Zurn Elkay Water Solutions (ZWS) 1 Feb 182018 Q3 Earnings call transcript

Good morning, and welcome to the Rexnord Third Quarter Fiscal 2018 Earnings Results Conference Call with Todd Adams, President and Chief Executive Officer; Mark Peterson, Senior Vice President and Chief Financial Officer; and Rob McCarthy, Vice President of Investor Relations for Rexnord. This call is being recorded and will be available on replay for a period of two weeks. The phone numbers for the replay can be found in the earnings release the company filed in an 8-K with the SEC yesterday, January 31st. At this time, for opening remarks and introductions, I'll turn the call over to Rob McCarthy.

Thank you, Paula. everyone. welcome, and morning, Good

release Before SEC. we this subject remind that our the need the as yesterday well as started, contains certain I in press in call contained are with Harbor to we forward-looking issued Safe afternoon the you filings language get that statements to that

In addition, to refer will non-GAAP measures. some comparisons

reconciliations Consistent we Our to investors, adjusted we with use why these operating our non-GAAP earnings release measures, data. to GAAP and we corresponding a helpful SEC share, cash quarters, core prior provide we and will of the filings as EBITDA, and believe why results. contain to speak flow and are feel growth, contain metrics understanding per additional information these non-GAAP adjusted about they earnings better free them

for your are fiscal to results of our President that, turn followed will adjustments not CEO cash in an XXXX, year GAAP the our call substitute will note and XXXX results. up that flow. cover of reporting With fiscal a to We'll data, of that our by our continuing and Rexnord. And I'll operating the for during and our financial full for the and update we third strategic highlights our over line Please for open information and Todd product on enable exited we Management you non-core statements the execution, urge call for some and call XX-Q. selected platforms, includes afterwards, fiscal quarter our the assess provide the our Adams, these RHF XXXX. two our from performance our Water questions. presentation overall specifics order to in core outlook on However, to better segment to operating measures GAAP we review our core investors understand release impact earnings Today's GAAP in the our of our

everyone. morning, and Rob, good Thanks,

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Mark. Now call over I'll turn to the

Please quarter a turn number on slide to basis. X. a sales X% third consolidated increased our On Todd. Thanks, basis, year-over-year core

$XX XX% per increased quarter million prior third to $X.XX. EBITDA our adjusted earnings from adjusted Our share year the was and

expectations when adjusted the tax quarter. our net a approximately entering quarter and share Our timing couple effective experienced function rate The is U.S. as U.S. benefit income compared tax the a added minutes. calculating reform, per the is discrete rate tax as rate third lower with reform certain from our of $X.XX we in adjusted the tax benefits. quarter recording well to tax when rate speak about of our of earnings in to XX%, I'll

for for our outlook previous third we growth. our growth mid-single fiscal indicated slightly percentage from low a in a digit fourth core for to for outlook our After given quarter, increasing we're are 'XX. As Todd earlier, and our financial quarter solid favorable to outlook our 'XX fiscal digit increasing mid-single outlook

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in supply year finish The points. core PMC's many basis, growth by million with about our a On and growth our margin repositioning to that adjusted execution rate and respect both full expanded core EBITDA and increased higher quarter aerospace and almost impact solid about consumer initiatives in our XX% OEM generally December by expansion end the our adjusted a to by expect in growth net margin the With and of chain year-over-year but completed quarter. million. PMC with $X by optimization markets. end-user market of our process low-single-digit XXX our significant facing our industry reflects basis a $X range of We second in and end profitability, customers increased footprint sequential declined sales EBITDA in seasonally year-over-year are

margin EBITDA fourth quarter. increase year-over-year about expect incremental approximately expected is points. our points dollar the and dilute to basis expectations, stated year full during in our margin earlier, the strong is and of financial adjusted slightly quarter PMC's PMC's that, which margins our of to our a quarter XXX running tends ahead As we XXX expansion by earlier and the to Despite hold weaker expected results margin fourth impact basis I little is to

order in our X, summarized be as excluding earnings been to provide XXXX. calculation the enhanced to RHF's quarter intend our we've operating turn exit. financial line results third fourth and minor of the core management exited will full impact comparability the fiscal slight metrics during negligible from XXXX with fiscal non-strategic the to We Let adjusted in we anniversary on upcoming platform please quarter core the our me in product in of and slide recall we growth

core result sales quarter, was from third Water XX% our a platform our delivered contribution from X% Dryer World of a October of net year-over-year acquisition was early translation. During in consistent a and a expectations growth, that our X% within currency our X% Management and increase foreign sales contribution

