PNR - Earnings call transcript Q4 2018

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Operator

Good morning. My name is Kathy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q4 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 Instructions] [Operator Mr. begin may your you conference. Lucas,

Jim Lucas

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

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

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

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

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

John Stauch

was the residential the successful despite shareholders, and our inflation. we and to overdrove nVent developed commercial XXXX executable and very titled turn are completed Please proud one we commitments Executive of. busy morning year of separation impact Thank Summary. tariffs you, treatment and good Pentair, to slide Jim, detailed water number We very we and for strategy, four, and a a XXXX everyone. of

In through to million financial to shareholders addition nearly returned dividends. $XXX and buybacks performance, we

is generation performance, in speak two cash Our about us financial sheet XXXX, start To strategy. strategic balance our announced will water advance these for will two our commercial shape. we great discusses Mark that I After help acquisitions more deals. our remains strong, residential and treatment and agreements

We for we believe a XXXX are to with pleased very are was we XXXX Financial labeled what well-positioned slide Please successful beyond. Pentair, to we and for believe continue and five, turn Highlights.

fourth over grow a grow the call our the turning to and some to highlights reviewing of year. Before In wanted quarter, moment the the quarter saw I adjusted we core spend for XX%. the EPS sales and Mark, X%,

EPS our we Adjusted our flow. For the sales XX%, X%. term. XX making us return basis number for of million position free generated on the points, grew longer strategic We $XXX over growth expanded while to investments full-year, sales and in a grew cash

we net expect increase an to we sales share, XXXX, X% income cash approximate again, $X.XX to are XX%. to to in XX%, grow to income. be X% segment the of targeting core per of to adjusted EPS X% $X.XX free flow increase For range to Once adjusted and X%, to

results over growth Pentair. as return provide While to of Mark our an well-positioned initiatives. and in our more to before are to fourth inflation I deliver some discuss we we provide predictability, mostly XXXX to once we outlook commitments continue, to performance headwinds we to sustained face details strategic on expect XXXX, would believe like again call on update and key anticipate the we our quarter to now the I on full-year turn the consistency,

Mark Borin

Year XXXX six, to Performance. Pentair slide turn Thank you, John. Full Please labeled

sales full-year. grew core for As the John mentioned, X%

for the contributed to businesses growth, Aquatic XX.X%. while ROS and segments the income sales both points X%, Segment sales low Flow core Our XX% full-year. Filtration growth increased Systems basis with robust way expanded single-digit led while the XX core

We pleased which per income significant exceeded inflation XXXX given ROS guidance of our and share to EPS initial February. our headwinds the share, the we $X.XX to year for performance grew set with segment $X.XX per XX% are last $X.XX particularly faced. Adjusted

Finally, over With performance. ROS adjusted cash our $XXX growth, very strong growth, expansion, core we sales generated free full-year and million XXXX in EPS with were we flow. pleased

seven, Now, Performance. labeled turn to Pentair slide QX 'XX

reported of XX quarter, expansion XX.X%, basis the of we For sales ROS growth $X.XX of and share. adjusted per points XX% growth fourth to X%, to core EPS

more We Below $X the XXX XX%, shortly. average interest/other the of will of adjusted million, in line, rate saw expense and the our were performance color segment provide net shares tax million. individual we on an quarter

our on our to project believe XXXX, As stock dynamics Core in of our fourth sales of Performance. forward less Pentair another favorable. labeled industry to Aquatics back pulled strong turn we that at million Filtration focused slide beginning increases. distributors effort basis Systems business income refocusing quarter with sales QX call, our the the depended growth. lumpy XXXX, some points remain the another lays of XX% bought our segment sales instead component to flat 'XX delivered performance and likely of XXX Solutions, systems were on Segment the expanding with of XXX believe lower business X% and eight, in its we margin some have been an filtration businesses. impact segments. core price mentioned on quarter and and We Please This and segment income the be three beat slide Aquatic growing XX.X%. XX% out do in to return quarter. entering Throughout remains growth We sales we core well-positioned

