Watts Water Technologies, Inc. (WTS) Q2 2024 Earnings Report, Transcript and Summary

Welcome to the Watts Water Technologies, Inc. Second Quarter 2024 Earnings Call hosted by Bob Pagano, President and CEO; Shashank Patel, CFO; and Diane McClintock, Senior Vice President, FP&A and Investor Relations. At the end of the presentation, we will open the line for questions. I will now turn the call over to Diane McClintock.

Thank you, and good morning, everyone. Welcome to our Second quarter 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 the second quarter and discuss the current state of our markets and our operations. Shashank will discuss the details of our second quarter performance and provide our outlook for the third quarter and for the full year. 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 undertakes no 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, and I’ll provide an overview of the second quarter. Our second quarter results were better than expected, including record sales, adjusted operating income and earnings per share. I’d like to extend my gratitude to the entire Watts team for their dedication to serving our customers worldwide and delivering another record quarter. Organic sales were flat in the quarter, which was ahead of our expectations, with solid growth in the Americas and APMEA, partly due to project timing, offset by weaker-than-expected sales in Europe. The Americas region also benefited from incremental sales from our acquisitions of Bradley and Josam, which are both performing ahead of expectations and continue to help drive our long-term success. Adjusted operating income and margin exceeded expectations primarily due to incremental volume in the Americas in APMEA, productivity and cost controls, which more than offset incremental investments in European volume deleverage. Free cash flow for the first half was solid, and we expect to be seasonally stronger in the second half. Our balance sheet remains robust, and along with our extended credit facility will allow for continued flexibility in our disciplined capital allocation strategy. Moving to operations. The integrations of our Bradley, Josam and Enware acquisitions are progressing well. Synergy identification and realization are ahead of schedule, and are all on track to meet our financial criteria for acquisitions. Additionally, our teams have done a good job driving productivity and price to offset inflation in investments. As previously mentioned, we are in the process of implementing a new SAP ERP system across our Americas and APMEA regions. We have a highly capable team equipped with the best-in-class resources executing this implementation, and we are currently on schedule and budget. The new SAP system will reduce our ERP instances, drive productivity and support our smart and connected strategy. Next, I’d like to provide an update on our end markets. Global GDP, which is considered a leading indicator for our repair and replacement activities continues to be lower compared to 2023, but remains positive in our key markets. Europe’s residential and nonresidential new construction markets have further weakened. The reductions of energy incentive programs in Germany and Italy continue to unfavorably impact OEM volume and drive destocking activities, especially in the heat pump market. In the Americas, single-family new construction was down sequentially in June and is expected to remain soft at least until interest rates begin to ease. Multifamily new construction indicators, including starts and permits have been down double digits for the past several quarters and portend a decline in multifamily new construction for the second half of 2024. On a positive note, Americas institutional new construction is holding steady in light industrial, including data centers and mega projects continue to show strength. These trends are expected to continue in the second half of the year. Americas nonresidential new construction indicators are indicating softness for the second half of 2024. The ABI has been down below 50 for several quarters and the second quarter ENR Construction Industry Confidence Index get back below 50%. Growth in certain subverticals, including retail, office and recreation is expected to be challenged. In the Asia Pacific region, we continue to anticipate growth in China end markets driven by data centers and in the Middle East due to strong project activity. We also expect growth in Australia and New Zealand with GDP expected to be positive in strength in institutional. Now an update on our outlook for the remainder of the year. We are maintaining our full year outlook. We believe our solid first half performance will offset continued weakness in Europe, new construction and lower OEM volume from the reductions in energy incentives and related heat pump destocking. We continue to monitor the geopolitical uncertainty in the U.S., Europe and the Middle East, and we’re positioned to proactively address any developments that may impact our operations. In addition, we’re accelerating $2 million of incremental investments into 2024, which will increase full year investments to $22 million from the $20 million previously communicated. The additional investments will fund new product development, including smart and connected initiatives. On Slide 4, I’d like to comment on our most recent sustainability report and the progress we have made. In early July, we published our 2023 sustainability report, which highlights the accomplishments and progress we’ve made within our 4 sustainability pillars: Footprint; handprint; social responsibility; and corporate governance. We have worked hard to exceed the goals we established back in 2018. We believe our triple play of solutions addressing safety and regulation, energy efficiency and water conservation enable our customers to achieve their sustainability goals and remain a top priority for Watts. Additionally, we established new long-term goals, including an absolute carbon emissions reduction commitment, which will help advance our sustainability mission while improving our operations. Sustainability is a core commitment at Watts that extends into all aspects of our business. I’m proud of the progress our global team has made and invite you to read more about it in our sustainability report, which can be found on our Investor Relations website. With that, I’ll turn the call over to Shashank, who will address our second quarter results and our third quarter and full year outlook. Shashank?

