MWA - NYSE

Good morning, and thank you for standing by. Your lines are in a listen-only mode until the question and answer session of today's conference. At that time, you may press the appropriate key to ask a question. Today's conference is being recorded. If you have any objections, you may disconnect at this time. It is now my pleasure to turn the call over to Whit Kincaid.

Good morning, everyone. Thank you for joining us on Muir Water Products' fourth quarter and fiscal 2024 conference call. Yesterday afternoon, we issued our press release reporting results of operations for the quarter and year ended September 30, 2024. A copy of the press release is available on our website, muirwaterproducts.com. I am joined this morning by Martie

Thank you, Whit. Good morning, everyone. Thank you for joining our quarterly earnings call. I'll start with a brief overview of our fourth quarter and full-year performance. We are pleased with our strong finish to a record year with our fourth quarter net sales and adjusted EBITDA exceeding expectations. For the quarter, we delivered a double-digit year-over-year increase in consolidated net sales, with healthy order levels that were supported by steady end-market demand and focused customer service. We increased our fourth quarter consolidated gross margin by 250 basis points year-over-year due to higher volumes and improved operational execution. We also increased fourth quarter adjusted EBITDA by approximately $17 million year-over-year and improved adjusted EBITDA margin by 240 basis points. In 2024, despite a challenging external environment, we achieved record levels for net sales, gross margin, adjusted EBITDA, adjusted net income per diluted share, and free cash flow. Our outstanding performance this year is a testament to our dedicated employees who serve our customers and communities with tireless energy and passion. Our consolidated net sales exceeded $1.3 billion for the year, driven by a return to normalized lead times, improvements in customer service, and resilient end-market demand. We increased full-year consolidated gross and adjusted EBITDA margins by more than 500 basis points year-over-year, supported by improving manufacturing performance, favorable price cost, and disciplined SG&A spending. For the year, we delivered record adjusted net income per share of $0.96, which increased around 52% year-over-year, and generated $191 million of free cash flow, an increase of $130 million versus the prior year. Our 2025 outlook, which Steve will address later in the call, anticipates continued net sales growth and adjusted EBITDA margin improvement as we focus on executing key strategies while managing external challenges. During the quarter, we published our fourth ESG report, which highlights our commitment and ongoing progress to becoming a more sustainable, innovative, and impactful organization. To help us achieve that goal, we are committed to providing products and solutions that help cities and municipalities repair and replace their aging infrastructure, increase the resiliency of their distribution networks, respond to water-related climate impacts, and ensure the health and safety of their communities. Mueller's legacy is built on a foundation of innovative engineering excellence and a deep understanding of and passion to protect the environment in which we live. Our spirit of innovation is not just about creating new solutions; it is about solving real-world problems that affect every individual living in our cities and communities. And we cannot do this without the hard work and dedication of our employees around the world. I'll now turn it over to Paul to address some of our commercial and operational insights.

Thanks, Martie. Good morning, everyone. It's great to be with you this morning. In the face of external challenges, I couldn't be more encouraged by the progress our teams have achieved this year. Their discipline, dedication, and teamwork drove a significant improvement in gross margin, exceeding our pre-pandemic high. After dealing with record backlogs and a period of customer and channel destocking, we returned to normalized lead times, most notably for iron gate valves and hydrants. Additionally, we experienced more typical seasonal order patterns. These more normalized conditions, combined with our disciplined focus on serving our customers and execution of manufacturing, material, and freight efficiencies, led to the significant increase in margins. Our new brass foundry wrapped up nicely during the year, and we remain on pace to close the legacy brass foundry by the end of calendar 2024. The closure of the legacy facility and the elimination of duplicative costs are expected to result in an 80 to 100 basis point annualized improvement in our consolidated gross margin starting in the second half of fiscal 2025. Our team in Israel continues to deal with the impacts of the Israel-Hamas war while working diligently to satisfy customer demand. We have made operational investments in our supply chain and production capabilities for Krausz repair products. While these investments resulted in a sequential improvement in shipments in the fourth quarter, we expect to continue to experience headwinds this year, especially relative to the first half of fiscal 2024. In 2025, we will continue to make disciplined investments in our commercial and operational capabilities, which are expected to drive additional performance improvements. As a result, we are forecasting further margin gains with our outlook for this year, implying nearly a year-over-year gross margin improvement at the midpoint of our annual guidance. We are focused on improving operational excellence, increasing supply chain efficiencies, and developing advanced manufacturing capabilities to drive productivity across our facilities. Additionally, we are increasing our customer experience investments to further deepen our channel and end-customer relationships and enhance how we engage with customers to promote our products and solutions. With that, I'll turn it over to Steve so he can provide you with a deeper dive on the financials.

