Watts Water (WTS) 8 Feb 192018 Q4 Earnings call transcript

Good morning, my name is Casey and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Watts Water Technologies Fourth Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. begin may you MacPhee, your conference. Tim

Shashank and quarter full and you me key are and accomplishments good discuss year, Bob conference morning fourth our today President; CEO Pagano, to this Welcome Bob our full our With CFO. will everyone. call. Thank Patel, touch discuss year past earnings XXXX offer XXXX connected and product and focus macro results a upon fourth smart analysis year in our our markets and our for Shashank will provide our the areas he detailed of will initial also XXXX. and strategy. quarter outlook

Following address webcast of site. information is the remarks, the can our Today's a our covered Web by in prepared section which presentation, we questions related Relation accompanied call. be will during our found to Investors

remarks. this reference the appendix reference presentation any financial is prepared presentation. our throughout reconciled And information will of in non-GAAP to We the

course we results that we I'd risks during materially. like to remind to actual subject that statements. certain and comments that differ everyone making numerous uncertainties call, could of the constitute statements are be cause Before to this These forward-looking begin, will

disclaims information update intention of For risks see company uncertainties, publicly or filings future events as information, these new with forward-looking The SEC. obligation and available to statements any or the result revise Watts' whether concerning any a otherwise. or

Pagano. turn Bob Now, to me over let call the

increasing operating of made to including good the factors February, and review and Starting Last in we XXXX. price is in some growth end organic year driving on be on many input with very on strong surfaced. accelerating achieved everyone. our markets continues wanted the Tim, provide and growth morning for intimacy since number on In focus our dynamic financial on I the to team The accomplishments positive strategic of reflected fastest contributed I'm productivity driving let's you, and this A earnings headwinds we our XXXX. thoughts despite that consolidated of Thank we focused initial XXXX, mentioned Slide organic will we X%, a pace performance presentation, initiative XXXX. customer growth. with and X complete, transformation the that results. Americas progress cost pleased past

We new like Benchmark Australia Africa, New Intellistation sales. Platinum product also also our growth East, benefited products Middle Fanning Zealand from like efforts driving into key sales development past contributed Boiler year. the and this to business incremental and

product the see year's and to our benefits new and geographic investments beginning are We development previous of expansion.

like of $X XX of we focus to our The training XXXX was adjusted and R&D adjusted that expansion margin the consolidated than record other the mention to strong in operating Another discuss we sales, wanted of XXXX in mainly contributing margin and and training the productivity. quarter the growth adjusted we Shashank increased China. expansion third the for funding and of company. in this in continuous share. area leading year's front-end finished will capabilities. growth estimate more commercial investment productivity enhancement Carolina reinvestment lean facilities results total strong results and thank adjusted of year initiatives share performance million the that operating and expansion and productivity. I on margin North In adjusted we performance. our two for I year would to This price per few for is all minutes. per and and drove industry continued to growth lower slightly Pauls, took fourth of This operating and We $XX volume our adjusted consecutive colleagues margin XXXX operating Watts detail for marketing achieved earnings my to driven expectations continued the year our in earnings was for operating improvements, in record good goal due initiatives a top-line year performance an our the the story expansion helped by long-term million XX% higher with on incremental QX drive opened working. Margin of versus One again margin. XXXX, strong organic strong XXXX, by Reflecting We this cash very initiative. led sales, St. entire sales up additional our was the realization, proving spent spending volume by that Ningbo, of a benefit flows for from to X% included delivered the The improvement. future. and about to basis to investments adjusted related growth also advantage the total, Americas. price, plan. productivity spend margin In year company. investment XX% strategy include projects is XXXX growth the our in one many we and with original incremental our incremental in above again accelerate We an quarter points a

new Looking expectations review regions ahead, continue solutions new our concentrate a on and XXXX, priorities commercial and account to let's we'll geographically and focused market XXXX. management. in key products introduce In on general key for excellence, fanned

continue adjusted expand expect We margins as operating volumes increase. should to

our in We simplification. also drive through expect through to SG&A future lean plants business in productivity and

improvement, is to standardize an opportunity programs. worldwide processes. I recently and ample experienced productivity to lean our directly hired spearheading continue continuous of leader to me global have streamline reporting journey the We our who

