Pentair (PNR) 27 Jul 232023 Q2 Earnings call transcript

Good morning, and welcome to the Pentair Second Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded today.

I would now like to turn the conference over to Shelly Hubbard, Vice President of Investor Relations. Please go ahead.

Thank you, Joe, and welcome to Pentair's Second Quarter 2023 Earnings Conference Call.

me and Stauch, Financial Bob with Chief President Officer. call Officer; Executive Fishman, the are our John and On our Chief quarter's On on this will we press performance second morning's today's in as provide release. outlined call, our details

reference. to GAAP can for that and as Investor a GAAP. slide non-GAAP release events and superior considered of additional of performance provide investors The is to be the the a you which we measures remarks prepared between on our supplement included earnings understanding reconciliation On have addition the financial are our prepared provided website, substitute clarifying results. impact and during with measures or accordance these further find to measures should Pentair aid intended Relations to company's will in in items non-GAAP and financial deck today's financial the differences call financial items as performance the They not in

Form of predict let are during factors predictions, projections in can our These you begin, are and many to are statements future materially about of carefully and Before that other risks the that risk which the which expectations. to XX-K. today, review and Listeners control these certain events. generally our actual we make subject statements We beyond most and current statements, difficult or Form uncertainties results our we uncertainties risks Pentair. cause from remind differ cautioned to advise XX-Q listeners will forward-looking to are presentation recent

questions. for will prepared remarks, we [Operator call our the Following up Instructions] open

ESG company. our to strategic slide X of and John, overview progress. X snapshot new at to Glance, framework, provide deck those our a illustrating through I slides These that it X hand especially highlight I our for our good our slide Before Slides newest Pentair wanted and a a who highlights Pentair Pentair is, include over earnings in to

our our a mission, water that of drive states at performance smart, Pentair of provides Slide purpose, annual our ROS framework increases, as on on in dividend X performance, company, record The historical group our consolidated vision a companies. installed snapshot a values segment. us our Glance performance XX-year and small X our overview Our strategic Pentair sustainable sales a Slide level base company. provides our which a track and on solutions and by of and great places

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especially We our proud stages to are program, years of achievements began date, very ago. X about of considering which the just early

over the I will to turn now call John.

good Thank you, everyone. Shelly, morning, and

the begin on segment record and flow EPS free with return our on cash we Pentair XXXX. summary and Let's income, results executive in QX, sales, of record achieved the In following separation X. Slide from QX sales, nVent

X% are flow QX, margin sales increased which to results, midpoint of the XXXX XX.X%, increased Adjusted all EPS $X.X XX% expansion $XXX billion, in to ROS across X Segment rose Specifically million. by driven points nearly expanded to XXX basis by X% segments. to income cash another increases to to was free $XXX and range With quarter of $X.XX, financial $X.XX, $X.XX raising to we million. $X.XX. our strong range EPS adjusted our

across strong quarter We our We ratio end, leverage sheet our power second continue QX. quarter diversified global X.Xx and demonstrates IFT, Water the segments: believe from net balance X to also portfolio execution strengthen debt in Solutions to of our water reduced record X.Xx and and all our performance down at Pool. EBITDA

resilience. resource water, enjoy is its to move, Our sustainably world life's proving the strategy essential help and improve most

segments, driven year-over-year. in last sales Pool volume Margin than more all segments the offset and our like IFT declines primarily sales X example, Solutions in For quarter, expected growth expanded Water across are actions price, inefficiencies chain our read and and initiatives our rightsize progress continued labor that to the on to by of transformation manufacturing elimination cost supply and beginning pool, direct out. XXXX

hard and dedication customers strong to for another Lastly, I quarter globe contribution our to across want thank and the shareholders. delivering for work, employees their

on pricing Let's X, QX XXXX Slide our IFT, and industrial and supply due achieved across replacement our Within our stabilization infrastructure across double-digit portfolios, driven highlights. we by categories, in sales, to to strong commercial chain. sales move titled sales aftermarket growth backlog, strong in actions segment all and from Commercial pump and businesses. carryover growth the primarily delivered record flow

new delivered QX replacement Record also were Solutions and components and driven transformation. business price our growth, and in Industrial sales aftermarket strong membranes by global primarily expansion, sales partnerships account portfolios. in key by driven and margins

IFT, to implementing offerings projects in pandemic in expansion. which the initiatives we and our recovery right addition venues Water margin also strong to capturing the on Solutions, to margin transformation the with benefited in of drive commercial have drove improved products focused In and offerings very QX, our from behavior in shift services. sales a hospitality growth consumer post part foodservice and from continued In

top locations the in XXXX, XXX chain Top fact, according report. of number Technomic In the the XXX XXXX U.S. to restaurants in benchmark now chain the of exceeds restaurant the XXXX

