Watts Water (WTS) 8 Aug 212021 Q2 Earnings call transcript

Thank you for standing by, and welcome to the Watts Water Technologies Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Timothy M. MacPhee, Treasurer and Vice President, Investor Relations of Watts Water Technologies Inc. you. Thank sir. ahead, go Please

and you, and quarter could to second Pagano, everyone. us. CFO. Patel, good conference call. morning, CEO Bob earnings are you me Welcome and We're Shashank With our our today Thank President; glad join that

the Bob He discuss the will and you our the state today's also quarter quarter call, of XXXX. connected second operations second a quarter initial our and an the smart efforts. of discuss provide update details will During of Shashank and overview for our an outlook the provide and offer current markets. will full revised for sustainability and on year performance, outlook third

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

presentation. is financial will the Appendix presentation to We this reference the non-GAAP our prepared reference reconciled in Any remarks. information throughout to

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

over risks, or The otherwise. see any I will or events concerning Bob. available information turn the whether publicly to as call SEC. statements, forward-looking For these to update with new of company future information, filings intention any revise disclaims Watts obligation or a the result now

provide time, They've constraints With as persistent for a quarter through by anticipated chain work continued of QX proud I'll please the and demand hard support Tim, team's been the our that, overview Thanks, dedication in strong everyone. I'm turn morning, employees times. the workplace. the supply the our second and want at robust these the and of good performance customers their a variants. navigating improved. presentation performance. to Slide and to challenging emergence same We environment while an in during our thanking start remaining safe X managing I X,XXX COVID-XX efforts global economy to of call our and

However, delivered record demand our was expected and better we even team than results.

working guided to also This demand. cost QX provide manufacturing to additional completed our February increases. exceeded cash the needed from management. freeze announced tailwind reporting second free we Adjusted focus a call, simplify June, by and and for help strong negotiations GAAP despite productivity. we our In U.S. our capital we our We've provided a in manufacturing the Year-to-date, action current exit will benefited structure our in France. operating charge incremental price revenue driven quarter. As last on volume taken the Mery, in to and successfully incremental estimate, and is meet late flow facility productivity the margin weather

savings the We Shashank by provide minutes. XXXX. few details expect realize more to will a financial full in

since me view trended on of regions the In let GDP XXXX quarter. first positive a direction a the markets for up expectations second provide continue general, key our to Now, in the have many move in during quarter. the global markets.

and weakness was expect continue residential both single-family certain quarter In non-residential and drive we lodging construction in new offset and So, like residential and than activity. new multifamily repair especially repair remained buildings. in second in new in that have non-residential to replacement and replacement should office verticals the These strong the construction activity markets more Americas, buoyant. construction

while own, France solid electronics XXXX. quarter, held by hope OEM some may the strong business. the offer and the repair again especially remained markets wholesale market market replacement momentum driven second data in gain were construction its and Europe new Forward-looking activity. non-residential in that Italy, in in The

the in channel high demand saw anxiety market. caused by shortages we component from Here,

green initiatives from We to also saw government driven heating stimulus. by benefit continue OEMs

We are the to for our sales third year And year. have quarter the third increased account quarter improvements adjusted versus introducing full with and margin and prior our we outlook stronger expected outlook results. quarter expected second

markets about issues, about continued more non-residential X, our but general, the supply are journey. and On have connected chain I'd to construction, concerns update in new still inflationary variants. and virus encouraged smart you like on We Slide pressures

systems. We designed on has developed eliminate sensor to continue It The write marketplace the need specifically products building melt in to based to ice cost custom contractor. the feedback. snow code, controller saver for to integrate introduce interface and time is snow the new connected a customer into tekmar management which a was

addition, testing plumbing ice snow leading patient copper-silver disinfection device. dosing maintaining system snow specifically of one mitigation is growth, to more monitoring systems made integrate the the a efficacy to the billion per copper while in melt levels. of By systems allows in to plumbing HF increases costs simple ionization CSM Scientific's and down the regulate challenge easier. as range. facilities. pathogen waterborne silver Legionella hospitality In the reduces guest system, healthcare overdosing accurately parts concentrations Monitor ions then of daily, Copper-silver and Silver to operating of CSM health. the of used in interface in emerged provides and technologies Under ion risk proven tekmar has their code or a Copper designed the monitor is of and level the commissioning, ionization The the functionality