Thanks, Paul, and good morning, everyone. Now taking a closer look at our fourth quarter and full-year results. For the quarter, our consolidated net sales increased 15.5% to $348.2 million compared to the prior year. This increase was primarily due to higher volumes, mainly in iron gate valves and hydrants, as well as higher pricing across most of our product lines. For the full year, our consolidated net sales increased 3.1% and exceeded $1.3 billion. This increase was primarily driven by higher pricing, which was partially offset by lower volumes, mainly in hydrants, applications, and repair products. In the fourth quarter, gross profit was $110.9 million, which was an increase of 25.5% compared with the prior year. Gross margin of 31.8% increased 250 basis points compared with the prior year. Benefits from higher volumes, favorable price cost, and improved manufacturing performance more than offset impacts of the Israel-Hamas war at Water Management Solutions. For the full year, gross margin was 34.9%, an increase of 520 basis points compared with the prior year, which is a record level for Muir. SG&A expenses of $63.1 million were $8.9 million higher than the prior year. The increase compared with the prior year was primarily driven by higher incentive costs and inflationary pressures, which were partially offset by lower third-party fees and personnel-related cost reductions for our restructuring activities in the prior year. Operating income came in at $28.4 million, which was an increase of 14.1% in the quarter compared with the prior year. Operating income includes strategic reorganization and other charges, as well as a non-cash goodwill impairment and warranty charge at Water Management Solutions, which have been excluded from adjusted results. Turning now to our consolidated non-GAAP results for the quarter. Adjusted operating income was $56.5 million, an increase of 41.6% compared to the prior year. This increase was primarily a result of higher gross profit, which more than offset higher total SG&A expenses. Adjusted EBITDA came in at $72.5 million, an increase of 30.9% in the quarter, which yielded an adjusted EBITDA margin of 20.8% compared with 18.4% in the prior year. For the full year, adjusted EBITDA increased $82.6 million, or 40.9%, to $284.7 million, which is a record level for Mueller. Our adjusted EBITDA margin improved 590 basis points to 21.7% for the year, which is also a record. Net interest expense in the fourth quarter decreased $300,000 year-over-year, with a $2 million year-over-year decrease for the full year. Both decreases were primarily as a result of higher interest income. The effective tax rate increased for the fourth quarter and full year primarily as a result of certain non-deductible items, including the non-cash goodwill impairment, an overall increase in the state income tax rate, and lesser foreign tax rate benefits. For the full year, our effective tax rate was 29.1% as compared with 21.6% for the prior year. If we excluded the non-cash goodwill impairment, our full-year effective tax rate would have been 26.4%. For the quarter, we increased adjusted net income per share by 15.8% to $0.22 compared with the prior year. For the full year, we increased adjusted net income per share by 52.4% to $0.96 per share compared with the prior year, which is a record level. Turning now to quarterly segment performance. Starting with Water Flow Solutions. Net sales increased 24% to $200.3 million compared with the prior year quarter, primarily due to higher volumes of iron gate valves and service brass products, as well as higher pricing across most product lines. Similar to the prior two quarters, the year-over-year net sales growth for iron gate valves benefited from normalized lead times and healthy order levels, as well as lapping low orders and shipments in the prior year quarter, which was mainly due to channel and customer inventory destocking in that period. Adjusted operating income increased 51.3% to $41.6 million in the quarter. Benefits from higher volumes, favorable price cost, and improved manufacturing performance more than offset higher SG&A expenses. Adjusted EBITDA increased 41.3% to $51.7 million, and adjusted EBITDA margin improved 310 basis points to 25.8% compared with the prior year quarter. For the full year, adjusted EBITDA margin improved