trends and growth, than of with consecutive performance margin quarter. pleased line this X% the more sales less inflationary income rebate Balance line increased The Flow segment the increases favorable of as Overall, Cash materialized core that in Please we income turn affected second-half Sheet Although pressures in the by were front was XXXX. of in Flow and is quarter its Flow. slide performance in realization reported with were which levels the fifth XXXX, occurred XXXX Technologies its increased with top in Technologies volume to the entering represented nine, segment. performance. adversely improved activity price sales price labeled of

announced our We a for invest dividend of expect consecutive two we We our mark significantly our for returning to debt before pleased leverage less debt XXXX, $XXX levels, results will with very times. acquisitions at increases. to we X.X the are net with as $XXX million. reduced We which X% announced end while XXXX XXXX the million nearly to XXXX, when of Shortly XXrd year dividend completed that we of shareholders. ended increase agreements EBITDA than

attractive XXXX cash to Although each aligned seasonal labeled bolt-on Year remain invest we see we first slide in businesses, and some quarter well-positioned core to introducing do targets, acquisition the continue are or our look Please Full believe return we XX, at usage year, our turn cash Outlook. to shareholders. tuck-in strategically in outlook. Today to we XXXX

We to X% comprised of of expect X% to core which about grow price X% X% X% to sales volume. and of is

to point We headwind expect offset with XX% total by X% anticipate the segment growing acquisitions. X% sales announced and growth income FX from We of X% X% recently from of inclusive divestures. headwind another contribution roughly from to acquisition, X%

for headwind, price offset improved anticipated principally and While performance. we inflation to remain our a inflation to expect full-year provide productivity the is to to

XX%. per an We tax shares. year rate of to wanted share, an XX.X%, of items million $X.XX our to a additional on of increase an million, of some net to expense of embedded introducing for $X.XX corporate count to guidance EPS adjusted and approximately $XX are a Other color X% $XX $XX We XXX items. of the range million interest/other million, in expense average few share provide include

First, corporate of the XXXX cost our of of last represented new addition structure expense given three separation timing reflective allocate is four in of some quarters increase to nVent how April. just in quarters our the the we of as

to guiding tax not requires are could final. our but if this to in if XXXX, new to rate they proposed tax get as current we a XX%. XXXX to headwind approved expected approved regulations our June increase of explanation. These until present final July indeed as proposed are Late changes that further the finalize some rate IRS do or Next, XX.X%,

However, basis in a we to increase rate. tax full-year point our XXX are factoring

expect first at or XX% are in when remain rate the QX quarter with will QX if regulations any tax true-up happening and We finalized. our

sales million Finally, $XXX Pentair We X% seasonality useful for the our think and consistent with with buying this The grow reminder plans does to estimated share remind we slide segments regarding two full-year, to years would count expect XX, about to our Outlook. wanted business to is year. quarterly which to us during distribution in EPS. We of some Continue. the XXX back shares QX quarter have million buybacks. turn of be account trends anticipate Seasonality 'XX everyone three slide similar turn continue. would does to Please sales contributing. communicated all that Expected previously you for first labeled long-term as a to experience XX, labeled that Please seen the adjusted X% We thought past our

interest/other quarter the to of up Aquatic range tax represent Segment XX%. X% the to million. XXX.X and is growth Filtration expect Flow EPS of share, XX%. which to line, $X expected to be grow Technologies be approximately Net X% $X.XX X%, be would to share to expect and X%. to expense of We a million, to anticipated be roughly Systems X%, approximately adjusted Below X% per $X.XX in to flat first to income up be rate to we be is to and Solutions up X% to X%,

are the the I we like our growth to core While now period back John. to call year, the believe positioned are we trends lightest turn first quarters would to seasonally continue. of sales see

John Stauch

Summary. number Please Pentair XX, Thank titled to you, turn Strategy Mark. slide

have of you consistently the in with investing strategy water areas share remind to to We and where everyone residential we our page treatment in growth. commercial and are used earnings leading the company this to presentations

enterprise commercial advancing strategy Our treatment the water accelerating business pool and requires remained focused of at the growth and investment which residential and in on level. areas

attractive And investment committed paying dividend. our a to capital maintaining to Our rating, competitive disciplined. businesses allocation we and approach grade are in reinvesting our remains most core

well is balanced look being M&A M&A the by approach available informed between one turn ability and as intelligent them that Strategic Please our XX, also commercial buybacks labeled of at of our We key as initiatives. our overall quality water strategic decisions and We residential Deals. a assets with valuations integrate treatment successfully. throughout slide discussed two XXXX to growth accelerating Two to

we pleased for Xth, throughout further key initiative. very We that growth are XXXX that connected, acquisitions smart, we Systems. funnel, and On January the of building we a that and innings products from we Aquion have solutions. M&A early agreements announced us acquire also our to component to help this announced the in supplier, strategic have are discussed are to last We agreements introducing being moving we Pelican Water change, that branded discussed signed up quarter value and leading two

