Mueller Water Products Q1 2026 Mueller Water Products Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q1 2026 Mueller Water Products Inc Earnings Call
Speaker #1: Good morning, and thank you for standing by. Your lines are on a listen-only mode until the question-and-answer session of today's conference. At that time, you may press star, followed by the number one to ask a question.
Operator: Good morning, and thank you for standing by. Your lines are on a listen-only mode until the question and answer session of today's conference. At that time, you may press star followed by the number one to ask a question. Please unmute your phones and state your name when prompted. Today's conference is being recorded. If you have any objections, you may disconnect at this time. It is now my pleasure to turn the call over to Whit Kincaid.
Operator: Good morning, and thank you for standing by. Your lines are on a listen-only mode until the question and answer session of today's conference. At that time, you may press star followed by the number one to ask a question. Please unmute your phones and state your name when prompted. Today's conference is being recorded. If you have any objections, you may disconnect at this time. It is now my pleasure to turn the call over to Whit Kincaid.
Speaker #1: Please unmute your phones and state your name when prompted. Today's conference is being recorded. If you have any objections, you may disconnect at this time.
Speaker #1: It is now my pleasure to turn the call over to Whit Kincaid.
Speaker #2: Good morning, everyone. Thank you for joining us for Mueller Water Products' first quarter conference call. Yesterday afternoon, we issued our press release reporting results of operations for the quarter ended December 31st, 2025.
Whit Kincaid: Good morning, everyone. Thank you for joining us for Mueller Water Products' first quarter conference call. Yesterday afternoon, we issued our press release reporting results of operations for the quarter ended 31 December 2025. A copy of the press release is available on our website, muellerwaterproducts.com. I am joined this morning by Martie Zakas, our Chief Executive Officer, Paul McAndrew, our President and Chief Operating Officer, and Melissa Rasmussen, our Chief Financial Officer. Following our prepared remarks, we will address questions related to the information covered on the call. As a reminder, please keep to one question and a follow-up, and then return to the queue. This morning's call is being recorded and webcast live on the Internet. We have also posted slides on our website to accompany today's discussion. They also address forward-looking statements and our non-GAAP disclosure requirements.
Whit Kincaid: Good morning, everyone. Thank you for joining us for Mueller Water Products' first quarter conference call. Yesterday afternoon, we issued our press release reporting results of operations for the quarter ended 31 December 2025. A copy of the press release is available on our website, muellerwaterproducts.com. I am joined this morning by Martie Zakas, our Chief Executive Officer, Paul McAndrew, our President and Chief Operating Officer, and Melissa Rasmussen, our Chief Financial Officer. Following our prepared remarks, we will address questions related to the information covered on the call. As a reminder, please keep to one question and a follow-up, and then return to the queue. This morning's call is being recorded and webcast live on the Internet. We have also posted slides on our website to accompany today's discussion. They also address forward-looking statements and our non-GAAP disclosure requirements.
Speaker #2: A copy of the press release is available on our website, muellerwaterproducts.com. I have joined this morning by Marti Zakas, our chief executive officer; Paul McAndrew, our president and chief operating officer; and Melissa Rasmussen, our chief financial officer.
Speaker #2: Following our prepared remarks, we will address questions related to the information covered on the call. As a reminder, please keep to one question and a follow-up, and queue.
Speaker #2: This morning's call is being recorded and webcast live on the internet. We have also posted slides on our website to accompany today's discussion. They also address forward-looking statements and our non-GAAP disclosure requirements.
Speaker #2: At this time, please refer to slide two. This slide identifies non-GAAP financial measures referenced in our press release, on our slides, and on this call.
Whit Kincaid: At this time, please refer to slide 2. This slide identifies non-GAAP financial measures referenced in our press release, on our slides, and on this call. It discloses the reasons why we believe these measures provide useful information to investors. Reconciliations between non-GAAP and GAAP financial measures are included in the supplemental information within our press release and on our website. Slide 3 addresses forward-looking statements made on this call. This slide includes cautionary information identifying important factors that could cause actual results to differ materially from those included in forward-looking statements. Please review slides 2 and 3 in their entirety. During this call, all references to a specific year or quarter, unless specified otherwise, refer to our fiscal year, which ends the 30th of September. A replay of this morning's call will be available for 30 days at 1-800-814-6745.
Whit Kincaid: At this time, please refer to slide two. This slide identifies non-GAAP financial measures referenced in our press release, on our slides, and on this call. It discloses the reasons why we believe these measures provide useful information to investors. Reconciliations between non-GAAP and GAAP financial measures are included in the supplemental information within our press release and on our website. Slide 3 addresses forward-looking statements made on this call. This slide includes cautionary information identifying important factors that could cause actual results to differ materially from those included in forward-looking statements. Please review slides two and three in their entirety.
Speaker #2: It discloses the reasons why we believe these measures provide useful information to investors. Reconciliations between non-GAAP and GAAP financial measures are included in the supplemental information within our press release and on our website.
Speaker #2: Slide three addresses forward-looking statements made on this call. This slide includes cautionary information identifying important factors that could cause actual results to differ materially from those included in forward-looking statements.
Speaker #2: Please review slides two and three in their entirety. During this call, all references to a specific year or quarter unless specified otherwise refer to our fiscal year, which ends the 30th of September.
Whit Kincaid: During this call, all references to a specific year or quarter, unless specified otherwise, refer to our fiscal year, which ends the 30th of September. A replay of this morning's call will be available for 30 days at 1-800-814-6745. The archive webcast and corresponding slides will be available for at least 90 days on the investor relations section of our website. I'll now turn the call over to Marty.
Speaker #2: A replay of this morning's call will be available for 30 days at 1-800-814-6745. The archived webcasts and corresponding slides will be available for at least 90 days on the Investor Relations section of our website.
Whit Kincaid: The archive webcast and corresponding slides will be available for at least 90 days on the investor relations section of our website. I'll now turn the call over to Marty.
Speaker #2: I'll now turn the call over to Marti.
Speaker #1: Thanks, Whit. Good morning, everyone. Thank you for joining our first quarter earnings call. As a reminder, this is my last week as Mueller CEO.
Martie Zakas: Thanks, Whit. Good morning, everyone. Thank you for joining our Q1 Earnings Call. As a reminder, this is my last week as Mueller's CEO. After my opening remarks, I will hand the call over to Paul to provide an overview of our performance, followed by Melissa, who will go over our Q1 financial results and discuss our increased guidance for 2026. It has been the highlight of my career to lead this talented team and extraordinary company with its rich legacy and iconic brands. The sense of fulfillment I feel in what the entire Mueller team has accomplished together is beyond words. It's thanks to their hard work and unwavering dedication that we have become the successful company we are today. Mueller plays a critical and essential role as a leader in water infrastructure products and solutions every day.
Martie Zakas: Thanks, Whit. Good morning, everyone. Thank you for joining our Q1 Earnings Call. As a reminder, this is my last week as Mueller's CEO. After my opening remarks, I will hand the call over to Paul to provide an overview of our performance, followed by Melissa, who will go over our Q1 financial results and discuss our increased guidance for 2026. It has been the highlight of my career to lead this talented team and extraordinary company with its rich legacy and iconic brands. The sense of fulfillment I feel in what the entire Mueller team has accomplished together is beyond words. It's thanks to their hard work and unwavering dedication that we have become the successful company we are today. Mueller plays a critical and essential role as a leader in water infrastructure products and solutions every day.
Speaker #1: After my opening remarks, I will hand the call over to Paul to provide an overview of our performance followed by Melissa, who will go over our first quarter financial results and discuss our increased guidance for 2026.
Speaker #1: It has been the highlight of my career to lead this talented team and extraordinary company with its rich legacy and iconic brands. The sense of fulfillment I feel in what the entire Mueller team has accomplished together is beyond words.
