MWA - Earnings call transcript Q3 2019 | Mueller Water Products, Inc.

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Operator

Welcome and thank you for standing by. At this time, all participants are in a listen-only mode until the question and answer session of today’s conference. [Operator Instructions] I would like to inform all parties that today’s conference is being recorded.

If you have any objections, you may disconnect at this time.

I would now like to turn the conference over to Whit Kincaid. begin. may you you, Thank

Whit Kincaid

XXXX Good morning XXXX reporting Products’ quarter our June Mueller of it copy is available Welcome call. We to at XX, ended conference quarter release muellerwaterproducts.com. for Water afternoon. issued A operations of third website, the everyone. yesterday our results press

and and Zakas, Marty our quarter’s Discussing for are and the results third Scott CEO; XXXX outlook our Hall, our President CFO.

recorded and webcast on call morning’s is being This the live internet.

help requirements. illustrate slides as posted have to as statements our We quarter’s on well the website to and also results our forward-looking address non-GAAP disclosure

At our Slide our press to believe measures provide release non-GAAP release, non-GAAP identifies Reconciliations within please measures the this this our slides that financial these are between in included our discloses time, we on supplemental and website. refer X. This the investors. information and why on information on in useful GAAP call, to measures financial referenced press and slide reasons and

forward-looking addresses factors that X and their important call. materially to Slides actual results Please forward-looking includes cause from review entirety. identifying statements differ slide in statements. this Slide X included information could in cautionary made X on those This

slides quarter, During September days year at to specific this of be unless be our XX Relations for in section of The for will our will available the A a available XX call, days website. this to X-XXX-XXX-XXXX. specified webcast replay which year all refer XX. or otherwise, at on corresponding and Investor references fiscal ends least morning’s archived call

morning. on copy prepared this Form later will we a furnish remarks addition, our In X-K of

turn the now call I’ll to Scott. over

Scott Hall

to quarter the XXXX. growth both you pleased our I of the results EBITDA. in in team Thank for our for solid discuss Thanks performance adjusted produced and sales joining the am with us as has quarter today Whit. third

and benefited and from volumes. net X.X% both our consolidated increased sales shipment Our organic increased pricing higher sales X.X% net as we

growth over to from of infrastructure XX at favorable basis performance inventory margin step-up This gross XX%, XX% points Krausz. and the EBITDA impact contributions excluding Our improved of adjusted with the deliver technologies. both helped

and We meet communicated release. remain on EBITDA net earnings in to target we second our quarter adjusted the ranges track sales

the continuing on the finishing on a organic as our we strong even focused and fourth the in momentum net performance we to in reported are prior XX% fourth which note, quarter sales. We a year quarter of increase in year the compare

address balance to Looking strong approach sheet, to forward, a later on support will continue call. maintain with the of capital balanced our will the which I we allocation,

to turn that, call over I’ll With Marty. the

Marty Zakas

everyone. Thanks our our results, performance. Scott, I review third financial quarter and morning good segment discuss will then first consolidated

as sales or increase for This third pricing well volumes. $XX.X acquisition was quarter to of $XXX.X higher the Krausz consolidated the Our as primarily shipment million and million. increased by driven net X.X%

this quarter associated inventory million a to gross which of was $XX.X sales, costs improvement inflation, and Our improved higher Krausz. to was step-up primarily due $X.X or increased at offset by profit XX.X% partially performance, expense This million net manufacturing with sales. net

quarter. Material X% the nearly increased in costs year-over-year

basis XXXX of year quarter inventory expense step-up year-over-year a million the the margin results third our included prior reminder, charge. $XX.X charge. delivered impact We point excluding a As XX a warranty and our gross warranty in improvement

the SG&A due prior in prior net XX.X% was to of were $X.X expenses the Selling, XX.X% general, increase in Krausz. over the The increase addition and third as quarter year. to administrative $XX.X compared percent the year. a in quarter, primarily a million to million the was sales

income $X.X the were income the million Adjusted was X.X% quarter income the increased Strategic quarter operating The $X.X technologies. million increase in prior and in corporate $XX.X $XX.X at in higher million reorganization in infrastructure, in performance year. offset SG&A operating or expenses partially $XX quarter. decrease operating million a third the and to adjusted driven versus in Operating was in the slight to which compared $X.X adjusted charges million third prior other was by by million year.