We saw in filtration North America. sales commercial also in strength

expectations the our Our to continued Ice were Solutions Manitowoc strong acquisition that Water to sales delivering accretive margins segment. outperform and

a deliver macro targeted few Ice lead a chain last times. with to product driven sales has better challenges effective its its supply strategy, chain its in supply reliability by go-to-market on and consumer, management Manitowoc years, with focus Over expanded the of

provide solutions are with to services. We the ice from us customers water complements and to how filtration pleased our Solutions Water acquisition very for commercial to enabling it businesses end-to-end

our or the in believe have to water the times nearing business is drinking and of stabilizing PFAS found residential rise. have continues lead chemical the believe bottom residential treatment Awareness water we is cycle, improved. of that that we been Lastly, forever

new We innovation certified this are We PFAS provide space. be drive today products to and residential the produce for to to we we to leader well products current company to that more we in PFAS. be to say to that And believe levels. R&D in invest have positioned are that proud continue a consumers certification have able reduced

softer and XXXX has supply given difficult during than XXXX periods. historical with challenges lead coupled Pool, higher been demand Within those we in that as times the expected, chain disrupted and year 'XX a our

returned lead X Our have products. most to days on times approximately of our

cost However, significant XXXX the labor channel drove higher versus creating a and transformation to continues sell-in to expansion for XXXX. delivered inventory sell-through in QX, lower from savings. volumes to volumes, in these work rightsize manufacturing sourcing Pentair through lower we imbalance and inefficiencies price, eliminated actions margin Despite

we to correct, allowing for channel a sell-in inventories to expect aligned expect higher continue to QX Pool We to as reflect volume more sell-through. for closely bottom be in Pentair with

and in remodeled and We typical break-and-fix our have past XX% from sales. XX% noted the replacement reflects the mix aftermarket sales pools that Pool from new

While pools of to of pools has built we of base year lower, reset attractive the number grow. the remains the continued new an XXXX, new pandemic, installed the U.S. market. the elevated Despite this believe is Pool during number than pools in short-term

X Before with Summary. across let's quarter Slide ROS turn I to Bob, over earnings CEO it turn all expansion to We quality another XX, segments. of delivered titled

underway. Solutions Water and declines, than IFT Our well transformation segments volume are initiatives our and offset Pool more

QX which first our completed return business half And following expect quarter strong we positioned by Pool end. for well another is inventory we guidance believe growth to has the Our XXXX be resulted correction, to increase. in channel

growth drive foundation water building All in, across our we strong are profitability to a long-term portfolio. diverse and

a to introducing QX. guidance $X.XX up are prior and We the the range from full guidance strong adjusted year QX of to due $X.XX, raising midpoint EPS to $X.XX $X.XX is

driven also by have expectations of We reflect updated in segment XXXX strong Water a first half Pool sales segment. our expected and in stronger lower and sales Solutions sales to IFT our

mindful to and continue environment. macroeconomic We uncertain operating an closely monitor remain developments of

our and long-term We necessary risk diversified our initiatives, and while drive strategies, We transformation on mitigation we implement we shareholder to our focusing to in as confident of accelerating the water remain business model, expect transformation continue continue company. returns. long-term are strategy which to investing growth funnels in

cash record long with allocation. a have and being of successful generating disciplined strong capital flow We track

We dividend XX high-teens have consecutive of ROIC. are increases and years achieved targeting

enviable track and balance record sheet financials. strong a in have an We X-year

I to more results will will financial call the in now over Bob? who performance Bob, and discuss our pass detail.

and good you, morning, everyone. Thank John,

XXXX on start QX Performance. XX, titled Let's Slide Pentair

of delivered up to nearly is record year's $X.X last separation a in QX Pentair quarter sales of nVent billion, from compared X% previous of XXXX. record in the post year-over-year. This sales second We billion $X.XX

IFT continued than Our segment more another performance, Water and Solutions quarter strong which volumes. of offset Pool sales lower

in in price and QX growth July of Manitowoc in XXXX. acquisition, and Pentair's strong partially and related was in volume from our note results, which pool strength closed the primarily record separation which The QX that Pentair nVent businesses I XXXX. other decline the Sales referenced where residential I'm offset Please was Commercial of to to Ice within contribution performance post included Industrial. referring by

to sales periods, both improved compared XX% Water IFT and increased in the XX%, and Core X% XXXX. prior QX in declining with XXXX in year pool XX% QX Solutions sales Pool

income XX% by record from inflation, driven our year-over-year manufacturing the initiatives. expanded offsetting points and improvement price margins to supply Manitowoc quarter a this our million and acquisition, transformation basis Second productivity elimination of than XXX Ice benefits increased return on a record XXXX to segment $XXX and accretive inefficiencies was sales XX.X%, chain more from segment

a was adjusted record share $XX tax quarter of million, the and interest million. expense XX% our $X.XX. was delivered rate Net EPS We with adjusted XXX.X count of during