Speaker #1: It's thanks to their hard work and unwavering dedication that we have become the successful company we are today. Mueller plays a critical and essential role as a leader in water infrastructure products and solutions every day.
Speaker #1: I have great confidence that Paul, the leadership team, and all our talented employees will build on our positive momentum. I believe our performance this quarter and over the last few years is just the beginning.
Martie Zakas: I have great confidence that Paul, the leadership team, and all our talented employees will build on our positive momentum. I believe our performance this quarter and over the last few years is just the beginning. I look forward to seeing Paul and the entire Mueller team write the next chapter in Mueller's winning legacy. I'll now turn it over to Paul.
Martie Zakas: I have great confidence that Paul, the leadership team, and all our talented employees will build on our positive momentum. I believe our performance this quarter and over the last few years is just the beginning. I look forward to seeing Paul and the entire Mueller team write the next chapter in Mueller's winning legacy. I'll now turn it over to Paul.
Speaker #1: I look forward to seeing Paul and the entire Mueller team write the next chapter in Mueller’s winning legacy. I’ll now turn it over to Paul.
Speaker #2: Thanks, Marti. Good morning, everyone. Before we veer in our performance, I want to start by recognizing Marti and thank her for her incredible leadership.
Paul McAndrew: Thanks, Marty. Good morning, everyone. Before we dive into our performance, I want to start by recognizing Marty and thank her for her incredible leadership. With nearly two decades of dedicated service, she has shaped Mueller into the company we are today. I am grateful that she will continue to guide us as a senior advisor through the end of the year. Since joining Mueller more than three years ago, I have witnessed firsthand the passion, expertise, and commitment of our team members. I believe we are in the early stages of our transformation. We have improved operational execution, strengthened relationships with our stakeholders, and delivered outstanding results, all while navigating a challenging external environment. I am pleased with the great start to our fiscal year.
Paul McAndrew: Thanks, Marty. Good morning, everyone. Before we dive into our performance, I want to start by recognizing Marty and thank her for her incredible leadership. With nearly two decades of dedicated service, she has shaped Mueller into the company we are today. I am grateful that she will continue to guide us as a senior advisor through the end of the year. Since joining Mueller more than three years ago, I have witnessed firsthand the passion, expertise, and commitment of our team members. I believe we are in the early stages of our transformation. We have improved operational execution, strengthened relationships with our stakeholders, and delivered outstanding results, all while navigating a challenging external environment. I am pleased with the great start to our fiscal year.
Speaker #2: With nearly two decades of dedicated service, she has shaped Mueller into the company we are today. I am grateful that she will continue to guide us as a senior advisor through the end of the year.
Speaker #2: Since joining Mueller, more than three years ago, passion, expertise, and commitment of our team members. I believe we are in the early stages of our transformation.
Speaker #2: We have improved operational execution, strengthened relationships I have witnessed firsthand the with our stakeholders, and delivered outstanding results. All while navigating a challenging external environment.
Speaker #2: I am pleased with the great start to our fiscal year. We delivered net sales growth of 4.6% in the quarter, supported by resilient focus on delivering outstanding customer service.
Paul McAndrew: We delivered net sales growth of 4.6% in the quarter, supported by resilient end markets and our focus on delivering outstanding customer service. Our operations and supply chain teams executed well as manufacturing efficiencies more than offset the impact from higher tariffs and inflationary pressures, driving year-over-year gross margin expansion. This includes the expected benefits from efficiencies associated with the transition to our new brass foundry. These improvements led to Q1 records for net sales, gross margin, Adjusted EBITDA, and Adjusted EBITDA Margin. During the quarter, we generated $44 million of Free Cash Flow and continued our balanced approach to cash allocation. We invested approximately $17 million in capital expenditures and returned approximately $16 billion to shareholders through our quarterly dividend payment and share repurchases.
Paul McAndrew: We delivered net sales growth of 4.6% in the quarter, supported by resilient end markets and our focus on delivering outstanding customer service. Our operations and supply chain teams executed well as manufacturing efficiencies more than offset the impact from higher tariffs and inflationary pressures, driving year-over-year gross margin expansion. This includes the expected benefits from efficiencies associated with the transition to our new brass foundry. These improvements led to Q1 records for net sales, gross margin, Adjusted EBITDA, and Adjusted EBITDA Margin. During the quarter, we generated $44 million of Free Cash Flow and continued our balanced approach to cash allocation. We invested approximately $17 million in capital expenditures and returned approximately $16 billion to shareholders through our quarterly dividend payment and share repurchases.
Speaker #2: Our operations and supply chain teams executed well, as manufacturing efficiencies more than offset the impact from higher tariffs and inflationary pressures. Driving year-over-year gross margin expansion, this includes the expected benefits from efficiencies associated with the transition to our new brass foundry.
Speaker #2: These improvements led to first quarter records for net sales, gross margin, adjusted EBITDA, and adjusted EBITDA margin. During the quarter, we generated $44 million of free cash flow and continued our balance to approach the cash allocation.
Speaker #2: We invested approximately $17 million in capital expenditures and returned approximately $16 million to shareholders through our quarterly dividend payment and share repurchases. We are raising our fiscal 2026 results.
Paul McAndrew: We are raising our fiscal 2026 guidance, reflecting our strong Q1 results and current views for the rest of the year. Our end market expectations are consistent with our prior guidance. We anticipate that healthy municipal repair and replacement activity and strong growth in project-related work using specialty valves will more than offset slower new residential construction activity. Our operations and supply chain teams continue to work with suppliers to manage the ongoing tariffs and inflationary pressures, mainly related to brass. With this in mind, we recently announced price actions across most product lines. We are on track to deliver another year of gross and adjusted EBITDA margin expansion, supported by our operational and commercial initiatives. Overall, I am excited about our team's strong performance this quarter.
Paul McAndrew: We are raising our fiscal 2026 guidance, reflecting our strong Q1 results and current views for the rest of the year. Our end market expectations are consistent with our prior guidance. We anticipate that healthy municipal repair and replacement activity and strong growth in project-related work using specialty valves will more than offset slower new residential construction activity. Our operations and supply chain teams continue to work with suppliers to manage the ongoing tariffs and inflationary pressures, mainly related to brass. With this in mind, we recently announced price actions across most product lines. We are on track to deliver another year of gross and adjusted EBITDA margin expansion, supported by our operational and commercial initiatives. Overall, I am excited about our team's strong performance this quarter.
Speaker #2: And current views for the rest of the year. Our end market expectations are consistent with our prior guidance. We anticipate that healthy municipal repair and replacement activity and strong growth in project-related work using specialty valves will more than offset slower new residential construction activity.
Speaker #2: Our operations and supply chain teams continue to work with suppliers to manage the ongoing tariffs and inflationary pressures. Mainly related to brass. With this in mind, we recently announced price actions across most product lines.
Speaker #2: We are on track to deliver another year of gross and adjusted EBITDA margin expansion. Supported by our operational and commercial initiatives. Overall, I am excited about our team's strong performance this quarter.
Speaker #2: We expect that our ongoing investments in our commercial and operational capabilities, together with strategic capital expenditures, will enable us to increase capacity, achieve sustained margin expansion, and deliver long-term value creation.
Paul McAndrew: We expect that our ongoing investments in our commercial and operational capabilities, together with strategic capital expenditures, will enable us to increase capacity, achieve sustained margin expansion, and deliver long-term value creation. I am grateful for our dedicated employees who serve our stakeholders with relentless drive and passion. With that, I'll turn it over to Melissa, who will take us through the financials.
Paul McAndrew: We expect that our ongoing investments in our commercial and operational capabilities, together with strategic capital expenditures, will enable us to increase capacity, achieve sustained margin expansion, and deliver long-term value creation. I am grateful for our dedicated employees who serve our stakeholders with relentless drive and passion. With that, I'll turn it over to Melissa, who will take us through the financials.
Speaker #2: I am grateful for our dedicated employees. Who serve our stakeholders with relentless drive and passion. With that, I'll turn it over to Melissa, who will take us through the financials.