reinvest IT in to and continue selling the marketing future of productivity. and portion to growth productivity R&D a to savings fund and systems expect We

that more strategy Finally, a and just we strategy. smart minute. details I'll our are introducing in provide connected about product

year-over-year data have that of Much forward-looking Dodge economic see the ABI we've growth at Americas, let's XXXX. year XXXX. information some about should recent although, in is with shaping we noted some up market recently. softness expect non-residential trended and data albeit mixed supporting heading slower although we briefly Momentum a The total grow levels lower continued the market like how pace. the than into Indexes the First, positively, at talk In

stagnant institutional growth housing interest cost building bumpy is in Regionally that outlook for down end-market anticipated market Saudi including continued countries down. to in the reduce new to Middle moderately We be expected XXXX XXXX. for growth to steady builder construction continue some Egypt and us GDP is sub-segment sentiment of America's and the softer France, UAE. our grow. for market important residential rates an slowing. major economy moving the overall us see expect is be appears in to to to key should the minimal ride finer slightly with region, East and we In and permits growth remain expect construction Italy in to as residential GDP XXXX. portend generally Europe, compared a some grow markets Nordics. the GDP overall is the Germany, starts Higher Asia-Pacific In Arabia, expected fairly like

Finally Brexit, East. macro and market, forces the in numerous Italy monitoring and markets and continued strikes Asia Middle summary, residential the In including tepid anticipate the growth year China Asia-Pacific close construction selective issues, China's and in more we Americas, Southeast unfolds. France's as trade in geopolitical the require East ongoing conflicts, to Middle slow budgeting actions its with concerns all Europe

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by products connected is Our drive XXXX. our revenue to from and/or goal of XX% smart

leverage around high teams globe We XXXX in intend were improvement Our digital achieving perspective, low-single and product digit. these digits. We analytical owners put Watts, we'll new this expand goal. the engineers, the continuous capabilities single to experiences, our drive to committed To in product the contractors products the have product are be help ended to with connected to ramping sales this in our the up long-term new concepts. XXXX and

system, on-demand reducing display provides automation together. X digital system came initiatives specific monitor couple can notification case control facility managers costs. and the owners commercial in property consistent monitor Slide a failure. of Finally, system This of provide to integrated alert into examples a has projects temperature Intellistation The a to and and smart care recirculation health an water, different data critical these in while mixing and go-to-solution be mixing building been energy hospitality for water system powers hot and remotely where

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used catastrophe. Technology at our and powers Unveiled Intellistation AHR Century Plus world. XXXX Alert tied is these continuously major and are Our benefits shut-off new automatically the century used avoid are of These Watts monitors a to discharge When Tradeshow, Atlanta, progress preventer and hotels alerts cause major to look connected existing execute and water with to our can loss in of that sends to energy technologies updating supply the on delivering solve can smart in control efficiency we water with strategic strategic in We back the customer smart and incoming be to regulation, problems a plus property. January event valves, slow Watts and conservation. upgrade themes, vision. water critical that continue using just our the conjunction our a real-time forward throughout to flood as the of an could safety a examples It two as Watts devices. you and connected

review results Shashank the year quarter initial XXXX. our for Now fourth full offer Shashank? and for our will outlook and

Thank in you, morning, mainly quarter reported million X driven results. organically. slightly X% Slide $XXX Bob, of basis top-line were turn and was everyone. growth by fourth X% up result up and Americas the positive Please Europe. on The highlights good to with Sales the which a solid

exchange euro X%. negatively Foreign the by sales impacted mainly

another rationalization the profit totaling offset of the of driven per $X.XX and product XX headwind. point and and Adjusted share points last per Earnings increased interest million line Adjusted was higher tax a $X.XX XX quarter increased XX% $XX versus record the XX.X% incremental fourth for company. more items than volume, of year, year minimal, growth restructuring and Europe's investments. productivity by or operations lower Benefits up last below into record basis was price, margin of growth an translated share adjusted was quarter from Watt. million including impact $X.XX the charges. in from expense for and fourth quarter lower $X.X inflation expected basis earnings X%. $X.XX This a operating in operating about consolidated As versus

year a basis Free year for points was was in last benefits reform. Adjusted adjusted quarter $X.XX flow by increase XXXX. The over exchange quarter last of year. conversion by XXX%. free X% an cash million, headwind driven Foreign tax full $XXX in rate lower the versus tax the the the flow effective than cash XXX was of was XX.X%

ratio. down course over are which million the net drive ROI $XX year, Over reinvestment We which in over paid majority our to $XXX of years. The we the equates growth next high investments of help invested and the will productivity debt capital capital several expenditures, million. projects, XXX% of

in During the we dividends XXXX, returned $XX also share shareholders of million forms to repurchases. and

