Thank you for standing by. Hello, and welcome to Watts Water Technologies' second quarter 2025 earnings conference call. Please note that this call is being recorded. I would now like to turn the call over to Diane McClintock, Senior Vice President, FP&A, and Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to our second quarter earnings conference call. Joining me today are Bob Pagano, President and CEO, Shashank Patel, our former CFO, and Ryan Lada, our new CFO. During today's call, Bob will provide an overview of the second quarter, an operational update, and an update on our outlook for 2025. Shashank will discuss the details of our second quarter performance and provide our outlook for the third quarter and for the full year. Following our 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 this presentation throughout our prepared remarks. Any reference to non-GAAP financial information is reconciled in the appendix to this presentation. I'd like to remind everyone that during this call, we may be making certain comments that constitute forward-looking statements. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially. For information concerning these risks, see WATT's publicly available filings with the SEC. The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. With that, I will turn the call over to Bob.

Thank you, Diane, and good morning, everyone. Before beginning our second quarter overview, I'd like to take a moment to express my gratitude to Shashank Patel as this will be his last earnings call with Watts. I'm grateful for his seven years of impactful leadership. He has been a tremendous asset to the entire Watts team and has been a key strategic advisor to me. I wish him all the best in his retirement. Over the next two months, Shashank will help support the transition to our new CFO. On that note, I'm excited to welcome our new CFO, Ryan Lada, to his first earnings call with Watts. Ryan, would you like to say a few words?

Thank you, Bob, and good morning, everyone. I'm excited to be part of Watts and contribute to its continued success. I had the opportunity to attend the board meeting shortly after joining Watts, and I was able to spend time with the board members and the leadership team. I was incredibly impressed with the talent, engagement, and high-performance culture, and I'm thrilled to be part of the team. Over the next few months, I will focus on getting up to speed and plan to spend time traveling to our sites to learn about the operations and the team. I look forward to working with the investment community and contributing to Watt's continued growth and long-term value creation. With that, I will turn the call back to Bob.

Thank you, Ryan, and welcome to the team. Now, please turn to slide three, and I'll provide an overview of the second quarter. Our second quarter results were better than expected, with record sales, operating income, and earnings per share. Our performance is a direct result of the commitment and strong execution of the entire WATS team and their dedication to serving our customers amid a challenging environment. Organic sales increased 6% in the quarter, with favorable price, volume, and pull-forward demand more than offsetting continued weakness in Europe. We also benefited from incremental sales from our ICON and EZ Water acquisitions and favorable foreign exchange movements. Adjusted operating margin of 21.6% exceeded expectations due to favorable price-cost dynamic, volume leverage, productivity, and cost containment. Our balance sheet remains strong and provides ample capacity to support flexibility in our capital allocation strategy. From an operations perspective, we continue to take proactive steps to mitigate the impact of tariffs through our pricing and supply chain strategies. The tariff environment remains fluid, but as of today, our global direct tariff impact in 2025 is estimated to be approximately $40 million. We have a proven track record of successfully navigating through inflationary periods and are confident in our ability to maintain a favorable price cost outcome. In line with our strategic approach to M&A, in June we acquired the assets of Easy Water, a company that engineers and manufactures innovative water conditioning and filtration solutions that serve residential, commercial, and industrial markets. Easy Water's custom solutions will complement our existing water quality portfolio. We expect Easy Water to contribute approximately $5 million in sales and be neutral to adjusted EPS in 2025 after factoring in normal purchase accounting adjustments. The integrations of Bradley, Josam, Icon, and Easy Water are progressing well and Synergy Realization is tracking ahead of our original estimates. The rollout of our Nexa Intelligent Water Management solution is gaining traction and we continue to build scale. We've had numerous successful installations including a luxury multi-family condominium hotels and in a commercial real estate portfolio where nexa provided remote monitoring issue identification and replacement component revenue importantly we are partnering with customers to help them make the most of the nexa platform through data-driven insights and comprehensive solutions for their water management challenges we view nexa as one of the most promising long-term opportunities and will continue to leverage our differentiated capabilities and expertise to build scale and drive growth. Nexa is delivering measurable savings and quick payback cycles for our customers within our targeted verticals, which include hospitality, multifamily, and property management companies. Nexa's momentum is building slowly, but we expect continued expansion and growth in the coming years. Now, an update on our outlook for the remainder of the year. Due to our strong first half and our expectations for the third quarter we are increasing our full year sales and margin outlook tariff related price increases foreign exchange movements strong data center growth and our easy water acquisition are all favorable relative to the outlook we provided in may however some uncertainty still remains around the impact of tariffs including the effect on global gdp as a reminder gdp is a proxy for our repair and replacement business which represents approximately 60 percent of our total revenue now please turn to slide four for an update on our sustainability journey in early june we published our 2024 sustainability report which highlights the accomplishments and progress we've made within our four sustainability pillars footprint handprint social responsibility and corporate governance we are confident that our triple play of solutions addressing safety and regulation, energy efficiency, and water conservation enable our customers to manage operational pressures, comply with evolving regulations, and meaningfully advance their sustainability initiatives. We continue to make progress towards our long-term goals, including an absolute carbon emissions reduction target, which will help advance our sustainability mission while improving our operations. I'm proud of the progress our global teams have made and invite you to read more about it in our sustainability report, which can be found on our investor relations website. With that, let me turn the call over to Shashank, who will address our second quarter results and our third quarter and full year outlook. Shashank.

