Watts Water Technologies - Q1 2017

Transcript

Operator (participant)

Good morning. My name is Scott, and I will be your conference operator today. At this time, I would like to welcome everyone to the Watts Water Technologies, Inc. First Quarter 2017 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Tim MacPhee, Treasurer and VP Investor Relations, you may begin your conference.

Tim MacPhee (Treasurer and VP of Investor Relations)

Thank you, and good morning, everyone. Welcome to our first quarter 2017 earnings conference call. Joining me today are Bob Pagano, CEO and President, and Todd Trapp, our CFO. Bob and Todd will provide their perspective and analysis of Watts' first quarter 2017 results. Bob will offer some color on the markets, update you on our key initiatives, and on our latest acquisition, PVI. Todd will also update you on our full-year outlook. Following our prepared remarks, we will address questions related to the information covered during the call. Today's webcast is accompanied by a presentation which can be found in the investor relations section of our website. We will reference these slides throughout our prepared remarks.

For purposes of today's call, all references to key performance metrics will be on an adjusted basis, unless otherwise indicated, and non-GAAP financial information and metrics have been reconciled and are included in the appendix section of the presentation. Before we begin, I'd like to remind everyone that in the course of this call, to give you a better understanding of our operations, we will be making certain forward-looking statements. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from such statements. For information concerning these risks and uncertainties, see Watts Water's publicly available filings with the SEC. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Now, let me turn the call over to Bob Pagano.

Bob Pagano (CEO and President)

Thanks, Tim, and good morning, everyone. Please turn to slide three, and let me briefly provide a rundown of the first quarter. Watts delivered another quarter of solid operating margin expansion and EPS growth, despite a muted top line. Overall, the first quarter was in line with our expectations and what we communicated during our last call in February. Sales, excluding product rationalization, were essentially flat, a continuation of what we experienced in the second half of 2016. Top-line growth in Europe was more than offset by softness in the Americas, mainly attributable to AERCO. Despite the top-line pressures, we were able to expand adjusted operating margins by 30 basis points to 11.1%, a first quarter record for the company. We delivered adjusted EPS of $0.65, a 14% increase over last year, another Q1 record.

We are executing on our strategy to transform the portfolio, restructure operations, and drive cost and pricing discipline, and these efforts are reflected in our financial performance. Todd will review the quarter's results in more detail in a few minutes. Overall, the end markets are performing in line with our expectations. In the Americas, much of the construction data remains lumpy, but we still expect both the non-resi and resi markets to grow moderately for the year. Europe continues to show signs of stabilization. Recent elections have quelled some anxieties, with the final French election still to come. Asia-Pacific markets are growing, but at more modest levels. Our key initiatives are also progressing as planned. The Americas transformation program continued to deliver results. Our efforts regarding phase II are substantially complete.

In total, we will exit 5 manufacturing sites in addition to 2 distribution centers, and we expect to achieve our goal of reducing our footprint by approximately 30%. Final project costs and expected full-year run rate savings for phase II are in line with our previous discussions. Our significant restructuring actions in Europe, primarily in France, are complete, and we're beginning to see the expected savings in our P&L from this action. We also continued what I call seed planning, or investing in new product development, geographic expansion, solution selling, and key account management to drive future organic growth. We are making inroads in new territories with recent wins in Mexico and expanding our BLÜCHER drain solutions into the growing U.S. craft breweries market. In Q1, we created a leadership position reporting directly to me for key strategic account management.

This will ensure we introduce our entire portfolio of products to strategic customers with a goal to make it easier to do business with Watts. We're beginning to drive more solutions for commercial customers, including bundling our Watts, AERCO, and PVI products for boiler room applications. Lastly, the PVI acquisition is performing well and in line with our expectations. PVI drove solid growth during the quarter, and we're starting to realize the anticipated cost synergies, although we are still early in the execution phase. Overall, a solid start to the year, in line with our forecasted expectations. Now, I'll turn the call over to Todd to talk about our first quarter operating results in more detail. Todd?

Todd Trapp (CFO)

Thanks, Bob, and good morning, everyone. I am now on slide four, which shows the first quarter results. Sales of $347 million were up 1% on a reported basis. This increase was mostly driven by the PVI acquisition, which delivered about $14 million in sales in the quarter. Organically, we were down 1%, but as Bob mentioned, flat, excluding product rationalization.