offset XX margin improvement. income to points than Slide & marking XXXX price XX% inflation basis Segment to QX and XX%, grew Flow offsetting was sales sales labeled by Industrial consecutive the of equal or sales continued of XX% growth Flow on growth Industrial strong to expansion & more of progress our of expanded a X%. than commercial quarter points on and basis year-over-year, Performance. sales in fourth Please Technology The industrial XXX sales driven transformation turn X% residential increased Technologies greater which decline of and a and return initiatives. XX.X%, result XXX of

million residential Water sales Ice Ice Slide volume QX approximately to year $XXX roughly primarily sales our Manitowoc business, to performance. $XXX Within Please our seeing our XXXX America to Solutions income increased XX% turn expanded Solutions Manitowoc our to expectations. labeled XXX% our acquisition basis QX, XX% up and well $XX from XX.X%, to as Manitowoc points QX driven were million, we by period. North exceed sales by continued In initiatives. to price. XX, acquisition, return transformation has driven compared Water stabilized. Segment are grew and prior XXX the million as efficiencies Ice on

SKU mix also our have complexity. evaluating We and been reducing

labeled in and offset sales the to U.S. inventory partially comparison XXXX QX Please transformation helped with volume QX. decline. XX points due volumes, cooler to This offsetting $XXX channel XXX points performance. Pool basis of to XXXX, expanded return supply primarily from inefficiencies Despite usual manufacturing The than points and QX to elimination on QX, The XX, volume was Slide align benefits turn direct QX to XX% Pool significantly strong inflation, X rightsizing corrections million. sales a In the pricing sales of and declined our Pool decline lower year, XXXX in due XXXX of lower benefit labor initiatives. weather. wetter chain and price

Please sale turn Pool our industry slide the to sell-through. versus to This of comparison Slide XX, provides Pentair Pool channel XXXX. sell-in estimated estimated sell-in sell-through since and labeled industry an illustration

levels. is sell-in in to Here, In have XXXX returning normal disruption. XXXX inflation returned record XXXX see to normalized due lead of chain imbalance to sell-through we and and you can supply expand to in sell-through continuing and XXXX, times the beginning and and

We expect of XXXX. sell-in following sell-through channel by million approximately to correction and inventory in rebalance XXXX, $XXX

this expect to XXXX. tailwind become a XXXX correction We in inventory

Please Slide to initiatives. transformation turn XX, labeled

operations and themes: sourcing, focus strategic initiatives excellence, effectiveness. on X transformation organizational excellence Our key pricing

we strategic quarters, all the benefit to actions As past of we've expect mentioned of X top pricing segments. line in our

transformation expect initiatives structure. our improve other overall help our We X cost to

expanding end XXXX, we as fiscal As of the a points basis XX% XXXX. targeting are result, margins over by approximately compared XXX to ROS of fiscal

Please turn runway. XX, Transformation labeled to Slide

different these the initiatives X at As that stages. themes, you in is you look key various the each transformation within of work can see

and sourcing For Wave we readouts see from to are beginning X XXXX, within example, operations. pricing, in early

each to of and these XXXX. in readout We Wave X are X beginning benefits expect margin within themes

You could wave compounds through expected see how on XXXX year-over-year the each other and drive margin expansion new to beyond.

playbook has is pricing In be to excellence, segment. out strategic the by category each which planned rolled developed, within been pricing

the to the currently actions X training is internal strategic plan next out. underway, completed these have sourcing, few Wave with implement In We over months. implementation of savings reading and

later excellence from transformed X Wave sourcing of our in waves, off kick to beginning Incremental expect readouts is We have summer sourcing we work. to our renegotiation with strategic our process seen this rapid that XXXX. part benefit

can X we of be stages while across beginning X we expect margin out in In our the excited the in completed and effectiveness, with to the XXXX realized XXXX. excellence of Wave see transformation to lean benefits transformation organizational continuing nature that what savings. staggered facilities these excellence, we are read we begin are in our have you about consolidation Overall, operations X Due and initiatives, to earliest post operations Wave In expect on plans sites. effectiveness. execution organizational to the

early We have execute begun from and can have and on confident particularly realize our remain waves sourcing. pricing identified the we to actions in that savings teams

ratio we QX. our period balance to the in to from prior our the million, QX turn record lowered labeled sheet net With Please debt, free X.Xx, cash in Slide million up have cash flow of leverage X.Xx from forma XX, $XXX year pro up and down flow. repayment debt $XXX and

free second As our flow a cash highest reminder, quarter. our typically is quarter

full our historical line be of XXX% expect free income. flow We cash approximately with our in performance net year to

invested Our includes was but EBITDA approximately quarters capital from the Ice return debt on which of contribution. XX.X%, acquisition, only X Manitowoc Manitowoc

hedge ROIC variable target interest into rate swap QX, debt. teens. order agreements to is our Our high and rate we entered collar in In

average and Our variable to with is now rate debt of approximately XX%, X.X%. an fixed respectively, XX%

environment. next significant X majority continue to capital term X with debt debt have on loans out to We focus debt amid remain years. disciplined interest plan our reduction the no X We long-term and in higher for maturing the to is years our going of and rate the

