MWA - Earnings call transcript Q3 2022 | Mueller Water Products, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Thank you for standing by, and welcome to the Third Quarter 2022 Investor Relations Conference Call. [Operator Instructions] As a reminder, today's call is being recorded.

If you have any objections, you may disconnect at this time. I would like to turn today's meeting over to your host, VP of Investor Relations, Mr. Whit Kincaid. you. Thank

begin. may You

Whit Kincaid

This ended Thank quarter joining issued XXXX results press the release everyone. A yesterday Water of copy our on Products reporting the CFO, being Scott quarter our our discussing third for and operations third results conference is and website available of President on XX, CEO, be on you morning, muellerwaterproducts.com. the our was and XXXX us will and outlook afternoon. for release Mueller morning's for webcast live XXXX. current our recorded Hall, press Martie call March Good call. Zakas, our Internet. We quarter

our to have posted in disclosure statements We accompany today's non-GAAP website address slides forward-looking discussion and on our also to requirements.

to cautionary please referenced important measures and between from that entirety. It and our October supplemental reporting identifies and investors. X-K reasons and useful changed factors X and includes identifying their management of could Slide time, results filed this the GAAP information website. review non-GAAP This call. an in XXXX included Slide financial our As on we those these materially slide X. forward-looking structure X, discloses provide within to January in actual this on differ this statements. We call. X quarterly press a effective our measures statements forward-looking Slides that are provided to historical cause made Please information the slides, on slide in XXXX. release our included in recast Reconciliations information press X addresses that believe our we on in segment XXXX. for why This reminder, refer and results At measures the financial non-GAAP release, have

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

Scott Hall

Thanks, everyone. for quarter joining third call. earnings for morning, us our Whit. Thank you Good

we Order with solutions water growth and activity, driven sales iron flow we sales this ended both quarter growth the delivered valves, generated a repair net record the quarter digit levels record contributing gate healthy with the made This to net management market quarter. were again and installation and specialty water products. solutions quarter end in and valves double We by in backlog.

As expected of price the product across the growth most in came our the quarter from realization improvement in lines. primarily continued

the third from We are actions year sequential and increase we're the quarter. taken past with the pleased in multiple price the benefiting over

manufacturing adjusted price chain a same the realization on improved below the supply second ongoing our earnings our While including the in headwinds in sequential of our and conversion led expectations discussed margin, improvement quarter, inflationary performance. quarter EBITDA call. our third faced to disruptions, experienced many was pressures, We we operational last margin

as healthy teams improving on record manage operational demand Our of are focused performance levels production and backlog. we

Martie I turn We the execute the financial third to expect the quarter over initiatives to continue to results. continued improved the realization our in quarter, headwinds, operational I'll now and fourth from review call. benefits in price which manage discuss will call will to later

Martie Zakas

review that morning I with financial I will results. quarter Thanks, will our non After Scott. and our consolidated everyone. liquidity. good discuss our third performance flow segments and GAAP cash And XXXX and GAAP start

in prior both $XXX.X management solutions with compared growth million sales year, the Our consolidated solutions. and net third to quarter flow increased water X.X% to water

decreased benefits quarter $XX.X lower by across with higher with basis pricing the lines profit product compared segments, to warranty overall accrual most the warranty was obligations. on were offset manufacturing our this XXX resulting increased million offset pricing unfavorable the XX.X% experience margin We partially our as million associated and year Gross historical from points prior based more charge. prior higher year. to decreased both and our a than by X.X% warranty installation volume. compared costs of costs, For Gross in performance, $X.X higher with

of general was charge, X.X% Excluding warranty in sales. second Operating as this income gross higher improved was activity margin year. the sales prior price prior in million tradeshow improved investments primarily margin increase to the quarter prior compared realization. offset previously XXX with expenses in net the to a as basis professional by driven million foreign quarter quarter, plant well the as improved gains. to the and SG&A sequentially with $XX.X income the personnel, with increased of million the by other XX.X% decreased quarter, the in gross which the includes percent Selling, Operating and closures. compared $XXX,XXX, charge, XX.X%, as reorganization compared fees our compared of the partially our and XX.X% in primarily in million to D&A, and due which quarter, administrative charges inflation year $XX.X leverage from XX.X% The year. $XX.X of we $X.X announced which the strategic exchange relate was points as