Our XX% the million driven to to of capitalization debt net reduction year during the $XXX ratio debt to down at was year. end due

substantial allocation is shape balance sheet to excellent flexibility capital Our in provides and address priorities. our

adjusted approved part in will plan, as a on earnings evening's an and share to strategy. adjusted again, delivered in repurchase Sales per still In last our investing This Finally, the margin the strong continued the and summary, year. $XXX new Board noted program. a release growth million important momentum good while capital and record for allocation follow program of repurchase our quarter existing finish remains earnings future. operating share we a very

margin margin two $XX announced discussed operating expanded more profit tariff freight cover incremental that which profit by the Americas organically introductions. also Americas the increases by to with year offset up growth heater XX% higher Please regions. in points $XXX and we million. X price were plumbing, volume from were new can The increased Moving the inflation. and also sales last to having ranging discuss growth water investments basis quarter quarter quality XX% saw in Americas increased inflation, increase the drains, to had water initiated million, driven and benefited and the turn price XX.X%. to products. adjusted XX% for than costs. results. benefited Adjusted from price, electronics including realization to product We we sales operating strong and previously to and Slide productivity Reported XX was wide

solid Americas. and of So for growth the strong profit quarter performance operating another sales

to Turning XX. Slide

a Europe's $XXX basically review Sales were of Let's flat million results. on reported basis.

was marine quarter. mainly a HVAC, solution land exchange digits of X%. Food based plumbing electronics essentially million include and drains both the up Foreign we in drain In stronger Organically, and headwind into From market in driven as the Germany, in by from or and $X up well platform and and wholesale was drains in electronics. saw as Brands France strength our in a sales saw euro drains platform. demand to by marine growth region, applications. sales plumbing solid Germany growth Nordic due about driven the was perspective, were Nordics. wholesale strength X% sales were the By growth in applications which the market. flat. was double

$XX broader As economy. Adjusted basis million approximated points negatively expected, margin was Italy more the restructuring benefits productivity in moderate profit Adjusted than X% XX.X% the in improvement in higher over investments offsetting a and summary, along In continued increase XX are performance last Europe and a operating up from due top-line Europe's operating year. to finally delivered slowdown increased operating price restructuring savings solid which and volume, with quarter. impacted growth inflation. a

results of review APEMA points turn were residential me inflation. with Consistent in Slide Africa, under up sales last weakness Australia of for let valves and commercial results. double East APMEA versus operating within million intercompany driven growth a was regional X% $XX On products. up New volume, on mix China by Zealand, better previous $X.X the grew and speak China continued X% adjusted but offset outside partially and sales organically. to Let's the floor double-digit year million driven with basis by margin Adjusted full operating quarter, and Middle profit Please down product by heating XXX to with basis productivity higher XX, both and year investments the mainly digits down reported and decline quarter. offset and the a were fourth than Slide more by XX.

Adjusted a an driven for sales basis XX time volume, points restructuring organic XXXX, were all was reported by X%. up productivity basis The record factors. record. margin increase was Watts. Size, another X% primarily and were growth the up XX.X% of For driving benefits and operating $X.XX on reported billion

to margin incremental up year. driven funding after versus favorable prior a XX% or note, by As Bob earnings investments our was per $X.XX interest of was share currency effective in of rates, transaction expansion movements. and full expense increase operating year lower roughly was foreign mentioned important and tax $X.XX The the million. Adjusted performance, reduction $XX improved

considered Now outlook. Slide the framework let's preparing discuss on XXXX we our general XX, in

retreat uncertainty the expected themes including head strategy. the of First, slower real headwinds. as year. data. at are that Debt the into going half and GDP look restrained reinvest data is Brexit, our market are continued in strategy, We've we be focused, in levels XXXX for continued from the initiatives during incrementally with regional Europe import and commercially trade concerns export soft and economic the our let's expect Europe residential our issues spending ongoing to growth concerns, to especially drive our recession second we long-term Macro seen in business Consistent smart estate German continued strikes point this constant growth in to Italy business a political connected as all reduced are softness China's outlooks, and to forecasted challenges in including of China and XXXX. XXXX. we latest France