XXXX Moving Full to Year QX and Outlook. Slide Pentair XX, titled

to unchanged are prior we guidance guidance the $X.XX, for EPS Also the XXX year, tax million, a to XXX of prior share count increase increasing X% full approximately adjusted compared $XXX expense to sales an down the which million. expect X% to in year, interest to our XX% is of $X.XX. guidance, with adjusted expense in roughly full Segment we to QX. to from to corporate $XX roughly up raising XX% of approximately $X.XX million, net to XX% of For be rate midpoint our and approximately income to XX% as flat, million

on and corporate last rate provided from expense, interest net share remain assumptions Our unchanged quarter. tax guidance expenses, count adjusted

correction record down sales be approximately quarter, third as quarter last This QX. be to mainly year-over-year expect expect the by inventory end. attributable For is versus channel we to completed lower Pool near sales X% to we year's the

to quarter EPS $X.XX. third also are We adjusted the introducing guidance for of approximately $X.XX

We share expense roughly rate of decrease million X% million. corporate and of million, approximately net income of expense $XXX $XX with expect to to segment interest approximately X% a $XXX million $XX of count to tax and adjusted XX%

XX% to our up and mid-single expect sales IFT, Moving XXXX segment IFT down digits, we billion. $X.X to to QX midpoint, Solutions IFT have approximately to now Water updated At expect follows: sales sales be we Full single X% as performance we Pentair residential within in Year assumptions digits; guidance Slide be approximately from be to we up expect low a the the midpoint. remains to to expect XX, total although commercial digits; approximately to Due unchanged at up higher rise strong titled versus continue expected double-digits. high expected approximately to down Pool and softer low expected XX%, roughly range range sales this down are down mid-single we of with and to teens to sales at due end be QX. now industrial the to be sales and be approximately residential Water approximately up Commercial at mid-teens. down mid-teens, sales Solutions is

discussed and Within remodeled we XX% guidance, remodels new our sales XX% to of of approximately now current XX%, and approximately in our be expect corrections. quarters, new and to XX% pools and consist As in pools XX% from inventory we to assumptions of with relating be have Pool aftermarket. approximately unchanged prior versus from decline previous down roughly X/X aftermarket the down to approximately XX% down inventory Pool

We up expect digits. be to roughly price mid-single

Segment up to the ROS income We compared more current after midpoint from with expect XX% basis sell-in, X% headwinds the absorbing in as XXX expansion year. points previously inventory XX.X%, expected XX of to at in QX to our to points sales return to over Pool increase normalized guidance. now basis correction XXXX is approximately significant

We challenges despite of sales we total can excited X across residential margins grow the believe are diversification expand continuing Pentair that portfolio significant future. in volume we to Overall, segments, has our weather segment X the and all about while declines our in proven businesses.

the are further We progress our repayment generating cash in transformation seeing free balance sheet debt. strong with initiatives, and our strengthening flow of

I Please Q&A, the Slide to that sets XX. turn believe characteristics distinguishing I for that opportunity. There is highlight investment over why call to we compelling Pentair Pentair are we a apart. turn Before wanted X believe

industry diversified focus across a and on segments. X driving portfolio an are brand a We all leader with innovation

We expected efficiencies drive to have a and transformation strategy margin that expansion. operational is

Our for ESG smart, progress the Corporate published planet strategic focus people sustainable water our towards our with in solutions. highlighting XXXX recently better life is on We making targets. Report, our Responsibility

favorable market have trends secular growth. driving We end

We and have balance additional aristocrat dividend. we XX expect increased a we and cash of a with value which creation are drive years to flow, sheet strong dividend consecutive

I'd now please like the a over Thank Q&A, call you. Joe, John which operator will open line after few to questions. for turn closing for remarks. the the to have

question here [Operator Instructions] will Our Barclays. from Mitchell with come Julian first

suppose, year-on-year when implying business, divisions, growth the QX declines I through or I changing right. -- wanted market X. sell-through? better just the Is pretty little looks within at then the Water cadence understood of couple for we're half. that heavy understand guidance of just of just it a end to example, If the comps try really that evaporate question, and a around non-pool was in looking back I sure bit at a increases look something the And first in wanted function make My in the guides back a and sales I guide the implies to IFT the half. the sequential also in like

as I think describe Julian. it moderating, we would more

And Manitowoc comments, half of our comps think In in in clearly, growth mentioned and XX%, side, and again seeing more huge but Bob the again, we're that against what there's result really year-over-year strong industry is also moderate that compare to those to performance the commercial as growth organic in a related his basis, demand. are the a from our industrial, eventually, there's nearly think year-over-year year. fulfill back and the I are I IFT start of we will year-over-year, those moderate component industry backlog of demand the acquisition ability normalized.