EBITDA operating margin Adjusted with EBITDA than associated more decreased costs points, basis Turning Adjusted compared compared Adjusted manufacturing quarter, in year. sequentially results. offset million by $XX in X.X% million SG&A performance, pricing non-GAAP quarter. second XX.X% an $XX.X expenses. prior year. to $XX.X our the income improved in million by the were decreased EBITDA XX.X% with with XXX XX.X% unfavorable margin X.X% the compared from benefits higher in The with and consolidated the inflation higher of of leading now to prior of adjusted

of prior quarter from million last interest The adjusted compared the million, during sales. for resulted the with X% the the year. with to to X.X% expense of XX tax May in third compared was associated was $XXX.X from last rate quarter interest in in senior our of For The declined XX% the expense due refinancing the XXXX. XX.X% months, tax notes million lower effective Net net with or benefits EBITDA decrease quarter senior XX.X%, $X.X $X.X year, R&D primarily credits. with primarily this quarter notes as

full by year, anticipate we tax in quarter, $X.XX be For our net effective prior with XX%. the the to now compared %and per adjusted year. rate in share will the $X.XX increased We diluted XX between income X.X%

of SG&A quarter. flat Adjusted the EBITDA million line. X.X% inefficiencies. segment as million water sales increased which of operating and valves, decreased by with compared decreased to was with starting $XXX.X margin XX.X% unfavorable of prior specialty manufacturing valves iron across pricing valves of compared net impacted Net to and double leading income adjusted and Adjusted EBITDA higher primarily products XX.X% $XX.X sales decreased was digit of year, last with year. million $XX.X by on segments compared valves by manufacturing product Adjusted Iron more flow consists EBITDA associated higher sales Moving prior gate second an compared brass prior the performance, with most X% with the products. specialty year solutions, service the gate to to pricing with Volumes performance year. margin of than experienced inflation due offset as brass service were higher of costs the expenses. XX.X% growth compared

to million addition the gas, valves the leak consists of was to and last of were points, lines sequentially margin higher across supply which impacted solutions, expenses. XX.X% unfavorable SG&A natural the decrease the an $XX.X the inefficiencies digit management prior basis double water the X.X% quarter. products Net of experienced margin with than and inflation to control income manufacturing iXO. by offset associated metering, in with meters quarter, pricing by higher the adjusted operating Adjusted XX.X% growth Adjusted manufacturing with decreased segments EBITDA product. year improved hydrants, to and of installation, most $XX.X more compared compared product pressure performance, sales leading software the XX.X% prior disruptions. $XXX.X compared control by as of fire in now of costs Volumes repair with and installation second as year compared and in sales pricing EBITDA decreased XX.X% sales ongoing XXX million year. chain Repair hydrants, and net year. with higher quarter, the due detection, of EBITDA prior XX.X% Turning increased and of compared primarily Adjusted

receivable. in year. for driven the quarter the The incentives. $XX.X compared method, liabilities, in XX.X% Moving decrease to of sales activities last Inventories payments $XX.X on end prior capital net and million quarter compared primarily increase the of primarily the higher second of to by million for fiscal with cash flow. the taxes income Net third at $XX.X increased and XXXX. the cash million X-point current year, a provided with than of was nine period, inventory using the of end than due Average the and customer XX.X%, in to end higher $XXX.X of working other including million rebates, employee quarter with percent the and net third higher by $XXX.X as were the operating month million inventories

to period, the capital the same compared with the prior $XX.X month year. in $XX.X by million the in in nine we nine provided lower with expenditures. cash period million period flow expenditures, by $XX.X invested year month $XX.X in capital decrease partially million due operating for primarily have in million the offset Free spent For prior the negative compared cash activities with

cash year anticipate For we the full that positive. be will flow free

quarter, share and authorization. the our in million remaining during repurchase $XXX we stock common Additionally, million repurchased under $X have