... Recall that we expected about $20 million for the full year in DIY erosion and other product rationalization, and we had about $5 million of that impact in the quarter. Also, foreign exchange, primarily driven by the weaker euro, lowered sales by roughly $4 million, or 1%. Adjusted operating profit increased 3% to $38 million. This translated into an adjusted operating margin of 11.1%, up 30 basis points versus Q1 of last year. In terms of operating margin, the 11.1% represents a first quarter record for Watts. Strong productivity, including savings from restructuring, was the main driver of the record Q1 margin. Adjusted EPS of $0.65 was 14% better than last year, another Q1 record for the company. The increase was driven by operational improvements, lower interest expense, and a favorable tax rate compared to last year.

The effective tax rate of 33.4% is basically in line with our full year outlook and is about 400 basis points lower than Q1 last year, primarily related to a reserve that we booked in 2016 associated with a tax audit. So overall, just as we signaled back in February, Q1 played out like we thought. We delivered strong operating margin expansion and EPS growth despite a sluggish top line. Before discussing the regions, I want to mention a minor change to our segment reporting. Recall that last year, we reorganized operational responsibilities between Munish Nanda and Elie Melhem. Munish took over Europe, while Elie assumed responsibility for the Middle East and Africa. Beginning this year, we aligned our management and financial reporting to reflect this change.

In the 8-K filed last week, we restated 2016 quarterly information for comparison purposes. That 8-K is also included in the appendix of this presentation. This change does not affect the Americas segment, and the financials included in this presentation have been restated accordingly. Now, turning to the regions on slide five, let's review the Americas results for the quarter. Sales approximated $229 million, up 3% on a reported basis, driven by the PVI acquisition. Organically, sales were down 2%. Solid performance from our core plumbing products, like drains, backflows, and valves, were more than offset by headwinds in our AERCO product line and, to a lesser extent, the anticipated retail sales erosion we've discussed during previous calls. AERCO sales were down due to softness in the overall condensing boiler market, continued product delays, and competitive pricing pressures.

As discussed last quarter, we have seen some very aggressive pricing actions in the marketplace. At the same time, we have remained disciplined with our commercial strategy, foregoing short-term gains for longer-term profitable growth. We are also very excited about our new Platinum boiler line, which was launched in the first quarter. We believe that this innovative new product will give us a competitive advantage that will allow us to differentiate ourselves in the marketplace. Early indications from our customers on the Platinum are positive. We expect sales of Platinum to pick up in the second half of 2017 as the new product gets specified into commercial buildings. PVI delivered $14 million of sales in the quarter, which represents mid-single-digit growth over Q1 of 2016. So a good start to the year for PVI.

We are very excited to have PVI in our portfolio, and the integration with AERCO is on track. Adjusted operating profit was roughly $34 million. This translates into an adjusted operating rate of 14.7%. The year-over-year margin performance was driven by strong productivity and transformation savings, which basically offset a volume decline in AERCO, lower operating margin at PVI, and continued growth investments. It should be noted that PVI negatively impacted Americas' margins by roughly 50 basis points versus prior year, which is in line with our expectations. So overall, a mixed start for the Americas, with growth in core plumbing products being muted by AERCO headwinds. Now on to slide six. Let's review Europe's results. Sales of $105 million were down 3% on a reported basis and up 1% organically. Excluding product rationalization, organic sales were up 2%.

Foreign exchange negatively impacted sales by about $5 million, or 4%. From a platform perspective, we saw strong growth in drains, offset partially by a reduction in fluid solutions. Drains had some nice project wins in Mexico and in Germany, along with strong growth in the Nordic region. Within fluid solutions, our electronics product line was up double digits, which was more than offset by softer HVAC sales and known headwinds associated with product rationalization. We saw low to mid-single-digit growth in some of our key countries and regions, such as Germany and Scandinavia. By contrast, we saw weakness in France in both the residential and commercial markets due to political uncertainty with the ongoing election, as well as continued softness in the UK. Adjusted operating profit for the quarter was $12.6 million, an increase of 24%.