During as connected XXXX. full well the the the first second percentage as to total the product of quarter sales compared sales to year as sequentially quarter, increased and to smart

to our make toward connected continue progress of XXXX. XX% goal by smart and We product sales

you update X, efforts. I'd Slide Now, sustainability on to on our like

are the solutions within us as positive reduce and water leading ongoing deploy in energy, world. to to We our impact waste customers' a initiatives sustainability is committed commitment as organization our usage to to having well on support goals. This own focused and developing

environmental we reduced establishing report goals reduce highlighting accomplishments issued our In most an view also sustainability our an In by are XX%. everyday employer, XXXX, our we usage and as our affect water to change June, and equity We addressing emissions gas opportunity greenhouse as in and in positive role our XXXX our to-date, to XX% comprehensive diversity, impact. some longer-term inclusion actions. by

Our product continues. more our for than reduced solutions portfolio sales condensing more times XXX,XXX past Watts heaters of generated This shift our boilers ecofriendly customers, of what metric year, a COX four products than and tons and water company. as to

people To-date, to employees, partnership new We Concerning of education, initiative. later and funding with proper additional to sites sanitization. diversity-based Watts have we over hope Planet education partnerships and and revised our eight Water, a maintained commenced future systems hand purification to this have Global impacted programs We've providing historically to begun water our countries, survey sponsoring be Handwashing of employee and with Day and colleges inclusion, for resource providing part standards. drinking as include positively the employees. we importance areas that equity garner We've safe inclusivity. we'll guidelines diversity, initiated XX,XXX black install and supporting will diversity we different of disadvantaged multiple DE&I And water first and recruiting several awareness in resources training the on manuals world. universities, promote we've our internal groups year,

provide Shashank? full discuss more the revised outlook. turn quarter performance Let third year and detail will our second Shashank, who our call and me to operating quarter over on

This consolidated the Thanks, on X% Both and Sales XX.X%. better tailwind more measures to Adjusted as to were global profit driven items from added primarily adjusted margins easier exchange as spend, points driven increased foreign our benefited and basis to price, by below recovery. X%. and economic by from inflation XXX operating well earnings Adjusted operating acquisitions last offset million increased share cost XX% a result Sales a than investment increased the and normalization. second incremental Please year, last return X comparative and compared organically, per to good of exchange operating results. XXX% foreign morning, expenses business the XX% and XX% everyone. as volume line and from actions. turn increased Slide reported of basis compares to to Bob, benefit. $XXX productivity favorable year quarter review our expanded the related

in rate compared Our adjusted XX.X% effective year tax to prior was the XX.X% period.

included year to discrete from benefit related repatriations. exchange primarily a a foreign impact reminder, a item As of last the

our which are approximate exit As Bob charges. are negotiations million non-cash costs in facility mentioned, Mery, have Total XXXX. be incurred to million, the expected $X costs exit to and severance-related approximately pretax in of we $XX includes Most completed France. through

million year be $X million, costs the For those approximately booked in restructuring $XX approximately additional rate in of XXXX. should fully of in quarter and XXXX. savings expect GAAP $X the second should charges purposes, approximate pre-tax run which we second million in realized half Full

net income this year. the was fourth in about largely lower $XX cash capital same June increase net XXth, expect Free year, million last through $X.X improvements flow in quarter. to due in We The was up XXX% from savings million period spending. and the

more Gross leverage conversion year. to cash X.X strong. or remains free achieve X.X The the goal of for net flow Our times. XXX% leverage remained balance income net sheet at was and negative times was

was at ratio net quarter debt-to-capitalization Our negative X.X%. also at end

investment During the primarily to common XX,XXX $X shares an we of quarter, of dilution. at repurchased stock million, our offset approximately

