Zurn Elkay Water Solutions Corp (ZWS) 2024 Q3 法說會逐字稿

Good morning and welcome to the Zurn Elkay Water Solutions Corp third quarter, 2024 earnings result conference call with Todd Adams, Chairman and Chief Executive Officer Dave Pauli, Chief Financial Officer and Bryan Wendlandt, Director of FP&A for Zurn Elkay Water Solutions. A replay of this conference call will be available as a webcast on the company's investor relations website at this time for opening remarks and introduction. I'll turn the call over to\

早安，歡迎參加 Zurn Elkay Water Solutions Corp 2024 年第三季收益結果電話會議，會議嘉賓包括 Zurn Elkay Water Solutions 董事長兼執行長 Todd Adams、財務長 Dave Pauli 和 FP&A 總監 Bryan Wendlandt。這次電話會議的重播將在公司投資者關係網站上以網路廣播的形式提供，以供開場白和介紹。我會將電話轉接至\

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Good morning, everyone and thanks for joining the call today. Before we begin, I would 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 SCC edition. Some comparisons were nongaap 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 nongaap metrics as we feel they provide a better understanding of our operating results.

大家早安，感謝您今天加入電話會議。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 SCC 版提交的文件中所包含的安全港語言的約束。一些比較是非公認會計原則措施。我們的收益發布和證券交易文件包含有關這些非公認會計原則衡量標準的更多信息，為什麼我們使用它們以及為什麼我們相信它們對投資者有幫助，並包含與前幾季度一致的相應公認會計原則訊息的調節。我們將討論某些非公認會計準則指標，因為我們認為它們可以更了解我們的經營績效。

These measures are not a substitute for GAAP. We encourage you to review the GAAP information in our earnings release and in our sec filings with that, I'll turn the call over to Todd Adams, Chairman and CEO of Zurn Elkay Water Solutions.

這些措施不能取代公認會計準則。我們鼓勵您查看我們的收益報告和 SEC 文件中的 GAAP 信息，我會將電話轉給 Zurn Elkay Water Solutions 董事長兼首席執行官 Todd Adams。

Thanks Brian and good morning everyone and thanks for taking the time to call in this morning. I'll start on page 3 the third quarter, again, slightly exceeded our guidance across the board and we are also raising our outlook again for the full year. We leverage third quarter core growth of 4% to 9% adjusted ebita growth which drove margins to 25.6% according to 150 basis points of margin expansion year over year through nine months, our consolidated EBITDA margins sit at 25%. And as you may have seen in the release, we raised our outlook for the year over year margin expansion to 250basis points to 270 basis points. Free cash flow in the quarter was $87 million. And we deployed 50 million of that to repurchase 1.6 million shares during the quarter at an average price of under $31. Leverage falls to 0.8 times. And as we mentioned in the release, we are raising our outlook for free cash flow and now see the full year around $260 million. And finally, we again raised our dividend this year to $0.09 a quarter. Which represents an increase of 12.5% later in the call. I'll spend some time on the outlook for our end markets heading into 2025. But much like we've said throughout the year, the resilience of our end markets and perhaps our unique exposure to particular verticals give us confidence of an improving backdrop over the course of the next couple of years. I'll hand it over to Dave to take you through some more color on the quarter. Dave.

謝謝布萊恩，大家早上好，謝謝您今天早上抽出時間來打電話。我將從第三頁開始，第三季的業績再次略微超出了我們的指導，我們也再次提高了全年的預期。我們利用第三季核心成長 4% 至 9% 的調整後 EBITA 成長，根據 9 個月的年比利潤率擴張 150 個基點，將利潤率推至 25.6%，我們的綜合 EBITDA 利潤率為 25%。正如您可能在新聞稿中看到的那樣，我們將利潤率同比擴張的預期上調至 250 個基點至 270 個基點。該季度的自由現金流為 8,700 萬美元。我們在本季以低於 31 美元的平均價格回購了 160 萬股股票，其中 5,000 萬股。槓桿降至0.8倍。正如我們在新聞稿中提到的，我們正在提高對自由現金流的預期，現在預計全年約為 2.6 億美元。最後，我們再次將今年的股息提高至每季 0.09 美元。這意味著電話會議後期增加了 12.5%。我將花一些時間展望 2025 年的終端市場前景。但就像我們全年所說的那樣，我們終端市場的彈性以及我們對特定垂直行業的獨特敞口也許讓我們對未來幾年內不斷改善的背景充滿信心。我將把它交給戴夫，讓他帶你了解本季的更多色彩。戴夫.

Thanks to please turn to slide. Number four, our third quarter sales totaled 410 million and grew 4% organically on a pro forma core basis, mid single digit core sales growth in our non-residential end markets was partially offset by flattish year over year sales to our residential end markets and pockets of the commercial segment within non-residential end market. Trends continue to align with our expectations and our growth initiatives drove the sales performance to the higher end of the outlook we provided 90 days ago, turning to profitability. Our third quarter adjusted EBITDA was 105 million and our adjusted EBITDA margin expanded 150 basis points year over year to 25.6% in the quarter at 25.6%. Our third quarter adjusted EBITDA margin is the highest consolidated margin since the Elkay merger two years ago and up 30 basis points sequentially from the second quarter the strong margin and year over year expansion was driven by the benefits of our productivity initiatives, leveraging our Zurn Elkay business system and continuous improvement activities across the organization as well as executing on the Elkay related synergies for calendar year 2024. We believe our year over year margin expansion will be a bit better than we discussed 90 days ago. And we are again raising our expectation for full year EBITDA. We'll cover that in a little bit more detail later in the call. Please turn to slide 5 and I'll touch on some balance sheet and leverage highlights with respect to our net debt leverage. We ended the quarter with 308 million of net debt and leverage continued below one at an all time low of 0.8 times, our 0.8 times leverage is inclusive of the 50 million. We deployed to repurchase shares in the quarter on a year-to-date basis. We have now deployed 130 million to share repurchases and 41 million to dividends. We continue to have excellent capital allocation optionality and as we have discussed, we will remain focused on a balanced capital allocation strategy going forward. I'll turn the call back to Todd.

謝謝，請轉到幻燈片。第四，我們第三季的銷售額總計4.1 億美元，在預期核心基礎上有機成長了4%，我們的非住宅終端市場的中個位數核心銷售額成長被住宅終端市場同比持平的銷售額部分抵消了。趨勢繼續符合我們的預期，我們的成長舉措將銷售業績推向了我們 90 天前提供的預期的較高端，轉向盈利。我們第三季調整後的 EBITDA 為 1.05 億，調整後的 EBITDA 利潤率年增 150 個基點，本季達到 25.6%，為 25.6%。我們第三季調整後的EBITDA 利潤率是自兩年前Elkay 合併以來最高的綜合利潤率，比第二季度連續上升30 個基點，強勁的利潤率和同比擴張是由我們的生產力計劃的好處推動的，利用我們的Zurn Elkay整個組織的業務系統和持續改進活動，以及 2024 年 Elkay 相關協同效應的執行。我們相信我們的同比利潤率擴張將比我們 90 天前討論的要好一些。我們再次提高了對全年 EBITDA 的預期。我們將在稍後的電話會議中更詳細地介紹這一點。請翻到投影片 5，我將介紹一些與我們的淨債務槓桿相關的資產負債表和槓桿亮點。本季末，我們的淨負債為 3.08 億美元，槓桿率持續低於 1 倍，創歷史新低 0.8 倍，我們的 0.8 倍槓桿率包含了 5,000 萬美元。我們在本季部署了年初至今的股票回購。我們現在已經部署了1.3億用於股票回購，4,100萬用於股利。我們繼續擁有出色的資本配置選擇，正如我們所討論的，我們將繼續關注未來平衡的資本配置策略。我會把電話轉回給托德。

Thanks Dave. I'm back. And on page 6 here, you can see our year-to-date sustainability impact and progress towards our targets. The beauty of our sustainability efforts and message and impact is that it compounds each and every day and the benefit accrues not only to the environment but directly to our customers benefit. You've heard us talk about various states and legislation related to clean drinking water and filtration. The leading edge of that conversation has set around has centered around the state of Michigan and its filter first regulations which are now being actively implemented. We're delighted to have worked with the state and its partners to develop the ways in which to implement solutions that will ensure that when a K through 12 student in the state of Michigan goes to school, they'll be drinking clean water.

