PNR - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thanking for standing by. And welcome to the Q3 2019 Pentair Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Jim Lucas. you. Thank begin. may He

Jim Lucas

and welcome Mark glad third I'm you President Chief and Senior And Stauch, is conference President our our Jim XXXX Chief call. Vice and Treasurer, Relations Investor We're could Officer; of me to Dorothy. today quarter John and Pentair's Executive earnings Lucas, with Borin, Thanks, join Officer. us. Financial

outlook as details as well press we call, third our today's full morning's on year in will and outlined provide XXXX our this release. as XXXX On fourth quarter performance quarter

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

herein differ made Company anticipated statements to today and included obligation update circumstances. statements or materially could events of are Actual publicly the to as results from reflect such no undertakes Forward-looking results. subsequent

by can Today's a website. webcast presentation, Pentair's in is be the Relations of which accompanied section Investor found

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

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

to now will John. call the I over turn

John Stauch

Please everyone. morning, summary. Slide to good and turn X Jim you, Thank executive titled,

performance In quarter second our expansion. the income third We to solid building and performance. particular, And from are to our pleased deliver quarter. ROS growth return on segment

stabilized encouraged business. see our and year line important full EPS aquatics are further our stabilization We've to top guidance. price maintaining are cost in seen We signs of we

priorities. growth two and We key accelerating our treatment. strategic in residential continue Advancing to pool growth commercial water and invest

experience our investments of are channel, out and products on inclusive brand, innovative services. a consumer centered building These

call well growth talk about in more later return sales XXXX. positioned the continue we the in little long-term an about We to strategy core I'll And believe prospects. are our to optimism and income

third quarter Mark? now over I'll the updated outlook. call turn and results to discuss full our year to Mark

Mark Borin

Thank labeled X Slide you, Pentair John. Please performance. turn to QX'XX

and EPS color quarter, For X%. adjusted Below We'll sales the saw provide increased and Segment XX%, increased saw core individual declined of X%. grew the income we segment performance X% net an more third tax quarter sales we of on line adjusted shortly. rate million overall in $X.X interest, a spread the The our XX%. million. across strategy in an long-term in expenses shares full resulting income tax $XXX.X lower other year the adjusted rate quarter XXXX average reflects and tax expected rate of were our in slightly base

this cash of seasonal believe significant Finally, patterns. inflation in we over a quarters. grow we just pleased softer and to ROS top and following segment in headwinds the price line normal $XXX discussed with and free line cost stabilizing see million income despite were We prior flow expand reflection the was is of

our Slide labeled lays to slide the Pentair This Performance. segments. third Segment turn Please quarter of performance QX'XX X three out

a Aquatic extremely segment X% experienced against core decline tough As an expected sales comparison. our

the first ROS was in income much came improved Aquatic sell-through. more the during an points a quarter north it of in the segment weather abnormal half X% rather result year, still XX country of and that Following of weather declined saw during and but basis the appeared normal was contracted XX%.

Filtration Segment and of sustainable both both with business track The Pelican businesses across in expectations. but throughout with with sales with backlog integration expanded repeated both improved all growth line more as and basis grew exiting on XXXX inventories gas. within beverage the in historical we we reported line have contribution and the channel As ROS performed remained XX% solid remain of XX smaller our shipped lines levels. out core Solutions Filtration some in we business points and particularly to X% food of for focused XX.X%. year, Aquion our beer on and income

In Flow Technologies, core sales declined X% during the quarter.

continue basis OEM and market. to after in line to income the ROS soft segment grew top see X% Ag our and expanded performance, points Despite We business strong both headwinds XXX XX.X%.

reminder, was a easiest was and hardest in hit by the in As tariffs Flow the segment comparison the XXXX and quarter year. broader half of Technologies its inflation a of

as most to continue more of only one we segments, by across and line are see price results products. we of for comparisons encouraged top the quarter three tough cost While well stabilization size our mix as

Cash Please turn Flow. and to Sheet Balance X Slide labeled

of quarter and delivered third Our quarter flow. balance to continues strong cash seasonally another free sheet strengthen

third and matured During maturing quarter. have another the bond the quarter we we had in fourth one

year As inorganic we to free XX our our a note and successfully healthy reminder, sheet ratios, the opportunities. Between quarter. remains improved growth issued cash leverage positioned during fund organic flow second balance and both well a