X.Xx. we leverage quarter. XX, At not net any cash June during of our outstanding XXXX, debt million. borrowings of of $XXX was agreement we the borrow debt our and amounts at end third under under As any end did ABL ABL our the ratio quarter, $XXX.X of quarter, million did nor the total had the have total the We of

agreement senior with to which to under excess allocation Based to $XXX.X June availability our brings support maturities currently balance our capacity back we before June availability debt and continue notes not capital maintenance data, is sheet agreement, maintenance and financial covenants million. have ABL XXXX liquidity liquidity ample minimum to Scott, have the We exceed million maintain our covenants total XX, we financial subject strong any you. X% ABL priorities. to the $XXX.X flexible a approximately no XXXX threshold. unless on had Our and of no

Scott Hall

Obtaining updated caused year. more and discus market phenomena and steel conversion After quarter, costs same purchase a Challenges performance be to top call third parts the they Martie. of variety continue our labor. us a freight, raw challenges ongoing lead challenging, These included higher disruption to that the our scrap shift materials, margins in see premiums. to for associated chain steel in Inflationary in second parts out production lead especially to expensive energy inflationary order pressures, supply with to we pressures and efficiencies. our to and the have and while and this dealing impacted iron the priority third to as with Thanks, quarter. schedules teams work we remains In times our questions. materials of purchase manufacturing relation beat of for in is times. for long get the where open I'll up continue we'll playing operational materials. long many markets quarter This a mix our of and that, price expectations faced

higher in will reason conversion performance than inflation margin economic a usual prices the primary longer of at favorable material foundries continue into lower-than-expected raw will anticipate XXXX. our costs, Due will manufacturing quarter. to expect the environment, benefits for believe magnitude conversion On our the we costs we in decrease was in the we eventually commodity to the impact and breadth this take our lower margins. While

the capacity, which Our actions in purchased production valves. were by Chattanooga during These for Water emergency lowered the shipments Decatur, impacted service volumes. brass to the downtime Machine significantly Albertville Valley and brass Flow melt mill products. from load experience record year-over-year and and order third Tennessee did for in service our products This which and for capacity decline foundries, led at backlog downtime both curtailments. June. in Authority our quarter foundry gate energy healthy Solutions a ended quarter impacted with brass impacted We activity decreased

supply times, than While typically times To in third-party increased of help outsource able levels. and critical for the parts. disruptions to less have the back replacement lead production chain week, get our personnel it in be to we maintenance continue and to the lead machines backlog improved address achieve extend service higher a would use we

with facility will brass will eventually benefits. Replacing completing which the provide melting, capacity new alloy will of and will foundry, improve savings which will pound, enhanced product usage also achieve increase It our design safety. we cost a will because Our expand teams energy the The and our product use provide believe lower goals many product assembly. enhanced help will development plant replace capabilities. very are new will facility new the our reduce sourcing It state-of-the-art it life per current and new lead-free sustainability waste, for the capabilities. focused facility, that productivity, to The relative many foundry. machining cycle brass with on facility, also

availability part the process have XXXX the with the completion we challenges progress, supply labor While XXXX. have pushed construction made fiscal date disruptions our into significant to production end chain and extending of approval

ensure machines working have we we efforts, with to hourly hourly help proactively production complete the a incremental focused workers billion large With our invested at that production three are levels demand, investing inventory, profit we have material projects of our we experiencing, support foundries. production at will capital all shifts, increases full are that anticipate non-union improve annualized are for $XX teams. impact and members previously backlog record equipment teams upgrading for announced labor delivery union implementing to maximizing healthy on and contract To to prior when teams times. our actions and To continue to our and are and all wage account These the include by address production rate. increase and combined renewals. a that adding in inflation gross have We in

performance. investments these improvements inflation manageable come our realization, we the operational While deliver teams pressure to will add can in from price XXXX, believe margins, which labor near-term will our continued and more improved

briefly labor inflationary to will Additionally, I help overall end closely take materials, monitor environment disruptions. chain offset updated will and pressures markets actions and for cost to our supply we outlook review ongoing now continue the as price XXXX. and the for needed

to quarter. healthy order this market We end larger healthy remained continues during municipalities. at strong. and activities the from the benefit full earlier, levels Overall, mentioned replacement especially As repair remains very believe market with budgets,

