Good day and thank you for standing by. Welcome to the A.O. Smith Corporation First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Helen Gerholt. Please go ahead, ma'am.

Good morning, everyone, and welcome to the A.O. Smith First Quarter Conference Call. I'm Helen Gerholt, Vice President, Investor Relations and Financial Planning and Analysis. Joining me today are Steve Schaefer, Chief Executive Officer, and Chuck Lauber, Chief Financial Officer. In order to provide improved transparency into our operating results of our business, we have provided non-GAAP measures. Free cash flow is defined as cash from operations plus capital expenditures. Adjusted earnings per share excludes the impact of restructuring and impairment expenses. Reconciliations from GAAP measures to non-GAAP measures are provided in the appendix at the end of this presentation and on our website. A friendly reminder that some of our comments and answers during this conference call will be forward-looking statements that are subject to risk that could cause actual results to be materially different. Those risks include matters that we described in this morning's press release among others. Also, as a courtesy to others in the question queue, please limit yourself to one question and one follow-up per turn. If you have multiple questions, please rejoin the queue. We will be using slides as we move through today's call. You can access them on our website at investor.aosmith.com. I will now turn the call over to Steve to begin our prepared remarks. Please turn to the next slide.

Thank you, Helen, and good morning, everyone. Before I discuss our first quarter results, I want to sincerely thank all AOSmith employees for their exceptional dedication and resilience during the first quarter. In particular, I would like to recognize our North American water heater team for their swift response to weather-related damage as they acted to ensure the safety of their colleagues while at the same time finding a way to recover from our production loss and continue to serve our customers well. I remain grateful for your dedication and teamwork which continue to strengthen our company and our culture. Now moving on to our first quarter 2026 financial performance please turn to slide four. North America sales increased 1% to $753 million, and rest-of-world sales decreased 11% to $201 million, resulting in total company first quarter sales of $946 million, a decrease of 2%. Our EPS was $0.85, a decrease of 11% due to lower volume and transaction-related expenses recognized in the quarter for the Leonard Valve acquisition. Despite these headwinds, diligent working capital management helps to drive strong free cash flow performance. Our China sales decreased 17% in local currency in the first quarter, which was in line with our expectations as well as broader market performance. With the discontinuation of most government stimulus programs and continued low consumer confidence, the water heater and water treatment markets remain challenged, especially the premium portion of the market where we compete. We expect this softness to pursue. We also believe that our ongoing strategic assessment has created some uncertainty in the market and has delayed certain investments, putting further pressure on our business. We continue to make progress with our assessment and are moving with urgency to provide greater clarity on the future of our customers and employees, with the goal of defining a clear path forward in the coming months. Now I would like to share some additional color on our American Water Heater sales decreased two percent year over year production and shipping constraints caused by adverse weather most notably our ashland city tennessee facility combined with softer than anticipated residential industry demand early in the year negatively impacted the quarter as we discussed on our january earnings call the wholesale residential channel continues to face challenges including a soft market in new construction and continued initiatives by retailers to expand into serving the professional despite these pressures we are encouraged by the stabilization of our market share and the wholesale channel in the first quarter while recognizing there's still work to be done with more improvement additionally we are pleased with our share performance within the retail channel and the strength of our retail partnerships our strong market leadership and balanced presence across both channels provide us with clear visibility into market trends supported by robust data analytics and deep customer relationships i'm encouraged by the positive momentum we have going into the second quarter our north america boiler sales grew two percent compared to 2025 as residential boiler volume growth and carryover pricing benefits more than offset lower commercial water treatment sales increased one percent in the first quarter 10 growth in our priority dealer channel was largely offset by softness in the specialty plumbing wholesale channel. A cautious consumer environment led to flat growth in our more consumer-facing channels, with a general trend towards a trade-down to lower-priced products. We expanded operating margin by almost 100 basis points despite the slower start to the year as we continue to work on improving the profitability of this platform. Leonard Valve contributed $16 million to sales in the first quarter of 2026, led by strong performance in the Valve's business. We exited the quarter with a strong backlog and Leonard remains on track to achieve another year of double-digit growth. I'll now turn the call over to Chuck, who will provide more details on our first quarter performance.