quarter million. was XX% XX% for Consolidated or million increased conversion the XX% prior to margin EBITDA $XX.X $X.X adjusted Adjusted compared the in third EBITDA year. to

last the adjusted or was EBITDA $XXX.X sales. net For million months, XX.X% XX of

Over XX-month the $XX.X adjusted period, prior increased or million. have we EBITDA XX.X%

compared $X.XX adjusted for per net year. income $X.XX in Our share to was the prior the quarter

expense, adjusted and interest Our associated Walter reorganization accrual. and Energy million mentioned of inventory the other the excludes strategic XXXX expense a with EPS quarterly the charges earlier, $X.X step-up

$XXX.X increase the and offset increase or Krausz, Turning prior Krausz performance. with $XX.X the now EBITDA increased primarily The EBITDA in XX.X% XX% partially to expenses, due an segment well This this million as to expense. margin associated pricing costs and third quarter or higher pricing EBITDA the the shipment the inclusion conversion quarter increased XX.X% million and SG&A and versus higher manufacturing XX.X% XX.X% million margin yielding was $X compared the was to net to by XX% income Adjusted million increased to million of year. operating shipment inflation, sales from quarter the as of volumes for for million, to inventory increased prior $XX.X to was starting year. in performance, quarter. adjusted Infrastructure with Adjusted excluding X.X% this infrastructure. for volumes. segment. sales the step-up higher Organic increased $XX.X or Adjusted sales $X.X net due

expenses. in technologies. lower in volumes sales $X net growth manufacturing driven SG&A lower $XX.X increased prior partially performance, at to due shipment million were by sales $X Echologics. year offset by product the at mix volumes partially and to to by and compared Adjusted loss offset on decreased million to lower improved quarter, million Technologies’ the primarily which operating Metrology $XXX,XXX Moving

EBITDA However, improved technologies’ adjusted the in $XXX,XXX quarter.

million. primarily and prior activities the cash year-to-date I’ll decrease was including provided million our period Now compared $XX to increase in taxes cash of $XX.X payments, by Cash liquidity. the The interest. review by operating XXXX year driven was timing for a

and more $XXX.X year and as $XX.X prior quarter, in of capital invested also we end which $XX net X.X expenditures had million in million was Chattanooga. investments the times. our million. debt June large our accelerated third equivalents total particularly ratio in is manufacturing the cash At the capabilities, debt million We in At our of than leverage foundry period, XXXX, casting of cash we $XXX.X the

turn I’ll Scott the more for about our call back to outlook to and results talk XXXX.

Scott Hall

Thanks Marty.

products a and customers history deliver infrastructure in are intelligent, of and strong early more We to municipal important and stages with residential one for resources. the a that take a manufacturing we manage to process company transformational brass help of iron provides solutions value-added as

of made a have key future our third strategies date to Our we solid create the a to quarter performance on foundation reflection for strong progress is growth.

slower in Our their challenging trade housing have to and we elevate other as starts growth team among concerns, members factors. a more environment execution from external continue faced

Through adjusted the with first EBITDA quarters increased three X% around year, XX%. of the consolidated net growth our sales

adjusted we XX% As XX% EBITDA margin a the a conversion in delivered prior year. result, versus

Our of a EBITDA at we on EBITDA adjusted infrastructure $X.X year-to-date have progress adjusted year over in quarters million Infrastructure’s both and the year. margin continue which prior XX.X%, increased initiatives improve X%. year-to-date by points basis improvements the to EBITDA first to technologies. adjusted to driven three technologies, At led margins, through the make to improvement nearly XXX increased

strong to capital with forward, will allocation. of approach balance to our balanced support sheet, we the a Looking continue maintain

of de-prioritized. investments upgrade company As our mentioned underwent under-investment. were decades facilities I In general, capital to multiple have previously,

As to our enhance a manufacturing further the our result, improve operations technological accelerate in will we capital investments fundamentals and business.

costs complete We foundry improve track our We by some for to the discussed expansion facility, year. specialty product expand our project capabilities which this and have our will end valve products. on large this previously casting of Chattanooga at our of remain