I say Moving rates to normalized growth would what basis, we expect on is a Julian. that more on would longer-term

Understood. follow-up on inventories. on quick point that And On then just Pool the my segment.

confident conversations So, feel in well have maybe weather finished see has months flagged and the point the track channel so happened, the just inventory how Is evolved very what's which far last end partners sort any now. with obviously what of why it's on that early you you the that to your that early by QX, delayed say, of the inventory the that's in on your is X But been requisite be on the Maybe X impact color sell-through, in depletion quarter, second for how the on. depletion months? September. to

Yes.

Pool, I I solely inventory numbers related my think just opinion, the in on out channel coming for we of expected. the than more mean, to QX it's

aggressively migrating moving amazing eliminate channel. an the channel the and that inventory and they and around it's the working branches of done where job working think to extra are has from needed, to inventory I

believe revenue that anticipate and as back deals and the it discussions talking worked related a I or continue to to partners our current more said, think QX as inventory all really we of guide, in we inventory us to coming on more early performance. channel into from decline in the forecast QX, in QX, inventory for seasonal and channel with would XXXX normal normalized buy our to our That as low our that is, as ramp be excess talk opinion, out we will for be and being QX we the reflecting that volume correction. demand, Pool we QX

Our next Andy from here will question with come Kaplowitz Citigroup.

little plan. a example, more the us a give the progress on transformation segments, ahead if of XX.X% because obviously, into bit look maybe at Bob, color and for seems John IFT, you quite

right So progress for over gone guys And of here quarters? what you to you last has that would continue? the expect couple

I sourcing. would X particularly Wave pleased the say within with we're across very board, pleased

a component components electronics, reminder, of casting, of up X of consisted a drives, and being packaging X, resins, within lot then a within can and Wave you mainly the that think of benefits transportation metals, setting the of indirect and the finished purchase We've and motors Wave for As area Wave in X XXXX as spend. logistics, Wave seen X other is benefit spend. goods

nice and able expedited commodity strengthen take advantage space, kind One where castings of air resins, team of plastics, actually within the where done down different XX% we've what that's particularly the to year. job of our down last from metals deflation, marketplace. expedited ocean XX%. really rates I consumption, was that a pricing some saw the to And in number coming the did capturing the of would they on ocean and areas the went down was an are relationship it that groups. over air in and We're is global motors, response across suppliers in with say

nice a finally, really I were corrective lot partial of push from have XXXX. we'd of direct done for expedites, done that volumes the wait those in. transformation and a job perspective, partial to overtime having come thing would there buys, a product job inefficiencies line the of that's part we've as final say well. the We a a as a completion off in into and business Spot had that attrition. really action. is addressing rightsizing complete XX% the to inefficiencies part truckloads, We've where products nice labor of And headlights we all The then taking about to expected the of and

team the across every So we're pleased the Board, on thankful very that this very works day. I'm to and

about any and ability particularly Have it's price in and too. about know then there, And -- your your pricing were of way the around moving Bob, your think somewhat one could you seen the Pool. hold you markets related how forward? to question maybe margins would given it's color. margin talk Obviously, you But deterioration? are. I initiatives good Pool good, maybe still

Yes.

prices as head up So we relationship we're in pleased ROS the I Bob I in indicative into held way what said. to certainly the has XXXX that XXXX, think think with unfolded. expansion way that's And of

I means that see I think early then we're and going drive I realization too the pricing industries that the to it rate Andy. how to that rely tell. normalized price I in margin. in be on think more expected now, going think -- environment we're have on and a would to to we And increases productivity work think aspects normal to on hard hold the those And those and or rate as the XXXX, way what increases depends it's fare of these price

And come our Oppenheimer. here from Bryan next will with Blair question

of initiatives. strong obviously results to you're and you've wanted stage and respective those transformation, that noted waves driving early pretty already, ask the about I

targeted core ROS to the any the identified moderate assume opportunity we drive seems other and solid now growth As to if And XXXX the above what just that sourcing then? pretty what imply between in gross I contemplated? your we core The level the is look to you reason baking level ask is for of then reinvestment realization math, growth then set, are that in levers and of kind simple target you've of range offset. that

think that's Brian. I Yes, fair,

early about, of as we're transformation. the I on would indications Bob really pleased mentioned, think I talk

benchmark a we're possible thinking reminder, drive this putting with transformation. looks outside give give establishing to processes us As and using to to at and working breakthrough us in us what's partners core

with The and thing of it's one Pool energy around innovation. an look investments as offsets as improving our leader consistent innovation. bit inclusive investing and for targets around imagine, innovation also have want would to lot in the and like our we investing though, and customer our that years. to It's our a to be would experiences, little transformation And of at drive experiences And you there innovation feel playing share customer we the they're And in So those channels, obsession defense you going predictable. I a can those product is of and foot many go-to-market we really been been expect. benefits both lately. pedal has to put you, are we

us to businesses. in back invest expect So our

since balance color. Understood. That the your all attention Manitowoc sheet Ice reduction makes focused pretty I the know starting shape. But in your sense. closed. debt solid Appreciate on

robust flow really Man over team will just of financial if back wondering term? cash tuck-in or your clearly generating your You're the and given M&A position bolt-on near Ice, to integration successful get

