Watts Water (WTS) 10 Feb 222021 Q4 Earnings call transcript

Good morning, and my name is Savannah, and I will be your conference call operator today. At this time, I'd like to welcome everyone to the Watts Water Technologies Fourth Quarter 2021 Earnings Call. All lines have been placed on mute to prevent any background noise, and after the speakers remarks there’ll be a question-and-answer session. [Operator Instructions]. Thank you. may conference. you MacPhee, Tim begin your And Please for some technical difficulties. stand by go Please ahead.

Welcome quarter our XXXX morning, to Good everyone. fourth call. earnings and conference year full

Joining past Planning and CEO; full Bob our will well President will our and year you Bob on overview McClintock, Watts' Analysis. in me of XXXX market an Shashank financial as this and Diane provide Financial fourth detailed update CFO, this QX review Patel; and Shashank of VP expectations provide today are discuss year, our as Pagano, year. XXXX. and of a analysis quarter for our year results for priorities outlook full the

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

in information presentation. non-GAAP We in relevant these reference materially. will refer everyone to we measures could to appendix throughout forward-looking to may constitute certain that our Any remind are comments is reconciled like statements remarks. to to the prepared to These statements. risks call, financial during slides GAAP I'd results differ actual and uncertainties numerous this cause be that making that subject the

these call. On or company my effective I be forward-looking via statements, events because note, For disclaims information whether earnings to XX. future concerning with or personal to The filings otherwise. any revise have risks new this retire any publicly last obligation the SEC. available March update intention or a of decided will information,

forward over well duties. our has also as excited XX VP the many chapter. responsibilities roles companies. over of so with Diane Relations assuming Analysis, Investor within Financial increasing Watts I'm experience with people inform be to last looking that excited other as you in financial McClintock, of to years will the my years, financial XX and am Diane Planning next worked Watts at I and have I While great

you find the the working I've to Diane over energetic wish much knowledgeable, expect the as Bob. investor will personally best, enjoy turn that, to company, be I all you, I fully working in appreciated have. analyst our and and X will interest continued You your with with I Diane the I very also enjoyed and call community, personable. you professionally. last both and I've With years. will over as

you, Thank and good Tim, morning, everyone.

beginning years. on the respected Before been presentation, announcement. a Tim's of the Tim comment member XX to for team I'd has like personal Watts

and CFOs appreciated have he at in all worked for Controller, Accounting several his in him to our his Treasurer his lead, counsel. wish with retirement. Tim CEOs As want all and the finance. work involved to Investor during has of thank Corporate I Relations Officer, services and Watts Watts tenure has Chief been aspects and and his all closely Tim all best

Bob. you, Thank

Instead, Now progressed. be new variants general inflation disruptions prevalent affected. XXXX more personal to XXXX. across-the-board I'll impacts became that the please expectations virus frequent, our earnings wane and our year to regarding recap more continue would were the efforts a supply global and the lives emerged, negative presentation, some Entering thoughts turn Slide provide in initial XXXX, of pandemic's X and as chain became

initiatives. I the work pricing Southeastern As enhanced challenging Throughout for collaboration to severe We United safety-first year, performance. market to worked supply the economy drive everyone demand. entire customer market-leading meet mindset. with weather all pressures global team diligently another remained drove in strong thank promote winter to the despite to complex adversities. close we the team with continue unexpected disruption, inflationary platforms recovered, addressed productivity tirelessly earlier our demands remote Also, through year, outstanding additional demand. our and The must a their saw dealt many Watts customers, States digital programs chain the and in

offering in our systems expanded and solutions Sentinel we addition, leak In with detection product of the purchase Hydrosolutions.

advanced program, of most participated future governance ESG the Counsel culture. our and our ESG our Sustainability in to determining our both We critical the also into in efforts our resources, updates Stewardship us and performed us environmental, ESC Water better the on Board. efforts Officer became to or journey. help facilities. affect Water water have understand to worldwide materiality further upstream ESG in providing downstream XXXX, how In at social touch embed Accelerator our tenets our eight We to Chief We General to quarterly the which success assessment allowed Council's guide we points is and a

our continue to groups our encourage have groups on within various resource expansion employee focusing of six company. now the and We constituencies