We for a both to enable in facility infrastructure brass significant efficiencies multi-year Illinois are project which and manufacturing technologies. initiating will unlock our at us Decatur,

product brass success; Our brass for Decatur a and ago and cost valves Decatur in the us further critical date and fact, Decatur in XXX back was and execution to to company some founded the and products early including technological has accelerating new expand foundry, The investment operation, key the capacity development to parts which will over of our Mueller’s capabilities includes years We efficiencies. XXXXs. of help foundry strategies, been hydrants. enhance structures manufactures believe

the expand enhance like adjusted lead to margin and our Over and gross capital will improvements time, to facilities, modernize margins. non-price conversion investments we expect EBITDA the investment, Decatur our

expect we above-market drive will initiatives these growth Additionally, sales performance. and manufacturing improve

further our base Over in more the manufacturing plan we reinvestments returning to a years, normalized few next before level.

As repurchase return we ongoing improve to cash quarterly also our continue to execution, our will we program dividend. and through shareholders share

we million $XX During stock the quarterly recently an our we of repurchased dividend. increase most in announced quarter, and third

with my results. our I comments review consolidated expectations a will XXXX current for full-year wrap of up

and municipal markets. labor end we growth in During of anticipate from believe severe challenges weather our healthy quarter, We remains despite the market our fourth constraints. end all

from expectations growth Our our starts end sales consolidated be the markets the towards from the XXXX our lower to the growth adjusted that weather net previously to positive slower expect XX growth anticipate EBITDA will residential for despite X% midpoint release; range quarter of we the the will and towards in during XX% end remain be housing full-year construction year. We challenges our second communicated provided. the X of however, we earnings range the

the finishing the in opportunities XXXX focused are about beyond. on are of excited note We ahead year strong a and us on and

comments will on outlook. provide Marty our some final XXXX now

Marty Zakas

Thanks Scott.

and will Corporate are be expected be XXXX, For expected million. we $XX and full interest million around expenses to depreciation million. $XX million. Net year $XX amortization between is expect expense to that about SG&A $XX

is full XX%. rate Our between for the income be year to effective expected tax and XX%

be to and Finally, to expect we capital continue opportunities. currently we about million expenditures evaluate investment additional $XX

open Operator, the call for questions. that, please With

Operator

instructions] [Operator

question comes first from Instinet. from Nomura Our Michael Wood

Your line is open.

Ryan Coyne

is Mike. this Ryan Coyne morning, for Good on

curious X% for lower didn’t end range. assumptions the change the XXXX, shift market of your X% end driving what’s to to just this so sales You

Scott Hall

of we is and a have muni lower the little general good to still bit left the because below, in said with think I end the end, by I think I that the housing to in of in expectations, but housing that fundamentals range the the Yes, year. we at think, change us end the been what’s get enough in bottom everybody’s think starts fundamentals market the did I it that

continue starts and other to we that recent for of thing will tepid especially think or import believe we enough there’s the that the so not see demand in rate I saw family starts, muni I of in kind and QX that is housing warm. household formations, housing new think weather deduction hot, - and construction, formations slowed but it most construction the slowed we with interest

Ryan Coyne

just then Okay, capex. great, more one on

to spend, going expect at project what then and You’re to two year, this we to be one capex $XX multi-year of trend over to how should to left one capex in much increased years? guiding $XX only With $XX year, is quarter this million the million previously. from the hitting million fiscal next maybe capex

Scott Hall

question, way. Great by the

the that about this of kind think so legacy is kind of the I business around a target as a for as with think issues, think this business kind somewhere --you is I know, meeting X%. that of some industrial capacity that X% legacy of along business, of technology of figure sales

in this see I to and decades, get of I run, then sales, we and should I X%. kind will back at under-invested an we’re think two in you the of to level for we that that have or expect X% is this long around think that where we year, for think one years were period elevated that and

water thing the considerations part level ESG probably two back usage, elevated of I more, the should utilization, impact year are and of the this a of for manufacturing the other both then get from think sales. get get be think investments, to normal we productivity and and of also these is of some so some that we’ll we we power amount I import

Ryan Coyne

you. thank Great,

Operator

question comes Deane Capital Our with from next Dray Markets. RBC

line open. is Your

Deane Dray

morning Thank everyone. you, good

Scott Hall

Good morning.