Please Pentair turn to X Slide labeled Outlook. QX'XX

flat. the For quarter, roughly fourth be sales core anticipate we to

we Systems approximately by the to focus making as to return levels of down X% inventories normalized continue channel more Aquatic to expect end to be X% We year. sure the on

in core be anticipate approximately X% to up to Flow income essentially Technologies Solutions as X% segment and stabilized we continue and drive cost be productivity. both expect further sales to expect growth We to we to Filtration We price flat.

range be $X.XX We in $X.XX expected of share. to to adjusted EPS per a

to $XX we corporate million $XX line million. approximately expense be expect the to Below

and be our and fourth be approximately expect XX%. to million. of million adjusted $X net XXX expense tax other quarter rate expect shares around WE to roughly interest We

XXXX to Year turn Pentair X Full Please Outlook. labeled Slide

year, sales to expect For core the full roughly down be X%. we

around two anticipate contribution We income We acquisitions to FX. to sales be segment expect offset X%. X% total by with X% down be our flat essentially roughly from headwinds from

roughly and to XX%, of of year We average embedded million $X.XX our for an in expense XXX be Other approximately guidance million expected tax share. continue $XX to $XX other adjusted shares. items rate full $XX corporate interest million count per adjusted expect to of year net EPS our expense million share include the and of

flat moving pieces undoubtedly there XXXX to signs While encouraged we to continue top be expected price cost by further stabilization pack and are many line our EPS, to improvement.

the are year. businesses performance line We light faced the in top challenges of delivering by this encouraged our are

would I to back turn John. to now the call like

John Stauch

XX, you, Thank Please turn to Slide a labeled Executing Consistent Mark. Strategy.

to our driving driving focused the of evidence we investment are Most on people there lot long-term agree results. right continue global a at challenge. and making strategy focused be and a we believe is that is We the investments would water quality is

to participating to focus While water argument markets. this There ownership of in many offering companies can taking on consumers from residential little global primarily and their we've benefit the experience. issue, are chosen is commercial solve that

and their variety meet water. And help preferences. They Pentair needs move individual can enjoy that and do a with it has to their and solutions taste to of solutions treat, own consumers

Also, residential half With million to nearly In fact, of Pentair Aquatic over the our few strategy when with total solution on years aligned we is one X leading ago, franchise. it two providers customers. our started new installed decade business and strong over of being US, development product serve. dealer there installed the built them and the loyalty. old, focus pools is strong large in to and on over We've base

of have is of creates million an which avenue automation position. the to results opportunity today, and decade Speed the introduction the US, in savings hybrid categories X.X pools with pools leading where created small north LED new around product compounded of awareness believe heaters. energy lightly ago The of adoption a roughly the has a We nearly from we other Variable continued XXX,XXX versus Pump growth

owning paths the time Filtration and in component acquisition a lot residential year suppliers homes. of solutions. Within both a in Pelican these and Aquion as believe us to moved to are quite being market, many short systems our being consumers businesses, we this of we value solve learned challenges and earlier there their now their water help leading provider create We've of

positions position food focusing of service on with enjoyed area. existing a and potential we've believe water with our customers. us this many strong customers presents side and commercial in total are Increasingly, the business, opportunity, On an we management historically the we better

Within office today further a believe the number And bottles. technologies expand increasingly water are customers of there plastic serve this in And are use to of can the we area. at that to we've opportunities looking decrease this commercial opportunities space, space.

Outside verticals, residential technologies a nano number filtration. and developed ultra we've the of of around and commercial we've

solve see new to As we challenges. develop opportunities more IoT even products, we customer

We've the operating beer enable this expand our this time. use into move overall reporting over gas we improved to believe parts sustainable, transition digital customers become lower performance. system, portfolio dynamic sustainable more and that opportunities technology plants are globally BMS approximately and cost, within our we've instance, For XXX live of other from industry, our industry static technology to the to there to

multiple that of closer allowed consumer. believe sustainable drive continue to best to residential in focusing we us businesses. healthy the And consumer also especially paths will us believe move commercial only to an our maintain there growth while dealer, the And We built to we core the our our recent aquatic acquisition are and business, have stronger to it rate growth better on already one in by enable businesses. not consistent,

we the as company. further the to water our believe positions leading strategy, technologies We right have right culture portfolio, the right that right the treatment and a

core to our and healthy balance strategy build organic to to strong demonstrating sheet and the With from our XXXX look support and beyond. shareholders we in QX, to and forward in opportunities, inorganic both our

you. open I I questions. Dorothy, Q&A, would the Dorothy closing over please a which have now for like call for few will the after to Thank turn to remarks. line