Our clean towers, providing countries. Planet water successful. with be to sponsored continues water partnership drinking year, almost past we six Water This XX,XXX people five additional in to

embody and themes product handprint our energy water framework. and safety regulation, Our conservation. three are ESG key efficiency macro the of themes These

forward We system, And we and line of we've validated one commercial our OneFlow third rating consecutive as reduce scores. the ESG one this natural responsible by heaters full most to have been IntelliStation, America and into XXXX We'll important on resources is the Newsweek year. conserve development rainwater systems. recognized than more keep harvesting ESG ingrained of of These have ESG leading touch people with our concerning agencies journey. these culture for our promote product safe, strides continue energy initiatives gas companies efforts efficiency, ever. anti-scale our improved move the as the like in make boilers environment or condensing products many Powers Several greenhouse our emissions. or in more the that products upon water either themes, and

spending team's to of inflation. dealing rapid due levels in flow including margin our and from increased to EPS demand increased portfolio while meet of future, Full performance. while by targeted points; income, cash buffer of to to operating per margin higher XXXX provide connected disruption. inventory of We operating our XX%. smart The a from XXX% and for decision incremental and adjusted sales, our French net announced full on productivity. sales facilities and earnings by year million goal to basis incremental our and and chain a cost below regarding adjusted efforts $XX with additional by delivered Now maintain product investing the collective the proactive share. record partial delivered year customers closure mainly our XXX still our operating footprint increased free came provide We XX%; logistics one supply Organically, and optimize record slightly manufacturing margin

operating during execution. exceptional financing agreement, our strengthened the and was level intense through the balance at consistently Finally, renegotiated record by debt Watts, cash teamwork of sheet our flow market down we paying and high early across level year, favorable XXXX by customer collaboration a extending an XXXX through of focus a driven rates. debt year and more

many and let's remain year. post-pandemic to priorities. as In respects, key crucial XXXX a governmental other continue we Employee #X our cornerstone. monitor our our and remains hopefully consistent. CDC Next, safety adhere is Customer this world review shift We'll a mandates focus guidelines priorities to priority. to

of development customer new to be feedback, smart product programs. Our continue continue cornerstone of our to XXXX We've and focal by We of products, process. be to XX% will increased in the and commitment Voice feedback restrictions received a as point. virtual in with development, through growth in and always, will connected especially a those XXXX. lot our COVID even double-digit plan sessions over XX,XXX virtual learn launch to

and employing As our investments. to still and a productivity, operating margins through expect to expand our drive continue price leader, performance Watts while long-term to market we system revenue growth One funding

new predicts XXXX, markets indicators, how about seen AIA in Index, our industry regions be in below forecasted strong XXXX. for Dodge repair the will expectations replacement due half forecasts to replacement and local we as the market markets. slightly are Repair low mixed. consensus about the the new nonresidential our permits U.S. will XXXX. to single growth we compares. was and briefly economic In see In packages commercial increase construction, economies. of a the second to In are digits. macro we expected tougher the that albeit and construction semiannual subsidies at government various grow, which impacts in mid-single-digit the in shaping up and help cautiously there and grow anticipate year perspective, nonresidential In for are in than optimistic the major mid-single the portending those Europe, starts recently in The XXXX, in we XXXX. to residential the expect could construction are are pent-up overall After in stronger extremely the lockdowns anticipate demand Momentum for From we as first talk the Let's both result in partly Overall, its residential general, including released The with market digits XXXX. GDP levels growth. for housing half latest all construction activity spend mid-single of Americas, a ABI digits low the and outlook, new banner a are XXXX.

X% to is as We will to X% and to subdued. regional Italy, and marine in slowdown in to lockdowns Pacific, the in The be subject as like constraints, Americas, and material to COVID growth support Asia is XXXX. be subsidies housing with In more will about continue economy continue not the starting to But coming be at And growth a to China's of expecting fallout. labor provide expect Germany is forecast inflation. ever-grand from from energy expect country robust signs government-sponsored market GDP XXXX. and grow show the XXXX, back. we headwinds certainly, pressures shortages potential

but from should the Middle economy quarter susceptible our lockdowns note, that variants, no homebuyers. the monitor market are grow grow either respect to past Omicron and growth, areas Australia year and our subsidies again, COVID the there is we've These incrementally we'll new to variant in for with Zealand need any in are in of productivity see to New positive and in variants expected to significant With On of expected XXXX the help XXXX. a demands we or continued something impact East end at in assumed levels first subsides future COVID XXXX. is have Australia XXXX. to the economic that as from from to in more lower outlook impacts this government seen XXXX. region

was year. to spend and valve initiatives to of incrementally an Slide initiatives. turn to support mix with immediate last We total We smart and sales at essentially the smart There I'd connected in linked year like of of with that We freeze on invested valves. most our the XX% the four. prior offerings. want demand million sales, connected more product to connected to This from by for from digitally half skewed resulting R&D is smart continue product roughly Now an lead our flat winter XXXX industry $X of product of provide in the in unconnected replacement our update need Please and toward connected explained XXXX Southwest total products. ended in partially U.S. the traditional than

compromised. extreme products the to global divert we this, customer addition With respond electronics shortages. to these and to to customers response In XX% our approximately and and been freeze, of these electronics XXXX second the times had to seen embedded extended capabilities, meet half component component been respond entire to would have market development Without issues, levels our pricing, to by needs. we delivery obsolescence. in lead of efforts approving for shortages component immediately alternative has validating these earlier-than-planned team's in In had the components to impacted ability of global by reengineering volatility production have

