PNR - Earnings call transcript Q2 2018

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Operator

Ladies and gentlemen, good day and thank you for standing by. My name is Lee Wei and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2018 Pentair 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. you. Thank like call now host, to turn Mr. to would over the our I Vice and Investor Lucas, President Jim Senior Relations Treasurer.

You may begin your conference.

Jim Lucas

and as We're and join me today Thanks, earnings Investor Relations we second Senior Wei, Borin, this welcome John And Officer; second Chief of Pentair's Lee Financial as with Treasurer. quarter performance Vice call, and conference quarter today's our President on Mark call. outlook our as I'm Stauch, quarter glad us. can will is Executive and morning's third you details Chief Jim On provide XXXX Lucas, our and well XXXX to Officer. XXXX our President press full-year release. in outlined

about to anticipated statements outlined Before Form are and forward-looking risks the future in results XX-Q, XX-K we as press let statements today's company's Pentair's remind begin, financial the subject me uncertainties you and release. such that recent risks most made any

company today, Pentair's be herein included subsequent circumstances. statements Forward-looking differ can statements Actual accompanied to results. webcast the by results which publicly Relations materially events Investors is the are obligation presentation, a reflect or Today's could in as of of to update anticipated such from found and section undertakes made no website.

these financials reference throughout are will of slides Any presentation. non-GAAP remarks. We reconciled our appendix references to prepared the in the

John. reserve will and to call to questions to ensure answers and their an turn for after a ask to everyone order remarks. to to time you request that like opportunity questions. be I limit prepared follow-up over I the sure would We your will our questions now in one

John L. Stauch

we adjusted have start we we the slide XX%, quarter and $XXX free everyone. we about to to and since Thank points shares. our expansion in slow first XX sales flow of titled Summary. $X.XX completing million million ROS reported you, marks some growth of EPS of separation we our of second to quarter, to good grew generated took with basis Executive pleased Despite million the reported back to nVent. turn X.X worth a Also stock core Jim. number quarter or are X%, the And of flow. X bought the of performance, which cash Please $XXX morning Overall, XX% quarter, cash

beginning earnings year the us, over we XXXX to confident Mark the high-end our provided outlook. behind of on our to benefit in should discuss For the as have at ROS details worse the still year. be full adjusted to to the I would well expecting operating the ability the that second now approximately we now like basis growth we shares of as our raising With of by to XX year and X%, of approximately we X% and impact. purchased sales you feel full-year update offset maintained our FX the to half guidance EPS quarter of results expectation core to guidance more reflecting we of slightly the deliver turn above expansion better XX% are of $X.XX, the slightly points are performance, call

Mark C. Borin

turn Please QX labeled to John. you, Thank slide 'XX Pentair Performance. X

mentioned, and growth declining sales Systems delivering and John Aquatic grew Filtration Technologies with As Flow modestly. core Solutions X%,

XX%. negatively This which slide at million what the delivered from with share the in we first Performance. slide to shares, benefiting came ROS $X.XX share we Pentair Aquatic segments performance the trends Segment in turn similar sales $XXX growth our basis on in was robust while provide Please the three our to performance in and to business and basis the growth cash was per of XX% XX patterns. core the EPS quarter Free any seasonal We in XXX.X line X%, increased in was implement lays XX three remained XX% part the rate quarter. expanded labeled $XXX will Adjusted more and quarter the impacted investments price in with to color adjusted shortly. normal our while tax at while ROS to inflation income as out all X%, strong by saw quarter. Segment increases. repurchased 'XX quarter elected shares Systems ROS segments X income in somewhat during grew million XX% points. of grew QX not points flow off-cycle million, count the contracted

food America half balance And cash continued saw positioned business and to received project one grew growth, further declines and improvement business. And Balance to favorable lower move reduced favorite due and levels in This with Solutions, remove slide we biogas from in nVent well business. and XX%. complexity the Technologies our we expanded residential spinoff. is lower pump sheet business. basis continue away sales Filtration continued as strength have XX.X%. Aquatics saw Please income to North core was the from margin positive commercial from the beverage improvement as our quarter turn Solutions growth walked away we income similar saw was labeled the free as our in remains We year. this in our X% our of specialty in a XX% Flow for segment Sheet to and XXX strong, driven debt exited second of impressive Filtration margin X% slides basis businesses product by or to is This expanded business lines Cash as sales improved the business. part and the of an for points our story. the as of flow X% Flow. ROS North to strength has very cash Segment X American up the mixing a decline by segment. We Filtration to and points entering we ROS core the XXX business offset industrial further is outlook commercial believe and part had in as

is the current for look and targets of believe at year our Considering fact, flow to In levels, well-positioned return not our we level acquisition aligned debt seen a remainder cash attractive strategically in business, generation XXXX. or cash bolt-on shareholders. we invest to continue tuck-in the the and free since at now our are expected debt to

increases X%. We flat Pentair in Half including $X.XX the have count expected interest grow bought fully net million. while million, third XXXX is would expense our inflation, EPS expect the $X.X to QX X%, anticipated is slide This labeled Flow be we Outlook. XX%, due is Second be roughly be in slide but raised to third share other are income XX X quarter. to be and tax ROS rate and turn and year-to-date, expected years. to quarter Adjusted out price around to line, XX to the share. X% consecutive tariffs X% Adjusted read EPS should Please basis Filtration turn to implementing adjusted principally shares we up in Please we core We remind Technologies to the of quarter back decline X% do until sales impact per approximately $XXX approximately timing Systems we that labeled is and anticipate Aquatic X% million have X% 'XX and Below Outlook. XXX X Solutions around to we to be dividend everyone our expect to to the X% of up higher to not growing fourth points. to Segment the for

third a And slide, during As inflation as seeing the portfolio. across in increased price increases segments the previous mentioned are result, all on quarter. we are implementing the we three