We the expect $XXX that the acquisitions add these margins combined, above to value Both move average. revenue, these million segment's Filtration two in of roughly up us acquisitions help our chain. further and have are

the us the number Aquion exciting it expect and commercial a also residential of to under affiliated have a also which these would through We in water us are a proprietary a treatment dealer network opportunity Pelican after to whole be water conditions for excited a innovative RainSoft acquisition XXXX has sell ultraviolet services internet-enabled systems about through the solutions. still We line and strategy. systems please is to treatment able Thank that call turn to acquisitions our regulatory remain all really Q&A, approvals. water open Pelican We like to a direct-to-consumer systems brand. few line closing quarter model is which our to and necessary of I subject and ecommerce an over for platform. to close for brings of closing our about home channels. Aquion questions. we'll because you. excited Kathy, remarks. advance ozone treatment customary I'll first in Kathy, national bringing now addition distribution disinfection of diverse and brings the

Operator

with Jones Instructions] [Operator from comes Nathan line sir. first Yes, the Stifel. question Your of

Nathan Jones

Good morning everyone.

John Stauch

morning, Nathan. Good

Nathan Jones

you any think that of of the of little know there was was, color bit commented but businesses Mark, that's in could you and probably calling pretty aquatics how out? kind pull-forward any a give to estimate try and I I any you much if other it's tough you of there pull-forward in worth kind think was there, thought business. that

Mark Borin

and probably presents business that as about in talked little XXXX. in then for the I if a well. Yes, it XXXX Aquatics And bit in a headwind two you about about to points also think it, referenced one growth of Flow it's

Nathan Jones

that just or year the for talking about? the total in points fourth two to One you're quarter

Mark Borin

For the year.

Nathan Jones

Can which year. about, XQ that you talk talk delays and on disclosed, you're expecting in the would that And are was what low XXXX. For offsets, to bar maybe the to productivity improvement? productivity think price then in the I any guys I XQ. many the seeing drops so and about also inflation fairly what like line, there for bottom productivity in about out you you about talked of productivity discussion XXXX,

Mark Borin

Sure.

I three segments at and amongst about it in look can in the and that the when think think performance segment see as you you performance Aquatics good then QX Filtration. you

manufacture for QX Technologies. in relate driven And some operational drivers pumps. was And factories to couple Flow so really of challenges large they're the productivity by productivity story of a that main there

that, improving the we and see so has QX. likely first-half in focused around of in we that on team saw And that XXXX. turning The been

Nathan Jones

things Okay, get of the dragging solved of what so discreet that the expect idea numbers the second-half, couple first-half. they in XXXX? we productivity out productivity are in in there a should Any down

Mark Borin

expansion about from As kind incremental XXXX, each the and of think of offsetting and margin volume then coming other, our we from price overall and talked kind inflation about productivity. guidance we for

Nathan Jones

I'll on. pass thanks. Okay, it

Operator

Joe comes your with from question Giordano Cowen. And next

Joe Giordano

John. Hi,

John Stauch

Hey, good morning.

Joe Giordano

morning. Good

I So, that real businesses and these you know bringing you guys on out talk maybe brand can getting of as you're you're here, for side, talk the building you is Can filtration the how value you're consistent guys. this in about focus talk non-core around new it's proposition the kind well. Pentair some filtration where and is of one like this assets going? about as this cohesive changing messaging of also Can kind brand, you and how see and there the a you

John Stauch

program and we Pentair that have represents are give channel. the then opportunity. not we either our Clearly that And chain products make to it's consumer. have affiliated consumer or because of helpful these choices, in acquisitions can to to are our that which our in to making a the brand-based services goal value direct distributions that loyalty regard whole systems close get bring filtration the is the today. to And that in in it we our a to the necessary, channel also we is brand through have the And

the think They touch a or So, it's the think country that's live as necessarily or consumers building forward. that and want care don't need the is ultimately they Joe. think story just components that they're geography be the to And we buying. where that consumer to this a the important I out. able about most it the as bring heading, or for in, close all that's about we and service. water to code want solution consumer products to that zip why have we be They