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larger systems. industry's installation expansion from print water the of For installed, reaction or applications like flexibility our for positive earlier and text the example, the diameter was products. to pipe getting while seen Zurn delivers best-in-class once we've join a supplier fiscal year. timesaving either the to this like leverage of broadest contractors new of piping Contractors work very launched more portfolio that a proprietary fittings of requirements offers product sourcing This the the saving of line non-residential able one to set traditional flexibility, being performance that efficiency new the they their

the the non-residential construction sustain relatively ahead, U.S. look season strength and market excited we As in coming in construction verticals. we're positive for growth XXXX developing building expect the institutional we to

plumbing our higher and verticals typically we've is before, of and square good. institutional position like in construction highlighted involve healthcare competitive per As investment foot education, quite

a market continue in outlook the Water outlook see X, incorporate for can unchanged markets. & new and top of you right mixed end to Slide Infrastructure is Wastewater and As our

margins cost growth to from The ongoing core was expectations reflected with deliver initiatives investment for our in our consistent another year. increase core growth Water platform quarter, the of and sustained leveraged and full the to offset by expect in digit core spending. overall Water productivity our expectations the during Management EBITDA reduction deliver We year-over-year quarter our fourth mid-single quarter supporting our to growth the Management's

slightly Management fourth the continuing XXXX Given translation, in basis by while points to our expand year-over-year expected of increase to in impact higher expect quarter. we our under the fiscal currency Water margin just XXX

see that has times. quarter. declined left by Moving the on Slide debt Based at fourth ratio in to can measured our acquisition you leverage Centa X.X top our net and assuming chart to our this on the leverage the XX, quarter financial outlook closes as

As see an comprised million our mostly at year the flow we debt related In you X.X top expect, million net outflow we our the approximate payments. which defined activities, would cash finished with SCOFR of ratio which leverage our right finish year-to-date approximately quarter we chart, $XX can includes $XX third cash with severance was unchanged times. to of free

for We a cash continue year. and to net $XXX our exceed free our full income roughly to flow meet the range project million

like in I'd we'll Next, of comments restructuring to tax up expenses and our comment make U.S. on then rate tax the the effective reform. our impact

we expect our in of expenses fiscal are million million and $XX up excluded restructuring is previous in cost-reduction initiatives, costs costs to our operating which terms XXXX unchanged adjusted These our made are of outlook. our results. from primarily of to severance report from $XX First, total

by year-to-date given of other under required impact pretax our corporate to tax to quarter, as income planning well effective financial rate U.S. XXXX of our recognize U.S. quarter, and third fluctuate can fiscal on our of due a year-end, initiatives. fiscal tax March we very 'XX level a the the rate were lower our results. timing tax In Next, overall as reform,

full year our income of XX%. incorporate result, tax our effective adjusted now rate of income fourth expect net XXXX expectations that a As fiscal adjusted approximately will an quarter XX% tax net effective and include to an we around our rate reflecting

that effective was liability impact and The net the reform federal our third is GAAP non-recurring benefit BIM a impact primarily U.S. a expense rate Partially from associated in adjusted the from biggest tax of from our in with U.S. and non-U.S. new the So impact tax quarter of effective adjusting between our the full quarter, non-cash the our benefit lower tax third the offset earnings on fourth from the takes excluded reduction rate results year discussing and the the puts onetime rate. with financial tax XX% $XX repatriated previous net of is U.S. rate. the reflects from of our and million subsidiaries. tax income our deferred tax tax outlook

Before we preliminary. your rate ongoing call will the open to to up remarks in and that recently my for tax be initial how like our thoughts I'd considered the U.S. changes stress is questions, enacted on share should impact Rexnord. I'd like analysis