We have increases full quarter. announced the we and price expect but are until of the increases not see the we currently implementing the them, do fourth to benefit

more benefits expect in see As quarter fourth to pressure we the but third a on result, quarter. margins

expected In quarter. second from benefit back half bought in second addition, we earnings are the shares to the

to from quarter quarter, in there labeled some our turn full-year. year is wanted walk segment to has anticipated update the these of numbers and fourth sales earnings While each moved shift year. our slide Pentair overall still one to the get the February, outlook XXXX in This to XX the raising Outlook. our an Please but up line introduced the with third the at of while changed. has halfway number to Day initial income is the slide for first in we at provide are point we Investor The forecast for we is

of look be to $XX a of core from investments, the down million We year. has continue a for has The slide to outlook with are positive of is to for being right now our this inflation little for gone to FX growth we more hand initial for in from our the target sales increase of significant tailwind which a X% growth section X% looking $XX appearing at nice being price and incremental million. modestly seen favorable. year

timing for update full-year of some We Please are slide wanted Year turn not the half slower forecast Pentair were dialing to back labeled the to but Outlook. XX the of reflect this Full we to investments XXXX the revised our timing. and in first this year investments

As growth outlook previously mentioned, X% remains our full-year core to sales X%.

adjusted to X%. Segment points. tax $XX and around to Below to We roughly the would to to the be expense to to year rate X% while up expect which Flow up adjusted roughly of be interest X% expected to sales Aquatic around to X%, XXX.X flat around XX% full-year is million Filtration shares million. income line we net ROS around represent and and expected core to grow X% Solutions an a Systems Technologies be to X% increase be basis end XX%, be other is expect increase XX

we adjusted per I to and back John. cash net XXX% For continue the call flow like adjusted share turn free to be income. of the approximate to now to to full-year $X.XX around would we target EPS expect

John L. Stauch

And turn showed is quarter at Thank same and XX This number Day the you, growth shareowner do in first drive our capital slide are value. wisely is the Pentair all remind discussion. to precious play I'd on to Summary. strategies The nothing we utilize news organic Investor and Please company, has good to a we our create page pure earnings Mark. water that Strategy you our be is titled slide desire incremental to changed. you focused like focused

yield. maintaining allocation, our investment in Regarding committed rating, most paying businesses our and remain we core to dividend reinvesting grade attractive a competitive capital

buybacks our XX intelligent integrate by approach informed to Strategies. turn We and quality with as them well balanced valuations to M&A our will between also slide at overall successfully. being decisions available, Focused of M&A Please assets and labeled look ability the a as

space. prioritize As quick progress drive important attractive we this water to on is regarding very growth our most we believe a a allows like our we to quality focused believe update opportunity differentiated our in two us give the strategies. best I'd growth opportunities, what you of

The advancing first strategy is pool growth.

a accelerate in-depth segmentation quarter, in better automated made Also and next more study the behaviors launched we to automation expanding during We great allow in consumers. quarter, IntelliConnect. the progress launched pool study to believe our second efforts space an we and completed aftermarket we automation to better home how for our the greater called During of the penetrate understand of platforms. winning generation of penetration the we dealers

Our consumer dealer water a progress Blue off second loyalty here end-consumers the through treatment. dealer and key to to driving kicked well True In commercial our residential second great initiative. Pentair growth our is made water understand needs as initiative segmentation the accelerating of residential study better back quarter, and we

commercial Lee priorities of in after in which We roadmap for continue organic as how I'll and to strategic to our like closing differentiate Wei also two and the both treatment. I to remarks. both now would dial-in Wei, line innovative questions. More to we the water ourselves offerings offerings turn Thank service please to have expand the come open areas, Q&A, few these for have on priorities a over to acquisitions product you. potential call customers. our clear and our residential included Lee

Operator

question, Thank you our so we comes Scott And Graham the so BMO. presenters, much. from of me have excuse from first line

now open. line is Your

John L. Stauch

are Scott. doing? Hey, How you

R. Scott Graham

Hey, morning. Jim. Good John. Hey,

next three you to the early. you just I kind apologize – minutes of know than years so about you just you couple want of I at late, of know do expect where wondering partners, that I just this was yourselves of I thing? this gates more to if on the that of maybe question. you've model this Because By year, obviously, of on lays that, sales on broader any I I opportunity give reaching of I any give I metrics to by what measure how the kind have like if do. John, deeper customers ask here hoping you accomplished, thing. connect missed you jumping expect that's some be a of sort channel end here use toward closely I'm do say to you a to end the this you kind with of So, your And you have and us with next type to kind can when thing. for have a type year this maybe year, involving movement more there's a talked kind kind just year end want that to us of of before, really thing? of two big can internally what heard of and end benchmarks, of of end out, type you