However, XXXX. portfolio advance in to hampered the further connected and ability that our effort smart

by the have worldwide XXXX. of Our to our XX% and stated that We're driving goal. team XX% connected be sales still is goal towards smart

created However, issues, chip by XX% and shortages by connected by given smart the XXXX. may softness supply COVID and chain, achieve sales we

leaks. execution feedback. The the the it experience easier. is jobs smart costs Smart sequencing, for operating and improving you'll solutions. At water not their is recently leak pressurization System off regarding the detected. insights the remote We've shuts This e-mail is launched use system temperature the in prevention Slide tekmar products. toward actionable building to shuts tekmar want and home boilers. system make The and Let of systems industry products when key programs resources strategy. intuitive, resets to or due me and boiler-to-boiler we've the smart around provide to Boiler aligned not owner reduce excited some Retrofittable fully metrics our We and to leak Control a a future the and the connected focused washing simple updated flooding about and connected lead of machine. existing our only smart continue of to-date is when prevent homeowner world. proven preexisting when highlight two new X, the boiler remain notice of in system helps continued connecting bottom team consolidates now operator remains the product outdoor to The indoor also to text machine invested several providing solutions connected with IntelliFlow off a we installations, alerts over the washing to and to of and system for the detected, our by water our into of to connected IntelliFlow

to and until agreed XXXX has place the and into to the to I be Americas to employed and Munish and the continue Europe, Munish personally as Before I contributions has turning comment Munish Shashank, and is then is our smooth for retire. news it him the his keeping company has to to by want very May want call to to over have and that for on remain informed generous for his of in interest time mind all this possible. President to decided best personal the his that with successor a seamless other of Nanda, time me for his assist until order as to that more in thank in as and his family pursuits. decision successor. made Munish his in transition current make on resource the company transition in willingness he -- role focus valuable this been

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

morning, and Thank you, Bob, good everyone.

$X.XX last share due of his driven margin from cost with He of share base $X.XX is stronger will history, company. regional understanding anticipated all Before with meaningful momentarily. $X.XX adjusted and, long lesser were to beginning, per investor thoughtful increased for points earnings basis those volume, I million. up normalization was to and variety very address contributions a concerns incentives, a growth primarily interest Earnings lower Adjusted expense Thank also offset unfavorable mind from been year. the helpful credits. me profit versus Tim from what appreciated of and by as and into partially more to double-digit productivity regions. want in rate The year year. adjusted declined you, our results. and and XX offset quarter to effective million, efforts healthy translated of of has Adjusted rate foreign I've manner. with in R&D last our XX% operating as subjects. which XX% from investments exchange of of offsetting with highlights down adjusted we Tim a in to was Organic increase, your been transparent in per to benefits the working inflation, compared input and higher the I $X by introducing Watts' well her thank by new million were to our in timely and great year-over-year. always we of The concise, XX.X%. last $XXX to one exchange tax board how mostly movements. his for versus lower sales and Benefits up savings role foreign shareholders me review a Tim, and price extent, sounding were than a analysts. has X, her for incremental than on had a wish fourth and an look XX.X%, rate, effective quarter up growth Diane a Please performance tax Reported and turn were long I impacts Slide operations operating to combination a top retirement. of forward the you XX% XX% Sales sales acquisitions movements another. $XX now

Americas. Europe mostly cost of in for For the initiated initial $X.X facility and related a asset we quarter, earlier of rightsizing the the million an to that in Mery, XXXX decommissioning purposes, GAAP we charge in for the restructuring France the continuing took

purposes per million better-than-expected to inflationary investments operations. primarily tax a incentives, also restructured supply cost pressures. global charge summary, for drove $X profit growth and to share higher with and We our chain top took In earnings moderating due margins Mexican line GAAP operating normalization, continued related

results. to recovery regional growth the turn and continued Please quarter, sales regions to Moving from during saw X. Slide the organic strong We reported economic and price. in in all the prominently

Adjusted million, Europe up driven by Europe million with $XXX saw Drains profit by $XX in In previous quarter. sales in X% and Americas tailwind XX.X% a million million sales continued of more organically headwind dollar XX% Fluid both were in residential We investments and business increased Solutions costs. of regions made was continuing the major XXX the demand of products. was operating energy-efficient margin safety was Adjusted declined offset normalization repair Americas, during XX.X% the with operating more due Europe acquisitions which from up APMEA. margin for strong XX% to to all We over Germany than the organically the was growth margin year. construction operating normalization a productivity profit and Italy X% growth organically. year, the Canadian quarter positive of exchange for Adjusted Price distributed than from approximately delivered stocks Sentinel $XXX adjusted double-digit in approximately in of categories, versus incentives, increased incremental end-of-year exchange approximated of a locations in incentives, of as in increased And price to We inflation $X positive most up Drains up new APMEA operating the year in the solution million. in and quarter. price, up Acquired to movements during from last investments. also up electronic points by $XX Like a large the profit operating was all platforms. Americas. of with million Revenues major down also to were to productivity, approximately and basis demand. volume, government XX% investments million, third-party sales during incremental Scandinavia business On XXX $X adjusted offset expansion Price organic mainly benefit including incentives, TDG and by quarter. in Americas, higher growth products. the Americas and speak sales $X Foreign XX%. market, also sales and saw price, the X, year operating X% foreign than approximately Together, added savings, were productivity was year-over-year. and price product replacement intercompany and offset and XX price. more was subsidies partly tailwind. inflation $XX volume the was basis costs points, restructuring X% results. costs high Adjusted and million XX% improvement for points than approximately heating due Europe as last volume a the inflation increased normalized and me volume, full let basis for Slide investments. to