Thanks, Bob, and good morning, everyone. Please turn to Slide 5, and I will review the second quarter’s consolidated results. Sales of $597 million were up 12% on a reported basis and flat organically. Solid organic growth in the Americas and APMEA offset a challenging quarter in Europe. In Americas and APMEA, we did benefit from project timing into the second quarter from the third quarter. The acquisitions of Bradley and Josam contributed approximately $65 million or 12% and foreign exchange, primarily driven by a weaker euro decreased sales by approximately $2 million versus the second quarter of 2023. Compared to the prior year period, adjusted operating profit of $112 million increased 8% and adjusted operating margins of 18.8% was down 70 basis points. Adjusted EBITDA of $126 million increased 10% and adjusted EBITDA margin of 21% was down 50 basis points. Operating margin benefited from price mix and productivity, which was more than offset by inflation, volume deleverage, acquisition dilution of approximately 80 basis points and incremental investments of $6 million. The decline in operating margin is also partially due to a very difficult comparison in the second quarter of 2023 when margins exceeded 19%. Adjusted earnings per share of $2.46 increased 5% versus last year, with growth driven by operational performance and solid contribution from our acquisitions. The adjusted effective tax rate was 25.2%, up 50 basis points compared to the prior year period, primarily due to the reduction of foreign taxes associated with the repatriation of funds that occurred in the second quarter of 2023. For GAAP purposes, we incurred approximately $4 million of restructuring and acquisition-related charges. These charges were partially offset by a $3 million nonrecurring gain on the sale of a building in the Americas. Our free cash flow year-to-date was $120 million compared to $89 million in the comparable period last year. The cash flow increase was primarily due to higher net income, lower working capital investment and the contribution from our acquisitions. We expect sequential improvement in our free cash flow and are on track to achieve our full year free cash flow conversion goal of greater than or equal to 90% of net income as previously communicated. The balance sheet remains robust and provides us with ample flexibility. Our net debt to capitalization ratio at quarter end was negative 1%, and our net leverage was negative 0.1%. Our strong cash flow, healthy balance sheet and the recent extension of our credit facility through July 2029 continued to give us capital allocation optionality. Please turn to Slide 6, and I’ll provide a few comments on the regional results. Americas organic sales were up 5% and reported sales were up 22% year-over-year. Organic sales were ahead of our expectations as a result of higher volume, partly due to project shipping earlier than expected. We saw solid growth in our core valve products and our heating and hot water solutions. The acquisitions of Bradley and Josam added $65 million or 17% to Americas sales in the quarter. Adjusted operating income increased 19%, while adjusted operating margin decreased 60 basis points. The operating margin decline was primarily driven by acquisition dilution, inflation and incremental investments, which more than offset price, volume leverage, favorable mix and productivity. Europe organic sales were down 15%, which was slightly worse than we expected. Reported sales were down 16% and included a 1% unfavorable impact of foreign exchange movements. Growth in our Drains business was more than offset by declines in wholesale plumbing in France, Benelux and Scandinavia as well as our OEM businesses in Germany and Italy, where heat pump destocking had a significant impact. Operating income decreased 48% and operating margins decreased 620 basis points. Price favorable mix and productivity did not offset inflation and the significant impact of volume deleverage due to our high fixed cost base in Europe. APMEA organic sales were up 18% and reported sales growth of 16% was negatively impacted by 2% from unfavorable foreign exchange movements. We saw growth across China, Australia, New Zealand and the Middle East. Project timing contributed to the growth in China and the Middle East. Adjusted operating margins increased 70 basis points as volume and productivity more than offset inflation, incremental investments and the dilutive effect of the Enware acquisition. Slide 7 provides our assumptions about our third quarter and full year outlook. First, let’s cover the third quarter outlook. On a reported basis, we expect sales to increase between 5% and 8%. Organically, we expect sales to decrease between 4% and 7%. Organic sales are expected to be down low single digits in the Americas and down low double digits in Europe, partially offset by APMEA, which is expected to be up low single digits. In the Americas, we anticipate weakening in multifamily and nonresidential new construction. In addition, our third quarter guidance includes the unfavorable impact of project timing in the Americas and APMEA, where we saw projects deliver in the second quarter, which was earlier than anticipated. It also includes a soft start to the quarter, resulting from a reduction in safety stocks at some of our channel partners in the Americas due to our normalized lead times. Europe markets are expected to remain soft, partly due to continued heat pump and related product destocking. We expect incremental sales in the Americas from acquisitions to be between $60 million and $62 million. Third quarter adjusted EBITDA margins are expected to be in the range of 18.7% to 19.3%, or down 70 to down 130 basis points. Third quarter adjusted operating margin should be in the range of 16.2% to 16.8% or down 120 basis points to down 180 basis points. Acquisition dilution of 90 basis points, incremental investments of $6 million and volume deleverage, particularly in Europe, will all have an unfavorable impact. A few other items related to the third quarter. Corporate costs should be approximately $14 million and net interest expense should be approximately $2 million. The adjusted effective tax rate should be approximately 25%. We are estimating a 1.09 euro-U.S. dollar exchange rate, which is flat compared to the third quarter of 2023. Now let’s cover the full year outlook. For full year 2024, we are maintaining our outlook consistent with our previous guidance. Reported sales are expected to increase 7% to 12%, and organic sales are expected to range from down 4% to up 1%. Full year incremental acquired sales from Bradley and Josam should be between $210 million and $215 million. Our full year adjusted EBITDA margin should be between 19.6% and 20.2% or down 30 basis points to up 30 basis points. Our full year adjusted operating margin should be between 17.1% to 17.7% or down 70 basis points to down 10 basis points. Our better-than-expected second quarter, including acquisition performance is expected to offset second half weakening in Europe, as previously mentioned. As a reminder, the operating and EBITDA margin guidance includes an increase in incremental investments of $2 million and acquisition dilution of 60 basis points. Our free cash flow expectation remains in line with our previous outlook as we expect to deliver free cash flow conversion of greater than or equal to 90% of net income in 2024. For the full year, we are assuming a 1.09 average euro-U.S. dollar FX rate versus the average rate of 1.08 in 2023. This would imply an increase of 1% year-over-year and would equate to an increase of $5 million in sales and $0.02 per share in EPS for the full year versus the prior year. Other key inputs for the full year can be found in the appendix. Now let me turn the call back over to Bob before we begin Q&A. Bob?