John L. Stauch

where we're everybody way at we're All XX in right. just thought Scott. we'd to stage. I I days best express the and remind to Yeah. is I Thanks, we be it this think mean, want

our really commercial we're our importantly, really process and commercial process about strategy. think drive we've our that to But rolled excellence more utilizing excited I prioritized out excellence the growth.

as serve dealer also so, influence a have consumer. example, traditional that but we we that distribution dealers, to making channel, and we And understand an the sure

the to so then, segmentation how this what work buying helping that and they run advantage served the that what of of dealers to of we're want. service they want inform so, our consumers doing are be and us take better that their is do we And can businesses those behaviors consumer consumers

do about business million pool revenue good we and really million good offering, of scale, roughly have a in pool the $XXX of in that have in have think we we U.S., we and of lot we the have I where a $XXX business a model. and

just then, through which sets would same water business go million residential which and just our residential pump for We have which also $XXX and filtration, businesses model, million under is our $XXX us to Scott. next under our is and to of have that we be have commercial

high have one growth it's measurement the we're expectations question, clearly, So trying but organic drive drop-throughs. and accelerated going metric I for profitable, that's here getting then, sure answer that's and your the making team, same to be to we're the and to

again, on on are doing dealer other got more be are leads turning here, just I sales. suggest How a we've to days But in. balanced The So into how culture. metrics. we want it's indications we're doing becoming conversions, earlier of we growth XX

the I So of it's hard I to love I leaned am love really call victory on team the in, and how attitude. it, way the but appreciative they're doing it.

better that suffer customers prepare reflect, have thought on price a I We to jobs going not us if wait, that also thing to Scott, our we our culture, cycles considered increases, you, be consequences to tell angles can the proud going I The saw other it worked would we for that price is quote are. some off-cycle. as increases. so our we way off-cycle we they their team normal mean, was move price would dealers of competition that. the and and the those I of were growth But and go the with our

I'd the we to haul So our is is and increases. bit hurting we here a it way price us in but us the that out help in of and little going say customer responded QX that's long into think appreciative very our year with next QX,

R. Scott Graham

the about to up be and my that, to was this I just your cost things – same going I is guess a That's to I drop-through. there's one on pretty point. given basis, and as that quick a you are get say follow more want welcome And a heard recently certainly you sustainable simple the you and a my keep cost this, key obviously Right. to it's markets organic go-forward talked question I to of particularly positive. that

of units, out of Or that this, So are kind a kind more have business there kind want internally you with of is this to fund the spend that? corporate if of telling you hey, to you is funding? it

John L. Stauch

Yeah.

we're the working we willing lower funding, that measure what enterprise a some to know to time, are and mean, the customers call have I to company. all. in And do shareowner us. margin you focused. for that focused the more of But ability I revenue, to think is growth don't that good on to to to I just we're we at benefit is have a want share same slightly we leads make We're through. I want sure we critical meaning making on that priorities here we're the all complexity that's our We're spending as and that and margin And be the think of our way for not owners, serve I that it. we money public revenue. we two grow that's what adding funding most we we're value. took sure and the

R. Scott Graham

you, Thank it. Got John.

Mark C. Borin

Thank you, Scott.

Operator

And Thank you from line the from of much. your so Joe next Cowen. comes Giordano question

is line open. now Your

Joseph Giordano

Morning, guys.

John L. Stauch

Joe. Hey, morning. Good

Mark C. Borin

Morning.

Joseph Giordano

if John. the you've could there things Flow, drive in that pretty margins good particularly immediately more to where obvious growth Hey, like accretive margins through kind was. of Maybe done look and some like considering us take you like of the business

So, that of are through very to some like you the were quickly what early that results? of are kind able seeing things put

John L. Stauch

Yeah. about but well, chime in in it's Mark I'll as quickly mix. then Filtration it and can hit

out still As We've team. actually more of had lot make introduced we're you're some and think be I some seeing were you there. know, making of hard Flow, where should those and some but I really we the we by that appreciate interesting businesses And and our resources we and constraining have money that and optimization really challenging we've interesting energy. on Flow's not only spending a of to geographies the time But SBU. benefit those the credit businesses. money, lines out love resources technology In getting not in effort, focused product we businesses, the work and where and of the getting the all the

So actually that mix businesses, by been both two being expansion think focused quarter. on the we've I margin you're businesses. seeing of those improve core in the in able to these really the And in

Joseph Giordano

putting there similar call generally, of think XQ that is call of out kind like looks of into quarters are XQ. and it split? anything just a there? out between anything you more timing it you'd there you're those I maybe margin specific and more of acceleration bit Or fairly And an terms mean, that XQ you'd in is the initiatives for I Is through?