謝謝戴夫。我回來了。在第 6 頁上，您可以看到我們今年迄今的永續發展影響以及實現目標的進展。我們的永續發展努力、資訊和影響的美妙之處在於，它每天都在復合，不僅為環境帶來好處，而且直接為我們的客戶帶來好處。您已經聽過我們談論與清潔飲用水和過濾相關的各州和立法。這場對話的前沿集中在密西根州及其目前正在積極實施的過濾優先法規。我們很高興與該州及其合作夥伴合作，開發實施解決方案的方法，以確保密西根州的 K 至 12 年級學生上學時能夠飲用乾淨的水。

The other element of our impact is in areas that have disruptions in their water supply. Places like North Carolina with the recent hurricanes. We're helping communities and schools with filtration to ensure that pfas and other contaminants that are in the water supply as a result of failed water treatment plants and the saturated watershed are filtered out and people are getting safe water in. What is a very difficult situation?

我們影響的另一個因素是供水中斷的地區。像北卡羅來納州這樣的地方最近遭受了颶風。我們正在幫助社區和學校進行過濾，以確保因水處理廠故障和飽和流域而導致供水中的全氟磺酸和其他污染物被過濾掉，讓人們獲得安全的水。什麼是非常困難的狀況？

I'm now on page 7 last quarter, we highlighted our long term growth algorithm of market growth plus price plus breakthroughs and how over the last 15 years that's resulted in a 6% to 7% compounded top line organic sales growth rate for us this morning. We'll go a touch deeper on the market part of that equation as we head into 2025 and I'll share the headlines and the data that everyone reads about but also how to get underneath that, to see that how that impacts our business. Just to start with some basic information starting on the left.

我現在在上個季度的第7 頁，我們強調了我們的市場成長加上價格加上突破的長期成長演算法，以及在過去15 年中如何為我們帶來6% 至7% 的複合頂線有機銷售成長率早晨。進入 2025 年，我們將更深入地探討該等式的市場部分，我將分享每個人都讀過的頭條新聞和數據，以及如何深入了解這一點，看看這對我們的業務有何影響。首先從左側開始介紹一些基本資訊。

Here's the dodge momentum index which measures the value in dollars of all non residential building projects in the planning process against the baseline year of 2000.

這是一個閃避動量指數，它衡量了規劃過程中所有非住宅建築項目相對於 2000 年基準年的美元價值。

The thought is that it's the leading indicator for all future non residential construction spending and therefore, it's generally used to monitor the future direction of construction spending. Think of it as a 9 to 12 month preview, preview of what's likely to start but also realize that there's a lot in there price, commercial institution, governmental buildings. So it's a pretty broad view of what could happen in the middle of the next is ABI which is a sentiment survey that tracks a cohort of partners of the AIA member owned architectural firms and whether their billing activity for the previous month grew declined or remained flat. To understand is just a little bit more. A score of 50 indicates a balance between positive and negative reports. While a score of 100 indicates that all firms reported improvements. A rise in the index above 50 means that more firms reported an increase in demand for design services then reported a decline in demand. It's important to note that a rise in the index above 50 is not a direct measure of rise in demand because the survey does not ask firms reporting stronger demand to quantify the level of increase in demand. Nor does it provide information on the size of those firms that being said higher readings in the ABI generally coincide with some form of growing demand.

人們的想法是，它是所有未來非住宅建築支出的領先指標，因此，它通常用於監測建築支出的未來方向。將其視為 9 到 12 個月的預覽，對可能開始的內容的預覽，但也要意識到其中有很多價格、商業機構、政府建築。因此，ABI 是一項情緒調查，追蹤 AIA 成員擁有的建築公司的一組合作夥伴，以及他們上個月的帳單活動是否增長、下降或持平。理解只是多了一點點。50 分錶示正面報告和負面報告之間的平衡。100 分錶示所有公司都報告了改進。該指數升至 50 以上意味著更多公司報告設計服務需求增加，然後報告需求下降。值得注意的是，該指數升至 50 以上並不能直接衡量需求的成長，因為該調查並未要求報告需求強勁的企業量化需求的成長水準。它也沒有提供有關這些公司規模的信息，據說 ABI 中較高的讀數通常與某種形式的需求增長相一致。

And finally, on the far right construction backlog is a measure of the amount of work survey contractors have in their current backlog in some ways, it's their lead time to taking on new business. And as you might guess, it's their best estimate assuming no delays and consistent levels of staffing. So when you look at and read the headlines of these, they all have a level of validity to them and how to think about the future. But it all varies by region vertical and other than backlog reporting lacks certainty as to what's really going on at the ground level which you can begin to see in the starts data, which is on page 8.

最後，最右邊的施工積壓是衡量承包商目前積壓工作量的指標，在某種程度上，這是他們接受新業務的準備時間。正如您可能猜到的那樣，這是他們在沒有延誤且人員配備水平一致的情況下的最佳估計。因此，當您查看和閱讀這些標題時，它們都具有一定程度的有效性以及如何思考未來。但這一切都因地區垂直而異，除了積壓報告缺乏關於底層實際情況的確定性之外，您可以在第 8 頁的啟動資料中開始看到這一點。

So here is the dodge starts data on a square footage basis. Actuals from 2021 through 2023 with an estimate through August for 2024 and a projection for 2025.

這是以平方英尺為基礎的道奇啟動數據。2021 年至 2023 年的實際值、截至 2024 年 8 月的估計值和 2025 年的預測值。

Here, we've split the data between institutional and commercial and again measured in millions of square feet first. A couple of very simple observations, square feet commercial is 2.5times to 3 times the size of institutional largely as a function of the massive impact of warehouses which represent roughly 55% of the entire commercial starts. Data. Second, the institutional starts just doesn't bounce around all that much. And education, which would be everything from an elementary school to a new research building at a university represents consistently 40% plus or minus of the entire institutional market off to the right. You'll see the dodge breakdown amongst the rest of the verticals between institutional and commercial and for institutional. It's health care and recreation buildings which includes things like stadiums, parks, public and private entertainment venues, as well as churches, dorms, government and municipal buildings. The common thread being highly specified, dense complex buildings built to last for decades and not particularly sensitive to interest rates and content rich from his own perspective in commercial. The remainder of the verticals are parking garages, office, retail and hotel with office, retail and hotel being the most relevant to our business. Again, because of the incrementally complex nature of those types of buildings and environments relative to warehouses and parking garages.

在這裡，我們將數據分為機構數據和商業數據，並再次以百萬平方英尺為單位進行測量。透過一些非常簡單的觀察，商業建築面積是機構建築面積的 2.5 到 3 倍，這主要是由於倉庫的巨大影響，而倉庫約佔整個商業開工量的 55%。數據。其次，機構開工並沒有那麼大的反彈。而教育，從小學到大學的新研究大樓，涵蓋了一切，始終佔整個機構市場右側 40% 的正負。您將看到機構和商業以及機構之間其餘垂直領域的躲避細分。它是醫療保健和娛樂建築，包括體育場、公園、公共和私人娛樂場所，以及教堂、宿舍、政府和市政建築。共同點是高度明確、密集的複雜建築，其建造時間可以持續數十年，並且從他自己的商業角度來看，對利率和內容豐富並不特別敏感。其餘的垂直行業是停車場、辦公室、零售和酒店，其中辦公室、零售和酒店與我們的業務最相關。同樣，由於這些類型的建築物和環境相對於倉庫和停車場的性質越來越複雜。

If you move to page 9, the only thing we've done here is further segment, the data from page eight down to our key verticals on the left. This graph is just the education and health care vertical starts information again, actuals through 2023 and estimates and projections for 2024 and 2025. These two verticals represent 60% of the entire institutional index and 80% of our exposure to the institutional nonresidential construction market simply said we're materially over indexed to the strong stable parts of institutional within nonresidential construction.

