Good morning, and welcome to the Zurn Water Solutions Corporation First Quarter 2022 Earnings Results Conference Call with Todd Adams, Chairman and Chief Executive Officer; Mark Peterson, Senior Vice President and Chief Financial Officer; and Dave Pauli, Vice President of Investor Relations for Zurn Water Solutions. .

This call is being recorded and will be available for replay for a period of 2 weeks. The phone numbers for the replay can be found in the earnings release the company filed in the 8-K with the SEC yesterday, April 26. .

At this time, for opening remarks and introduction, I'll turn the call over to Dave Pauli. .

Good morning, everyone, and thanks for joining the call today. Before we begin, I'd like to remind everyone that this call contains certain forward-looking statements that are subject to the safe harbor language contained in the press release that we issued yesterday afternoon, as well as in our SEC filings.

In addition, some comparisons will refer to non-GAAP measures. .

Our earnings release and SEC filings contain additional information about these non-GAAP measures, why we use them and why we believe they're helpful to investors, and contain reconciliations to the corresponding GAAP information.

Consistent with prior quarters, we will speak to non-GAAP metrics as we feel they provide a better understanding of our operating results. These measures are not a substitute for GAAP, and we encourage you to review the GAAP information in our earnings release and in our SEC filings. .

With that, I'll turn the call over to Todd Adams, Chairman and CEO of Zurn Water Solutions. .

Thanks, Dave, and good morning, everyone. Hopefully, everyone had a chance to read through our earnings release last night, and we certainly appreciate everyone taking the time to join the call this morning. .

I guess it's only been about 70 days since we last updated everyone about the Elkay transaction. We've made terrific progress towards the close and bringing the 2 businesses together. All the regulatory things are behind us, really without a hitch. The S-4 became effective this week, and we'll have the shareholder vote towards the end of May.

I think we're going to target a clean closing right at the end of the second quarter. So as we announce our Q2 earnings in July, we'll be in a position to talk about what a combined second half will look like for the new Zurn Elkay Water Solutions business. .

I'll talk more later about some of the joint preparation we've been doing, but it's been really rewarding to see the teams engage with one another and begin to build action plans to execute the opportunities in front of us as we get to the closing. .

Moving on to the first quarter results. In a nutshell, it feels like a pretty decent start to 2022.

Obviously, there's been a lot of moving parts in the world the last 10 to 12 weeks, but the benefit of being a focused pure-play water solutions business and the combination of a clear strategic plan around driving share gains in our core business, coupled with the Zurn business system that underpins our strategic and operational execution, provides us great balance to some of the macro uncertainty out there.

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As we talked about last quarter, we're not immune from the supply chain, transportation, material challenges most everyone is facing. But taken as a whole, this quarter again feels better than the last.

There were, are and will, of course, be spot challenges, but our teams continue to navigate with higher risk, while also having to look forward to continue to support what is really good growth for us.

There are a few things in the quarter that didn't go our way, but we had a good plan and executed well, and that's simply what it takes to perform at a high level in the type of environment we're in. .

As far as the quarter, sales were up 17% year-over-year, 15% organically. And again, this is against the first quarter last year, we grew 12% and 4% organically. Our segment margins in the quarter were 24.5%, very much in line and slightly ahead of our expectations, and our pro forma leverage was 2.1x, exactly what it was at the end of December. .

Mark will cover some additional details on the financials, but a couple of points that I think are incrementally positive for the quarter are we saw really strong order growth across all categories, considerably above our sales growth rate. And secondly, we're seeing great traction to our BrightShield offering and seeing the market take to it.

And this integrated solution we've developed ahead of what will be a busy new construction season in North America over the next 6 or 7 months as well as what will be the first traditional school MRO cycle in over 2 years. .

I'll move on to Slide 4. As we've discussed in the past, there are a lot of inherent barriers to entry in our business. It's a complex path to win consistently and at scale.

