good morning, guys.

[Mark Peterson, Senior Vice President & Chief Financial Officer]

Good morning, Bryan.

[Todd Adams, Chairman & Chief Executive Officer]

Good morning, Bryan.

[Bryan Blair, Oppenheimer]

I believe you said that resi was down mid-teens with roughly $7 million of unanticipated sales that while being [indiscernible] they stayed in the quarter. Just to clarify what was the margin on the $7 million?

[Mark Peterson, Senior Vice President & Chief Financial Officer]

The margin of $7 million was about the fleet average what we had for the quarter. So we did a little better on that given the fact that the last time buy is below what you'd net normally in the state, but it didn't materially impact the overall EBITDA margin in the quarter.

[Bryan Blair, Oppenheimer]

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

[Todd Adams, Chairman & Chief Executive Officer]

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

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

[Mark Peterson, Senior Vice President & Chief Financial Officer]

Yes, if you go back and look at the backlogs just go back to last year's Qs, it was about a $60 million backlog burn last year on the Zurn side of the core business. That's what Todd's referring to.

When you look at the order the sales rates you've got to take that into consideration. As Todd pointed out the order rates are accelerating in Q2 and we think right now we see a good second half year-over-year demand pattern.

[Bryan Blair, Oppenheimer]

Got it. And one last one higher level question. Just be great to hear your thoughts on non-res in general. There's been a fair amount of concern regarding the cycle that's obviously levered in recent past consternation related to the banking sector.

Just wondering how your team feels about the backdrop overall and in which end markets or product lines you're most confident in growing through an uncertain market and where there may be a bit more risk to Zurn Elkay going forward?

[Todd Adams, Chairman & Chief Executive Officer]

Sure. Yes, we've heard the concerns. I think qualitatively if you look at our forecast for the remainder of the year, it's essentially unchanged from what we had developed to start the year. I think that's an important piece to take into consideration.

Secondly, if you look at our overall nonresidential mix, 47% of that is institutional primarily health care and education and some water works. So, you get to over half of the overall revenue.

If you look at the slice of commercial, obviously, we're watching it. When we entered the year, we had obviously identified a lot of that risk in the outlook that we had provided. We're not seeing anything that points us to being more outsized than that at this point.

But again Bryan I think our forecast for the remainder of the year is essentially unchanged. That wouldn't be reflected in sort of the consensus view of the world, but from our standpoint very little change in the last 90 days relative to maybe the range of outcomes that we thought could happen for the year.

[Bryan Blair, Oppenheimer]

Appreciate all the color. Solid start to the year.

[Operator]

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

[Jeff Hammond, KeyBanc]

Hey, good morning guys.

[Todd Adams, Chairman & Chief Executive Officer]

Good morning Jeff.

[Mark Peterson, Senior Vice President & Chief Financial Officer]

Good morning Jeff.

[Jeff Hammond, KeyBanc]

So, I guess just on the margin bridge first half to second half, can you just kind of remind us the moving pieces? I know you've got some -- certainly the higher cost inventory, the investments in the safe drinking water and then kind of the synergies, but just walk us through kind of that I think you said 250 basis point first half to second half move.

[Mark Peterson, Senior Vice President & Chief Financial Officer]

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

So, as we've said we were buying inventory in 2022 at elevated levels from a cost standpoint. That worked its way through Q1, it's going to impact us a little bit in the first part of Q2. But the big difference is the back half of Q2 and then into Q3 as well as Q4 we'll be at the lower commodity, lower transportation costs that we've being experiencing for a period of time here impacting the P&L.

So that's really -- that's the biggest piece of the puzzle Jeff is you'll really see it in the third quarter because really were not in anything different in Q4. So you'll see a meaningful improvement in the Q3 margin. And then that margin will decline a bit in Q4 just based upon the seasonal reduction in sales in Q4 expect a normal decremental margin in Q4. So Q3 is at the point you'll see that full run rate of those lower commodity and transportation costs impacting the P&L.

[Jeff Hammond, KeyBanc]

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

[Todd Adams, Chairman & Chief Executive Officer]

Hey, Jeff, as it relates to our regular way core new construction work, we think that that is going to continue to accelerate and grow as it has been for a long period of time. The opportunity is measured in the hundreds of millions when we look at a combination of aftermarket retrofit replace and filtration. And obviously we've got some pretty targeted initiatives in key states, as well as this broader awareness campaign that we're going state-by-state school district by school district to begin to identify where is the problem most acute? What's installed? What can we do to replace? And then, obviously, how can we provide that filtration on a recurring basis?