actions, the volume, strong Central delivered strong. Outside regional cost the government The continued basis last France operating as favorable major the tailwind United XX% by and in benefit component amid operating Germany inflation, sales to related Italy growth subsidies. experienced points saw shortages. investments, platforms. and which XX%. during profit exchange Italy driven activity of between compared quarter benefited offset from OEM economic residential Europe's replacement had quarter around XXX by margin both residential The expenses and increased major operating February the an the and platforms to slowly region growth return normalization growth business concerns all double-digits, more demand sales solid normalization. benefited single-family Europe valve Turning adjusted by by to adjusted operating Europe APMEA's was second to customers and second data improving increased XXX respectively. volume, and cost basis across increased quarter results. regions price another and by of good with a which benefit trade volume, a in Slide remained X growth outside from volume, markets in inflation. inflation Electronics benefits driven and to The Americas APMEA actions market and is repair from employment This Sales to foreign increased freeze The sales States. prices. wholesale to and to the centers. sales APMEA commercial in China, especially strong points the partially adjusted increased more the of productivity, return loss continuing investments, which oil revenue strong higher year, we Americas basis and points sales in related offset as XX.X%. by in increase margin and sales X% weather XX% margin XXX incremental of in markets. XX%, Americas' and expenses New of affiliate continued APMEA's demand actions, productivity East increased is due XX% and than pre-buying our with XX% related in XX.X%, to a South from Acquisitions plumbing XX% inside was organic from recovery. business China region all was by from and sales. price, than and driven XX.X%, cost also strong and adjusted China. offset estimated and products, as experienced Zealand benefits Growth Middle the

and X quarter about outlook. general Moving Slide our to assumptions operating third

increases to XX% year, additional are the quarter X% over benefit June. growth of of sales volume the through XXXX. We consolidated quarter should the be allowed for last third third we price see estimating Versus and organic to

We the our third a sales quarter, the minimal goes range but in $X announced price adjusted margin to third million. into by volume anticipate approximate benefit the in third that which have should quarter. could operating We Americas, we third driven from of about the incremental effect XX.X% the in in increase September, XX.X% should Acquired anticipate discretionary and should rate price, return approximate at Corporate partially million to of cost million $X.X and effective quarter. million QX tax million. of with Interest $X spend. related expense adjusted $X XX%. investments in approximate line should in be $XX by The offset costs

expected the persist Foreign neutral be slightly rates quarter. positive is last year current to exchange to throughout should to

range the X Slide a will I an for due GDP outlook XXXX increase growth price full stronger review third expect $X year to North we revised expectations, market Sales and repair XX% sales year is be acquisitions. by should than by from May of stronger outlook. From This XXXX. in to turn the to perspective, higher America please is residential million higher Americas' the being organic about in X% full our growth anticipated our and in non-residential and announced. increase driven Now, and replacement to for recently

be in adjusted driven of drop-through margins expect XXXX, additional We freeze impact. operating benefits the the the including by volume, up Americas should versus

We inflation more cost than for the also will offset expect that price year.

Consolidated drop-through. primarily is sales adjusted and We to points sales market also investments incentives anticipate the In on price inflation. to the up of offset midpoint previous of volume compared inputs. is to margin better Europe, to grow from and through, the margin to be now anticipate end This by year. increase XXX AVG by energy And and expect growth from is partially For we APMEA, XX%. $X half $XX the and third normalization and general related to XX% business in at XX% be should margin the driven operating residential up year from from the increase global first regarding basis organic expected organic the to year by from $XX operating be driven In to and we're Germany approximately higher market expectations drive our sales third-party to growth million, cost now initiatives. price, XXXX acquisition incremental XX% X.X% the forecasting and will restructuring basis points for for Americas. Sales Adjusted the for approximately XX%. operating other continued range outlook We Italy. will in increase the be our by year-over-year, adjusted expenses from growth incremental driven organic will drop key by million government incremental as XXXX. France, savings volume in million and full XX% increased and of XXX by approximately drop-through between volume, affiliate price savings up

million $XX We Interest costs should corporate expense year. will the expect be million year. roughly $X approximate for the for

XX.X%. expected $XX tax Our $XX the Capital approximate spending year. to effective adjusted Depreciation estimated rate should amortization range. and should million approximate the million XXXX for be for in is

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

euro-dollar sales that €X.XX every assuming average dollar are XXXX. approximately We full down are versus Please in rate, rate year annual FX impacted in European movement or U.S. and rate $X.XX for by now $X impacted our a X.XX the Euro our is average recall of by the for up exchange the million annual EPS $X.XX.

approximate XX our expect to year. We count million for share the

turn let begin Bob that, with So, call over me to the Bob? Q&A. before we

Thanks, themes. you with leave Shashank. few me a let summarize, key To

during the Second better recovery, expected replacement quarter, economic global a quarter helped the tailwind. the freeze as were weather activity and repair market improved results than U.S. and strong by