by more than 1,000 basis points to 28.8%, which is a record for the segment. Turning now to quarterly results for Water Management Solutions. Net sales increased 5.7% to $147.9 million compared with the prior year quarter, primarily due to higher volumes of hydrants, as well as higher pricing across most product lines. Similar to iron gate valves, the year-over-year net sales growth for hydrants benefited from normalized lead times and healthy order levels, as well as lapping low orders and shipments in the prior year quarter, which was mainly due to channel and customer inventory destocking. Adjusted operating income increased 36.1% to $29.8 million in the quarter due to benefits from higher volumes, favorable price cost, and lower SG&A expenses, which more than offset impacts of the Israel-Hamas war. Adjusted EBITDA for the quarter increased 26.1% to $36.7 million, and adjusted EBITDA margin improved 400 basis points to 24.8%. For the full year, adjusted EBITDA margin improved 70 basis points to 23%, which is a record for the segment. Moving on to cash flow. Net cash provided by operating activities for the full year was $238.8 million, an increase of $129.8 million compared with the prior year. The increase was primarily driven by improvements in working capital compared with the prior year and higher net income. In the fourth quarter, cash flow from operations benefited from the timing of liability accruals, including incentive compensation and benefits, and other payments. During the year, we invested $47.4 million in capital compared with $47.6 million in the prior year. Our free cash flow for the year increased $130 million to $191.4 million compared with the prior year, primarily due to higher cash from operations. For the year, our free cash flow as a percent of adjusted net income was 127%, which exceeded our expectations. At the end of the year, our total debt outstanding was around $450 million, and we had cash and cash equivalents of approximately $310 million. We have a strong and flexible balance sheet with our net debt leverage ratio less than one, no debt maturities until June 2029, and a fixed 4% interest rate on our $450 million senior notes. We did not have any borrowings under our ABL at quarter end, nor did we borrow any amounts under our ABL during the year. With approximately $473 million of total liquidity at the end of the year, we continue to have ample liquidity capacity and flexibility to support our strategic priorities, including acquisitions. I will now review our outlook for fiscal 2025. We expect consolidated net sales to be between $1.34 billion and $1.36 billion, which represents a year-over-year increase between 1.9% and 3.4%. Consolidated net sales seasonality is anticipated to be normalized, with quarterly consolidated net sales highest in the third quarter and lowest in the first quarter, with a sequential increase in consolidated net sales in the second quarter as the construction season ramps up in the spring. We believe municipal and new residential construction end markets will continue to be resilient. We expect our adjusted EBITDA will range from $300 to $305 million, reflecting year-over-year growth of 5.4% to 7.1%. We expect total SG&A expenses to be between $230 and $240 million. Our SG&A forecast is below the prior year due to the benefit from lower amortization expense and incentive compensation, partially offset by commercial and IT investments as well as inflationary pressures. In 2025, our annual amortization expense will decrease by approximately $18 million as the customer relationship intangibles from 2005 will be fully amortized. We currently expect our second half 2025 adjusted EBITDA margin to be higher than the first half of the year. This expectation is primarily driven by the seasonality of net sales and continuing manufacturing performance improvements, including the anticipated benefits from the closure of our legacy brass foundry along with operational and supply chain efficiencies. We expect free cash flow as a percentage of adjusted net income to be more than 80% in fiscal 2025. This outlook includes capital expenditures between $45 and $50 million and takes into account the timing of liability accruals, which benefited our fourth quarter cash flow from operations. With that, I'll turn it back to Martie for closing comments.