Mark C. Borin

the driver when Really key kicks Yeah. QX of price is that's the ramp in.

price in in and implemented the at then we of of comes So QX. back see fully the half it end QX

John L. Stauch

So price in Those announced we've mid-September-ish. increases here last week. effective publicly our the go

of some normal getting we're receive cycle benefit the is said, that's way. what that QX and Mark most benefit And in our in a we For businesses, then expect not but QX. the to by that

Joseph Giordano

me business like the just put given then some And Aquatic like not last you and to I And POOLCORP. side guide, It the the obviously on the And your on channel how Does that's view there pretty by second it technologies mean fear Like automation for any side, on that through seems in like some in up gotten curious update made numbers was I as but you're comments you've earlier that. the just half progressing is market know – on the seems seem newer channel the for there? clear? maybe there? of like the the that pretty some robust. seem comments what POOLCORP

John L. Stauch

Yeah.

shipments be. very and slow I it to think quarter. sure as all outlook making the are almost in business the we progressing just our of serviced And and good I job full we start very, is be that back did The was continues for team reflecting demand up weather we're strong. pool mean a a in had April. got the nicely. in I current and guidance all think would we that And half not demand and in things the hoped really yeah, the responding So

hybrid a products, high new the launched heater We really yeah, got we as efficiency that launching. we rating. far a products a have couple new that's another heater of we're and got version good a As

and then think that you connects our doesn't is of it make is by And right connects we've the products all in ability So this But now. their that real than that about that about more penetration are Filtration think do the also, And Pentair of is with And which pump in products purpose and period What's versus experiences gives that Pentair those the lower capabilities. it of all by on rate. I of raising two it is to industry cool Flow, gives price some of maybe competitors in for and industry working make also those IntelliConnect to their pools. products the really point. that to necessary the is think rate is the for to today. our IntelliConnect, control excited been penetration gets breakthrough, all increase penetration And across to within other consumer the some million think pools less if we sure us to The gives or that X to with we connect ability makes and a devices. really really the time. to which ability And automation the with rate upgrade penetrated XX% the automation it we're experiences pool. really what's it across Pentair begin products and really us really the

excited very by we're So that.

Joseph Giordano

Thanks, guys.

Mark C. Borin

you. Thank

Operator

so JPMorgan. Steve question the you line Mr. And comes Thank from your next of much. from Tusa

line is open. now Your

Charles Stephen Tusa

Good guys. Hey, morning.

John L. Stauch

how Good, you? about

Mark C. Borin

Morning.

Charles Stephen Tusa

industrial? color were On Solutions, give Can weakness in the Filtration on you you some projects was that, the down? said what

John L. Stauch

the and That's merger de-investment beer there's the on those it's some where completed there. food And the substantially stalled. and space and a It's that's weakness. have place. Yeah, of out sustainable food investments beverage regarding are the not and yet gas in It's taking beverage. in area the breweries global also that

Charles Stephen Tusa

year? what sure, this. is on kind for But the the I price/cost now guidance then just more not specifically. of And have might missed Okay. I'm

John L. Stauch

Meaning?

Charles Stephen Tusa

Price/cost material pricing? versus inflation like

John L. Stauch

Yes.

to it's Steve, point out you. I'll the in So it slide,

on we're is So full-year, and X. price It's $X.XX our getting of $X.XX. inflation slide

Charles Stephen Tusa

Okay.

John L. Stauch

related two-thirds – of being about related material third two-thirds? to that to and A to And I'm is what no, sorry about third it? a

Mark C. Borin

of labor. Two-thirds third a and it material is of is it

Charles Stephen Tusa

far of in these out with these third of gone I here early the loaded? already is as back-end And increases, as it timing some more of Okay. the have of mean, quarter price you or kind kind

John L. Stauch

too I Steve. went with far, (XX:XX:XX) but shared out not everything we're... mid-September, effective that and why We so that's until they're

Charles Stephen Tusa

Got it.

John L. Stauch

getting slightly to we ... benefit expect in then, in related and (XX:XX:XX) QX to have more QX increases. of price a those

Charles Stephen Tusa

Okay. Great.

John L. Stauch

quotes, Real out absorb especially I didn't the shared we six customers that for for I feel We price heads to this right quick, quoting you're we just coming. was channel. ahead pool – without having nine it months to of that our think time. because a with to it them it industry, listen And in was up important listen were that non-off-cycle the – Steve. they're customers. We to there asking was our

these channel, by that way for giving appreciated feel I'm proud forward get So XX increases for the we is this Is in exercising notice. that us team days' and everybody bringing a and behind. that price the can what's of

Charles Stephen Tusa

of went when mean, they HVAC, didn't through Is I increase. unusual – like to competition have mean, problem mid-season mid-season I kind oblige of customers then that say a behavior? they a channel. ask to of your your they little of and price putting kind that seem there that They the conditioning – with kind price of don't something of that increase. I it's going the just want mean, in price on kind not a really drove is in unusual industry kind

John L. Stauch

I issue (XX:XX:XX) didn't that and didn't. instance But referring any I out coughing than it's The a they're a know they the you're your quoted those break installing working. new job you for and if are off-cycle that's industry mean, pool you're the customer, of completely construction price quoted and other a pocket. coming that jobs increases – was to, more and they say of I mean, Yeah. is, do fix

You're that not passing along.

you your to going you is increase have the have. to and with, to of price set least If the the those ability jobs have not even price quote job coming you that you're know we're ability how and increases significant forward originally know at losing on next

for know I did it We're So not appropriate the about way. industry. don't industries but it our think HVAC in the we we

Charles Stephen Tusa

Okay.

a right. just So, Thanks. problem. No dynamic. All different industry

Operator

comes RBC. much. the Deane from from Dray line Thank Mr. of you question so next And your

now line Your open. is

Deane Dray

Thank you. morning, Good everyone.