Speaker #1: Thanks, Paul, and good morning, everyone. We are pleased to report a great start to the year, with consolidated net sales increasing 4.6% to $318.2 million.
Melissa Rasmussen: Thanks, Paul, and good morning, everyone. We are pleased to report a great start to the year, with consolidated net sales increasing 4.6% to $318.2 million, surpassing last year's strong first quarter performance. This growth was driven primarily by higher pricing across most product lines, partially offset by slightly lower volumes. Gross profit for the quarter increased 16.3% to $119.8 million, and gross margin expanded 380 basis points to 37.6%. The improvement in gross profit was primarily driven by higher pricing and manufacturing efficiencies, as well as inventory and other asset write-downs at WSS in the prior year period that did not recur. Manufacturing efficiencies largely resulted from the expected benefits associated with the closure of our legacy brass foundry last year.
Melissa Rasmussen: Thanks, Paul, and good morning, everyone. We are pleased to report a great start to the year, with consolidated net sales increasing 4.6% to $318.2 million, surpassing last year's strong first quarter performance. This growth was driven primarily by higher pricing across most product lines, partially offset by slightly lower volumes. Gross profit for the quarter increased 16.3% to $119.8 million, and gross margin expanded 380 basis points to 37.6%. The improvement in gross profit was primarily driven by higher pricing and manufacturing efficiencies, as well as inventory and other asset write-downs at WSS in the prior year period that did not recur. Manufacturing efficiencies largely resulted from the expected benefits associated with the closure of our legacy brass foundry last year.
Speaker #1: Surpassing last year's strong first quarter performance. This growth was driven primarily by higher pricing across most product lines, partially offset by slightly lower volumes.
Speaker #1: Gross profit for the quarter increased 16.3% to $119.8 million, and gross margin expanded 380 basis points to gross profit was primarily driven by higher pricing in manufacturing efficiencies.
Speaker #1: As well as inventory and other asset write-downs at WFS in the prior year period that did not recur. Manufacturing efficiencies largely resulted from the expected benefits associated with the foundry last year.
Speaker #1: These benefits were partially offset by higher tariffs and ongoing inflationary pressures. Total SG&A expenses for the quarter, of $59.8 million, increased 5.9 million compared with the prior year.
Melissa Rasmussen: These benefits were partially offset by higher tariffs and ongoing inflationary pressures. Total SG&A expenses for the quarter of $59.8 million increased $5.9 million compared with the prior year, reflecting higher personnel costs, inflationary pressures, and unfavorable foreign currency impacts. Operating income increased 19.6% in the quarter to $56.7 million, compared with the prior year... Operating income included $3.3 million of strategic reorganization and other charges, which have been excluded from adjusted results, along with the inventory and other asset write-downs at WSS. Turning now to our consolidated non-GAAP results for the quarter. Adjusted operating income increased 14.5% in the first quarter to $60 million, driven by higher pricing and continued manufacturing efficiencies, partially offset by increased tariffs, inflationary pressures, and higher SG&A expenses.
Melissa Rasmussen: These benefits were partially offset by higher tariffs and ongoing inflationary pressures. Total SG&A expenses for the quarter of $59.8 million increased $5.9 million compared with the prior year, reflecting higher personnel costs, inflationary pressures, and unfavorable foreign currency impacts. Operating income increased 19.6% in the quarter to $56.7 million, compared with the prior year... Operating income included $3.3 million of strategic reorganization and other charges, which have been excluded from adjusted results, along with the inventory and other asset write-downs at WSS. Turning now to our consolidated non-GAAP results for the quarter. Adjusted operating income increased 14.5% in the first quarter to $60 million, driven by higher pricing and continued manufacturing efficiencies, partially offset by increased tariffs, inflationary pressures, and higher SG&A expenses.
Speaker #1: Reflecting higher personnel costs, inflationary pressures, and unfavorable foreign currency impacts. Operating income increased 19.6% in the quarter to $56.7 million, compared with the prior year.
Speaker #1: Operating income included $3.3 million of strategic reorganization and other charges, which have been excluded from adjusted results along with the inventory and other asset write-downs at WFS.
Speaker #1: Turning now to our consolidated non-GAAP results for the quarter. Adjusted operating income increased 14.5% in the first quarter to $60 million, driven by higher pricing and continued manufacturing efficiencies, partially offset by increased tariffs, inflationary pressures, and higher SG&A expenses.
Speaker #1: Adjusted operating margin expanded 170 basis points year over year to 18.9%. Adjusted EBITDA reached a first quarter record of $72.1 million, an increase of 13.5% compared to the prior year quarter.
Melissa Rasmussen: Adjusted operating margin expanded 170 basis points year-over-year to 18.9%. Adjusted EBITDA reached a first quarter record of $72.1 million, an increase of 13.5% compared to the prior year quarter. Adjusted EBITDA margin expanded 180 basis points year-over-year to 22.7%, marking a new first quarter record. Over the last twelve months, adjusted EBITDA was $335 million, or 23.2% of net sales, a 90 basis points improvement compared with the prior twelve-month period. Net interest expense of $1 million declined to $0.6 million, reflecting higher interest income. Adjusted net income per diluted share increased by 16% year-over-year to 29 cents, setting another first quarter record. Moving on to quarterly segment performance, starting with WSS.
Melissa Rasmussen: Adjusted operating margin expanded 170 basis points year-over-year to 18.9%. Adjusted EBITDA reached a first quarter record of $72.1 million, an increase of 13.5% compared to the prior year quarter. Adjusted EBITDA margin expanded 180 basis points year-over-year to 22.7%, marking a new first quarter record. Over the last twelve months, adjusted EBITDA was $335 million, or 23.2% of net sales, a 90 basis points improvement compared with the prior twelve-month period. Net interest expense of $1 million declined to $0.6 million, reflecting higher interest income. Adjusted net income per diluted share increased by 16% year-over-year to 29 cents, setting another first quarter record. Moving on to quarterly segment performance, starting with WSS.
Speaker #1: Adjusted EBITDA margin expanded 180 basis points year over year to 22.7%, marking a new first quarter record. Over the last 12 months, adjusted EBITDA was $335 million or 23.2% of net sales.
Speaker #1: A 90 basis points improvement compared with the prior 12-month period. Net interest expense of $1 million declined 0.6 million, reflecting higher interest income. Adjusted net income per diluted share increased by 16% year over year to 29 cents, setting another first quarter record.
Speaker #1: Moving on to quarterly segment WFS. Net sales decreased 0.9% to $173 million, primarily reflecting lower volumes of service brass products, which were partially offset by higher pricing across most product lines and increased volumes of specialty. Income increased 28% to $49.4 million. The increase reflects benefits from manufacturing efficiencies and higher pricing, which more than offsets increased tariffs, inflationary pressures, lower volumes, and higher SG&A expenses.
Melissa Rasmussen: Net sales decreased 0.9% to $173 million, primarily reflecting lower volumes of service brass products, which were partially offset by higher pricing across most product lines and increased volumes of specialty valves. Adjusted operating income increased 28% to $49.4 million. The increase reflects benefits from manufacturing efficiencies and higher pricing, which more than offsets increased tariffs, inflationary pressures, lower volumes, and higher SG&A expenses. Adjusted EBITDA grew 26.4% to $56.5 million, and adjusted EBITDA margin expanded 710 basis points to 32.7%, compared with 25.6% in the prior year period. WSS set a new record for quarterly adjusted EBITDA margin. I'll now move to quarterly results for WMS.