Thank you, Bob, and good morning, everyone. Please turn to slide five, which highlights our second quarter results. Sales of $644 million were a record for Watts and were up 8% on a reported basis and 6% on an organic basis. Strong organic growth in the Americas more than offset declines in apnea and Europe. America's organic sales were up 10% and reported sales were up 11%, both better than expected, driven by price, volume, and pull forward demand. Sales from the Icon acquisition added $7 million. Easy water sales were immaterial in the quarter. Impact from our 80-20 actions in Americas were limited, with approximately $1 million of eliminated product sales as a result of strategies aimed at improving profitability. Europe organic sales were down 8%, and reported sales were down 3%, with organic declines across all geographies due to continuing OEM and market weakness. Reported sales benefited from favorable foreign exchange. APMEA sales decreased 1% on an organic basis and 3% on a reported basis. Growth in Australia, New Zealand, and the Middle East was more than offset by a decline in China due to project timing. Compared to the prior year, adjusted EBITDA of $153 million increased 22% and adjusted EBITDA margin of 23.8% increased 280 basis points. Adjusted operating income of $139 million also increased 24% and adjusted operating margin of 21.6% was up 280 basis points and is a record for Watts. Adjusted EBITDA and operating income benefited from favorable price-cost dynamic, volume leverage in the Americas, productivity and cost containment, which more than offset inflation, volume deleverage in Europe, and investments. America's segment margin increased 290 basis points to 27.2%. Europe segment margins increased by 170 basis points to 11.7%, and APMEA segment margin was flat to prior year period at 18.9%. Adjusted earnings per share of $3.09 increased 26% versus last year, with contributions driven by operations, acquisitions, foreign exchange, and reduced interest expense. The adjusted effective tax rate in the quarter was 25.2 percent which was flat compared to the second quarter of 2024. For GAAP purposes we incurred 3.8 million dollars of pre-tax acquisition costs and restructuring charges related to the exit of a facility in France and other actions within Europe. Our free cash flow year-to-date through the second quarter was 105 million dollars compared to $120 million last year. The cash flow decrease was probably due to working capital timing and increased CapEx. We expect sequential improvement in our free cash flow and are on track to achieve our full-year goal of free cash flow conversion greater than or equal to 100% of net income. The balance sheet remains strong and provides us with ample flexibility. Our net debt-to-capitalization ratio at quarter-end was negative 10%, and our net leverage is negative 0.4. Our solid cash flow and healthy balance sheet continue to give us capital allocation optionality. Now on slide 6, let's review our assumptions about our third quarter and full-year outlook. We are increasing our full-year sales and margin outlook due to our strong first-half, incremental price, favorable foreign exchange, strengthened data centers, and our acquisition of Easy Water, which will be included in our Americas segment. We now expect organic sales growth of flat to up 3%, a two-point increase to the midpoint from our previous outlook. Our reported sales growth is expected to be up two to five percent, a three-point increase from our previous outlook. We expect incremental revenue from our easy water acquisition and favorable and foreign exchange movements which are listed by region in the appendix. Regionally, we expect the America's sales growth to be better and Europe to be slightly worse compared to our previous outlook. We are increasing our full-year adjusted EBITDA margin outlook to a range of up 60 basis points to up 120 basis points, an increase of 30 basis points to the midpoint of our previous outlook. We are also increasing our full-year adjusted operating margin expansion to a range of up 50 basis points to up 110 basis points, an increase of 50 basis points to the midpoint of our previous outlook. Our updated outlook includes $40 million of estimated direct tariff costs as previously mentioned by Bob. This is based on the tariffs in effect as of today, which includes copper tariffs as currently defined. Our free cash flow expectation remains in line with our previous outlook as we expect to deliver free cash flow conversion of greater than or equal to 100 percent of net income in 2025. Next, a few items to consider for the third quarter. On an organic basis, we expect sales growth of two to five percent. Regionally, we expect mid-single-digit growth in the Americas and low single-digit growth in apnea, partly offset by high single-digit decline in Europe. The Americas growth is sequentially lower than the second quarter due to the pull forward demand previously discussed. We expect approximately eight million dollars in incremental sales in the Americas from acquisitions. We estimate that foreign exchange in the quarter will be a tailwind of approximately four million dollars and our assumptions by region are listed in the appendix. We expect our 80-20 actions in the third quarter to be an estimated two million dollars of product exits primarily within the Americas. Third quarter EBITDA margin is expected to be in the range of 19.7% to 20.3% or up 20 to 80 basis points. Operating margins should be in the range of 17.1% to 17.7% or flat to up 60 basis points. We expect that price and volume leverage in the Americas in apnea will more than offset continued volume de-leverage in Europe. The sequential decline in margins is due primarily to the non-recurring price cost favorability in the second quarter as the impact of tariffs rolls into expense plus normal seasonality. Other key inputs for the third quarter and the full year can be found in the appendix. Before I turn the call over to Bob, I would like to express my gratitude to the entire WATTS team for the opportunities I've had over the last seven years. I've also enjoyed working with you, the investor and analyst community, and wish you the best in the years to come. With that, I'll turn the call back over to Bob before moving to Q&A.