Thank you, Steve, and good morning everyone. Please turn to slide five. First, I'd like to highlight two items impacting the quarter. As Steve noted, we had weather-related headwinds in the quarter, including damage to a portion of our roof at our Ashland City manufacturing facility. Because of our team's swift response and our insurance coverage, we project minimal impact to our full-year performance. However, we estimate that production and shipping constraints offset by insurance coverage on direct costs negatively impacted our first quarter by approximately four cents per share. In addition, we acquired Leonard Valve on January 6th, and as a result, recognized three cents of transaction-related expenses in corporate expense for the Comerica segment first-quarter sales of $753 million increased 1% against the tough comp. Carryover pricing benefits and Leonard Valve sales contributions were largely offset by lower residential water heater volumes and weather-related production and shipping constraints. North America's segment earnings of $175 million and segment margin of $23.3, $10 million and 140 basis points. The lower segment earnings and segment margin were primarily the result of lower residential water heater volumes and more than offset the earnings contribution from lettered valve. Carryover pricing benefits more than offset cost inflation in the quarter. the first quarter of 2025 benefited from pull forward demand ahead of an announced price increase and a stronger mix moving to slide 6 rest of the world segment sales of 201 million dollars decreased 11% year-over-year due to continued weak consumer demand in China driving lower sales which was partially offset by favorable rest of the world first quarter 2026 segment earnings of $12 million, end-segment margin of 6.2%, decreased by $8 million in 250-segment earnings end-segment margin in 2000. By diligent, we're 100,000 shares if we expect to repurchase $200 million of our shares. Consistent with our focus, please turn to slide 9, transportation and certain material cost assumptions. Our guidance assumes oil prices and tariff levels will remain at a similar level to where we continue to monitor this. We maintain our estimate that capex we continue to expect 470 million dollars of additional debt incurred to acquire leather valve corporate and other expenses are expected to be between 80 and our effective

tax rate is estimated and we project our outstanding diluted shares will be 130 i'll now turn the call back over to the potential water heater industry had a slower than expected in our view that fully softness and new construction persists and proactive replacement department of energy indicating a one-year enforcement. We revised our outlook. We now project that U.S. commercial industry volumes will be in response to rising steel, freight, and other input cost inflation. We have announced price increases for most of our water heater and boiler products, with increases varying by product, but ranging from approximately 4% to 7%. We have seen some cost increases already leading into the second quarter, particularly within transportation. We expect to begin realizing the benefit of these announced price increases beginning in the third quarter. As always, we are maintaining ongoing communication with our suppliers, customers, and stakeholders as we address current market challenges while also implementing diligent cost management strategies. We continue to project our North America boiler sales to grow between 6 to 8 percent in 2026 due to pricing benefits and a strengthening Bat blog and commercial and residential boilers. We have reduced our 2026 sales guidance for North America water treatment to growth of five to six percent. The decrease in our outlook reflects the impact of cautious consumer behavior in our consumer facing channels which is approximately half of our business where we have experienced soft demand as well as a shift toward lower price. We are pleased with the progress of our priority dealer network expansion efforts and expect sales in that channel to achieve double-digit growth in 2026. Our guidance at Leonard Valve will achieve double-digit growth and contribute approximately $70 million in sales in 2026 is unchanged. Integration efforts are on track and we are pleased with the reception we are receiving as we explore ways to go to market together. Moving to our rest of world outlook and assumptions. We have updated our four-year guidance for China sales which we now expect to be down low double digits in local currency compared to last year, with sales in Q2 down approximately 15% compared to Q1, as we balance channel inventories to the current environment. This revised guidance reflects our updated view of the China market, where we expect persistent headwinds throughout the year due to continued low consumer demand, severely limited government stimulus, and ongoing competitive pressures. we continue to advance our China assessment evaluating strategic alternatives to strengthen our long-term competitive position the valuation is providing valuable insight into both the advantages and challenges facing our business many actions we've identified to improve the performance of our China business are pending the conclusion of our assessment which is impacting our expected recovery timeframe we are looking to provide greater clarity within the next few months. We project our India business, inclusive of Purit, will have top-line growth of approximately 10% and is unchanged. Based on these 2026 assumptions, we expect total top-line growth of approximately 2% to 4%. We expect our North America segment margin to be approximately 24% and rest-of-world segment margin to be between 6% and 7%. Please turn to slide 10. This morning, I'd like to provide additional color on our operational excellence value creation opportunities. Our focus is to provide sustainable margin improvement in mid-cycle markets and protect our profitable growth in times of less market certainty. Over many years, we have looked to drive continuous improvement throughout our operations with our AOS operations. Today, we are building on that foundation with new tools and making more strategic moves to help prioritize around our strengths and drive improved profit. The tool sets we are now bringing to our operations include an enhanced ability for process intelligence and AI capabilities to drive better customer experiences at greater levels of productivity. Initial application examples include order management, warranty claims processing, and technical service support, where we are identifying opportunities, developing process improvements, and using AI agents to drive. Still early days, but we are excited by the potential of what we see. The streamlining of our North America water treatment business is an example of focusing on our strengths to drive more profitable growth. As we announced this morning, we are taking actions to continue improving our profitability and accelerate long-term growth through footprint optimization and brand rationalization. These steps are part of our ongoing water treatment strategy evolution and allow us to further focus on the areas where we expect to be most competitive going forward. We expect to recognize a restructuring charge of approximately $20 million in the second quarter and a projected annual savings of between $6 and $8 million beginning in 2027. These exciting new tools that help us reimagine our operating processes and our continued strategic focus on prioritizing around our strengths are two ways in which we are bringing operational excellence to life at AO Smith. I look forward to sharing more details as this focus area for us matures going moving to slide 11 our team responded well based with pressure in several of our key markets in the first quarter I am pleased with the market share improvement we saw in residential water heating the double-digit valve sales growth that Leonard valve contributed to the quarter and the strong free cash flow achieved through diligent working capital management with the strategic actions that we are taking supported by our consistent operational discipline. I believe A.O. Smith will continue to strengthen its leadership position and be well-equipped to capitalize on future opportunities. With that, we conclude our prepared remarks and we are now available for your questions.

Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We ask that you please limit yourself to one question and one follow-up. If you have additional questions, please re-enter the queue. One moment for our first question. And our first question will come from the line of Susan McCleary with Goldman Sachs. Your line is open. Please go ahead. Thank you.

Good morning, everyone. Thanks for taking the questions. Good morning. My first question is on the channel inventories in residential. You mentioned that you did have some pull forward around the pricing that you announced.

Can you talk a bit more about how much you're seeing in there and how you're thinking about the channel going to the second quarter and how we should think of the flow through in the next couple quarters as a result of that yeah good morning Susan this is Chuck you know the reference that I made to pull forward in the first quarter was to last year so we really haven't seen any pull forward in Q1 of 2026 this is kind of thinking about the quarters so by the way that the channel inventories we think are kind of in line with what we would expect coming out of the first quarter okay okay so you haven't seen anything from the pricing you announced this year yet yeah not meaningful I mean

the price increase that we have is effective mid-may roughly so it's pretty early days okay all right that's helpful and then you know turning to commercial you mentioned that that regulatory change got pushed out for a year can you just give us more color on what drove that and how you're thinking about the demand there now for the balance of this year and then even into next year's the channel positions for that sure Susan so you know the regulatory DOE commercial rule that was set to take effect in October of this year that's been being challenged through the court system and it's been held up so far through the court system but it is pending and

waiting to see if the Supreme Court will review it so we don't know whether the Supreme Court will take on that challenge or not but what the DOE issued late last week was because of that uncertainty around what would happen through the legal system and because we're obviously getting closer and closer to the October 6th date they issued in essence a letter that they would not be enforcing the rule until October of 2027 however that might also change as things play out both in the court system as well as how DOE thinks about the rule going forward so that was new information as of last week there's still a lot of uncertainty out there both on the legal front as well as the DOE positioning but it has us feeling like it was a more prudent thing to do to think that the industry may do less buy ahead because of that announcement thank you and one moment for our next question our next question will come from the line of Matt Somerville with DA Davidson your line is open please go A couple questions.

On the water treatment side of things, I guess I was under the impression that getting out of the retailer big box channel was the reset sort of recipe for that business. And it sounds like you're initiating yet another reset in water treatment.

Remind us how big that business is and just help us understand a little bit more around how we should be thinking about that looking ahead yeah well good morning that you know the business the water treatment business is just over 250 million roughly I'd say last time we talked about a reset was the exiting of on-the-shelf retail and that I call that ingredient one of the reset this is kind of the next step of focus and it's really a step into focusing on leveraging our brands focusing on our A.L. Smith brand more than some of the brands that we acquired and then rationalizing our manufacturing footprint so you know think of it in terms of in 2026 we're looking to expand 200 basis points in our margins to move about 15% operating margins in North America water treatment we would expect in 2027 with this next restructuring an incremental couple hundred basis points so you know think of it as just kind of the next step and moving that profitability up there's a follow-up if I think I heard you right you expect China business to now be down low double digits.