Operator

Instructions] [Operator

JP from Morgan. Your question the first of with Steve Tusa comes line

SteveTusa

and Hi Hey, one. revenues you and of versus was profile more kind Flow were can in morning. what’s off the way the but that going the business? held profits like margin in. good guys, in this The businesses, model, little a on dispersion breakdown of just those of some so know I our

segment? quarter straight out. to are on What’s I this What’s figure think, the going I forward. on going two of tougher think first was in pretty in the kind that segment? that in other

JohnStauch

of let Yes, of sequentially out not a slide that to the just out, of the a But in both positive some had just I’ll give Steve, QX, we And saw saw at orders. so Mark in we during And QX. recovery miss did and little end gate let happen. we anticipated to right the the me little Ag in it speak details. all, the Ag didn’t recover QX, revenue more

figured would we adjusted don’t out of bit But at And a probably all. the I the fact in recovering expected now. it happen. data that that, right that next see didn’t had the and global we we’ve that bounce that into was think Ag of lot now we’d little a QX So heading QX suggest year

SteveTusa

isn’t a that of front? negative on missing I that kind impact How big that Shouldn’t the on am It Ag? a had that What have relatively margin like? had more is profitable? -- shouldn't

MarkBorin

a see two things getting were and here positive Steve it’s you’ll question. Yes, Mark, better. great really, signs cost we saw it’s What price

saw pressure inflation also the in my we out cost weren’t, touched we reading in said happened. in QX. us the so Flow was of although degree we we would I really hit by see high we didn’t that start on And As that, gave that’s a see comments, signs that productivity, in that QX in then positive confidence see prepared we to price hardest and QX turning what that QX that productivity

right push that, perspective margins you’re was by income down from and and down productivity --we would mix being So, in price Steve-- that better Ag cost. a And were but, improved benefited down

SteveTusa

guys? And is you for how big Ag,

MarkBorin

Ag be million $XXX range. somewhere would in the

JohnStauch

Per year.

SteveTusa

in comments and comment just year validate next on Can you easy the bit, should of kind there then considerations when there comps ’XX some thinking made their that thinking would the clear. about up little of Aquatics, or pretty Okay, guys else half some in year? channel one or other something in the of first a is is positive we think are coming last keep trajectory mind kind and that here next the about pool I have you one that

JohnStauch

our I the that so And that goal sure calls gets agree the in mean year definitely we earnings inventory that our of into track make end is Steve, do you’re a getting think pattern. more and between Yes and of we is normalized I customer’s lot here. right. it normalized and largest now

is levels year anything to reach not pricing more do I last any I channel do would normal know year a suggest with that we which saw if this we’ll elevated want buy of more? the don’t add to relatively heads though that, think Mark, so, the the you much pricing that more

MarkBorin

in mean, we’ve continue we year, end we to normal historical with that normal and the of line of the perspective. stabilized I agree, think exit I levels more we’ll XXXX with by believe Yes. said seasonal

Operator

next line Stifel. Jones comes Your from question of the Nathan with

NathanJones

Good morning, everyone.

XXXX. thinking comes a organic Just little where maybe the bit about returns from growth in

results; return should been business having quarter's the couple pool price. impacts last why I with the in sales positive look kind that have think we of down I'm look understand growth. But of being if from to have mean thinking organic probably a at I

X. This -- pool come are you quarter, would with price you're some to to Outside and of what volume XXXX points of the growth X price, where imagine I would tailwinds down expect here, down negative volume in to moderating outside from and with pool? business trends the

JohnStauch

it’s mean also asking. first But year's QX I ahead That all, you for QX. question, up mean, and had pool, patterns I we was I think of in thank we the some inventory happened built Well. of and channel in Filtration both buy last Flow. that same good and for some beyond I

Flow Filtration, QX Aquatics. this QX QX So easier year's and and of then QX and year those much have across difficult next comparisons and comparisons have

NickStokes

Okay.