XXXX. and are positive We have entering increase in Markets announced are for supply a non-residential third the inflation new rise. Americas to costs price supportive the as leading indicators continue and construction chain

invest long-term our smart that connected continue in manufacturing in facilities strategy. long-term in We and support in and productivity-enhancing solutions especially our technology to growth opportunities,

We investment have year spend. also our full increased

we During the in-house see training as expect pandemic as Still, necessary from to business we investments, increased closely costs monitor continue normalizes second half, expenses. on to levels. such

We see expect versus last in to quarter improvement third results year.

please for given for second QX year raised expectations been sales and anticipated outlook second full in and questions. the operator, for adjusted profits, quarter results open that, has than half. stronger operating the lines With Our both the

line And Nathan Jones from [Operator question with comes Instructions] Stifel. first your the of

Good morning everyone.

Nathan. Hi

your about anxiety. like channel you start just demand a high prepared made off comment Bob, on remarks, I'd during to focusing from

own about your of distributors markets. customer here, Any ordering bit line. Maybe what over on broadly little I is a your lock comment comment chains. versus front get a was about is? to sell-through the could European your you have kind their on you trying trying color potentially feeling to more think some to that specific Everybody the sell-in of supply in

so some over, seeing an give of Europe. think in supply business of electronics that needed, electronics particular, pushing view. I could our their I channels to how inside they we were we Europe, we the customers in could because America commented and of point lock And Europe. in understand really us actually North of Nathan, our so Yes. our are in that all much from orders we chain on

there think out some I there. buys again, are So,

I are seeing think people we beating increases, are price channel. the but sell-through in

So, through inventory want the people now. when get and pushing we inventory, it's right

has of saw up been economy So, some demand again, GDP we pent-up strong. the as there's opening and

watching line forecast that in quarter. But we're third the very results far So, it our we based July on all with closely. believe for it's our so

are markets well. Yeah. like the It much getting as seems better

increase price year? up, to carryover go be? where to freight Can next up. full costs another the announced for price to Obviously, expect maybe cost you be the You price about continues year what inflation go And talk September. on for continue you into would

Yeah.

first and the in think about look, two So, positive. material of net slightly if the were cost, half, price you

about, curve our stay in we've why the and that always price we of talked looking to that's try at ahead increase the Americas. As we're third

one X place between second through and into Europe July the the Americas, rest went world. The of

will because XXXX. color But little certainly, of about because year-over-year mean, we in to But goes that As third second get into on price much and on I think timing, the of the incremental realization for that be to basis it's still the we'll the how of a we early there in a give got more next that increase. XXXX, benefits call.

positive And inflation? or neutral or as on to half in lag pricing positive expect slightly catches Got you be first the you're to some second slightly you up it. said Do half.

you this Nathan, ahead, know be business. we We how always expect to run

it. of front in we're So,

Not the surprising. for questions. taking Thanks

Nathan. Thanks,

Thank you.

Hammond Capital comes question the Jeff Markets. of with KeyBanc next from Your line

guys. morning good Hey,

morning Jeff. Good

Good morning Jeff.

impressive, has couple an this know how very results margin on margin kind kind Hey, over to quarters of and I here particularly mix trying improvements? And the but just been think versus much the so you last structural side. improvement the effort, ongoing European are of the of unpack is

sorry, particular, combination the Well, I'm residential strong in some there. think in I Look we're demand, at France, France freeze in both. there it's - I a of the was think pent-up

some in are a various same and their and just little houses. home we staying DIY and doing North patterns we're in things America, local of saw people bit, So, seeing the delayed

Italy, structure, higher of we're When We continue the electronics, strong all Mery, between people around us So, that. the some France to which in and in helped the was as know at in been be OEM sure. a addition, orders we we with and Germany taking favorable seeing I in taken previous look in business. we that. announced and out costs those I energy volume electronics, to along made you comment fixed quickly that's has there. in platform. us look we've we're about talked while incentives this for put And mix cost our for at the closure And on that do, fixed cost the think our But our France

it's margin opportunities So, think to of really I hit as of volume operating we bit off we effort where focused But but I'm and on it's team's take proud little a advantage record going could. we're the And improving. taper that the volume related. to always going, get

out Okay. the you think can second the price price, how plays And And in you Great. half? in how then was price quarter? quantify much

Yeah.

one and fourth And range. X%. XX% then of the will will second end the the increase, second third From us the that's typically, talked in to realization quantification we to about increase increase then price benefit time quarter. we a And that quarter, went price the let's price And Americas got the the in the quarter. second in third second is in the the third one was closest increases, our X% us into end And price the period. of as price to from, obviously, say, rates a us. are global about, and XX% June the our benefit on about May that of So, effect basis,

XX% So, X% increase, that to half realization. about price of is the

Americas, the days in of kind on one it's its early third that The one.

an you standpoint? kind what Bob, about still recovery. one. from last little that less certain on Can order of activity tell what kind you a you an commercial just And does of about construction then seem And there? inflection timing talk for you're Okay. just new seeing

Yeah.