How does that sort of sync up to what is actually happening in the market? Are you seemingly losing share? I guess, how do you sort of justify the length of this review process with the potential that you're continuing to kind of bleed share in that business because of how long that process has taken to unfold? Thank you.

Yeah, I mean, first off, regarding the market environment and our performance in it, you know, in the first quarter, I think the whole market saw a lot of the challenges and many of the things that we highlighted in our prepared remarks around the stimulus has kind of, you know, run its course, confidence. So it was a challenging first quarter, I'd say, across the market, at least in the categories that we participate in. From the third-party data we track, we didn't lose a lot of share. I think we actually maintained our share in the first quarter, but it was certainly a down-market condition. I think it is probably the biggest driver to why the assessment is taking a bit longer than we had hoped. There's still a lot of really positive things coming out of the assessment for us. And just as context, I go back to we've done some third-party assessments on our business in China, and our brand is just very strong. our pricing power is very strong that has been sort of validated also with the partners that we're talking to there's a lot of interest in the AO Smith business in terms of you know partnering with us so it's been a process and an assessment that's had a you know there's a lot of interest in lots of competition in terms of people who have thoughts and ideas of how they could work with us to strengthen the business going forward so that that's all been very positive but we are doing it in the backdrop of a very challenging market environment. And anytime you're having those kinds of conversations with partners and we're all being challenged, you know, by the current context of the environment, it gets tough and it makes the dialogue take a little bit longer. And I think that's what we're going through right now. But as I mentioned, we've been having these conversations now for quite some time. They're maturing and I'm hoping that in the coming months we'll be able to get clarity on our path forward.

Thank you. And one moment for our next question. Our next question comes from the line of Tomohiko Osano with J.P. Morgan. Your line is open. Please go ahead.

Hi. Good morning, everyone. Good morning. Thank you. We understand the guidance revision was mainly driven by external factors in China and North America. In this challenging environment, have you observed any changes in your market share across key regions?

As I mentioned, in China, in the last few years, there's been some market share loss, but I'd say as it is right now in Q1, we don't see any meaningful market share loss. We think we're kind of holding our own in a challenging market. Within the U.S., as we mentioned, in the water heater side, we've stabilized our share position in the wholesale sale side of the channel, that was a big focus for us over the last quarter. And we're happy with the progress we've made there, but there's still more work to be done in terms of share. And then on the retail side, we're very pleased with the share position we have and the strength we have with our partnerships on the retail side. So, you know, at this point, you know, nothing meaningful, but it's a big focus for us is to continue to maintain our share position in the markets where Thank you.

And just to follow up on the Leonard Valve, and how is the integrations of the Leonard progressing? And are you on track to our relied expected synergies?

Yes, we're very pleased with our first quarter in with Leonard Valve. We think it's a great fit with our portfolio. Serves as the foundation for our water management strategy going forward. More work to be done there more broadly. But in terms of Leonard Val and the integration, we think we're working well. We're on track with the plan that we have. Most of our opportunity we see is ways to go to market together, and that's been a big focus for us. And so we've been out talking to customers in the market. It's been very well received. So we're pleased with the progress so far.

Thank you. And one moment for our next question. Our next question will come from the line of David McGregor with Longbow Research. Your mind is open. Please go ahead.

Hey, good morning. This is Joe Nolan. I'm for David.

Hi, Joe.

Hey, guys. I just wanted to focus on the margin and price cost outlook over the remainder of the year. So just in the second quarter, you'll be feeling the impact of higher steel and freight costs, but it sounds like you're not expecting to get price benefit until 3Q.

So could you just walk through kind of margin cadence over the remaining quarters of the year? sure I'm happy to do that so I you know we were happy with our price cost relationship in Q1 you know pricing overcame the cost that we incurred plus a little bit of margin so we're we're walking into the second quarter and in a good position for the cost that were behind us however you know we are seeing incremental cost in the second quarter so we're seeing costs rate raise up on transportation diesel fuels up we've seen cost on steel continue up and we had the announced price increase so the announced price increase would come into effect in the third quarter so I you know we're gonna see a little pressure costs before we see pricing in the second quarter we'll see a little pressure in the second quarter that'll that'll be overcome in the in the third and fourth quarter with the pricing that we expect to have in place so you know we feel pretty comfortable with where we're positioned right now and both but we're watching costs closely right because you know some of those costs related to oil seem to be pretty persistent got it that's helpful and then another one just a clarification question on the commercial water heater industry outlook coming down to flat now is that really just a reflection of the regulatory change or is there any other moving pieces within that yeah that's the biggest driver for the change in our outlook thank you in one moment as we