如果您移動到第 9 頁，我們在這裡所做的唯一事情就是進一步細分，即從第 8 頁向下到左側關鍵垂直的資料。該圖只是教育和醫療保健垂直領域的重新開始資訊、截至 2023 年的實際情況以及 2024 年和 2025 年的估計和預測。這兩個垂直行業佔整個機構指數的 60%，占我們對機構非住宅建築市場敞口的 80%，簡單地說，我們對非住宅建築內機構的強大穩定部分的指數過高。

On the bottom left, this is the graph again just for office, retail and hospitality verticals, the same periods as before. With the conclusion being those verticals represent only 30% of the overall commercial starts. Information yet represents 75% of our exposure to commercial.

左下角是辦公室、零售和酒店垂直行業的圖表，與之前的時期相同。結論是這些垂直產業僅佔整體商業啟動的 30%。目前，資訊占我們商業曝光量的 75%。

So when you look at this and break it all down, it's certainly one reason why our business has been so resilient over the past 20 years. The other thing is that when you look at the projection for starts in 2025 within our most critical verticals, it's better than at any point in time over the last number of years. So certainly a good signal for us, but we're not popping champagne yet because those starts, number one actually have to happen. And two, we'll see it when we start to see the bid quotes turn into by quotes which brings me to the last one for me, which is on page 10.

因此，當你仔細審視這一點並將其全部分解時，你會發現這無疑是我們的業務在過去 20 年中如此有彈性的原因之一。另一件事是，當你查看我們最關鍵垂直領域 2025 年開工的預測時，你會發現它比過去幾年的任何時間點都要好。這對我們來說當然是一個好信號，但我們還沒有開香檳，因為這些開始了，第一件事實際上必須發生。第二，當我們開始看到出價報價變成逐報價時，我們就會看到它，這將我帶到了最後一個報價，位於第 10 頁。

I'll start by saying non residential construction and all that goes into it is a very complex industry. If you visited a job site or even built a home, this will resonate with you. When you think about all the coordination amongst the trades, staffing levels, regional migration supply chain challenges, permitting inspections and on top of that weather and just the reality of the different seasons in which work can be done in various parts of the country. It's complex in general. The way to think about our business is that the average length of time to construct the non residential building is approximately 18 months, some shorter, some longer with our portfolio, which is by far the broadest and most expansive in the industry. We participate across the entirety of those approximately 18 months with flow systems early in the process, water safety and control in the middle and towards the end of the process, with hygienic and environmental and drinking water.

我首先要說的是非住宅建築，它是一個非常複雜的行業。如果您參觀過工地甚至建造了房屋，這會引起您的共鳴。當你考慮到行業之間的所有協調、人員配備水平、區域移民供應鏈挑戰、許可檢查以及天氣以及可以在該國不同地區完成工作的不同季節的現實時。整體來說很複雜。考慮我們業務的方式是，建造非住宅建築的平均時間約為 18 個月，有些較短，有些較長，我們的投資組合是迄今為止業內最廣泛和最廣泛的。我們參與了整個大約 18 個月的過程，在流程的早期涉及流量系統，在流程的中間和最後階段涉及水安全和控制，以及衛生、環境和飲用水。

This is the chart on the left to think about how that manifests itself within our business. You need to understand the the lag effect simply said in any given year, only about 20% of our new construction sales will come from starts activity within that calendar year and roughly 80% will come from the start activity of prior years to the right. We've tried to illustrate that over a given year by quarter. Think about it this way in Q1 of 2025 virtually all of our new construction sales will come from starts in 2024 and before and by the time we get to Q4 current year, 2025 starts, we'll have about 40% contribution to our sales.

這是左邊的圖表，可以思考這一點如何在我們的業務中反映出來。您需要了解滯後效應，簡單地說，在任何給定年份，我們的新建建築銷售中只有約 20% 來自該日曆年內的開工活動，大約 80% 將來自右側前幾年的開工活動。我們試著逐年說明這一點。以這種方式思考，在 2025 年第一季度，幾乎我們所有的新建銷售都將來自 2024 年及之前的開工，到 2025 年第四季開工時，我們將對銷售做出約 40% 的貢獻。

I think the way to conclude all of this is to say on top of all the market data we just run through. We've got our own more detailed views of specific regions, channels and customers and is ultimately how we manage the business. We also have things like drinking water infiltration which can drive outsized growth that isn't really dependent on anything we've looked at this morning. The net of all of that is that it gives us high confidence in core, in our core growth outlook. We continue to improve over the next couple of years and with that, I'll turn it over to Dave on slide 11.

我認為總結這一切的方法是基於我們剛剛瀏覽的所有市場數據。我們對特定地區、通路和客戶有更詳細的看法，這也是我們管理業務的最終方式。我們還有像飲用水滲透這樣的事情，它可以推動巨大的成長，而這並不真正依賴我們今天早上看到的任何東西。所有這些的最終結果是，它讓我們對核心業務以及我們的核心成長前景充滿信心。我們將在接下來的幾年中繼續改進，因此，我將把投影片 11 上的內容交給 Dave。

Thanks Todd.

謝謝托德。

While the market has had its ups and downs over a longer period of time, we have demonstrated an ability to deliver core growth through a number of different market dynamics. Over the last 55 quarters, we have had positive core growth 51 times and our long term core sales CAGR back 10 years is 6%. We are focused on a single geography in North America that is highly leveraged to the stable education and health care and markets within institutional. Our retrofit exposure has increased over the years to 45% and we are deploying resources at the local regional levels where we win every day. There is not a single contiguous nonres market here in the US in the US. This is a hyper local hyper regional business.

儘管市場在較長一段時間內經歷了起起落落，但我們已經證明了透過許多不同的市場動態實現核心成長的能力。在過去 55 個季度中，我們實現了 51 次核心正成長，10 年來我們的長期核心銷售額複合年增長率為 6%。我們專注於北美的單一地區，該地區對機構內穩定的教育、醫療保健和市場具有高度槓桿作用。多年來，我們的改造風險已增加到 45%，我們正在當地區域層級部署資源，我們每天都在這些地方獲勝。美國沒有一個連續的非再生能源市場。這是一家超本地化、超區域性的企業。

Our track record of sales growth has allowed us to deliver excellent profitability and cash flow year-to-date. Our consolidated EBITDA margins are 25% and our expectation is 30% to 35% incremental margins. As we move forward, our margin strength has come from leveraging our variable cost model and relentless continuous improvement to the deployment of the Zern LK business system. The CapEx light model coupled with our disciplined working capital management has led to robust cash flow. And finally on capital allocation, the balance sheet has never been in a better spot. We currently have the lowest leverage we have had as a public company with a flexible balance sheet allowing us to increase our return of capital to shareholders via dividend and share repurchases. While in the background, cultivating M&A please turn to slide 12 and I'll cover our outlook for the fourth quarter and for calendar year 2024 for the fourth quarter of 2024 we are projecting year over year core sales growth to be in the low single digits and are anticipating our adjusted EBITDA margin or excuse me, our adjusted EBITDA to be between 88million and 90 million for the quarter for the full year. We expect to see low single digit pro forma core sales growth year over year with respect to our adjusted EBITDA margin. We are again raising our outlook and now expect adjusted EBITDA margin expansion to be between 250 approximately 270 basis points year over year.

