Watts Water Technologies, Inc. (WTS) Q4 2022 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Watts Water Technologies, Inc. Fourth Quarter 2022 Earnings Call. [Operator Instructions] It is now my pleasure to turn today's call over to Diane McClintock, Senior Vice President of Investor Relations.

Thank you, and good morning, everyone. Welcome to our fourth quarter and full year 2022 earnings conference call. Joining me today are Bob Pagano, President and CEO; and Shashank Patel, our CFO. During today's call, Bob will provide an overview of 2022 as well as an update on our expectations for the markets in 2023. Shashank will discuss the details of our fourth quarter and full year financial results and provide our outlook for Q1 and the full year 2023. Following our remarks, we will address questions related to the information covered during the call. Today's webcast is accompanied by a presentation, which can be found in the Investor Relations section of our website. We will reference this presentation throughout our prepared remarks. Any reference to non-GAAP financial information is reconciled in the appendix to this presentation. I'd like to remind everyone that during this call, we may be making certain comments that constitute forward-looking statements. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially. For information concerning these risks, see Watts' publicly available filings with the SEC. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. With that, I will turn the call over to Bob.

Thank you, Diane, and good morning, everyone. Please turn to slide 3 in the earnings presentation, and I'll provide a recap of 2022 and some initial thoughts regarding 2023. I'd like to start by thanking the entire Watts Water team. We've continued to execute and provide outstanding service to our customers despite escalating inflation, supply chain challenges and labor shortages. The team's collective efforts delivered another strong quarter and record full year sales, operating margin, earnings per share and free cash flow. Organically, full year 2022 sales increased by 13%. Adjusted operating margin increased by 210 basis points and adjusted EPS increased by 29%. We delivered record operating margin while still investing in an incremental $23 million for the future, including spending on our smart and connected initiatives. We generated record free cash flow in the fourth quarter to end the year at $201 million, which represents an 80% conversion rate. Our balance sheet remains strong and provides us with the flexibility to continue to invest for the future through our strategic investments in R&D, smart and connected projects, factory automation and M&A. From an M&A perspective, we have signed a definitive agreement to acquire the assets of the Enware Australia, a leading supplier of specialty plumbing and safety equipment. This acquisition will expand our presence and scale in the Australian market and further provide channel access. We expect to close the acquisition later in Q1 and we'll discuss our expectations in our Q1 earnings call. Operationally, our team did an outstanding job executing through numerous challenges. We are able to deliver meaningful margin expansion in 2022 despite unprecedented inflation in material, labor, overhead and energy costs. Our teams overcame material availability challenges, drove cost savings and realized price increases to keep in front of our cost base. We maintained our focus on the customer and invested in inventory early to ensure we had stock on the shelves during supply chain disruptions throughout the year. We have been reducing our inventories as supply chains have begun to normalize. However, there are still some challenging areas, including electronic component availability. We successfully completed the closure and sale of our plant in Marie, France and transferred all production to sister facilities in France, reducing our footprint in Europe. Our focus on ESG is evident at all levels of our organization. Our employees, customers and suppliers are all engaged in expanding the positive impact we can have on our environment and communities. I'll talk a bit more on our sustainability progress in a moment. Now, I'd like to talk about our view of the markets in 2023. From a macro perspective, global GDP has slowed, but remains positive in our key markets. The North America repair and replacement market is currently solid despite lower GDP. Rising interest rates have significantly slowed single-family new construction, and this is expected to decline double digits in 2023. While multifamily new construction remains resilient today, some leading indicators suggest a slowing in multifamily as 2023 progresses. In the Americas, non-residential new construction indicators are mixed. The ABI dipped below 50 for the last few months, suggesting a slowing towards the end of 2023. However, the Dodge Momentum Index continues to be an expansion in our territory, suggesting growth in non-residential projects will continue into 2023. Other forecasts, including the AIA consensus construction forecast are slightly more optimistic with expectations of mid-single-digit growth in 2023. Certain sectors have been