price. As to were economic Bob by recovery driven mentioned, results we increase billion, XX%, and a the attributable sales delivered organic record primarily XXXX. Reported up XX% for operating $X.X

and respectively. was and results volume million of approximately driven versus costs XX% We prior on margin adjusted of the expansion offset incremental a approximated favorable development, to invested disruption. funded investments driven We chain rate translation Foreign more meet year. factory the or basis year, drove of XXX $X.XX potential effect $X.XX flow normalized demand a $XXX effective points approximately in in XX%. year-over-year share million, and investments. earnings increase. year. $XX exchange customer decision last acquisitions product $XX to lower margin a and per investments conversion and full to increased increased and incentives compared for by by mitigate supply accounted XX.X% year foreign capital and and spending, productivity, was $X.XX Adjusted Lower for versus which to new acquisitions expansion year and price, Adjusted $X.XX the XXXX. the full a carry Operating sales $X.XX year. interest cost, million to was The reduction of last cash in than capacity operating X%, XX% had proactive Free positive inflation, Free tax inventory approximately flow currency X% including productivity. cash additional for incremental

to reinvestment million XXXX, was We XX%. XXXX $XX annual in dividends return form share the ratio and In increased repurchases. dividend XX%. by returned we of Our our shareholders

$XX by During XXXX, from cash we also operations. paid million down debt using

Our at capitalization net as X% ratio prior the debt compared in year. year-end negative is X% to to negative

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

our significant I disruption, despite sheet and challenges, drive chain our delivering inflationary operating margins So was the many as results. for growth, well ability we strengthen in faced to these pressures notable. XXXX, team the and price, supply as commend logistics outstanding team's our proactively balance expand

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

Firstly, expected at headwinds. let's look

progresses. will We continue the should the major second to but be issue problematic will we the the continue growth of than impediment. Labor be shortages throughout half supply deal to year. Presently, believe chain year the incrementally the think as improve disruptions. half will a first with persist less We year,

quarter in variant, inefficiencies With issues operations. acute do in driving more the our current see Omicron the we labor first

higher and we'll a investments in the inflation, comp well freeze a costs, have to be as to as first year. due Also incremental expect in tough last We U.S. weather normalized XXXX. half, headwind

activity As are coupled XXXX, rise during we Interest labor ongoing of anticipate This a the replacement Bob and rates and expected could for to do strength year the construction the reacts in inflation. projects. and/or mentioned, material due repair comp delay to also as reduce funding with Fed tough shortages. to

most that interest able the our column given continue the to price themes positive in we'll a been In dynamic We've XXXX. year, be over currently rate We monitor. XXXX. may maintain anticipate dynamic Foreign of translation productivity exchange headwind rates a for to FX environment. to fluctuate cost this middle

customer impact be services impact pandemic if any, operations. overall However, project the continue new the also our in commodities, We'll evolution across-the-board could monitoring our logistics, pressures to costs. variants, the persist the chain as labor supply economy, customers, of and and and inflationary

quarter we mentioned, during should with Bob or the year as subside impact it first minimal from As currently the other assume variants impact Omicron's progresses.

at expected growth but up marginally price price below are tailwinds. repair GDP XXXX. year's new activity. Global and see of at increase. XXXX should increase to in in anticipated XXXX have looking and moderate new foreseen nonresidential positive levels into with this construction year's spending and Now grow We carryover a regional We home and effect last replacement

We expect to continue Europe from the to savings expand revenue through other our exercise smart in and incremental product new cost restructuring connected have begun product offering introductions. and XXXX. will

our discussed, coming As is exceptionally sheet strong balance XXXX. into

regional range from Americas with full transaction We flexibility our estimated to X%; have to of Starting is year Watts and criteria. the from APMEA revenue consolidated. consolidated full to assuming financial assumptions, of pursue let's our to to XXXX and outlook Europe to as another review augment the for strategic opportunities follows: the X% expectations organic X% X% business, X% provided quarter growth for to XXXX. from our backdrop, assumptions. meets With and X%. and the we growth our On with first Slide add X, the million for inorganic growth Acquisitions growth major X% $X that from a X%; year the have Americas