In our that we upcoming in year effective terms to currently fiscal our our is estimate estimates which of the XXXX rate tax XX% is XX%. income adjusted will to apply net best fiscal our

fiscal XXXX, to of to fiscal XXXX drop our and percentage rate as pre-tax to timing look as cash we U.S. U.S. that high reduction reform moving and of cash been fiscal percentage beyond. activities our pieces tax in domestic respect low direction, there the going federal meaningful the while largest headlines a our While are below being in anticipate in to we XXs XXXX, production a due tax our rate, on XXs some our income With the and XXs ahead XXs tax in would we've the low the pre-tax expect the puts other focus to deduction. repeal rate, fiscal XXXX takes as for we some being income between the and

best from impacts U. remind current of you tax are comments of the S. our that the me Let estimate my reform. based

our for we initial mid-May, of positive anticipate able guidance rate provide Rexnord's in refine the As we cash for provide and specific earnings continue financial impacts estimates the tax to being we on when XXXX. to flow, our our size guidance fiscal more

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our appendix, in slides to to the you and guidance future the impact Turning the of our and In potential means of Centa guidance into to a restructuring excludes the is first, remind I X assumptions items, today's that divestitures our such have specifically come you've that included XXXX need incorporated separate acquisitions expect. guidance. the we as impact slide, nonrecurring for acquisition case, in in included other not costs. fiscal as the

adjusted Second, your of and impact of income. our for each a in after-tax net some we provides made convenience, specific we've calculation that table adjustment included individual have

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and call the earnings included tables up in our we'll open per also adjusted each Lastly, your questions. to EBITDA release adjusted earnings we are that quarter. share related include that, the for reconciliation With

Thank you.

the begin Please now go Capital question-and-answer our will We [Operator from comes session. from KeyBanc Instructions] ahead. first Hammond Jeff And question Markets.

morning, Hey, good guys.

Jeff. morning, Good

morning, Jeff. Good

just talk early or can margin Centa, where multiple you you opportunities synergy And see just on? about some then So structure on paid?

ultimately we reasons, on details get those multiple €XXX.X within we more of clearly versus we and Sure. basis that years. digits with really pencil mid-single we a X point to we'll as sort sort but give that single-digit, any of synergies sight, view of I The cost think on purchase a for is for hunted it's purchase growth. high synergy got, is X you one price We'll we've so think, the The good price of obvious paid closed based think million. line of

I think into in we the world. best already what growth business will be is the coupling think there the with DiRXN integrating

think I super see us about So after it it. you'll It's about quarter. talk here we a closed are next we and fit it get because for synergistic excited highly and in

then a what That maybe East And for next kind still year? talk some sounds great deferral to shake that about of sounds just like seeing quoting - better hearing it of you like VAG maybe growth. growth Can global we're you're deal. over Middle lagging, delays the expectations out your customers activity, from

I I mean, wouldn't assume lagging. it's Yes, that

growth quarter the that good. was think I in the

build backlog. continue We to some

it's I at quarters converted standpoint, - to still this East think hasn't it think but a clearly Middle I it's point, from stable. far much more

region improve. have I the think you seen

places. and in seen other Saudi You've improvements

I say would a months converted into this wouldn't a hasn't point. X that I than this was probably drag really at growth bit XX So either. assume ago. better massive at that any little But ago, it's it's point It incrementally months it

Okay.

our question Please from from Research. O'Dea next ahead. Vertical go comes And Joe

Good Hi. morning.

Joe. morning, Good

previously bit little end Management at speak a stocking? you in particular be And that whether then the outlook organic quarters XQ, Looking Water what seen segment setup the three on might like first XQ into versus of to out, better it underlying mid it's at mid year. you in whether single that a what anything kind have the calling low for level now a of or about But and looks representative stronger detail also OEM little then a user for little of seeing in bit could within you would to called you on the and a thinking side? versus demand distributor bit PMC,

is this Mark. Joe, Yes,

think are you right. I

comp, XX at days need you than will If be our margin - I quarter for outlook go for best stack strongest it is going was said at if fourth quarter, fourth PMC it again the core quarter. margin, stack a into meant year, even result margin, ago. - core XX stack our our quarter. do tougher you this XXX we stack better look throughout the our and to margin what's I growth, look be But really growth, the We've stack a felt growth not always months, will core back the

core This flat So last quarter. low range year, the year we mid-single-digit wanted that something basically for growth. requires