resilient, including health care, education, data center projects and food and beverage. In Europe, energy cost inflation and the war in Ukraine continue to have an impact on economic activity. Euro zone GDP has trended downward, although it is expected to remain slightly positive in 2023. We expect government-sponsored energy subsidies to continue to provide support in Germany and Italy. As a reminder, Europe represents approximately 25% of our business. In the Asia Pacific region, China's economy is now forecasted to grow in the low single digits in 2023. The China markets have been significantly impacted by the reopening after the elimination of the zero-COVID policy. We expect the aftermath to last at least through Q1. In addition, both Australia and New Zealand are seeing the impact of interest rate increases on residential markets. The economy in the Middle East region is expected to grow low to mid-single digits in 2023, and we expect the strength in the oil industry to support new construction. Now, a preview of the drivers for our outlook for 2023. We expect challenging comps for the year after a record 2022. Rollover price, repair and replacement activity and non-residential new construction will be supportive, at least through the first half of the year. Weakness in Europe will continue. The slowing volume will have a more significant impact on our earnings due to our higher fixed cost base in Europe. We did take additional restructuring actions at the end of the fourth quarter, which will help to reduce the impact of the volume deleveraging. In addition, we expect higher interest rates and inflation to unfavorably impact single-family residential new construction. As a reminder, this is less than 10% of our total business. Despite the tougher 2023 macro backdrop, we are continuing to invest in strategic initiatives, including our smart and connected enabled products and expect full year incremental investments of approximately $20 million. Now, I'd like to update you on our smart and connected initiative. Please turn to slide 4. As part of our strategic focus to grow organically, we're investing in innovative new smart and connected enabled products. We invested an incremental $15 million in support of our smart and connected initiatives in 2022 with more than half of our total R&D spend linked to smart and connected products. We have a team of over 100 engineers supporting this important initiative. We ended 2022 with approximately 19% of total sales generated from the sale of smart and connected enabled products. The percentage increased 300 basis points over 2021 and sequentially increased each quarter as we introduced 20 new products. These new products are contributing towards our goal of generating 25% of our sales from smart and connected enabled product sales by the end of 2023. Let me now highlight one of our new smart and connected product solutions. Our Aegis system by Lync provides building owners with a cost-effective hot water system that limits greenhouse gas emissions by combining innovative carbon dioxide heat pump with key ancillary equipment such as domestic water heater exchange skids, electric hot water tanks and mixing valves. The technology provides flexibility to build systems customized to unique applications. Integrated into a building automation system, the Aegis system can monitor unit status in real time, record operational data, check for faults with alarms and warnings and change set points in the operating moats. We are excited about the progress we have made in the future of our smart and connected systems. Our goal is to lead our industry in connecting our products and providing superior benefits to our customers. Please turn to slide 5, and I'll update you on our sustainability progress. Our mission at Watts is to improve comfort, safety and quality of life for people around the world through our expertise in solving water-related challenges. Sustainability is inherently part of how we fulfill our mission. We focus daily on improving sustainability outcomes for ourselves, our customers and our communities by aligning to long-term secular growth trends, including safety and regulation, energy efficiency and water conservation. We work to reduce the water, carbon and waste footprint across our operations and create innovative products and solutions for our customers to help them protect, control and conserve critical resources. Social responsibility is critical at Watts, where safety at our sites is always our first priority. We encourage a diverse, equitable and inclusive environment to ensure all employees are heard and we strive to make a positive economic and social impact on our communities. Recently, we issued a human rights policy aligned with the UN Global Compact. We also endorsed the CEO water mandate, expanding our commitment to water stewardship. Our Sustainalytics ESG score improved by 24%, promoting Watts to a low-risk category. Finally, Watts was again recognized as among America's most responsible companies for the fourth consecutive year. With that, let me turn the call over to Shashank, who will address our results for the fourth quarter and full year and offer our outlook for Q1 in the full year 2023.