the trade exchange for that current issues in the still our teams the as foreign flux. XXXX. to In to full year headwind continue may middle monitor, will outlook, compared are Given a column, be

how to later we've price would in in XX% construction the like non-residential although room March. both to affect And be as the cycle The with institutional before is more are so, sub-segments tariff may and not construction respect cost. have the will if markets to that China noted U.S. We imposed certain if China innings mid in grow. and certain incremental

impact are concerns construction a indicators Middle and discussed to could the residential of East. Pacific are and Bob choppy Asia There that portend number geopolitical As slowdown.

as Something and we'll continue action to monitor necessary.

anticipated at continue with should The undertook pricing in inflationary actions to tailwinds. looking mitigate respect we concerns Now to proactive XXXX in XXXX.

comparisons be benefits We general necessary. Included impact that to slightly We'll again from expect Europe. expectation of tailwinds are is the inflation the should and should provide margin down this outlook XXXX determine if XXXX neutral year should actions watching inflation pricing to in commodities that further growth in pricing tariffs more half be first Restructuring our year-over-year. actions. the benefit

our grow review X% product assumptions; XX, with lines. America Slide On to let's should many of we Finally, growth for that have outlook XXXX. anticipated organically our estimate our we across major provided X%

in leverage we half Americas adjusted expect We expand XXXX. first of the in given stronger to half the phasing should price initiatives. second XXXX as half from productivity the quarter-over-quarter timing the perspective, in From increases and of as revenue tougher second margin the operating in volume a of expect compare well growth the become

of X% many outside may Overall, increase X% XXXX. of investments. which sales estimate includes XX consolidated play. expect should restructuring to and are For uncertainties including anticipate to adjusted for some and should operating quarter-to-quarter $XX to X% productivity, to AMPEA between and basis, approximately with adjusted this to sales year. margins up we XXXX estimated with organic this growth between Europe, flat growth XX will Watts margins X%. in growth stunted decrease We incremental expansion sales year approximately the we margin be X% in consolidated year's actions. million pricing organic was points in China. of forecasting is be spotty intercompany selective a volume Growth and incremental expand of basis we the on our Adjusted increase and percent anticipated APMEA, And are challenged from expected organic expand the X% benefits in macro

to Now for XXXX. a consider other few inputs key

in million. about should below be for be slightly line Interest to expense We to expect corporate the million cost $XX $XX year. XXXX roughly

systems and estimated expected the approximately million in Depreciation year. will for Capital adjusted to for growth productivity. amortization be to future spending rate tax XXXX approximate facilities $XX we and be effective should should our in as reinvest the which and support is Our manufacturing million continue range $XX XX%.

income. or continue to XXX% flow of conversion free to cash to than net expect We equal drive greater

should year. with [indiscernible]. full offsetting We a our remain are for the assuming exchange a buyback flat we minimum program €X.XX U.S. And to expect the count at finally, share dollar rate foreign

the to Bob Before few the housekeeping back if over QX. a for turn items I call

quarter QX of higher organic our expectations. quarter high-end first higher growth growth consolidated year XXXX XXXX given the end expecting to but two will Americas full expectations two sequentially timing. first quarter shipping of are organic the tailwind. year as the should year of expectation holiday of rate should year. second shipping the pricing below be X% the our at at above QX, in Conversely the in of be days fewer end full full to Europe growth We see the will Europe be The have the days quarter last in more due than in growth organic there'll first XXXX as compared Americas

APMEAs we is below as in the to expectations half second business of Finally, full be China growth rate XXXX. continues the drag as expected year saw to

should investments tax Europe. million first adjusted the in $X.X in in Corporate AMPEA. $X expect anticipate given current Investments quarter. to incremental savings turn Bob? about million in million Q&A. $X moving it $X be With will as about will quarter Europe XX% quarter effective and Americas, in $X.X We a in of The incremental foreign approximately million partially million in should rate XXXX. compared the be restructuring offset million of the by quarter approximate first first Bob $X.X be the the rates that, to quarter. headwind I'll We of before costs over exchange first in to the