XX margin points $XX to and affiliate adjusted normalized compared APMEA's and year volume. full We both includes range inflation Consolidated decrease initiatives to approximately anticipate in the to as sales operating points. incremental and note price and to XXXX XX.X%, increased incremental XX margin We basis may in to costs, Europe may with XX.X% operating a between that expansion basis is Americas from the expect offset flat investments. to X margin range for due million from range adjusted investments. productivity up reduction Important consolidated

the about expense inputs, Interest million. to for million expect for As year. be approximate should other the $XX we $X XXXX key costs corporate

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

free deliver to to cash income expect XX% conversion in of payments. We and flow XXXX net incremental of restructuring CapEx due

dollar are We versus share. share and for X% assuming foreign million $XX an Euro-U.S. would impact in X.XX average in rate year-over-year imply X.XX full of XXXX to reduction a sales rate This the equates a year a in of $X.XX and the XXXX. earnings exchange per

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

up few Organically, items regions. Americas for should to anticipated quarter. million the XX% a Acquired to in see X% Finally, approximate consider all sales with sales growth QX. we in $X in first

We first down versus of of be Omicron quarter impact XX% the or quarter to due tougher XXXX flat costs higher expect the points first margin to of is operating of due in This in and as normalized as quarter the XXXX. to the labor basis range to first XX investments, to impact XX.X% a comp the inefficiencies well of the variant.

in QX. We expect $X incremental investments million approximately of

quarter. savings the of should rate tax a Incremental in approximate The cost million anticipate in effective of should also normalization first adjusted We $X million first be headwind We be $X.X the to foreign restructuring in expect exchange Europe. XX%. quarter. realized incremental

Q&A. quarter a an versus of share QX, million Bob X.XX to X% XXXX in equates per in impact the $X.XX discussion that, moving This which sales before first euro-dollar Bob? estimating We over our rate to are would the reduction earnings to $X be call summarize to and a back share. average. With a of I'll exchange for turn

XX Thanks, summarize many year. Shashank. throughout team navigating turn delivered discussion. challenges XXXX our The to and Please Slide the while record in results me let

our and of workforce make journey, part embracing it educating of ESG do to business. our its continued concepts We how we more

expected COVID the our supply investing Our for portfolio XXXX margin smart growth delay connected are goal, to target product expect we and but continue moderating and and ambitions. those XXXX Markets XXXX, and pipeline compared chain The grow continue In moderate with issues and revenue we'll grow. levels. original remains to when expansion, may to future.

sentiment I'm our we again exceptionally questions. and prioritizing they our entire variants deployment, the for in monitoring in continue be confident lines always, delivering focusing disciplined core, please open strong future the capital through build technology that, to our scale. customer add reinvestment to in may for XXXX. the virus-related the long-term that strengthen We'll our in team execute how on our remain still expand thank an how closely growth labor acquisitions want experienced strategy. As impact markets. issues I year further in chain again to XXXX, With virus reach materialize and will construction and operator, supply and team many very work while geographic

will from Please [Operator our Stifel. question first with Instructions] Jones ahead. take We go Nathan

is called in as This price cost morning. detail good to Do your you more you to be planning to positive? you price XXXX? a out you expect expect Adam framework. neutral being Yes, what XXXX price presentation, a on it Could Farley cost In little in granular be your favorable for on Nathan. give tailwind

Yes.

to offset productivity XXXX, just overall and price about And first price inflation. where in going Clearly, price increases back of see have the there's price more productivity average, the price and in XXXX, on inflation. So we than And from then and in cost carryover 'XX. price will we XXXX. a quarter increases realization offset more X% did the was, -- to same dynamic than cost we

productivity, we again, will it dynamic, will inflation. exceed that with and price So with --

transitory? think share your to the having Thanks. is And gains? permanent versus that. resulting for share then your do or you the impact any you to Thanks broadly. likely Is more over Watts will Do these gains And this foundries supply own Okay. shifting in be reducing chain competitors? think

Well, foundry benefited destiny. our a able we at because our strategy look XXXX to strong products our at our us sell is, own we in believe, -- where overall manufacturing been of that I has the strategy, and way greatly control our and look we've it,

our to keep the year gained more. advantage, this it's gain So and we then and some is share a we've believe goal competitive all

our that's efforts team's that's and our So focus that. on

my taking for Thanks questions.