Thank you, Bob, and good morning, everyone. Please now turn to slide 6, which highlights our fourth quarter results. Sales of $502 million were up 6% on a reported basis and up 11% organically. Foreign exchange, primarily driven by a weaker euro reduced year-over-year sales by roughly $22 million or 5%. Sales were stronger than we had anticipated with double-digit growth in the Americas and APMEA and high single-digit growth in Europe. I will review the regional performance momentarily. Adjusted operating profit of $72 million, a 12% increase, translated into an adjusted operating margin of 14.3%, up 90 basis points versus last year. Benefits from price and productivity more than offset inflation and incremental investments of $8 million. Adjusted earnings per share of $1.60 increased 13% versus last year. Earnings per share growth was driven primarily by strong operational performance, up $0.25, which was partially offset by the net impact of interest expense, income tax expense and unfavorable foreign exchange movements. The adjusted effective tax rate in the quarter was 22.4%. The rate declined by 40 basis points compared to last year, primarily due to a more favorable state tax rate. For GAAP purposes, we took a $6.2 million charge for restructuring in the quarter, largely related to the continued rightsizing of our European cost structure, along with some smaller Americas cost actions. This charge was partially offset by the gain on the sale of our plant in Méry France after its closure. We also recorded a tax benefit of $18.2 million for GAAP purposes, primarily related to the modification of the structure of our Mexican supply chain operations. In summary, the better-than-expected global top line growth drove higher operating profit, margins and earnings per share compared to the fourth quarter of 2021. Moving to the regional results, please turn to slide 7. The Americas had a solid fourth quarter with organic sales up approximately 11%. The growth was driven primarily by strong price realization. Unfavorable foreign exchange movements in the Canadian dollar reduced reported sales by 1% year-over-year. Adjusted operating profit increased by 27% and adjusted operating margins increased by 240 basis points. The margin expansion was driven by price and productivity, which more than offset inflation and incremental investments. Europe also had a solid quarter with organic sales growth of approximately 9%, mainly driven by price. Reported sales were negatively impacted by 13% from unfavorable foreign exchange movements. We had organic growth across all platforms with double-digit growth in Germany and Italy, driven by our HVAC OEM business, largely due to government energy incentives. France and Benelux also saw strong growth through the wholesale channel and electronics. As a reminder, we stopped our direct shipments to Russia in April 2022, and we estimate the impact of that to be approximately $3 million in the fourth quarter. Operating margins declined by 320 basis points as price and productivity were unable to fully offset rising inflation, energy cost increases, volume deleverage and investments. APMEA sales grew organically by 17%. Reported sales growth of 5% was negatively impacted by 12% from unfavorable foreign exchange movements. China's organic sales growth was in the double digits, primarily driven by the valve business sold into data centers. Organic sales outside China were also up double digits due to strong growth in Australia and the Middle East. Adjusted operating margin decreased 260 basis points as price and productivity were unable to offset a reduction in affiliate volume, inflation and investments. On slide 8, let me speak to the full year results. As Bob mentioned, we delivered record operating results for 2022. Reported sales were $1.98 billion, up 9%, driven by a 13% organic increase attributable to solid price realization and higher volume. Americas and APMEA were both up double digits and Europe was up high single digits for the year. Foreign exchange, primarily driven by a weaker euro reduced year-over-year sales by roughly $72 million or 4%. Acquisitions accounted for $6 million of incremental sales year-over-year. Adjusted operating margins increased 210 basis points to 16.4% in 2022. The margin expansion was driven by price, volume and productivity, which more than offset inflation and incremental investments. We also benefited from the onetime price cost benefit that we captured in 2022 of $13 million due to our proactive investment in inventory. Lastly, we funded approximately $23 million of incremental investments in new product development, smart and connected Solutions and our ESG efforts. Adjusted full year earnings per share of $7.13 increased by $1.61 or 29% versus the prior year. Operating results drove approximately $1.64 of the increase, while acquisitions, lower outstanding shares and a lower adjusted effective tax rate combined for an incremental $0.27. Unfavorable foreign currency translation and higher interest costs combined to decrease earnings per share by approximately $0.30 for the year. Free cash flow for the full year was $201 million, a 26% increase compared to last year, driven by higher net income and a lower investment in inventory. We generated record free cash flow in the fourth quarter to end the year with free cash flow conversion of 80%. As a reminder, we had incremental restructuring and incentive payments in 2022, which reduced our conversion percentage. We invested approximately $28 million in capital spending, including investments in new product development, capacity expansion and automation. This capital investment is partially offset by proceeds of approximately $5 million from the sale of 2 facilities. Our 2022 reinvestment ratio was 102%. We returned $109 million to shareholders in the form of dividends and share repurchases in 2022 and increased our annual dividend return by 15%. Our net debt to capitalization ratio at year-end is -14.3% as compared to -9.3% in 2021. Our balance sheet continues to be in excellent shape and provides substantial flexibility to address our capital allocation priorities. So, despite significant inflationary pressures and continuing supply chain disruptions, we delivered record financial results in 2022. Our team did a great job proactively driving price, expanding margins and further strengthening