That building same about talk little reasons sense. results. driving the those pool bit these? where Maybe You latest filtration. more specifically of little year. some And a commercial the tough bit maybe more talk about So next investments the is being for bit focused the channel out a investments and this you little drive? Can comp what residential for and seeing maybe of ones you're more about talked results about them some right makes kind year issues investments a and

JohnStauch

you three we commercial about and growth first, we’re pool systems and are people the in commercial office carbonated seeking about the and water. start have capabilities. best having also seeking as commercial and water opportunities, it’s filtration. commercial about that residential water really specific they’re It’s so having, building And we’re at and Yes, know, really carbonated flavored both sell I’ll to with excited technology priorities

that we’re side, a from So year really than excited think better that product from. really that technology while on we benefit will product away about the market investments that solution is we made our more the launching

So excited there.

water we’re to and the that I the within mile. those technology, technology, both to also innovative hooking then am We through the are softener internally more piece the valves having also residential last smarter acquisition acquisitions Smarter, best Pentair; services having complete Pelican systems. and to automation systems

mobile the progress brands And that we’re call our the really home about and capability, which sales out our resource out what we we that sell in build of of excited centers with. and go are

So huge progress there.

so filtration, will show side, the to we technologies that around pool we’re penetration On new excited around continue new see that advancement, technology rate automation, technologies up.

they’re the sell-through in single-digits When both QX to again. you of back look QX, the high at pool and rates

see inventory I So once we and get issue very through this we’re that growth think channel the normalizes, we’ll pool next return to positive that year. business

NathanJones

the filtration On of for is about enough guys water, and you to the work think bubbly commercial of have done water talk you product, the size opportunity you? what kind that flavored

JohnStauch

I really think it’s fragmented.

overall I think the is momentum there.

component. know you part sure we wanted systems what as do that overall and is peer think sparkling the we that make a you can I that give to have big our of is heated, chilled, filtration other

to solution, right and can want space, the systems talked a that has. that want about customer we commercial we solve sure make we to be any have So the basically in

Operator

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

JoeGiordano

just morning. clarify good I you earlier Ag, something guys, question to said Hey on Steve’s regarding John, Flow. wanted

that the we bad any recovery first I mentioned materialize was was under taken in that about headwinds of the of the you half when weather was some Ag I have exiting think that once quarter. that Ag, that Ag out didn’t that impression like guidance. in kind there in QX

can me? I'm confused kind So that little a of square you just about, for

JohnStauch

two forms of are there Yes, Ag.

precision Ag margin we is very-very address a a offering. did business and that that high We spray and have earlier

that’s the is pivot the in more to. irrigation Ag referring was of spray of Ag what I business, of side part other specifically the The

JoeGiordano

is Okay, so the the cool. okay not precision, this irrigation

being on about Because growth Okay, through you the some particularly about couple there’s talk kind number today maybe of differently just you’re than you a internal a so of done having shared? year a cost weak clearly, mean, you that of or us maybe that can some may I come the the of talk you’re examples ago, can are the maybe some some of mean, Flow, be weak I enterprise maybe? sort in impacts margins across things on with level high seeing take number, through you a at

JohnStauch

Yes, sure.

one a where things and did is margins. really complexity where can the of drive high inherently up at Flow degree we drives we looking into separated cost was of we we with things, saw talk One of businesses that complexity about after and and segment down how lot get that optimization have and skew rationalization certainly reduction Technology we those the

We’ve exited after here XXXX those and talked to also the factories to that machinery in and where readout that’s some that’s really as throughout challenges. actions and the we in other been also we’ve so older investing of improve had got activities and also, stages. early the and replace and we in technology started off we And see starting team to factories pay about automation of those of And XXXX, some some some XXXX. used in equipment

more again there’s XXXX we seeing signs favorable that seeing. by but of think about we’re to and what So we’re encouraged comments,

JoeGiordano

see And things up little in just I to think of headwind XXXX, we one you producing situation can kind too that if rates? free if partners, going into higher through as where being and there’s bit. and and nice much early Is that your the on, cash to about is of ramp look up inventory think When the there quarter. be, how talk about start ’XX flow, at performance me cleaned last start we but here do ramping the a it’s we for

JohnStauch

flow cash as even so to we we that cash on focus approximating adjusted and really change view to of grow opportunity wouldn’t targeting at have income, though still point view flow we we net think I working maybe point, type things -term still that need that capital manage places target to maintained. balance would to some that out have there we in But there invest. we long are opportunities to continue your other and

Operator

question the line next Mike comes from Baird. Halloran Your of with

MikeHalloran

Hey, good everyone. morning

couple here, related on how to pipeline more something aggressive willingness, on the to the any a M&A being in ability just usage capital And that, ones What's out are the look? the there? side thoughts So secondarily bring to how’s back and looking first, bring again? evaluations buyback then

JohnStauch

we’re so was I mean area. I now on Mike QX, of we’re focus that’s first our QX, Yes, that QX commitments, part that focusing and think right on clearly execution sure our making and delivering

I there opportunities to that we’re growing those acquisitions would say done in continuing the feed what think mentioned. we’ve And tuck-in are invest at more platforms the already. to I I look that

But you can never time those.

where next no to we giving what most we year think do protecting flexibility into make to balance of they’re ourselves idea want going, value. is going sheet have We just to heading that we’re and sure the amount and drive

MikeHalloran

pipeline side, The John? on that

JohnStauch

Good.