this of quarter. kind on our we've distribution As seen improving earlier sell-through we comments, said the past modestly

profits sales levels. level know, in things and still fourth XX but within think, market stacking consumer where end be And things end of we've that lot and be stable cases, improve - demand a our you were our an we has better. from seen could And ago. from the markets overall remained for in quarter haven't though catalyst the our seen the couple in opportunity We a days to next for has our some change us, end market low-single-digits year, we general in

growth rates we PMC. that the kind From things some standpoint, a fourth will of the to expected. kind the us in little more quarter are solid those We year. conviction give is going with half better a water as mid-single-digit So water back of the about anticipated growth

that. quarter be little expect solid mid-single-digit fourth better third our than bit in that in to a that range. saw You In we quarter the

biggest So to PMC the challenge conviction in on the more got PMC our on now. not your really little growth seen quarter we're haven't fourth in point, a we've

the of fiscal kind what to have and free XXXX, that thinking you about That's to, helpful. flow to growth? independent you at $XXX reset could on but outline you. million guess And you little the just cash costs get bit in tax think that before the of $XXX point of XXXX about the million anything this lower. even coming moving $XXX Centa be fiscal resets do and into moving rough that we pieces And just talk some million down Thank should What expense then would SCOFR can't really a organic I front?

Yeah. Sure.

and talked fiscal next little going we've are a about forward. prior year that $XXX So range XXXX or beyond million than quarters that we starts the better talking year mean in to I

SCOFR past talked an So ago We've for years goes with XXXX. paying been about costs about restructuring a away incremental you moving on tax - would clearly moderates X deferred we've away. restructuring the several next five gain the went that go year pieces that in we think cash years into

will see better debt We refinancing.

Those moving interest rate will on the side. benefit not and next that Our pieces see some cash give there we bit. between is as the this decline. year things little are will year expected from We'll cash you it the a overall much positive tax

dangerous starting run So for rate year free much still had ever I $XXX-plus now, type our think right cash to we conviction as us say flow next around million forward. going we it's have little

Got it. you. Thank

from Charley Robinson. ahead. from Our SunTrust question Brady go comes next Please

Good guys. Thanks, Hey. morning, guys.

Good morning, Brady.

your margin that strong over I on you margin. I the thinking on you going to runway on benefits business long But just through, seeing the more Just basis longer-term past Obviously, come could your if on the comment where comments where see SCOFR you see bit you to little kind be margin can seeing has change done kind the wonder XX you guess are a you had PMC in business. months? as a X, prepared been now and you a runway a go that remarks Todd of improvement have mentioned that out or margin the of flesh while. what may for

so, don't think Charley. I

drive to in I sort we where as sort think we we've range the already form. XX% it of sort XX% current pointed to think to its of can being of

changed is I think there. nothing

a growth. greater I XX% a on see incremental quarter. fourth And margin nice our a margin, nice quarter year-over-year you'll think saw than you again, in the in

And add another sort that into Centa then growth cost we a into into to well you into think that's this a a that more the includes of environment. fiscal you business migrate bit And It's heading - range. we when at think that probably can think clearly that below I so little the setup growth alluded probably as reduction little head we better XXXX mix $X whatever you what low have shifted, industry. say, if losing billion-plus margins, flow. without the more up could But we very that much platform, end CapEx where high of is with very strong process any base in very point. stable And in is at with think the, now you environment free legacy I growth would portfolio ultimately installed look about we if very, cash

premier So playing confident and to here this this. we really I long to that game going we think a little of nothing's segment changed. get be sort very industrial are are a But a is of bit

hear. Okay good to

I from cash of a of its days know more, standpoint, customer wondering is early from clearly a one Just being tax this. reform, but released lot I'm just

hearing other more goes maybe hearing of PMC spending customers you as into business, are equipment up are where or - by the a kind systems? I'm line, customers hubs it to expectations in. other specifically, larger We wondering anything and spending optimistic on from just companies' equipment to lot comes your retching

think a giving that I would Look, point, Charley, it's say you I number. largely firm anecdotal at versus this

think table, we the two didn't inquiry years see I think on sales rates, I that lot funnels that all included, the the ago. clearly of projects a

a there's more optimism. is there - So that lot

is more there a think lot inquiry. I

you tell there's reform. or there's are optimistic number. translates the the our over than think can and million $XX result more I to we optimism, levels. spend get it's been hoping and But but of that, a that that anecdotal up next I shipments you can't that it are year-or-so, $XX sales orders course seeing we and million I tax of as really in clearly show more

guidance, kind accelerate, it right? that XXXX, I Yes, for yet, can it's it's trying your to haven't specific that. would number, it looking be what But but you I where baking today? do not really it if thinking incremental then core too know anecdotally, you I'm that, - through growth was you to to hard to guidance, guess I are a seen get come Obviously, get of not in for obviously your all were

