Zurn Elkay Water Solutions Corp (ZWS) 2023 Q2 法說會逐字稿

Good morning, and welcome to the Zurn Elkay Water Solutions Corporation Second 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.

早上好，歡迎參加 Zurn Elkay Water Solutions Corporation 2023 年第二季度盈利結果電話會議，董事長兼首席執行官托德·亞當斯 (Todd Adams) 出席；馬克·彼得森，高級副總裁兼首席財務官；以及 Zurn Elkay Water Solutions 投資者關係副總裁 Dave Pauli。

This call is being recorded and will be available for 1 week. The phone numbers for the replay can be found in the earnings release the company filed in an 8-K with SEC yesterday, July 24. At this time, for opening remarks and introduction, I'll turn the call over to Dave Pauli.

此通話正在錄音，有效期為 1 週。重播的電話號碼可以在該公司於昨天（7 月 24 日）向 SEC 提交的 8-K 財報中找到。此時，為了進行開場白和介紹，我會將電話轉給 Dave Pauli。

Good morning, everyone, and thanks for joining us on the call today. Before we begin, I'd 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.

大家早上好，感謝您今天加入我們的電話會議。在開始之前，我想提醒大家，本次電話會議包含某些前瞻性陳述，這些陳述受我們昨天下午發布的新聞稿以及我們向 SEC 提交的文件中包含的安全港語言的約束。

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.

此外，一些比較將參考非公認會計準則衡量標準。我們的收益發布和 SEC 文件包含有關這些非 GAAP 衡量標準的更多信息、我們使用這些衡量標準的原因以及為什麼我們認為它們對投資者有幫助，並包含與相應 GAAP 信息的調節。與前幾個季度一致，我們將討論某些非公認會計原則指標，因為我們認為它們可以更好地了解我們的經營業績。這些措施不能替代 GAAP，我們鼓勵您查看我們的收益報告和 SEC 文件中的 GAAP 信息。

With that, I'll turn the call over to Todd Adams, Chairman and CEO of Zurn Elkay Water Solutions.

接下來，我會將電話轉給 Zurn Elkay Water Solutions 董事長兼首席執行官托德·亞當斯 (Todd Adams)。

Good morning, everyone, and thank you for calling in this morning. As Dave said, we released our earnings last night and taken as a whole, they were very much in line with our internal expectations, not only for Q2 but really for the first half.

大家早上好，感謝您今天早上打來電話。正如戴夫所說，我們昨晚發布了我們的收益，從整體上看，它們非常符合我們的內部預期，不僅是第二季度的預期，而且是上半年的預期。

It's been 12 months since the Elkay transaction and all the work we did to accelerate the integration and simplify the business is essentially behind us, and we're now beginning to see the benefits both from a growth and profitability perspective with the initiatives we've been working on.

Elkay 交易已經過去 12 個月了，我們為加速整合和簡化業務所做的所有工作基本上都已成為過去，現在我們開始看到我們所採取的舉措從增長和盈利角度帶來的好處一直在努力。

Sales in the quarter were ahead of our guidance and orders even more so with high single-digit order rate growth in the quarter. Profitability of 21.6% showed the progression we've been talking about. And then you'll obviously see another step change over the second half that Mark will talk about a little bit later.

本季度的銷售額超出了我們的指導，訂單率更進一步，本季度訂單率出現高個位數增長。 21.6% 的盈利能力體現了我們一直在談論的進展。然後你顯然會在下半場看到另一個步驟的變化，馬克稍後會談到。

With our supply chain and service levels now back to pre-pandemic levels and even better or shorter in many cases, our free cash flow was again very strong, and it enabled us to repurchase 4 million shares in the quarter, bringing our year-to-date repurchases to $87 million as total leverage actually ticked down to 1.5x. We also expect that to continue to decline over the second half based on a strong free cash flow expectation and end the year right around 1.2x.

隨著我們的供應鍊和服務水平現已恢復到大流行前的水平，在許多情況下甚至更好或更短，我們的自由現金流再次非常強勁，這使我們能夠在本季度回購 400 萬股股票，使我們的年度業績- 回購額達到 8700 萬美元，總槓桿率實際上已降至 1.5 倍。基於強勁的自由現金流預期，我們還預計下半年這一數字將繼續下降，到年底將約為 1.2 倍。

With that, I'll turn it over to Mark, and he'll take you through the quarter.

接下來，我會將其交給馬克，他將帶您完成本季度的工作。

Thanks, Todd. Please turn to Slide #4. On a year-over-year basis, our second quarter sales increased 42% and were above the high end of our outlook for the quarter at $403 million. The Elkay merger contributed 47% year-over-year growth, and our core sales decreased 5% from the prior year. On a pro forma basis, including Elkay in the prior year second quarter and reducing those sales for the $29 million impact from the product line exits that we have outlined, core sales decreased 1% year-over-year.

謝謝，托德。請翻到幻燈片#4。與去年同期相比，我們第二季度的銷售額增長了 42%，高於我們對該季度預期的 4.03 億美元的上限。 Elkay 合併貢獻了 47% 的同比增長，而我們的核心銷售額較上年下降了 5%。在預計的基礎上，包括去年第二季度的 Elkay 以及我們概述的產品線退出造成的 2900 萬美元影響而減少的銷售額，核心銷售額同比下降了 1%。

As we discussed on our call last quarter, our year-over-year second quarter core sales growth was impacted by the timing of orders and shipments in the prior year as we began working down an elevated backlog in the second quarter of 2022. Breaking down those pro forma core sales, sales to our residential end markets declined in the mid-teens year-over-year as we'd expected, which was substantially offset by a low single-digit increase in core sales to our nonresidential end markets. While pro forma core sales modestly declined, pro forma core orders increased at a high single-digit rate as we anticipated with drinking water growth outperforming the fleet average.

正如我們在上季度的電話會議上討論的那樣，隨著我們從 2022 年第二季度開始解決積壓增加的問題，我們第二季度核心銷售的同比增長受到上一年訂單和發貨時間的影響。正如我們預期的那樣，在預計核心銷售額中，住宅終端市場的銷售額同比下降了十幾歲，但非住宅終端市場的核心銷售額的個位數低幅增長大大抵消了這一下降。雖然預計核心銷售額略有下降，但預計核心訂單以高個位數增長率增長，正如我們預期的那樣，飲用水增長超過了船隊平均水平。

Turning to profitability. Our adjusted EBITDA was $87 million in the second quarter, and our adjusted EBITDA margin was above the high end of our outlook for the quarter at 21.6%. This compares to $64 million and 22.6% in the prior year first quarter -- second quarter. The benefits of price realization and our productivity initiatives, inclusive of the cost synergies that are a little over $6 million each quarter in calendar year 2023 was more than offset by the sell-through of higher cost inventory purchased last year, which was complete during the second quarter. Investments in our growth and supply chain initiatives as well as the impact of the Elkay merger.