Operating margin of 12% increased 260 basis points as compared to Q1 last year. The strong margin expansion was driven by higher volume, favorable product mix, productivity, and restructuring savings. So all in all, a good start to the year for Europe. Moving to slide seven, let's review Asia Pacific's results. In the quarter, sales were approximately $14 million, flat on a reported basis, and down 10% organically over the same period last year. Excluding product rationalization, organic sales were up 6%. With the addition of the Middle East into the Asia Pacific reporting segment, sales outside of China now represent over 65% of the total regional sales. Organically, sales outside of China were fairly flat due to some tough comps and timing of projects in the Middle East.

China sales, excluding product rationalization, were up 23%, driven by continued strong demand for our underfloor heating products. We continue to expand our presence in this market as the growing middle class in China demands more comfort in their living arrangements. Adjusted operating profit was $1 million, which translated into an adjusted operating margin of 7.4%. The key drivers of the margin decline were a 22% reduction in affiliate sales in support of the 2016 Americas transformation, negative product mix, and some growth investments. So as expected, a little bit of a slow start to the year for Asia Pacific. I would categorize it more timing than anything else, as we expect growth to accelerate in the out quarters. On slide eight, a couple of comments I'd like to make on cash flow.

As you know, historically, Q1 is a slow period for us. Our free cash outflow for the quarter was $15 million, as compared to a $31 million outflow last year. The year-over-year improvement was driven by higher net income, less inventory build, and lower capital spending. As you recall, in 2016, we increased inventory to support the opening of our new distribution center in Columbus, and to establish buffer inventory for other Americas Phase II transformation activities. This quarter, we spent less in capital versus prior year. However, we believe this is just timing, and we still feel like the full year range of $36 million-$40 million is intact. We purchased approximately 69,000 shares of our common stock at a cost of $4.4 million.

Overall, we returned $11 million to shareholders in the form of dividends and share repurchases as part of our continued balanced capital deployment strategy. While the first quarter is seasonally slow, we fully expect our cash generation will improve as the year progresses and are focused on achieving 100% cash conversion for the year. Before I turn it over to Bob, just a quick update on our full year outlook. Slide nine provides the details, and I will highlight a few points. Generally, not much has changed since our February call. At the consolidated level, we continue to expect full-year organic sales growth in the low single digits, with sales by region falling in line with our previous guidance. We expect operating margins should grow by roughly 60 basis points, despite the incremental investment to support future growth initiatives.

Currently, we expect to invest between $1.5 million-$2 million per quarter for the remainder of 2017. Lastly, as I just mentioned, we anticipate free cash flow converting at or above 100% of net income. So with that, let me turn the call back over to Bob before we, we begin Q&A. Bob?

Bob Pagano (CEO and President)

Thanks, Todd. Let me summarize our discussion before we address your questions. The year started out in line with our expectations. Despite a muted top line, we delivered Q1 record adjusted operating margins and EPS. We continued to drive our various rationalization and transformation programs, as well as continued seed planning for future organic growth. We expect to make continued progress as the year unfolds and look forward to another solid year of profitable growth. So with that, operator, please open the line for questions.

Operator (participant)

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Your first question comes from the line of Ryan Connors with Boenning & Scattergood. Your line is open.

Great, thanks. Thanks for taking my question. I wanted to get your perspective on the pricing environment, Bob, and why it's not better. You know, it seems like we've, you know, raw materials are up. There's been some consolidation, both by yourselves and others. So, you know, supply or capacity seems to be maybe down. You know, demand environment's not great, but it's certainly, you know, workable. I mean, why do you think it is that price increases are having a hard time, harder time going through?

Bob Pagano (CEO and President)

I really think, Ryan, if you look at it, what's happening is in the commercial market, I think the projects have been a little more lumpier. And I think when, you know, projects get lumpier, people are playing the price game. So I think that's a big piece of it. When we look at, you know, passing through, we announced our price increase at the beginning of March. It's too early to tell, but all signs right now are looking like we're gonna be able to pass that along into the channel. So we feel good about our prospects of getting that. I think the competitive pricing level is really in, you know, in the AERCO environment, which is really, we've seen larger commercial projects just being pushed out. And, you know, I think that's where some of the pricing gets full.

People wanna, you know, fill their factories at any cost, and, you know, we're just gonna be disciplined in that area.