Joe Giordano

something And like sustainably that higher consistently? as of business is a kind that more that leads happens predictable to margin like

John Stauch

consistency filtration you predictable the of view driver. and part these how annuity-based the service residential And we an commercial customer of of absolutely time. making that the business our I That's today over goal. I think -- more but already is are there's that main is sure mentioned higher margin, mean, that

Joe Giordano

any Okay, you then here, great. the all price that's segments into comment on guidance across on offsetting as two clarifications statement And and that do inflation, consistent color by is well? of a kind three segment your margin 'XX, have about

Mark Borin

don't we on have profitability generally be And XXXX. segment for would specific consistent all segments. no, across three That guidance

Joe Giordano

individual we consideration math on -- that we to segment we do to direction there should out there level, -- not take Is you'd a into the point it as anything that? get anything basis is like but with could segment do an

Mark Borin

aquatics businesses QX margins about growth XX%, to our around, talked way and the think we segment. that think you by X% strong in of of XXXX flow the upside would productivity in about overall on to that kind continued about that if think think technologies and segment I frame I turns

John Stauch

as ramping the strategic them for see growth. but about how want we we our all based flexibility up to think or down expect growth investment Joe, do improve, investments some upon ramping to the organic maintain we we

all So, we're specific don't improve. by into targets them want to expecting to but segment, lock

Joe Giordano

you tax who that what into there's can get this just sure aren't exactly people think Mark, just you some -- I mentioned, that And thing is.

proposed So it guys? what I'll regulation then how does -- apply thanks. this to and is And you

Mark Borin

know point. I sure. new a that's Yes, data

global IRS a at and of part there them and regulations, our to not laws the of So, a right lot specifically that end And XXXX, that new related published earlier. related were were the to regulations that's us, the regulations see XXX and surprisingly passed of XX% to around this of structure, writing States, and points, that XX.X%. going applied of where specifically from regulations new to and the around basis of those interest it's headwind us, interpretation in deductibility technical those United we the year

As included said year. our not now, guidance I that The regulations the for in are they're right we've remarks, my in proposed prepared so final.

January As of early think, why end proposed, XXXX, perhaps in the finalized, full-year actually of guidance, them don't Xst, put July. as get June until which they they're we effective is but our wont we or

to And so been And in happens implement QX QX, they're in wont that's to we'll why revised so have XX% we because if wont or we what they finalized, them same QX. and guided they see then in QX in and would that inform and tax the of the if QX XX.X%. originally that'll the true-up they're were a in happen rate full-year then to proposed, get rate kept as

Joe Giordano

Thanks guys. Great.

Operator

Mike Halloran Your next Baird. from question with comes

Mike Halloran

everyone. morning Hey,

John Stauch

morning, Good Mike.

Mike Halloran

It the expected here broader core environment stable relatively through question just you year. through are underlying then year that quick way the the the trends your for seems be on here. guidance to on as So, work assumptions based

about the on know should as anything demand side? if trajectory clarification through Just want the we work some year on and that, there's that we

John Stauch

such of this it you throughout increases outlook, read two basically we as got price one price points I in the think Yes, core to points Mike. little buying and in place into that substantial we trends I I we of had and mentioned, expecting And recall, given we're I we think the we're right. expect you into QX think about volume. And QX. that last we a start mean three as were seeing distributors we same year, put mean QX I have of we'll mean a year, the strong expect outlook and a QX a probably bit do stronger QX. probably took great if very QX slower little and advantage X have so did dealers to a or ahead,

we're certainly feel see the to as go through. space the be to aftermarket going think pretty not new a remain But more trends as movement and of of So, We're close stable. last that type install, residential I same year. tend were side, core we to overall, XX% the we necessarily in all trends so aftermarket they the those served, we're commercial and in much housing

Mike Halloran

point out would Any that regional you're right seeing variances you now?