John L. Stauch

Good morning.

Mark C. Borin

morning. Good

Deane Dray

like I'd Mark get on this was with the cash and expectations. some Hey, start significantly above to quarter free perspective flow which

is just be through quarter. quarter And part it, of second inventory also the appropriate. think pool it a I in this sort then at and comparison comes seasonality to that half first both build we're now Pentair is a this the more of seeing as – opposed first we of – a I to to second and is we explanation gets the should the play first in the as half the quarter. as pure looking just water in Thanks. aren't want make that's the seeing a sure

Mark C. Borin

right. That's Sure.

couple on cash operations. discontinued A nVent separation kind is Pentair that now associated in of You discontinued And seeing own in what the includes there. answered things, the the we're operations. its with with question one

is see numbers end pool really that the continuing the seasonal quarter operations is the the cash quarter. as at second ongoing business what second the of So which our business. you the really influx in has in you reflective big And said, of

quarter came round But yes, on about the that million, a that of will felt year-to-date bit see – is to half. the which cash very XXX% the out per in quarter million. it in more we basis. year. are $XXX-ish be $XXX to – on at a ratable then Think million year-to-date income basis, good we about get net little where with of So, and And to a as in $XXX about we're the the back

Deane Dray

increase then to And price/cost, just it. and the Got shifting clarifications. just price couple a back

is The make wouldn't pricing, benefit what's wouldn't all, tariffs off idea some the to forward and and and So, with you – some question price the – of makes some as or the But I increase maybe benefit end had you pull you're how you that impact here that first doing it get more? not the ahead sense of pre-buy wouldn't that go quarter put didn't tail and dealers that? us. third being calibrated you – cycle of then have first get why the

Mark C. Borin

Sure.

So, of price the maybe on increase. timing first just the

effective So, cycle is referenced, of as we announced normal for clarify, the to business. the week price last John mid-September September. And pool of it increases middle

the year. businesses are typically The the of beginning other

in for So, Filtration talked that accelerated fact, about. the was we timing in the and the of very the side Flow reasons increase

And will of be at so, then the September in to that up as we our said, pick start numbers. fully QX and end

Deane Dray

Tariffs?

Mark C. Borin

through – frankly, breaking Oh, And those the tariffs really the What are think potentially in out we separately tariffs Tariffs to not to we're price impacted Thank going by really and the what really indirect-indirect, piece. not and our China, really we passed when to as may how suppliers what is impact, an direct is inflation. reason at that not going us, other to are use indirect make they and that just included of that's And of why be form a to at assumptions we're to raise most around opportunity the significant do so you. us. sorry. trying looking is as the are you be number. think look

to that. we as assumptions for things that we here the at place year this back factored agile and the in have think to we about we we're the they of stay year all develop. was for if we the next further, off need as our certainly ability into increase And to of Flow And to and going now. said, as put re-evaluate price continue half I do cycle that inflation because in look and Filtration, So,

Deane Dray

we Got meet it. reflecting to couple in broadly. didn't focused John, in it there fit like opportunities outlook a in priority looks And China what about And on commercial then the opportunity Singapore Asia-Pacific earlier big to a strategies, was are opportunity Week Asia-Pacific., customer. in it the then weeks last Shanghai and your see question is China under third the but your beverage and your talked Pentair that page, maybe had Water just ago with at

on just that. So, us if can up bring it. Appreciate date to you

John L. Stauch

important priority, term. Still more longer Yeah. a very it's

million As you MSRP around saw and grow destinies we a and very list the $XXX you especially that. really Internet And price there, make got Tmall to destiny, capabilities control and today, have time significant spending our sure can got think back understand of it our Asia Southeast we Deane, it's JD.com own out the I you as know, China, and the we're that we appreciated or at and in probably think own of and fact around off that then our and that really we've controlling and work to rate.

our to of we So, do how the team results. and market want have to bringing is excited proud really in would bit right and we and in the the as are customer the the demonstrate the a and really very especially and in manage near food in descriptions lot products, growth our service term, we're experience. excited about expect serve driving of disruption and I start the a way We that about that little long leaning think there those the marketplace But up. products for it. run, ability control of our product consumer the around well-positioned, I'm Thanks we're I to opportunities and

Deane Dray

Thank you. Appreciate it. you. Thank

Operator

you Mr. so Dray. much, Thank

the comes next of from Steven from Winoker Mr. line question UBS. Your

Your line open. is now

Steven Winoker

as John, Thanks And and good on morning. great. the a congrats That's standalone. quarter first

John L. Stauch

you it Thank lot you, work into know. as of A Steve. went

Steven Winoker

debt to I want down deployment comment coming first do. light here. I do. also hit you quickly the of capital that I fairly in just levels made on

repo in at priorities be – even standalone look given point should the the is an repurchase investment there further? could that the now, the where given cetera, we this those the et look share pipeline expectation you of community at you that and sort are that at in building As accelerate right and

John L. Stauch

No, Steve.