MikeHalloran

thoughts and on the Is to the talk the some All implying from little out puts right, the side? commodity kind here. bit and on bit into should talked side, relatively takes a little favorable next price cost price you’re side? about cost more year? flattened forward --it that Maybe moving then seemed that thinking about of pricing just And you’re side like a you how moving be

JohnStauch

think beginning the of maybe into the about we cost so significant we price had to about talked this coming year. it year out as and last way of headwinds is, Yes,

moderating. QX particular we’ve in because referenced I price favorability favorable in we have got and what was inflation Now

year-over-year more unusually over price XXXX in forward at that than that will be spilled a the we XXXX. that high move had little bit into a more increases level price versus favorable to start you normalized As normal,

on is than is significant have kind also of to rather not or or had side, benefit. in and don’t commodity It’s -- And the labor always don't more a mind thing away of inflation but material we a that inflation keep inflation going I inflation, what just mitigation moderating. So, the certainly we see stabilization just headwind. one story it's been pretty of a

will be our will to XXXX of about like. continue look think part how that So we what

Operator

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

JeffHammond

morning Hey, guys. good

filtration about look here is where in lower forward our talk Just of forming what you seeing on, the and signs just macro-slowing some you of about in then you rate are as in Ag your that just just just business where lot slowing space? outside a can and growth and

MarkBorin

Sure.

Both in little in those the story. where performance components do of place. and about saw talked continued business. part in residential We and in I took those of moderates incremental pretty on improved the QX, part improvement as QX, a and important the we-- so the As the filtration see side. stabilization the we investments That systems pretty, -- bit commercial that's food acquisitions and beverage businesses,

of then investments So moderated some and overall, XXXX. a we reading would sales in performance just of their performance of growth. improve about A QX, about to starting of kind moving out expect the as talked John given similar more and that view and think to into see level core

JeffHammond

then some digits. above? business got of early we certainly Okay, levels you mid-to-high of on what easy And normal XXXX, you back pool. into of the just and Thanks. kind and telling typically those What kind just, assuming comps are are XXXX to an single if look and grows we and you get then think you've or comp buy about customers easy can situation? is Should this

MarkBorin

and year first what was little is question pattern, kind of we're unusual buy of trends. of an a of kind early seeing seeing perspective, last impact because more the this buy we're the of So consistent the bit with the on the historical blend increase. from in early year line But of a price

income the we're in believe our flattening said, what In which performance, QX, the going you terms bit would I normalization to term we about more of on XXXX, just level as think back performance we and decreasing, be to what with is objectives. think would of exiting really focus been of next we're guide line year, had as long a we QX see back of improved little line, that top getting as

Operator

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

DeaneDray

around about, put the little thank a very on down the thinking normalizing. Thanks. far? about excess expected million think we million working haven't $XX it Good pool? XQ we commentary been $XX it and How a If well, finer on worked much up How should Hey, excess about inventory point that had was been you. we everyone. just based can channel morning, so

MarkBorin

and some worked inventory with down down in at sort in our and that and more line QX coming historical that to we of talked, exiting we patterns. are levels that line year of we seasonal in expectations further continue with as So the see

DeaneDray

Okay, and then on season? pool, John, you and for expectations, talk about pool set some some and automation of might you the XXXX new the automation have product development new in filtration to just offerings are

JohnStauch

can to help selling tweak along, capability. Yes, right we our a products or It's can selling sell do that believe more believe a user a we sell think type though. have learning capability. like benefit it technology. really to already. We automation I ability we're the we of we better. the to sale service It's and product. not like different from that And And that have everybody how It's

a And so think those the And year. can we progress head this year. learned by next really I as we're And we're in and making accelerate products encouraged lot into QX. QX they I think