Melissa Rasmussen: Net sales decreased 0.9% to $173 million, primarily reflecting lower volumes of service brass products, which were partially offset by higher pricing across most product lines and increased volumes of specialty valves. Adjusted operating income increased 28% to $49.4 million. The increase reflects benefits from manufacturing efficiencies and higher pricing, which more than offsets increased tariffs, inflationary pressures, lower volumes, and higher SG&A expenses. Adjusted EBITDA grew 26.4% to $56.5 million, and adjusted EBITDA margin expanded 710 basis points to 32.7%, compared with 25.6% in the prior year period. WSS set a new record for quarterly adjusted EBITDA margin. I'll now move to quarterly results for WMS.
Speaker #1: Adjusted EBITDA grew 26.4% to $56.5 million, and adjusted EBITDA margin expanded 710 basis points to 32.7%, compared with 25.6% in the prior-year period.
Speaker #1: WFS set a new record for quarterly adjusted EBITDA margin. I'll now move to quarterly results for Net sales increased WMS. 12% to $145.2 million, driven by higher pricing across most product lines and strong volume growth of hydrants.
Melissa Rasmussen: Net sales increased 12% to $145.2 million, driven by higher pricing across most product lines and strong volume growth of hydrants. The benefits were partially offset by lower volumes for natural gas distribution and repair products. Adjusted operating income decreased 11.2% to $24.5 million. The decline reflects increased tariffs, manufacturing inefficiencies, higher SG&A expenses, inflationary pressures, and unfavorable foreign currency. These headwinds more than offset the benefits from higher pricing and hydrant volume growth. Adjusted EBITDA in the quarter decreased 9.5% to $29.5 million, and adjusted EBITDA margin contracted 480 basis points to 20.3%. Moving on to cash flow.
Melissa Rasmussen: Net sales increased 12% to $145.2 million, driven by higher pricing across most product lines and strong volume growth of hydrants. The benefits were partially offset by lower volumes for natural gas distribution and repair products. Adjusted operating income decreased 11.2% to $24.5 million. The decline reflects increased tariffs, manufacturing inefficiencies, higher SG&A expenses, inflationary pressures, and unfavorable foreign currency. These headwinds more than offset the benefits from higher pricing and hydrant volume growth. Adjusted EBITDA in the quarter decreased 9.5% to $29.5 million, and adjusted EBITDA margin contracted 480 basis points to 20.3%. Moving on to cash flow.
Speaker #1: The benefits were partially offset by lower volumes for natural gas distribution and repair products. Adjusted operating income decreased 11.2% to $24.5 million, the decline reflects increased tariffs, manufacturing inefficiencies, higher SG&A expenses, inflationary pressures, and unfavorable foreign currency.
Speaker #1: These headwinds more than offset the benefits from higher pricing and hydrant volume growth. Adjusted EBITDA in the quarter decreased 9.5% to $29.5 million, and adjusted EBITDA margin contracted 480 basis points to 20.3%.
Speaker #1: Moving on to cash flow. Net cash provided by operating activities for the three-month period was $61.2 million, an increase of $7.1 million compared with the prior year.
Melissa Rasmussen: Net cash provided by operating activities for the three-month period was $61.2 million, an increase of $7.1 million compared with the prior year. The improvement was primarily driven by higher net income and non-cash adjustments, partially offset by changes in working capital and other assets and liabilities. Capital expenditures through the first three months of the year increased to $17.2 million, compared with $11.9 million in the prior year, reflecting continued investments in our iron foundries. Free cash flow for the period increased $1.8 million to $44 million and was 96% of adjusted net income, in line with our expectations. We ended the quarter with $452 million of total debt and $460 million of cash and cash equivalents.
Melissa Rasmussen: Net cash provided by operating activities for the three-month period was $61.2 million, an increase of $7.1 million compared with the prior year. The improvement was primarily driven by higher net income and non-cash adjustments, partially offset by changes in working capital and other assets and liabilities. Capital expenditures through the first three months of the year increased to $17.2 million, compared with $11.9 million in the prior year, reflecting continued investments in our iron foundries. Free cash flow for the period increased $1.8 million to $44 million and was 96% of adjusted net income, in line with our expectations. We ended the quarter with $452 million of total debt and $460 million of cash and cash equivalents.
Speaker #1: The improvement was primarily driven by higher net income and non-cash adjustments, partially offset by changes in working capital and other assets and liabilities. Capital expenditure through the first three months of the year increased to $17.2 million, compared with $11.9 million in the prior year, reflecting continued investments in our iron foundries.
Speaker #1: Free cash flow for the period increased 1.8 million to $44 million, and was 96% of adjusted net income, in line with our expectations. We ended the quarter with $452 million of total debt and $460 million of cash and cash equivalents.
Speaker #1: Our balance sheet remains strong and flexible, with no debt maturities until June 2029 and $450 million of senior notes at a 4% fixed interest rate.
Melissa Rasmussen: Our balance sheet remains strong and flexible, with no debt maturities until June 2029 and $450 million of senior notes at a 4% fixed interest rate. We had no borrowings under our ABL and ended the quarter with $623 million of total liquidity, including $164 million of availability under the ABL. As a result, we continue to maintain ample liquidity, capacity, and financial flexibility to support our strategic priorities, including pursuing acquisitions. I will now review our updated outlook for fiscal 2026. We are raising our full year guidance for consolidated net sales by $20 million at the midpoint of the range.
Melissa Rasmussen: Our balance sheet remains strong and flexible, with no debt maturities until June 2029 and $450 million of senior notes at a 4% fixed interest rate. We had no borrowings under our ABL and ended the quarter with $623 million of total liquidity, including $164 million of availability under the ABL. As a result, we continue to maintain ample liquidity, capacity, and financial flexibility to support our strategic priorities, including pursuing acquisitions. I will now review our updated outlook for fiscal 2026. We are raising our full year guidance for consolidated net sales by $20 million at the midpoint of the range.
Speaker #1: We had AVL and ended the quarter with no borrowings under our $623 million of total liquidity, including $164 million of availability under the AVL.
Speaker #1: As a result, we continue to maintain ample liquidity capacity and financial flexibility to support our strategic priorities, including pursuing acquisitions. I will now review our updated outlook for fiscal 2026.
Speaker #1: We are raising our full-year guidance for consolidated net sales by $20 million at the midpoint of the range. Our net sales growth is now expected to be between 2.8% and 4.2% year over year.
Melissa Rasmussen: Our net sales growth is now expected to be between 2.8% and 4.2% year-over-year, reflecting our strong first quarter performance and our current expectations for end market demand, orders, and price realization, which includes expected benefits from our recently announced price actions across most product lines. We are also increasing our annual Adjusted EBITDA guidance by $10 million at the midpoint, to a new range of $355 to $360 million. At the midpoint, our updated guidance range represents an Adjusted EBITDA margin of more than 24%, an improvement of more than 100 basis points year-over-year. We are maintaining our expectations for total SG&A expenses. We continue to expect our second half Adjusted EBITDA margin to be higher than the first half of the year, largely driven by seasonality of net sales.
Melissa Rasmussen: Our net sales growth is now expected to be between 2.8% and 4.2% year-over-year, reflecting our strong first quarter performance and our current expectations for end market demand, orders, and price realization, which includes expected benefits from our recently announced price actions across most product lines. We are also increasing our annual Adjusted EBITDA guidance by $10 million at the midpoint, to a new range of $355 to 360 million. At the midpoint, our updated guidance range represents an Adjusted EBITDA margin of more than 24%, an improvement of more than 100 basis points year-over-year. We are maintaining our expectations for total SG&A expenses. We continue to expect our second half Adjusted EBITDA margin to be higher than the first half of the year, largely driven by seasonality of net sales.
Speaker #1: Reflecting our strong first quarter performance and our current expectations for end-market demand, orders and price realization, which includes expected benefits from our recently announced price actions across most product lines.
Speaker #1: We are also increasing our annual adjusted EBITDA guidance by $10 million at the $355 and $360 million. At the midpoint, our updated guidance range represents an adjusted EBITDA margin of more than 24%, an improvement of more than 100 basis points year over year.