Absolutely.

of We at in are rounding have not - we here our fiscal home XXXX. looking sort XXXX and

increase any reform. a result baked the in spending really significant as in from haven't tax bump We of

XXXX. done do reasonable doubt really a with for really up if with announce starting fund be marry tax on we very guidance. constructive a you But we'll should that We position that. point, in have a it when I good set that the clearly, macro, to decent backdrop, on a non-spending not us nice fiscal

thanks. Yeah,

from Oppenheimer. next go from Giannakouros ahead. Jim Please comes Our question

Rob. Hey, Mark and good morning, Todd,

morning. Good

Good morning.

Question humming growth digits Zurn, along cited. that seems to be specifically, you nicely, mid-single on

I products, for think forecast or new mentioned growth building greater gains? or are or non-res you X% calendar within vertical this so by overall, geographically next, opportunities year demand and where you seeing for call that but share

see we And to look commercial res our with, for - started spot. that institutional. of talk the know while, as and that's our sort by You non-res migrating then obviously, a the as about they're now sweet has off we followed some Zurn recovery really way at we business, worked,

seeing And a it or So I we're they've starting generally West. whether see. the stages than We the XXX-bed that about what think at Midwest the if over in in about - market square to of we - things all healthier dormitory, per are we you're the content of early say it the foot, beginning perform. a that's starting have think are to hospital, been regions country, Most you XX-floor while. institutional know to would very lot it's see a the

new to that. pretty backlogs relatively And and solutions we that inquiry to that are that dose optimistic and with marry outperform able rates you up, a bringing so we'll market project are be are growth, high, have of nice X% market, we products been the

that a augmenting on focused - are we Are there going should Or be story be PMC? you there? organic thinking working opportunities your an Yes, M&A to it's - you. M&A for and been is really

the commercial are logic we acquisition going essentially in if do and all the it's be so in Dry for World applications. the we think industrial own restroom Jim. We how back is did to I both, October, come

do, in pieces do can competitive we it's some advantage we fragmented pick and in. can more a mold. think build it and we there's we bigger can is there sustainable even really And there So geographies bits up still more are

is that's internally, see I M&A smaller comment today initial it story is the humming being and your So and obviously, rule pretty market but that along, making happy out. progress good the correct. wouldn't I and think the with we're Zurn We constructive we're

to for me, And on Management you. VAG. over Thank Water one more just it. Got switching

leverage plans specifically? building a still that to healthy U.S., like Just curious what the case? deemphasized apparently been is I'm in and Or Is you're if there correctly, here committed about feels backdrop the here thinking in the it's that the very brand U.S. organic

U.S. look, are and the quite well. frankly mean, in I Yes, still winning We're doing we still

on The innovation base. and that from starting European are think markets having bringing I are a sort the technology small the a very growth. is to we our issue from we is the positive U.S. of impact

take but sort then time, going are we're to with meaningful while a point success. to long a out take point we of but I it to going deemphasizing are it's it's happy rises going see the lever. any the don't that a to way, we in it so until and growth it talk to And as

you. Got it. Thank

Baird. question Dobre from Please ahead. go from is Mig next Our

Yes. Good morning.