resiliency to a bill represents of of water reminder, the As utilities, infrastructure two-third that spending water, net approximately highest new are business. sales of providing for mid-XXXXs. and activities $XX of with funds our repair replacement estimate we level since federal infrastructure our wastewater dedicated related to billion storm The and the

of anticipate infrastructure is not the a appears to While could there timing bill been don't constraints believe directly to ongoing the driven by interest mostly for the chain there supply We bill. the challenges labor for be by year municipalities, projects. that this impact a benefit to year of availability level next benefits process in due high states access has and money earmarked that the could limited and any be

time that from benefit beyond we build infrastructure that expect We period, should spending. the

believe the that end construction levels residential activity, new to healthy we at be development during the lot For demand market, quarter. specifically land continued

data activity. housing increase interest contributing to in other slower construction rates is recent new the data most on monthly residential based and the However, points,

to to lead this land development continue and that anticipate levels lower We of activity. will

will given levels We suggest Low for the of the that expect slow activity, levels. and and we help residential year Due relative during pre-pandemic levels, lower population could strong could return level availability for normalized the municipal shifts pandemic. rest repair we to believe labor activity challenges replacement strong inventory, activity demographics demand that new is activity to above construction construction. municipal of a to with

to consecutive on net deliver consolidated to for remaining, With sales of be year growth. one are track to outlook our Moving our on we quarter second XXXX. updated pleased double-digit

XX% account for XX% narrowing growth to full range price year. and our prior consolidated and the year, demand. forecasted for expectations takes sales with compared market current we net forecast end This are the between be into as For the realization orders,

to We quarter continue expect already we the the resulting price the benefit from realization increases multiple improved price fourth have announced. with from

previously will We that fourth be quarter discussed. lower anticipated, anticipate to than the due also previously the primarily operational conversion in margin challenges our

now will adjusted As we a the comparable to EBITDA result, prior be expect year.

pricing price anticipate realization and taken. we improved we delivering margins performance have operational from with XXXX, beyond higher actions Looking conversion better already

sheet the disciplined economic our flexible will uncertainty, With cash balance our balanced benefit from and and strategies. ongoing we allocation strong

our continue through quarterly dividend and as our in business to and repurchases. will return shareholders to We appropriate reinvest cash share

including over demographics. including - repurchased closing, of face ageing in months, XX climate challenges, authorization. water and $XX many We million and have the share change, we million our common million last repurchase the work under were have workforce infrastructure, purchased In stock third utilities demographics $XXX quarter, $X accelerating unfavorable the remaining

to that broad strong a municipal network have is water primarily from the serving environment. positioned well product drinking benefit a demand We portfolio,

execute to a improvements, our adjusted operational in for and deliver conjunction that of price growth America the requirements. accelerating with Iron and are open in for to focused qualify end on favorable water. strategies product investments. for the demand and deliver and And for products ongoing enabled adoption These The expect In continued technology Steel this our products, with trends please questions. commercial teams operator, Our the are municipal key that increased we EBITDA and capitalizing from capital Build America development, important American most XXXX benefits and our operational on call and sales market beyond. include priorities and Buy realization

Operator

Blair you. [Operator Instructions] with Oppenheimer. Thank First Bryan comes question from

Your is line open.

Bryan Blair

Thank morning all. you. Good

Scott Hall

Good morning.

Martie Zakas

morning. Good

Bryan Blair

locked for a on Given major XQ early barring your fiscal and growth I activity goes color more and drivers. And demand the XXXX. and little in market disruption maybe record assume your offer takes of seems backlog puts order pretty same momentum, the

for look and new replace ready repair, we As and municipal forward respectively? construction

Scott Hall

of sequentially, growth more driver improvement relates which improve price We would is - it and the quarters realization as our QX. think some to to, in in ship really expected expect I net levels the at think function backlog we it's I record opportunity The end QX to - of the at the more. future. plants that at a throughput the bigger had the

think And environment directly, the that prepared mentioned them, there the in so, from biggest I mix will projects. of an think a in a I that expect And question growth backlog improving contribute that in demand. of have price of is to pretty front my the is support remain it. to the driver answer larger performance. Bryan, And strong. as believe budgets I extremely The menu municipalities, the that remarks large muni I to I volume