Speaker #1: We are maintaining our expectations for total SG&A expenses. We continue to expect our second half adjusted EBITDA margin to be higher than the first half of the year, largely driven by seasonality of net sales.
Speaker #1: Additionally, we expect the benefits from our recently announced price actions will start to phase in the coming months. Benefiting gross margins in the second half of the year.
Melissa Rasmussen: Additionally, we expect the benefits from our recently announced price actions will start to phase in the coming months, benefiting gross margins in the second half of the year. We are reaffirming our expectations for capital expenditures to be between $60 and 65 million and continue to expect free cash flow to exceed 85% of adjusted net income for the year. With that, I'll turn it back to Paul for closing comments.
Melissa Rasmussen: Additionally, we expect the benefits from our recently announced price actions will start to phase in the coming months, benefiting gross margins in the second half of the year. We are reaffirming our expectations for capital expenditures to be between $60 and 65 million and continue to expect free cash flow to exceed 85% of adjusted net income for the year. With that, I'll turn it back to Paul for closing comments.
Speaker #1: We are reaffirming our expectations for capital expenditures to be between $60 and $65 million and continue to expect free cash flow to exceed $85% of adjusted net income for the year.
Speaker #1: With that, I'll turn it back to Paul for closing.
Speaker #2: Thanks, Melissa. I want to provide a few closing comments before opening up for Q&A. We are excited about our start to the year, as we continue to execute well despite the challenging external environment.
Paul McAndrew: Thanks, Melissa. I want to provide a few closing comments before opening it up for Q&A. We are excited about our start of the year as we continue to execute well despite the challenging external environment. We are pleased to be raising our annual guidance at this point in the year. We are benefiting from our strategic capital investments and improving commercial and operational execution. We are confident that we can build on our momentum to accelerate net sales growth and expand our margins further. I want to thank all our employees worldwide for the extraordinary commitment and passion in supporting our customers and communities. They are the reason for our success and why Mueller has been a trusted partner for over a century. That concludes our comments. Operator, please open the line up for questions.
Paul McAndrew: Thanks, Melissa. I want to provide a few closing comments before opening it up for Q&A. We are excited about our start of the year as we continue to execute well despite the challenging external environment. We are pleased to be raising our annual guidance at this point in the year. We are benefiting from our strategic capital investments and improving commercial and operational execution. We are confident that we can build on our momentum to accelerate net sales growth and expand our margins further. I want to thank all our employees worldwide for the extraordinary commitment and passion in supporting our customers and communities. They are the reason for our success and why Mueller has been a trusted partner for over a century. That concludes our comments. Operator, please open the line up for questions.
Speaker #2: We are pleased to be raising our annual guidance at this point in the year. We are benefiting from our strategic capital investments and improving commercial and operational execution.
Speaker #2: We are confident that we can build on growth and expand our margins further. I want to thank all our employees worldwide for their contributions.
Speaker #2: They are the reason for our success and why Mueller has been a trusted partner for over a century. That concludes our comments. Operator, please open the lineup for
Speaker #2: questions.
Speaker #3: You, sir. At this time, if you would like to thank one, to withdraw your question, ask a question, or take a moment, you may press star, please.
Operator: Thank you, sir. At this time, if you would like to ask a question, you may press star one. To withdraw your question, please press star two. One moment, please. Brian Lee with Goldman Sachs, your line is open.
Operator: Thank you, sir. At this time, if you would like to ask a question, you may press star one. To withdraw your question, please press star two. One moment, please. Brian Lee with Goldman Sachs, your line is open.
Speaker #3: Brian Lee with Goldman Sachs, your line is
Speaker #4: Hey, guys. This is Tyler Bissett on for Brian. Thanks for taking our questions. So you guys took revenue guidance up for the year, and you're reflecting the one-key results and price increases so far.
Tyler Bissett: Hey, guys, this is Tyler Bissett on for Brian. Thanks for taking our questions. So you guys took revenue guidance up for the year, and you're reflecting the Q1 results and price increases so far. So can you quantify how much you guys have raised prices so far this year and how that compares to prior years? Should we think about this revised guidance as almost entirely due to the higher prices, or are you seeing improved demand across any key areas of your business?
Tyler Bissett: Hey, guys, this is Tyler Bissett on for Brian. Thanks for taking our questions. So you guys took revenue guidance up for the year, and you're reflecting the Q1 results and price increases so far. So can you quantify how much you guys have raised prices so far this year and how that compares to prior years? Should we think about this revised guidance as almost entirely due to the higher prices, or are you seeing improved demand across any key areas of your business?
Speaker #4: So can you quantify how much you guys have raised prices so far this year and how that compares to prior years? Should we think about this revised guidance as almost entirely due to the higher prices, or are you seeing improved demand across any key areas of your
Speaker #4: So can you quantify how much you guys have raised prices so far this year and how that compares to prior years? Should we think about this revised guidance as almost entirely due to the higher prices, or are you seeing improved demand across any key areas of your business?
Paul McAndrew: Yeah, good morning. So as we said in our prior guidance, it didn't include our annual price increase, which we recently announced, which we will see the main benefit in Q3, our fiscal Q3. Prior guidance included the prior price increase, plus the tariff price increase that we put in effect, which really took effect in Q4 of the prior fiscal year. So in your question, yes, the majority of the increased growth in our guidance is predominantly price related.
Paul McAndrew: Yeah, good morning. So as we said in our prior guidance, it didn't include our annual price increase, which we recently announced, which we will see the main benefit in Q3, our fiscal Q3. Prior guidance included the prior price increase, plus the tariff price increase that we put in effect, which really took effect in Q4 of the prior fiscal year. So in your question, yes, the majority of the increased growth in our guidance is predominantly price related.
Speaker #5: Yeah, good morning. So as we said in our prior guidance, it didn't include our annual price increase, which we recently announced. Which we will see the main benefit in Q3, our fiscal Q3.
Speaker #5: Prior guidance included the prior price increase plus the tariff price increase that we put in effect, which really took effect in Q4 of the prior fiscal year.
Speaker #5: So, in your question, yes, the majority of the increased growth in our guidance is predominantly—
Speaker #5: So in your question, yes, the majority of the increased growth in our guidance is predominantly price-related. All
Speaker #4: Right, thank you. And then I guess, just in relation to that on Water Flow, you guys saw a nice pickup in margins and you called that manufacturing efficiencies and favorable pricing.
Tyler Bissett: All right. Thank you. And then I guess, just like in relation to that, on water flow, you guys saw a nice pickup in margins, and you called out manufacturing efficiencies and favorable pricing. So can you break down the impacts from those two items and how you expect margins to trend for the balance of the year?
Tyler Bissett: All right. Thank you. And then I guess, just like in relation to that, on water flow, you guys saw a nice pickup in margins, and you called out manufacturing efficiencies and favorable pricing. So can you break down the impacts from those two items and how you expect margins to trend for the balance of the year?
Speaker #4: So, can you break down the impacts from those two items, and how you expect margins to trend for the balance of the year?
Speaker #3: Sure. With water flow, I want to had mentioned last year that we would expect to see a benefit as we closed the legacy brass foundry.
Melissa Rasmussen: Sure. With water flow, I want to remind you that we had mentioned last year that we would expect to see a benefit as we closed the legacy brass foundry. We saw a benefit in the second half of last year, and we expect to see a benefit from that in the first half of this year. So we benefited from the closure of the iron foundry in Q1, and that was the largest impact. And like I said, you'll see that again through Q2. Sorry, we had some impact related to tariffs, and we'll continue to expect to see that as well. The tariffs will start to lap in the second half of the year, as they started to really impact us as a whole in Q3 of last year.
Melissa Rasmussen: Sure. With water flow, I want to remind you that we had mentioned last year that we would expect to see a benefit as we closed the legacy brass foundry. We saw a benefit in the second half of last year, and we expect to see a benefit from that in the first half of this year. So we benefited from the closure of the iron foundry in Q1, and that was the largest impact. And like I said, you'll see that again through Q2. Sorry, we had some impact related to tariffs, and we'll continue to expect to see that as well. The tariffs will start to lap in the second half of the year, as they started to really impact us as a whole in Q3 of last year.
