Zurn Elkay Water Solutions (ZWS) 31 Jul 192020 Q1 Earnings call transcript

Good morning and welcome to the Rexnord First Quarter Fiscal 2020 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, July 30th.

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

Good morning and welcome everyone.

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

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

to reconciliations and Our measures, why non-GAAP the earnings about why believe data. information we these release contain and additional SEC investors, they're GAAP corresponding helpful use to filings them, and contain we

with to operating Consistent our and core adjusted EBITDA, provide we prior flow feel metrics of cash understanding results. share, per growth, a quarters, we'll better non-GAAP these speak adjusted free as earnings

urge release review our you information in However, in SEC. and GAAP to for measures these not we a the earnings are filings substitute with our the and GAAP data

update XXXX. statements. provide the and strategic Today's open highlights year fiscal first an financial some followed questions. from two by our up of selected we'll platforms our for our our quarter call on for fiscal XXXX, your specifics on call We'll overall for performance the our Afterwards, our will cover outlook execution,

I'm CEO to call turn to Adams, President Todd and And the that, of with pleased Rexnord. over

everyone. Thanks, Rob, and morning good

with our our XXX some growth sales growth with weather the Overall was and where on basis our simplification was Our to first quarter X% results initiatives. point overcame outlook strong core line the include about in expected. short-term our does we finish challenge from a concern impact quarter up which and ended roughly

which a quarter year-over-year growth from currency to record headwind for and we in $XXX adjusted for bit grew our us, X% EBITDA first of EPS XX% delivered a a Despite any our adjusted is year-over-year. million translation,

business our compound each things doing years that improvements macro system into very strong when execution focus we Rexnord get everything continuous quarters. improvement. over of better a look day makes to cycle, the reflects the relentless little environment In on back and near-term feel the Our importance short meaningful and

number we're three we essentially a back, sheet cash cost structural terms initiatives significant in a a delivering Phase delivering also Taking comes when is with a be flow a we've set exactly and right amongst growth X products the place, and a a strong planned actions to business environment put great behind industry that's position competitive actions had platform in of ever a organic our growth to a that ago balance where resilient portfolio ourselves the of leading heading connected slower step of fixed us, and down the number in earnings and it before. underway. create where in free in invested well middle years than We've with more

to as we've parts two of scale continue talent add, execute to disciplined also strategy acquisition to we our business great substantial acquisition through added our I'll our grow various platforms.

major a footprint of least to results I'll the to teams are on macro dynamic coming in build with It the to proven from great changes, done a we've delivered to against our unpredictable success navigating unprecedented years. disruption two high above $X making and laid and little to be add that that's say very all by delivering can the out ago continue backdrop that to the distinguish tariff performing have execute great this poised leverage very feels a into while enterprise to time. strategy billion that the and continuing flow market, us that further multi-industry grow we Rexnord platforms concentrated billion we $X returns to as will over high three can with cash years business

of since our last XXXX. making integration of five the results in are about Centa this of year-and-a-half. We've examples visible now excellent February for executing dynamic in been quarters the over the Two acquisition

RBS or as reputation one the recall for three-year one increase improved and great The and as has on of in company growing with the its Centa's deployment double-digits the margins. with flourishing we've we've part we products point XX EBITDA from may a saw is a and that's of since of acquisition brand, we XXX the in waste, a local a and that improvement Rexnord margins. identify Centa You productivity, already rigorous time double-digit times point less the team at in to how at basis worked objective lead percentage than eliminate transitioned established business year

the to goal the we're With point our internal of two sustainability to margins getting tracking lift which we've to XX our raised where close years fiscal of just success and in integration, XXXX. the initial is

there's work expansion While optimistic that margin XXXX. get still room as even into to do, our for I'm more fiscal we there's

is of proven should over that time great in leveraging Centa a than philosophy competitive operating create underlying our a our markets. industrial example market a to advantage faster grow

in that XXX of These ended real combination an $XX market the input rates. of and in to cross-functional and our start supply XXXX able last confidence implementation run example expansion points early commercial and next our from could perform additional across a solid conditions. what import out in time very been our XXXX, year fiscal you The have we've cost Leveraging us been a challenge speak delivering basis up the for the current been has then we navigate range examples for accelerating see tariffs fiscal can margin wide of absolute end to of as chain expansion created well to million successfully our this costs can our and quarter, teams first challenge margin playing as XXXX. at

three reduce of to primary while that point. been profile; actions at drive variable years has just our flexible. our transform We it focus growth, think is business more the frankly macro to over more making broadly, reality to our the strategic structure levers cost Stated develop overall last this and uncertainty more a and

the improvement teams that gives value to condition ability relying compete, coming places priority to nimble, on over be and a on that great organization years. system us confidence a the having our in having business to love lot of So continuous create a