allocation value buyback all, think strategy. stock agile an could we or our drive capital we if we the we to that market. first I think be we see of We not – want feel opportunity did. And did think properly some we we're not is the with reflected and I

we same build great really to to we're use way. the think to our want in ability and capital continue build businesses that out At I think have time, to do I here some going those we the be we act a from. those of want shareowner then and realistic, to significantly those that and pipelines and become more funnels benefits in opportunities. the them to opportunities them And able more integrate upon as way

we're discussions looking look-forward in flexible these on now So in now to ago owners a and challenges, interest. feel us, fancy as seem starting these And we're encouraged and see We're a discussions there. think basis did use not shareowners' think ago the to some front them the supply capital We're was by the use as and to the months of it active. it looking. direction maybe Steve, and of didn't I happen want opportunity forward the word might with months there more I that of But of robust great. best be three likely just right is funnel properties it six global as before I to our chain potential

Steven Winoker

going was given on how we on Aquatics you I pipeline Flow that's I if of Aquatics and thinking there and ask Flow of the answer, look Well, are Okay. more, about consolidation about all that, levels Filtration mean, the given the should at expect you to but M&A Filtration and activity or versus Control the side globally out that that?

John L. Stauch

business it's business it our and investing think as in. biggest definitely a filtration worth to is I pool look should we at next water second that's

a services pipeline, how we likely build M&A couple think getting about I we through themes automation through to connect would are how of consumer, some do realm think are Steve. closer we our out to themes that we occur the the as and connect the maybe meaning do

Steven Winoker

that the are maybe that some that you were a versus still at price other the maybe, does is part that contemplating And XXX mean Okay. point? ones cover, sort pricing don't tariffs out – announcement are want of already kind the one little of was of answer of are or uncertain that this already which just to of you've me the for baked I current but to that you talked unclear you've in you tariff are sort nothing there? gave, it tariffs word question Mark on that about further use taken that Because that clarification the in increases that the

Mark C. Borin

Yeah.

our or view a that announced second that round actually did at of or inflation we the overall feel recent the have of information price of or So third tariff a our all to very enacted there, And reflective few small and has whether look but not. us. But that impact ago is and weeks the round that's the little it's covered, we very take most currently again, out was that dollars. frankly,

John L. Stauch

we little Steve, at there's having some to on tariff that everything very we'll right, China, tariffs get for. of all of point, be out left

Steven Winoker

Very Okay. Good luck. guys. Thanks. All helpful, right.

John L. Stauch

you. Thank

Operator

Thank you Brian line Lee from so from Sachs. Goldman much. the And comes of our next question

Your line open. now is

Brian Lee

morning. Hey, Thanks guys. question. Good taking the for

quarter had But then a a also have mine here, on pretty and Mark, specifically, And quite Filtration Just Aquatics for a guidance coming moving growth of you're sales actually where one, beat healthy here. off outlook been most around covered. the by you're margin. bit ROS the

back for is about expectation by conservatism board guess the the of was and here, year? wondering there's the given mix, the why moving ROS and you're And I some half thinking how but particularly ROS that the price/cost to Thanks. around growth the full-year pieces So here Aquatics no targets views better half given some back through the curious, here wondering segment? for change across

Mark C. Borin

Yeah. Sure.

but numbers As similar quite the numbers get way a themselves we different. in I said to remarks, are the pretty bit are the my

is that you mentioned. it of So some the things

why in about still not little at the a QX As so yet the we coming then we investment maintaining otherwise might margins price expanding you and of think. were had very tariffs growth year, in originally of to half, the to as as the opportunities. business But was QX. much there. think kicking bit the investments our impact have improve I we about of really timing but committed key why, across biggest as driver continuing talked that investing to overall, fact of bit in with and invest, and for that little talked half planned. we the not what And they growth. being lower and in, the And inflation than in ramp businesses That's tend biggest we growth the the you be a we're we're we pace And that of the see three back look parts in those the first the

Brian Lee

I lot. All right. Thanks a That's all had.

John L. Stauch

Thank you.

Mark C. Borin

Thanks.

Operator

And much, Stifel. line Nathan next Thank from Jones you of question comes your Lee. Mr. so the from

Your open. line is now

Nathan Hardie Jones

everyone. Morning,

John L. Stauch

Morning.

Mark C. Borin

morning. Good

Nathan Hardie Jones

numbers of revenue, that really Filtration bit what can comment potentially the Can of XXXX little at some sales particularly from some is? opportunities maybe core you've a of bit low-margin talked in in idea drag but growth you moment, just get do so about growth revenue exiting think, your fiscal John, guys to core the exit sales are little for what on voluntary this we of a better little a you about bit Flow. talked to a I also

John L. Stauch

all divestiture, it's the That's about... in being to right, Yeah. – is just of so be clear, handled all that

Mark C. Borin

About a point.

John L. Stauch

of $XX the About million point. for shy year. a just About

Nathan Hardie Jones

to and X% those X% of – exited independent the of those So to X% Filtration product Flow lines? X% targets actually are

John L. Stauch

is That correct.

Nathan Hardie Jones

you a happy as productivity with? guys think you year, think million. for that just you're a nVent. know number that in is go give I productivity, Is Or goal expectations? think I that on of any disappointed Productivity in Okay. be been though see a XXXX that color we XXXX? with you Is it improved? can I $XX lot can the about had us accelerating resided You through can number future

John L. Stauch

million on And be That $XX of page so remind $XX really One get the in productivity. presentation. that closer further is to million as thing then $XX of said, there the we've productivity opportunities But you the after investment, certainly that before, about that's business. will XX something I'd that numbers of growth remains that it's we doesn't talked underlying it's Sure. to embedded think include the reflected, the million.