Deane Dray

One season of seen and are we’ve and destocking pressures from the industrial across the themes this more short-cycle companies distributors. earnings that

core different are markets very companies, any these of but in of seeing types you You’re of industrial quarter? than those trends this some

Scott Hall

little experienced No, I we think actually a QX. in bit that

main had inventories. in that through if end our little were result lived If think I that as February another September you We our pretty price that at think price the probably of will, you distributors the a back a bit about flattened thought and inventories we traditional a we with We good. increase elevated distributor is where of flow little the of QX were, we through in destocking, felt QX, increase. now

looking waterworks space, of think we’re so when look we’re their to I do. way seeing, they close going to--when I the demand in off what you the is pipe you much they’re the general, take that and pretty we’ll pretty be think exactly like put what side, at it seeing be in to

Deane Dray

what that is through, sell matching referencing? sell-in you’re the that’s so Good,

Scott Hall

Yes, perfect.

Deane Dray

one year? triggering to year on be the footprint - some towards what timing end going investing the bit was on the a here. follow-up make can so you performance hey, part as headwinds You Then Then this manufacturing makes midstream to kind a terms a footprint the this That It’s manufacturing did quarter, the event? we’re of start reference flesh the investment, these what catalyst? the out you of in this more decision was in of should of a what got return I’ve but sense, investments. expect the of

Scott Hall

thought when Decatur, buildings in facilities we the I facilities. that, thought XXXX, money my of of lot there’s thank new or and Well, these and level I melting all automation say In particular, you all looked for spacing opportunities was just away a some we at and opportunities let to and of the sub-optimization from minute as referenced of better as modernization and that and be today. that in technologies to moving with the in and in opened of exists higher we foundries were of in went it some a when back script the a that hard where it’s for look pillars look utilization, toured question, of more thought and investing whether kind that me took a the utilization cored would our left furnaces I things upgrades we coreless a up at between kinds in capital, power at look, better of for

generation other in think the the us take have our good able there skilled next I I getting union talking with about big catalyst and assurances plants, a be that and employees we of the was it. would the felt workforce through technology to this

honest sight look projects, that Marty, depreciation not believe fact, but as perspective of I here, I’m treatment of but a you from the the bonus me last it’s in need will these not And kinds to going in favorable losing at that so I tax and least, get think--keep would project, renewed fairly we like that at went tax needed since Congress, ground by was a we get be break that we soon. this to multi-year as what we looked and service treatment on, felt the XXXX

Deane Dray

have that as investment? the might but and ramp I a catalyst this, performance the in moving headwind was reference to along the quarter, decision missed was a what up to manufacturing this

Scott Hall

with I with how that think I happy was we got you productivity not and No, in we’ve terribly always transparent much guys, been manufacturing.

some felt think point from the a was in I and year but think improvement been I that an so okay ago EBITDA had had Chattanooga, that to. ago, I reference from of our manufacturing, view, performance impaired which it it more, we like have bit first and should comp easier was a said really in have remember and I this what That’s room for there. for QX the comment was many would year people problems that our expecting a

Deane Dray

helpful. That’s

to last you on kind Any metrics prepared thanks. capex are to return? internal get yet what clarify, be of of one rate that would helpful, Just you of returns from talk me, about like this sort just

Scott Hall

right where stretch, now, that I our hurdles goals think have meet we and and our obviously Deane, I we have are is around involved. internal think to that philosophy have stretch we

we’re what may. defer, but our I’d with and returns that prefer healthy at are I would to you think targets point consult assure say you going But on and give this. number, finance if IR can I projects publicly, say I fairly this to a rather like I to internal

Deane Dray

Absolutely, thank you.

Scott Hall

you. Thank

Operator

Blair with Our Bryan question next Oppenheimer. comes from

is line Your open.