Thanks, Steve. We delivered record results in 2024, and it's with appreciation for the hard work, dedication, and commitment of our employees. Our teams are focused on executing our key strategic priorities and servicing our customers to drive continued net sales growth and future margin improvements, which are supported by our purpose-driven organization. With these strategies, we are well-positioned to capture the benefits from the investment needed to address the aging North American water infrastructure and the expected incremental spending associated with the federal infrastructure bill, particularly with lead service line replacement projects. Our strong flexible balance sheet continues to provide ample capacity to support our strategic priorities, including dividends, which were recently increased for the tenth time since 2014. I am confident in our future, knowing how Mueller's team members differentiate us in the market. Our team members are driven to be leaders in water infrastructure solutions, solving challenges, enriching lives, and safeguarding the future. To accomplish this, we are connecting communities to water, life's most essential resource, with exceptional people, solutions, and products. We are focused on working collaboratively and seamlessly across the organization as one unified team, what we internally call Mueller One. We are confident that the actions we are taking to execute our strategy will further strengthen Mueller for the long term. That concludes our comments. Operator, please open the call for questions.

Thank you. At this time, if you would like to ask a question, you may press star one. Please unmute your phone and state your first and last name when prompted. To withdraw your question, you may press star two. One moment, please.

Thank you. Good morning, everyone. Yes. Can you hear us okay?

Yes, I hear. Okay, good.

Yeah. So the timing of your call is opportunistic because we've got the election out of the way, so we can't ask about election uncertainty. But now it's, you know, where does policy what might change? Can you just give us a sense of how much stimulus spending has is still to come through, and is there any risk that any of it gets pulled back and just any other kind of policy considerations from, you know, where we sit today?

Yes. So let me kick off with your question. And I think first of all, with respect to the infrastructure bill and timing in and around the infrastructure bill, I think our general expectation is that has that was a bill that was supported by both parties. So I would say overall that we do expect that there will continue to be support for the infrastructure bill. Largely due to the ongoing challenges with the aging water infrastructure in the US. You know, what I think has been happening that is just as we have said, these things take time. There's generally a lag between the bill and then as the funds begin to flow and a lot of that is due to the regulatory processes they go through when they determine exactly what the requirements are those requirements are specifically to meet the domestic sourcing requirements for BABA or what's known as Build America. By America. Thus far, I'd say we've seen limited bid activity. For that the documentation requirements in and around the BABA are certainly higher than they were for AIS. And we think that's partially the reason for the timing lag I will tell you in our outlook for 2025, we have presumed that there will be minimal dollars flowing through coming from IIJA. So overall with the know, given the results of the election, we don't expect any differences. The only thing that we could see could be possibly some timing implementation requirements for things such as the service brass appliance.

That's a great recap there. My second question is and we've talked about this before, but it came up multiple times in your prepared remarks is, risk management at Krausz. So it's foreseeable that Middle East conflict could escalate. And it just it seems that I love to hear about risk mitigation, are you restricted at all about moving manufacture maybe manufacture more in the US. Are you restricted in any way? About your flexibility there? Because it's a fabulous business. And it just it seems like an avoidable risk from our perspective. Yes.

Hey. Good morning, Dean. This is Paul. Just as a reminder, the repair products is a relatively small portion of consolidated sales. But the team there has done a really great job of increasing our flexibility in terms of production and strengthen our an increase in labor in terms of meeting our demand. So as we continue to evolve and derisk certain elements of that production, I think we're in a strong position going forward in terms of how we continue to supply the Krausz products in the US.

Thank you. Our next caller is Mike Halloran with Baird. You may go ahead, sir.

Good morning, everybody. This is Paz on for Mike. Obviously, a lot of exciting turning points here as we move past the old foundry. But as we think about the balance sheet and the strength of your cash position, should we think about capital allocation as we move forward? Maybe we revisit the M&A pipeline. And then are there other chunkier organic investments that we should be thinking about beyond normal course of business product investment and R&D?

Right. Yeah. No. Thanks for the question. And, yes, I think as we have been pleased with the as you point out, the capital structure that we have because we do think it affords us flexibility and capacity along with our cash-generating capabilities. So I would say as we think about the capital allocation and capital allocation going forward, I think we will con we do expect to continue the component which is the I'll put it in the bucket of return to shareholders. That's largely through the dividend that we have as well as share repurchase and we had $80 million remaining in share repurchase authorization at the end of our fiscal year. The other piece, I'm just gonna touch on capital expenditures. We are off that elevated level of capital expenditures that we've had as a result of the largely or really fully domestic investment that we have just had with the three large capital projects. Expectation is capital expenditures will generally be less than 4% on a go-forward basis, but we will continue to look for opportunities to invest in our facilities. Importantly, as we do have boundaries from a maintenance perspective in terms of keeping them running efficiently and importantly as well looking for opportunities where we can enhance efficiencies or where it supports product innovation. In and around acquisitions, I would that also remains an important area of focus for us. There are certainly any number of acquisition opportunities that we think could be very attractive for us. Bolt-ons that could help us leverage the distribution and customer relationships that we have, certainly looking for synergies within our manufacturing facilities, and importantly looking for ways that we could either deepen or broaden our product line. So I would say that also remains of importance and we'll continue to look very closely at those acquisition opportunities.