Thanks, Shashank. On Slide 8, I’d like to summarize our discussion before we address your questions. Our second quarter performance was better than we anticipated, with record sales, adjusted operating income and earnings per share due to better-than-expected performance in our Americas and APMEA regions. We are maintaining our full year outlook with a solid first half performance expected to offset second half weakness, especially in Europe. Our portfolio is agnostic to end markets, and we are well positioned to pivot to growing subverticals as needed. Our business model includes a large repair and replacement component that provides a durable base and drive steady revenue and cash flow. The integration efforts at Bradley, Josam and Enware are going well. We are pleased with the progress to date and excited about their growth potential. Our balance sheet remains robust, and with a proactive extension of our credit facility, provides ample flexibility to support our disciplined capital allocation priorities. We are well positioned financially, operationally and commercially but I’m confident in our team’s ability to execute despite down certain environment, which will enable us to continue creating value for our shareholders. With that, operator, please open the line for questions.

[Operator Instructions] Your first question comes from the line of Ryan Connors with Northcoast Research. Your line is open.

Good morning. Thanks for taking my questions.

Good morning, Ryan.

Good morning. Yes, so I wanted to talk about this issue. You mentioned project timing as a driver behind the strength in the quarter in both Americas and APMEA. And if I think back, I don’t recall project timing being something you’ve mentioned much in the past, except maybe around data centers a little bit and generally don’t think of Watts as a project-oriented company. So can you just expand on exactly what that is, what types of projects those were that were pulled forward into the second quarter?