Said another way, building a sustainable competitive advantage is something that's very difficult to and, in our case, across the broadest portfolio in the industry, which is only further enhanced with our transaction with Elkay. .

Many of you already know this, but as a refresher, building codes, regulatory approvals, reliability, quality, service level and innovation really, really matter. And only with great innovation can you drive high levels of specification share.

And then there are the countless relationships at the owner, engineer, architect, general mechanical contractor level that need to be cultivated, both nationally and in the local trade areas. .

The final mile is having the best, strongest local representation as well as strong, strategically aligned relationships with leading wholesalers. If you've got that, you're in the game.

In our case, there's no one that comes close to delivering the content per square foot we can deliver to an opportunity, which makes us the default lowest total cost of ownership. .

Some of the newer realities in our business are sustainability, labor shortages, value engineered solutions, pod construction, connected products and things like the WELL 2.0 building standard, providing safe public and private spaces to students, patients and patrons will only be a bigger differentiator moving forward.

And these have been the thrust of our strategic plan in the last several years, essentially leveraging our competitive advantage today while skating to where the puck is going. .

Here's just a simple example of leveraging innovation into a competitive advantage today and one that will absolutely be lasting going forward. PRVs, pressure relief valves. This is a market that we've sized around $120 million. These valves are integral to regulating water pressure inside a building for both potable and fire protection systems.

Depending on the size and the location of the building, we have dozens of these. Our new product in the category, really across all 6 typical sizes, is a new patented solution that's built with a venturi valve design that handles high-pressure rates while providing industry-best flow performance.

It allows for both horizontal and vertical installation options, making it quicker and easier. The shortest lay length in the industry means, to every opening in the market, we can provide a valve. Some competitors' products simply aren't ergonomic.

And the combination of a stainless steel interior and composite cartridges extend the life of the valve, and it uses 60% less material than competitive PRVs. .

And finally, it seamlessly integrates into Zurn's remote pressure monitoring system to easily monitor building water pressure.

I share this example not because I'm trying to sell you one, although we'd be happy to, but highlight how we segment, target and go after opportunities embedded in our strategic plan, and this replicates itself dozens, even hundreds of times across categories and compounds over years.

In this case, our new innovation gives us a chance to upgrade specs, change codes while opening up in a new category that will turn into meaningful organic growth for us. And this is against a competitor with an inferior design with a bunch of attributes not suited to how future buildings are going to be built. .

Next, on Page 5. When we shared the news of the Elkay transaction, we expect the people in the industry to be excited. The feedback from the marketplace and our customers has exceeded all of our expectations, and the unique nature of the transaction and true partnership has created a great dynamic and foundation for all of the integration planning.

While we continue to operate and make decisions as independent companies, we found plenty of opportunity to introduce our teams, hold joint meetings and do some planning sessions. .

Just this week, we're doing all of the diagnostic work for our 8020 implementation with a broad team of both Zurn and Elkay associates while also holding our initial Zurn Business System leadership training session.

Ten weeks post the announcement and about ten weeks until we close, the resounding view is that the strategic logic is probably even more sound than we thought when we announced it. The sociology between the 2 organizations has been really, really good.

And finally, our confidence in delivering the financial synergies is exactly where we had hoped it to be. .

Just one more thing for me on Page 6 before I turn it over to Mark. With having published our sustainability report a few weeks ago, hopefully, many of you had a chance to check it out. We've made ESG leadership a priority, and that's only enhanced with Elkay, the clear leader in drinking water for public and private spaces in North America.

What's also gratifying is all the progress around ESG is manifesting itself in some recognition. And while we're not big on talking about it or advertising it, it's great to see.

And we're actually seeing some strategic advantage from our ESG leadership, attracting and retaining talent, being sought after as a thought leader on sustainable buildings are all things that help reinforce that by integrating ESG into our strategic priorities. It's helping us grow and building on to the competitive advantage we've already built. .

So with that, I'll turn it over to Mark to walk you through some additional details on our performance and provide some color on our Q2 outlook. .