轉向盈利能力。第二季度調整後 EBITDA 為 8700 萬美元，調整後 EBITDA 利潤率高於本季度預期的上限 21.6%。相比之下，去年第一季度至第二季度的增幅為 6400 萬美元，增幅為 22.6%。價格實現和我們的生產力計劃的好處，包括 2023 日曆年每個季度略高於 600 萬美元的成本協同效應，被去年購買的成本較高的庫存的銷售所抵消，這些庫存在 2023 年期間完成。第二季度。對我們的增長和供應鏈計劃的投資以及 Elkay 合併的影響。

When looking at our margins sequentially, we stepped up 210 basis points from the first quarter of 2023, and we expect further margin expansion in the second half of the fiscal year. Please turn to Slide 5, and I'll touch on some of the balance sheet and leverage highlights.

當我們按順序查看利潤率時，我們比 2023 年第一季度提高了 210 個基點，我們預計本財年下半年利潤率將進一步擴大。請翻到幻燈片 5，我將介紹一些資產負債表和槓桿亮點。

With respect to our net debt leverage, we ended the quarter with leverage at 1.5x, inclusive of deploying $87 million of cash to repurchase common stock in the first half of 2023 and $112 million since we started repurchasing shares in the fourth quarter of 2022.

就我們的淨債務槓桿而言，本季度末我們的槓桿率為 1.5 倍，其中包括在 2023 年上半年部署 8700 萬美元現金用於回購普通股，以及自 2022 年第四季度開始回購股票以來部署的 1.12 億美元現金。

With that, I'll turn the call back to Todd.

這樣，我會將電話轉回給托德。

Thanks, Mark. We continue to prioritize drinking water and filtration growth based on the massive opportunity we see in the K-12 and higher-ed end markets. We've been investing in an awareness campaign, adding commercial resources, top grading our product offering for simpler installation and maintenance and also advancing the filtration aspect of drinking water with the addition of a PFAS filter that we expect to begin selling sometime in the fourth quarter.

謝謝，馬克。基於我們在 K-12 和高端市場看到的巨大機遇，我們繼續優先考慮飲用水和過濾的增長。我們一直在投資宣傳活動，增加商業資源，對我們的產品進行頂級評級，以簡化安裝和維護，並通過添加 PFAS 過濾器來提高飲用水的過濾性能，我們預計將在第四季度開始銷售該過濾器四分之一。

In the last 90 days, we've spent time doing 3 blitzes across states that have advanced legislation that will require more access, reporting on water quality as well as mandating filtration. K-12 is a school-by-school or district-by-district game where we're engaging with administrators, faculty teams, educators and parents and we'll continue to do that as -- we'll continue to do that as we continue to work at that.

在過去 90 天裡，我們花了時間在各州進行了 3 次突擊檢查，這些州已經制定了先進的立法，需要更多的准入、報告水質以及強製過濾。 K-12 是一項針對學校或地區的遊戲，我們與管理人員、教師團隊、教育工作者和家長合作，我們將繼續這樣做——我們將繼續這樣做我們將繼續為此努力。

At the higher-ed level, we're seeing tremendous traction as both public and private universities prioritize sustainably -- sustainability in their master plans. We saw our funnel for higher ed grow by over $20 million in higher ed alone. And we hope we continue to see that, that will be a significant growth opportunity for us, not only this year but for several years to come.

在高等教育層面，我們看到了巨大的吸引力，因為公立和私立大學都在其總體規劃中優先考慮可持續發展。我們看到我們的高等教育漏斗僅在高等教育領域就增長了超過 2000 萬美元。我們希望我們繼續看到，這對我們來說將是一個重要的增長機會，不僅是今年，而且是未來幾年。

As we continue to keep sustainability in front and center in front of all of our stakeholders, customers, employees, suppliers and shareholders as well as the compounding benefits of all the products. Sustainalytics just issued a report that rated us in the top 7% of all companies they rate. That's over 15,000 companies and -- in the top 2% within our end markets. As I've said before, this isn't borne out of any target to go through the motions. It's fundamental to our business, it's integrated into every asset -- every facet of our business and our business system, and we truly believe it's adding a competitive advantage to us in the marketplace.

我們繼續將可持續發展放在所有利益相關者、客戶、員工、供應商和股東以及所有產品的複合利益面前的中心位置。 Sustainalytics 剛剛發布了一份報告，將我們評為所有評級公司中的前 7%。其中包括超過 15,000 家公司，而且都在我們的終端市場中排名前 2%。正如我之前所說，這並不是出於任何走過場的目標。它是我們業務的基礎，它集成到每項資產中——我們業務和業務系統的每個方面，我們堅信它為我們在市場上增加了競爭優勢。

With that, I'll turn it back over to Mark, who will take you through our outlook.

接下來，我會將其轉回給馬克，他將帶您了解我們的前景。

Thanks, Todd. Please turn to Slide 8, and I'll cover the highlights of our outlook for the third quarter. For the third quarter of 2023, we are projecting sales in the range of $390 million to $400 million and our adjusted EBITDA margin to be in the range of 23.5% to 24%. Like last quarter, to help better understand the growth trends in the business in 2023. On the right side of the chart, we have presented Zurn Elkay pro forma sales for the third quarter of last year, which takes our reported sales for the third quarter of 2022 and plus the year-over-year impact of the 8020 product line exits we have executed.

謝謝，托德。請轉到幻燈片 8，我將介紹我們對第三季度展望的要點。我們預計 2023 年第三季度的銷售額將在 3.9 億美元至 4 億美元之間，調整後的 EBITDA 利潤率將在 23.5% 至 24% 之間。與上季度一樣，為了幫助更好地了解 2023 年業務的增長趨勢。在圖表右側，我們展示了 Zurn Elkay 去年第三季度的預計銷售額，其中包含我們報告的第三季度銷售額2022 年，加上我們已執行的 8020 產品線退出的同比影響。

With respect to the sales outlook, you can see on the page our assumptions for year-over-year pro forma growth in our nonresidential and residential end markets, which is impacted by the timing of orders and shipments last year as we continue to work down an elevated backlog in the third quarter of 2022. We anticipate pro forma orders in the third quarter to expand in the mid- to high single-digit range year-over-year with nonresidential end market growth above the average and residential end market growth below the average for the quarter.

關於銷售前景，您可以在頁面上看到我們對非住宅和住宅終端市場同比預計增長的假設，隨著我們繼續努力，這受到去年訂單和發貨時間的影響2022 年第三季度積壓量增加。我們預計第三季度的備考訂單將同比增長中高個位數範圍，其中非住宅終端市場增長高於平均水平，住宅終端市場增長低於平均水平該季度的平均值。

Turning to profitability. Our third quarter margins are expected to expand 350 to 400 basis points year-over-year and 190 to 240 basis points sequentially from the second quarter of 2023 as we begin to fully benefit from the lower commodity and transportation costs we've been experiencing.