John Stauch

our mean a is than really opportunity our No, And to I I a to base, aware, I in there mean continue enough it's not expand we're X% big I for think revenue matter an news opportunity mean China overall less big not is hearing we're our because have good China. starting we us, and that of then so revenue. slower. to our we're news/bad it's from grow to so business story we're

huge in 'XX. factor last and other year. we in It generally don't huge that, a than the headwind think it wasn't 'XX, contributory a think remains was way So, it's I Europe

Mike Halloran

year, the versus is soon one coming about the right? of first Aquion Pelican just quarter at of are assumed guidance, first late the contribution that quarter, those and on And quarter, your like the based clarification, beginning acquisition are acquisitions, it in to those divestiture rest seems in and the be the second then

Mark Borin

the quarter, so in sometime them of and on expecting right, first That's close to the here we've added basis. to guidance we're back-half that

Mike Halloran

great. Thank you All it. Appreciate your time. right, for

John Stauch

you. Thank

Mark Borin

Thank you.

Operator

next Your Patrick question with comes from JPMorgan. [indiscernible]

Unidentified Analyst

the versus for just my taking in segment year, think few income the drag it questions, X% in XX%, impacting impacting quarter just maybe the a mentioned but a for to -- inflation quarter, it you bit a first maybe the Thanks in I margins, is second-half. gets guys. the top X% cadence and line Hey, but the still call. the Had on growth to X% little first of what's pull-forwards better the the first-half first

little profit help the Just in being growth bit curious factors the the the underlying lighter. versus if could you understand full-year quarter first behind guide a

Mark Borin

guidance yes. the quarter, really around particular separation and structure was year-over-year, strong mentioned from certainly part investment the corporate fair year-over-year of that going up that that. in are comps and in slightly Xst was year had Sure, so last of talked that place our QX comes I standalone John before a the a last bit being year, of forwards. the that quarter, timing of because the the a first in May about

the performance underlying So, operating those the as are impacted quarter-over-quarter. really not is look you key that drivers, significantly

Unidentified Analyst

Got going guess, in it. said the question; That's you standalone that I much. part That the of answers my first I had so not place, that, up missed I guess so corporate second structure call my probably of first earlier? around because being probably --

Mark Borin

right, allocate of That's the way just overall then we the businesses. and to kind

Unidentified Analyst

And it. interest Is just of going just up then Got deals? because expense. the that on

Mark Borin

with an That's associated that right, acquisitions. interest the so the two assumption around includes

Unidentified Analyst

for the And would you XX.X%? confirm rate, be XXXX finalized, then on that can if normalized tax just rate

Mark Borin

our be would run rate. XX.X% right, That's new

Unidentified Analyst

can it what kind of it is? or that, there you capital of do things then offset are And was structure-wise, some to is it

Mark Borin

always for to our structure, manage company. like just effectively We're looking any opportunities

but our -- structure, be based rate going possible, our is and on the run for be to our efficient XXXX we'll So, as tax as XX.X% team estimate be will the looking forward. existing would

Unidentified Analyst

price starting slower up that going little of year, that a And more it. on first you three in the or for points quarter, the last clean one Got in first back-half the layer the get is there? quarter, expect start sorry, growth does bit you the to of you're the then

Mark Borin

we the price of that most by driven XXXX. increases Yes, in QX QX the of was announced and

but slight balanced. first for part, quarter, pretty XXXX. bit evenly in pretty it's then the lower ramp, the throughout And and spread little so most A

Unidentified Analyst

lot, Okay, Good great. luck. a Thanks guys.

Mark Borin

you. Thank

Operator

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

Jeff Hammond

Hey, good guys. morning,

John Stauch

Jeff. Hey,

Mark Borin

Good morning.