I continues year optionality down, debt interest for this to of would the We wisest on that that repurchase share the around capital. that's say XXXX the going pay focus and be use M&A. where are. rates think then into And creates

Our next Baird. question here will come from Mike Halloran with

So a couple of commercial questions here.

from sustainability Man would great. And demand think peers then the now? from hood? well an what some seeing a I context the is but to how in on right performing perspective, from little to inventory the you guess underneath more be First, of the about do what customers saying how on give are on a what's Manitowoc Ice. Can channel some you're going just comments you perspective, Ice

Yes.

how you remind is X What where hospitality start-up if finish, part unfolds. the single-digits. years, to to a we 'XX high a and you that X, be hospitality prior catch-up this back the higher, like the point industry and about think upon significant big been slightly take steady grower at the as to if downturn some the want a people based that starting look to think years of that's XXXX, I a there's Clearly, significant years being and has might lower 'XX expect demand. with we restaurant faced X X% to slightly has X% historically to market

my XXXX above As slightly back restaurant note, I we're referenced in numbers. now the

we more the forward to look as in forward. this pattern going So historical I see think of we're going business trend

is year Pentair, started using ability to and than elsewhere grow work partner the Pentair to Our of we're having the sourcing share rest years the Manitowoc this faster completely chain upon the was that supply and that earlier that based X gone ironically was really using coincidentally, -- initiative capture we're doing through in us. outsource on same that X

place And put the well. to rest to to encouraging us increased for big so been supply business. to get the partner Pentair on benefit a what they able Manitowoc that's them that these into the can and prepared allow and It's realize also demands, as very chain of were ready be to

Good on point. the second going and the to answer the Kind was for question of ask there on part outlook I commercial side.

specifically, see piece. margins to if the these have? to for transformational quarters. the impact is how forward the to So core of piece the about It's just higher should back the I think much to that think you in is hood that of the a of of below a nice part progression. we Clearly, moving that there's let me And last to mix kind how segment year to like look going little what there? more about progression bit tranche the hoping as was you any pieces half the looks And context IFT get pivot couple

right? frankly, doing they're margins just encouraging. special it out And and in commercial they're our to getting is quite call think Yes, think growing, that, infrastructure ROS extremely didn't which I on were while Mike, possible, to is team I

to selective you as think in at we these into the service Because think easy we're aftermarket likely I them, it's win I projects go that's selective mid-single the it's be digits, find. discipline -- when more get tailwinds said, to group. and to industry, and putting it's how that the you these jobs being know, how get be when maintaining about harder to to That the forward, jobs be grow as can continue while we And we tougher margins. [Indiscernible] maybe have to going

see encouraging made. to But really they it's the progress

margins. I has think again, to ROS. at opportunities able that by know, the they of expand clean one to things this still invest worked And do projects as area about the to you on pump fire see synergies to the blue been been appropriate able in. side, we've strong really So want side find always and some But the is and on, water of talked the is right? bringing to we're the water, we've we an that we've

at that see the to encouraging time. the really growth and same it's So margins

Brian next from Goldman here come Sachs. will Our question with Lee

about at A a of on guide, record a ROS, maybe of ones. this timing I modeling look guess been and I maybe related -- covered, of had seems some expansion when it like full mine but the us know exiting but ROS of a in as into kind comments have Can the you think driving or I might the you here puts year? more just walk couple bit the XQ. be suggested? through year nitpicking, I lot specific little takes is and little down your 'XX of the implied As bit

us expanding in QX. and more year-over-year, that given both The ROS actually guidance QX has we've in significantly even

the year. crises to is half back of So Pool little year-on-year of But rallying continue ROS QX in our out overall, the the one to in the transformation that to of business. headwind expand read bit less because again, a continues of

bottoming And closer Okay. Understood. model. trends look sell-through, maybe Pool. go Yes, pretty inventory around take sell-in back a you're we'll here, sounds at It on normalization. just the like confident then and

year in low and a to I in trends volume, how case it's potentially? 'XX? the pricing normal sort any back of too to maybe Are the thinking So type know reasonable digit probably in it this as that reasonable get plays like rest thoughts and pool. terms tell, gets you of what's growth but 'XX, what the case about quickly single-digit to setup of tailwinds initial of to you normalization to according back out, think to base Just goes about all plan points mid-single to early a kind what of we base around

that of reasons added why try to we the year. headwinds was extra next chart year for and view some could and give the tailwind be of a potential One this what

at quantify did we inventory million. So the about $XXX correction

will so that next not repeat And year.