And so I think the opportunity continues to be there. I think the awareness campaign and this legislation is just bringing it closer and closer to impact. And so we're building the funnel as we speak. We're, obviously, addressing these states particularly the ones we identified first. But I think this has got a very long tail. And we would qualify it as something measured in the hundreds of millions of dollars over the next three to four years, incremental to that core business that we continue to see nice growth from.

[Jeff Hammond, KeyBanc]

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

[Todd Adams, Chairman & Chief Executive Officer]

Well, it's not much different than we identified. If you think about the attachment rate and you think about the ability to continually provide this through subscription services or other things and really drive the replacement with our filters was not a strategic focus that Elkay really had spent a lot of time on. We identified it through the size of the installed base, the conversion from non-filter to filtered units and then obviously ensuring that we would capture that replacement event. And so we think this is clearly identifiable and broadly the same size we thought but it's not crazy to think about this as a $100 million opportunity in the next two to three years.

[Jeff Hammond, KeyBanc]

Okay. Thanks guys.

[Operator]

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

[Mike Halloran, Baird]

Hey, good morning everyone. Following up on Bryan's last question there. When you think about the guidance for the back half of the year, certainly realize it's unchanged all else equal for the full year. But are you assuming any -- what is the assumption for demand relative to normal seasonality? Is it just a stable backdrop on the residential side and the non-residential side when you normalize for the inventory machinations and all the other things? Are you just assuming a relatively stable demand pattern underneath or is there something different?

[Mark Peterson, Senior Vice President & Chief Financial Officer]

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

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

[Mike Halloran, Baird]

That makes sense. And then on the inventory side, maybe just talk to how you feel about channel inventories, as well as how you feel about your own inventory levels, and how you see that working out through the year?

[Todd Adams, Chairman & Chief Executive Officer]

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

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

[Mike Halloran, Baird]

Thanks. Appreciate gentlemen everyone.

[Todd Adams, Chairman & Chief Executive Officer]

Thanks.

[Operator]

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

[Joe Ritchie, Goldman Sachs]

Hey, good morning guys.

[Todd Adams, Chairman & Chief Executive Officer]

Good morning.

[Joe Ritchie, Goldman Sachs]

So I'm just trying to square your non-res commentary. Back of the envelope it looks like non-res is probably up I don't know high single digits this quarter and now we're expecting it to be negative modestly in the second quarter. And I'm just wondering like is this mostly channel inventory dynamics? Were there any cancellations in your backlog? I'm just trying to understand that a little bit better.

[Todd Adams, Chairman & Chief Executive Officer]

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

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

[Joe Ritchie, Goldman Sachs]

Okay. Got it. That's helpful. And I guess maybe just as we're progressing through the year I know you've given a lot of color at this point on the margins improving particularly in the third quarter. I guess, I know that you guys typically don't give pricing, but I'm just curious you're seeing across the sector some really good tailwinds from price cost. And I'm wondering if you can at least give us maybe some quantification on -- with lower cost inventories going through your P&L, what does that ultimately mean from a dollar standpoint? Just trying to understand the impact that we should see in the second half?

[Mark Peterson, Senior Vice President & Chief Financial Officer]

Yes. We're not going to get into giving the actual dollars for the third quarter. We'll get to the outlook at the end of our -- at the end of this quarter when we report again in July. If you think about pricing and cost, we've been talking about getting effectively a low single-digit price realization on a year-over-year basis this year. That's been sticking. There's been no price walking back at all as we anticipated and we think that continues for the balance of the year.

From a cost standpoint, we said, there's about a 250 basis point headwind in year-over-year in the first quarter that moves down to closer to 100 basis points in the second quarter then obviously that headwind disappears. So the benefit really is that, we get to that lower cost structure we've been talking about yet the price stays in place in the back half, and you'll really see that stand out in the third quarter margin when we give our outlook 90 years from now.

[Joe Ritchie, Goldman Sachs]

Okay. Thank you.

[Operator]

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

[Nathan Jones, Stifel]

Good morning, everyone.

[Todd Adams, Chairman & Chief Executive Officer]

Good morning, Nathan.

[Nathan Jones, Stifel]

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

[Todd Adams, Chairman & Chief Executive Officer]

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

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

[Nathan Jones, Stifel]

Okay. Fair enough. Maybe just on the share repurchase higher than the average for the first quarter. You talked about having done more in the second quarter here is how much you execute on the share repurchase in 2023 dependent on share price opportunities you find for other capital deployment bolt-ons anything like that? Just any more color on where that number might end up for the year?

[Todd Adams, Chairman & Chief Executive Officer]

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

[Nathan Jones, Stifel]

Okay. Thanks for taking my questions. I'll pass it on.

[Operator]

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

[Dave Pauli, Vice President-Investor Relations]

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

[Operator]

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