X and Please we'll at quarter turn results. Slide first to a quick our look take number

sales million, before but Our at net X% $XXX last from in year, factoring translation. up finished currency X%

Our initiative and approximately XXX again basis saw and reduced by by sales especially product our Zurn's points line simplification weather constrained we April in bad May. unusually growth

EBITDA expanded Despite the adjusted margin our headwinds points. to million growth and year-over-year to XXX X% to $XXX continued by basis expand

operating platforms. in year's in growth aerospace applications we our distribution Looking with our our PMC and double-digit year's Asia quarter last in in we in platform in in somewhat this declines line first challenged quickly North but in as in first our Europe. OE slower Compared at growth solid sell-through further business, growth expectations with experienced growth was and quarter. Core saw America core

strength PMC's and adjusted on the XX.X% benefited we inflation of although from in cost just operations in structural our second we year, our completed was aerospace a our to delivered and EBITDA business about continue margin last more a the offset as margins being that moment. cost the SCOFR overall aerospace of to impact in wave say the reductions bit

institutional and markets from works site water the weather steady management delivered growth and despite end of well platform benefit the markets. Zurn as in growing quarter the commercial and as to continues end We fire in growth protection penetration demand in solid our adjacent

to the equation provides best tariff price and both long-term. basis the EBITDA that manage evidence can margin and point we expansion ongoing XXX the structures over in Zurn's immediate the continue cost

shareholder as balance options Our and June value set we drive to unchanged at evaluate we our sheet increased leverage forward. expanded was XX continue to go

leverage Given is each for results will performance XXXX as X.X ratio cash our comments and of times tracking in M&A, little fiscal to of the our platform his range part the outlook of at XXXX. no Mark and call. a in free bit additional the end later the consolidated the flow review assuming

about Optimization X graphic we Supply Excellence. Please a content. product Repositioning I'll largest at left turn offering where completed COE range Footprint the Slide applications that the comments we individual to our new wave of Chain Center The our was within make second aircraft last of our our and have of and year. the The profiles projects Aerospace project bottom and few

facility paper pace on to a clean state-of-the-art the near improvement certain a in constructed new critical our operations near-term and established took the of invested area, new operations. to hit and for plant, equipment out Chicago XX% quickly We machining laying sheet approach ramping a Productivity our in are increases objective.

Our more seen new and customer base the investment the that learn they've about when was to announced excited result. pleased was it now even

and customers strategic have our the the of strongly been all have toured at this reviews facility almost point positive. As

the in that winning bid won five doubled share production been from we've long-term to specifications the position goes gains Airbus new continuing our into of this additional effectively importantly, and expand content key first customers and years our commitments year. Airbus after on supply on chain. aircraft Recent penetration have we More last

core our XXXX. in Compared fiscal in growth our we the with delivered fiscal low-single-digit XXXX, be core to range aerospace growth high-single-digit in the expect

that our shareholder steady our return, a deliver to business Our flexibility business and towards and digital time. all are over higher progress perform commercial higher demonstrates initiatives and transformation, XX:XX to cycle generating simplification stages our with model returns making cash in of aerospace with innovation, excellence, the experience work investments our higher stronger in contributing combining SCOFR well we're the growth,

Peterson. With over to that, I'll Mark turn the call

Todd. Thanks,

in quarter with XXXX increasing basis, Please our year-over-year with X% grew basis, financial X%. sales turn core expectations. a sales our of line first were to Slide number consolidated X. results mostly On a our fiscal On total

million per by by $X.XX. X% increased EBITDA adjusted Our to to earnings XX% adjusted share our increased and $XXX

Please turn to number Slide X.