Speaker #3: We saw a benefit in the second half of last year, and we expect to see a benefit from that in the first half of this year.
Speaker #3: So we benefited from the closure of the iron foundry in first quarter. And that was the you'll see that again through second quarter. With the we did have—sorry, we had some impact related to tariffs, and we'll continue to expect to see that as well.
Speaker #3: The tariffs will start to lap in the second half of the year, as they started to really impact us as a whole in third quarter of last year.
Speaker #4: All right. Thank you very much.
Tyler Bissett: All right. Thank you very much.
Tyler Bissett: All right. Thank you very much.
Speaker #5: Thank
Speaker #5: you. Thank you.
Paul McAndrew: Thank you.
Paul McAndrew: Thank you.
Operator: Thank you. Our next caller is Dean Dray with RBC Capital Markets. Your line is open, sir.
Operator: Thank you. Our next caller is Deane Dray with RBC Capital Markets. Your line is open, sir.
Speaker #3: Our next caller is Deandre with RBC Capital Markets. Your line is open.
Speaker #3: sir. Thank you.
Deane Dray: Thank you. Good morning, everyone.
Deane Dray: Thank you. Good morning, everyone.
Speaker #6: Good morning,
Speaker #6: everyone. Hey, can I start
Speaker #7: Good morning,
Paul McAndrew: Morning, Dean.
Paul McAndrew: Morning, Dean.
Speaker #7: Dean.
Deane Dray: Hey, can I start with once again congratulating Marty? I wish you all the best, and truly, you're leaving the company in really good hands. It isn't often that you see, you know, smooth leadership transitions. It's nice when it happens, and I just wanted to call that out and again, wish you all the best.
Deane Dray: Hey, can I start with once again congratulating Marty? I wish you all the best, and truly, you're leaving the company in really good hands. It isn't often that you see, you know, smooth leadership transitions. It's nice when it happens, and I just wanted to call that out and again, wish you all the best.
Speaker #6: with, once again, congratulating Marty? I wish you all the best and truly, you're leaving the company in really good hands. It isn't often that you see smooth leadership transitions.
Speaker #6: It's nice when it happens, and I just wanted to call that out. And again, wish you all the best.
Speaker #6: best. Great.
Melissa Rasmussen: Great. Well, look, thank you, Dean, and I think, just echoing what you said, I think everything was structured to ensure that it was a very smooth CEO transition, and I think things are going very, very well and look forward to Paul and the leadership team taking this company forward.
Martie Zakas: Great. Well, look, thank you, Dean, and I think, just echoing what you said, I think everything was structured to ensure that it was a very smooth CEO transition, and I think things are going very, very well and look forward to Paul and the leadership team taking this company forward.
Speaker #3: Well, look, thank you, Dean, and I think, just echoing what you said, I think everything was structured to ensure that it was a very smooth CEO transition, and I think things are going very, very well.
Speaker #3: And look forward to Paul and the leadership team taking this company forward.
Speaker #6: Terrific. And then just for Melissa, can you size for us the inflation pressures? And just to clarify, you said that the price increases should more than offset those pressures as they stand today?
Deane Dray: Terrific. And then just, for Melissa, can you size for us the inflation pressures? And just to clarify, you said that the price increases should more than offset those pressures, as they stand today.
Deane Dray: Terrific. And then just, for Melissa, can you size for us the inflation pressures? And just to clarify, you said that the price increases should more than offset those pressures, as they stand today.
Melissa Rasmussen: Yes. As the price increases, we do expect to be price-cost positive for the full year. For inflation, we typically see a low single-digit range of inflation. However, since the tariffs went into effect last year, that's more than doubled. In our guidance, we have incorporated an approximately 3% impact from the tariffs as we, as we netted out the efficiencies that we expected to gain from that. So a 3% impact is what we're seeing related to the tariffs.
Melissa Rasmussen: Yes. As the price increases, we do expect to be price-cost positive for the full year. For inflation, we typically see a low single-digit range of inflation. However, since the tariffs went into effect last year, that's more than doubled. In our guidance, we have incorporated an approximately 3% impact from the tariffs as we, as we netted out the efficiencies that we expected to gain from that. So a 3% impact is what we're seeing related to the tariffs.
Speaker #3: Price increases, we do expect to be yes. As the price–positive price, cost positive for the full year. For inflation, we typically see a low single-digit range of inflation.
Speaker #3: However, since the tariffs went into effect last year, that's more than doubled. In our guidance, we have incorporated an approximately 3% impact from the tariffs as we netted out the efficiencies that we expected to gain from that.
Speaker #3: So a 3% impact is what we're seeing related to the tariffs.
Speaker #6: Great. And then just the second question, has there been any update on your assumptions regarding residential lot development? Just kind of activity there. What's the expectation?
Deane Dray: Great. And then just the second question: Has there been any update on your assumptions regarding residential lot development, just kind of activity there? What's the expectation?
Deane Dray: Great. And then just the second question: Has there been any update on your assumptions regarding residential lot development, just kind of activity there? What's the expectation?
Speaker #5: Hey, good morning, Dean. There's been no change in our assumption. We still anticipate that high single-digit range of slowdown in residential construction. We track external reports.
Paul McAndrew: Hey, good morning, Dean. There's been no change in our assumption. We still anticipate that high single-digit range of slowdown in residential construction. You know, we track external reports, we look at the public homebuilders, and they kind of all aligned in what we are guiding to there on the decline in housing starts. But I think if you think of that positive, or given the low inventory on homes, the population demographics, we could see land and housing activity increase, particularly if rates lower, and we are ready to support that activity.
Paul McAndrew: Hey, good morning, Dean. There's been no change in our assumption. We still anticipate that high single-digit range of slowdown in residential construction. You know, we track external reports, we look at the public homebuilders, and they kind of all aligned in what we are guiding to there on the decline in housing starts. But I think if you think of that positive, or given the low inventory on homes, the population demographics, we could see land and housing activity increase, particularly if rates lower, and we are ready to support that activity.
Speaker #5: public homebuilders. We look at the And they kind of all aligned in what we are guiding to there on the decline in housing starts.
Speaker #5: But I think as you think about positive, or given the low inventory on homes, the population demographics, we could see land and housing activity increase, particularly if rates lower and we are ready to support that
Speaker #5: activity. Great.
Deane Dray: Great. Appreciate it. Thank you.
Deane Dray: Great. Appreciate it. Thank you.
Speaker #6: Appreciate it. Thank you.
Speaker #3: Thank you. And as a
Operator: Thank you. As a reminder, if you would like to ask a question, you may press star one. Our next caller is Bryan Blair with Oppenheimer. Your line is open, sir.
Operator: Thank you. As a reminder, if you would like to ask a question, you may press star one. Our next caller is Bryan Blair with Oppenheimer. Your line is open, sir.
Speaker #3: reminder, if you would like to ask a question, you may press star one. Our next caller is Brian Blair with Oppenheimer. Your line is open,
Speaker #3: sir. Thank
Bryan Blair: Thank you. Morning, everyone, and I'll echo Dean's sentiments. Congrats, Marty. You're definitely leaving Mueller in a very solid place.
Bryan Blair: Thank you. Morning, everyone, and I'll echo Dean's sentiments. Congrats, Marty. You're definitely leaving Mueller in a very solid place.
Speaker #7: Echo Dean's sentiments. Congrats, Marty. You're definitely leaving Mueller in a very solid—you. Good morning, everyone. And I'll
Speaker #7: place. Very good.
Melissa Rasmussen: Very good. Thanks, Brian.
Martie Zakas: Very good. Thanks, Brian.