So there future be it'll headwind. in won't still continued but be year-over-year it the for a investment

Nathan Hardie Jones

at improve Are there to you're specific initiatives that the at productivity? moment looking

John L. Stauch

if on or the – path manufacturing feel that to mean And also longer on, think theme, productivity intelligent mean get generally behind got think factories which as facilities. to Nathan. that a large more we're lot far OCOGS, initiatives is we've you, I we're term, is we'd I I incremental say – working mean, our top freight that's or we automation just But look accelerate out organic to leverage elements existing I efficiency. got going us. growth you Yeah, that and on I cost of a But restructuring, well. about a as and through theme, cost things have to right, those as we're We've I working remind of like is we're a that we mean, think and higher going

Nathan Hardie Jones

helpful. Thanks. That's Okay.

Operator

comes so you much. Thank And the Capital. your next from Jeff from question of KeyBanc line Hammond

question. You ask now your may

John L. Stauch

Jeff. Hey,

Jeffrey D. Hammond

Hey. Thanks, guys.

Mark C. Borin

morning. Good

Jeffrey D. Hammond

clear to on be the Just investment.

saying I $XX million think the it's $XX you're saying million? So pretty what de you deferral and now minimis were So, is?

Mark C. Borin

correct. That's Yeah.

Jeffrey D. Hammond

Okay.

environment, pretty but weakness demand Okay. seems still just That's good in problematic, I know seems Filtration. the you on helpful. it just industrial project a to And then cited anemic. growth global like be

you see business? So, start better that growth to need within to what see to of kind do

John L. Stauch

Yeah.

well. industrial within a Solutions obviously well, gas as that's oil with recovery lot specifically of and filtration the business So, really doing Filtration of clear, And we be to It's and just global the an have a that couple beer, is companies and gas the piece also which gas via process that go also exposed in management industry Jeff, that are of the sustainable beverage to offerings the into our merger. and food manufacturing. a

what a we're we continues higher rate it's the and And that need today. revenue. headwind. that's currently yeah, percentage where done to So, at the well, residential really than of become need? is to commercial growing continues grow portfolio, seeing which a sure to that greater We do It make

is the focus help focus the margins. think it's within the and I So, portfolio

You're growth core in got Filtration. not seeing yet the understand going. on and we that to that that get We

Jeffrey D. Hammond

indicate they these food and in would XXXX? anything be or starts get up to that beverage companies that that And Okay. back better indicating into would gas management are picking

John L. Stauch

that that you'll as whole projects the sense million about not it's think necessarily a about million, of you overall right? So, mean case portfolio you're where headwind the $XX take I – it's come at scenario right down percentage of Only much looking the forward. you it's scheme are of see if of the and But those going now, in substantially. $XX not that a worst in things,

Mark C. Borin

as of that lot headwinds of half first the a the so. a it's on comps year mainly John because has the said, shrunk saw we smaller, the anticipate we half the business don't in back continuing because the that and year So, the point to of

Jeffrey D. Hammond

I Aquatic And back any see maybe Okay. versus don't talk on about just sell-in or know sell-through? then just I impact if this, you missed pre-buy did

Mark C. Borin

early No, change process. of No kind no any in increase buy the in timing normal orders. buying or habits of and

So, strong. process in was normal pretty sell-through, a the sell-through

Jeffrey D. Hammond

guys. Thanks, Great. Okay.

John L. Stauch

Thank you, Jeff.

Operator

you Thank so from Hammond. Mitchell much, line Mr. And Barclays. next from of the Julian your question comes

Your is now open. line

Ronnie Weiss

on for is This morning. Good Julian. Weiss guys. Hey, Ronnie

John L. Stauch

morning. Good Ronnie. Hey,

Ronnie Weiss

the initiatives don't you into guidance yet, know to growth back on but get but... I XXXX want

John L. Stauch

Definitely not.

Ronnie Weiss

the you we see a what I a into these growth is out, initiatives into multiyear are And the being on initially than little putting next initiative? guys think that? that acceleration of them growth going or volume year lighter peak about ...back is XXXX given initiatives, could be to as about we the being into should think expected, pushed

John L. Stauch

there spend No. that in ratably knew we to we get mean, I set all be around tough we fact $XX would spend out it wisely million to that it and given didn't the QX.

running where is innovative. culture more a reflecting but process really is which a want and to company which we think lean rich, we're doing We're is we're a the much spend But be. ideas what growth takes these we have will process you also time. full-year on new it. be likely still for before test and run have we're have doing a through ideas brand standard to – to like we ideas consumer a launch these we'd to that feedback instance, product and to and innovative That So,

move the if move phase. to the on consumers have want. to next And we're think consumer deciding phase And we we that, gathering and want so, that actually what and on once they we next information

year. next Probably, ramped investment. as we've expect a Mark yeah, year? incremental to said, this bit we little $XX So, But this ramp do million as as far

million put year, million. maybe If you incremental, it it's maybe scale $X-ish it's a next $XX on

you're positive investment next ratable a of part year there. that's still have So, year-over-year the going as impact to

not worried I'm So, about it.