Great. Thanks, Todd. Please turn to Slide #7. So on a year-over-year basis, our first quarter sales increased 17% to $240 million.

The November 2021 Wade Drains acquisition accounted for 2% of the year-over-year growth and the core business drove 15% of growth, with solid core sales across our water safety and control, hygienic and environmental and flow control product categories. .

With respect to profitability, our adjusted EBITDA, excluding corporate costs, $59 million in the quarter, and our adjusted EBITDA margin was at the high end of our expectations at 24.5% and improved 50 basis points sequentially from our fourth quarter of 2021, as the incremental margin on the sequential sales growth was just over 40%.

On a year-over-year basis, the benefits of the sales growth, inclusive of price realization and our productivity actions was partially offset by the increase in material and transportation costs as well as our investments in our growth and supply chain initiatives. .

With respect to our corporate costs, we communicated over the past several quarters that with our transition to a stand-alone Zurn business, we're anticipating annual corporate expenses to be approximately $20 million in terms of adjusted EBITDA on an annual run rate and $22 million in calendar year 2022.

With the February announcement of the merger with Elkay, which we expect to close in the early part of the third quarter of 2022, as Todd mentioned earlier, we now anticipate our corporate-related expenses to be approximately $27 million in calendar year 2022. .

Please turn to Slide 8, and I'll touch on some balance sheet and leverage highlights. With respect to our net debt leverage, we ended the quarter in line with our expectations at 2.1x. Pro forma for the adjusted annual corporate expense run rate, I just discussed.

Over the balance of the year, our net debt leverage will decline as our free cash flow generation accelerates and our adjusted trailing 12-month EBITDA continues to increase. .

Please turn to Slide 9. I'll make a few comments on our outlook for the second quarter of 2022. For the second quarter of 2022, we are projecting total sales to increase year-over-year by a low to mid-teens percentage.

We expect our adjusted EBITDA margin, excluding corporate costs, to be between 24.5% and 25% in the quarter, and anticipate corporate costs in terms of adjusted EBITDA to be approximately $7 million in the quarter. .

Looking at fiscal year 2022, as we mentioned earlier and anticipating the transaction with Elkay closing in the early part of the third quarter, we'll be reporting combined results in the second half of 2022. We'll provide an outlook for the balance of the year in early August.

That said, we remain confident in delivering solid double-digit reported in core growth in 2022, with sequential improvement in the adjusted EBITDA margin in the second half of the year versus the first half of the year, and strong free cash flow over the balance of this fiscal year. .

Before we open the call up for questions, a few comments on our interest expense, stock comp expense, depreciation and amortization, tax rate and diluted shares outstanding for the June quarter.

[ We expect ] interest expense to be approximately $5 million, our noncash stock comp expense should be about $4 million in the quarter, depreciation and amortization will come in around $5 million, our tax rate on an adjusted pretax earnings will be between 26.5% and 27.5% in the quarter and diluted shares outstanding will be approximately $129 million in the quarter.

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With that, we'll open the call up for questions. .

[Operator Instructions] And our first question will come from Jeff Hammond with KeyBanc Capital. .

Just on -- I guess, one on just supply chain. I think you said maybe a little bit better.

But what's getting better, what's getting worse? What kind of informs kind of the margin change 1Q to 2Q and the confidence that margins tick up in the back half?.

Yes, I'll take the supply chain piece and Mark can take you through the margin progression. But I would say, in general, we felt like September, October last year was sort of the peak of the logistics knot and it's gotten a little bit better each quarter, every month from there.

On the materials side, we've been, I think, pretty forward-leaning on what our expected demand was. So obviously, by getting our supply chain ramped up to deliver at higher volumes towards the end of last year, that certainly helped us deliver and avoid maybe some of those more recent spot challenges. .

But look, as I said in my comments, there are a million and one things that are happening. And certainly, one of those -- or 2 of those are going along each and every day. It's really how do you think ahead, how do you plan accordingly and try to stay in front of it.