Thanks, Martie. That's super helpful. Maybe switching gears a little bit. It sounds like you're taking a prudent approach when looking at the residential outlook specifically. Obviously, a lack of supply and affordability challenges kind of continue to stretch in the underlying market. And trading action would suggest that homebuilder sentiment's getting worse. Can we maybe take a step back, and can you maybe talk about the high-level discussions you're having with customers today and versus twelve months ago?

Yes, great question. I think in terms of our discussion customers, we still believe the residential construction is normalized and it's a healthy level. Demand for new homes has been resilient despite the elevated interest rates. We have low housing inventory and price inflation, and we still in terms of our discussions with our customers, homebuilders have strong balance sheets. And are managing a lot of investments and inventory levels at a disciplined pace. So from our perspective, that's what we built into our guidance for FY 2025 and believe that the market is still strong.

Thank you. Our next caller is Joe Giordano with TD Cowen. You may go ahead, sir.

Hey, good morning. Just along those same comments, right, like you've had a couple of years now where we've had pretty healthy markets like, one from the municipal side, from the builder side, I think we're still looking at kinda, like, pretty low organic and the guide kind of implied similar just kinda can you can you comment on how you're performing in, like, an environment that I think an outsider would consider to be pretty healthy. Like, do you consider that to be like, strong growth within that market?

So, yeah, let me let me hit that in terms of the sales guidance that we have provided, you know, looking in a range with just call it just under 2% to 3.4%. So we do think we'll continue to have some carryover pricing benefits as we look to our 2025. You know, in and around the municipal and new residential construction and Paul commented on this as well. We do think that it's resilient. And as I commented earlier, we are not assuming that there's going to be and the guidance that we have given, much benefit coming in from the infrastructure bill in our 2025. You know, I think as we look out, we do feel that there is still some uncertainty in the external environment. I know we the presidential election at this point, but I think, you know, what could be seen or where current views are in and around mortgage rates as well as well as the ongoing global tensions that we've got in the Middle East region as we think about what could be some additional impacts. We have basically lapped now what we were experiencing with the destocking and longer lead times. And I think, you know, very pleased that particularly with our short cycle products, we have lapsed through all of that in 2024. I will give the one reminder that our Service Brass was the last what we characterize as short cycle product that still had the elevated backlog in 2024, and that elevated backlog largely being the result of some of the COVID supply chain challenges, etcetera. So we have, as we said, worked through that elevated backlog pretty much through 2024, and as a result in 2025, there could be some modest headwinds coming from that. Overall, as we look at 2025, I think our first quarter and the growth that we could see in our first quarter from a net sales perspective could benefit because we're lapping some of the destock that we were still experiencing in the first quarter of last year.

I got it. Okay. That makes sense. And then can you talk about the impairment you took and the warranty charges? Like, what were they and apologies if you said this right at the beginning of call. I jumped on a minute late. But what was those related to and the businesses that are being impaired, like, what's the go forward plan on some of these?

Yeah. I think we'll take that in two parts. I think Martie will address a little bit of the go forward plan. But as you mentioned and saw, we did incur a $16.3 million non-cash goodwill impairment charge, which has been adjusted from our reported results and our adjusted items. You know, as you expect, we test goodwill and indefinite live assets intangible assets for impairment annually or as needed, circumstantially. This particular impairment was related to lower forecasted revenues and associated profits within our applications product lines. And those are mainly related to our technology-related products, which include We are strategically focusing our commercial resources on a more streamlined approach. And perhaps, Martie, you would like to talk a little bit about that.