Bryan Blair

hoping outlook. growth we morning think If Krausz decent with comp How assumed on detail still offer technologies in fourth segments. and everyone. baked the the you XQ? little infrastructure contribution, could quarter a a we in I both Thank into and exclude fourth more quarter, growth about was there you, good obviously should challenging

Scott Hall

business, fairly think up we’ll is a that in each of West average around that Echo two almost quarter we the the fourth to that think saw demand you that to some to probably growth, I with getting of with do what healthy customers think In was range. detracting we feel QX, this, into weighted X%-ish end is QX, from that we get on of the gives to if environment, kind end kind DX kind if have a fourth can technologies help that lot pushed we But range, the growth math number. instead similar like largely of ship. will, say us of to a the is the you of environment, if we that confidence go muni we think still even due have why what in have lumpiness sales disappointing can the technologies of to in of housing about expecting getting the That we component is I similar expect nodes the have low end for lot still that to be quarters were way we getting the is that that Coast of at and of, that so our we Echologic that’s the a lower other nuance it to quarter. shipments stacked even growth the we Echo experienced and we

Bryan Blair

difference guide right much can in you Okay, that’s visibility is you helpful. as in and speak market have end you as I ’XX year where understand growth next not any that but confidence out now? to from sustained outlook, your fiscal yet, stand, maybe to

Scott Hall

Right.

reason a economic no period send to rate on couch given point to of us horizon the trade as I from correction settles the into an activity as down catalysts calms view. of long given interest any believe with I everything it the have think environment, I’ll down, environment, and there’s

so see that low think in we to I think place. to you So the of problem year, low yes, fundamentals again aging been housing not should environment, continue say are market dynamics grow all that favorable interest no, it away, has the rate inventory, next - invested infrastructure expect would I

clouds these because a other the in recession, has--you think On what tenth developments, waiting this that us positive. new expansion and and uncertainty, have with of everybody’s like in and storm building will to we’re things see know, into now a increase almost we expansion. something recession housing I that, side we send into fundamentals that, sends trade, I it’s fundamentals have curb the the These the the believe are year us and of for so sewer, water the that barring infrastructure water discussion, all

You would expect next them to year beyond. provide growth and

Marty Zakas

as the acquisition one other a as to from revenue, our will be move of just had that from it we will new XXXX of fiscal Krausz just is nine thing with entity our remind into Krausz for months ’XX us. perspective, first a will we you Probably for have year-over-year benefit quarter and

Scott Hall

Right.

Bryan Blair

Got it, I the appreciate reminder.

that the how been as of terms In Krausz, expected? performing Any integration date? to has business surprises? Is

Scott Hall

Yes, going very the I well. is integration think

good Krausz, I we’re both to in seeing cooperation to think Krausz that Mueller. Mueller

doing sales I is representatives very, getting distribution excellent all well. of very are harmonizing face, our aligned, and of united and think of around I that providing a an we’re think job party teams the third doing that work the channels going

buy buy good well, as a of said companies don’t along, think growth you continue digits will, I of inflection weeble think We expected; year, and in as but that you to of QX had we that all kind double we’ve or these I’ve you kinds failures that we’re the multi-year accelerates. performing market QX, record is couple point. of that in for during repair months going curve this, believe the as if so the for to them as investment, really grow

Bryan Blair

point going quick year, this that is One To sustainable one, All couple I if moved XX% rate guide somewhat discrete tax can. makes what was to by affected extent The last sense. lower. a items or XX% forward?

Marty Zakas

out. tax with as a XX%, that, for to about as overall you current think at that lower third XX% year effective rate would call the rate items for tax the quarter, guidance I the few have look of saw. we Certainly we I a did in this

the of reversed uncertain quarter. of reversal this for tax One was were quarter the reserves that reasons this position

that, eliminated I that think with changes the deductions certainly statutory XXXX, a subject guidance looking call we’ve some but to there of tax XXX overall, specific part were top advantage need taxes changes. manufacturing rate to federal and we able XX%, back of, not tax the tax are the were out I’ll of on or been as that as now deductions, to law and previous then law state again consider take of reminder, discussed just in Section we out, have certainly as

Bryan Blair

again. thanks Okay,

Operator

Our next from Sachs. with question comes Brian Goldman Lee

line Your is open.