Bob. Thanks, Shashank. On slide seven, I'd like to summarize our discussion before we address your questions. Our second quarter performance was better than we anticipated, with record sales, operating income, and earnings per share due to strong performance in our Americas region, which benefited from price realization, favorable price cost dynamic, and volume leverage. We We continue to execute well amid an uncertain trade environment and expect that price, our expansive U.S. footprint, and global supply chain will enable us to navigate the current backdrop effectively. As a result of our strong first-half performance and third-quarter expectations, we are increasing our full-year sales and margin outlook. Our balance sheet remains strong and provides ample flexibility to support our capital allocation priorities, including M&A, factory automation, investment in new product development, and our digital strategy, and returning capital to shareholders via share buybacks and dividends. I'm confident in our team's ability to execute despite the uncertain environment and continue to create durable, long-term value for our shareholders.

With that, operator, please open the line for questions thank you if you'd like to ask a question please press star and the number one on your telephone keypad additionally if you'd like to withdraw your question please press star one again our first question comes from the line of ryan connors from north north coast research the line's open good morning good morning congratulations shashank and uh welcome ryan So my first question was just, you mentioned in the press release, in addition to the other things here, this idea of a dynamic of a pull forward in the quarter.

Is there any quantification you can put on that in terms of the impact of volume of that pull forward effect you mentioned in the press release?

Yeah, Ryan, there was approximately $20 million of sales pull forward pre-price increase that we shipped in the quarter.

Okay. And then in terms of the price increase, you cite the favorable price cost. You mentioned the $40 million headwind, but can you just kind of dive into a little deeper into the price dynamics? Obviously, you've got lots of different products, lots of different magnitudes of price increases. The copper tariffs are kind of brand new. I mean, what's the dynamic in terms of pricing? Have you accomplished what you need to do? Are there certain products that are leading or lagging on that? Just any deep dive you can give us on the pricing dynamics would be helpful.

Yeah. So specifically in the second quarter, we talked about price cost favorability, and that's where we implemented price increases, but based on having lower cost inventory, we had some favorability, approximately $6 million. The price increases we've announced, and you're right, there's been multiple rounds of tariffs. So they've staggered between the March 31 date all the way to the June 2nd date, and they're in the range of 5% to 15% of price increases. We'll see the full realization of those in the second half.

Yeah, Ryan, as you know, we are constantly analyzing our cost inputs, especially with the recently announced tariffs, and are looking for all options, including price increases in the future, like we've done in the past. So we'll update you on our pricing as we roll into the next quarter. Yep. Yep.