Ryan Connors (Managing Director and Director of Research or Senior Research Analyst of Water & Environmental)

... Okay. And then as it relates to AERCO, you know, you talked a lot about the kind of tepid, you know, demand environment there, but what's your sense of how long that lasts? I know you mentioned, Todd mentioned an expectation of some return to growth on a consolidated basis in maybe the second half. But, speaking about AERCO specifically, can you give us some more detailed flavor on where you see that heading nearer term?

Bob Pagano (CEO and President)

Yeah. So, you know, when we look at the condensing boiler market, you know, our data shows that it was down 6% in the first quarter. So as we look at that, our project pipeline, what we're quoting on and what we're seeing in the marketplace is, you know, a continuation of growth really in the second half. So the projects are going on, and they're being quoted, and architects, everybody's really busy at this point in time. They just haven't released all these projects. So, you know, people are scrambling to get those. But we feel good about the prospects. You know, I was just out in the field with the AERCO team, and again, and the reps, and they feel good about the second half of the year because these projects are starting to move forward.

As you know, we have a real tough comp in Q2 with AERCO. We were up double digits last year in the quarter, so we believe, you know, we're gonna have another tough quarter with AERCO in the second quarter, and then it's gonna return in the second half of the year.

Ryan Connors (Managing Director and Director of Research or Senior Research Analyst of Water & Environmental)

Got it. Okay, that's helpful. Then one last one for me. Just to revisit this issue, which we've, you know, touched on a couple times in the last couple of calls about kind of the impact of the product realignment on your distribution, you know, distributor re-channel relationships and so forth. I mean, anything to report, any kind of update there on, you know, whether that's impacted anything, whether it be channel inventories or, you know, line cards being moved around? Anything you can give us on that?

Bob Pagano (CEO and President)

No, we haven't seen any more movement from that. You know, when we exited the undifferentiated product, some of our DIY channels was a little upset maybe with us and reacted in the fourth quarter. Since then, we've not seen, you know, any further actions, but as you know, that's not our most profitable part of the market anyway. So again, I think inventory levels are in line. We don't see any issues with inventory in the channels.

Ryan Connors (Managing Director and Director of Research or Senior Research Analyst of Water & Environmental)

Got it. Well, super. Thanks for your time this morning.

Bob Pagano (CEO and President)

Thank you.

Todd Trapp (CFO)

Thanks.

Operator (participant)

Your next question comes from the line of Brian Lee with Goldman Sachs. Your line is open.

Brian Lee (Chief Risk Officer)

Hey, guys. Thanks for taking the questions. Had two of them. Hey, morning. The first one, you know, to follow up on Ryan's question, just on AERCO, the pricing and competitive issue, it sounds like there's some irrational players in the market as you talk to. But, can you give us some sense, is there anything that whether it's historical precedent or other signposts that give you the general confidence that this is temporary? And then to any degree, if you can quantify how many more quarters you think you may see this play out for? And then I have a follow-up.

Bob Pagano (CEO and President)

Yeah. So, a little bit about the market. We believe the condensing boiler market is, and it has been, very positive. People are moving to higher efficiency condensing boilers. So overall, we think it's, you know, it's—this is a temporary glitch in the market. We saw it in the fourth quarter, the third and fourth quarter. We believe we're gonna see the same thing in the first and second quarter, primarily just because some of these projects are being pushed out, where in the first half of last year, we saw more robust activity. The political uncertainty slowed everybody down, slowed these projects down. And, you know, but overall, we believe the trend towards more high efficient boilers is gonna happen. And, you know, we think it's gonna—we believe it's gonna happen in the second half of the year at the turning point.

Brian Lee (Chief Risk Officer)

Okay, great. Thanks. And then, you know, Bob, you alluded to some of the political uncertainty in your prepared comments. I know you guys talked about that in the February call when you outlined guidance for the year, and the guidance is unchanged. But directionally, would you say that the trends you're seeing in Europe, you know, either more cautious or maybe more optimistic versus your original view from February with the ebbs and flows that we're seeing real time in the political environment out there?

Bob Pagano (CEO and President)

We're feeling a little bit better. I think Sunday's elections will really tell us what's going on. I think everybody's waiting and seeing what that is. Hopefully, there's no surprises there. But, you know, we're cautiously optimistic. I mean, we had a good first quarter that was driven by, you know, double-digit gains in our drain business, which drove the operating margins favorable. But, you know, the general environment, as Todd talked about in France, is still a lot of uncertainty, so not a lot of construction spending is going into France at this point. So hopefully, with that behind us, on Sunday, we can move forward with that. But again, I think everybody is in a kind of wait and see mode, and then if that starts ramping up, it'll take a while.