Speaker #3: Thanks,
Speaker #3: Brian. I have a couple
Bryan Blair: I have a couple of higher level questions. You know, Paul, you'd mentioned that, you know, Mueller's transformation remains kind of early, early innings, early stages. Maybe offer a little more color on that. You know, what are the next steps in the team's journey, and what does that mean for, you know, through the cycle growth prospects, margin entitlement, and any of those kind of key metrics?
Bryan Blair: I have a couple of higher level questions. You know, Paul, you'd mentioned that, you know, Mueller's transformation remains kind of early, early innings, early stages. Maybe offer a little more color on that. You know, what are the next steps in the team's journey, and what does that mean for, you know, through the cycle growth prospects, margin entitlement, and any of those kind of key metrics?
Speaker #7: of higher-level questions. Paul, you'd mentioned that Mueller's transformation remains kind of early innings, early stages. Maybe offer a little more color on that. What are the next steps in the team's journey?
Speaker #7: And what does that mean for through the cycle growth prospects, margin entitlement, any of those kind of key metrics?
Speaker #5: Yeah, good morning, Brian. We've really improved our commercial and operational investments over the last few years, and bringing a lot more discipline to the organization, which you can kind of see in how we've been achieving our results and our margin expansion.
Paul McAndrew: Yeah. Good morning, Brian. You know, we've really improved on our commercial and operational investments over the last few years, and bringing a lot more discipline to the organization, which you can kind of see in how we've been achieving our results and our margin expansion. I think looking forward, the capital expenditures that we got laid out in our iron foundries for domestic capability is gonna drive further capacity and further efficiency, so further margin expansion. And then just continuing that strategy of how we interact with our customers, either through digitally or in terms of our training programs, our whole commercial team, segued with the operational investments. And you know, we're well positioned with our specialty valve portfolio to capture the project work that is related to that product line.
Paul McAndrew: Yeah. Good morning, Brian. You know, we've really improved on our commercial and operational investments over the last few years, and bringing a lot more discipline to the organization, which you can kind of see in how we've been achieving our results and our margin expansion. I think looking forward, the capital expenditures that we got laid out in our iron foundries for domestic capability is gonna drive further capacity and further efficiency, so further margin expansion.
Speaker #5: I think looking forward, the capital expenditures that we got laid out in our iron foundries for domestic capability is going to drive further capacity and further efficiencies for further margin expansion.
Speaker #5: And then just continuing that strategy of how we interact with our customers, either through digitally or in terms of our training programs, our whole commercial team, segued with the operational investments.
Paul McAndrew: And then just continuing that strategy of how we interact with our customers, either through digitally or in terms of our training programs, our whole commercial team, segued with the operational investments. And you know, we're well positioned with our specialty valve portfolio to capture the project work that is related to that product line. So overall, continue our commercial operational initiatives, and drive capacity and margin expansion with our capital investments.
Speaker #5: And we're well positioned with our specialty valve portfolio to capture the project work that's related to that product line. So overall, continue our commercial operational initiatives and drive capacity and margin expansion with our capital investments.
Paul McAndrew: So overall, continue our commercial operational initiatives, and drive capacity and margin expansion with our capital investments.
Speaker #7: Okay, understood. That all makes sense. And how about capital deployment? I think it's fair to say that your team's in a better position and has the rights to deploy capital more so than at any time in Mueller's history.
Bryan Blair: Okay, understood. That all makes sense. And how about capital deployment? I think it's fair to say that your team's in a better position, you know, has the rights to deploy capital more so than any time in Mueller's history. Balance sheet's in great, great shape, generating free, solid cash flow. So it'd be great to hear, you know, the funnel developments, thoughts on actionability, the kinds of assets of greatest interest, you know, if and when they're available.
Bryan Blair: Okay, understood. That all makes sense. And how about capital deployment? I think it's fair to say that your team's in a better position, you know, has the rights to deploy capital more so than any time in Mueller's history. Balance sheet's in great, great shape, generating free, solid cash flow. So it'd be great to hear, you know, the funnel developments, thoughts on actionability, the kinds of assets of greatest interest, you know, if and when they're available.
Speaker #7: Balance sheets in great shape. Generating pretty solid cash flow. So it'd be great to hear that funnel development thoughts on actionability, the kinds of assets of greatest interest, if and when they're available.
Speaker #5: Yeah, great point, Brian. We are in a much better position now. Our improved momentum on execution and acquisitions are more of a priority for us.
Paul McAndrew: Yeah, great, great point, Brian. You know, we are in a much more better position now. Our improved momentum on execution acquisitions are more of a priority for us. We continue to evaluate the funnel, you know, evaluating opportunities with a strong focus on drinking water, wastewater, and infrastructure exposure, where we can drive synergies with our operations and our commercial teams. It is a priority of ours.
Paul McAndrew: Yeah, great, great point, Brian. You know, we are in a much more better position now. Our improved momentum on execution acquisitions are more of a priority for us. We continue to evaluate the funnel, you know, evaluating opportunities with a strong focus on drinking water, wastewater, and infrastructure exposure, where we can drive synergies with our operations and our commercial teams. It is a priority of ours.
Speaker #5: We continue to evaluate the funnel. Evaluating opportunities with a strong focus on drinking water and wastewater, and infrastructure exposure where we can drive synergies with our operations and our commercial teams, is a priority.
Speaker #5: ours. And Brian, I'll add on
Melissa Rasmussen: Brian, I'll add on related to the capital as far as our capital expenditures. We had expressed that we will begin spending 4% to 5% of net sales in the next couple of years. Paul's earlier point, that is related to our iron foundries and investing in domestic capabilities, and to drive efficiencies and increase capacity across the board.
Melissa Rasmussen: Brian, I'll add on related to the capital as far as our capital expenditures. We had expressed that we will begin spending 4% to 5% of net sales in the next couple of years. Paul's earlier point, that is related to our iron foundries and investing in domestic capabilities, and to drive efficiencies and increase capacity across the board.
Speaker #3: Related to the capital, as far as our capital expenditures, we had expressed that we will begin spending 4% to 5% of net sales in the next couple of years.
Speaker #3: And Paul's earlier point, that is related to our iron foundries and investing in domestic capabilities. And to drive efficiencies and increase capacity across the board.
Speaker #7: Understood. I was more focused on inorganic or M&A deployments with the follow-up question, but completely understand that the higher return is on the organic side and you have that path forward.
Bryan Blair: Understood. I was more focused on inorganic or M&A deployments with the follow-up question, but completely understand that, you know, the higher return is on the organic side, and you have that path forward. Thanks again.
Bryan Blair: Understood. I was more focused on inorganic or M&A deployments with the follow-up question, but completely understand that, you know, the higher return is on the organic side, and you have that path forward. Thanks again.
Speaker #7: Thanks
Speaker #7: again.
Speaker #5: Thanks,
Paul McAndrew: Thanks, Brian.
Paul McAndrew: Thanks, Brian.
Speaker #5: Brian. Thank you.
Operator: Thank you. And the last question comes from Joseph Giordano with TD Cowen. Your line is open, sir.
Operator: Thank you. And the last question comes from Joseph Giordano with TD Cowen. Your line is open, sir.
Speaker #3: And the last question comes from Joseph Giordano with TD Cowen. Your line is open.
Speaker #3: sir. Good morning.
[Analyst] (TD Cowen): Good morning. This is Michael on for Joe.
[Analyst] (TD Cowen): Good morning. This is Michael on for Joe.
Speaker #8: This is Michael on for
Paul McAndrew: Morning, Michael.
Paul McAndrew: Morning, Michael.
[Analyst] (TD Cowen): Thank you for your time. So just wondering, can you just run through your exposures, maybe help us get a better understanding of the, or, you know, repair and replace contribution in the quarter, new builds, gas and tech, such as meters and leak detection. Understanding that for the quarter would be helpful. And then, you know, as we look towards the remainder of the year, maybe just help us contextualize those assumptions, and guidance.