Jeff Hammond

profile growth the better the informing what's in organic for Flow Tech? So,

John Stauch

Well, around Jeff, so, backlog infrastructure, building able backlog they volume. a had and helping and been to lot that's up, in build primarily the that were commercial a we

We we know, the last de-stocking global as the switched residential and one some year, system over we had that inventory. also identified had incident East that had you in buildup with Middle had the irrigation of happened mentioned and distributor. -- too in they we side, kind We much a

So those headwinds forward, and we that's are as yes. gone helping, look

Jeff Hammond

on Okay, from you price the a to captured then dynamic, XX% that contemplating cost are in your just move XX% price? in three the list is how or

John Stauch

our to from in Xst. Yes, the inflation three increase list includes for assumption XX% XX% scheduled that's March

So our that the for inflation is year. built assumptions into

Jeff Hammond

can on Okay. acquisitions, last those businesses, the of or the and outlook you in about the just the long-term of kind growth growth of for putting And those one, expecting you're businesses talk rates in what terms then on 'XX? in

John Stauch

historically we term that that then term, mean, very the know, Pelican, at see near X%, to it. strong range, being longer close expectations the XX% being Aquion has I in we to been Yes, see as at least for acquisition have somewhere and the X% growth we -- growing obviously upon which you double-digits,

for you us, the these a outlooks longer-term about all the we'll at behind and at know, we right So do these about regulatory get businesses. we it's after better think really how approvals time, take look

Jeff Hammond

Okay, great, guys. thanks

John Stauch

Thank you.

Mark Borin

Thank you.

Operator

comes question Capital Markets. RBC Deane next from Dray with Your

Jeff Reive

Hi, morning, for this Dray. good Reive is Jeff on Deane

conflicts your the from channel? deal Pelican e-commerce will deals, capabilities meaningful new dealer sticking any the to just with the have So

John Stauch

they it's a different of consumer targeted which very the code. segmentation it's to, them know, like in to -- code expect by ZIP market, specific can areas feel Don't help, which they and you overall more ZIP and

approvals, Again, So we as it hopeful well. we and we're explore expand and our channels take after help maybe we're able excited it the can regulatory to be capability that deeper. to get dealer that really and

Jeff Reive

it, thanks. an can maybe update just M&A your pipeline? more give broadly, you on And then Got us

John Stauch

really about types a really an on, well-thought-through strategy we we looking strategy good gives really Yes, our I that was that I being deals global exhaustive think aligned to that we feel better on, the it at. mean, us and board we're with a align have visibility of which

but at aspects. the say But so, fits? always also And you stage strong ultimately, and we fits have cultural acquisition it strategy meet a right financial get and aspect it's looking and now, we're that about, what So also also financial are then has funnel, a do the funnel. they cultural final building makes are I'd know, through the to they to they

Jeff Reive

you. thank Great,

Operator

Your next question Partners. Linzey comes Brett Vertical with from Core Research

Brett Linzey

Hi, guys. good morning,

John Stauch

Good morning.

Mark Borin

Good morning.

Brett Linzey

to Hey, to back just inflation. want come

inflation that's like with Sounds number offset all-encompassing of know, $XX three I'd commodities going you you're if an that's and to to million. know, price, assume tariffs included, points you the and fully, about million $XX

you just number, that could inflation and in is much unbundle is commodity If tariff-related? what how then

John Stauch

trick impact is that. be two, of we've and been unbundle of to the to that's because direct indirect hesitant there's to comfortable identifying but been the Yes, the try the impact the tariffs, then tariffs really there's

relevant, tariffs So the in total. about it's not really think and think number when important those things there's that the combined of our impact more is to of direct that the inflation really it's kind impact we total, both of of really

Mark Borin

you about, mind of is about as just well. as -- also wage know, you that number XX% the are under also next and in you little inflation, do globally is year keep a Yes, know, wages which math, up

Brett Linzey

I start just Okay, well? the a demand filtration, of perspective little little that's you're slow then maybe guide here, you're bit seeing, of the there, some mean, in color backdrop QX, showed and a want demand business implies what QX softened a life regional just QX as to what and the and on helpful. a signs And in understand seeing from

John Stauch

businesses have different and we three is there's beverage. Yes, filtration. underneath One -- food

industrial the a been commercial commercial one business, third in residential and a on two fit. digits filtration for global it's acquisitions low-to steady. also been has growing It's The is focused year the have and where the our so. business residential and We side, mid-single these filtration relatively last and then or

had bit and food side. on some volatility a the little mentioned earlier as on have beverage we We of projects

to continue want at be but those we large out We our de-backlogged expect end went and the projects. Don't us QX. as to those an excuse, behind really of

moved side, lift and which a Solutions been the overall. strategy Filtration it to On a big really in more also the margins food to component beverage has

get have we forward. we that behind through then once So, are we QX, moving us year-over-year impact and

Brett Linzey

along. I'll great. Okay, pass it

Mark Borin

Thank you.

