Adam Farley: Good morning. This is Adam Farley on for Nathan. My first question relates to — good morning. My first question relates to your cash flow guidance. I appreciate the unchanged $250 million guidance on the year. You had really strong cash flow conversion in the quarter, driven by significant improvement in working capital. So my question is, are there any further opportunities to optimize working capital through the year?
Todd Adams: Well, Adam, I think that there always are going to be and obviously, we saw a solid first quarter. We’ve not changed the full year at this point, but I think it’d be difficult to convince you that there’s not — there’s not a bias to maybe do a little bit better than that. And obviously some of it comes from working capital, but its stuff that we just work at day in and day out and so we’re off to a good start. And I don’t know that we could — I can sit here and say that there’s a $100 million opportunity in trade working capital, but I think on the margins, we’re going to work to optimize it and get it to a level that we think makes sense for our business.
Adam Farley: Okay, thank you for that. And then in the quarter there was a non-cash restructuring charge. What was that related to and are there any expected savings related to that?
Mark Peterson: Yeah, the restructuring charge in the quarter was related to the synergy actions that we’re working through. There’s some facility things that we’re doing this year. So it’s all tied to the $25 million synergies that we’re generating in Fiscal ’24, Adam.
Adam Farley: All right, great. Thank you. Thank you for taking my questions.
Operator: Your next question comes from the line of Brett Linzey with Mizuho. Please go ahead.
Brett Linzey: Just wanted to follow up on the resi part of the portfolio. I know you guys have been 80-20 net down. I think about 12% of the total pie. How would you characterize the channel inventories and the tone in that part of the business? And then as you look on the other end of all the moves you’ve made, how is the margin profile relative to the rest of the portfolio? Are we running at corporate average? So a little bit lower? Just any context would be great.
Mark Peterson: Yeah, I think the resi slice of the overall pie is, yeah, I think roughly 12%. From a channel inventory perspective, I would say that is super low. There’s nothing in there anywhere. So it’s sort of nothing, but upside if we see some recovery, but in terms of margins, it is not at the corporate average. It is below the fleet average. So when you when you look at that piece, but it’s not miles apart, but it’s a good five points or so below the corporate average, but it’s come up nicely because we’re sort of sticking to, parts of residential that we think we can build a competitive advantage and want to be in and so that wasn’t the case 12 months to 18 months ago. So the margins come up nicely. No channel inventory and a pretty stable end market taken as a whole.
Brett Linzey: Okay, great. And then maybe just a more strategic question on the election and tariffs. Obviously we don’t know what the outcome is going to be, but the Zurn does have a heavier outsourced manufacturing model. Maybe you could just talk about how nimble that supply chain configuration is. If you can flex it up and down different regions and so on, if we do enter another tariff regime.
Todd Adams: Yeah, I think we certainly feel like that. I think that some of the conversations around newer tariffs related to steel and aluminium don’t impact us. We don’t import any steel or aluminium. I think from a supply chain perspective, one of the things that we’ve been working at really for the course of the last 12 months or 18 months is to incrementally reposition some of our supply chain to capture the benefit of avoiding tariffs. So I think that, when you dial back to 2016, when all of that happened, I think we showed incredible flexibility in moving volumes around to minimize the impact of those tariffs. We still are impacted by some of those. We’re further taking action to position our supply chain to avoid those and so I think we’ve got high confidence that based on past experience, what we’re working on.
And maybe some of the things that are being talked about, that we will have a really good amount of success navigating forward. And so it’s really a testament to, I think, our supply chain team, finding the right suppliers in the right geographies and really skating ahead of the puck, which we’ve been doing for the last 12 months to 18 months and that is some of the benefit that we expect to see, maybe a touch at the end of the year, but certainly into 2025 and 2026.
Brett Linzey: All right. Appreciate the insight. Congrats on the quarter.
Operator: Your next question comes from the line of Jeff Hammond with KeyBanc Capital Markets. Please go ahead.
Jeff Hammond: Hey, just I think Bryan brought up kind of, legislation earlier in the call, but there’s this specific EPA funding for safe drinking or PFAS, that I think the Biden administration put out a couple of weeks ago, seems a little more focused at clean-up at the water utility. But I’m just wondering if there’s anything in there for point of use, drinking water or something that would affect you or any kind of knock on from that specific legislation.
Todd Adams: Yeah, I think that the legislation and awareness, Jeff, is certainly helping us. We’ve had a number of school districts come and inquire about the new PFAS filtration and several have onboarded us. So, I think that that is all net positive, but I think like anything else, there’s a way to solve the problem today, right? If you put one of these filters in, it solves the vast majority of the problems down to 20 parts per trillion. That’s what our filter takes out as well as most recently microplastics. And so when you think about being able to solve the problem for a very low initial cost and decision, you can eliminate the vast majority of the problem immediately and I think that is sort of the thing for us. I think waiting on funding from the government to solve this at the municipal level, municipality by municipality is a slow boat.