And then lastly, just on the gross margin, I mean, really impressive to see, you know, a number above 50%. What should we be thinking about an intermediate term, you know, kind of run rate? I mean, it's obviously that might be a little elevated here, but you've made strides in terms of internal improvement and other things. So what should be kind of the, what do you consider a base normalized level for the company over the intermediate term?

So that 50% certainly benefited from about 100 basis points on the price-cost dynamic I talked about, which was one time, right? And it also benefited to a certain extent from volume leverage. We got significant volume leverage in the second quarter. So as you recall, you know, prior year when that 47% margin range, the goal this year was to get to that 48 percent level uh as part of our continuous improvement priorities productivity driven primarily as you noted so going forward i think you know in that 48 range okay super very helpful thanks for your time thank you thank you our next question comes from the line of nathan jones from steeple the lines open good morning everyone good morning morning everyone shashank congratulations on getting bob to finally let you retire and

ryan welcome to the team um i guess i'll ask first about uh the competitive positioning and the footprint uh your domestic more domestic footprint and the advantage that gives you obviously evolving i'm sure customers are talking about those kinds of things but any update you can give us on what kind of benefit you think you'll see you'll be able to realize from that versus, you know, particularly some of the smaller competitors who maybe source a lot more out of China or other places internationally. Just how you think you can use that to gain market share?

Well, listen, Nathan, we always believe that our overall strategy of basically, you know, producing products in the countries we sell is a positive strategy, especially in this uncertain market environment where the tariffs keep on changing so just that uncertainty has helped but certainly you know we do source as we indicated globally to diversify our product and our production capabilities but again you know we believe it's a positive for us in this current environment and we'll continue to capitalize on that going forward do you think there are any opportunities to maybe manufacture more domestically?

I mean, you did say you source globally. It certainly does seem that there's going to be some level of tariffs that are permanent here. And just how you think about the break points of whether you would continue to source internationally for some of the products or whether you would reshore some of that production for yourself?

Yeah, I think our supply chain teams and our manufacturing teams are We're constantly looking at that and, you know, where it makes financial sense to bring it here. We'll do that. I think we talked on the last call that we have capacity in, you know, by adding, you know, third shifts in most of our locations. So we're open to those ideas and just looking at overall what the competitive opportunities are by country, by place, et cetera. So again, constantly evolving, but we have a great supply chain team and they're doing a great job in this environment.

And I guess I'll just ask one on the European business, I guess, with a focus on the heat pump market in Germany. I think the belief was that that was kind of going to bottom out mid-year, destocking, it might be done mid-year. Sounds like maybe that's not the case. So just an update on your expectations there.

Yeah, from a heat pump perspective, for the most part, we're starting to see it. It varies by each one of the customers based on their distribution channels and inventory. But like we thought, that has come down, the de-stocking has come down, and, you know, we're believing Q3 is probably the end of that. However, you know, it's just the general construction market is soft in Europe, and it continues to be. And as you know, I'm cautious on Europe. I always have been. And until I start seeing the order rates pick up, we're going to continue to be cautious.

Thanks very much for taking my questions.

Thank you.

Thank you. our next question comes from the line of jeff hammond from key bank the line's open hey good morning everyone congrats to shashank ryan welcome aboard thank you bob good to still have you with us um i want to go back to the tariff so i think you originally said 60 million and most of it are maybe 50 of the 60 was china i know we had a big reset there um so i would have thought that that number would have gone down more i think you said 40 is kind of the new baseline so maybe just walk me through the puts and takes in that 60 to 40 change yeah so you're right the china tariff

did come down significantly but since since that happened there's been other tariffs including in copper tariffs. Tariffs on Europe are now set at 15%. So there's been quite a bit of change. And so we factored all of that change into coming up with the $40 million from the previous $60 million number on direct cost. Okay.

And then is there a way to quantify what price you got in the quarter and what you think you get for price in the second half?

Yeah, so in the quarter, across Watts, our price realization was approximately 3%. If you recall, in Q1, it was 1%, so it stepped up to 3%, and our expectation is with the full impact of price realization in the second half, we're probably going to be in the mid-single Okay.

And this pull forward, I assume, all comes out of 3Q? Yeah, that's our current assumption. And then just last one, it sounds like all your deals are integrating well. Can you just maybe talk about what's going better and whether it's cost, margin improvement, revenue synergies, where the upside surprises are?