But I wouldn't really point to anything specific other than it's certainly an interesting dynamic that we're all living through. But in our case, doing a lot of forward planning, diversifying our supply base and -- has really been a good move that our teams really looked at towards the end of last year.

And we made some calls and it sort of helped us here as we enter the busy part of our year. .

Yes. On the margin question, Jeff, I think it's very similar to what we've talked about last quarter. It kind of falls in the 3 main buckets. As the year is progressing, clearly Q2 versus Q1, we have incremental sales volume as we hit the construction season. So just getting the leverage you'd expect on that incremental sales growth.

And when you look at the second half of the year versus the first half of the year, sequentially, H1, H2, we're going to see a larger step up in sales dollars in the back half versus the first half than what we would have seen, say, last year, for example, just given the demand backdrop that Todd highlighted..

And the other piece of the puzzle is just price realization. So as you know, we've been putting price in place. We just had another recent increase that's been announced.

So that kind of goes over the course of the year and we get more realization in the back half versus the first half, that sort of price and inflation cost equation improves and benefits the margin as the year progresses. I'd say the last thing then is just overall our [ cost of productivity ] initiatives.

And Todd mentioned earlier, the issue around forward planning and getting more inventory in place sooner rather than later. .

One thing we were fighting for a while is as the demand is ramping up, for example, an EMEA customer may need a certain valve and we only have it in a warehouse in the East Coast and the customer's in the West Coast, you're not efficient in your shipping.

So we've improved our SIOP process and just got a little more aggressive on the demand environment that we're seeing and bringing more inventory in, that's improving our availability regionally, which is allowing us to be more efficient and reduce our overall cost as we're moving products around North America.

So it really falls into those -- I'd say those 3 big buckets are the things that are benefiting margin this quarter and then more so in the back half. .

Okay. Great color there, guys. You mentioned, Todd, the education market kind of not seen an MRO cycle for a couple of years.

Can you just talk about, one, that opportunity? And two, if any of those COVID kind of dollars that went to the schools would be flowing around safety, hygienics?.

Yes. With the onset of the pandemic, you lost '20, there wasn't a lot happening in '21. And schools started to ramp up this year, and so there's a lot of routine maintenance and upgrades that goes on over the summer when kids aren't there. So we're sort of 2 years behind some of that maintenance.

There's obviously a continued retrofit opportunity towards a more hygienic solution in the restroom and other parts of the school. And certainly, the ESSER funding that's now flowing to the states, and ultimately, the school districts, they have a wide swathe of what they can do with it. And certainly, hygienic and environmental is part of that..

And so it's really a school district by school district and really targeting those top 4,000 school districts, driving awareness, being there and helping them create a safer environment for their students. So it's -- everyone wants to talk about how much it is and where it is, it really is a school-by-school decision.

And some schools have greater needs in the areas of technology or things like that, but we're getting our fair share. But I think it's certainly a positive market backdrop as it relates to schools. .

Our next question will come from Bryan Blair with Oppenheimer. .

You sound quite confident in the double-digit core growth outlook for the year, I guess incrementally so, and you have posted 1 solid quarter on that front, so there's clear momentum.

Todd, last quarter, you had framed kind of low to mid-single-digit underlying market growth, 2 points or so of outgrowth and then low to mid-single -- seemingly leaning toward mid-single-digit price contribution.

How should we think of those buckets at this point?.

I think as Mark highlighted, I think with the pricing actions that we've taken, there's probably incremental price from where we were a quarter ago, so call it 7, plus or minus. I think the market may be incrementally better by 1 point or so.

And so you take that as a whole, I think we've gotten, I think, even more confident in the double-digit growth that we'll see. We had -- I think, as I highlighted, we had terrific orders. When you think about the next 6 to 7 months, that's the peak of the construction season in North America.

And so we saw very strong orders across all categories above our growth rates. .

And so we think we're pretty well positioned heading into Q2 and Q3 to drive really strong growth. Our supply chain is sort of set to deliver against that.