我們的銷售成長記錄使我們能夠在今年迄今實現出色的獲利能力和現金流。我們的綜合 EBITDA 利潤率為 25%，我們的預期增量利潤率為 30% 至 35%。隨著我們的前進，我們的利潤優勢來自於利用我們的可變成本模型以及對 Zern LK 業務系統部署的不懈持續改進。輕資本支出模式加上我們嚴格的營運資本管理，帶來了強勁的現金流。最後，在資本配置方面，資產負債表處於前所未有的良好狀態。作為一家擁有靈活資產負債表的上市公司，我們目前的槓桿率是最低的，這使我們能夠透過股利和股票回購來增加對股東的資本回報。在後台，請翻到投影片 12，我將介紹我們對第四季和 2024 年日曆年的展望。調整後的EBITDA 利潤率，或對不起，我們調整後的EBITDA 全年季度將在8,800 萬至9,000 萬之間。我們預計，就調整後的 EBITDA 利潤率而言，預計核心銷售額將出現低個位數成長。我們再次上調預期，目前預計調整後 EBITDA 利潤率將年增 250 至 270 個基點之間。

Our free cash flow expectation has also improved as we are now expecting cash flow to be approximately 260 million before we open the call for questions. Just a reminder that we've included on page 12, our fourth quarter assumptions for interest, expense, non cash stock compensation, expense, depreciation and amortization adjusted tax rate and diluted shares outstanding. As a reminder, the year over year sales comparison in the fourth quarter is completely comparable as the last impact from product line exits occurred in last year's third quarter. We will now open up the call for questions. Thank you.

我們的自由現金流預期也有所改善，在我們開始提問之前，我們預計現金流約為 2.6 億。只是提醒一下，我們在第 12 頁中包含了我們第四季度對利息、費用、非現金股票補償、費用、折舊和攤銷調整稅率以及稀釋後流通股的假設。提醒一下，第四季的年比銷售比較完全具有可比性，因為產品線退出的最後一次影響發生在去年第三季。我們現在將開放提問。謝謝。

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via speaker phone on your device, please pick up your handset to ensure that your phone is not on mute. When asking your question again. Press star one to join the queue.

謝謝。我們現在開始問答環節。如果您已撥入並想提問，請按下電話鍵盤上的星號一舉手並加入隊列。如果您想撤回問題，只需再次按星號一即可。如果您被要求提出問題並且正在透過裝置上的免持電話收聽，請拿起您的聽筒以確保您的手機未處於靜音狀態。當再次問你的問題時。按下一號星即可加入佇列。

Your first question comes from the line of Bryan Blair with Oppenheimer & Co. Your line is open.

你的第一個問題來自布萊恩布萊爾與奧本海默公司的專線。

Thank you. Morning,

謝謝。早晨，

Yes morning

是的，早上

another solid quarter, noted growth in all product categories for Q3, I guess the level set was there, you know, meaningful delta in growth rates in the quarter. And then for, you know, Q4, what are you contemplating by major product category in the low single digit guide that you offered.

另一個穩定的季度，注意到第三季度所有產品類別的成長，我想設定的水平是存在的，你知道，該季度成長率的有意義的增量。然後，您知道，第四季度，您在提供的低個位數指南中按主要產品類別考慮了什麼。

Yeah, Bryan this is Dave nothing different between the different product categories. Obviously, drinking water continues to perform very well. We saw double digit growth in the installed base of of filtered bottle fillers in the quarter. You know, we continue to focus on just expanding the installed base of filtered bottle fillers as well as the attachment rate of those filters. Todd talked about some of the events in Michigan this quarter and I think that'll help both of those factors that our team are focused on. So we'll now have a nice installed base of filtered bottle fillers in Michigan with a pretty high attachment rate on a go forward basis as the state looks to comply with that legislation.

是的，布萊恩，這是戴夫，不同的產品類別之間沒有什麼不同。顯然，飲用水仍然表現良好。我們看到本季過濾瓶灌裝機的安裝基數出現了兩位數的成長。您知道，我們繼續專注於擴大過濾瓶灌裝機的安裝基礎以及這些過濾器的附著率。托德談到了本季在密西根州發生的一些事件，我認為這將有助於我們團隊關注的兩個因素。因此，我們現在將在密西根州擁有一個良好的過濾瓶灌裝機安裝基地，隨著該州希望遵守該立法，未來的附著率相當高。

And then I would say very similar for the fourth quarter in terms of breaking down between the four product categories, how the sales looked in the third quarter. I'd I'd expect something similar in the fourth quarter.

然後我想說，第四季在四種產品類別之間的細分方面非常相似，第三季的銷售情況如何。我預計第四季會出現類似的情況。

Okay. Understood and kind of offered a segue there with drinking water, you know, still growing double digits looking to 2025. Is there any reason to you know, expect that growth rate to moderate? You know, and to what extent if you can, you know, quantify, you know, could Michigan filter first implementation or other states following suit benefit your team over time.

好的。了解並提供了飲用水，預計到 2025 年仍將實現兩位數成長。您是否有任何理由預計成長率會放緩？你知道，如果你可以，你知道，量化，你知道，密西根州過濾第一個實施或其他效仿的州可以在多大程度上隨著時間的推移使你的團隊受益。

Yeah, so I think in terms of next year, nothing would suggest that it would slow down just in terms of trying to size Michigan. If you look at the state, the legislation that was passed requires one bottle filler, one filtered bottle filler per 100 students in the state. And so if you look at the state of Michigan, there's just about 1.5 million occupants within K through 12 schools. And so you can do the math on how many bottle fillers would be required in the state. Just as a, as a proxy, you know, an average bottle filler might sell for 12 to $1300. And then there's also regulation around just faucets within classrooms and things like that. So there's a number of filtered faucets that will, will also sell into the state of Michigan. The, the other thing to keep in mind though, with the legislation in Michigan is that it's a two year adoption. So the law was passed in October of last year, the state just put out applications for schools within the last month, month and a half. Schools will start to get approval for spending and then they'll likely spend in 25 and 26. So a lot of the legislation stuff that is either in play or passed like in the state of Michigan tends to have a fairly, a fairly long period of adoption.

是的，所以我認為就明年而言，沒有任何跡象表明它會在試圖調整密西根州規模方面放慢腳步。如果你看看該州，通過的立法要求該州每 100 名學生配備一個灌裝機，即一台過濾灌裝機。因此，如果你看看密西根州，K 到 12 所學校的學生人數大約是 150 萬人。因此，您可以計算該州需要多少瓶灌裝機。作為一個代理，你知道，一個普通的瓶子灌裝機的售價可能為 12 至 1300 美元。此外，還有關於教室內水龍頭之類的規定。因此，有許多過濾水龍頭也將銷往密西根州。不過，另一件事要記住，密西根州的立法是兩年的收養期。所以這項法律是去年10月通過的，州政府剛在上個月、一個半月內發出了學校申請書。學校將開始獲得支出批准，然後他們可能會在 25 和 26 年內進行支出。因此，許多正在實施或通過的立法（例如密西根州）往往有相當長的採用期。

Understood. Appreciate that detail.

明白了。欣賞這個細節。

One more quick. if I may, you mentioned that normalized 30% to 35% incrementals. You expect to, you know, drive going forward, I believe you're also, you know, underway with some, you know, supply chain repositioning that that should benefit even to grow up next year. Can you remind us of the you know, the benefit that that should drop through and perhaps the phasing or the timing of that?