Yes. Ryan, in APMEA actually, the data center business, 5, 6 years ago, was virtually nothing and we’ve been growing from a small base but we’ve been growing at double digits. So it’s significant. It’s a reasonable part of our business globally, quite significant in the APMEA region. So in the APMEA region, we had data centers in China, and those projects were scheduled for third quarter, they got pulled into the second quarter. And in the Americas, it’s primarily in the heating and hot water solutions business, the commercial water [indiscernible]. There are some large projects that customers needed in the second quarter that we shipped in the second quarter. Combination of both of those is about $7 million to $8 million of sales that were pulled into the second quarter.

Got it. Okay. And in Americas, what types of non-residential construction projects or those not really data center related, those are more general?

Yes. We’re starting to get into data centers in North America. So we’re seeing a little bit of that but this was mainly in the heating and hot water, heat pump section of our business.

Heat pumps. Okay. And my other one was just around pricing. It’s been a hot topic, some companies out there talking about some deflation. Any update on pricing in your business there and any discounting going on some product lines or – and also any shift to – as price gets more of a discussion, any shift to the online sales platforms you have like Backflow Direct?

Yes. In general, so pricing was favorable about 1 point in the quarter. Certainly, on large projects, they are very competitive. So we see that. And certainly, our online business with Backflow Direct is up. So we continue to drive e-commerce where our customers need it but pricing has been, like I said, up 1% in the quarter.

Good to hear. Thanks for your time.

Thank you.

And your next question comes from the line of Jeff Hammond with KeyBanc Capital Markets. Your line is open.

Hey, good morning, guys.

Good morning, Jeff.

Okay. Appreciate the color on the pull forward and quantification. I think you talked about a number of headwinds kind of 2Q to 3Q, some destock, non res, multifamily, maybe just rank order those headwinds and maybe a little more color on that destock impact.

So Jeff, on the destocking, that’s probably basically our – in the wholesale channel, our customers because we now have normalized lead times, they’ve been reducing their safety stock levels. We saw that in the month of July. That’s approximately $7 million to $8 million so far that’s happened in the third quarter. The rest of it, on the multifamily, this is what we expect with all the double-digit declines we had in new starts on the construction side of it because there is a lag. We expect that to downturn in the second half, which we had factored in when we set the guidance early on and we still expect to see that. And what was the third part of the question again?

I guess just non-res in general.

Yes. Non-res again, and that’s the ABI indicator, right? They’ve been flashing red below 50 for over a year. And on the nonresidential side, we’ve seen weaknesses in, again, office, retail, restaurants, all those – sort of those subsegments but strength in the institutional side. So again, we factored that into the guide as well for the second half.

Okay. And then Europe, I guess, one, if – it sounds like you’re going to continue to see weakness. Can you hold double-digit margins into the second half. What else is weakening in Europe besides the European heat pump? And then finally, just any signs that were hitting bottom or stabilizing or any of this destock on the heat pump side?

So on the heat pump side, I’ll take that first. I don’t think you’re going to get any clarity to the potentially end of the first quarter of next year related to heat pump. There’s – our channel check showing a bunch of heat stock or heat pump inventory in the channels, and they’ve got to bleed that off. In general, when we look at Europe, just think about new construction is very limited there, given the uncertainties, the economic challenges, the geopolitical issues, etcetera. So that’s something I’ve been concerned about for a while here, and we certainly saw it in Q3, and we’re expecting to see it again in Q4. But some of our channel checks and everybody else, once this heat pump goes through some of the easier comparison to next year, they believe they’re starting to bottom out as we exit this year.

And just to note, there is one area of strength, right? In our Drains business on the commercial marine side as well as food and beverage, Drains actually had a good quarter in the second quarter. So we do see pockets of opportunity, albeit small.

Okay. And then final one, can you just – you mentioned data center and how it’s been growing. Can you just size that business as a percentage of sales now? `Can you speak to how you – it looks – it sounds like most of that’s in Asia, how you bring that product or how you enter the North America data center market? And then finally, there seems to be this big shift to liquid cooling, which requires water, etcetera, in a data center versus traditional air cooling. And I’m wondering if we – as we move there, if there’s an incremental content opportunity for you?