Ronnie Weiss

Understood. for for just guys of Filtration. And quantify and benefit a then, you you how was much quarter be that if some wondering I'm mix of the much margin uplift should year. mentioned the how kind for it could

Mark C. Borin

Benefit a about Yeah. is point income a the half. and point, on side

Ronnie Weiss

guys. Thanks, Great.

John L. Stauch

you. Thank

Operator

from next so question line comes Brian the Drab you from Thank your of William much. Blair. And

now Your open. line is

Brian P. Drab

the through? are my segments, I pricing. cycle, versus accelerated. of on wanted price you. is of lot business going there a Most in I answered pricing. questions Thank questions been but those just of But know, which the on for were when normal some know have Mark, increases the clarification on terms you has you cycle Can to get increases three I been clarify and go off mentioned that? just price to through Hi. cycle

Mark C. Borin

Sure.

is pool And so, September. to the September Aquatic Systems business is always – follows the season, which

So, of those the the beginning most the September business within normally the the part timeframe. year. other the that for in increases price are the normal It's be would businesses two timeframe

January early the would timeframe. be normal So,

July announcement an So, mid-September here with in target with been those of have accelerated. effective the two

John L. Stauch

in with doing mid-September, said. we're that And in we're one, we forward reflects need what just as point well, hopeful to as my that going we're XXXX clarify Mark there, and

with that as our that on in appropriate that's can and can necessary get and react that way. in stays businesses hopeful customers expectation this the that forecast the to so, And pricing their those

Brian P. Drab

quick slide last XXXX is of a one D&A just then on $XXX X, forecast million. And Thanks. Okay.

to think split but...? second assume this $XXX more, the in I that we do million about with $XX in do has D&A to get I everything need but the quarter. for million just I think How year? the to

Mark C. Borin

catch. year. I'd the it. Wrong full It's say for good We'll update $XX-ish number. million

John L. Stauch

Yeah. Yeah.

Mark C. Borin

Yes.

Brian P. Drab

you. Thank Perfect. Okay.

Operator

question Thank Walter Seaport from comes your Global. from the much. And Liptak you line of so last

now Your line is open.

Walter Scott Liptak

could morning, pretty but what help if about share. X.X% share I you with to Good ask understand market you was gains. we've wanted It ask like gaining Thanks. wonder us market Aquatics be growth, sounds was gains. lot Hi. that I to about strategy guys. talked focused what I This a market may good. is – growth wanted a share market more

John L. Stauch

the it volume would call estimating differentiated we're reflect rest penetration that I somewhere to price and that we around is mean, incremental and growth we're the the or getting. probably X.X points general X

Walter Scott Liptak

Okay. Good. Right.

volume split Can price versus price? there. some there so was that And in you out

John L. Stauch

don't is I about think it a just we do was just – point. that. oh price No, under

Walter Scott Liptak

And the Great. the looks help productivity back the half? part done wonder that if benefits to that Okay. little charges us I year-to-date. understand it like for. in the that about? charges, bit this productivity now wonder is part I up that were already what you're And a restructuring is you're going about with then if restructuring that you show talking receiving can You the of Is you're already, in talked of productivity to or charges

John L. Stauch

standing were standalone and the we the that the product about. the last business. talked relates of and – Sure. A and up the that we is it's with the separation as The portfolio the exits associated businesses year really the exits of this business the that restructuring end water started program lot of into to year optimizing we've some line of

further into productivity are and underway as we'll we drive expect those would XXXX. So we move certainly,

Walter Scott Liptak

you. Thank Great. Okay.

Operator

this and questions time. Presenters, ladies are Thank you gentlemen. so much, there no further at

You may continue.

John L. Stauch

Thank you.

in ability exceeding hope thank and prioritization commitments, pursue to of So that capital that our building we're and demonstrating us I agility our up use flow to to And targeted you acquisitions. and agree record solid conclude core joining By interest. call. but growth a meeting and Lee for a second we cash meet earnings accretive you we Thank you pursue track to commitments. you your the can for us to continued strategy strong also our the Wei, to allows to compounding hope right strategic, and earn today, quarter, a delivered structure and and achieve trust not only utilize

Operator

Thank so thank And appreciate This you, call. today's your much, ladies and conference gentlemen. presenters. We participation. concludes you

disconnect. now may You

Jim Lucas	Pentair Plc
John L. Stauch	Pentair Plc
Mark C. Borin	Pentair Plc
R. Scott Graham	BMO Capital Markets (United States)
Joseph Giordano	Cowen & Co. LLC
Charles Stephen Tusa	JPMorgan Securities LLC
Deane Dray	RBC Capital Markets LLC
Steven Winoker	UBS Securities LLC
Brian Lee	Goldman Sachs & Co. LLC
Nathan Hardie Jones	Stifel, Nicolaus & Co., Inc.
Jeffrey D. Hammond	KeyBanc Capital Markets, Inc.
Ronnie Weiss	Barclays Capital, Inc.
Brian P. Drab	William Blair & Co. LLC
Walter Scott Liptak	Seaport Global Securities LLC

Pentair (PNR) 25 Jul 182018 Q2 Earnings call transcript