Yeah, I think it's across the board. And each one of them is different. But the nice thing is all four of them are green, which we track, as you know, judiciously on a monthly basis and stuff. So, you know, costs are certainly the key focus. And as you know, we're doing the 80-20 on most of these businesses. And so the top line is important. But, you know, we are seeing synergies definitely on the top line. but we're also you know as shashank earlier said we continue to look at making money and uh so we don't want we're getting rid of some of the bad business that we've had in the past okay thanks for the time yes thank you thank you thank you our next question comes from the line of mike helen from baird the line's open hey good morning everyone it's pez on for mike and shashank Congratulations.

I want to take a moment just to circle back on the 80-20 comments. Bob, should we consider most of the 80-20 actions that are being discussed going on in the acquired businesses, or is there a chunk of that going on in some of the legacy business as well?

It's constantly going on. For the most part, we continue to talk about big ones, especially especially with some of the acquisitions that we've pointed out, that's the biggest pieces, but we're always doing 80-20, right? We don't necessarily call it 80-20, but it's the conceptual concept that we go through our organization and are always evaluating that. So again, my team knows that our goal is to drive profitable growth. Right.

All right. That's helpful. Thanks. And then, you know, we're two years post-Bradley close. You know, are there areas where you've been able to maybe step on the gas in terms of investments where, you know, maybe the previous ownership maybe had, had maybe not identified opportunities as well as you had. And then additionally, are you seeing Bradley as an opportunity to be another platform to bolt on future acquisitions?

Yeah, so the answer is yes. We've been investing capital to lean out the organization, streamline the business and invest in new product development. So we had the fortunate opportunity to have our board there on Monday and Tuesday of this week. And the board got to see firsthand all the improvements and the great strides the teams are making. So and yes, Bradley has been, you know, front of the wall. I think it's a nice start. And we purchased Icon, as we talked about before. So, you know, that continues to expand our front of the wall capabilities. So, nice platform, doing exactly what we thought it was, and, you know, we're ahead of schedule on our integration and synergies.

Awesome. And last one for me, you know, Bob, some really helpful comments on the Nexa platform, you know, obviously some encouraging opportunities with the luxury condos and hospitality. You know, maybe talk a little bit about how you're approaching the targeted verticals. You know, is it kind of going pilot programs in certain verticals and then looking to expand? Maybe just provide us a little bit more color about how you're thinking about expanding the offering for Nexa and the approach to go to market.

Yeah, so we're leveraging our complete sales force, whether we have some direct capabilities, strategic accounts, and leveraging distribution. The process is a long process. It's a long sell process where we pilot and then the pilot, you know, they get to look at it for a while, then they have to put it in their budget. And then once they put it in their budget, they go forward. So it could be anyways from a year to two year selling cycle. So it takes a while to get this. But we're happy to say that every installation is, you know, been a great success and we're seeing the benefit of all. So, again, it continues to move forward. It's never as fast as I would want it to be, but it's moving in the right direction. And I think we've also talked about that we're migrating all our previously smart and connected products that had individual apps into the Nexa platform. So it's all centered on one overall application, you know, for all the watch products. So for the most part, that'll be done by the end of the year and early into next year.

Awesome. Thank you. I know I said that was my last question, but I'm going to follow up on one of your points there. You know, as we get further down the road and as you run more and more pilots, would you expect, you know, and I'm not talking about necessarily this year, next year, maybe not even the year after that. But would you expect the sales time on NEXA to shorten as proof points build and, you know, your ability to demonstrate returns to customers, kind of your Rolodex of wins and pilots gets bigger? Would you expect that sales cycle to slow or is that just more of how the customers are able to integrate the technology into their current assets? Yes.

We would expect it to grow, but certainly you raised the concern again. But yes, the answer is we expect it to accelerate as more people have it and really realize the benefit. And I think this property group is, when we get that fully installed by the end of this year, that would be a great asset for people to see and understand how to manage their portfolios across the U.S.

Great. Thanks, Bob. I'll pass it on there.

Thank you.

Thank you. Our next question comes from the line of Andrew Krill from Deutsche Bank. The line's open.