And I think we'll have, I think, as Mark said, if we deliver our guidance, which we fully expect to do, we'll have 6 months in the jar at meaningfully above 10%, and that was just a function of what can it be as we look at the second half. .

That's great to hear. And on the margin front, we have your Q2 guide. Incrementals are implied to step down a bit versus the Q1 level. I guess on a sequential basis, the math is a little cleaner in that regard if we look strictly at Q2 versus Q1 in terms of the step-up.

But nonetheless, looking to the back half, given the moving parts that you've walked through, should we expect third quarter margin, core margin that is, to be flat to up year-on-year? Or has the progression, just given the headwinds that everyone is facing, been pushed back a bit more in that sense?.

The margin year-over-year, I mean our models all along have always had the margins still stepping down a bit in the third quarter, but that gap compressing quite a bit. So as you can appreciate, through the first, call it, 2 to 3 quarters, so that price inflation cost equation is the toughest for us. It gets better as the year progresses.

But then as you get into the latter part of the third quarter, clearly into the fourth quarter, just the comps just got easier. .

The other thing, too, is we've talked about -- we've had some investment that we had started, call it, midweek of the third quarter, clearly into the fourth quarter, around some of the growth initiatives we've been driving as well as some of things we're doing on the supply chain and working more aggressively on [ near strong ] supply chain than we have in the past.

And we lap against that, so you get an easier comp from that standpoint, too. So it's really a function of those 2 things just as the year progresses, the comps are just getting a bit easier right at the end of the day. .

So it's one of the years where just given the -- how things have changed, that sequential look is really important because some of the year-over-year stuff just gets a little bit noisy with what's -- just how the world has transpired over the past 6 to 9 months. .

Okay. Completely understood. And then a higher level one. Zurn has navigated a lot of market turbulence over the last 10 to 15 years, and you've had pretty consistent performance.

If we see fears of 2023 recession come to pass, how should we think about the puts and takes of combined the Zurn-Elkay resilience relative to your core operation?.

Well, you're correct in your, I guess, history of our ability to navigate through. And look, I don't want to answer a hypothetical question around '23, other than with the combination with Elkay, over half of our business or nearly half of our business will be MRO retrofit replaced.

If you look at the model that we have around a design, procure, assemble, test supply chain, we've got a very flexible model there. So we won't absorb fixed cost should things slow. The vast majority of our selling effort is third-party reps, which is also all variable. .

So I think our business model and the resilience of that has only improved really over the last several years with more MRO if you're worried about new construction. The variable model on the supply chain and the variable model of the selling, I think, really position us well.

And the reality is we're going to be in great shape because, right now, the pro forma balance sheet will have essentially no debt. And so we feel like we've navigated and iterated our business model to be ready for an environment that is maybe not robust. .

That being said, when you look at where things are in terms of their progression through a business cycle, nonres construction is sort of like at the starting line right now. So I think we've got what we've talked about as a very good '22. We think '23 can still be very good with the amount of activity that's happening around the country.

But should we find ourselves in a maybe a less-favorable environment, I think we're fully ready and willing to go through that, and we'll perform extraordinarily well. .

Yes. I appreciate that. And then for what it's worth, we agree on the U.S. nonres outlook. .

Yes. .

[Operator Instructions] And our next question will come from Joe Ritchie with Goldman Sachs. .

Just a comment on the margins. So yes, I think we're modeling it the same way, down year-over-year through 3Q.

I'm just curious, are you guys still looking to hold margins ex corporate flattish year-over-year? Or has some of the kind of the inflationary pressures, that going to have some type of like impact, at least at a margin rate level for the year?.

Yes. So look, I think we've said going into this year that our goal was to try to hold margins generally in line with the prior year. That means exactly -- what did we do last year, 25.8%? Could be. Could it be 25.5%? Could be. I think that it's generally in that category.