快點再來一張。如果可以的話，您提到標準化了 30% 到 35% 的增量。你期望，你知道，推動前進，我相信你也，你知道，正在進行一些供應鏈重新定位，這甚至應該有利於明年的成長。您能否提醒我們您知道的、應該放棄的好處以及可能的階段或時機？

Yeah. Bryan thought. You know, we've sized that somewhere in the neighborhood of 5million to 10 million at full run rate. You know, I think we'll be in a position to articulate that perfectly, you know, when we get to February, but I think you could, you know, you can for sure, count on five next year and then it's just a matter of, you know, how fast is, does it all ramp and, and can we get all the benefit in the year just based on current inventory levels and sell through and all that kind of stuff? But, you know, something we've been working on for a number of years. I think it's a particularly helpful hedge against, you know, the backdrop of a potential tariff environment. And but, you know we've been working at it for a number of years and so it'll begin to read through next year and then full run rate, you know, into 2026.

是的。布萊恩想。您知道，在全速運轉時，我們的規模約為 500 萬到 1000 萬。你知道，我認為當我們到二月時，我們將能夠完美地闡明這一點，但我認為你可以，你知道，你肯定可以指望明年有五個，然後這只是一個問題是，你知道，速度有多快，一切是否都在增加，以及我們能否僅根據當前的庫存水平和銷售量以及所有類似的東西來獲得今年的所有收益？但是，你知道，這是我們多年來一直在努力的事情。我認為，在潛在關稅環境的背景下，這是一種特別有用的對沖手段。但是，我們已經為此工作了很多年，因此它將從明年開始通讀，然後到 2026 年全面運行。

Got it. Appreciate the color. Thanks again.

知道了。欣賞顏色。再次感謝。

Our next question comes from the line of Andrew Buscaglia with BNP Pariba. Your line is open.

我們的下一個問題來自法國巴黎銀行的安德魯·巴斯卡利亞 (Andrew Buscaglia)。您的線路已開通。

Hey, good morning, guys.

嘿，早上好，夥計們。

Morning,

早晨，

So you know the story all year, then you really strong margins and this quarter in fact, gross margins I thought were exceptional. You know I wonder if you could talk a little bit more about gross margins. But you know what's driving that, how sustainable are the current levels? And then what's the long term goal from here in gross margins? Is there really a ceiling or can that just keep going higher?

所以你全年都知道這個故事，然後你的利潤率非常高，事實上，這個季度的毛利率我認為非常出色。你知道，我想知道你是否可以多談談毛利率。但你知道是什麼推動了這個趨勢嗎？那麼毛利率的長期目標是多少呢？真的有上限嗎？

Well, I think it's you know a testament to a number of things. One the foundational so business system work that happens day in and day out. That winds its way into gross margin through productivity, waste elimination, improvements in quality waste elimination around, you know freight and things like that. So the the short answer it's incredibly sustainable. And then I think the other thing that to point out is, you know, that our fastest growing product category is mixed favorable. And so I think it's our, our view that it's very sustainable at the levels, it's at you know subject to the usual seasonality that we see but in general, we think it can continue to march higher. I don't know that there's a number that I'm going to give you. But, you know, from where we are. I think you know targeting over time you know a 50% gross margin is realistic for our product portfolio in today.

嗯，我認為這是你知道很多事情的證明。這是日復一日發生的基礎業務系統工作之一。透過生產力、廢棄物消除、廢棄物消除品質的改進、貨運等，這會逐漸影響毛利率。所以簡短的回答是它具有令人難以置信的可持續性。然後我認為要指出的另一件事是，你知道，我們成長最快的產品類別是混合有利的。因此，我認為我們的觀點是，它在各個層面上都是非常可持續的，你知道，這取決於我們看到的通常的季節性，但總的來說，我們認為它可以繼續走高。我不知道我要給你一個號碼。但是，你知道，從我們現在的位置來看。我想您知道隨著時間的推移，您知道 50% 的毛利率對於我們今天的產品組合來說是現實的。

Yeah, that's helpful you know another question I had on the margin line is on slide 10, you talk about that pro how you work through that process. Is there a margin differential as you work through you know the month one through 18.

是的，這很有幫助，你知道我在邊緣線上提出的另一個問題在幻燈片 10 上，你談論了那個專業人士如何完成這個過程。您知道從 1 月到 18 月，是否存在保證金差異。

You know particularly. You know I think when you get to the end, our drinking water margins are better than our hygienic, but when you aggregate the three across they're pretty similar at the end of the day.

你特別了解。你知道，我認為當你到達最後時，我們的飲用水利潤率比我們的衛生利潤率要好，但是當你將這三者加在一起時，最終它們非常相似。

Yeah, and that's why obviously Andrew assumes that it all jobs start at the same time which isn't necessarily the case, you've got jobs in process in different stages of the process at any given point in the quarter.

是的，這就是為什麼安德魯顯然認為所有工作都是同時開始的，但事實並非如此，在本季度的任何給定時間點，在流程的不同階段都有工作正在進行中。

Right? Okay. Thank you guys.

正確的？好的。謝謝你們。

Yeah, next question comes from the line of Andrew Krill with Deutsche Bank. Your line is open.

是的，下一個問題來自德意志銀行的安德魯·克里爾（Andrew Krill）。您的線路已開通。

Hi, thanks. Good morning, everyone and thanks for all the new color in the slides are helpful. So on those and all the information on Dodge Star. So you mentioned more encouraging projections looking into next year but that you need to see them actually happen. So, just wondering have you seen kind of any increase in like pauses or hesitancy with customers, you know, to like actually push projects through the finish line right now.

你好，謝謝。大家早安，感謝幻燈片中所有新顏色的幫助。關於道奇之星的所有資訊。因此，您提到了明年的更令人鼓舞的預測，但您需要看到它們實際發生。所以，我只是想知道您是否看到客戶的停頓或猶豫增加，您知道，就像現在真正推動專案完成任務一樣。

Not in any, not in any pronounced way. Andrew, I think you know, you said that the magic statement which is they actually have to happen. And so when you look at you know, the 24 information, you know that's actuals and projections through August, you know we're not seeing on the ground anything, you know, moving around over the last quarter. And then obviously, as they get into 2025 you know, there's usually some wiggle in the beginning of the year based on the weather patterns in the US. But taken as a whole, you know, the dodge starts information usually is pretty reliable and gets, you know, I would say retroactively updated every time it's issued each month and the bias is usually again to the to increase to increase it. So we've got to see it happen but nothing pronounced or anything of any significance on delays or push outs from our vantage point.

不以任何方式，不以任何明顯的方式。安德魯，我想你知道，你說過神奇的說法是它們實際上必須發生。因此，當您查看 24 條資訊時，您知道這是截至 8 月的實際情況和預測，您知道我們沒有看到任何實際情況，您知道，在上個季度發生變化。顯然，隨著進入 2025 年，根據美國的天氣模式，年初通常會出現一些波動。但總的來說，你知道，閃避開始的訊息通常是相當可靠的，並且，你知道，我想說的是，每次發佈時都會進行追溯更新，並且偏差通常會再次增加以增加它。因此，我們必須看到它發生，但沒有任何明顯的延遲或從我們的有利位置推出任何重要的東西。

Okay, great. And on net on pricing just I think my understanding is this year price net price has been a bit below the long term algorithm, you know, maybe in that like 50 bits or so range just to talk us through like your confidence. I think maybe like 1point to 2 points in 2025 as demand comes back a bit.

好的，太好了。在網路定價方面，我認為我的理解是，今年的價格淨價略低於長期演算法，你知道，也許在 50 位左右的範圍內，只是為了讓我們有信心。我認為隨著需求的回升，到 2025 年可能會增加 1 到 2 個點。

Yeah. I think that's a very good assumption. You know we're seeing the market put in price increases beginning in 2025 we've done our preliminary communication around that and everything that we see and I see, leads me to believe that's a really good assumption heading into 2025 as we sit here today. Right. I mean, I think to the degree there are tariff implications or other things that happen between now and you know, points in time in 2025 that could differ. But I think as a baseline, you know that a couple points of price is probably a really good assumption. I think in the 2025.