our balance sheet. Now on slide 9, let's discuss the general framework we considered in preparing our 2023 outlook. First, let's look at the expected unfavorable conditions. As Bob mentioned, we do anticipate a tough comp in 2023 due to the strength of 2022 and the inflation-driven price realization. Higher interest rates are having an unfavorable impact on single-family new construction starts and could also impact multifamily and non-residential construction projects. Global GDP has slowed, but is currently expected to be positive in the U.S. and Europe. GDP acts as a proxy for our repair and replacement business. The European economy continues to slow as the war in Ukraine continues to put stress on the region. Higher inflation and general uncertainty may negatively impact purchasing decisions, especially in new construction. We expect incremental investments and inflation to be a headwind in 2023. Labor shortages will continue to be a challenge and could hinder our ability to manufacture and distribute product efficiently as well as impact our customers' ability to timely complete projects. In the middle column are themes that we'll continue to monitor. We have been able to maintain a positive price cost dynamic through 2022. However, inflationary pressures in labor markets continue to persist and impact overall customer project costs. Although supply chain disruptions are beginning to subside, we are still seeing pockets of challenges, particularly in electronic components. We have begun reducing our inventory levels to reflect the shorter lead times, but we'll continue to monitor and adjust as needed. As Bob discussed, the non-residential new construction indicators are mixed, but this is expected to be supportive in at least the first half of 2023. Some verticals will be more challenged, including office and retail. Some leading indicators, including the ABI Index, have dipped in recent months portending a potential slowdown in the second half of 2023. Now, looking at potential favorable conditions. Institutional and industrial new construction are expected to be a tailwind. Health care, education, data centers and food and beverage should maintain solid growth. We should have a positive carryover effect of last year's price increases into 2023. In addition, we plan to implement price increases during 2023 to keep up with continuing but moderating cost inflation. We expect to continue to expand revenue through our smart and connected product offering and other new product introductions. Productivity and automation investments are expected to provide cost savings in 2023. In addition, our Europe and Americas segments are expected to have incremental cost savings from the restructuring activities commenced in late 2022. As discussed, our balance sheet is exceptionally strong coming into 2023. We have the flexibility to pursue inorganic growth opportunities to augment the business, assuming a transaction meets our strategic and financial criteria. With that as background, let's review our outlook for the full year 2023 and our expectations for the first quarter of 2023. On slide 10, we have provided our major assumptions. Starting with the full year assumption, consolidated organic revenue is estimated to range from -5% to +2%, with regional expectations as follows: Americas from -4% to +2%, Europe from -7% to -1% and APMEA from -1% to plus 6%. As Bob mentioned, we have signed an agreement to purchase the assets of Enware Australia. This outlook does not include the Enware acquisition as the transaction is not expected to close until later in Q1. We will provide additional information on financial expectations after the transaction closes. We expect consolidated adjusted operating margin for the full year to range from between 15.4% to 16.0%, with both the Americas and APMEA down 60 basis points to flat compared to 2022 as price and productivity do not fully offset inflation, incremental investments and the onetime price cost benefit of $13 million we captured in 2022. We anticipate Europe's adjusted operating margin will decrease 120 basis points to 170 basis points due to the impact from inflation and volume deleverage. Consolidated margin declines may range from 100 basis points to 40 basis points. It is important to note that the range includes approximately $20 million in incremental investments. As for the other 2023 key inputs, we expect corporate costs to be about $49 million for the year. Interest expense should approximate $8 million. Our estimated adjusted effective tax rate for 2023 should be approximately 25%. Capital spending is expected to be approximately $42 million. Depreciation and amortization should be approximately $42 million for the year. We expect to deliver free cash flow conversion of greater than or equal to 100% of net income in 2023. For the full year, we are assuming a 1.08 average euro-U.S. dollar FX rate versus the average rate of 1.06 in 2022. This would imply an increase of 2% year-over-year and would equate to an increase of $8 million in sales and $0.03 a share in EPS for the full year versus prior year. We expect our share count to be approximately $33.5 million for the year. Finally, a few items to consider for the first quarter. Organically, we see sales flat to up 4% with low single-digit growth in the Americas and APMEA, offset partially by a low single-digit decline in Europe. We expect first quarter operating margin to be in the range of 15.7% to 16.2% or flat to up 50 basis points versus the first quarter of 2022. This is due to the impact of a tougher compare as well as higher investments and continued inflation. We expect incremental investments of approximately $4 million in the first quarter. Incremental restructuring savings of $1 million should be realized in Europe and $0.4 million in the Americas. Corporate costs should be approximately $11 million. Interest expense should be approximately $2 million. The adjusted effective tax rate should be between 23% and 24%. We anticipate foreign exchange to be a headwind in the first quarter. We are estimating a 1.08 euro-dollar exchange rate, which would be a 4% reduction versus the average rate of 1.12 in the first quarter of 2022. This equates to an impact of $5 million in sales and $0.02 a share in EPS. With that, I'll turn the call back over to Bob to summarize our discussion before moving to Q&A.