We're not looking at the scenario where we think margins are going to fall off to 24%, 24.5%, right? All the things that we have line of sight to and the actions that we're taking, I don't think that it keeps us in that ballpark where we're going to be generally close to where we were last year from an overall segment margin standpoint within Zurn.

Obviously, when you bring the Elkay business in, we know that brings a lower margin profile, so that will muddy the waters. But talking just about Zurn, that's what we've been working towards all year. .

I mean, the bias obviously through -- let's just say, through April is the double-digit growth will creep past the 10%. And as that migrates up, we've got, I think, a better chance of getting to where those margins are. And I think Mark talked through the comparable issue relative to the prior year.

And once we lap that by Q3, I don't think there's any question that the momentum in Q4 and into '23 with a combined Zurn-Elkay, and then on top of that the synergy realization in year 1, puts us in a great place. .

So I mean, growing at the rates we're growing at the margins we're growing in that, despite some of the comparable headwinds, I think by the time we get to September, October with what's in front of us with Elkay, I think it's going to be a great dynamic and a powerful earnings story. .

Yes, that makes sense. And since we're talking about Elkay, I appreciate you guys snapping the line at the end of the quarter, makes things easier for us as well. I'm curious, as you kind of think about the synergies, I think you guys called out $50 million.

Can you start to realize some of those synergies? Or do you expect to realize some of those synergies in this calendar year if, in fact, you do close by the end of 2Q?.

Yes. Look, I think that there may be some, but probably offset with some investment. So consistent with what we said 10 weeks ago, the synergies that we're going to sort of sign up for really begin in '23. Will there be some? Of course, but I wouldn't pencil it as anything meaningful.

We're going to going to close, we're going to go through a strategic plan. We're going to get the org rolling and aligned around a long-term strategic plan. We're going to make some investment in certain areas. Will we get after some of the low-hanging fruit early? You bet. But I think very much consistent with what we said about '23.

'23 is the year to start thinking about occurring those to the bottom line. .

Okay. Got it. That makes sense as well. And one last one for you guys. Just clearly, like the China situation is evolving, shutdowns are continuing.

Can you just give us an update on any supply chain issues, particularly out of China, that you're seeing with any of your suppliers?.

Well, Joe, how much time do you have? I mean the reality is... .

I'll take as much color as you give me. .

We have a global supply chain with hundreds of critical suppliers. I think we've prioritized the ones that are in zones where you're seeing things like shutdowns and things of the like. And we've got plans in place to move supply where necessary. We've got some in transit. We've got some consigned here.

And so it really is a pretty complex view that, at any given day, there's something that is new news and different than maybe what we thought. So you've got a plan around a variety of contingencies. I think our teams have done a terrific job with that. .

I don't know that it's going to go away anytime soon. So we've just got to keep thinking ahead, managing forward. And are there things that didn't go our way in the quarter? You bet. There were small components that, had they arrived, shipments could have been greater. They did, but we still delivered a really strong quarter.

We've got a great backlog heading into what's a very busy season for us. But we've got to stay in front of them. And I think that's just the reality of the world right now. But there's nothing that I can point to that is sort of below the water line issue from what we can see. .

And our final question will come from Brett Linzey with Mizuho. .

So it sounds like a very solid demand pulse across most of your markets.

I was hoping you could maybe put a finer point on the magnitude of the order increase or book-to-bill or some measure to help frame the momentum here?.

Yes. We try to generally stay away from backlog, but if you think about a 15% core number, it was 4, 5, 6 points of that from an order rate perspective year-over-year. .

With a book-to-bill above 1. .

Yes. .

Yes, clearly. .

Okay. Great. And then maybe just a finer point on the individual verticals, be it health care, K-12 universities, where you're seeing that strength? Or is it broad-based? Any color would be great. .

It's broad-based. Obviously, health care and education, our 2 single largest verticals, we're seeing really good activity there. I think hospitality is improving. Things like municipal buildings, stadiums are all positive. But I think the encouraging part for us was that it was really broad-based across a lot of categories and verticals.