Bryan Blair

headwind understood, Yes has versus pressures a recent parse faced thinking Can from team's team walk QX. price the conversion margins unfavorable the on manufacturing little and your through impact Compare in performance level to maybe second then in of more about and I past. forward? to guess the us more margin that that quarter, the these variables set the you going material isolate to your timeline how normalized and costs

Martie Zakas

sequentially Yes, so this up quarter, quarter, to overall, the price from cover we did that experienced quarter. we strong realization probably second double-digits - improved that did more continue expenses slightly and close to than this see, inflationary

pressure performance disruptions. real supply as manufacturing from unfavorable we came as there chain the that the saw, think well continued the I

address old foundry, down that ended which time was we the contributes some limited emergency But impacted of talked is, a inefficiencies, A to up main we our as And of are Valley we key the got looking as I'd the challenges machine that foundries the that decline that Tennessee the of our one of when that of the of the quarter, well load volume was our machines impacted Some year-over-year what cetera. And driver labor, drivers of that production. and brass from place, some are during by purchased were melt service overhead equipment the say number down, our et where initiatives pounds of with in capacity. that failures. curtailments. the Authority, to impacted materials that, shipments experienced. we've we out products, sort about aren't energy brass century lot or of inefficient

think well of term, once coming to products that will that as for our longer our we've we new in engaged increased availability. outsourcing third-party Certainly online certain brass help. personnel, we maintenance have as help We the with get use foundry

out say from our talked look with Scott into Additionally, for as I we've about we've backlog think, opportunity municipal I got we improving as would outlook think we XXXX, we into margins. and look segment, XXXX got as for we a what as the

Bryan Blair

Okay, helpful Thanks color. again.

Scott Hall

Thank you,

Operator

next Markets. Capital our Deane question you. RBC with comes Thank And from Dray

Your open. line is

Deane Dray

Thank you, good morning everyone.

Scott Hall

Deane. morning, Good

Deane Dray

question. Hey, like to continue that line of

quarter? of a of as it's yes third reconcile came to trying the a change? headwind saying terms lower was guidance still, didn't Just get thing tipping the on inflation. we It's what point same - EBITDA that in up kind that What big you've in got chain supply

sounded at that not inefficiencies clarify, Martie, - point it of your make that fair? was tipping foundry it and Is like that the shortfall the were to to up So you to was just going more manufacturing the hit guidance. EBITDA

Scott Hall

Yes.

product fair and that's everybody I'll want call to but think brass there's in Martie, to make. on basically understand product turn the we I Deane I every it

you if about components think So a there's, gate in brass valve, it.

rest you If of downtime, the And of looking brass it. The workforce certainly, point like components things year. as we was there's downside a that the with experiencing at tipping about the I foundry issues our and speak. [ph] we're think think, for brass

it, the -- valves you components those reevaluate work for and yes, biggest chain for assuming equipment that was we're to quarter, into so what outsourcing is through these the quarter us think about and issues the through will fourth forces issues really our we that the And we for outsourced providing that well. as as Decatur force quarter we the investors some will the part in that problem, foundry. fourth of made have And supply what Once insight in we have thought fourth in happen brass, gate it were hybrid the service that but driver supply do? does sales as you

Deane Dray

So how go operational manufacturing away? foundry the these new inefficiencies in have place, when of you much

Scott Hall

equipment and that Because would like for is both the that's all say and like that, them. I. made of things of machines reality you older is, I all - things they're than

Deane Dray

lot. a saying That

Scott Hall

for the improvement. step We progress yes, really, accelerate process capability, that, to go associated throughput excited all a Last try to going think got of positive. think I to the and there's so the running machine warning be PPAP there opportunity foundry. the to contractor facing from systems, tour a we I'm they're month So change of we I really associated new the foundry detection the all new in. both or opportunity availability worker on the early that it's can I data like a get ways machine improvement things think learning labor that environment, with it - headwinds to I'm supply facing of getting with chain the And for open. sooner, but are headwinds looking and get the parts an for