So, same been looking et reports Dodge But pretending our still again, they're on certainly, et But the buildings, still based you more to recreation, it. all slow we're market positive have estimate And cetera, we we lodging, hearing, at, intelligence, channel. those stores, growth. the that do Momentum, have because to what cetera, we sell-through office of all at et the look that cetera. ABI, the are wholesale

from pickup some in the healthcare also. some education the seen institutional markets, we've side, So,

for lot to that new a and starting watching out starting that's hearing there. that on is we're the at different. is construction still at again, new and looking look closely. right bit Every again, region it's labor So, we're see big still little data of There quotes We regional. loan But that. discussion, move We're projects direction. shortages and a in We're stuff. to

things think indicators But offset new significant and direction. forward. right to are our been move nice to has I in to that. in the starting nice bump the So, to And move replacement construction see of it's some repair starting

Okay. Guys. Thanks,

you. Thank

the comes from Boenning Connors of Scattergood. Ryan & with question Your next line

thanks for Great, taking my questions.

basis kind as the picture analysis inflation thoughts the price that of the going just happens? back the terms only gets What's demand just raw XX money how end driving in XX, cost the back the impact maybe margins but fact contracts not potential walked of if on in that least money in future scenario and costs off, in increased impacts, markets, the next all but of the we in months, of the steps bigger that what that about unraveling that the not of that on the the as and in Fed supply? If your one. First well, are at a is part assume higher, monetary just markets only what's markets a general material as supply, driving and

going here. Yeah. look, environment we're low think forward rate still in interest I a Well,

So, to although be interest I raise little they still it it's lower might think going cetera. et bit, still a rates,

depends on shortages, hope not virus, too. variants et case. I that's overall, a the said think how the happens, these lot of could potentially, if another cetera, as some But fast labor let's I of lockdown earlier, this

demand. There pent-up projects seeing that we've some a out there's we're So, this I some that back are are be you there. to feet, follow our repair-replace some see follow XX,XXX if trends. boom new now, to going step is tends to which pent-up think right think tends GDP demand. because But been to XX% don't the of XX% business of tends the our then construction and I

think, So, the carefully. I has significantly. And certainly, up X%. gone we GDP this year Overall, it's very watch world that for

that and investments, little taper in to think some bit. continue these makes to there be But bills' will a think open of continue down healthcare to I going happen sense. pass, especially I as And that's things type institutional But might if construction So, some areas. up.

think but how right closely, we're again, now. looking very So, we're watching world I that's the at

Okay. And some economy prices that what has there do general commodity guess, I sucked mean, in that of brass, obvious believe out to effect back? just kind of I amount of you market then I you'd would is price like significant be do that you some scenario, think of a hold mean, give out cost. liquidity drive of in can benefit I'm Or of an of that, and in realize you've you the the force the price things the to trying specifically, gotten and you and this most that of gets on if sort margin? the

goal give our solution going it that to we're why some will and keep commodity and back. really offers our be we much of a as differentiated focused leveraging initiative goal and our that our as smart can is versus customers team's our It have on connected to that's product think that. in of to I to product a

look We a at that. what cost plus. to we our do necessarily customer, providing we value not don't So, are

But again, focus. higher our we not And that. we're continue that's why our to So watching value that's customers. to provide

watch market that structural about office, you just fully then is maybe on follow-up one mean, of like does to got to where prior seem to the office to have X% I question I we've change. I'm to where there actually talking non-resi. a And elected Got mean, it. one from one, last a be How term? opened important people on here. longer the

like of maybe we remote it And and a really if terms terms have so on just back, new impact that are growth business? forth. that is of longer in it you in come So, seems what of never normal in term, work does important market? How does

than less significant, not It's X%.

So, again, the we'll on are focus markets that going well.