Thanks, Sashank. On slide 11, I'd like to summarize our discussion before we address your questions. 2022 closed out on a strong note with record Q4 sales, adjusted operating margin, EPS and free cash flow. Our teams did an outstanding job delivering on our customer commitments despite the many challenges. We expect a tougher 2023 with difficult year-over-year comps from 2022 and challenging market conditions with rising interest rates and an economic slowdown. We are focused on controlling what we can and will take advantage of market opportunities as they arise. Our business model, which includes a large repair and replacement component, provides a durable revenue base that in turn drives a steady cash flow stream. We have a strong capital structure and strong cash flow capability that provides flexibility to address our capital allocation priorities to create value for our shareholders. We remain focused on executing on our long-term strategy, continuing to invest incrementally for the future and driving our smart and connected strategy. We continuously monitor economic conditions and our markets. Our experienced team is well positioned to execute throughout the economic cycle and adapt to meet our customers' needs in any environment. With that, operator, please open the line for questions.

So, just a couple of questions here. First, just on the non-res outlook, you talked about some of those leading indicators. Maybe just put it in context of the mix of business you're seeing, whether you're seeing any softness on the non-res side today, or if this is more prospective based on what those leading indicators are saying. And I know you guys referenced some concern on the office retail side, makes sense. Any other pockets where you feel particularly good about given the visibility you have? So, just some context around all those things.

Yes, the institutional market, education, health care, data centers, food and beverage side has been strong, Mike, and we expect that to continue through the rest of the year. Like you said, the-- more office buildings, retail, that has been soft, and we expect that to continue to be soft. So, that's in our assumptions for the rest of the year.

And are you seeing that today, though, Bob? Or is it the soft points from the...

Yes, that's what we're seeing, that's what our team is seeing that and feel confident that institutional education and health care, all of that will continue to be fairly even-- continue its strength through the rest of 2023.

And if you think about the sequentials that have been assumed in guidance, it feels like a more conservative back half of the year, which makes sense. Is the assumption here then that relatively normal trends into the front half of the year based on what you're seeing in 4Q and then tapers through the year with the hope that maybe the environment stays stronger, but might as well be cautious going into the back half -- is that the thought process?

Well, yes, the thought process-- I mean, the big thing we're watching is multifamily because that's been offsetting some of the single-family residential side for us. So, those indicators, we're watching closely. We expect that to soften as the second half goes-- as well as repair and replacement, Mike, has been strong all year, and repair and replacement usually follows GDP. So, with GDP coming down, we're assuming repair and replacement is likely to come down because it's been very robust in 2022.

Last one for me, if you don't mind. On the smart and connected side, when you're starting to see pockets of weakness, how are people reacting in the smart and connected adoption curve in those areas? Meaning, are you seeing people lean in as they start thinking how to manage people and cost in a weaker environment? Or you may be seeing the opposite, I'd be curious if there are any trend lines associated with that because overall, it seems like the trend line remains pretty healthy for you.

Yes. I mean when you look at smart and connected, there continues to be a shortage of plumbers as well as maintenance personnel, right? And I think anything we can do to make it simpler for the building owners to look at their systems and not have to guess is important. So, we continue to lean in on that. Our customers are taking that very positively. Especially if you have a leak or an incident, you clearly want to look at our products because if you don't, your insurance is going to go up. So, we believe, as I've said before, 10 years from now, pretty much all the products are going to be smart and connected, and we just want to lead in that journey.