Yeah. That's it. You know, I think just generally in and around our metering business, I'd say we're gonna look to be very targeted from our perspective of approaching that business, and that was somewhat reflected in what Steve talked through from a goodwill perspective. And I think that second question Steve, if you wanna hit it, in and around the warranty expense for the quarter.

Thank you for the reminder, Martie. The charge in the fourth quarter related to warranty was associated with our metering products within our Water Management Solutions segment. As you've covered us for a while, you know that we monitor and analyze our warranty obligations periodically and revise our accruals as necessary to reflect that analysis. In this instance, we did increase our warranty accrual due to historical warranty experience of some of our products as well as our forecast for product replacement costs, which do utilize information and data that's provided to us by certain third-party studies. And you're familiar with our business, but as a for those who might not be as familiar with it, the water meter industry has exceptionally long warranty periods. And so, you know, this warranty obligation for us is a relatively long term.

Thank you. Our next caller is Brian Lee with Goldman Sachs.

Hey, everyone. Good morning. Thanks for taking the questions.

Good morning, Brian.

Good morning. I guess just following up on a few of the prior questions, just I suppose, you know, the punchline here is folks might have expected a little bit more growth given, you know, the spending trends and your own momentum here exiting fiscal 2024. So if we can kinda try to break down the 2% to 3.4% growth view for 2025, like, how much is price? How much is volume? And I know you're saying there's no infrastructure spending tailwinds that are playing into that view. Like, would anticipate that you would see some of that at least in the order and backlog trends by the end of fiscal 2025. Like, I'd assume they're more long lead time type of volumes you'd see at some point, but maybe just, you know, breaking down the 2% to 3.4% view for the year, and then also what you think in terms of timing around when you might see some infrastructure spending tailwinds start to emerge and know, in some other KPIs.

Right. Alright. So yeah. Just to mention that a little bit more. So I'll hit pricing first, and I will tell you in the guidance that we have given, we do assume the benefits from carryover pricing. And I think it's, you know, with respect to additional pricing, we have always very clearly said that with respect to any price increases those will always be shared with our customers first. So we've got the assumption of carryover pricing in the guidance that we've given. The other piece of the growth or the sales guidance does come from some expected volume growth. We do think that we could see it both from the municipal and the residential end markets. As part of that, I think that we talked about the elevated service back. We did bring down our service brass backlog throughout our fiscal 2024. And as a result, if think of it sort of the same way we describe the impacts from hydrant that impacted us through the first three quarters. You know, as we're looking at having service some of the backlog in the prior year, that impacted the volume in the current year. So we do think that we could see some modest headwinds coming from the service brass backlog. To hit directly your question in and around spending coming in from IIJA, and how we're seeing it. So it's very much I would say, focus certainly for us, and certainly for customers. It's really a process now of going through and understanding what the specifications are, to get the funding for those particular projects as they come through and what those seeking funding will need to validate to ensure that they are authorized for the spending. I would expect that we could it probably more in from an orders capacity, from our specialty valves just to go back to what we have. Really where we generally see our backlog, it's in our specialty valve business, and that's largely because that is a more they're more can be more customized engineered products for portions of it. So that could be an area where we could see some of the initial backlog, if you will, for potential infrastructure spending. And I think we will just also see it as we continue to work with our customers and help them with the requirements that they need to provide to qualify for the spending. At this point, as I said, we have not assumed that there would be any meaningful impact in the guidance that we have provided.

Okay. Fair enough. That's helpful. And then just one more question on the guidance. I know you had made some prepared remarks about second-half trends on EBITDA being stronger than the first half. I don't think that's a huge surprise, but you know, you do have tougher comps given the excellent performance in the second half of the fiscal 2024 period. So if we kinda think about cadence, is EBITDA sort of flat to maybe even down in the first half of fiscal 'twenty-five before you see much more significant increase in growth in the back half and if that is the cadence, what is that is that mix related? Is that, you know, cost and you know, productivity, timing, differentials between the first and second half. Just trying to understand maybe the cadence on the EBITDA given Thanks.