轉向盈利能力。隨著我們開始充分受益於商品和運輸成本下降，我們第三季度的利潤率預計將同比增長 350 至 400 個基點，從 2023 年第二季度開始依次增長 190 至 240 個基點。

Turning to Page 9. With half of the calendar year behind us, we have adjusted our full year outlook and now expect sales for calendar year 2023 to be in the range of $1.525 billion to $1.55 billion and our consolidated adjusted EBITDA to be in the range of $335 million to $345 million, resulting in a year-over-year margin expansion of at least 140 basis points up to 170 basis points.

翻到第 9 頁。 日曆年已過去一半，我們調整了全年展望，現在預計 2023 日曆年的銷售額將在 15.25 億美元至 15.5 億美元之間，我們的綜合調整後 EBITDA 將在3.35 億美元至 3.45 億美元，導致利潤率同比增長至少 140 個基點至 170 個基點。

Similar to the third quarter outlook. We have provided our expected full year pro forma sales growth for our nonresidential and residential end markets, which is calculated off the prior year reported sales plus Elkay sales for the first half of 2022 less the impact of the 8020 product line exits we have executed. In addition, we've increased our free cash flow outlook for the calendar year from approximately $200 million to approximately $215 million.

與第三季度展望類似。我們提供了非住宅和住宅終端市場的預計全年預計銷售增長，這是根據上一年報告的銷售額加上 2022 年上半年 Elkay 銷售額減去我們已執行的 8020 產品線退出的影響計算得出的。此外，我們還將日曆年的自由現金流前景從約 2 億美元提高到約 2.15 億美元。

Before we open the call for questions, just a reminder that we have included on Page 8 and 9, our third quarter and full year outlook assumptions, respectively, for interest expense, noncash stock comp expense, depreciation and amortization, our adjusted tax rate and diluted shares outstanding. We'll now open the call up for questions.

在我們開始提問之前，請先提醒一下，我們在第 8 頁和第 9 頁分別包含了我們對利息支出、非現金股票補償費用、折舊和攤銷、調整後稅率和稀釋後的已發行股票。我們現在將開始提問。

(Operator Instructions) Our first question comes from the line of Bryan Blair from Oppenheimer.

（操作員說明）我們的第一個問題來自奧本海默的布萊恩·布萊爾（Bryan Blair）。

Solid quarter. With regard to your Q3 revenue guidance, I was hoping you could parse that out a little bit more. I know there's a lot of year-on-year noise. But it seems like there's a fair amount of conservatism baked in if we think about the sequential trend, most difficult stacked comp in Q2, typically some seasonal lift in Q3, you noted solid pro forma order growth. I know the backlog unwind is a little more challenging year-on-year, but perhaps walk us through how you're thinking about the sequential revenue progress.

堅實的季度。關於您的第三季度收入指導，我希望您能進一步分析一下。我知道有很多年復一年的噪音。但如果我們考慮連續趨勢，似乎存在相當多的保守主義，第二季度最困難的堆疊比較，通常第三季度會出現一些季節性提升，您注意到預計訂單增長強勁。我知道積壓訂單的解除比去年同期更具挑戰性，但也許請告訴我們您如何看待連續收入進展。

Yes. Well, Bryan, I think as we've kind of been all year long, we've been a little more conservative with our outlook going into the next 90 days across the board. So I think that what you said is accurate. If you look back historically, yes, our third quarter tends to be similar to the second quarter from a revenue standpoint, could be a little bit up, it could be a little bit down, it could be on par. I think as you've seen in the guide, yes, there's a bit of conservatism that's been our practice this year.

是的。布萊恩，我認為，正如我們一整年的情況一樣，我們對未來 90 天的前景更加保守。所以我認為你說的是準確的。如果你回顧歷史，是的，從收入的角度來看，我們的第三季度往往與第二季度相似，可能會有所上升，可能會有所下降，也可能持平。我認為正如您在指南中所看到的，是的，我們今年的做法有些保守。

So nothing different there. I think you're right on the order trends, we expect those to continue, like we saw in the second quarter or in the third quarter. The revenue growth, as you pointed out, clearly is impacted by the backlog work down that we had last year.

所以那裡沒有什麼不同。我認為您對訂單趨勢的看法是正確的，我們預計這些趨勢將繼續下去，就像我們在第二季度或第三季度看到的那樣。正如您所指出的，收入增長顯然受到我們去年積壓工作的影響。

So I think the orders are a better proxy of what we're seeing from a demand standpoint. But yes, I can -- I think the sequential trends that you've laid out of what you historically see and there's not anything that's imminent that we see that would change that. But as you know, we've just taken more of a cautious approach to our outlook this year.

因此，我認為這些訂單更好地反映了我們從需求角度看到的情況。但是，是的，我可以——我認為你從歷史上看到的情況中得出的連續趨勢，我們看到沒有任何迫在眉睫的事情會改變這一點。但如您所知，我們對今年的前景採取了更加謹慎的態度。

Okay. Understood. And perhaps provide a little more color on what your team is seeing in your key institutional verticals and your current pace of activity, how the project pipeline has developed year-to-date and specific to Zurn Elkay, how your commercial drinking water platform has influenced the pipeline and your forward opportunity?

好的。明白了。也許還可以提供更多信息，說明您的團隊在關鍵機構垂直領域中所看到的情況以及您當前的活動節奏、項目渠道今年迄今為止的發展情況以及針對 Zurn Elkay 的具體情況，您的商業飲用水平台如何影響管道和您的未來機會？

Yes, Bryan. So institutional is notionally half of our total revenues, split primarily between education and health care. So I think from a current state perspective, backlogs really across the country in those 2 verticals continue to be very high. And if you follow some of the leading indicators in that -- in the institutional end market, they've been quite positive. So obviously, we continue to think that the diversity of the business, adding drinking water, specifically, adding filtration into the educational vertical provides us I think, a lot of comfort that this is something that we can grow sustainably for a pretty long time.

是的，布萊恩。因此，理論上，機構收入占我們總收入的一半，主要分為教育和醫療保健。因此，我認為從當前狀態的角度來看，全國范圍內這兩個垂直領域的積壓情況仍然非常高。如果你關注機構終端市場的一些領先指標，就會發現它們非常積極。顯然，我們仍然認為業務的多樣性，增加飲用水，特別是在教育垂直領域增加過濾，為我們提供了很大的安慰，因為這是我們可以在相當長一段時間內可持續發展的東西。

There's pockets of strength when you go throughout the country, obviously. And then there's pockets of where there is just less activity, but it's nothing unusual in that institutional end market really since the beginning of the year. So very much on track. Drinking water is certainly helping our value proposition when we're talking to K-12 schools and colleges and universities because as I said in my comments, sustainability at the university level is increasingly important K-12, we're getting solid traction with a combination of legislation and then really just going out school by school and district by district and communicating what we're doing, which is essentially, we can provide clean drinking water to students for $1 per student per year, which is an amazing value prop that we think is going to resonate for a really long time.