low impact before simplification in XXXX continues outlook our to year initiatives. product line to a XXX to for incorporate point growth basis XXX fiscal Our mid-single-digit our core from factoring

growth. continues a low-single-digit to our incorporate basis on net core So outlook

expect to to to representing flow $XXX mid-point our cash $XXX million of We our net million growth income. in EBITDA and be the at our a X% exceed for adjusted free range

draw earnings to a our But I statement. On results would added schedule consolidated for bridge to to we release from your provides adjusted to I income GAAP attention move that summarize our Slide on, X, have an like the new our quarter. statement before a income we

quarterly also sales adjusted expanded EBITDA of operations have and income our scheduled growth reconciliation of we GAAP of from the for adjusted and platform. results to platform to EBIT addition, a quarterly composition each restructured In include and summary

Control. by exchange the than growth PMC to Total recent Process year. year-over-year modest X% Now decreased Motion from M&A headwind platforms the of the to remain were our let's the a contribution positive sales through a X% and Slide X% stronger balance dollar. of of expect in and operating discuss of X% offset core to At rates, would as & translation we turn growth first impact more the two X our fiscal currency

in profile we quarter during in weakened. approximately was growth and growth the from by moderated Europe the Core quarter's pronounced growth PMC call product as reduced core more last initiatives. XXX% line weakness Asia also discussed became our our in simplification

end generation, On continued food our domestic our hand, in beverage, the and construction-related to we good end mining, see in markets. markets other and and aerospace power demand

We North also channel. of see sell-through our to low-single-digit growth in American products distribution in our continued

The into the incorporated is for in end our the of on we've our in only world shift past fiscal distribution flat assumptions the outlook demand assume market guidance market rest based change trends roughly over quarter. the our to XXXX to

of execution operational the point increase we more chain continue execution as delivered EBITDA and good in from margins offset we XXXX our spend. fiscal ongoing system basis the are PMC is PMC's aerospace expansion a growth business in operating optimization Strong to realizing structural expected operations rest to margin to our and expect than initiatives investment our XX year-over-year supply and footprint and through our the savings repositioning in

of we quarter up strongest models PMC's against basis XXX your to we're than last when for PMC, update growth from up you year growth XXXX. points other second X% any quarter remind and in core stronger you our As was quarter XXX that fiscal

X number Water we'll platform. Management Slide our to discuss turn Please

first Water and platform delivered a quarter, net both our increase During a as-reported sales our core Management basis. on X%

the growth Our product plan simplification in initiatives Zurn's core on minor quarter. had impact a relatively

three-year the in from restarted we weather poor from comp May negative reaccelerated last during the had and Management sequentially. for quarter, despite growth difficult conditions our second our year, a relatively as second quarter in Water more on stable core growth. second impact June consecutive expect Growth quarter core stack But growth particularly

to growth Zurn North growth, of innovation construction our Underlying year on non-residential realization. demand forward based robust; favorable demand price American and looking pipeline, we're solid remains at additional market another

and the spring, in stable. slowed from overall in commercial market non-residential a our the our conditions construction retail has continues As are illustrated declines by markets ongoing office end remained construction summarized persistently half. building remain unchanged spending is this our in end verticals by sector sector but the demand relatively issues the growth in posture that outlook outlook has weather in U.S. Year-over-year verticals been favorable. somewhat non-resi adverse Commercial outlook overall has growth in slide, relatively solid cautious pressured more the detracting core institutional in for more incorporate growth as second to our sector growth

Institutional share a content would grade sector grow and to plumbing relatively spending higher where continue expect greater rate. them relative is at specification we stronger, is our to

we During our formally connected for and and institutional washrooms. first quarter, our flush digitally launched first valves faucets commercial

portal. hand or and As Zurn displayed faucets hub can that Smart accessed XX/X enabled of graphic illustrated right connects the the digitally slide gateway the Zurn to by Zurn's through secure be our web cloud the sensor Plum to in lower wirelessly connected

and consumption Alerts the need mobile arises. each visibility Our for maintenance of directly trends patterns preventive be customers when gain can for to sent usage as their well fixture. as connected device real-time water

send visibility our plug preventative and changes better improved and Zurn Renowned mitigate building's control usage, the institutional team commercial immediately plumbing and fillets can respond to functioning connected products can over local daily maintenance quickly an the maintenance status. need expect and faucets the the customers gain concern total more system a in and in detect manage With to impact. any buildings of water alert on for the regular sudden are and system, problem timing to