Our Please Jeffrey will next with Capital. come question Hammond KeyBanc from go ahead.

morning. on good Hey, for is David This Jeff. Tarantino

of or Just better puts supply and in could takes starting out, chain color some availability given pricing us and in get you XQ? on we've like seeing worse all you're give what terms broadly, input seen with the

get things better Some of get but supply Listen, chain I general, some like some in worse. saw we would get whack-a-mole, right? say, it's our things better, and

suppliers' only late carried into quarter, I the first which think us Omicron, fourth over the really but So not impacted force. in the quarter happened and labor our

obviously, of China, China some the facility. shutdowns in And our impacted

hard. So believe we general, more said but one better, step our going. Omicron keep this issue prepared to are was on working caused back, things But and to like continuously better. are said, get teams as I steps two And our starting I think problems, get in remarks, but going we we that forward, in an it's

as we will into own, the going the team latter of the we believe to So get we quarter. their in be difficult, better. think holding year, is go And but still it the part especially first it's

do And guidance clear then And sales be? to expect what what XQ? in just as X% XXXX price realized also, was a follow-up you on Was to the up to price. contribution the

for Obviously, was number three X% we year the that Yes, XXXX. full increases globally. announced almost

realization So the year. price the ramped as through up went we

estimate of be to it's what point, be price the is we'll into a call some get price hard as of Obviously, on it we the we of for price XXXX, the increases. earnings do XXXX to first this QX will And realization along increases. the next At reporting when XXXX. tailwind that realization with quarter

Thank Great. you.

Our ahead. Scattergood. next question go from Ryan Please Connors Boenning and with will come

taking And I I the to the to Munish, down for goal, things my helpful guess, Fed amazing going is both a us Thanks have Great. about be raising And from now very congratulations evolved last how where is tamp point the price to we're It's obviously Tim been and at inflation. different the rates their angle. the in to question. year. to hinge wanted years. over talk and

year, the looking cost thoughts 'XX ability around hold on the So to trying on by of and two the strategy some Any of material the end off. to cool are 'XX? theoretically, out your raw What thoughts start end price, things? that into side past the into quarter challenges of tail next will of the or

So we'll you more I it's drops economy I think the are, have those into to more Ryan, type future. portfolio, potential going watch be you when And towards soon, think the then the now, you to look of you're inflationary right? right at when commoditized abate the going at any don't look susceptible I think to anytime that.

to years connected effort our And a products. lot our we we early spending focus of are and several So products as time value you of commoditized and provided know, a ago. customers lot smart our with pruned on to

Wage costs going different. is And away. that's inflation that, insurance, going look, going not Once provide it's like is inflation stay. go to So you to stay. to

So price we're going to keep and we whether to going will as that products value, move, we're focus be raw add build that differentiate to as materials much can. but an area we'll continue and on,

it's focus. that's more price. more you the be are, think the But to So our commoditized going to difficult keep I

Got it.

helpful. and clear That's Okay.

to navigate any to benefit. that where presumably, actions to stands. related that the many your I pricing few think of to different own the around And sort expect channel other situation and The their wanted about type channel Obviously, trying got volatility stand? can is I out, where when going one are was does mean there that quarters? so next you've partners we inventory chat you that

Yes.

So now we visibility. interesting channels, the where thing starting is in past. haven't inventory are watch they the whether store contractor, that we're it very seeing closely. that We The to don't be full have a

to robust. So in seeing of volume People but has to and repair front increases, replacement it's trying interesting get see. been general are price We're increases.

demand that's some So the driving been for that of inventory.

supply come We're especially very because better, times we're in a year, manufacturing we're business, rely watching why of So watch, on very lead that and and second we as the can half book-and-ship careful of gets people general. chain this closely. down that's in

them be think their at potentially to inventory. I the for look will tendency reducing

So we that watch very closely.

Thanks great. for time your morning. Okay, this

from Seaport Research. from come will ahead. question Please Liptak next our go Walt And

morning great it's Good everyone. with And been Tim, working you, thanks. Hi, too.

in luck with good So future. everything the

Walt. Thanks,

a -- channel. increase? maybe that follow-on of I buy question I timing you quarter about wanted to fourth talk if pre to you about the maybe there's a if all that think at price wonder last could the price and of ahead about And ask the increases XXXX

our and notice based timing. I quarter on our through varied Yes. the say, first increases would price look,

a believe bunch I price do shipping. So will of be the increase? orders it beat came Yes, in to

saw could difficult in in happening, It's them of we of called see quarter. in some saw more shipped gauge the we stocking Drains that. points, but figure, wholesale the at stocking in to level but figure again, some difficult difficult two very our probably We Europe. Shashank particular, to where business. or Some in it very to Europe, But maybe I it's out. out fourth one

first wait quarter seems coming wonder could so Great. are any the us we wonder year. be to to peaked of the the going about rest some if having if And issues Okay. pandemic-related more by, in I now chain, that for commented to can impacted better into I back. be start I you That quarter do those things supply some it. Omicron-related of have then guess, talk you than absenteeism give until second getting and you is insight dissipating. to or

with was the better Yes. which January on actually down. it absenteeism, saw our January, being in the that higher a in peak in like is better. and get the last, I'm and rate half We've much weeks We normal than seen of knocking wood, couple absenteeism we've highest. Still trend much but

we overtime -- working We're there. the up take for to again, it month make of missed hard. all protocols the we're working in are teams in are the first very safety serious, year. what We and So

Okay.

a one for maybe And last then me. Okay.

about wondering Just government the EU programs.

a You restructuring of last to seem accelerate similarly, there's more about year? going government that is from you still in gotten mentioned that from savings. Or nice Are last have the benefit some those same? it And it year. Does programs to place? be

Yes.

at look I'll you the when productivity. let answer -- Shashank So

want the productivity? So answer you to

Yes.