顯然，當你走遍全國時，你會得到一些力量。還有一些地方的活動較少，但自今年年初以來，機構終端市場的情況並沒有什麼不尋常的。所以一切都步入正軌了。當我們與 K-12 學校和學院和大學交談時，飲用水無疑有助於我們的價值主張，因為正如我在評論中所說，大學層面的可持續性越來越重要 K-12，我們通過以下方式獲得了堅實的牽引力：結合立法，然後真的只是逐個學校、逐個地區地走出去，交流我們正在做的事情，本質上是，我們可以為學生提供清潔的飲用水，每名學生每年 1 美元，這是一個驚人的價值支柱我們認為這會在很長一段時間內引起共鳴。

Absolutely. One last one. I know you're not providing 2024 guidance, but you had put out the $25 million in incremental synergy guide before. Is there any shift to that at this point?

絕對地。最後一張。我知道您沒有提供 2024 年的指導，但您之前已經發布了 2500 萬美元的增量協同指南。目前有什麼轉變嗎？

No, I think it's very much on track. I think the majority of the work is behind us. There are some things that we're wrapping up over the course of the next 2 to 3 months, we have obviously announced the closure of one of our facilities and consolidation of that into 2 different Elkay facilities. That's primarily around sink manufacturing. So that work is underway. And so we'll hit the ground running on 1/1/24 with another $25 million into our earnings run rate.

不，我認為一切都已步入正​​軌。我認為大部分工作已經完成。我們將在接下來的 2 到 3 個月內完成一些事情，我們顯然已經宣布關閉我們的一個設施並將其合併到 2 個不同的 Elkay 設施中。這主要是圍繞水槽製造。這項工作正在進行中。因此，我們將於 2024 年 1 月 1 日開始運營，盈利運行率將再增加 2500 萬美元。

Our next question comes from the line of Jeff Hammond from KeyBanc.

我們的下一個問題來自 KeyBanc 的 Jeff Hammond。

So it sounds like the order rates were maybe a little bit better than you expected. Can you just speak to what's coming in better? And then just within the different product categories, is it pretty broad-based? Or are there outliers, good or bad?

所以聽起來訂單率可能比你預期的要好一些。您能談談即將到來的更好的事情嗎？然後就不同的產品類別而言，它的基礎是否相當廣泛？或者是否存在異常值，好還是壞？

Yes, I think that the 2 sort of out performance areas for us were a combination of residential improving. We started to see resi deteriorate a little bit in the third quarter and more into the fourth quarter. We've seen that begin to snap back. I think as housing starts begin to stabilize and improve, we're seeing a little bit of traction there. And then obviously, drinking water. The comparable is easy given the backlog reduction, but we're seeing significant order growth in both the bottle filling units as well as filtration.

是的，我認為我們的兩種表現領域是住宅改善的組合。我們開始看到 Resi 在第三季度略有惡化，在第四季度更加惡化。我們已經看到這種情況開始反彈。我認為，隨著房屋開工量開始穩定和改善，我們看到了一些牽引力。然後顯然是喝水。考慮到積壓的減少，比較很容易，但我們看到瓶子灌裝裝置和過濾裝置的訂單都顯著增長。

So those are the 2 outliers. Everything else is sort of around sort of the fleet average. We saw some strength in our in our flow systems business, which is very encouraging. And then we continue to do just a great job in water safety and control. So it was relatively broad-based, but a combination of residential and then drinking water were the areas of sort of outperformance.

這就是兩個異常值。其他一切都在艦隊平均水平左右。我們在流量系統業務中看到了一些優勢，這是非常令人鼓舞的。然後我們繼續在水安全和控制方面做得很好。因此，它的基礎相對廣泛，但住宅用水和飲用水的組合是表現優異的領域。

Okay. Just on the clean water kind of initiative, can you just talk about momentum versus expectation? And just what you typically see from a sales cycle given it seems very kind of local regional.

好的。就清潔水之類的倡議而言，您能談談動力與期望嗎？這正是您通常從銷售週期中看到的情況，因為它似乎非常具有本地區域性。

It is, particularly on the K-12 side of life. Obviously, our specification share across the country is significant. And so as schools get built or retrofit, we start the game in a really good place. I think what we're trying to do is drive more access points inside of these particular schools, obviously, getting them to understand the benefits of locking in a filtration solution over a period of time. But you are correct. I mean, it is a school by school, district by district. There's not an overarching sort of mandate of when to do it and how to do it. And so that's where -- partnering with the commercial resources we've added internally along with our third-party reps, we're able to go out and really understand where are the big school districts, what are the influencers, what's our competitive position and then how do we sort of get that work done for them over the time period that works for them.

確實如此，尤其是在 K-12 生活方面。顯然，我們的規格在全國的份額是很大的。因此，當學校建成或改造時，我們會在一個非常好的地方開始遊戲。我認為我們正在努力做的是在這些特定學校內部建立更多的接入點，顯然，讓他們了解在一段時間內鎖定過濾解決方案的好處。但你是對的。我的意思是，這是一個又一個學校、一個又一個地區的情況。對於何時進行以及如何進行，並沒有一個總體性的規定。因此，通過與我們內部添加的商業資源以及第三方代表合作，我們能夠走出去，真正了解大學區在哪裡，有哪些影響者，我們的競爭地位是什麼然後我們如何在適合他們的時間內為他們完成這項工作。

I think that is the one thing in K-12, that's a little bit unique relative to higher ed, which is students are not there in the summer. So the vast majority of the work gets planned, I would say, late winter, into spring, so that it's done over the summer. And then it gets a little bit quiet as kids are back in school.

我認為這是 K-12 中的一件事，相對於高等教育來說有點獨特，即學生在夏天不在那裡。因此，我想說，絕大多數工作都是在冬末到春季進行計劃的，以便在夏季完成。然後隨著孩子們回到學校，周圍變得有點安靜。

I think universities that's obviously sort of a living, breathing thing almost every day of the year. So that work gets done over time. So I think from a school perspective, particularly on K-12, I think the momentum that we're building this year will benefit us even greater into next year, right, as they begin to do some more long-range planning on what they're doing.

我認為大學幾乎一年中的每一天都顯然是一個生機勃勃的事物。這樣工作就會隨著時間的推移而完成。因此，我認為從學校的角度來看，特別是在 K-12 方面，我認為我們今年建立的勢頭將使我們在明年更加受益，對吧，因為他們開始對他們的目標做一些更長期的規劃。正在做。

I'd also say, Jeff, that in a case where a school district may have 500 units, they're not going to replace or upgrade these all at one time. They're going to do school A, B and C, and then they're going to do the remainder over time. So it's really one of those things where the business and the opportunity, given the 131,000 schools is just it's just huge. And when you get to the end, we'll be ready to retrofit and replace the others. So it's a longer process, but one that I think has far more durability over a really, really long period of time.