Deane Dray

All really for color. helpful and additional that right thanks is that part

cut what in Just to are pushed? getting the on clarify initiatives projects or CapEx,

Martie Zakas

I'd think on guidance we some project in delays. of I had at seen lower CapEx, is what just say, terms looking some the - of have overall,

got pushed some of that Some foundry we've spending the a additionally, portion that the the chain our are for a of Decatur some disruption, challenges. think is new supply brass And of the operational of portion focusing teams into of on of coming result the I projects from a XXXX. delayed

certainly I the one So reasons. think that's of

Additionally, opportunities, some of deprioritize we the have as forward. look capital project we to going elected to various at them continue

Deane Dray

the one warranty charge. And Okay. then last on

a - this want that So experience sense particular what products triggered it? to just Are warranty covers of I the broadly get is you've how had? and there

Martie Zakas

as that Water an And part the metering segment. of as our as replacement just And to costs. certain sales was Yes, our so product our and to did basis the ongoing monitor reminder, obligations Solutions Management necessary. warranty warranty periodically well we and charge, of we experience it products. primarily products a what due to with revise do historical respect We and is warranty any warranty our analyze higher that on on relates accruals as as some the accruals,

Deane Dray

based is been many Is more just supposed this any claims there first noticeable - of upon whatever say there that reserve? change this to is the that your or time period experience? routine accountants you're Has

Martie Zakas

regularly. I at judgment an warranty time. on say say, available based have the best would review to with what that the the long. we within we I would estimate so the look, tends generally it's We periods, the have them be Yes, do industry very information is, And

So that experience, the did as we and we'll get was adjust quarter. and what more we update appropriate, and as this evaluate estimates information

Deane Dray

Okay, thank you.

Operator

you. question from Giordano comes Thank And Joe with Cowen. next our

Your line is open.

Joe Giordano

Hey guys good morning.

Scott Hall

morning. Good

Joe Giordano

to to like what manufacturing the want what from - XXXX? the your next a of XXXX from just in XXXX, type that gets into gets now like end So is by - thinking like better margin approval pushed into productivity what year, foundry a like under a project? for of the gets out what Like get push And setup. into better delays to offsets control just

Scott Hall

Yes.

I policy I think notwithstanding has from acknowledge environment we economic biggest actions highly supply we given we the the But going already taken uncertain monetary rises thing about that rate taken. locked the think recession. is that and already Fed to certainly, disruptions, the the carryover significant that and price we've benefit could the in pressure the believe interest chain the growing it are inflationary that think lead to backlog for a is that's by offset

expected high backlog which [ph]. short-cycle offset levels, slowdown - very with will help products, in our XXXX relating end to to for relating decreases the to expect especially We construction market demand

anticipate we municipal So repair municipal replacement level. budgets at to continue benefit the healthy market from

ELT levels days EBITDA the to adjustments prices part not to any pretty make at we items result to basis material do to expect the any I the summer a which improve of for summer. manufacturing I prior didn't implement the as levels doing of to review much perspective, but as dark to initiatives, expect we'll surcharges ordered. and conversion and improve throughputs already will raw they of on We from actions, what we're weekly back remain the were believe contribute a year-over-year And see I would as But that since that these the margin those. relating our Martie have sure for ongoing that Certainly, wage the inflationary the have said rates, freight. take in that will of we rational performance, our mindful pricing an and that market below prepared as also the peak I commodity will adjusted actions comments, we're of offset that pressures have We're which improved expect in been will I a higher to significantly headwinds in upside [ph] my we utilities improvement. to the get believe

that's a so improvement bullishness perspective. performance basis for for, if guess, may I XX And margin our I conversion the margin

Joe Giordano

about pretty And great. thinking the looking data on single-family, come not it's then out just housing that's -

to adjust actions of like You or referenced kind decently is housing world than where that. of your up What plans business drawing is to kind like it now? internally potentially a are worse you