Our care product it market goes what into. end doesn't

take and the of markets we'll So, some advantage that. of are moving that offset

So,

less X%, X% So, office qualify that Ryan, construction just the to is than new piece our of sub-segment.

Okay. Yeah, that little makes more a low. sense if

time. your for Thanks Okay.

you. Thank

Company. of question Oppenheimer line comes next with & Bryan Blair the Your from

morning. good Thanks,

Good morning.

called fix back two side what bit a half? the and all is expecting your makes versus at the repair, sense replace differentiating level. break high can Drilling between that on of momentum color for more, retrofit you offer and a across a strong You've the portfolio, activity your team down

Yeah.

I at It's what because we're both. to think determine a seeing the point demand. this hard combination is what of time it's in

I think XX%, break about we around renovation XX%, is talked fix about somewhere there.

So, between the and it's distinguish across board the two. can't I

saw there's QX So, off have People repairs of renovating. do and that it. solid in before, look, I to think so some plumbing before that some as we of your only in And we long are up. and you really QX. can you happening And opening said adjusting just hold

That's hear. fair, good to and

that dynamics? baked full of if in walk versus points for Just a the incremental to X level Shashank price? pricing what's you've set outlook, of you on But year we through the revised X the some guide, think lifted the volume can

volume is X now, and that other of July increases, we've October price is one Americas It's if break price those already then But quarter. incremental them X. the really second because approximately some effect it's effective half is some Yeah. in the roughly were I half of of and going incremental half to about seen of out, the some to the it

it. Got again. Thanks

Thanks, Bryan.

Bryan. Thanks,

Your of Joe next line comes & Cowen from Company. with Giordano question the

morning. Good Yeah.

Joe. Morning

When unwillingness the the extrapolate just and there we're the of something a here, raise we're into little guide think to over or three ago rest later I about the was the for just months? last and about what months maybe previous like better growth guide like now still the a for changed three do full structurally of couple the saw more you year, just feel year the you months

a uncertainty. could when of was we look there slowdowns, gave the Well, et How I be think, things still cetera. lot guidance time, were last there growing,

third we and compare we're think in quarter. confident an easier year forecast now globally world the And was the kind down second that's I second aggressive our why of last the us this shut in time. for because remember, point and outlook at quarter with more feel quarter more

again, our So, what what think customers the we're for the to forward confidence the hearing that I of gives bring leading us indicators, from seeing, of some we're rest year.

it just clarify again, too market. in gave early we wanted We hearing before, still what the So, was was guidance signals mixed to we're when happening.

where you guys your then the want I if sorts pipeline, don't deployment capital I balance but other And if the them just sheet, you - sheet? have you mean, fair always to Yeah, balance know - be, not of need you're are usage on priorities. looking on prices and enough. things of on thoughts thoughts a to there

opportunities we'll always do to have be ourselves this going we capital for not there, to to is first. as we point we're disciplined patient, always be first strategy believe and look, balanced said, alternatives. and at continue We're you And We think time. that. like priority out give in deployment as That's we our up our Well, deployment willing have. just look We a in have. there's we in to at and investing capital

be we've we're at timing never and of growth investing factories automation we'll an view. any in So, we but M&A dividends and increased an watching, But from you in looking, that. the again, to view of well But can from monitor point first priority M&A. look is our our continue organic ourselves, predict as point of rest as our

guys. Thanks

you. Thank

line Michael of R.W. the Halloran next Your Baird. Instructions] with [Operator from comes question

Hey, good morning guys.

Michael. morning Good

on spend Hey, on we so, connected on side, always uptake going see. the could strategy? is you the just R&D Obviously, like the and innovation to happening how which go is the incremental through

kind that still if are and Just saying it? any of gaining behind curious is what clients momentum, receptivity context the

very getting look to talked our on connected. solutions from as and And the offer strategy, various Yeah really we've And customers we pain our labor and in smart of to And plumbers especially shortage of things us at it customer. personnel. our the Mike, points. innovation as in allows this I positive will connected is relates mean we're past, products or have comments it smart especially a to there's about and there's everyone issues anticipate connected and valuers, for us seeing see catastrophic of maintenance that so the them shortage the before now. right to shortage their And more market issues a to that, allow really, benefit

percentage increase of percentage again, of our overall the up, results, as second we're but non-smart you going actually, in as positive lot continuing sales. comments percentage let's keeps though think our that's a in to it, even And very it, So, freeze our if traditional quarter. let's had it, total in on products lot a said opening about the that, our, and I a call connected sales, we of, my increases sold call

our is excited team is we The very our that. percentage. full. So, pipeline continue about And to increase

of outside you channel some are sitting the pre-buy then And how think Europe, about activity you talked here Thanks. do Thanks. of inventories in today?