Jeff，我還想說，如果一個學區可能有 500 個單元，他們不會一次性更換或升級這些單元。他們將完成學校 A、B 和 C，然後隨著時間的推移他們將完成剩餘的部分。因此，考慮到 131,000 所學校，這確實是一個巨大的商業和機會。當您完成時，我們將準備好改造和更換其他設備。所以這是一個較長的過程，但我認為在非常非常長的一段時間內具有更長的耐久性。

Okay. Great. Last one on buyback. You guys seem to be running ahead kind of the pace for the $100 million. Just wondering if you're thinking same or different around buyback, just given the stock move?

好的。偉大的。最後一張是回購。你們似乎正在以 1 億美元的速度領先。只是想知道，考慮到股票的走勢，您對回購的想法是否相同或不同？

Yes, I think we're sticking to that at least $100 million. We're not going to put a new number on it at this point in time. But I think it's been for us -- the time was really positive for us with the first half and the opportunity to buy the stock at the prices that we did. We'll continue to keep a balanced capital allocation strategy in place over not just this year, but going into next year as well.

是的，我認為我們至少堅持 1 億美元。目前我們不會添加新的號碼。但我認為這對我們來說是有利的——上半年對我們來說非常有利，並且有機會以我們當時的價格購買股票。我們將繼續保持平衡的資本配置策略，不僅在今年，而且在明年也是如此。

Our next question comes from the line of Andrew Krill from Deutsche Bank.

我們的下一個問題來自德意志銀行的安德魯·克里爾。

I wanted to ask on free cash flow. I think it was nicely above what we were expecting this quarter. I want to see, I guess, any of like the big drivers of that strong free cash flow, it seems like inventories helped and maybe just how you're thinking about that for the rest of the year?

我想問一下自由現金流。我認為這遠遠高於我們本季度的預期。我想，我想看看，像強勁的自由現金流的主要驅動因素一樣，庫存似乎有所幫助，也許你在今年剩下的時間裡對此有何看法？

Yes. I think for us, free cash flow has been a positive this year. The team has done a really nice job with managing the trade working capital in the business this year, working down the inventories from the elevated levels last year. So I think as we look at the balance of the year, I think from a timing standpoint, it will probably reduce a bit in the third quarter and then uptick again in the fourth quarter from a phasing standpoint. Based on the timing of some payments. But at the end of the day, as you know, we took our outlook up from $200 million to $215 million. So good momentum. It will be a strong year of cash flow, and we see a lot of good momentum going into next year as well.

是的。我認為對我們來說，今年的自由現金流是積極的。該團隊今年在管理業務中的貿易營運資金方面做得非常出色，將庫存從去年的高水平下降了。因此，我認為，當我們審視今年的餘額時，我認為從時間的角度來看，第三季度可能會有所減少，然後從分階段的角度來看，第四季度會再次上升。基於某些付款的時間。但最終，如您所知，我們將預期從 2 億美元上調至 2.15 億美元。勢頭這麼好。這將是現金流強勁的一年，我們也看到明年將出現很多良好的勢頭。

Andrew, I think the one point to make is our overall lead times in our supply chain are roughly half of what they were a year ago. So obviously, we've had a view on demand and a view on that we were going to be able to get back to that. And obviously, a function of that is then selling through that high-cost inventory that you saw us do in the first half. So it all sort of works together in terms of the demand that we are seeing sort of broadly in line with what we're expecting, maybe a little bit better.

安德魯，我認為需要指出的一點是，我們供應鏈的總體交貨時間大約是一年前的一半。顯然，我們對需求有一個看法，並且我們將能夠回到這一點。顯然，其中一個功能就是通過您在上半年看到的高成本庫存進行銷售。因此，就我們所看到的需求而言，所有這些都在某種程度上協同工作，與我們的預期大致一致，也許更好一點。

Our supply chain is back to prepandemic levels, notionally half of what it was 12 months ago. and then where our service levels are high. So the net effect of that is the margin progression that we communicated tracks very nicely with the cash flow. So from an accounting basis, our margins were, I would say, understated relative to the current purchases that we were making. So you'll see that, as Mark pointed out in the outlook, that drives the vast majority of that margin step up in the second half.

我們的供應鏈已恢復到大流行前的水平，理論上是 12 個月前的一半。然後我們的服務水平很高。因此，其淨效應是我們所傳達的利潤率進展與現金流量非常吻合。因此，從會計基礎來看，我想說，相對於我們當前的採購，我們的利潤率被低估了。所以你會看到，正如馬克在展望中指出的那樣，這推動了下半年絕大多數利潤率的上升。

Okay. Great. All makes sense. And for my follow-up, just on the guidance and maybe more for the 2023 guide. What is something like the major puts and takes that would push you to like the low versus higher end of the range?

好的。偉大的。一切都有道理。至於我的後續行動，只是關於指導，也許更多關於 2023 年指南。主要看跌期權和看跌期權中有什麼東西會促使您喜歡該範圍的低端與高端？

Well, I mean I'll let Mark comment as well, but I think it's really 5 months left in the year. There is always going to be a range of outcomes I don't think there's anything specific that would push us one way or another. I think the order trends that we've seen through July here would definitely give us confidence that the range is appropriate given the length of time left in the year.

好吧，我的意思是我也會讓馬克發表評論，但我認為今年還剩 5 個月了。總會有一系列的結果，我不認為有任何具體的事情會推動我們以這種或那種方式前進。我認為我們在 7 月看到的訂單趨勢肯定會讓我們相信，考慮到今年剩餘的時間長度，這個範圍是合適的。

Yes, I would agree. We just -- [fortune taken] earlier, just accommodating a broader range of outcomes into the outlook. So we're staying consistent with what we've been doing for several quarters. But as Todd pointed out, order rates remain in a good spot early in July. That is the case and we'll be back in October report.

是的，我同意。我們只是——[財富]早些時候，只是將更廣泛的結果納入前景。因此，我們將與幾個季度以來的做法保持一致。但正如托德指出的那樣，七月初的訂單率仍處於良好狀態。情況確實如此，我們將在十月報告中回來。

Our next question comes from the line of Joe Ritchie from Goldman Sachs.

我們的下一個問題來自高盛的 Joe Ritchie。

My first question, maybe just on that backlog comp issue that you guys referenced last quarter. I'm just curious like what kind of impact do you have baked in for the rest of the year on just tougher comps in the backlog and what you experienced from a growth standpoint last year?