Yes, Jeff. So certainly, our initiative of data centers did start in China several years ago, and we’ve been bringing that to North America and even Europe. So these are growing opportunities, I would say, in total, it’s less than 2% of our overall Watts sales but it went from nothing 3 years ago to about 2% of our sales. And as you can imagine, it’s lumpy business. As you get into liquid cooled versus air cooled, certainly, there’s more content for our valves and our products. And from our point of view, we’re bundling our solutions. It’s not just – it includes leak detection, backflow, the whole gamut of products. So it’s an opportunity to offset some of the softness we’re seeing in the traditional markets that we’ve been in and something we’ve been flexing towards and growing very quickly on a small base.

And as you said, the market is shifting to liquid cooling. So we are developing the products for liquid cooling. We saw liquid cooling a little bit of the market in China’s already there. So we’re into that market.

Okay, thanks for the time.

Thank you.

And your next question comes from the line of Nathan Jones with Stifel. Your line is open.

Good morning, everyone. I want to follow-up on the destocking question. I’m a little – just a little surprised to hear that there’s still a bunch of inventory in the channel for certain products at this point in the recovery. I would have thought that your lead times would have already been back to normal. So maybe any more color on what those products are? And if there’s anything in your portfolio that still has extended lead times that could lead to us seeing some destocking in the future?

Nathan, I think it was just across the board. I think everybody is looking at reducing inventories, just like we are. And I think it’s just a natural thing. It’s quite interesting, though, is we saw it in July, and it spiked out. So I think everybody looked at their June 30 balance sheet and said, they need to start reducing inventory. So we’re watching it carefully. Our lead times are probably the best they’ve ever been, even pre-COVID. So no major things there but we’re watching this closely and adjusting accordingly. So just something we wanted to call out because we had a softer than expected July.

And kind of a onetime reset working capital optimization.

Follow-up question on the repair and replace side of the business. I think the general expectation from the macro guys is that you’re going to see a slowdown in GDP as we get towards the end of the year, the fourth quarter specifically. Can you talk about kind of what you baked into the guidance from repair and replace? I know your business is correlated to GDP. So just any color you can give us on what you’re thinking there?

Yes. It’s a very low single-digit range, right? You’re right, Nathan, and that GDP will continue tracking softer, is probably the best way to put it. And that’s what we factored into our guide is lower numbers on GDP. And remember, it’s going from 2.5%, 3% to maybe 1%. So it’s a law of small numbers. It’s not a big number, right?

Yes. Perfect. Thanks for taking my questions.

[Operator Instructions] Your next question comes from the line of Mike Halloran with Baird. Your line is open.

Hi, good morning, everyone. Just a question on how you’re thinking about the back half of the year in terms of sequentials and then also where you previously had the guidance, certainly understand the weakening comments in Europe and the OE and then the – how projects can swing things either way. If you look at the underlying dynamics, let’s focus on Americas here. Has there been a change in your thinking at all as you move to the back half of the year? I know you already had some concern embedded in that outlook going into the second quarter. Curious if that’s changed? And then if you normalize for everything, are you just thinking kind of normal sequentials as you move to the back half?

So Mike, I think for the most part, Europe is a little softer than we were expecting. Americas kind of in the same, maybe 1% softer based on this adjustment and destocking that happened in July. But when you look at overall, I just want to remind everybody, we had a days issue in the first quarter of the year, right? And that will negatively impact us in the fourth quarter. So that’s 6%, 6 points of growth in the fourth quarter. So just keep that in mind. But in general, we expected the markets to slow based on the leading indicators, and we’re adjusting accordingly. So it’s not a major shift. It’s kind of seeing some of the things that we were anticipating all along in our previous guidance.

Yes. And at this point, Bob, when you think about some of the leading indicators you guys have seen out there that we’ve all seen that point to some concern. Are those at the point where they would even impact this year? Or are those things that are more relevant for next year?