Thanks. Good morning, everyone. Congrats again to Shashank, and welcome, Ryan. I want to go back to the 3Q margin guidance, as it implies a very steep, you know, about 400 basis points or so, sequential decline in the EBIT margin. You know, I know 2Q, it's an elevated starting point to compare it against. But just, you know, can you talk through, again, like any of the moving pieces here? Like, was it really all pull forward and price cost related, or was some of this more structural? You know, and I thought that could have persisted more into the back half. So maybe just touch on that and, like, if there's any conservatism at play, please.

Yeah, so Andrew, there's three pieces of that, right? First was the price cost dynamic, which I quantified at approximately $6 million. dollars so that's about 100 basis points the second element is usually is the typical seasonality we see between q2 to q3 which is about 170 basis points and then the balance is basically volume deleverage right so certainly the volume in q2 volume growth is higher than the volume growth in q3 especially when you strip out price so it's those three elements that contribute to that approximately 400 basis points decline in up income margins okay great that's helpful and then for sales in the back half um can you maybe speak to you know what you're assuming for end

market demand um you know price clearly i think is going up um so do you have any cushion for volume destruction related to that or are you assuming more of kind of the status quo of current run rate thanks yeah so for the most part um there's still a lot of uncertainty especially in the far back, the fourth quarter in particular.

But we're basically the same. The markets haven't changed significantly. If anything, residential is down a little bit more than we expected. But overall, we had to pull forward. That's going to play out against Q3. And then the markets will continue. And we're having strengthened data centers. That's been a great win for the team this year. And we're continuing to see the benefit going forward. So we'll see what Q4 looks like when when it's there but we're gonna um watch what the markets do how the reaction to these recent tariffs and some of the uncertainty how it unplays uh out in the markets great thank you guys thank you thank you our next question comes from the line of joe giordano from td cowan the line's open hey guys good morning uh morning just that six million dollars on the price cost i just want to make sure I understand.

That's just, you're getting the price capture plus what you're selling is just flowing through inventory that was acquired at a lower price point that didn't include the tariffs. Is that what we're, and then that ultimately goes away? Is that what we're talking about?

Absolutely. That's correct.

Okay. Great. On data center, like how large do you think that's going to be now this year?

You mentioned it a couple of times already, this call. yeah we're not going to give the specifics but um you know as we've talked about in the past last year is about two percent of sales and i would say it's growing high double digits um at this point in time so again it's it's offsetting the residential softness we're seeing in the market and uh the team's doing a great job to continue to grow in that area so nice story yeah uh that makes sense and last for me on next uh what is the um what is like the pay terms on this is this like a subscription base like how and how what is it based on yeah so there's a cost for installation of the various products and we're flexible with the customer based on you know what you know opx or or whether um you know how they want to do it inside of they want to pay by the month we'll incorporate the costs inside of it. And yes, it does have a future annual fee that we charge the customers to continue to monitor and measure and keep the upgrades in the system and have access to our experts. So yes, it's the combination of both of those.

How big do you think your whole like software type revenue base is now?

Yeah, we don't provide that information, but it's certainly growing it's it's small right but it's growing growing you know high percentage basis on a low number but we'll continue to grow it and when it gets big enough we'll begin talking about that but we're accelerating that and we believe nexa is one of the best platforms to do that with thanks guys thank you thank you thank you our next question comes from the line of brian lee from goldman sachs the lines open hey everyone this is nick cash on uh for brian lee uh just a kind of a question going into again the end of the year i mean you know we've had pull forward

kind of expecting you know a step down in margins uh you know heading into 3q and then probably another one heading into 4q but do you guys have any additional you know shipping days in 4q that you expect to see and realize again you know some incremental volume or just kind of talk to the you know puts and takes um that you're expecting in the back half of the year on margins there's a couple of days uh impact in q4 if you recall in q1 we talked about lower shipping days we picked those up at the back end of the year okay um but then i guess you know our i think the guide implies you know another step down and adjusted operating margins in what 4q um is that mostly due to again you know, additional volume deleveraging off a 3Q in the America segment?

Yeah, that's correct. Yeah, the volumes in Q4 are lower than Q3, so you have volume deleverage that's impacting margins in Q4.

Awesome. That's it for me. Thank you.

Thank you.

Thank you. There are no further questions. That concludes the question and answer session. I'll now turn the call back to Bob Pacano for our closing remarks.

Thank you for taking the time to join us today. We appreciate your continued interest in Watts and look forward to speaking with you again during our third quarter earnings call in early November. Have a great day and stay safe.

The meeting has now concluded. Thank you all for joining. You may now disconnect.