我的第一個問題，也許只是關於你們上個季度提到的積壓補償問題。我只是很好奇，今年剩下的時間裡，您對積壓中的更嚴格的競爭產生了什麼樣的影響？從去年的增長角度來看，您經歷了什麼？

Yes. So if you went back and looked at our 10-Qs last year, the backlog reduction in the core business was over $20 million in the third quarter. I think I'll call it close to $25 million and another $20 million in the fourth quarter. So from a sales standpoint, that's the kind of backlog reduction that we were working through last year.

是的。因此，如果你回顧一下我們去年的 10-Q，就會發現第三季度核心業務的積壓訂單減少超過 2000 萬美元。我想我會稱其接近 2500 萬美元，第四季度另外 2000 萬美元。因此，從銷售的角度來看，這就是我們去年正在努力減少積壓的情況。

I think, Joe, to answer maybe the question, I think our order book-to-bill, if you will, over the next 6 months is always going to be somewhere around 1. I think we saw, as lead times extended through a couple of years post pandemic, that forced different order behavior. I think when you get to where we are today, the backlog sort of sits at the traditional sort of relatively low levels. And the second half would imply a book-to-bill right around 1, maybe just a touch better.

我想，喬，也許要回答這個問題，我認為，如果你願意的話，我們的訂單到賬單在接下來的 6 個月內總是會在 1 左右。我認為我們看到，隨著交貨時間延長，大流行後幾年，這迫使人們採取不同的秩序行為。我認為，當你達到今天的水平時，積壓訂單處於傳統的相對較低水平。下半年意味著訂單出貨比大約為 1，也許只是稍微好一點。

Okay. Great. That's helpful. And then I heard your comments earlier around margins accelerating into the back half of the year. I was really curious around 4Q specifically because historically, what we've experienced is a sequential downtick in margins in 4Q versus 3Q, but it seems like the guidance implies something better at this point. So just maybe some thoughts around that, the margin kind of exiting the year. And what's driving that?

好的。偉大的。這很有幫助。然後我早些時候聽到了您對今年下半年利潤率加速增長的評論。我對第四季度非常好奇，因為從歷史上看，我們經歷的是第四季度與第三季度的利潤率連續下降，但目前的指導似乎暗示了更好的結果。所以也許只是圍繞這個問題的一些想法，今年的利潤率有點高。是什麼推動了這一點？

Yes, Joe, I would say, I think we would still expect a modest margin decline in the fourth quarter versus the third. Just to your point, as those -- seasonally as those sales sequentially decline that will put a little bit of pressure on the margin. But I think you'd expect to see a decremental margin or an earnings fall that would be generally better than what you would normally see because of the cost environment we're guiding. But I think from a modeling standpoint, I would still anticipate a modest step down in that margin from where we'll see the [divergence] based upon the decline in sales that we always traditionally see seasonally.

是的，喬，我想說，我認為我們仍然預計第四季度的利潤率將比第三季度小幅下降。就你的觀點而言，隨著這些銷售額的季節性下降，這將對利潤率造成一些壓力。但我認為，由於我們所指導的成本環境，您預計會看到利潤下降或收益下降，這通常會好於您通常看到的情況。但我認為，從建模的角度來看，我仍然預計該利潤率會略有下降，我們將看到基於傳統上季節性銷售下降的[差異]。

Got it. Yes, that makes sense. Maybe if I could squeeze in one more just on Elkay. So it seems like clearly, you guys are going through some product line simplification on that business. I'm just curious, just as you kind of now look at the -- what's left in Elkay and the margin profile of that business, maybe just kind of some thoughts around that org profile and how that's changing with the product line exits that you guys are doing.

知道了。是的，這是有道理的。也許我可以在埃爾凱上再擠一會。因此，很明顯，你們正在對該業務進行一些產品線簡化。我只是很好奇，就像你現在看看 Elkay 還剩下什麼以及該業務的利潤狀況一樣，也許只是圍繞該組織概況以及它如何隨著你的產品線退出而變化的一些想法伙計們正在做。

Well, I think if you -- I think the cleanest way to observe it is really look at the gross profit margins year-to-year and then obviously, with what our guidance implies. And so in aggregate, we're approaching 46%, somewhere in that range over the back half. And obviously, we've got synergies into next year.

好吧，我認為如果你——我認為觀察它的最乾淨的方法是逐年查看毛利率，然後顯然，根據我們的指導意味著什麼。因此，總的來說，我們接近 46%，在後半段的某個範圍內。顯然，我們明年將產生協同效應。

And so I think obviously, the business has improved materially from a profitability standpoint from 12 months ago. And the simplification is driving that gross profit improvement across the existing and remaining part of Elkay, which we went to great lengths to try to communicate over the course of the last year. But obviously, when you look at that overall company gross profit margin at that sort of level. I think it speaks to the simplification work that was done is having quite a dramatic impact.

因此，我認為顯然，從盈利能力的角度來看，該業務較 12 個月前有了實質性改善。這種簡化正在推動 Elkay 現有和剩餘部分的毛利潤改善，我們在去年竭盡全力試圖溝通這一點。但顯然，當你看看公司整體毛利率處於這種水平時。我認為這說明所做的簡化工作正在產生相當大的影響。

Our next question comes from the line of Mike Halloran from Baird.

我們的下一個問題來自貝爾德 (Baird) 的邁克·哈洛蘭 (Mike Halloran)。

Just a couple of questions here. First, how are you guys thinking about the M&A funnel pipeline. Obviously, you feel very comfortable with where the Elkay business is from an integration perspective or at least given the simplification efforts well underway. I'm guessing there's a lot of willingness to bring smaller things in. Just curious how that pipeline looks and how you think actionability looks.

這裡只有幾個問題。首先，你們如何看待併購漏斗管道。顯然，從集成的角度來看，或者至少考慮到正在進行的簡化工作，您對 Elkay 業務的現狀感到非常滿意。我猜想有很多人願意引入較小的東西。只是好奇這條管道是什麼樣子以及你認為可操作性是什麼樣子。

Yes. I think, Mike, like always, I think we take the long view on M&A and spend a great deal of time cultivating things over years. And so I think that from a funnel standpoint, I don't think that there's anything materially new in. I don't think anything has changed from transactions that have occurred that would have taken things off the board.

是的。我認為，邁克，一如既往，我認為我們對併購抱有長遠的眼光，多年來花費了大量時間進行培育。因此，我認為從漏斗的角度來看，我不認為有任何實質性的新內容。我認為已經發生的交易沒有發生任何改變，從而使事情脫離董事會。

And so I think it's just a matter of continuing to develop those relationships, I think, over the course of the next 12 months, which is probably a better horizon than the last -- the remainder of the year to think about. We certainly think that we're going to have several opportunities to bring things in that are complementary to what we do, fill some product areas and maybe strengthen us in some of our existing categories.