move on to our next question our next question comes from the line of Mike Halloran with Baird your line is open please go ahead hey good morning everyone hey my morning line do you help put all this in context on how you expect the the earnings the cadence through the year here obviously the two cents from Leonard goes away but you know maybe the price cost dynamics and two cures you just reference are a little less favorable more favorable in the back half of the year you know the timing around you know some other headwinds demand dynamics do you get a catch-up from GQ from the weather how does that

keyed into the year so I guess could you just put it together and put the cadencing in line with maybe how it looks normally versus this year and we should think about sure happy to yeah there's a couple moving parts and a couple moving parts since our last guidance outlook right so you know let me start with China and start with maybe Steve's comments on China and Q2 being down we believe it'll be down roughly 15% from Q1 and think of that in terms of decremental margins 35 to 40 percent so we expect a difficult quarter in China we expect that will come out of that quarter though with a little bit better balancing of the inventories in the channel the inventories in the channel are relatively the same as last year it just uh we'd like to be a little bit leaner in this environment um in in north america you're right we have costs kind of ahead of us in the second quarter before we see pricing in the third quarter um and so that's a bit of a headwind to the margin in the second quarter um we also on the doe you know so if you look at what we're thinking about for the regulatory change for the department of energy policy statement previously we would have expected a meaningful amount of pull forward in q2 and q3 we just softened that a bit we may have some but we would not expect to have the same amount in q2 and q3 as what we had before so that kind of level sets to a flat commercial volume year over year and that cadence would be pretty similar to other years um on the uh so i mean when you kind of look at mike on q2 you know overall q2 eps is expected to be roughly 25 percent of our full year guidance midpoint that's with a little bit of help in q2 i would say from some pricing pull forward so we do expect a solid a solid performance in north america in the second quarter based on a little bit of pull forward. Our overall industry, we have, you know, pretty weak on the first quarter, but coming back decently in the second quarter with that price pull forward. The back half of the year, a little stronger on, I'll call it the boiler part of the business. Third quarter is always stronger. And we have China. If you think about China as normal cadence, the fourth quarter is typically the strongest. So China, you know, had a fairly muted first quarter. We're happy with the performance in China and 7% operating margins in Q1 but Q2 and Q3 we expect to be a little bit of challenge and then bounce back a bit in Q4 like normally see normal seasonality happens in China so overall a little stronger Q2 on the top line some headwinds on cost some real headwinds in China and a little bit more normalization in the back app thanks for that and then a question on the pricing side of things um maybe a two-fold question here one are you expecting any pull forward uh of demand ahead of the 47 price increases you're pushing through here and then and secondarily how do you think the acceptance is going to go on the channel um given some of

the moving pieces that are happening in the water heater space in general right now yeah and i mean we'll see regarding you know kind of pull ahead mike i think you know there's always a little bit of that but we work closely with our customers and as we've talked about in the past we we navigate through those transitions we always look to serve our customers well as we go through the price changes and also look to make sure we're we're being smart around operationally how we serve those transitions so we'll see but we'll stay close to our customers as we step through that in the in the second quarter you know in terms of going forward you know So we'll see how the market plays out. I think ultimately, at the end of the day, we remain committed to keep our customers competitive, and we'll continue to do that. But also, we know we're in an environment of a lot of uncertainty and a lot of cost pressures.

Thank you. And one moment for our next question. Our next question will come from the line of Jeff Hammond with KeyBank Capital Markets. Your line is open. Please go ahead. Hey, good morning.

Good morning. Maybe just to go with the guide a little bit different, it seems like you're just cutting EPS 15 cents, but a lot of the macro assumptions are kind of moving the wrong way. Can you just talk about offsets to that? I mean, I know you're now expecting some price, but any other offsets around restructuring savings or catch up from this plant issue that would kind of mitigate the EPS impact?

Yeah, we had a little bit of catch up on the plant issues, not a lot, but that would help us a bit in the second quarter, I think. If you kind of look at the year, really from last guidance, the big change was what we saw in China and then this Department of Energy policy statement. So other opportunities, the teams continue to look at cost management like we have in China and continue to do that in North America as we watch kind of the market mature throughout the rest of the year. On the cost side, you're just going to have to really watch cost. I mean, costs are pretty volatile right now with the oil up, but that's probably the biggest.