Yeah. Let me start off with that. Look, I'm gonna say in and around the cadence, I would say we have not given specific guidance quarterly or first half second half basis relative to the prior year. First of all importantly, we do expect to see EBITDA growth in the full year, we do expect to see an improvement in our EBITDA margin on a year-over-year basis as well. So in looking at what some of those impacts are going to be. As we said, we do think the second half is gonna be stronger than the first half. Some of it, as you point out, is due direct to the seasonality of net sales. As well as the ongoing manufacturing performance improvements and very specifically we still are planning to close the our old or the legacy brass foundry at the end of calendar 2024. As we said, we expect about 80 to 100 basis points benefit from that on an annualized basis. Alright. And would expect that to start to hit in the second half of our fiscal year. The other area that I wanna call out, and it's within water management solutions. And I know Paul addressed the question earlier. In and around our Krausz facility. We'll just remind everybody that we really did not have much of a higher cost and other impact from that in our first quarter last year, and that largely due to the level of inventory that we carry with our Krausz products. So there was really very little impact through the first half of the year and more in the second half of the year. And as we move into our fiscal 2025, we do expect to have more of a headwind from the higher cost associated with our repair products.

Next caller is Walt Liptak with Seaport Research. You may go ahead, sir.

Hi. Thanks. Good morning, everyone, and good morning all. On the turnaround. So I wanted to ask one about, you know, profit improvement programs. You guys talked about Mueller One, Martie. And I, you know, I don't recall that we've heard too much about that in the past. I wonder if you could tell us what that means. You know, are there profit improvement programs behind it? Are there, you know, kind of longer-term targets or margin improvement that you wanna get out of the business?

So let me I'm gonna hit your first question and describe to you sort of what Mueller One is and then I want to turn it over to Paul to talk about what some of the opportunities have been for profit improvement and what we can see going forward. So Mueller One is really what we it's an internal logo or call to action that we have, and it really is to help the whole team across the company, across all of our facilities, to really think as one company. And to really encourage, I think, as we laid out on one of our pages, how we are going to work to collaboratively and seamlessly and really have sort of a singular alignment across the organization. And so that's what we mean by when we're we use that internally it's Mueller One, and it's just to get every employee continuing to think about the importance of working together and how that is making us better as a company for our customers and for the communities that we serve and importantly a better experience for all of the employees that we have in the organization.

Yeah. Thanks, Martie. Good morning, Walt. I think for us as we've internally realigned the organization and really focusing the operator as one company. That's where we've seen some of the benefits in fiscal year 2024 as we operate as one team across the whole organization. Collaborating on those profit improvement, operational excellence, material and freight productivity initiatives, and also how we kind of focus on the on our commercial activities with our customers and end users. So that will continue with that's part of our guidance as we move into FY 2025. So it's really an evolution how we've realigned the organization really focus as one team moving forward.

Okay. Makes sense. Are there any profit improvement targets or anything like that that, you know, we can hang our head on?

I mean, like I said, you see the benefits in the fiscal year 2024 and our guidance in 2025 reflects the projects that we are working on right now.

You look at the areas which where we think we can continue to reinforce and have the opportunities for growth. We've had a long history. I think if you look over a longer time period, we've had net sales in sort of a mid-single-digit growth rate. I think there's certainly a lot of consistency and resiliency in our end markets. We do see more volatility in around the residential construction, but generally, I think we see more consistency in and around the municipal side. We have very strong brands. And we have been successful in terms of managing price realization or really managing that price cost as we say over the full cycle. We have been making investments and have called out that we've expect to continue to make investments in our customer experience and product innovation. We think that's gonna help us with the net sales growth. I think we've certainly you know, we really would call 2024 for Mueller a real turning point. I think you saw a step change in terms of the gross margin improvement that we saw over the year as well as the EBITDA margin improvement over the year. And I think as Paul did a great job with the leadership there and with the strength that we've had with the team members that we have as well as additional talent that has come into the organization. I think we have been able to identify and execute on improvements that have helped with our efficiencies, and the team remains focused on operational excellence and ways to continue to drive our gross margin improvement over time.

Thank you. And at this time, I am showing no further questions.

Very good. Well, thanks, everybody, for the call today. And we look forward to continuing discussions with you all.