是的。我認為這是一個非常好的假設。你知道，我們看到市場從2025 年開始價格上漲，我們已經就此進行了初步溝通，我們所看到的和我所看到的一切讓我相信，當我們今天坐在這裡時，這是進入2025年的一個非常好的假設。正確的。我的意思是，我認為從現在到 2025 年之間發生的關稅影響或其他事情可能會有所不同。但我認為作為基準，你知道幾個點的價格可能是一個非常好的假設。我想在2025年。

Thank you.

謝謝。

Next question comes from the line of Nathan Jones with Stifel. Your line is open.

下一個問題來自 Nathan Jones 和 Stifel 的對話。您的線路已開通。

Good morning, everyone.

大家早安。

Morning

早晨

Good morning.

早安.

I Have a follow up to Brian's earlier question on the incremental and supply chain savings. You've got 30 to 35% normalized incremental. Should we think of the supply chain savings over the next year or two as contributing to that 30 to 35% incremental or as additional to that 30 to 35% incremental?

我對布萊恩之前提出的關於增量和供應鏈節省的問題進行了跟進。您已經獲得了 30% 到 35% 的標準化增量。我們是否應該將未來一兩年的供應鏈節省視為 30% 至 35% 增量的貢獻，還是 30% 至 35% 增量的補充？

Yeah, Nathan this is Dave, I would think about it as additional so 30% to 35% normalized incremental margins and then we'll have a step Elkay up benefit from that supply chain action.

是的，Nathan，我是 Dave，我認為這是額外的 30% 到 35% 的標準化增量利潤，然後我們將從供應鏈行動中獲得更高的 Elkay 收益。

Awesome. But when you guys acquired , you gave some data around, you know, the number of water fountains in the US, it was like 8 million and the penetration of bottle fillers on those was like, I think it was 1.6 million. Is there an update? You have to that I'm just interested to see kind of how the penetration of those has evolved over the last couple of years to get kind of a better idea of how long the runway is for penetration of bottle fillers.

驚人的。但當你們收購時，你們提供了一些數據，你知道，美國飲水機的數量約為 800 萬個，而瓶裝機的滲透率約為 160 萬個。有更新嗎？你必須這樣做，我只是有興趣了解過去幾年這些滲透率是如何演變的，以便更好地了解瓶子灌裝機滲透率的跑道有多長。

Yes. So if you look at the call it 5million, 2 years ago, Nathan, I'd say there's an incremental 200,000 to 300,000 bottle fillers over the last, I guess, since July of 2022.

是的。因此，如果你看看 2 年前的 500 萬個，Nathan，我會說自 2022 年 7 月以來，過去的裝瓶量增加了 20 萬至 30 萬個。

One last one on that.

最後一件事。

Yeah. So there's still a fairly massive installed base of non bottle fillers and non filtered bottle fillers here in the US.

是的。因此，在美國，非瓶裝灌裝機和非過濾瓶裝灌裝機的安裝基礎仍然相當龐大。

What's your guys' opinion on what the saturation of that is like? If there's 8 million water fountains out there they're not all going to have bottle villas. Eventually. There's going to be a you know, a top number to that. I imagine it's still far above where it is today. But do you have any kind of estimation of, of what max penetration might be?

你們對飽和度有什麼看法？如果那裡有 800 萬個飲水機，那麼它們不會全都是瓶裝別墅。最終。將會有一個你知道的最高數字。我想它仍然遠遠高於今天的水平。但是您對最大滲透率有什麼估計嗎？

You know Nathan I don't know that I don't know that we do, but I think you know, I think you can reliably think about that installed base growing, you know, in the couple 100,000 potentially 300,000 over the coming years. So, you know, I think, check back, check back with us when we feel like it's, you know, more appropriate. But at the present, I think it's very early days. I mean the category is, I think 11 years old. Right. And, and so, you know, it took, it took our entire lifetimes and multiple lifetimes to get to the 8 million of installed drinking fountains, I think with legislation, you know, mandating you know particular number of units per student. And then that and then the retrofit replace, right? Because the life cycle of a bottle filler is somewhere in the neighborhood of 10 years. So, you know, we're in the very early innings of capturing a little bit of that very initial replacement cycle. But I, I think you can think about it is reliably growing the installed base by a couple 100,000, you know, probably moving to 300,000 over the next, you know, five years or so.

你知道內森，我不知道我不知道我們這樣做，但我想你知道，我認為你可以可靠地考慮安裝基礎的增長，你知道，未來幾年可能會增長到 100,000 到 300,000。所以，你知道，我認為，當我們覺得更合適時，請回來查看，再與我們聯繫。但目前，我認為還為時過早。我的意思是，我認為該類別已有 11 年歷史。正確的。所以，你知道，我們花了一輩子的時間和好幾輩子才安裝了 800 萬個飲水機，我認為通過立法，你知道，要求你知道每個學生的具體數量。然後再進行改裝更換，對嗎？因為灌裝機的生命週期約為 10 年。所以，你知道，我們正處於捕捉最初更換週期的一小部分的早期階段。但我認為你可以認為，安裝基礎可靠地增加了 10 萬，你知道，在接下來的五年左右的時間裡，可能會增加到 30 萬。

Excellent. Thank you very much for taking my questions.

出色的。非常感謝您回答我的問題。

Yes.

是的。

Next question comes from the line of Michael Lauren with bear your line is open.

下一個問題來自邁克爾·勞倫 (Michael Lauren) 的線路，請注意，您的線路已開放。

Hey, good morning guys.

嘿，早上好，夥計們。

A good slide. And I'm just trying to triangulate, you know, the dodge starts on in the sub segment information with the timing that you laid out on slide. 10 and it seems to me what you're saying is there's relative stability in your markets as we sit here today, the tailwinds from a potential spike in the education, the ed, the education health care side of things. I mean, thatt would be more the second half of next year. So the idea from your perspective, if I'm triangulating, this is pretty stable going into the front half of next year and then back part next year and 26 is where the tail went from, that, where that would come in or is it just a little early to make that assumption?

一張好的投影片。我只是想對你知道的進行三角測量，閃避從子段信息中開始，與你在幻燈片上佈置的時間同步。 10 在我看來，您所說的是，當我們今天坐在這裡時，您的市場相對穩定，這是教育、教育、教育醫療保健方面潛在激增的順風車。我的意思是，那將是明年下半年的事情。所以從你的角度來看，如果我進行三角測量，進入明年上半年，然後進入明年下半年，這是相當穩定的，26 是尾部的來源，即，它將進入的地方，或者是它做出這樣的假設還為時過早嗎？

No, I think in general if the starts turn out to occur as projected in the verticals, particularly on the institutional side, the vast majority of that benefit accrues to 2026. And, and just as a maybe a point to make, you know, this represents just our new construction sales, right? And so, you know, we have 40% to 45% of the remainder of the business is retrofit, replace break fix which occurs, you know, in a relatively orderly, you know, 2% to 3% growth per annum and then it doesn't include our residential exposure. So this is just new construction in institutional and commercial. But your thesis around when does it show up? Yeah, it'll show up, you know, a little bit towards the end of 2025 but in a more pronounced way throughout 26 provided, you know, these things happen as they're projected today.

不，我認為總的來說，如果垂直領域的開始如預期那樣發生，特別是在機構方面，那麼絕大多數收益將在 2026 年之前實現。而且，也許需要指出的是，這僅代表我們的新建築銷售，對嗎？所以，你知道，我們剩下的業務有 40% 到 45% 是改造，更換發生的故障修復，你知道，以相對有序的方式，每年增長 2% 到 3%，然後它不包括我們的住宅風險。所以這只是製度和商業上的新建設。但你的論文大約什麼時候出現？是的，它會在 2025 年底左右出現，但會在 26 年內以更明顯的方式出現，前提是這些事情按照今天的預測發生。

It makes sense. I was going to ask about the other piece that you got to it. So how do you think about the balance sheet usage from here, rate of dividend balance sheets in great shape obviously, how's that funnel from an M&A perspective? Look at this point and how do you think about actionability?