where retrofit Our see larger into system relatively building control the which seamlessly products opportunity. connect is can and be the customer's easily we

local network. savings launched benefits we a in or office to connected introduce talking year. solution this Together that solution a these We backfill system, single solutions capability may substantial product national that can owners digitally December. connected water later recall operators a enabled and and to about combined a healthcare our plan You a drain building, economic whether presents deliver school we're

year-over-year increased price cost to we initiatives. XXX basis while leverage as delivered our adjusted and reduction profitability. continue and to Management's points our to cost year-over-year margin the in favorable Water Now market manage turning X% of EBITDA and quarter a by first growth core equation, expansion expansion funding

with XX left. Slide onto and far chart the the Moving starting in

typically our our our for growth quarter accounts confident Our of fiscal over-year XXXX. free year- increased We less although cash free our cash free expectations remain in first in for full-year than flow. flow XX% cash

debt center, the the by our measured Moving of financial of see near drains. range to as the leverage the can slightly as is debt ratio that our chart even acquisition targeted low-end our in you leverage increased our net net fund to stainless

call expenses up Before questions, I'll the on effective we touch open our for and restructuring rate. tax

primarily and continue million expect in SCOFR and our million restricting our of reduction initiatives, results. XXXX. expenses $XX $XX costs severance fiscal operating in initiative, of of our our X from including to terms These excluded First, up total we are made cost are to adjusted costs

other our corporate planning fiscal XXXX approximately rate by of effective approximately timing In net well as on drain second the will we to be of our rate pre-tax We and tax rate anticipate the will quarter, initiatives. income tax given XX%. XX%. XX% our adjusted effective Next, fluctuate income levels as of quarter anticipate

losses Turning and included impact to Slides acquisitions, items incorporated potential future Appendix, other gains have restructuring you we the the remind in XX. excludes certain such guidance guidance the accounting I'll Slide for of that as first fiscal or in our XXXX costs. our potential on non-recurring assumptions

modeling accounting the preferred. if-converted a used our earnings per for on as our required help XX been mandatory share convertible outstanding count the practice, reconcile under has presentation quarterly As the share also you method under today's incremental adjusted to Appendix table Slide reference includes of for

method if-converted was and the dilutive quarter As illustrated Slide therefore in appended was EPS first adjusted to the applied. on XX,

like sure count earnings to share I'd XXXX everyone with to how on share. also determine estimating use is make clear to the per fiscal correct our

date. only the XX, that count will average converted shares November include preferred on common after share have shares into Given that converted our the full-year will

Our in is current million shares. XXX.X estimate fiscal for shares average outstanding XXXX approximately diluted

for we'll open call that, the up With questions.

you. Thank

now We question-and-answer the [Operator begin will session. Instructions].

from comes Joe question first Our O'Dea.

Your open. line is

there that get you side? PMC things just just side, about in end you various in understandably expectations XQ, quarter out low-single-digit of and across you're give short the you what the in within markets through that continue it complexion generally you of at to as kind first thoughts and confidence looking comments seeing in how the organic thinking that's the on with kind around that and changed seeing feel move cycle you on whether and full-year your maybe of the on anything or price where volume around was tougher but a just confidence what about perhaps are what Starting you're talked comp that year kind there

Sure.

PMC, the up quarters. has been look of I last of when end Absolute couple to sell-through think a we for at the low-single-digits market couple things.

Our is say relatively some price. growth would I base case a is which low that continues plus market combination of

specific Looking PMC. half a know as of you roughly, that's and Joe, about

good aerospace have gives to cautious the sort at high-single-digit then We right. look other think And you visibility a end I from when outlook taking we're number. backlog view that a also for markets, growth us end-user all of solid that a perspective OEM core

America food growth I still that think from have getting Centa. as things pointed good been and out like good, beverage Mark North

but taking rather we're on it think view I we're year playing a that's the sort of cautious of remainder how the out.

ago; we when think relatively a we short visibility I had of lot again time to guided And that.