Brian Lee

I of get mention be the some investment maybe around for historical margin Hey be some expanding. results. taking you to a specifically targeting what there? Scott, some you in then would remarks up prepared around Any us to Thanks of EBITDA XX% spending guys, to morning. show think this during Is the the give timeline that? or you maybe good your Can back start and elevated just sense conversion color there might it levels, to when questions. above potential did the of helpful, might well drop-through XX% here, and

Scott Hall

Okay, so bunch there. questions a of

break down. it Let’s

what expected conversion a this are that to bit from the would sensitive the seen conversions you to of said quarters, conversion is the obviously in last so XXs our think accelerate One, be little a through inflation our in margin Brian. things conversions. couple six I we’ve the impact there, margin, I’m and normalized, when

I margins start better think to and stable we back conversion a get to going as environment. that to better long you’re commodity see as

basically, and some information, of made. not us some know, that material allow context will any just--you not just it’s that to to improvement ranging the the wide chemistry of what real ’XX cost the but the in of are and expect think for timing this--you a Secondly, I of we be Its I long the fundamentally without know, into breakthroughs a to also going impact impacts cycle be beyond, project. getting think we competitive change

and that and be into that, So think should they improvement higher than outlook without beyond, be should you to these anything expect the cost ’XX for with changes. yes, than margins be normally conversion I that more getting would

was the of your I’m What sorry. question? part third

Brian Lee

You as got just level spending helpful. you about that’s Maybe to around maybe think it the was the being and the this related capex couple normal new timeline, be just it, thoughts targets so that, here, we next conversion, cash of environment? this years capex targeted levels spending during for sort around free of the of flow thinking about should any newer heightened range

Marty Zakas

that think we higher I be about as certainly of long-term able to going these I see expect to approximating think cash see, levels won’t years. going think net given higher think But free sort free would capex flow, flow adjust few our what I next to as guidance capital that we’ve that I we’re have you to levels the see as going cash to is of that over with income. of expenditures, we’re

Brian Lee

Thank Okay, fair enough. you.

Operator

next with Zane Our question DA Davidson. comes Karimi from

Your open. line is

Zane Karimi

any color like relatively market? portion on resi business. your and still found having the It a in slowdown you morning. the more customer view positive like it feel to a have you good your channel bottom does from the with been of on provide regards market, in they’ve Hey, the Can looks this you’ve discussions

Scott Hall

XX housing that number up curb in. think more, somewhere when and the and that I going all construction subdivision said to clear, the see we to be are two bad kind seasons, flows pick XX.XX around, so sewer say our Well, and let’s of QX in end more just start view, our and we activity That’s it’s the is up that view. QX some but QX summer through done,

based but think it’s was severe summer from distribution see feel how through I’ll our to don’t the muni XX, at that continue construction ends I’m that through as this strong to weather that think resi it of I I the other community, enough we’re and us we’ll impacted the confidence gives know starting this, the demand, which contractor like the pent-up year. to so September end to as remind construction everybody thing, is what and the season, there demand or the going say so should order QX, push and view I justify rainfall the give channel created on book to to that’s flow the this us impacted through confidence that a be much

Where fundamentals of around of average is things bottom? that would like that. ask happening is with around houses, the price, formation, inventory price, I what what’s the average question new I that think household house the are availability

I little think they’ve starts is that that million paused continue number--we call housing that, inventory, up. maybe but X.X XXX,XXX, opportunity is equilibrium so think to long-term is being think below a and bit, move sales bottom we is million or starts, negative. to that There’s housing to it XXX,XXX We ourselves in around I I X.X all housing see to little not it so there room at for the for that there continue, dead think they’re premature. to think low a

Zane Karimi

the can Mueller right is Then color onto for have M&A also now, priorities, for here how topics guys much allocation the there. you talked a right Thank you about capital that that being internally but changing of about focus focused and pipeline now? you talk

Scott Hall

to leverage, things of all We have continue of continue debt net relatively can these an we to balanced. have and dividend the with in Krausz, this do $XX acquisition strength me our our quarter, done our bought we to we just weeks and that active allocation spending, a the believe the and year saying low we’re sheet we remaining of balanced acquisition shares we balanced, approach, a have position capital is by worth capital ago, in with increased an start that we’ve be we Let couple increased million balance pipeline. to our of committed

and dividends. look internally, at yes, So our look share we will and we continue to to opportunities, buybacks, M&A yes, continue investment at both

Zane Karimi

Thank you.

Operator

Giordano question Joe from next Cowen. Our comes with

line is Your open.