DeaneDray

stream? would of be that dealer service, When a you is from benefit part sell that that revenue their something is recurring basis a would that on say a or Pentair pool

MarkBorin

of on have We'd Home be Well, to of way, this obsolete. that but going that that would going that clearly buy takes launching ultimately, starting Apple of, the things Deane available suite consumer connecting services all that channel or whatever and they devices more is the rented water which are to the basis the that. offers the be be Pentair We're think the believe see sees a attach products the that you Pentair in we're with line right to that as answer. everybody or products buy the allows Alexa that benefit, to umbrella of into quality, would technology more Home the App, your monitoring is broad connected Google more and new to you to to then have at whatever some quarter, some and the the to we day, that's App. basically start right? they people And that of because end that vision either And be or most your would and Home hopeful benefits of

DeaneDray

are that good fragmented. one you thinking hear. of when agree the would just you both? sales opportunity thinking it's about equipment or and rental opportunity, office talk still this And you a still we very to Are That's be commercial water last me for or

MarkBorin

some the Today, solution providers it's know about units. in. we water if end having out does introduced the to in them, early we them. that want But know years market. the were market likely We you be rent selling the The Deane, Don't rent as right and systems carbonated to yet that's X we space XX -- do ago. were probably

service how environment in and that and do commercial bring technology want. the people all deliver we way, if productive that's food we a for so into that have a office We what

As there's you of know, a drinkers. guys fickle lot

and coffee. is one tea first The get

for plays other it's so that And thinking, opportunity a into XXXX. forms in units of think that. this Pentair. a you expand water, and we those big probably technology or a tea somewhere the all And don't coffee filtered, it's we XXXX not is we Most huge needs filtration filtration look, probably if forward to where our believe have in cause units. And damage there's part to scale be the we launch,

Operator

next question from Pokrzywinski Josh of a Stanley. line comes Morgan from Your

JoshPokrzywinski

to prices something start season, inventory expanding cleared raise an it's in than generalized some more overhang harder down from would price probably point question Quick that with to related from working perspective? cost, I now the try and the I guys. guess, year. morning, of get channel we've price to for of kind Good market certainly, that room weather we more weakness, on incentives should channel to imagine channel. earlier that kind the of expect rapidly this the cleared inventory Is in

JohnStauch

a big overall a have September, is place. gone I of it before, as inflation. in unusually more normalized business those is, last increase price chunk go had think I the effect see level know historical of to price, other businesses. normal high which that price think a level something just they pool it's and year, This that response the you a to said in from the And into more we the best that had call a of comes that price into I in similar they price would way increases the more timeframe about as in normal year that

--we as we higher of seeing that result incremental level didn't that given a we year just do not inflation. a by to driven channel So see this year's normalized are inventories more any to really see price and was price last unusual reaction but going

JoshPokrzywinski

Got as I and later they maybe Is the you that the job the warmer and kind just noticed with not kind in in third through weather Did to of to next of are accomplish May regions related, you about the and just but do maybe guess the and contributors quarter, up, then going had always just the season, weather even through up first start it. stretching in September. sets longer, And of thinking maybe out get folks some there that extra with something August, but season, year? slow guys an of that sell in busy a year that round be think it obviously would we it pertains been have made bigger down quarter. particularly aquatic of any as in

MarkBorin

of can holidays celebrate would the likely But will in I those to And meaningful the is Yes, those work think QX. pool it that otherwise fill yes, they builders slower exists But continue I enough. done. first in will. will in areas. as in comp they as also that probably not long they'll have all, think the some of don't jobs they season

that And see so to that you're not summer build of you going to see level the same seasons. tend in more

Operator

next Your from Jefferies. Boroditsky with of question the comes Saree line

SareeBoroditsky

positive. the any Good last being on towards color that about morning. of and Could forward And saw the geographically? Europe talked you quarter you you Did some end expectations as year? provide believe look I China what we continue?