So we're staying with our, you know, full year flat forecast for Europe only because, you know, the drains business was very. You know, that's a lumpy business. It was strong in the first quarter, and we can't count on that every single quarter. So we're gonna be cautious, and then, let's hope that the elections, you know, the uncertainty goes away and it, it becomes more positive for the rest of the year.

Brian Lee (Chief Risk Officer)

Okay, fair enough. Last one from me, and I'll pass it on. The, again, when you guys provided the 2017 outlook, you gave us some directional feel for how Q1 was gonna shake out. You know, given some of the subtle resegmentation here in Asia Pac and EMEA, any directional feel you can provide for what we should be thinking about Q2 trends across the different segments? Thanks, guys.

Todd Trapp (CFO)

... Sure. So Brian, this is Todd. You know, from a top-line perspective, we expect Q2 to be marginally better than Q1, you know, flattish versus down on a top-line perspective. I think a few items worth mentioning is, as Bob alluded to, Q2, we did have some tough comps. And so recall last year that we had, I think, you know, close to 4% growth in Q2. You know, product rationalization will impact Q2 by about $6 million, and I would say it's about $2 million in each of the, in each of the regions. In the Americas, we'll continue to benefit from the acquired sales of PVI, somewhere in that $14 million-$15 million range. And, you know, also, we have to continue to take account foreign exchange.

As you recall, last year, the euro rate went up to about 100, you know, 1.13%. Today, it's a little over 1.09, so could have some more headwinds in the you know, from a top-line perspective associated with foreign exchange. You know, from an operating margin perspective, we still expect to see some nice growth year-over-year, really driven by productivity and restructuring benefits, you know, which will, you know, offset some higher incremental investment spend. But we stood to see better margin expansion in Q1. And PVI's margins should negatively impact the consolidated margins by, you know, 10-20 basis points in Q2, you know, on a year-over-year basis, and probably 40 basis points at the Americas margins. So that's a little bit of color how we see Q2 playing out.

Brian Lee (Chief Risk Officer)

Okay. Super helpful. Thanks, guys.

Todd Trapp (CFO)

Thanks, Brian.

Operator (participant)

Again, to ask a question, press star, then the number one on your telephone keypad. Your next quoestion comes from the line of Jim Foung with Gabelli & Company. Your line is open.

Jim Foung (Equity Research)

Hi, good morning, guys.

Bob Pagano (CEO and President)

Hey, Jim.

Jim Foung (Equity Research)

Yes, I just wonder where you just kind of talk a little bit more about AERCO. Could you kind of size the, maybe dollar value and number of projects that were pushed out that caused revenues to be down double digits? And then, who's cutting prices at that industry?

Bob Pagano (CEO and President)

Well, Jim, you know, look, at the project activity, there's many projects, and some are larger than other, and it just depends on the various projects. But we've seen them pretty much across the board in all the territories, projects being pushed out or delayed, where we thought we were gonna ship some in Q1 and it moved out to Q2. Regarding pricing, we don't talk about competitors specifically on that, but, you know, it looks like, you know, there's both public and private companies in that space, and I think a lot of them are going after whatever share they can grab, but we're being disciplined. And, you know, we spent a lot of time over the last three years focusing our teams on profitable growth, and we're not gonna change that.

Jim Foung (Equity Research)

Okay, fair enough. And then, I know you've completed your phase II in the Americas transformation, and I know you outlined margin improvement when you started the transformation plan. You know, now that you've completed it, are you able to see if you could get more margin lift from exiting the manufacturing sites and distribution locations?

Bob Pagano (CEO and President)

Well, Jim, clearly, I think in our results, we're seeing the impact of that.

Jim Foung (Equity Research)

Right.

Bob Pagano (CEO and President)

As Todd alluded to in the first quarter, our margins in North America were muted by the PVI acquisition by 50 basis points. But when you look at overall restructuring, you know, we're on track with all our commitments. You know, as I said in my prepared remarks, you know, the France restructuring is done in Europe, so we're seeing the impact of that.