growth Water your into with help maybe Zurn? sticking comment out So infrastructure between year full that can plays outlook? in as also maybe break And how and you Management, the to quarter

between growth two Mig, its meaningful Todd. of difference of the There parts wasn't in Management. the the numbers any Water

is that to? still And full year, works the for

- our we're down to, fourth I and Mig, think we Zurn that's quarter fourth relatively mid mid-single quarter. the digits, end a is for our and growth growth expecting our think in third end quarter Mark. balanced to between Core this Core in markets VAG markets

embedded Zurn business I clarify, out. a have side. say guess quarter I by the it's our the mean I Infrastructure sort growth was Water to solid Water sort for total the drive line would will that include would what of the the think expected outsized in business Infrastructure would performance and just maybe we with in any the Mig, part not of of in I core outlook, growth the in significant

positive very both the to overall contributing growth. So

was it. that's I lumpier, because was the a I just wondering is infrastructure asking little question. why Got

Yes, totally understood.

you're for the still Then points that expecting assume in both expansion margin, terms segments, on it's XXXX again of of XXX in full year? again, outlook, to your fiscal fair basis

the is in Yes. both Correct. correct. segments. basis XXX points That It's

is And that corporate $XX item, expected line the around Okay. still expense be to million?

higher, mean going call higher to million year. that for to $XX fees incurring That we it the just little know we'll one there's be $XX closer seems full million range I Mig. fourth in the some to probably a be professional quarter

stay think some stable? forward? this do forward? have this item you going of inflation line Can to how And going kind about Or going Okay. you are

range. be It to will we be. stable place $XX Stable. fair the that keeping That's next yeah year $XX million as are million

me helpful. your puzzled a you then tax. a Okay, But seems your about you that it me structure maybe understand for Mark, this production cash the you're you added thinking both losing than question that, is set as I And benefit help would bit within what domestic I'm P&L tax little rather the very away. incentive And I'm the but goes rate understand me, about an last if and expense to can this. know, that tax simply of if that it's somewhat

here, what sure something bit maybe looking XX missing but higher why at you than I is maybe years? me XX, in am understand we're essentially paying little have which as last been So I'm help to a the few

items discrete year that number, some and in we're this XX that investing Well are there we going rate are to down.

XX% the items is You take XX% all discrete that in rate range. to our Mig

been called going out discrete and always we'll but that item be there's year it's yet. to year, Now XX% when putting that items I next discrete think next just haven't XX%

If you the to XX% look at is base XX%. our rates, going range XX% to XX% to

right why I'm Okay, XX%-ish talking am of we - talking the circumstances. enough. I same are most company's are guess dealing they to wondering fair I the are with and not just

point? starting or or Were XX% their was XX%? what XX% they starting Well

this suspect are facts just I at an know are by is we're generated year. taxes company our go year planning the and all obviously going to next to Mig can that a our a Obviously, going The income under and different point. our circumstances is company. observation? is thing good are to this what best don't be make giving down is I think we solved conference that can I that something be call. would shot Well, you

XXXX $XX more a to we and away. cash on Our headwind go to the going down. year cash significant going a million taxes And at to look of XXXX tune significantly is a tax go as are basis

I it's positive us. don't we that sort we are. can net-net, take am think to And And show details up Mig on it's call. talk we it's that bit all results. I I effectively the not of going the of a that confident it's through all in where you can for specific the so through But know

enough. Thank Fair you. Well.

Our Please Lau comes from from Karen Deutsche ahead. next go Bank. question

everyone. morning good Thanks Hi.

Good morning, Karen.

into context had and a normal So should margins? of kind XXXX in us Todd, DiRXN you Can heavier going level the of help think how next incremental of with think you the so I investments level forth. of launch sort we fiscal investment about of year frame

if Karen, is the significant to again, do bit tough move year a invest I take for we little try creating in growth. you two or think back what things us a capacity and to while were actions

As think rate, both, we're think growth. think the an sort cost going we at to that we and so don't standpoint, a And about that so think to really manifest are perhaps investment head because way same in margins any to better invest environment we we're can incremental we keep the going into change I growth will likely investing out from what we it's continue of be going the itself of at more. to incremental right. business to to do take going

back We leverage we're investment business And and doing system convert the to out. take are but to cost that level. wastes take out things going the a the into and of significant growth that amount at platform

change We to the are not going margins what a incremental outlook really are going for as be result. the to

think better starting a business. of we're And very stages to it's So creating net-net, I see that. early

with into kind SCOFR I get DiRXN, right? to on to to just like do was want bit want terms investments you or of obviously, There's, the assume more whether little incremental from call continue, dampen XX% should account to next year, should some sure. the it in of but the SCOFR XX% lot that do? going for you you take core, we Yes, that savings incrementals to next we savings that a runway a of there? curious There's