這是有道理的。我本來想問你得到的另一件作品。那麼，您如何看待資產負債表的使用情況，資產負債表的股息率顯然狀況良好，從併購的角度來看，這個漏斗是怎麼樣的？看到這一點，您如何看待可操作性？

I think they've covered a lot of that in his comments. And obviously, we think we can you know, continue to grow the dividend at a double digit rate for the foreseeable future. We're going to continue to invest in ourselves by buying back stock below. We see the intrinsic value being based on our view of the outlook and to get to the root of your question, you know the cultivation activity is picking up. And so I think we're going to have opportunities to convert things that we've cultivated on a proprietary basis. You know, sometime in 25 I think that you know, the nature of the conversations gives me some element of confidence that there will be some things that are actionable and we'll be able to convert. But in the meantime, you know, I think we're going to reliably invest in what we believe is a great investment ourselves. And, and continue to watch and be in a position to execute on some M&A sometime in 25.

我認為他們在他的評論中已經涵蓋了很多內容。顯然，我們認為我們可以在可預見的未來繼續以兩位數的速度增加股利。我們將透過回購下面的股票來繼續投資自己。我們看到的內在價值是基於我們對前景的看法，為了找到你問題的根源，你知道種植活動正在增加。因此，我認為我們將有機會轉換我們在專有基礎上培育的東西。你知道，在 25 年的某個時候，我想你知道，對話的本質給了我一些信心，相信會有一些事情是可行的，我們能夠轉化。但同時，你知道，我認為我們將可靠地投資於我們自己認為是一項偉大的投資。並且，繼續關注並有能力在 25 年的某個時候執行一些併購。

Thanks to appreciate it. Yes.

感謝欣賞。是的。

Next question comes from the line of Joe Ritchie with Goldman Sachs. Your line is open.

下一個問題來自喬·里奇（Joe Ritchie）與高盛的對話。您的線路已開通。

Hey, good morning guys. How are you?

嘿，早上好，夥計們。你好嗎？

Good, good morning.

好，早安。

Good. So I wanted to follow up on that question. It was really helpful to get some of this macro data and the kind of like the initial framework for next year.

好的。所以我想跟進這個問題。獲得一些宏觀數據以及明年的初始框架之類的數據確實很有幫助。

I just want to maybe understand that education and health care piece a little bit better because for the last few years, we've seen a bunch of ser funding come through on the education side. And so I don't know is there any is there maybe a little bit more color on what's driving that expected increase in 2025 on the starts data?

我只是想更好地理解教育和醫療保健部分，因為在過去的幾年裡，我們已經看到教育方面獲得了大量的資金。所以我不知道是否有更多的色彩可以解釋是什麼推動了 2025 年開工數據的預期成長？

It's Dave can probably quote the assert numbers more efficiently than I can. But when you look at the vast majority of that funding, virtually none of it went to building any form of new schools. It was all everything from you know, salaries to safety to technology. And so the demand for new schools and frankly, the age of schools, you know, did not benefit in any way from that funding. And so I think when you look around the country and you see population migration, you see the age of those K through 12 schools throughout the country and the requirements today to make them, you know, safe buildings, sustainable buildings. I think that's simply what's driving the expected outlook. Dave can probably quote the s or numbers more efficiently than I can.

戴夫可能比我更有效地引用斷言數字。但當你看到絕大多數資金時，你會發現幾乎沒有任何資金用於建造任何形式的新學校。你知道，這一切都是從工資到安全再到技術的。因此，對新學校的需求，坦白說，學校的年齡，你知道，並沒有以任何方式從這筆資金中受益。因此，我認為，當你環顧全國時，你會看到人口遷移，你會看到全國各地 K 到 12 所學校的年齡，以及今天對它們的要求，你知道，安全建築、可持續建築。我認為這就是推動預期前景的因素。戴夫可能比我更有效地引用 s 或數字。

Yeah, I think Joe when you look at it I think Todd hit it the SR numbers were massive in terms of the amount of money that was provided to K through 12 schools in the USI. Think the unfortunate thing is or what, what this graph is illustrating is that it wasn't spent on new construction. I think that's the point there were, there was certainly some upgrades that were made, but not even in a material way. And so in terms of our numbers, we haven't seen a massive influx or a significant influx from ser funds going towards drinking water updates. And so I think as the as the US school infrastructure continues to age you, you start to see new construction come out here in 2025.

是的，我認為喬，當你看到它時，我認為托德擊中了它，就通過 USI 的 12 所學校向 K 提供的資金而言，SR 數字是巨大的。想想不幸的事情是什麼，這張圖說明的是它沒有花在新的建設上。我認為這就是重點，確實進行了一些升級，但甚至不是實質的升級。因此，就我們的數字而言，我們沒有看到大量資金湧入或大量資金湧入飲用水更新。因此，我認為，隨著美國學校基礎設施的不斷老化，到 2025 年，您將開始看到新的建築物建成。

Got it. Okay. Understood. That's a really good distinction, appreciate that. And then I guess my follow on question look, it's great to see the balance sheet position where it is today. Sitting at some, you know, one times leverage at this point, just just give us an update if you can on your M&A pipeline priorities for, for the excess liquidity that you have today and any thoughts around that would be helpful.

知道了。好的。明白了。這是一個非常好的區別，對此表示讚賞。然後我想我的後續問題是，很高興看到今天的資產負債表狀況。您知道，目前處於一些槓桿水平，如果可以的話，請向我們提供有關您的併購管道優先事項的最新信息，因為您今天擁有的過剩流動性以及對此的任何想法都會有所幫助。

Yeah, I mean much like we said, just a question ago the you know, the idea would be to continue to stick to what it is we do. I would not see us doing anything outside the USI think it would be a combination of things within categories, as well as some adjacencies that fit nicely between some of our existing product lines. So very much sticking to our knitting in our core market, you know, that give us incremental content per square foot that we can leverage through the way we go to market today. And obviously, you know, migrate to the model that we've leveraged as they pointed out, you know, CapEx light, highly specified those types of things. So that's the pattern of things that we're shooting at and cultivating. So I think it'll look a lot like things we do today. You know in our core market here in North America.

是的，我的意思很像我們說的，就在一個問題之前，你知道，我們的想法是繼續堅持我們所做的事情。我不會看到我們在美國以外做任何事情，我認為這將是類別內事物的組合，以及一些與我們現有的產品線之間非常適合的鄰接關係。你知道，我們非常堅持我們的核心市場的針織，這為我們提供了每平方英尺增量內容，我們可以透過今天進入市場的方式加以利用。顯然，你知道，遷移到我們所利用的模型，正如他們指出的那樣，你知道，資本支出輕，高度指定這些類型的事情。這就是我們正在拍攝和培養的事物模式。所以我認為這看起來很像我們今天所做的事情。您知道我們在北美的核心市場。

Yeah, and I should have probably clarified the question a little bit just maybe just on the adjacent fee, Todd. Can you elaborate on that? Like what you know, what are the types of different, you know, opportunities that are out there that could fit with the portfolio.

是的，我應該稍微澄清一下這個問題，也許只是關於相鄰的費用，托德。能詳細說明一下嗎？就像您所知道的那樣，有哪些類型的不同機會適合您的投資組合。

Well, there's, I mean when you go inside each of our four significant categories, there's a bunch and so I'm not going to get into each and every detail of the pockets of opportunity that we see. But you know, suffice it to say they will all fit really nicely within one of the four product segments that we, we, we talk about today.

嗯，我的意思是，當你深入了解我們的四個重要類別中的每一個時，你會發現有很多，所以我不會詳細介紹我們看到的機會的每一個細節。但你知道，只要說它們都非常適合我們今天討論的四個產品領域之一就足夠了。

Okay. Thank you guys.