Shashank. Thanks

to year. anticipate deliver Americas in pleased please the but future sentiment the the business grew at expansion construction in continue XXXX to should investing you customer and strong the XXXX. and by deliver a successfully growth We summarize XXXX, impact how growth reduced this cash plan to overall in for company would free closely We'll discussion. deliver turn solid markets. results and be let while especially for potential Slide record We If expanding past level We XX, macro to in geographically. were me We to monitoring flow. headwinds continuing our margin

in remain our we'll capital always deployment. disciplined As

gaining help into and we smart expect connected and growth Our future. the strategy drive it product is momentum should

and our operator its that progress open deliver we to that, to With questions. leaner, XXXX years, that centric commitments last team please for intend beyond. a will four journey our the substantial for made customer become confident to in on continue focus organization. Over continue more We line the and have I'm

[Operator Stifel. go And question you. Thank Jones comes ahead. first Nathan your Please from Thank Instructions] you. with

line is Your open.

Good morning, everyone.

morning, Good Nathan.

Thanks the Maybe solutions you about changes -- a the the of little profile kind growth Any looking can growth kinds could investments how on think you company. kinds bit color you on what you're can future derive of this things for how you from the of all on all you those investments? returns these color these us the of talk that Bob. much of think and connected give investments from

for Sure it's to When basis strategy the our I be look competition. look at connected this, at -- new I Nathan. really about going

if the think it do didn't I we would this, hurt us in long run.

product to portfolio, world solutions. is and this broad opportunity the leverage with we So I knows have going think it's the our the to Everybody future. our

increase return higher return has Certainly percentage and a program, we we it a on we investment. with believe at high. but to So as a into look investment by early least future, there's point the our growth on is the costs the believe on in potential

been why key time a thrust that's again our a putting effort of of and and it's lot So in been we've this overall in strategy.

of the you basis falls guys? And into much the becomes has the with kind compete. kind resources industry the of less the up commodity Maybe then resources the and the keep solutions challenging think complication industry how R&D that's If about is have for innovation? of you much these resources, of and this to of you bucket talk engineering a can competitor these how connected actually competition where the you is have financial to the going to

Yes.

us for to difficult our it's So talk about competitors.

a general, to in say in I'll I this. invest think think lot does cost I it

think smaller than can So obviously the larger ones. will afford more I it -- competitors the

different but paradigms wary also they these for too of technologies competitor's the So because have our also industry. eyes that startup small I don't let's and got open we're companies to that aware have of them think innovative again, each traditional we be the keep new and

with partnering products, it we're colleges product and is bundling closely, but to our as just our of what's I sure an to watching we have you venture, But happening very we're a at that lot the make the watching exciting we're So the of marketplace. just and competitors. think compared portfolio portfolio unique look in a universities

Okay.

growth those that investments had guys -- least absent see operating continued and the I imagine a putting level you've going investments at probably into XXXX growth some the company. actually Do in in the XX% been forward a with the long-term of was you can where incremental that growth in targeted the XX% still XXXX? that? of into give You margins is you hit Any can margin the it XXXX, than you on investments value growth investments? you hitting XX% to funding is company that color Do more think

Nathan. Sure,

You embarked connected that are we our implications we that. set costs going an smart to the target we in and what knew on understand before and was of well strategy before correct fully strategy. We really happen is as as innovation

that still team had but We're to to my we've So target. on many the new get long XX% run, I'm definitely focused ideas. challenging

and about again, we the innovation see, re-evaluate we're on focused our next But we're pipeline. we'll excited will it So year. long run

are of able clearly be they should having. I think see investors the those to benefits investments

Thanks much for So move. I think very time. the that's a good

Nathan. Thanks

ahead Your with from Please is open. Walter Liptak go next Seaport Global. question comes line your

the to on looks little the it Hi. get that want number, rate to X%. a Thanks. new XXXX ask questions growth the bit than and to follow-on some product Great like faster would spending quarter I be XX% guys. --

replace talk do about you these wonder some new products? I cannibalization? of So if How your just products old could

depends see guesswork it about cannibalized. Yes. it's we're a But be also We've it of is will -- that at and components lot of of we but used Intellistation, together of thinking the various the looked the We that how we right. Intellistation it, these XX% as products put this now to systems into on we sell like have an and system. more

our estimate that's in cannibalization the will at it, XX% general what So we how of be. look is best

you year? to residential. wonder where the growth to investments the Okay, is I if great. making a like It your is spending this faster you about faster were in going products. sounds Sticking end-market. with new than next benefit the -- hoping since new construction by get be bit and little Where talk products could