Joe Giordano

Hey good morning. guys,

year-on-year. of and from? the up pretty XX% something guide, growth you Can can revenue midpoint the and you--I XX, year-on-year on are low points quarter EBITDA, fourth sizeable growth like of so using Going it’s of it’s that’s kind where a major that, XXX-something end almost what through implied think coming me through buckets, margins the the basis talk year-on-year end margin,

Scott Hall

the biggest piece be is from going coming Yes, get technologies. we I think from to bump the

lot As Echo-Shore the earlier, continued unit manufacturing. DX, of I’ve it’s of referenced pent-up primarily sales execution a Echologics then in and just

one in we and We’re September main have increase, of fairly in lap price a reasons. increases, in conversion price right in period hybrids we’ll then impact our on going a ago one ballast two having being September, healthy September another the lap--in the a to year business a--basically of and now February. but still the They’re

Joe Giordano

on on the the million sustainable run now, there? profitability, making expectation to--how does tech, to related and what’s commentary that is $XXX bump-up that that, profitability it that required meet rate, is in to you’re going Is forward impact if and the is that sales, is,

Scott Hall

me by the where have we closer, there relatively relatively tech $X.X with has nine both the managing of I’m small but start first gotten, team million pleased the saying through of from Let improvement EBITDA overall, business year-to-date, amount growth months.

there area, that able through be large, quarter I that to that still a The price your and both it breakeven. have think scale from of discipline there that million, breakeven? and point of could should when think is an second and do opportunities from not I scale point get we business, should a of get part view, $XXX be view business question but need is to we to what that we’re talking to the we breakeven efficiency we a enough is we

that of share still we smartly. to said, all have take With

and grow price. sales just use not to smartly have We our

which sensing was important advantage, of technologies, flushing order it, and to in been so other We’ve software a well, acoustics, and of our one have valves, where are is I out in We’ve business, now is--and we infrastructure long those flow strategic the where areas, introductions at anybody for call important with got their sources got there pricing it think saying I to are little we where our find from do who and health put that terribly taste insertion a of it. think term. from sustainable long just time, terribly ACE that in both that started for I’ve We continuously I we we technologies in can as to let’s the in in pressure. strategically are contribution overlook our metering, technologies think abilities valves, channel importance from power and are it’s fire the hydrants, is that infrastructure the group strategic the us of power,

Joe Giordano

Thanks.

Operator

Our Buscaglia Andrew Berenberg. question comes with next from

Your open. line is

Andrew Buscaglia

Can think near guys, that forward little little elevated. about thanks for a bit something reason more Was bit is you as is see pushing way maybe know, capex why you a little and your M&A you maybe question. there about taking the M&A? not change you Hey are Does more capex term? my talk it likely a a with your--you

Scott Hall

the flow to on as No, to the opportunity capital, cash even working think at from have We from pipeline. generate ways balanced. I M&A talked I that think cash do we we look but conversion, the said, as opportunities we as we capacity want be I still continue to We’ll well. both, have to about, think other

and that bonus go with take we’re it for to in will going to be period create through advantage believe are I a all and much cash in favor structure as it’s depreciation is that XXXX that said, certainly bonus we we as it into for but can, turn the cash that out cash of the the think out balanced, because that depreciation capex taxes. ahead our with we do think I

Andrew Buscaglia

okay. Yes,

Scott Hall

it’s the If math, compelling. you do

Andrew Buscaglia

yes. Right,

your would Okay. elevated now? SG&A SG&A looking what low have so a your that are would expecting, your lower. the maybe you SG&A sales Any you’re segments, trend like end reason should It think little little bit we seems in of then at would to come right going modeling an would both be forward, why a SG&A--I bit and be lower thought across

Scott Hall

of months past SG&A will to Ariel, the a the know, everything is the I increase, before, I facilities next dual Singer acquisition. this from call to But from here you’ve an if the infrastructure spend, the and two have result running, got the around call out. But then all take a with look think of our come some and total world that’s close we for that--you facility acquisition, discussion SG&A point Krausz facility you some in there’s - Tel will efficiencies impact largest years and in, manufacturing the Israeli can of do the Aviv it people piece six maybe what we we have think has and associated the you’ll the at as that let’s that’s and the there. get acquisition Krausz

Andrew Buscaglia

then Okay, maybe just one last one.

technologies, year. see you looking Your be it end just see there seasonality what year at a pick a was saw think still comp from dynamics I’m but in top last decline, year-over-year strong. despite Should guess the up, your line seasonally where that Is tough a QX could last any about usually growth similarly? to tends might I we year?