and of that market Centa an things a on production end from sell-through We low-single-digit confidence has environment good I I from is and couple contemplated growth. that absolute in are we're place. the core a much And much don't doing We industrial So is other think same seeing get the guided changed. well perspective. we today. to of aerospace still view get we and reasonable think then

think that's about So see we're at of we sort today. things. where But least I downside significant don't I from thinking it a where plan

some those and on getting what has could of doing substantial are product of potentially it sale bit of it something those or opportunity could how how and the drains, kind digital avenue a launches. ranges, share connected Can generally kind across system opportunity about worked way terms the become talk Water on And get faucets, really in little then market go-to-market separate more you're at the change when be? Management you a of and sale backflow you that like a of

these think a all way system. together work control integrated the nice is in thing Yes, components an I with building

And having we're of the in so the contractors the critical of are building of all able a user to lot integrated capability, were can quality part inside has. these seeing end safety with water contractors general whatever and offer into a where building integrates owner who building the be traction non-residential a solution prior performance and components that to that interface or that both owner a the to

that costs. schedule but actually real the They labor the control This comes work were right so but can takes us sort job only we're and systems and flow also a way. when do so owner not safety we intelligent the sale maintenance lower to and integrate to well And these setup everything really selling installation and things a another well else always building of level the it and contractor these from work monitoring that in together. as actually components where time with

that has gone that inside the they've period lighting see being of non-res path water can where a think value able route but the it's void and performance in time control to contracting monitor nothing a I to long also But the in monitoring all the same. -- this additional world and building of of on of for a building. this channel is really fills been So finding market critical that down partners we're HVAC

the seeing performance of So added. interest lot see we're a from value a world real contractors this of that part where as

So over opportunities are to time. significant we that they're be into really pulling going think us pretty

line Mitchell. next Julian comes from the of question Your

open. is line Your

Hi this is Julian. Jason on for

been if give sort guess particularly one color growth just to realize difficult you the that of Management. conditions quarter what poor if could as any weather I in question Just to but Water in without size there's on I have May. would it's

Just first of run to sort have so rate can quarter? we a [ph] what been get picture as

at be pretty to had decided, was I to June and mean really the it's looked would April substantially. If what April by guess. our bad be we three we looked up we picked May two visibility got like, time had to points perfect

sort So July we good season ended of at the and pretty rate. That construction of continues a now. into we're heart into

anticipate finished seasonal May less get America So as be second then to March tapering go that June and but weather and in down sort North July we a quarter of would we is we tough, through would is growth that was the better then obviously good quarter in place. our strong,

get really that little up quarter following you in mentioned bit demand see is then that's PMC really in you demand guided to that come gave or to saw guided you that relative a on worse after you QX, throughout that clarify environment the much in just that anything imply in point? what you And you why guided trying when did and how compared solid PMC didn't to QX, you did too just a worse get just the that earlier, see back post Great. color didn't you demand

think would that we're guided days that had when half so much not we course Well mid-May, that visibility we of changed guided ago. May and again what saying thought different the the quarter sort and from first of first substantially I good it's I of XX April over we don't what the and to we say from

to change a not and that one lot we different is confident I'm right to think distinction everyone still of our outlook the question what I seen are of in that exactly we than haven't that look, was reasons. sort gave So a whole we the say, other sure best for we thought we your the provided material

Rob. is this Jason

a take if -- did Our our is June. this you're loss what not in looking growth for

Hammond. comes Your the from line next of Jeff question

is line open. Your

you of simplification quarters out that the it does basis three that of rating through the called is at Just next think see quarter-to-quarter? then points or run and I we and all on lap kind each around you then the line that product XXX move

I think Management. Water around moves little is it PMC that more probably bit. it I in relative would pronounced to But a say

I by quarter the PMC and you start in quarters fourth sort between then majority anniversary And expect the the three will prior so we see impact would to first the of the year.

And little picks water and up we then quarter it second into the then back a in bit probably the tail into fourth starts quarter. third again get as and

I out. So would relatively say And clean. the by fourth platform that's by rolls how it should be quarter

any this there water in impact quarter? Was

only Yes, points it so. was XX was modest. It basis probably or

rate And you the I think how guidance know then for quarterly in just PMC, should the growth comp don't PMC. the XQ we give about core but given in

I think have the issue timing Arrow? with you

Yes, Jeff, Mark. this is

call if sequentially in QX that given just to sales that, it, flattish saw closer type to see percent last dollars a to you'll year the XQ last step look like I to range plus put QX growth X up at that year's you you core tough think absolute in but comp number.