XX%, Yes, our from side the of allocate at space where exactly. that it the of in business. the have from systems we impact and most bigger really our would looking believe XX%, towards but commercial of looking side at the of residential view. focus point That's We more some We're have investments on and is. are the the customer our most I commercial do they'll

great. Okay,

Now Shashank. for last one one

revenue, what you thinking as are thinking Just about a and about going XXXX? percentage on to year, headwinds get FX the in are of Europe the headwind for this a you

million rate The each $X top-line total Yes. euro our about last at was We've revenue. year average X.XX is point a in rate and the about X.XX. set budget

So impact. $XX million top-line basis of total, it's revenue about XXX points

great. Okay,

Thank good. you. Sounds

you. Thank

from Scattergood. comes Ryan next Please Boenning Connors Your question & with go ahead.

is line Your open.

not and everywhere. year, Thanks. for all which but first Great. very done adjustments quarter -- great wanted in not the a these rarity a the of a for clean adjustments is quarter these I and congratulate on particular on two a only days off with lot nice numbers cleanly guys you

of the I with cash that's want being where kind on there more become impact lot think because little metering stick on margin fewer in of more of cow. are So strategy counter can technologies lower connected I legacy tech this the to to and a kind competition some other and the the been margin trend. sectors, barriers products bit of there's a new for that new to just and that dive there's end-up example hopefully of side tend intuitively of entry the on

about margin on how just you plays that out? strategy can and of things connected outlook side your the the for So talk

cows look question, it certainly because you margins Ryan. the as larger at could argue have they you traditional investments. cash Great any Because have Yes. don't incremental

our important, However, proposition customers. to in they really what with that foundation in all look a can connect higher the would together it in I believe I And our customers. have they're systems when the shortage on certainly all system build provide on you cost, run. pay. front-end together together a of industry, as and and to how components put putting the solid of security, drives you're SG&A we think more are in call value But with system, benefit the the at other the these proposition plumbers putting that the a we versus and interact each premium the a scalable long value the to for certified, you -- greater there's but the the upfront cost factory But willing they're value the

that terms which my sort is in then, guess And of -- strategy. so pricing next I question into of Okay. segues

that mean you're at products about just you're going you're for embedding premium that a the about on you more product to guess legacy premium to of I way want degree without talking or technology, technology I roll embed be to divulge version think about and/or I the understand reasons, too what much competitive the a is how to going pricing but pricing are that? to strategy You the conceptually, kind to a is, that get technology. the don't your out to works

That's Exactly. the strategy. exactly

especially of more last does that was my scenarios and out going -- a if of to little about this we of relative I connected the side your in to price severe talked be, maybe cycle. a one maybe impact guess especially scenario in and more non-resi in would little go sensitivity tougher. cycle where cycle a you the timing a into get then, How to are we a which be And down rolling you more where talk strategy Okay. you be mean is just are that down presumably one. because about the I to on, would in how goals the

helpful. on any that be might So thoughts

it always look and The future. the believe way is, for in at always this I I investing Yes. always

that is one differentiator But is a to is to just one, and us come going maybe I also and back a repair deep to it this maybe. I a of recession XX% cut if So fund we're for our was replacement. want think little business there bit

as So than not still existing may although our to well building leverage it nice happening. upon -- products, to fair with going share more differentiate be fair we our capturing therefore, the be of solid can our that's building we've they'll as foundation a got be growing hopefully and

kind very at the triggers, economic closely of very conditions, teams we're that's we we it way looking are have So we're plans, mindful ready. But and now. of it the we're have right watching our contingency

Okay. That's for you time. great stuff. Thank your

Ryan. Thanks

comes Halloran question from next with Mike Your Baird. Please go ahead.

line open. is Your

Good morning guys.