Yeah, I mean, the cost control is sort of the near-term lever. A little bit longer term, but obviously the lever we're going to continue to look at polling is operational excellence, and I mentioned a little bit of some of the tools we're putting to work there, and I think the timeframe of when that will kind of play out in terms of giving us some productivity space, we're still trying to get our head around and understand. But I think that's another area where we're investing significant time and focus is to figure out how do we get our operations even more productive with some of that.

Okay, great. And then just on, I guess, competitive dynamics between wholesale, retail, and kind of this price increase. One, have you seen the other players in the water heater space announce similar pricing around, you know, steel, you know, fuel inflation and just any kind of changes you're seeing, you know, in that wholesale channel, which has been pretty competitive.

Yeah, I mean, we won't comment on competitor pricing, but we, you know, we kind of looked backwards on our historical performance and how successful we've been to offset costs. So we feel good about our positioning and point the history on that, our ability to be able to cover costs over time. It remains a competitive environment. We would expect the whole industry to be experiencing very similar cost inputs. And, you know, as Steve said a little earlier, our commitment is to make sure we keep our customers competitive.

Thank you. And one moment for our next question.

Our next question will come from the line of Nathan Jones with Stiefel. your line is open please go ahead good morning this is adam farley on for nathan yeah i'm following up on hey good morning following up on the commercial water heating regulatory impact um does that change how you guys are planning to ramp capacity for that commercial water heating change and then maybe more broadly just update us on you know capacity plans for this year into next year well we were prepared for the transition from a capacity standpoint and we made a bit of the investments to get ready for that and I think at this point if if the demand is pushed out and customers delay

their orders and in fact the regulatory rule goes into effect later we'll be ready with those investments that most many of them made and some of them were still in front of us and we're delaying until we have the certainty of the need for this okay fair enough um and then maybe on tariffs you know is there any incremental change to the gross tariff impact with the recent changes to some of the rules and then you know what is what is maybe contemplating guide on tariffs thank you yeah we saw some relief on the IEPA tariffs and then other tariffs came in so I mean overall kind of the tariff outlook maybe a little net neutral

maybe a little favorable but then kind of overshadowed by some of these other costs that we see in front of us related to oil you know diesel fuel going up transportation we've seen steel be very resilient so net net it's just a bit of a headwind on our costs and that's why we have pricing out there thank you and one moment for our next question our next question comes from the line of Andrew Kaplowitz with Citi.

Your line is open. Please go ahead.

Hi, good morning. This is Natalia on behalf of Andy Kaplowitz. Good morning. Good morning. First question I'll start with. You have the outlook for boilers despite lowering expectations across most other product categories. Can you maybe just unpack what you're seeing in underlying demand?

I know you mentioned earlier on the call you're seeing strength in commercial and residential, but specifically how much of that is volume versus pricing our our growth for the year it has a big price component into the carryover pricing from from last year i think uh you know q1 um was a little bit softer on commercial um which was which was we highlighted but we see those orders coming up and this is a typical seasonality too for that business so we we still remain you know confident in that six to percent growth forecast commercial is the one that I think is we see from the order book is catching up but price is still a big component of that growth that's helpful color and then my second question as you think about capital deployment how are you viewing the current M&A pipeline particularly in terms of opportunities within your core business for adjacency areas yeah I mean, there are a few opportunities to strengthen our core as it relates to M&A, but there's also a lot of organic investment we do to make sure we maintain our leadership position there. I think getting scale and profitability in our water treatment platform, that's been a big focus for us on the M&A side over the last seven, eight years. And there's still a few opportunities for us to strengthen that business through M&A. And then a big focus for us is on the water management platform. And Leonard Valde was a business that we closed on in January that we put into that category. And we think that's probably the richest area for us from an M&A standpoint is how do we build out and expand in that water management category.

Thank you. And I'm showing no further questions. And I would like to hand the conference back over to Helen Gerholt for closing remarks.

Thank you for joining us today. We look forward to updating you on our progress in the quarters to come. In addition, please mark your calendars to join us at four conferences this quarter. Oppenheimer on May 5th, KeyBank on May 27th, Stiefel on June 2nd, and Wells Fargo on June 9th. Thank you and enjoy the rest of your day.

This concludes today's conference call. Thank you for participating and you may now disconnect. Everyone, have a great day.