Jim Foung (Equity Research)

Mm-hmm.

Bob Pagano (CEO and President)

What's somewhat offsetting that is our investments that we're really focused on growth. So we are seeing the impact of it. The teams are aligning around that, and I think you'll continue to see that. We're now moving on to what I call the more sustaining part, which is driving lean and productivity inside of the plants that now have been consolidated. So we'll continue to do continuous improvement in each one of those areas.

Jim Foung (Equity Research)

Okay. And then when you see PVI being accretive?

Bob Pagano (CEO and President)

I think as we get into next year, I think that's the piece of it. You know, their, their margins and the integration is going very well, as we talked about, but as we move into next year, I think, that's what we're driving towards.

Jim Foung (Equity Research)

Okay, great. Okay, thank you.

Bob Pagano (CEO and President)

Thanks, Jim.

Todd Trapp (CFO)

Thanks, Jim.

Operator (participant)

There are no further questions at this time. Mr. Pagano, I will turn the call back over to you.

Bob Pagano (CEO and President)

Okay.

Operator (participant)

Excuse me, we-

Bob Pagano (CEO and President)

Thank you, everyone, for ta-

Operator (participant)

I'm sorry. We just received a question from the line of Ryan Cassil with Seaport Global. Your line is open.

Ryan Cassil (Director of Investment Banking)

Hey, thanks for squeezing me in, guys.

Bob Pagano (CEO and President)

Hey, Ryan.

Todd Trapp (CFO)

Hey, Ryan.

Ryan Cassil (Director of Investment Banking)

I wanted to just talk about the resegmentation a little bit. Wondering if you could expand on the just the rationalization a little bit there. Are Europe and the Middle East and Africa at sort of different points here in their transformation journey, or are there additional actions you're maybe thinking about, and that's why you separated these out and changed the management up? Or any color you could give there would be great. Thanks.

Bob Pagano (CEO and President)

Yeah, last year, we made the change to create the focus. And, you know, Elie and his team have experience in the Middle East. We believe, it's a growth, market for us. We believe we're under-penetrated, and, so we have a key focus in that region. So there's nothing more really to read into that. And, all we've tried to do is realign our internal reporting to our external reporting, because internally, we hold Elie and his team accountable, for both Middle East and Africa and Asia-Pacific, and he has dedicated teams in those regions. And we just didn't wanna have two separate books, one internally and one externally. We felt it was more appropriate to have them the same. So that's, that's all there is inside of that.

Ryan Cassil (Director of Investment Banking)

Got it. Okay, thanks for the color. And then, one of the things hasn't been addressed, your leverage still isn't too aggressive. Wonder if you could talk about your thoughts on M&A here. You're really focused on what you already have, or if you're still, you know, combing the M&A market and what you're seeing there broadly, would be helpful. Thanks.

Bob Pagano (CEO and President)

Sure. Well, certainly we've been internally focused. You know, we did the PVI acquisition. We're, we're moving forward and integrating that well. But, you know, we're always looking and cultivating, you know, acquisitions and potential acquisitions. And, you know, they're out there, the pipeline's full. We actively continue to look at that, but it's very difficult to say when and timing of any of those things at this point in time. So, you know, we'll continue to look for ones that make sense and that, have the appropriate returns for our shareholders. But, we're always looking, and if it makes sense, we'll take a look at it.

Ryan Cassil (Director of Investment Banking)

Okay. Still very U.S.-focused and, and more commercial product-focused? Is that fair to say, or has that changed?

Bob Pagano (CEO and President)

Yeah, I think that's a fair statement. Absolutely. That's a fair statement because we believe the margins in the commercial side are stronger than the residential side.

Ryan Cassil (Director of Investment Banking)

Makes sense. Thanks very much.

Bob Pagano (CEO and President)

Thank you.

Todd Trapp (CFO)

Thanks, Ryan.

Operator (participant)

There are no further questions at this time. Mr. Pagano, I'll turn the call back over to you.

Bob Pagano (CEO and President)

Okay. Well, thank you, everyone, for taking the time to join us today for our first quarter earnings call, and we appreciate your continued interest in Watts. We look forward to speaking to you again during our Q2 earnings call in August. Thanks again.

Operator (participant)

This concludes today's conference call. You may now disconnect.