因此，我認為這只是在接下來的 12 個月內繼續發展這些關係的問題，這可能是一個比去年更好的前景——今年剩下的時間需要考慮。我們當然認為我們將有很多機會引入與我們所做的事情互補的東西，填補一些產品領域，並可能在我們現有的一些類別中加強我們的實力。

Makes sense. And then in the prepared remarks, you briefly mentioned a PFAS filter. Just a little bit more context that it seems a little bit more, I don't know, manageable relative to a lot of the remediation efforts in product categories and services we've seen for PFAS so far. So just some thoughts there, please.

說得通。然後在準備好的發言中，您簡要提到了 PFAS 過濾器。只是多一點背景，相對於我們迄今為止所看到的針對 PFAS 的產品類別和服務的許多補救工作，我不知道，這似乎更容易管理。所以請提出一些想法。

Yes. I think we've been working internally and then some with some third-party partners to develop the kind of filter that can be integrated into a bottle filler that will eliminate PFAS. We've been through the pilots. We're sort of ramping production and something we'll be getting in the market in the fourth quarter.

是的。我認為我們一直在內部合作，然後與一些第三方合作夥伴合作開發一種可以集成到瓶子灌裝機中的過濾器，從而消除 PFAS。我們已經完成了試點工作。我們正在提高產量，並將在第四季度將產品推向市場。

And so I think it's just one of those things where for a relatively low amount of money if you can eliminate lead and PFAS in the drinking water for kids at school, it seems like a pretty good idea. So I think our team is, I would say, making great strides on the filtration side of things, and we're seeing it resonate when you actually sit in front of administrators, facilities, people and all the things we're also doing with the product to make it easier and quicker to install. Gain an understanding of the life of the filter and ensure that it's done on time, all things that are incremental value add to these schools that have a million and one things going on every day. And if you can ensure that the water that the kids are drinking is lead-free and PFAS free, it's a pretty good value proposition and one we're excited to bring to the market.

所以我認為這只是其中之一，如果你能用相對較低的錢消除學校孩子們飲用水中的鉛和 PFAS，這似乎是一個很好的主意。所以我認為我們的團隊在過濾方面取得了長足的進步，當你真正坐在管理員、設施、人員以及我們正在做的所有事情面前時，我們會看到它產生共鳴該產品使安裝變得更容易、更快捷。了解過濾器的使用壽命並確保其按時完成，所有增量價值的事情都會為這些每天發生一百萬零一件事情的學校增加價值。如果您能確保孩子們飲用的水不含鉛和 PFAS，那麼這就是一個非常好的價值主張，我們很高興將其推向市場。

Our next question comes from the line of Brett Linzey from Mizuho Americas.

我們的下一個問題來自 Mizuho Americas 的 Brett Linzey。

Just want to come back to price. Curious what your assessment is on the state of pricing or your competitors taking actions this year, are you on hold? Just curious what you're expecting and seeing out there in terms of price and the contribution for this year?

只想回到價格。想知道您對定價狀況或競爭對手今年採取的行動的評估是什麼，您是否在猶豫？只是好奇您對今年的價格和貢獻有何期望和看法？

Yes, I'd say the price compartment has been very stable this year. There's been some modest pricing actions taken in certain pockets across the industry, but nothing remotely close to what we've seen over the past several years. So I would characterize it as a very stable environment back to sort of normal.

是的，我想說今年的價格區間非常穩定。整個行業的某些領域採取了一些溫和的定價行動，但與我們過去幾年所看到的情況相差甚遠。所以我將其描述為一個非常穩定的環境，恢復到正常狀態。

I think the pricing environment has continued to stick. There's not been price giveback in this environment. So I think I'd call it stable going into next year and beyond that kind of looks like it's getting back from a normal range where -- we've always historically generated 1.5 to 2.5 points of price in a given year, we think it feels like it's back to normal trends on a go-forward basis, Brett.

我認為定價環境繼續存在。在這種環境下並沒有出現價格回饋。因此，我認為，進入明年，我會稱其為穩定，超出這一範圍，看起來它正在從正常範圍恢復，歷史上我們總是在某一年產生 1.5 到 2.5 點的價格，我們認為感覺就像在前進的基礎上回到了正常趨勢，布雷特。

Okay. Yes. And maybe just shifting to the synergy cost actions. I believe originally, you were looking to achieve the $50 million over a 2-year period. But just curious how the integration has progressed relative to the original time frame. It does sound like the consolidation efforts or at least versus my expectation or a little ahead of schedule, but curious your thoughts there.

好的。是的。也許只是轉向協同成本行動。我相信您最初希望在 2 年內實現 5000 萬美元的目標。但只是好奇整合相對於最初的時間框架進展如何。這聽起來確實像是整合工作，或者至少與我的預期不同，或者比計劃提前了一點，但很好奇你的想法。

I think in aggregate, Brett, when we announced the transaction a year ago, we outlined $50 million. We obviously got a running start over the back half of last year. We got $25 million plus this year, and we're targeting another $25 million. So in aggregate, it will probably end up being a little bit more than the $50 million that we originally contemplated, but it's essentially on the same timeline.

我認為，布雷特，當我們一年前宣布這項交易時，我們總共概述了 5000 萬美元。去年下半年我們顯然取得了良好的開局。今年我們獲得了 2500 萬美元以上的資金，我們的目標是另外 2500 萬美元。因此，總的來說，最終可能會比我們最初設想的 5000 萬美元多一點，但基本上是在同一時間表上。

I think the only acceleration was some of the simplification work that we did really from July through December because we just felt like getting that piece behind us quicker, sooner would aid everything else, whether that was supply chain, whether that was organization, whatever it might be, we sort of got ahead of it early but since then, we've been hitting our marks on whether it be an announcement or internal work that needed to get done to facilitate a next set of moves. So very much on track, taken as a whole probably a little bit ahead early the last 6 months of last year.

我認為唯一的加速是我們從 7 月到 12 月真正做的一些簡化工作，因為我們只是想更快地把這部分放在我們身後，更快地幫助其他一切，無論是供應鏈，無論是組織，無論是什麼可能是，我們有點提前了，但從那時起，我們一直在努力達成目標，無論是公告還是需要完成的內部工作，以促進下一步行動。總體而言，一切都步入正軌，可能比去年最後 6 個月早些時候提前了一點。

Our final question comes from the line of Nathan Jones from Stifel.

我們的最後一個問題來自 Stifel 的 Nathan Jones。

A follow-up question on margins here. Guidance for the back half of the year, 23.5% plus. Obviously, there's been a lot of disruptions over the last 12 months with supply chain and high-priced inventory and freight and logistics and integrating Elkay and all that kind of stuff. Are we through all of those meaningful hits to cost? Are we looking at what is basically a normalized environment in the back half of the year or are there transient costs or benefits in the back half of 2023 still there that we should be thinking about going away in 2024?