And markets. end then on just the

I think that softening world. activity? and in you're change softer seeing particular the Are that are end of any out rest some in of there maybe Europe the jumping where markets

manufacturers Jeff, the not lot continued, softer I beverage lot but pronounced for that's but beverage the Well that's It's new activity, of partially of not Asia a producing partially But in by some we've equipment slower large but it so for Europe to processed one there. business seen think so side product partially same well. there industries. our our extent area in of in that Europe been that's Asian most are driven as us stocks the the as also the

quarters. continue for is trend going past that the think couple I of to

of Europe and in will category Asia. beverage So the be revenue leading

quarterly. And that you margin just $XX like growth be on then million. can what basis what basis on you the kind acquisition the Anything drain looks contribution profile, rate paid give business us Okay. on multiple a stainless the run revenue on would profile of a you Thanks. finally paid around

from a on to nice small within to of relatively It's what accretive it's little invested accretive I Jeff. year. It's we capital return viewed Yes. It's tuck-in, a sort think margins. a

think thought double-digit Great return within tuck-in leading couple year and quarter for we off So of it's million I quarter. we EBITDA something million it paid a a margins, a made relatively a it's low a start. it it multiple bucks well to bucks our gives a about us, as capital. think into three on maybe invested for sense line us little Nice a and drain of lot and that great extension we

Okay hear. Thanks. good to

Dobre. question next Your comes line the of from Mig

Your line is open.

expect good everyone. and sticking we When at maybe we normal Yes, I'm here. comps seasonality disruptions Good Management that the this with theme in sticking the you with here this. looking given Water morning, morning weather quarter just sequentially before should sequential are in a second uptick just mentioned revenue as well?

QX like expect as growth would Mig, in revenue seen from historically we standpoint. a to QX have is We from uptick Mark. this Yes, sequential a

in we out similar year laid we so posted as last XX%, So the phenomenon.

step-up QX similar As what PMC, number we're to QX. on from core definitely I basis. so in we the dollar we about expecting think to growth the look But talked will core year-over-year a absolute saw

growth. end still is that's how areas you're or does with wondering seeing down that Resi if currently of it work? lights I'm sales working terms of C&I and And markets about you function actually would How through line you in something weaker on where then that you potential here kind your through a slide being the the two the is helpful. of yellow market Great, were kind have of thinking positive this and in contractors these the slowness backlogs

flag -- starts It's have I been that. just trying we're been Mig think is inconsistent. what to doing

it basis on billion, If is standalone you right, June look starts. year's problem commercial data $XX with XX% that for a at over was the June start it's says down last the all-time be XX in And an above XX been happen last years is only been and record. months them. or this to June so that have The which there's of five one

we're going relative good, how trying starts where on but starts a cycle numbers weaker sort bit ago be to the fact still a to was less see is going that from predictable. very starts and it the robust. maybe it's is to number the manifests to months number think itself of little a So sort build is really less of the that over all basis And where you're than you're basis, see a year is flash going do I

well, But of And it's to we're trying are it. And And that labor still contractor to work we think country having I business. having not a is all are think is there's It's but fact backlogs see really market place. parts big, the this for backlogs of green hyper the real. Right, good, a in still again great a so to aren't. it's I the regional doing the there I parts again think sort the everywhere are constraints flag of just that function day. that

get it extends things. It happens weather when And doesn't quarter. up caught in a

you think mid-single-digits. I range. out. all so still to growth is look that's It's really XX% we're maybe We solidly a trying not as And that it's signal probably see still but

it's. market us small resi sort res -- side where for is thing in that's of and a documented relative to well of sits relatively where the think that On I terms

how of? have year. that what of call thinking that think going that like any mean are of more or you everybody data mean the have there When rest the market your might really in I PMC mix would for And based at of that should and anything all investments aware quarters puts guess looking else is be enough guess Right. takes you we specific on understand margin I out we are make are and made now comments clear. I to you to the of question I the fair a the way kind end that I you or in seeing any like to to business

Yes, is Mike, this Mark.