Scott Hall

think construction I order specifically to in in market, at land new residential is continue healthy book. reflected which QX be levels, our activity and development also Yes lot QX,

understand will at data But think that I everybody, we really that permits as as in I a pulled that. certainly, levels. have could remind housing use follow lower the because have to starts you a of I look would future indicate So it surrogate. But lot inventories we the

starts - construction million decreasing, leading slower new but in think I about less And slightly residential interest pace with than, is believe, in total single-family expected, housing the to activity. multi-families slightly to increasing. X.X As rates increase interestingly, starts I

higher before single-family there's demand housing than starts at that decade pace in pandemic. And some so, running think lower still I it's a pace, still but now the the underling the

leading I production this borrowing to it. So were homebuilders sharp trajectory. downward we're And scale clearly think compare the rise costs, if above to annual, continue average plans, still the you we'll in significantly back

slow new of resi of for and see long, I not replacement get land that the [ph] just so people will homebuilders level lot a construction started. we development. lag were me in minute lower I curb a to but put sewer And be we'll in still repair activity. the could that, report anticipate spend a lot us And in, not on housing in be sewer. municipal a There tend and once to let And that and the the help to curb believe as

exact and contractors repair contractors, and tend to they municipalities to put to in So at do work. be they contract tend replacement the be to same the

work trenching people. So of same of a are lot the repair lot a the and the

we that of And our slack, quarter. healthy expect muni saw is in expectations. think labor, we that. line third those orders on bullish and with biggest I order budgets the that in activity July, we And In pick healthy the remain so given the will indicator about up were the squeeze some

will feel have the have be will from [ph] confident the we IIJA some while that we tailwinds budgets I tailwinds slowdown, there muni than offset. So more from

Joe Giordano

for all color. Thanks the

Scott Hall

you. Thank

Operator

Thank you.

comes with Liptak Walt Seaport. from Our question next

Your line is open,

Walter Liptak

cost from good workers. of and about the the for guys. will us some how thanks be ask those in and expectation maybe costs to of - give wanted the temporary long those the you that Hi can idea an I incremental Are outsourcing morning place?

Scott Hall

frankly, story long short, our have is to Yes, freight. that But performance, a us the Part machine cost couple places. that's different QX. increases shows part that looking When of were what harder at of Part out. we the manufacturing biggest in is for versus at outsourcing. that, was reason is of of performance kind of would what cost in up it parse look we will actual experienced cost

And so that get would parse I'm longer. not to want into something it's it's I to sure it. hard

Walter Liptak

That's right. all fine. Okay

and way it this it if Let should and what sorry In fourth you comes we margin gross all quarter, but margin about on manufacturing already, margin. because what for this down mentioned how gross maybe the be me I'm ramps footing quarter? ask the - what of fourth some the think to a get you as And thinking with issues? gross these stronger do then - then you

Scott Hall

Yes.

in under to be to EBITDA, is it adjustment I going flat. I reason quarter you think the think implied Well, do fourth to to going if X% from took we the our XX% margin down QX. that down, gross pressure

significant be we've that see the QX. that near or in will QX pressure You seen at can

might couple have so a And a little basis pressure. - of even points of

I our the to think SG&A I'll our quarter. takes fourth of expenses our note that national other things based just higher seasonal that and in will expect on the QX that way thing sales is place are we meeting some other those significant have in

I to EBITDA you to the higher what think if were happen so little infer take would And a flat SG&A have fourth be to from quarter and perspective. then in bit an

gross determine no would in QX. You little our there's improvement margin or that in

And I reliance the throughput, get of comes hang we to of and these first remind as as We're half our quarter quarter, from on order improving. comes necessary is on build in we the before think things in water in like for preference year a I next at necessary far cost do are customers the expect would to some more behind satisfying to we that kind point of our as going we're certainly newer to turning that put have us of premiums order to one the we're is materials the the and things end things to expedited. the the satisfying of going get everybody continue third job And to share. paying the the customers day, today of municipalities. fourth to in freight that in and products. that that in do for outsourcing, for business us these schedules for

Walter Liptak

you thank helps. that's great, Okay

Operator

you. Thank

with next Our question Ramirez comes Davidson. from D.A. John

open. Your line is

John Ramirez

are speaking morning. How for you? John Good Brent Tillman. This is

Scott Hall

how Good, are you?