Good morning, Mike.

customer layer side, proposition just on much the here. value next the analytics from staying control proposition a have return maybe couple do that? the And or about secondarily, connected from then, their just they how want enhancing decision you side. perspective fold higher letting the view the how talk response control the been, their So What's on the to versus

our Good excited put now, specify know I the field it's very questions. engineers on the certified. engineers that and the has while issue example an customers and the from it's that in Right Intellistation that because feel comfortable been together you to it give factory coming be more have much the

connecting management that to what, So that's digital that we're going Watts a company feel with like we mixing system. and a that putting have knowing it great station better example be assuming credibility the we building of much or into the

they now instead they real feel and about components spec they system. that. good entire specing positive of inspect, very They've the So been

are positive. that very imagine But people been is. it's can uncomfortable you as with there's certain So

Our to to brand continue use Watts. easy job make simple, our and is trusted to of leverage it

to to analytics, to that data that and invest we're that's in So area. monitor stuff and we're on that's business the focusing how it. we further continuing want And related

data that. think particular It's air our We our their data. on on I innings capabilities we're share with in customers. from early

some And data the for ask to them them. of us monitor

-- again, five now But the our in early data years Mike. on analytics of innings as is combination. a much it's So think going from that's component we're look a critical that But be I I the to overall strategy.

Thanks And down level the growth maybe do an at the on the Whatever can a internal for little being capital with, high dollars how that here? certainly side on of the longer talk metric not time, global improvement towards term. has how basis. between a but balance or could this then, you you want growth that been side done focus from is much call operational The about rationalization versus the portfolio help the two winding a from XXX% focus the dollars investments bit that. very and between think the or use, you restructuring side. to allocated perspective about balance Maybe the

our the factory. really discussion of significant inside our all that with time. innovation is the productivity have we have, Mike ideas The and Yes. now issue accelerate we to right we have

XX% So lean productivity at growth on been initiatives. about as XX% we look more investments, it's and

to as on the our those we're -- improvement productivity, experienced I again, said my the of are the on in get hired and continuous accelerate mindful and leader report minus growth I that. to to CapEx to more it's say to there. margin or to our plus XX% earlier long-term in maintenance I initiatives However, aspirations. statement fund side and would We're initiatives growth fund a directly productivity me very to it. help looking But And rough here rust XX% at XX% very

for Thanks the that. Appreciate time gentlemen.

Thanks Mike.

Your ahead. next go Joe Please question comes Cowen Company. with & from Giordano

line open. Your is

morning. Good Yes.

Joe. morning, Good

fourth further tariff increases forward price companies pull potentially trying their just customers So deal other having talk of heard to get with some combination ahead quarter of was bit to we've XQ I from a a of about or -- inflation little commodities. curious or of

just you if So XQ? curious that any saw in

the of leverage to because but had Yes. we was price, good We necessarily pulled believe of also they've we X.X% North -- business believe to rebates not America did X% years. about in for their some

So we believe as slight walk a that's headwind QX. into we

up the iron first probably how how are guys And as see is inflation growth? kind of in side, And Okay. are that? in we far so embedded then, your expected guidance commodities price second thinking for helpful how as half the half, maybe much about is ore of your here; copper going the then, you the on in thinking not

Yes.

just year next recent price half volatility. our in -- looking that's year But break increases at at we we points in then, iron -- think given is ore, look overall certainly for had at what dam price on a relative probably dynamics that that the of on to we're why look stronger price cost commodities, we company. the it's the a we half the growth, company the the and this be as to pricing look comp in of So going of seen I tougher comps. second basis the we've overall year, and if And couple it's second the the

we've watching announced So our our closely. that in But we'll October on when we been increase. pricing very be aggressive price

and So overall, we'll to ahead of we're -- our cost the the watching we're that. be game. going I of think game to price continue ahead But stay

on you little down. ticking look over the and these price, has a And but and on -- are Copper XX are days, day copper, steel color started steel average up contracts really last few et the copper slightly when just add to at we overall, and the cetera.

first do expect So half softer the of second steel I in noted a And little after the a down the year. last all half in bit we copper. went quite tariffs

we on softening see a as So the little steel side well.

we which dynamics lot. a the use favorable more steel and So a on bit copper especially little commodities

been challenging the in into OEMs German that given May of be know the last a that's market look kind is year? next from and me, factored is the how I Germany how macro data what