Yes.

should... Is that we the way

We announced…

Sorry, go ahead.

to incrementals. So, am guiding is what XX% those I highlighting guess, we're I

the next incrementals into that You can as investment. with year continue number to think level of about same the

as I to And, sort cost these of incrementals to are things which is in some to sort we so hopefully invest be message going probably, think we Which to we do we'll reductions are those DiRXN. going growth may both. to is to we think do I like going that absolutely, that are in have ensure invest can deliver we we're of articulating, continue the to initiatives. said,

what of market changer be think we going we've a to from to year. that and next with that the of bringing bring able to good been products some a game more You there, you but about. productivity got going products, and more a talked It's digital can lot assumption is the see platform margin We've is connected advantage are that in we market so to a quickly, competitive to invest and building even impact. incremental examples

Great. that on follow-up on a you earlier. it. the Got Okay. made comment then M&A And just

side? expansion to you, that more Or an on alluded So sounds rebuilding you North on more geographic the did earlier process obviously, like America there's the the at kind Infrastructure maybe then Zurn PMC. Water do there is of would and you side, in meaningful process? that's more on to Centa do organic Is the anything that

Yes.

are business. We invest Infrastructure Water M&A in to going not our of side the on

Okay.

And organic. would any do growth be we would there that

Thank it. Okay. Got you.

Our go comes from next question from Goldman ahead. Sachs. Samuel Please Eisner

morning, Good Yeah. guys.

Good morning, Sam.

here. Just a question quick incrementals on the

year. strongest obviously, line the you incrementals, XX% So here, organic you at guys total for know, about kind I XX% had the recognize of

Just driving drivers of cost? price what's curious that? various what of it it the Maybe major stronger? incrementals Is components Is the the walk through absorption?

Sam, this is Mark.

anticipate and you SCOFR Mexico move levering going through our really PMC benefits coming we're this first quarter, fully the at time If read PMC look water, the to were degree, we the through. biggest, to and lesser saw platform,

out, I largest SCOFR down, going the range to expect for will back the platforms. are incrementals benefits When that the fill the that we in would hands think So we be driver. the

we core years we're the top fixed in than its leveraging less on - I It's taking what we ago, have Todd. it. reasonable and two - mean business growth cost Sam, and had that of

that cost think as wouldn't coming gone absorption. about would have about that I away think it it back. as I So just aren't

any margin incremental talked reinvestment, in And so we be would profile the about, better. that the growth absent

are are wind I think XX% and also going that that saying we to why we you up that's investment is do with rate. some

sort also say, of Supply Chain in is this Optimization would are mind's a when back I investment said going growth what we couple significant think exactly dose and years pretty to done a launch, in. we get of our it do of plan eye ago, had I we so the And

out of so with the we have in played what And line expect. would quarters what

guide follow-up Maybe on And that's helpful. a here. the just

corporate in said Mark, know, only think, I mid-single-digit full the there the XXs kind that the so incrementals expected. for fourth bit whole company? one, sounds higher growth quarter I you? like that than Assuming sounds So you have end for organic And two, or discrete so of a of implies I think - does don't it to people low year, are makes any type would like the X% low this sense fourth quarter that range, in expenses items,

curious, just incremental quarter in are of the the Thanks. lower So the applied profitability kind guide? drivers what fourth

Sure, yes, Samuel, correct. definitely your is math

see we earlier, think in will range water, quarter. fourth in lower be again, in in mentioned you I as quarter the a the start of range the we'll think be mix this fourth again. I end the water, the margin, very corporate in strong and PMC when In XX% to higher XX%, incremental will core expenses that of given in we

that's so rest incremental So all right. we probably margin, the and about talk level think those combined about together put you that

guys. Thanks,

you. Thank

I to will closing comments. now turn call for over McCarthy the back Rob

providing year interest for today. update fourth and like Rexnord a to your in report day. in mid-day looking fiscal we XXXX us joining on in Have sorry, mid-May. we're appreciate call when results our quarter thank to We forward I'd good everybody - the our next

and Thank today's for you, now you and may disconnect. Thank This participating, concludes ladies conference. gentlemen. you