好的。謝謝你們。

And our last question comes from the line of Brett Linzey with Mizuho Securities USA, your line is open.

我們的最後一個問題來自美國瑞穗證券的 Brett Linzey 專線，您的專線已開通。

Hey, good morning, all morning.

嘿，早上好，整個早上。

Good morning.

早安.

Hey, just wanted to come back to the construction cycle illustration. Very helpful was wondering if you might be able to drill down on the groupings in a little more detail. So if you look at the flow systems, which does lead are you seeing any early signs of improvement on the rate of change that might, you know, might inform that things are getting better there. Any granular color on some of those, you know those rates of change.

嘿，只是想回到施工週期插圖。非常有幫助的是想知道您是否能夠更詳細地深入了解分組。因此，如果你觀察流動系統，你會發現變化率有任何改善的早期跡象，這可能表示情況正在好轉。其中一些的任何顆粒狀顏色，您都知道這些變化率。

Yeah, I mean qualitatively, I would say if you had to force rank, What's growing the fastest? That might be our, our fastest growing at the present again, excluding drinking water. And so what we're seeing is you know, we're seeing flow systems activity you know, at a pretty decent clip. And so that's where, you know if we weren't seeing that as a backdrop to some of the stability and maybe early innings of growth in the dodge starts, it would be a little bit worrisome but we are seeing flow systems grow, you know, in line with what we would expect and, and sort of at the trajectory that I think the starts data would, would indicate that's just qualitatively and obviously, that has some level of seasonality to it because the number of starts obviously, you know, beginning in the late fall and through winter in certain parts of the country decline. So we're seeing, we've seen that throughout the year. So I think it's a good sign. We're not trying to declare victory on 2025 yet because a lot can happen between now and then. But, you know, they're performing in line with the trajectory that the starts data would would indicate.

是的，我的意思是從品質上來說，如果你必須強制排名，我會說，什麼成長最快？這可能是我們目前成長最快的，不包括飲用水。所以我們看到的是，你知道，我們看到流動系統活動，你知道，在一個相當不錯的剪輯。所以，你知道，如果我們沒有看到這一點作為一些穩定性的背景，也許是道奇開始的早期增長，這會有點令人擔憂，但我們看到流動系統正在增長，你知道，符合我們的預期，並且按照我認為的啟動​​數據的軌跡，這將表明這只是定性和明顯的，它具有一定程度的季節性，因為啟動的數量顯然，你知道，該國某些地區從深秋開始一直到冬季，產量下降。所以我們看到，我們全年都看到這種情況。所以我認為這是一個好兆頭。我們還不想在 2025 年宣布勝利，因為從現在到那時可能會發生很多事情。但是，你知道，他們的表現與開局數據所顯示的軌跡一致。

Okay, great. And then just to follow up on some of the the growth. So you noted the high end of the growth achievement and was driven by growth initiatives, but you didn't go as far as saying anything was related to share gain. Do you think you picked up a little bit of share in the quarter? And I guess, is there any way to parse out what growth initiatives bridged you to the to the upper end versus, you know, more, more market related activity?

好的，太好了。然後只是跟進一些增長。因此，您注意到了成長成就的高端，並受到成長計畫的推動，但您並沒有說任何與份額收益相關的事情。您認為您在本季度獲得了一點份額嗎？我想，有沒有什麼方法可以分析哪些成長計畫將您推向高端，而不是更多、更多與市場相關的活動？

Yeah, I think measuring share in a quarter is extraordinarily difficult. I think the way to think about it is, are we are we growing our specification share reliably over time. And I think the answer to that question is unquestionably yes. And so, rather than you know rather than try to measure a discrete set of opportunities that may have started as long as 18 months ago and say, did you capture share, you know the North Star for us is, did we grow our specifications share throughout the year and specifically in the quarter? And the answer to that is absolutely. And so, you know that will manifest itself in long term share gains versus trying to measure it, you know in any specific quarter with a unique set of opportunities against the competitive set.

是的，我認為衡量一個季度的份額非常困難。我認為思考這個問題的方法是，我們是否會隨著時間的推移可靠地增長我們的規格份額。我認為這個問題的答案毫無疑問是肯定的。因此，與其試圖衡量一組可能早在 18 個月前就開始的離散機會，不如說“你是否獲得了份額”，“你知道我們的北極星是，我們是否增加了我們的規格份額”。 ，特別是季度？答案是絕對的。因此，您知道，這將在長期份額收益中體現出來，而不是試圖衡量它，您知道在任何特定季度都有一系列獨特的機會與競爭對手相比。

Okay, great. Maybe just one last one because I'm last but back to the EBITDA margin progression. So just been really strong you noted the ongoing productivity. You know, when you think about the efforts in terms of structural versus discretionary, is there any variable discretionary cost that would maybe need to come back next year? And then thinking about the mixed complexion, institutional versus commercial if commercial does get better next year and maybe there's some moderation in some of the pockets of institutional are, is there any mixed dynamics to think about?

好的，太好了。也許只是最後一個，因為我是最後一個，但又回到了 EBITDA 利潤率進展。因此，只要非常堅強，您就會注意到持續的生產力。你知道，當你考慮結構性與可自由支配方面的努力時，是否有任何可變的可自由支配成本明年可能需要回來？然後考慮機構與商業的混合情況，如果商業明年確實會有所改善，也許機構的某些領域會有所緩和，是否有任何混合動力需要考慮？

Thank you.

謝謝。

I'll try to remember the whole question but I think that I don't see anything from a variable basis that needs to come back beyond the stuff that you would ordinarily think of like rep commissions and freight and things of that matter. But all at a ratable level. So inside that 30% to 35% incremental envelope, and then as it relates to the categories, you know, institutional, I would say it's not a secret, it's our most profitable vertical commercial next followed by residential. And so, you know as we see institutional chug along and as we see commercial begin to recover, you know commercial is probably much more in line with the fleet average. So, you know, I would say it's good but nothing, you know, nothing outside of that. So again I think when you look back over time, those incremental are pretty reliable. Institutional is clearly our most profitable vertical and residential is our is our least profitable. So, you know I think taken as a whole, we're pretty comfortable with that 30% to 35% incremental going forward.

我會盡力記住整個問題，但我認為我沒有從可變的基礎上看到任何需要超出您通常想到的東西的東西，例如代表佣金和運費以及與此相關的東西。但一切都處於可評價的水平。因此，在 30% 到 35% 的增量範圍內，然後由於它與類別相關，你知道，機構，我想說這不是秘密，這是我們最賺錢的垂直商業，其次是住宅。因此，你知道，當我們看到機構的發展以及商業開始復甦時，你知道商業可能更符合船隊的平均水平。所以，你知道，我會說這很好，但除此之外什麼都沒有。所以我再次認為，當你回顧過去時，這些增量是相當可靠的。機構顯然是我們利潤最高的垂直領域，而住宅是我們利潤最低的領域。所以，我認為從整體來看，我們對未來 30% 到 35% 的增量感到非常滿意。

Appreciate the extra insight. Best of luck.

感謝額外的見解。祝你好運。

That Concludes the question and answer session, Mr. Bryan Wendlandt. I turn the call back over to you.

Bryan Wendlandt 先生，問答環節到此結束。我把電話轉回給你。

Thanks everyone for joining s on the call today. We appreciate your interest in Zurn Elkay Water Solutions Corp and we look forward to providing our next update when we announce our fourth quarter results in early February. Have a good day.

感謝大家今天參加電話會議。感謝您對 Zurn Elkay Water Solutions Corp 的關注，我們期待在二月初公佈第四季度業績時提供下一次更新。祝你有美好的一天。

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

女士們、先生們，今天的電話會議到此結束。您現在可以斷開連線。