這裡有一個關於邊距的後續問題。下半年指導值，23.5%以上。顯然，在過去 12 個月裡，供應鏈、高價庫存、貨運和物流以及 Elkay 整合等方面出現了很多中斷。我們是否經歷了所有這些有意義的成本衝擊？我們是否正在考慮下半年基本正常化的環境，或者 2023 年下半年是否仍然存在暫時的成本或收益，我們應該考慮在 2024 年取消？

I don't know, Nathan, there really is nothing that's a material transient cost. I think you are starting to see margins getting into that normalized run rate in the back half of the year. As you go into next year, obviously, there's always investment in our business and things that we're doing to grow the business and invest in our supply chain initiatives as well as growth initiatives. But there's nothing to point to in the back half of our year is an outsized unusual cost that would go away next year or an outsized benefit that doesn't repeat. We talked about the synergies we have next year, going into the $25 million. So I'd say nothing unusual nonrecurring in the back half that would impact the next year.

我不知道，內森，確實沒有什麼是實質性的暫時成本。我認為您將開始看到今年下半年的利潤率進入正常運行率。進入明年，顯然，我們的業務和我們為發展業務所做的事情總是會有投資，並投資於我們的供應鏈計劃和增長計劃。但在今年下半年，沒有什麼可以指出的是明年會消失的巨大異常成本或不會重複的巨大收益。我們討論了明年 2500 萬美元的協同效應。因此，我認為後半段不會出現任何會影響明年的異常情況。

I mean, Nathan, the only thing I would say is based on what we know today, obviously, nobody envisioned container costs going from a couple thousand bucks to $22,000 and now round tripped. So I think given what we see and assuming no event specific challenges, I think Mark's comments are right. I think the run rate is sort of the run rate. And we've got synergies that we have a high degree of confidence in. And obviously, it assumes sort of a muted inflationary environment, which is also reflected in a relatively muted pricing environment. So all things considered. I think if we can deliver the second half like we were projecting, I think it bodes well heading into 2024.

我的意思是，內森，我唯一要說的是基於我們今天所知道的情況，顯然，沒有人想到集裝箱成本會從幾千美元增加到 22,000 美元，現在是往返的。因此，我認為鑑於我們所看到的情況並假設沒有特定事件的挑戰，我認為馬克的評論是正確的。我認為運行率就是運行率。我們對協同效應充滿信心。顯然，它假設通脹環境溫和，這也反映在相對溫和的定價環境中。所以考慮到所有事情。我認為，如果我們能夠像我們預計的那樣實現下半年的目標，我認為這對 2024 年來說是個好兆頭。

And I guess the follow-on to that question for 2024 then is if we were expecting another $25 million of synergies next year, which is about 150 basis points on a 23.5% plus. Is there any reason why we should not be expecting 2024 margins to be 25% plus?

我想 2024 年這個問題的後續問題是，我們是否預計明年會再產生 2500 萬美元的協同效應，這大約是 150 個基點，增幅為 23.5% 以上。我們是否有理由不期望 2024 年的利潤率達到 25% 以上？

Well, we will talk about 2024 in 2024. But I think your thesis of should we continue to see margin growth into the future? I think the answer is yes. We're obviously going to continue to make growth investments. But taken as a whole, that is the right sort of algorithm with obvious puts and takes given comparables and whatnot and the environment. So we're not going to guide for 2024. We're going to deliver Q3 and we'll come back and talk about Q4 in October.

好吧，我們將在 2024 年討論 2024 年。但我認為你的論點是我們是否應該繼續看到未來的利潤率增長？我認為答案是肯定的。顯然我們將繼續進行增長投資。但從整體上看，這是一種正確的算法，具有明顯的放置和取出給定的可比性以及諸如此類的環境。因此，我們不會為 2024 年提供指導。我們將交付第三季度，我們將在 10 月份回來討論第四季度。

Fair enough. Final one, a follow-up on one of Bryan's questions. He asked about institutional backlogs and the market conditions you're seeing there. I just wonder if you could comment on the commercial side.

很公平。最後一個，是布萊恩提出的一個問題的後續。他詢問了機構積壓的情況以及您所看到的市場狀況。我只是想知道你是否可以從商業方面發表評論。

I think it's been an interesting year. We started the year, and the world was falling apart as a function of the regional banking crisis and the downstream or collateral impact on the commercial market. So I would tell you that the commercial -- the specific commercial office end market is a very, very small percentage of our business. Embedded in there are things like retail, amusement, hospitality and other things. And so I wouldn't say it's an outsized drag by any stretch of the imagination.

我認為這是有趣的一年。今年伊始，由於地區銀行危機以及對商業市場的下游或附帶影響，世界正在分崩離析。所以我想告訴你，商業——特定的商業辦公終端市場只占我們業務的非常非常小的比例。其中包含零售、娛樂、酒店等業務。因此，無論怎麼想，我都不會說這是一個過大的阻力。

Obviously, it's something that we continue to watch. But I think the hyper local nature of what we're doing sort of absorbs a lot of that risk because there are pockets of activity. There are always going to be pockets of activity across the country. So we're not particularly worried about office vacancies in Chicago as a specific example. So it's really spreading the risk across the country across a whole bunch of different verticals and then there's always the MRO aspect of what it is we're doing.

顯然，這是我們繼續關注的事情。但我認為我們正在做的事情的超本地化性質吸收了很多風險，因為有一些活動。全國各地總會有一些活動。因此，作為一個具體例子，我們並不特別擔心芝加哥的辦公室空缺。因此，這確實將風險分散到了全國范圍內的各個不同的垂直領域，而且我們正在做的事情始終涉及 MRO 方面。

And so nothing specific to really call out there other than I think there's now a better appreciation that our business is not particularly exposed to commercial office. And therefore, we'll look for the next opportunity to fill the divot if that happens.

因此，除了我認為現在人們更好地認識到我們的業務並不特別暴露於商業辦公之外，沒有什麼特別值得指出的。因此，如果發生這種情況，我們將尋找下一個機會來填補空白。

I would now like to turn the call over to Dave Pauli for closing remarks.

現在我想將電話轉交給戴夫·保利（Dave Pauli）發表結束語。

Thanks, everyone, for joining us on the call today. We appreciate your interest in Zurn Elkay Water Solutions and look forward to providing our next update when we announce our September quarter results in October. Thanks, everyone.

感謝大家今天加入我們的電話會議。我們感謝您對 Zurn Elkay Water Solutions 的興趣，並期待在我們於 10 月份公佈 9 月份季度業績時提供我們的下一次更新。感謝大家。

Thank you, ladies and gentlemen. This does conclude today's call. Thank you for your participation. You may now disconnect.

謝謝你們，女士們、先生們。今天的電話會議到此結束。感謝您的參與。您現在可以斷開連接。