If starting look operating that into start run you will X in we'll some our of incurring QX, duplicative through the SCOFR costs results.

in a from see QX, going sequentially margin that's So step-up into QX. QX probably a QX same to pickup the you'll not big margin

X and our that bit. start I those will a to of that dampen some incurring we in little costs a little as of we as starting be QX, will SCOFR margin that's going the executing start So duplicative different some think

margin full-year, look But are full-year the you incremental PMC those despite overall we in still if costs. projecting expansion at

in I incrementals really were quarter think the mean I first good. the

if QX you QX at to think I -- look

They be yes. good, will

end Even higher at the to the range we've expect of you see what over will net time. of incrementals the duplicative communicated cost, of

at is maybe set obviously And now, Okay. year you're looking of thinking November. about the last are convert by flow you to question generation convert deploying available end is to down actually when capital you to good. great, cash How in this expecting then, that your which X.X you're your is the leverage, have be

material from than considered? I'm the how that? you. Thank be more tuck-in a thinking you're wondering a that would rather perspective, about M&A then there at. anything looking So And things just you're is acquisition And what are that

we marching think I that. again the good feel Well Yes. about really leverage towards

well we not as tuck-in I nature but as today's recession. in larger, are we keep in in think scenario a be and place approach did only time, leverage we're to things that want see to M&A we a as at our -- bolt-on, that want communicated keeping a in we we've environment would be look keep always disciplined as very into forward would but things both to mind over the to going could continue that include manageable to where

point, ways So see to the money I we that in likely of think to continue sheet the balance going mandatory I how And approach to this disciplined and would the back to that At buy have always very wanted some road is a opportunity beyond to that, if we incremental very down dilution not. then of to the have say we shareholders in appropriate. to to or option continue think be some a we view and use dividend going manageable the are give we're about to allow sort back way the form convert is from buybacks. want and our standpoint, that we and/or to to

balance think I going of disciplined too not form very keeps using a but M&A to about be it the of high expect leverage way manageable that scenarios. to our sheet return a continue to and hurdles I'm variety So across in the get specific

that. that four don't or we times like envision anything leverage anything doing takes to So

[Operator Instructions].

line question Joe of comes O'Dea. next from Your the

line Your open. is

Hi.

what ahead improve from or water ask of things see benefit that move also about normally XQ. in that anything you well the margins to were and wanted to been a we Just sort cadence XQ a have quarter into management perspective expected of might we as

that's anything just so quarter like or of thinking And the more a level? kind contained as of to about this structural kind

quarter, that can about as relative And expect margins into well. year. Nothing I you get that usually think to the prior think you second you better as I unusual can think

equation I that compounding ahead the SCOFR think one-timers. price initiatives. it's mix nothing effect, a unusual on or things Joe, done So the lot respect I initiatives, staying cost And of we've simplification to the the and so with really with the of think well

So second. with what both performance I think quality first really the quarter we in the in the of happy and the expect

of just then, one the think I question. And raises comment kind other

some some over distribution the response in hearing pushed from partners? in through think earnings slowing maybe season of evidence so I you're that much all seeing of of Are commentary distribution about to of sort course the channel think some from I your a and Just There's and distribution cost the been you environment, hearing distributors. pushback. inflation and at price

in we've the been all not think avoid way. done doing tariffs I Well along chains, say hasn't of addition how any some pronounced in price. when supply look it, to you mean Again rerouting passing our I things managed I amount priced. significant would we've to at a it

we're the getting at pareto, forcing where I they're a if think price I spot component we're So to not level it where the significant pushing we distributors into a were think that pushback. to look as

we would seen that particular it So the we significant in And pass-through have. water levers to different frankly we've I all I think pushback tried we've not manage increases price side any across on say manage the then sudden the a what the building pass because want because become do to don't of things to increases to is the owner price we when all along appropriately channel and it on you through tried significant we've unaffordable, right. around

And it demand. not be it things we so point disciplined to hurt pretty to in pretty people of we're how about overdo but trying the that doing -- go

at this questions time. further no have We

appreciate could we today. in everybody to like providing Rexnord We us to a announce our Have I'd October. next your second when So XXXX forward interest quarter join and we call great late thank the on update in results fiscal look that our day.

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

may You disconnect. now