interesting. it's So,

I our dialogue ago year it's with customers channel is it say, the have and or flattish. interesting. not, would to a from probably continue We inventory believe

wants demand and given current there. inventory out the the volume more However, channel

because So, it's People concerns more. supply mixed chain the they're and think of demanding want more a I bag.

you So, want if overall, would more. they they tell

a capacity And where a inventory, and from that are, is for chains where like? supply capacity at looks channel meet perspective what challenge the mean, is where I your you point to this

stayed been in but the this of looking at thing team a challenge at front could. only of It's chain as alternative we and we've because worked issues, tirelessly best our supply sources has

they're doing great a job. So,

is area. tell our I supply I And us excelling to is would grow. the in say think would - we're doing helping team I continue you chain that strong

everybody, issues. shortages and have to watching continue like we very supply push. The we'll closely. labor So, But is chain team

it. we need continuing to real where and we're So, on hard capacity building work that

it, Appreciate Great Bob. Great. quarter. Thanks.

Mike Thanks,

Thanks, Mike

question from Research. Walter next comes with Seaport Your the Liptak line of

Hi. Thanks guys.

one. inventory share you're your to competitors their channel first a Are to Do market think you as the meet partners' supply? last because Just follow-on getting of able needs?

I think we're That's holding best our doing better. the own or I say. can

Okay. All right, fair enough.

costs your I were what them? a about if quantify wonder talk coming I back that are and costs could little coming talked maybe about more bit back think those you in. commentary, you in some

Yeah.

last headwind about year, training, for marcom, those was of starting travel, that we things cut costs million full we and like And XXXX. the in things talked So, about back business those are all had normalization that $XX March.

compensation had to year In Europe got cetera. little in some benefit Obviously, of pay few China. that a we incentives, this that, cuts, those the in bit the obviously, got also, for primarily are benefit. government et addition last benefit not a And and of last year, we We months. We year got year. last

kind of kind and that's goes away And all incremental that of So, headwind. spend. investment then

et we spend. million But this our global that are smart incremental it And the market about it's of expansion expansion, year, strategy. year. got is, product half or of of headwinds those rest cetera. is investment connected For the in About and this whether $XX

to Okay, from of from allowing expenses forth. all or to and you think people bands you I you travel locations? travel kind Have right. some and mentioned travel so lifted any your And are

with been team, So, not met out travel I've still sales travel there. our has has cetera. is Travel there's gotten out International our together, to sites there. limited and et begun.

internally. more I think it's

but closely. starting but very these up, very watching and visit starting limited be we're variants So, to and to it's again, we'll customers, ramp

So, that we're balancing now. of again, right all

to I ways? coming I get important have guess able or it's new training around around you or your able to are you your of been have this, is the into figure Okay. on And you it do to important channel now, for reason ask get products out think partners facility to that travel selling digital ways that through

Yeah.

take field to you been we've got products. on offering you, training, but our where I've the So, pushing is a digital which tell is start doing really part to in-house training, hands us training,

them. beginner training. troubleshoot Great You

back open quarter we're we're it's So, to and lot it looking open we're of now, sooner. scheduled being up, to pushed and Right to even do up for pressure fourth that getting that. the a

did would to So, people it external that, before if of we facilities. have certainly our allow inside come we to be vaccinated people

we get some So, a developments to and more new we there of great and at and with do everybody out show anyways, been But need what We've list product our pent-up there's Zoom. digitally doing in long point, innovation, training have. demand.

to can so see excited I'm industry to So, sure and the only it that last come long, is starting back. everybody in

Great. Okay,

Okay. Thanks the color on for that.

Walt. Thanks,

Thanks, Walt.

questions like [Operator for at call would have to Instructions] no the this turn over closing Bob further I to We Pagano remarks. back time.

everyone, of us speaking second for your Watts, call summer. and quarter Stay Thanks, for on call. early We and in to the forward continued earnings third today look your rest quarter we again the safe November. you with taking our time appreciate join to interest in earnings our enjoy

concludes This participating. call. today's conference for you Thank

disconnect. now may You