John Stauch

you. Thank

Operator

next Brian with And your from Lee comes Goldman Sachs. question

Unidentified Analyst

This for Hey, Brian. morning. is on Rebecca good

following that productions about all. margins shifting Just if lower how think the this up wondering I was versus the trend on helped up that quarter, margin of we price from then, picked how XXXX. at should And away filtration for was the

Mark Borin

has just in price and commercial impact talked the Filtration business just overall. about you the Yes, residential the those see that side of sure. price really three smaller in a business. businesses And John

So It then as is margin get about just and mix the after they of as lower And businesses also lower you productivity the have segment and to productivity core some less it in improve is opportunities about price. referenced. that.

productivity price mix. more less it's and and So

John Stauch

next of Yes, we Obviously, XXXX. expect would year that will year. in performance and the roll the sequentially as the to in this realize we mix to shrink benefit impact the year-over-year start

Unidentified Analyst

you wholesale the provide strategy dealer customer you XXXX heading channel? following Okay. of about up how potential question that [ph] in how change conflicts? U.S. filtration color are you channel, expect on the a the little for into struggling more ecommerce and then, just then And can in your And much terms channel do any on

Mark Borin

the opportunity to the solution also But the think that served our closing. those being can them. we those need are for. also closer are not And again, they to to looking end close gives And Yes, the the back it the to independent after we can by leads And regulatory dealer we approval channel. be to only us customer right consumer, I at believe that we're consumer. end we bring looking an by leads give acquisitions

are where targeted built platform of out available. we share a And our through that's the ecommerce in time, to then sure will meets consumer that solution needs so, we more make consumer, and that channels to ultimately when it's going that will to we've with and we bring right and the code by over information is all got ZIP solution continue

Unidentified Analyst

thanks. I'll pass on. Okay,

Operator

[indiscernible]. Next question comes from Damien

Unidentified Analyst

everyone. morning good Hi,

John Stauch

morning. Good

Unidentified Analyst

the for bit solid elaborate there? the core price X% that's to I think X% In increase. from Aquatics, a some outlook carrying you could have still September over your you growth on

contribute talk just much are there, XXXX? and growth recent about maybe drivers little bit you could to the So investments a expected in how

Mark Borin

Sure.

I and and chunk coming the certainly to business. business right, remainder of price the so perspective, you're growth a from Aquatics for pool of price of Aquatics. is up So segment a sales coming the in Aquatics And around thinking from lot then the X% impact that from a of so our for and mentioned big core X% earlier questions the makes strongest overall are volume, the impact

for So factored we our the way the think about assumption year. that's into volume

Unidentified Analyst

you I growth And Okay. what give about for the kind on the key obviously, XXXX? a been update wanted area for expectations and of you China, an to have performed in could ask for Southeast quarter and maybe you, China focus strategic it's region Asia you how

Mark Borin

of strategic it's need repositioning, to growth going and It's we approvals than participate here that five, in it through our the X% really And for of be solid and moves for behind at a half can make year XXXX faster able through to and revenue, investment a rate. that. so a not It's to four, launched we year the get e-commerce our Yes. were and in able just am was we wise. health and grow much get pretty products direct of more less why channel, we Then I also apologizing move the China. new to some platforms distributor were the in ministry bold China. in back

we did So and all that I think XXXX. repositioned in

the probably single-digits. closer growth we to know, on in You low were you QX, side know, lower

would closer XX% a head weren't we we're again, double-digit in to starting disappointed we to and XX%, very if forward from relatively to be because we're we base. As continue, growth XXXX expecting low

Unidentified Analyst

Right, sense. makes much. Thank very you

Mark Borin

Thank you.

Operator

question next from Mitchell Your with Barclays. comes Julian

Unidentified Analyst

for Hi, it's Julian. Jason on

upon quick offsetting XX% the three of expected correct a Just contingent way XXXX, portion to tailwind that contingent about so, since the of a of it re-rating one pricing think in be points question is tariffs… on would it's this --

Mark Borin

No.