Your next question is from the line of Jeff Hammond with KeyBanc Capital Markets.

This is David Tarantino on for Jeff. Maybe just starting off with Europe, I mean, organic growth in the region hasn't really shown any signs of cracks to date, which has been a positive surprise, but obviously, guidance implies a decent amount of slowing in the region. So, could you just give us a bit more color on what you're seeing on the ground in the region right now?

Yes, I mean just what I talked to Mike about just now. I mean, when you look at it, we're seeing single-family residential softening been offset by multifamily residential. We're watching that very carefully because some leading indicators are now projecting that to soften, especially in the second half of the year. As I said, GDP is slowing down -- we tend to follow GDP -- and obviously, with interest rates going up, there's some concern longer term, especially in the second half that commercial construction may slow down. So, we're watching that carefully. We feel good about the first quarter and more in the first half. We're watching how the second half unfolds at this point in time. Certainly, in Europe, with the war, there's-- we're seeing a decrease pretty much on new construction. That's where the concern is. A lot of it has been finished, they're finishing up what they started. But, I think new construction is what we're watching very carefully there, and we think that's going to continue to slow down, and that's why we've assumed that in our overall guidance for Europe.

Okay, great. Then, maybe, switching to price cost. I mean, you have that in the monitoring items, and we're starting to hear some signs of disinflation of certain commodities, but maybe could you walk us through the puts-and-takes here, especially within your own commodity basket?

Yes, look, on the price cost side, we talked about the benefit of carryover price into 2023, as well as we're announcing price increases for 2023, and that's all going to be subject to market pushback, right? But, back to your comment on disinflation, when you think about commodities -- commodities did soften. I mean our biggest commodity is copper, and it did soften in the second half of last year. Since then, it's actually picked up, and the price today is slightly higher than the average price of last year. We've assumed about a 4% inflation both for commodities and other costs like compensation, et cetera -- compensation being one of the biggest costs that we have. But it is-- there is disinflation in the market. So, inflation will be lower than prior year. Operator Your next question is from the line of Joe Giordano with Cowen.

This is Michael on for Joe. Performance in Europe was probably much higher than most were expecting, and you had mentioned earlier that price was a large contributor. Can you just give us a sense perhaps on the magnitude for the quarter and perhaps describe the volume price relationship built into the fiscal year guide?

Yes. So, look, overall, our price realization across Watts was approximately 10% in the fourth quarter, a little bit more than that in the Americas, a little bit less than that in Europe. In Europe, if you strip out price, volumes were slightly negative. Clearly, as we think about 2023 and the guide that we have, unit volumes will be negative. We talked about that when we talked about our margin expectations with the deleveraging we have with a high fixed cost base. So, that's what our expectations are, and specifically to Europe.

[Operator Instructions] Your next question comes from the line of Brian Lee with Goldman Sachs.

Brian, you there?

Sorry, everyone. This is Miguel on for Brian, I was on mute. I just wanted to follow up on that last question and the answer around Europe volumes being down for the guidance in '23. Will volumes also be down in the Americas? Then, also just looking at the Asia guidance, it looks like volumes will be up there, but I just wanted to check on volumes across the regions as well.

Yes. We did talk about Europe. If you strip out a little bit of the price we got going on, unit volumes will be down. In the Americas, if you strip out price, our expectation based on the guidance is unit volumes will be flattish to slightly down. Then, the APMEA region, unit volumes will be up a little bit, primarily driven in the Middle East-Africa market.

Okay, great. That's helpful, thanks for the clarification. Then, yes, on APMEA -- this is my last question -- on APMEA, it looks like it either will be growing in '23, but the operating margins are down. Specific to that region, what's causing the pressure on margins this year?

It was related to intercompany -- last year, in 2022-- in 2021, there was a lot of product sourced from North America. We don't put intercompany sales in that number, but it does have the intercompany profit that is made from its sales to our North America sub. So, again, it's solely due to intercompany volume.

[Operator Instructions] There are no further questions at this time. I will now turn the call back over to Mr. Bob Pagano.

Thank you for taking the time to join us today. We appreciate your continued interest in Watts and we look forward to speaking to you again in May to discuss our first quarter results. Have a good day, and stay safe.

Ladies and gentlemen, thank you for participating. This concludes today's conference call. You may now disconnect.+