Zurn Elkay Water Solutions Corporation (NYSE:ZWS) Q4 2022 Earnings Call Transcript

Mark Peterson: Well, I mean again I think we are leading with safe drinking water and obviously, adjacent that filtration. And so, I would say the thrust of what you’re going to hear us talk about what we’re focused on are really those two things. Obviously, we’ve got some other opportunities, particularly around building upgrades at MRO now that we have the entire package between all the hygienic products that we had historically and now pairing that with drinking water in sinks. So, the way to think about what we’re focused on is really that drinking water piece, but also the leverage we’re getting out of having this broad portfolio that we have sort of unrivaled the ability to specify that spec it — pull it through it’s an advantage for building owners, it’s been a hit with the wholesale community and we’re really excited about that first turn of traction we’re getting with our newly instituted third-party rep network.

But as relationships and in territories where we went through a lot of change over the course of the last year. But now six to six months in, we’re really starting to see the traction of driving change and preference in share opportunities with the new fully constituted portfolio.

Mike Halloran: And then — thanks for that. And then the last one if I may. So, the share buyback commentary makes a lot of sense. And I just wanted to clarify something from your prepared remarks, it sounds like you feel comfortable that given the cash flow situation and the leverage levels on the balance sheet that you’d be able to do a complement of buyback as well as strategic M&A. And then just flex the buyback piece if the M&A opportunities ramp. Is that a fair thought process?

Mark Peterson: Yes. I think the way to think about it, really, over the course of the — at least as we start the year here is we said a minimum of $100 million. If you think about the earnings sort of range that we’ve provided, and then the $200 million of cash flow you can see that you end up in a leverage scenario that is frankly below where we are today at the end of next year. And so we do have room to do more on the buyback, and we also have room to continue to cultivate some of the bolt-on tuck-in activity that we historically do. And so, I think that this framework at least initially accommodates sort of a very balanced view of the world with the opportunity to do more on the buyback than clearly the $100 million.

Mike Halloran: Appreciate that. Thanks.

Mark Peterson: Thanks.

Operator: Our next question will come from Joe Ritchie with Goldman Sachs. Please go ahead.

Vivek Srivastava: Thanks, good morning. This is Vivek Srivastava on for Joe Ritchie.

Mark Peterson: Okay.

Vivek Srivastava: My first question is just on the residential side. So, now that you are exiting the residential sink business on Elkay. Can you help us understand how much residential exposure is left in Elkay? And then on the Zurn side given the demand for residential is lower this year, help us understand how you’re managing factories throughput in this demand environment?