perspective. $XXX We're expect we next a we But grow, good too perspective, from has that and overall an might sticky that's as itself, in do as view still million increases pricing any in guide giving price XXXX. from year. been that price our perspective So what from early not go aftermarket to into

question come Deutsche from Krill Andrew with Bank. next will Our here

back I Water Solutions. wanted to to go

And strong nice margins had in were quarter. historically, sequential a second the Here, into they've very going XQ. step-up the

increase a the bit. the you I mix there know do of meaningful for But Manitowoc mean, margin? changes kind sequentially expect So a I still

roughly to drive because perspective. the sequentially, -- won't see we We residential we as of filtration slightly the amount the from big transformation the be would volume playing we role. at as piece I say, a down maybe that when Yes. Solutions, leverage Water just line, within different will in to get an continue overall, we pieces, necessarily and But well Ice look we that saw

significant pressure that's earlier from -- say to John's you to for to Water QX return normalized levels. I bit of So year-on-year, expansion little Solutions, QX just seasonality to start point, would in more because QX a ROS as go

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period. the to And the throughout our earlier, way softness Yes. the played as said intends into it inventory word eventually its I weather I I bring to into usually think Weather did. out QX don't hate focus. correction Pool much as work the as

right I would And certain So time, trends to necessarily don't that some the at when heat hot, heaters. in areas seeing this demand. have say you we're same positives gets driving now, need it

forecast into not I -- our at I bring weather So would all. don't

don't included to everything we I our been forward. expect weather discussion today be think going of weather a know our forecasting our big guide, from has in and part we

Tusa Steve here question will come JPMorgan. with next Our from

going about assumptions I'm to you underlie Not the forecast. too that bad. your ask weather Yes. not

transformation, you on normal are logistics in cycles just in deflationary mean this down, the just what you are of that of do are disaggregate types mentioned obviously, like kind versus happening of logistics? these general So how the materials? I the doing prices phases you guys like

to and We down. to point go and done. coming work need trying there's to are perspective, the flipping be but in I'm environment, be commodity our deflationary even here, From prices not that suppliers back out to the

negotiation through X through So our process, structured either Wave view and gate within process is XX X. the that either Wave our

market, the perspective initiative. and so stability understand of longer-term from or to first all asking for all, sourcing sure it's decreases make price our that of we're part strategic have price We --

everything and Steve, we to we do said, to that a But did add the happy, lines a that the Bob need, and And was series are the choose reduced almost But it with of I work we agree and carriers the part also, have on benefit is best our by to just but we're that, and that savings. optimizations of deflationary, route we work partners big serve the routes generating X/X. of negotiate. do the a that's

Right. transformation That us year? what from just that sure sense. remind next for not mentioned Can you if makes the earlier you is benefit I'm the in call.

not. did We

just that you expect update on you us what to Can be?

we've What go said a now what And to XXXX. we we'll is XX%. will XX% until year be ROS this up that get is as view linear roughly from to by XX% roughly our that

expansion. of that So piece -- and big margin transformation plays a

What percentage?

investment, putting increase that Steve. we're because back than Larger also

could X a of that's that savings material start I So as doing. purchasing savings And significant material that, double-digit said to assume about in the benefits and prior think direct that the the next that, we're realize Bob wave the X/X Wave of comments you we'll buy. the against is

all that bridges -- parts as it Sorry, in the all up up of will this. Where that won't in or be part more one on show So show like Will productivity? the bridges? inflation. of

in you those execute in all net better will inflation? You're bar? initiatives, shows up of bucketed maybe saying If that some transformation productivity that the be if the transfer purchasing that on you --

bar, Price bar correct. productivity and

The price well? as bar

it's price transformation on then of the of price productivity and the So price the productivity work the is transformation contribution. Well, initiatives, piece the a is contribution right? we're a doing strategic the piece of

will question KeyBanc. next Our from Hammond with Jeff come

is pretty This from attack was pricing Jeff. price been from tailwinds kind the what carryover quarters. Margin's kind David parse actions couple out to Maybe normal the for the just of early margins last bit Could what on of and benefits the transformation just and different. cost the a Tarantino of impressive you program?

moderate X in look you -- When out for will back has the around land price half benefit quarters, that at year. mid-single-digit first the and the read Yes. basically nicely price in that

We primarily first are carryover a been that of It just or years where the we of a made catching with a of quarters. least up versus and there decisions many as were And last But the taking that half. were years couple last cost we mainly headwind. was over as think pricing a reminder, at carryover advantage advantage. pricing price tailwind has few that benefited year

of implied of maybe level on a versus that were had in would prebuy, what channel the outside of kind couple we've recent then seems you in Pool, And on cleanup the softer set you what's maybe of trends how -- maybe maybe years? sell-through destock, magnitude you like like expect would It Great. us on bit could one the the the and then just the an unusual a describe given guide, expectations?