Unidentified Analyst

you -- lower, rest locked you would nice all come to just just from that X% inflation would little is a of would and the sort down as that? that That be the of know, inflation necessary the never bit is in, pricing a not equation and see side you offset in or happens, of not come could of the enjoy tailwind

Mark Borin

moving determining the as what actions all all, know, to if to shakes know, then who the be on that dependant to some you terms so happens else knows of to from that just of still that that price, go and taken, I may been you how is going status respect what when not yet with said that first or And of be -- changes list with XX% in tariffs, majority and ultimately out happen that's seen. already Well, be but from the three have would XX%. the it's of taken,

guidance you talked wouldn't the our now assumption I know, that right that on expect about to based change. And earlier. we is So

Unidentified Analyst

of just the helpful on that guidance, to QX And X%, color lot kind in to environment and embedded you've QX of sort sales closer the Definitely. differs a underlying take from wide the the X% environment organic X% outcomes just range you sales given infiltration high-end in demand then talk it get that around guidance, to X% core and maybe to the a the seem of given would on be QX of right that solutions, how quick terms now? of one just to that what go could trajectory,

Mark Borin

on do wider business catch, our a our come -- we Yes, of I like do volatility why strong, we revenue we global outside that the Europe as reason there's and right Solutions range see it because than we have U.S. is real a have slowdown feel I we think United know, economy mentioned it's half good you so States, in and from some mean, now China. remains in more see most in earlier, and Filtration no the we see

and somewhat in and So on aspects, those so industrial just gas, industrial to food just to and global there, and industries wider the some tied again is a being of included oil I investments capture also, so, that they're we the of and that. the also -- range think beverage spaces, range volatility serving, because its there's more

Unidentified Analyst

very thank you Understood, much.

Operator

question with from next William comes Aiken Blair. Your Joe

Joe Aiken

question quick model. directionally for Hi, gross a have just any XXXX? looking at least in Do good margin our expectations at you had morning,

John Stauch

we we talk wouldn't Yes, go gross segment no, the beyond the margin I'd margin about and say about assumptions. that talked right, and -- income assumptions,

Joe Aiken

got Okay, thank it, you.

Operator

comes Liptak question from next your with Walter And Seaport Global.

Walter Liptak

be Hi, price like covered thanks, good out most would morning price and the on this what of sticking guys. for and XXXX? it help play about, reignites, you're in things the wanted situation costs ask inflation year, and did you've got a to might you learn timing I good you if price price this how year increases would last year, with anything sounds that with

John Stauch

got like we Sure, actions we'll what certainly to inflationary in we've pricing the based and on like in the outlook our continue I we mean, place. feel but are environment, monitor is our landscape see reflected what looks

to So remain got we're we the now our assumptions going we've built expectations. but right right think nimble, into

Walter Liptak

Right, okay.

that increase, know, the wanted last business, you're little wonder price jamming the I I of said Now, back but something installers predominantly to it not -- it pool pull-forward, going your you getting see to accepted is far? is year through, -- if pools ask, flow expect so was the some I price pushed a price. how on this how in increase, are You you -- a bit with recall, you was of there them

John Stauch

and the of Now, pool that really or what the would about that's installers, price as increase been was an early pushback the increase related the middle disruptive channel a and of we so of pool but season, hesitancy because that comments a get any to in result last pool that. you time year a that put is there the season that know talked to of coincides hasn't the price don't dealer to blowback have is the increase doesn't, do we on dealers the that, and distributor there if season increase price with the price timing -- from our

Walter Liptak

Okay, great.

all Okay, right, thank you.

Operator

back no the presenters for will this there are over closing any now remarks. questions our time. turn call I And to at

John Stauch

up as Thank we commitments. can cash us call. and today's core our not By to flow solid a building I the record the call. to you use capital Thank and agree us agility achieve strong that ability we our growth allows you on earn strategy a exceeding bolt-on, acquisitions, as to in strategic, also had right hope few growth demonstrated for structure today, tuck-on and you a create to utilize our hope joining that prioritization such a announced continued you meeting weeks two trust for targeted pursue of we discussed we and and but earnings, Kathy, XXXX commitments, and interest. your the and compounding track pursue conclude meet a to only ago to to

Operator

today's concludes this conference you, Thank call.

may You now disconnect.

Pentair (PNR) 29 Jan 192018 Q4 Earnings call transcript