So productivity on side. the

this So in complete we the that's France the restructuring facility Mery, that year.

$X incremental that get XXXX. we'll So there's roughly incremental savings, an million in

Shashank. Thanks great. Okay,

benefited the XXXX. from in are rate, at continue Those will in programs XXXX. Yes, Italy Walter, a those Germany into will But and lower a also you continue. subsidies subsidies programs think in asked I the question but incentive on government that we

you. Okay, great. Thank

And question Lee come Please our from will with Goldman next go ahead. Brian Sachs.

for Lee. This everyone. Hi, is Brian Miguel on

chain those of Thanks. of set become We're higher hearing think the certain in on connected that's component on questions you of I Or general, mix sales? kind touch back especially been Is more you about I my might constraints by components? of either most incrementally recently? most electronic impacted there specific a wanted And just constrained is your region -- that because us electronic shortages, chip of those seeing just chips. to supply the smart or Could a but on components? by have a are and also, quick. more be more shortages then there on level more answered, real supply and

Yes.

your my inside chips point or looks what we when at what obsolete nice products have I shortages at are say own in have what remarks, become general, we who reengineer, we of it's ship I in chip would stuff. we your team go we But can So view as out. and said can seeing a look to do, difficulty. to electronics requalify prepared We can different from organization and customer

and It's it's again, But to second. board. issues. most global. connected, say these to Americas engineers still have from of Europe own great Primarily connected we smart be a I That's and most would help capabilities impacted have team your indicate the by general the I mitigate would smart So it's all is and you where that. products, across and then internal

weekly we're it on get what reports and very and it. to watching shortages correct doing daily So the We are closely. where

team the So great doing is job a with that.

much. pass on. very Great, it thank you I’ll

next will Our Michael from [ph] Anasagio come Cowen. with go question ahead. Please

guys. Hey, How good doing? morning you’re

Good morning.

other target headwinds? sorry, is out this you if we you provide Great. Previously, due to joined pushing products more connected COVID to XXXX was might I be shortages there Can color any here I'm here. it XX% late looks for a for chip XXXX. the and or mentioned like

Yes.

shifting what discussed our for to just with we team's goal XX% goal our current remarks, resources So talked internal is been shortages given by still the to to chip -- chips Look, about our XXXX. current and prepared upgrade we've is I products. just in my the get Walt, that. our But

shift products we've been which to the advantage of continue that, door. our and really existing to us able take to get allowed them out So

to year to of again, this chip key So second and about half -- on is shortages, diverted chip of not our in look engineers letting the work had we're There existing off. at when XX% products but shortages. we you

for supply all start issues XX%. how the the fast So saying quickly internally, we're how around chip may shortages away this It and going. delay. may I'm all industry the chain only depends go because on shooting still

So again, still the on XX%. focus is

Great. that, and prior. this types just to framework a little a procurement of provide towards such? strategy a for apologies was can these But Thanks And if then for your the of follow-up just inputs you and more -- color. answered and bit

low-cost and Well, one we companies: in manufacturing in a electronics France in one Canada, have two Tunisia.

companies So more space. we have a our scale in traditional most lot than

have around the chain capabilities world. ability to supply have we the get So --

it. at this, monitor we look we So

agreements have We in long-term place.

the potential becoming at older team and for products that look of watch those obsolescence current continues from some upgrading available. and more that to chips are to our also then chips So look then more

So again, all is the team it. over

Great. for the you color. Thank

come Halloran from Baird. Our ahead. Mike will question go next Please with

new Good congratulations, morning, guess. Munish also responsibilities. And everyone. Diane, And as Tim, well. the I retirement, the congrats, Congrats, with in

here. questions two So

of challenging how supply your product of shifting And do benefit relative in much shares the it's shortages, What you perspective. having First, you manufacturing base landscape is just How do cetera, from now? et chain do obviously, across qualitatively a think lines? broader scale think competitive a think competitively? environment, the faring to helping peers you're you from some right

competitors getting multiple doing result, I XX% we've yes, think quarter. XX%, Yes. we've think a And job I themselves, been some here. our Well, as for certainly, again, And there's here. and our product results good product. massive in up a share that our believe are lines speak the But I customers' gained

a global So to on at I think that's continue and we'll look that basis.