the one. I'll Yes, first take

been whole some combination that a expectations. think is this original year of as finances. has items industry. It's their our previous happened as the slightly consumers rest And probably are of mentioned, think is as I periods. out a are of behind discretionary that And the I dealing through the in with of sell-through prebuys the then pushed first couple quarters also being that from

the Pools slower were of than originally they I are anticipated. think some finance

go know of about we forward, we early of early and And are talk earnings those generally buy, at early QX. through end into more of shipments we those categories. those orders As QX you know about normalized and And at buy are those generally, what the And look buy. the programs fall call. wouldn't QX the QX into QX the shipments our rest standard half orders. what work And are orders we

UBS. comes Our Damian next question with Karas from here

is That at business summer, couple a really pressures demand the operating of profitability of Maybe healthy a the Pool. spirit despite in questions obviously follow-up now. facing the on you're of level

thinking you're how curious about.. Just

Your breaking little up a bit. just

apologize. I you me? hear Could

question, please? you mind wouldn't the If repeating

absolutely. Yes,

the inventory thinking how as look should recovery? So I just and ask trajectory year like reverse to despite headwinds demand right wanted about you what volume mean margins. very the you it's you are get I a now next pressures, Pool about that profitable so

Do we have another question?

move to with We'll from next Nathan on Jones question our Stifel.

on couple I'm projects. is about could to much talked looking you've not talk maybe growth IFT. selective quarters. how how has if overall to where one are versus you bit I want where Volume on the the for about much pretty will last declines flat wondering ask little been you you're grow of more a grow? being But the

got been remind us you around Water And got the well you residential business that the trends as as and pumps, to slow has of When Flow, that down Pool. a reflecting think and in Nathan, right? residential we've Solutions soft, that's

and we seeing growth, talk we're growth Flows what overall commercial. is in infrastructure, about really when so And

also commercial a data just aren't centers. As reminder, office include buildings, they buildings

They coming would infrastructure include that warehousing. that They include well water any building. wastewater that or into need as pumps type of building and exiting as require fire

been point grow those a ours, And want spaces. in those strategic has that in we to strong so and spaces. of We're

and really mix infrastructure here. so got a is commercial And residential, what you've

Solutions Water Okay. more Maybe then the just one on business.

where going more sell-through in inventory back there probably that matching Is I there's in of to the think business? basically had -- a bit well sell-in as that you to expected XQ. case on kind destocking end in you that

businesses through comps We're exited that and Water through in direct-to-consumer side residential decisions. last those year, those the of business, year-over-year we're and in actually to we what had, most of have we challenges inventory And reminder related that QX did the we working a the Nathan. Solutions so Yes. we as is

business the yet core core so systems moderating, -- inventory have or but components And our doesn't doesn't our it inventory underlying challenges. growth of is challenges in have

Joe from Our come Giordano question here next Cowen. with will

on than we now were negative. more priced yes, right of like so IFT touched and volumes So growth the modestly of the is but this, kind XXX%

where the to some likely price? start of that expect from we price Or as second are does volume the to you that the further pick do look up moderation does like half, As into progresses year today, you moderates, of deteriorate?

business make margin a to growth mix it as side. We we IFT of and productivity would mid-single-digit business. Flow of second the to that continue normal. is contribute strategic has which to an the remember, to those R&I got to business single-digit traditionally, rates and higher I the we're And do is tends as side, on believe lot of a And and more gotten out as we've the is be to projects half, is a think to believe of we mean as low expansion a contributor well the the lot to C&I. then start margin moderating reminder, of we what Flow back industrial is Flow. solutions we've But sure side get

so And as that forward. more normalized we would expect go contribution get we

higher the Is -- that Meaning don't in reflect am half. volumes second necessarily I right? like reading that

That's correct. Yes.

that on you then you like levels lower And appropriately guys you've commented -- well headcount Pool adjusting done Okay. here. to and the

build for You to have of, sizable XX% say, as up could level is off you kind like good on come headcount? -- add as incremental a that back, a to XX%, to of inflects? revenue be like like as declines better revenue rate? of to start like this growth way just Like volume and margins the -- a How need about think margins lack nicely. like margin Or do we expansion there

off of. build It's to a basis good

to is begin good be some commissions overhead we thing provide would really would here, selling the of get volume structure leverage With I'd product only all throughout relative comments. to off the think from on add-back to The a the level growth good of. grow that closing the really that, like you channel. on a model that we But to As the that, this an when rebasing is is and business. be thing

lower a IFT sales strength and offset across joining to everybody transformation. portfolio along third, expect solid beyond first, volume drive transformation earnings to wanted expansion initiatives we the segments; second, I you, greater for fourth, XXXX implement execution identified had creation by we us call Have Pool our due performance, efficiencies These reading price value our transformation our expected all our with drove to day. beginning as to we And QX growth And key to of strong finally, and our as X with well year. deliver today. everyone. guidance in our to confidence driven raised XXXX; we as are expect segments you to towards our beyond themes: diversified sustainability out QX and reiterate in fiscal margin diversified actions this initiatives and benefits continue and savings. Thank QX Thank in within and portfolio; great Solutions continue in we Water a to

much Thank for very you today's The presentation. conference has attending now concluded.

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