So nothing outsized. It wasn't like a unique onetime thing. It's really just -- I think the water level is just fundamentally higher across a lot of different things. .

And I think we're winning more. I think the integrated solution around BrightShield has gotten great traction. We saw significant growth there this quarter in myogenic environmental.

And so the gestation period of that really coming to market, us getting out and working with building owners, engineers, architects to introduce the solution we're winning. And we're winning in upgrades and retrofit opportunities, which is great news, too.

So it's broad-based and then, I guess that sort of gave you the magnitude relative to the sales growth. .

Yes. No, I appreciate you framing that. And then maybe just sticking with BrightShield, obviously, the virus is episodic and we're going to be living with it.

But are the COVID cases is really a gating factor that drives customer urgency on the hygienic retrofit opportunities? Or do you think that customer conversations are pointing to sustainability here and really the focus on safer, cleaner washrooms is here to stay?.

I think it depends on the person. I don't think COVID cases at a discrete way is driving a decision-making. I think it's around sustainability. I think we've, I think, come to acknowledge that handwashing and keeping yourself clean is a great way to avoid spreading the virus.

And so I think those 2 are sort of universally true, and I don't think the case count is really driving any of the decision-making, at least from my vantage point. .

There is more general awareness around hygiene in general. Yes. .

Yes. No, makes sense. And then maybe just one follow-up because I am the last one. On the Q2 supply chain situation, obviously, very complex. I know you've taken various mitigating actions, some near-shoring and so on.

But is there more to do there as you try to wean some of the overreliance on particular regions where your supply is coming from? And then I'm just curious in terms of Q2 revenue visibility, how many containers have landed that give you comfort that the framework you put in place is achievable here even given the supply chain issues?.

Well, I would maybe suggest that the overreliance piece is sort of behind us. I think we've got a geographically dispersed supply chain. I think we're going to continue to work to minimize risk where we believe we still may have some. So that's going to be an ongoing process for us. I think we've got good plans.

And I think there'll be a lot of activity really in the second half of our year and the first half of next year to continue to do that in maybe a more scaled way. But I wouldn't say we're over-reliant upon a particular region or supplier at this point. .

And then in terms of -- what was the other question you had?.

Overreliance and then, yes, how many -- visibility on Q2 revenue. .

Over the last month... .

Yes. I mean, we import hundreds of containers. And so at this point, everything that we see looks like it's going to arrive on time based on our SIOP when we wanted it, when we ordered it, when it's picked up. We're tracking all this sort of at a supplier-by-supplier, container-by-container level. And so a month in, we don't have any issues.

And I'm not going to project issues. I think our guidance embeds the fact that there will be issues. And so if we outperform that, well, that's great.

If we miss a container or 2, I wouldn't suspect us coming back to you and talking about it, right?.

So it's just a rolling series of a dance that has to happen. And so far, it's gone, I would say, extraordinarily well given the complexity and some of the challenges in the world. And it's a testament to, I think, our team and digging in and doing the work and really getting ahead of it several years ago.

But more -- in a more acute way really towards the middle part, end part of last year, looking ahead into '22 and '23 and making some decisions, and communicating and procuring the right material, the subcomponents and getting in the queue early. And now it's just a function of delivering against that demand. .

No, that's great.

And then just last one, any expected change in the adjusted tax rate once Elkay closes?.

Elkay is generally, as you can appreciate, a North American company. So I don't think it changes materially from where we sit today from an overall North American tax rate on an [ adjusted ] basis. You can use what we have kind of guided to for the full year to model out inclusive Elkay, I think you'll be fine. .

And that will conclude today's question-and-answer session. I would now like to turn the call back over to Dave Pauli for any additional or closing remarks. .

Thanks, everyone, for joining us on the call today. We appreciate your interest in Zurn Water Solutions, and we look forward to providing our next update when we announce our June quarter results in August. Have a good day, everyone. .

And that will conclude today's conference. Thank you for your participation, and you may now disconnect..