Speaker #8: Thank you for your Joe. time. So just wondering, can you just run through your exposures, maybe help us get a better understanding of the repair and replace contribution in the quarter, new builds, gas and tech, such as meters and leak detection, understanding that for the quarter would be helpful.
[Analyst] (TD Cowen): Thank you for your time. So just wondering, can you just run through your exposures, maybe help us get a better understanding of the, or, you know, repair and replace contribution in the quarter, new builds, gas and tech, such as meters and leak detection. Understanding that for the quarter would be helpful. And then, you know, as we look towards the remainder of the year, maybe just help us contextualize those assumptions, and guidance.
Speaker #8: And then, as we look towards the remainder of the year, maybe just help us contextualize those assumptions in guidance.
Speaker #3: Sure. The quarter, we had a strong quarter, grew by 4.6%. And that was related to higher pricing across most of our product lines and slightly lower volumes.
Melissa Rasmussen: Sure. In the quarter, we had a strong quarter, grew by 4.6%, and that was related to higher pricing across most of our product lines and slightly lower volumes. We did see volume growth in specialty and hydrants. And that more than offset, was offset by a decrease in service brass, natural gas, and repair. We continue to expect to see resilient end markets. Paul had mentioned earlier that we will continue to expect to see a decrease in the residential outlook, but strong performance in the residential or the municipal markets. And then how it flows to guidance, as far as the overall guidance report, we expect that we'll see growth on a consolidated basis for each subsequent quarter for the year.
Melissa Rasmussen: Sure. In the quarter, we had a strong quarter, grew by 4.6%, and that was related to higher pricing across most of our product lines and slightly lower volumes. We did see volume growth in specialty and hydrants. And that more than offset, was offset by a decrease in service brass, natural gas, and repair. We continue to expect to see resilient end markets. Paul had mentioned earlier that we will continue to expect to see a decrease in the residential outlook, but strong performance in the residential or the municipal markets.
Speaker #3: We did see volume growth in specialty and hydrants. And that more than offset was offset by a decrease in service breadth and natural gas and repair.
Speaker #3: We continue to expect to see resilient end markets. Paul had mentioned earlier that we will continue to expect to see a decrease in the residential outlook, but strong performance in the residential or the municipal markets.
Speaker #3: And then how it flows to guidance, we can, as far as the overall guidance report, we expect that we'll see growth on a consolidated basis for each subsequent quarter for the year.
Melissa Rasmussen: And then how it flows to guidance, as far as the overall guidance report, we expect that we'll see growth on a consolidated basis for each subsequent quarter for the year. We do expect that will be driven by slightly positive volumes at the midpoint, and price realization in the low to mid-single digits. We'll see normalized seasonality, and that, again, will be healthy municipal and strong growth in Specialty Valves, offset slightly by the residential impact.
Speaker #3: We do expect that that will be driven by slightly positive volumes at the midpoint and price realization in the low to mid-single digits. We'll see normalized seasonality and that, again, will be healthy municipal and strong growth in specialty valves offset slightly by the residential
Melissa Rasmussen: We do expect that will be driven by slightly positive volumes at the midpoint, and price realization in the low to mid-single digits. We'll see normalized seasonality, and that, again, will be healthy municipal and strong growth in Specialty Valves, offset slightly by the residential impact.
Speaker #3: impact. Great.
[Analyst] (TD Cowen): Great, thanks. Any way you could just, you know, drill down a little bit more deeply on, like, the growth rates for those particular markets? Assuming they got any, you mentioned kind of from a high level qualitative perspective, but just trying to help us understand how we can kinda underwrite into the end of the year. Thank you.
[Analyst] (TD Cowen): Great, thanks. Any way you could just, you know, drill down a little bit more deeply on, like, the growth rates for those particular markets? Assuming they got any, you mentioned kind of from a high level qualitative perspective, but just trying to help us understand how we can kind of underwrite into the end of the year. Thank you.
Speaker #8: Thanks. And any way you could just drill down a little bit more deeply on the growth rates for those particular markets assuming the guidance you mentioned kind of from a high-level qualitative perspective, but just trying to help us understand how we can kind of underwrite into the end of the year.
Speaker #8: Thank you.
Speaker #3: Yes. For the markets, we do expect to see a high single-digit decrease in the residential construction market. And that is going to be offset by the municipal repair and replacement growth that's going to be in the low to mid-single digit range and the project-related work with our specialty valves, which we expect to see in the mid to high single-digit range.
Speaker #3: Yes. For the markets, we do expect to see a high single-digit decrease in the residential construction market. And that is going to be offset by the municipal repair and replacement growth that's going to be in the low to mid-single digit range and the project-related work with our specialty valves, which we expect to see in the mid to high single-digit
Melissa Rasmussen: Yes, for the markets, we do expect to see a high single-digit decrease in the residential construction market, and that is going to be offset by the municipal repair and replacement growth. That's going to be in the low to mid-single digit range, and the project-related work with our specialty valves, which we expect to see in the mid to high single-digit range.
Melissa Rasmussen: Yes, for the markets, we do expect to see a high single-digit decrease in the residential construction market, and that is going to be offset by the municipal repair and replacement growth. That's going to be in the low to mid-single digit range, and the project-related work with our specialty valves, which we expect to see in the mid to high single-digit range.
Speaker #8: Thank
[Analyst] (TD Cowen): Thank you.
[Analyst] (TD Cowen): Thank you.
Speaker #3: Thank you. And at this time, we are showing no further questions. I will turn the call back over to you for closing comments.
Operator: Thank you. At this time, we are showing no further questions. I will turn the call back over to you for closing comments.
Operator: Thank you. At this time, we are showing no further questions. I will turn the call back over to you for closing comments.
Paul McAndrew: Thank you, operator, and thanks to everyone who joined us on our call today. We are very pleased with how we started this year with the record Q1 results, while facing a challenging external environment, including the expected impact from higher tariffs. Our increased annual guidance reflects the confidence we have in our commercial and operational capabilities, as well as the resilience of our end markets. We're excited to be in a position to expand sales and margins for a third consecutive year, especially given the external environment. We believe we're in the early stages of our transformation. I want to once again thank our dedicated team members who have been and always will be the driving force behind our success. Thank you all, and we look forward to speaking with you again on our Q2 results when they're announced in early May.
Whit Kincaid: Thank you, operator, and thanks to everyone who joined us on our call today. We are very pleased with how we started this year with the record Q1 results, while facing a challenging external environment, including the expected impact from higher tariffs. Our increased annual guidance reflects the confidence we have in our commercial and operational capabilities, as well as the resilience of our end markets. We're excited to be in a position to expand sales and margins for a third consecutive year, especially given the external environment. We believe we're in the early stages of our transformation.
Speaker #8: Alberita. And thanks to everyone who joined us on the call today. We are very pleased with how we started this year with a record first-quarter result while facing challenging external Thank you, environment.
Speaker #8: Including the expected impact from higher tariffs, our increased annual guidance reflects the confidence we have in our commercial and operational capabilities as well.
Speaker #1: as the As well resilience of our end markets . We're excited to be in a position to expand sales and third consecutive margins for a especially given the external environment .
Speaker #1: year , Executive year , especially given the external environment , we believe we're in the early stages of our transformation . I want to once again thank our dedicated team members who have been and always will be , the driving force behind our success .
Whit Kincaid: I want to once again thank our dedicated team members who have been and always will be the driving force behind our success. Thank you all, and we look forward to speaking with you again on our Q2 results when they're announced in early May. With that, operator, please conclude the call.
Speaker #1: all and we you look forward to speaking Thank with you on our again they results . second quarter When early May . And with that operator , please conclude the call .
Paul McAndrew: With that, operator, please conclude the call.
Operator: Thank you. This concludes today's conference. You may disconnect at this time, and have a great rest of your day.
Operator: Thank you. This concludes today's conference. You may disconnect at this time, and have a great rest of your day.