region we And local talked where having to is our earlier, that. for right product our key the us. we'll And we manufacture in local advantage think that products serve continue availability current is manufacturing So have customer I to strategy, we focus think where an as now. I on

few it. touched kind on you a guys spots, I just but this know cohesive around in And to want hear message of a I

how Just compares when the assumed you're expecting the guidance the you? the might well And seasonal maybe go revenue that you've on cadence for just could as touch seasonal line typical as curve you to like a margin to you line? that look year, and cadence for the for what

do and can off Well, Shashank Mike, I'll start it.

we only over X% XXXX. at in compare X about easier look QX mean, had of of comparisons, an months last year. We growth. you had our We grew If last I the XX%

increases at think comparison look from QX. in it XXXX. all easier of we I second price had half you cadence point And of as in the it's So certainly, last QX the a view, income, of year's

So seasonality. I the of changed some think pricing impact just the has

at that got early you year-over-year comparison. XXXX, will quarter supply back global was everything And stronger locked First because things be don't that look vaccinated. especially in down of when XXXX and open the -- people of being and chain hitting inside up shot just to pent-up again, forget there everybody, demand after up in related now started the

fourth up in and things think quarter. third second, the opening I So started

half, the points going So we're the I tougher forget, have overall two And back those growth -- year. had freeze last in comps don't of we to second including quarter. think

comping against second biggest an we but impact in that. we're So was had in impact The first quarter, also the quarter. the

all more on that. certainly I Yes. No, basis, I'm sequential appreciate Bob. a thinking

that? you years little could in continue a more through So year, a is of thinking to I'm Maybe revenue of chain maybe bit few ramp more challenges, normal work through challenges, Or how the the about and supply the you're it expecting if the year? given shortage some a year? address

Yes.

little and historically, with a the which summer it prior look, obviously, by I does to quarter year QX go pre-pandemic, the So QX the just quarter our on all if the in of post-pandemic, -- springtime. higher activity quarter, second new And be seasonality, depends bit because than in and comps. change construction and mean, used third you

quarters, this of have think supply pattern, you go variant. chain seasonal we into don't Bob is if on new no So that about a out as a assuming And or disruptions relevant. then assuming of variance it's point the very there's greater QX year, made the we more

more a out are that risks pattern. the disrupt are those there that normal would So

of That you. Appreciated. sense. Thank makes lot

Please Nathan have ahead. do with follow-up from go we And Jones Stifel. a

Good morning, everyone.

Just Bob. commentary following up on that -- there, on some

and would repair think Do do Or has do. now? XXXX? reopening, understand through there's benefit to have you things some as and that you from reopened, replace continuing you was about talked think there that got some in You I work passed that

continued with I latter general into through. don't that Nathan, all then of labor have first shortages the XXXX of then it been half the in come and think I given of Omicron in because the projects think and delayed, has quarter.

that's that first and to I the stabilize, first think will come But think second job at come through. I is going of we'll sites will growth. you're it and and to in where that supply quarters as think past look most and be -- chain half I normal finally see be us the stabilize through going

down question through since on raising rate The interest environment. does your new rates. long time follow Fed It's if interest the side could then slow rates. we've of interest potentially And a actually been had a construction a business with rising

I make any impact Just any your the 'XX beyond? could comments imagine you maybe has you on XXXX, expectation how think wouldn't in that and impact of it might business? but

also inflation It what also. is on Yes. depends

I But you So if it, that you're interest point are inflation on think a commodity but if up off. X. low. could they starts and significantly, raise balances if or -- up They're coming really again, historically interest especially rates, somewhat back look still go only side, rates, down, talking the at

up. the cautiously we're and optimistic, commercial not fully again, seen So market open we've

side. and low, rates on let's and interest of you're do if more rates interest versus carefully. think the about even But again, about talking increases. longer think something the they if -- so we're I But it, homes still very are term single-family you impact really commercial some watching very the

a Still I that the what likely very XXXX, increased the investments up to on highest the What do be level you investments ROI investments years. growth is growth think the going in few seeing want these incremental $XX low, of you've those -- over you Have by had think just long-term you are ask I on agree. to investments? last kind currently? on million I is in which of ROI follow-up growth

is is and going to look connected. it whole the move towards smart Nathan, portfolio I way Well, our at

connected. -- smart we're driving So the and sales think have I future we'll because to no it's

this every the year our term So and ROIC of improve has majority But to continuing our is up get going to long significantly to year bounced and portfolio year. smart connected. been single last we've

say to look differentiate from I know and add point our a margin we also our it every general, of return increase products of at us in that so And we price but would from on point project and allows and margins standard our view, a view. value if

And really So question. we'll continue to can overall which focus on I answers our that. you watch your ROIC, think

And questions. to Tim. congratulations Great. Thanks for taking my

Thank you.

And that back Pagano will turn to our the any would for like session call today. to closing conclude for remarks. Bob I question-and-answer

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

disconnect. and participation your you may you for And now conclude this will conference. today’s Thank