Europe to X% OEMs watching I know, think softened mean, closely. as very some of Well, and we're you certainly, I we're that the their And is with on X%. that's why mercy at you see that. the German

it's about our why of very That's Europe. watch and monitor to more watching conservative closely. guidance something continue So so And that we it. we'll we're closely is inside concerned

guys. Thanks

Thank you.

the next ahead. Coast comes Cohen from go with question Your Andrew North Research. Please

Your is line open.

we of it? should a I X% to Thanks. double-digit China was in other. China's rest Great shrinkage on little and a how X% maybe thinking the going for with of margins. Has bit of -- the China APMEA where quarter. and still guess continuation going one the direction color hoping be or a outside Great about kind of it's

And you at started China, the it's X% second we China, at half overall look look it back of you in less really half -- when when So of seeing than of business. XXXX. first all, our the

growing and Asia other strategy we're And and APMEA then, countries, have on Pacific even that the first out. business in -- our half expansion outside been our Middle of East digits compares China. to the I we're should pleased So that's very of we're part diversify double the of our long-term area. Asian XXXX. that think the in it things is doing -- going to But we're tough And

second but feel China on we you it'll half those and is think confident bit lumpy, think and and reliance lesser less know, as portfolio of with ability China in our more stabilize the grow it's a little difficult in less of areas. I it's to XXXX. becoming So I now, part our

said That's helpful. of what that? view the obviously, looking mean, most to Thank I through -- should you. go-to-market still And you we development all in like you as strategy how either a or portfolio need it's to you you there are smart holes or do and then, you that or feel the you're fill acquisition have research changing connected on field do constantly. But

where satisfied are. never we think feel I we

think M&A on the to we're looking be for fill new where holes I investments. increasing and/or pipeline And it's we our right. So plan R&D all of that whether our above, it

base. and a M&A that a as foundation leveraging remarks, from little our of we've an in. potential as grabbing bring did said some example leverage have So capabilities prepared we like small I an small in foundation solid a And the that stabilized can point that and small we view of now in company, Syncta of pieces plugging a my very startup. acquisition lot That's invested we and our it in we installed

to for innovation that. we'll opportunities. and at we're satisfied to looking And be new look always going never and but So continue we're

Thanks very much. right. All

you. Thank

Brian question comes Please Sachs. from Lee Goldman go with next ahead. Your

open. is Your line

Hey, taking the question. guys. Thanks for

XXXX. couple the on we head a here, the that shift incremental strategy I does development guess priorities in signal around share allocation any here. and or maybe as shift capital Just buybacks any set's into

BSEs of like the fairly avoid with did years. stuff. avoid been QX. creep to and consistent share been stock the options, does extended we've if But when But just opportunistic always below next the overall, time over it periods we repurchase in plan, and our Now, and situation it's to has several share do arise dips over the with share strategy creep stock our

lot question you then, smart the strategy thinking was enough. in good so from that connected then, needs build you it of longer some time. be and potentially in Fair XXXX, potential here? a analytics for a you question to more how medium that maybe $XX more or to there about ultimately ramp infrastructure another spend target the drive an by or CapEx an earlier monetization Okay. can I product the incremental baseline term and over data a would timeframe? a And does does XX% that are annual to Is here in million Bob, about, And model to something guess that thinking is that arena services around strategy, XXXX contemplate around

Yes.

So $XX half that about investments. let's includes half the CapEx with start million and

products the that little So earlier key gathering and went building analytics focus, of that's combination the big this said we that. probably area new future. evaluating question, I looking I because with and and you're our the and early capabilities CapEx look innings that of in data into investment. less as piece right, so are a year in it's forward an we're was forward site new both. And XXXX. that our that we'll Similar the information, a Web a outward be and that think be And infrastructure I our as I look But as with teams a with we'll yes, investing into of

that, So something to. we're investigating but it's no clearly stay definitive Again, tuned. on looking forward and plans

All right. guys. Thanks

you. Thank

questions there Bob time. I to over And any this turn call for back remarks. closing further would Pagano, the no are at CEO,

fourth continued quarter interest Watts the you during thank day. Have again for with a speaking May. our our in closing, earnings In first your today in us We taking appreciate earnings call. great look to we join you time and forward call for to quarter

ladies And call. and conference concludes gentlemen, today's this

now disconnect. may You