Scott Hall

us that of that in based last I that in that shipments know, hung and tough I’m that I to up bulk expect--you at I to it have think shipments. end that I needs we business everybody but QX got such the business around lumpiness not $X.X I what so of it’s think shipped That’s million, lumpy it a had comp. in was is QX, expect the would remember meter of terms year, we say project help would the sure visibility lumpy, for the Echo a

Andrew Buscaglia

okay. it, Thanks. Got

Operator

question next from Liptak Walter comes Global. Seaport with Our

open. is line Your

Walter Liptak

a this changed Wanted to year, Why EBITDA Thanks, and looking year-to-date it and improvement a was good in mix? tech EBITDA ask about quarter little it from million Was $X.X structural something congratulations in nice better. on last the quarter? a EBITDA morning better guys, or was is bit quarter. up that technology. the

Scott Hall

They’re and business better, take, don’t of volume take of running we the think them. we’re we more and some not I around things. business breakeven it’s on I business what at chasing believe. what a They’re combination responsible being

have make lot and can a demand some avoid and that actually you our channel can strategy same primary relationships distribution up we’ve valves see you when that the picked as that the we’re the you I distributors operational of house overtime getting can customers, will, avoid our you executed some think with, you now order, the large with large with efficiencies hydrants channel there because of and and have plant around our also if relationships has come business and in we’re [indiscernible] getting the and inefficiencies around. primary schedule can you we and

think $X.X manufacturing and price It’s all I flat the been improvements, discipline operational. million a about think it of has you volume. if on combination basically efficiency

Walter Liptak

going profit quarter That’s fourth to quarter, breakeven the are great. close to The get rate. we level? at the be $XXX fourth run million Could a

Scott Hall

don’t so. I think

I got--I’m either containment, in need would number math. know would where cost can Walt, massive think improvement the do that or I are. so still don’t but what it’s--I they margin think be, There to just looking math, the at be we’ve the you

Walter Liptak

benefits, Okay, and manufacturing we’ll do guess. our the best, but you’ll get price I still

through the excess about with and are made the contractors now through of any better Just about sell levels channel quarter? seeing getting municipal in you thinking quarter fourth inventory, resi. out the inventory now comments the saying has you’re some some you’re weather and how you from now, that cleared Are good that inventory sell your into fourth into

Scott Hall

we was believe. from when what we’re going they’re are what destocking QX is closely. pretty monthly close, some there numbers that versus the would matching sell so reconciliation from that the product lines QX after those we think do through indicate pretty saying mean, what saying, we That’s our I for slowdown on, where our

Walter Liptak

Okay, you. right, great. thank All

Scott Hall

Thank you. I everybody want us joining morning. this for to thank

with quarter performance. things everybody make with the left I is is I’m to third of One sure want our very pleased

net undertaken. all EBITDA the testament the and to sales and think adjusted growth in has a the EPS the execution are I team adjusted

tariffs little about channel the think didn’t than this manufacturing, the a helping room we get us more which improvement positive. we getting morning, I execution, price, even inflation, in really, of but for more all impact really have talk that price

target as second a EBITDA a think given to trying the to I which release, we here. is net what the our on we was I communicated testament meet think earnings we’re second to track of remain sales quarter culture quarter, in range difficult also and build execution adjusted

upgrade I and think to been and three by think sales, our adjusted wanted people, the allows to in our manufacturing strategy us muni, and on margin, EBITDA we to think in is steady to improve us that year, the believe our what remain that especially healthy, we’re to drive just a time capital our capabilities, spending that that we and at this it’s our executing. for margins accelerate construction is focused we’re I processes reiterate following markets grow foundries. end I excited I have team future to facilities, returning conversion our growth markets driven about this reinvestments we I as continuing with growth prioritize think residential momentum, steady about

for want week, your but and a Thank pleased just to you you great very hope again, all quarter. I I thank once the have you. interest with

Operator

conclude does Thank for That participating. today’s you you. Thank conference.

disconnect may at time. You this

Mueller Water Products (MWA) 6 Aug 192019 Q3 Earnings call transcript