Well, the multifamily, we’re seeing some of that, and I think that’s some of the wholesale destocking that’s happening. We said we’d probably see that in the second half of this year. And I think we’re – that’s holding true. I think in the retail, which is a very low percentage of our business, OEMs or the retail big boxes are lowering their inventories. So in general, I think it’s slowing and as we anticipated, I think in this market, in any commercial construction markets, new construction, uncertainty always leads people to slow down projects, right, and defined. So I think until the elections are over, clarity on interest rates, maybe some of the geopolitical risk. I think some of this stuff is just being held at this point in time but there’s a lot of shovel-ready projects out there to be released at some point in time. But we are hearing projects are on hold and being deferred until next year. So we’re starting to hear that and see that versus, I think, the first half of the year, there was a solid backlog with everybody. I think some of this stuff is just starting to catch up.

And last one on my side. Just how – what do you see in the M&A outlook? Obviously, your balance sheet is in great shape. How does that pipeline look? And how would you think the pipeline is at this point?

Yes. So we continue to work the pipeline. It’s a strong pipeline. As you know, we – you never can predict timing of acquisitions. And all I can assure you is we’ll be disciplined like we always have been and – but we’re continuing to have discussions in the space.

Thanks, appreciate it.

Thanks, Mike.

And your next question comes from the line of Joe Giordano with TD Cowen. Your line is opne.

Hey, guys. Good morning. I mean, it’s a small change but I noticed the M&A dilution is being reduced here a little bit. Can you tell us like what you’re finding on the acquisitions here? Or is it just better execution, you’re finding incremental synergies that you’re able to take advantage of earlier? Just like what’s driving that?

Primarily better synergies, right? If you remember, for the Bradley acquisition, we had a synergy target of $12 million with about 40% realization in year 1. It’s running slightly ahead. So we baked that into the guide. And a little bit more on the Josam acquisition as well.

Better execution all around, I would say.

On the institutional side in the U.S., I mean, I noticed you mentioned like it’s holding in pretty well. Like if you look at some of the – like the census that at least for construction put in place for institutional, it’s definitely positive but trending down. Are you like incrementally seeing that shift, like even if we’re in positive territories, like getting kind of progressively worse? Is that consistent with what you’re seeing on the ground?

We haven’t seen that yet. We’ve seen institutional business has held up fairly well at this point in time. So – but we’re watching certainly with the leading indicators, just like you are and – but that’s a bright spot for us right now.

Great. Thanks, guys.

Thank you.

[Operator Instructions] Our next question comes from the line of Walter Liptak with Seaport Research Partners. Your line is open.

Hey, good morning, guys. Wanted to ask about the Europe business. You guys have been – and we’ve been talking about Europe, the heat pump slowing for some time. Was it below your expectations in the quarter? Or is the destocking kind of going the way that you have been thinking that it would?

So we have – you’re right, right? Early in the year, when we gave guidance, we expected the destocking to happen. Quite frankly, it now looks like it’s going to be longer. As Bob said, Q1 2025 is the latest view we have. And it is worse than we anticipated. So that’s why when you look at Europe, Europe did come in softer in the second quarter than we had anticipated. We recalibrated the third quarter and the balance of the year but it is worse than we had anticipated.

Okay. Great. And can you remind us the positives around the European heat pump, I think, was driven by incentives. Are those incentives – is there another round of incentives coming through? Or is that – are we back to like sort of a normal consumer market for those products?

No. So the incentives – obviously, the incentive levels change, right? We had talked earlier Italian incentives of 110%. And then last March, they dropped them to 60%, but they weren’t instant, they were over a 5-year tax period, etcetera. So the incentives are there but they’re different and less. Similarly with Germany and France, they’ve solidified their incentive program. But I think the situation was there was a huge buildup of heat pumps across Europe, and that’s why we got in a situation where even today, there’s about a 9-month inventory of heat pumps in the European market. So that’s got to be bled through, and that’s where that Q1 2025 number comes in. But the incentives are there, they’re less but they’re still there.

Okay, great. Okay, good. Okay, thanks. I will take it offline from here. Thanks.

And there are no further questions at this time. Bob Pagano, I turn the call back over to you.

Thank you for taking the time to join us today. We appreciate your continued interest in Watts and look forward to speaking with you again during our third quarter earnings call. Have a good day, and stay safe.

And this concludes today’s conference call. You may now disconnect.