John Ramirez

has MWA historically, share still a issues, wondering the challenges some How very share shift products. of facing Presumably, So result? are some had in product that same at decisions the competitors market your is core occurring I'm but your as if and impacted different all?

Scott Hall

of Yes. share I being us going share losing on, share. think lot us don't there's gaining shift either or a

competitors the lead are on get time as far I think say scheduled I on valves, we're inside to as work projects outside I say, to will, that make competitors, would that get our sure our going sprint, you our gate hybrids, out. are times. there's on on worked -- a that lead if would

that reality material the the so small are is And a costs piece.

going share don't I there's a shift so huge on. And think

market, that look those I spot think agreements that of the supplying supply you when it's under in the we are at and municipalities the characters. same

in a a that's I valve where day higher don't of significantly gate that's day and about we kind when it's X,XXX than think X,XXX, been market think know, are, of a I we've kind a that. kind you that of today. X,XXX market where been that, over

more flexed. I think has anybody much have so flexed than And don't that we

feel good share And so where about perspective. are shift we a from I

John Ramirez

follow-up, raw last quarter? we more those but color already I'm going worsened Got materials it. And And just the availability to as talking as if issue well provide mentioned, much since how you sorry following if I for has are Could you what the year. on secure strategies could. a into next

Scott Hall

a That's great question.

But seen I raw prices. think some softening seen we've look, some in that availability challenges. also peculiarly, we've So material

on it you but price, you actually down. pressure shred there's a upward can't get the seen we've pressure or come -- normally, take So

I've too lose when explained have previous in availability efficiencies the the our As enough on what or quarters, quality, for. much not we we in plate, yield

our are can substitute premium busheling we've that high-cost so recipe keep from we into costs And a up. like in to things in yields view continue as looks like finished to QX ensure what And market order to at to perspective. goods the our certainly into had get those a we we get what near-term will

so that that think will I steel continue. market the especially And we're these premiums today, recipe experiencing in

only is, those to like with days. reality basically much Rail allowed others. now under to XX we then our as we as forward the about markets question Progress the your are We're that is and you base. buying XX So right People how in are you is agreements can buy have buying? supply And forward

John Ramirez

these to than And this much to you're in buy environment just top a that XX you just XX so where said have availability days how though? higher the don't a normal the quick follow-up allowed - you is or issues, where

Scott Hall

No.

think you're that I asking. understand what I -

it thinking to There's on we mentality chain. What think call X have days of incorrectly. supply about we what just-in-time a X the our backlog high-turn around I you're materials.

the daily we order we're of ahead even bumped kind are increases, But forward take flow. basically need that backlog, away materials. it's orders, then look from what we And ordering, and those buy we call to shipment pounds obviously. materials, what required As short-cycle the go at now and we a daily

in more we're animal, lock say get and the want our yesterday. trying we I expect have in unusual back to buy XX to with to to And the so state, get steel, let's to so today Brass a we rig you that match would And brass. different what normal days time, forward backlog where back we a sold we're a ordering to, advance. we when in margins. at in call XX an pounds that's our it, why could supply relates we chain that into not for is buy

John Ramirez

additional Thank I the I you so information hop Thank much, I'll provided. you back appreciate think. you.

Scott Hall

team's environment, initiatives importantly, point with to we're we challenges, the internal like to external issue addressing we you, service most capabilities deal want operator. our I'd discussed. to the we've dedication unprecedented growth in with Okay, to and continue while I as for and transform of joining price they at by to customers. pleased really manufacturing our everyone downtime executing Thanks there's, in disappointed say external and be the call progress that net while lack machine also quarter year, inspired our thank with our sales this are no questions. realization more today's this

in If have production orders shorter-cycle challenges, products. operational capital and address record margins well XXXX volumes. as positioned execute to improve are price that increased our we're we our backlog seeing a We continue market, healthy the to in get projects for

municipalities for help and infrastructure to excited markets we're our address water challenges. the end about accelerating Finally, the ability tailwinds their

So for And you that, to I'd with conclude your all continued please the thank like interest. operator, call.

Operator

concludes conference. that Thank you. And today's

all disconnect at You this time. may

Mueller Water Products (MWA) 5 Aug 222022 Q3 Earnings call transcript