JohnStauch

-- that continue. Sure, did it

really filtration the saw balance saw there. Europe, commented move again year So year in we to as and and we some the in through side, then we weakness QX, we we of year, the had in on the in see earlier the improvement QX, particularly that

So now good level. and well as to is reasonably is moderating back growth has to -- growth China a Europe returned

SareeBoroditsky

aquatic. longer about just we then effect the on think into Speed question Legislation more impact And goes the How from Pump term Variable should XXXX? a into that

JohnStauch

We Variable Pumps sell Speed probably sell believe They half for value. pumps total through just of higher today our sold. our are do at sales. should it over in XXXX overall a help us

been work transitions to before does through transition So the happen we of of one inventory and through. to happens. dates also, slippage its have as will do go believe going those way always Those these who've there really question, how us the and be

bump putting not we're relative so to there's in if but XXXX, business. our overall a XXXX, And anything should see into and, positive we'll obviously, be

Operator

question next the Barclays. Mitchell Julian Your comes from with line of

JulianMitchell

lot Good the We've already Ag. few of Maybe past up just you. talked emphasized the US residential on about some a you in in Thank that the point, weakness months. in following morning. trends geographic had

wondered in you've shift the commercial from you in detail any could seen been since US? some more or markets July? the what industrial around Just month-to-month give particular demand If of if any in there's

JohnStauch

inventory -- month-to-month as that year. perspective, of residential move commercial the through our talked of and we is XX% but the significant underlying that overall end the of positive kind the of of markets the the a beyond impact, has to continue balance reading driven remained Nothing our the year, about we've by out demand and we businesses and see balance sort from through

JulianMitchell

your on slide I it's aggregate, it in or probably the whole. maybe looks a million year something Income of then that guess productivity the when And we're a for tailwind portion on a thinking Bridge $XX Thanks. like X, about of sort segment as

If rate about you the could do sort current measures around for number good demand sounds clarify that that we is think year, of just pushing run when about environment? about thinking some of those right you've and then productivity a accelerated that or up pretty next that

MarkBorin

we Yes, remember I would think multiple elements. with level of in QX that seeing up. more think the that to I There is anticipate. And in you're kind what what are line makes

making opportunities some productivity think reduce the on would G&A at to operating costs which growth costs. And the R&D that. we're inflation in we're and to offsets headwinds. factory looking around but as is selling, productivity things productivity, also and technology there's the areas then that and So there's material trying then you're like is marketing that that There's investments about what's investments of working mitigate

invest So some to continue that where continue as for and of utilizing opportunities. into in the to we increasing the next we growth levels year, but to areas think of look about see will this biggest year productivity we

JulianMitchell

quick And much. one for very Thanks me. last one

healthy at or the its that around there that figure? anything with within growth you incremental business had operating see filtration of one QX. so. that or a The you Looking margin placeholder reasonable mix sort do time current was in sort for of Is XX% pretty sales performance,

MarkBorin

services I are with in and systems the where wouldn't the call have one this, businesses, do and but it right. we investing time this also we significantly is consumer residential those

line advertising, encouraged very add growth back top branding by long-term spend digital really there. we R&D continue growth we're accelerate and marketing, So we the have the to to and

more I into head into of think as benefiting this reinvesting back more then pattern, and is from portion fuel a a is we that growth. growth So normalized the XXXX income

Operator

Walter of Seaport comes a question from next Liptak Your with Global. line

WalterLiptak

good just numbers, detail share regions? up Hi. that the or Europe that's and wonder those could helping ask I Thanks, get bit we want I we continues question, sectors about at morning. if the with the worse. moving a EU continue the China, in now. about your geographic going numbers to little growth on to GDP weaken. market macro look of okay, as doing kind more China moderating understand why What's to filtration a comments from get

JohnStauch

China, overall annual our let said is north first. some talk in just and so Yes, XXX before business, think basis. China, me Asia dollars being And about of on commercial million Southeast China we that an about primarily. filtration In and residential

starting which we enormous in new very base have rates market low really in a growth we lab. a marketing. invested talking and a And and R&D China dedicated about factory of dedicated lot a team really growth are product relatively from the So we're about we have dedicated a

in may Mark well that and overall runway or we gave space In in be doing but winning that is in have and lot things things those numbers aren't well of Within left may that overall so doing a those a are Europe. numbers, the that Europe, So, that there's not overall appropriate. we're growing, area. Europe, in

So definitely you at aftermarket when at market we would of environment. look a more residential Than downs. And the as no a of some product some robust base, industrial commercial doing lines, they're take the saw we installed global you businesses way look call slow know, and okay. we

WalterLiptak

us with Can the EU industrial help Okay. of business? the size you

MarkBorin

million. Yes, it's I roughly $XXX think

WalterLiptak

million for total $XXX the year.

MarkBorin

Not right. the year, quarter. a For in

WalterLiptak

then of just over but in to XXXX, investments some about R&D step Okay, similar hearing some great. the And we levels R&D, the of R&D, more should or focused switch a opportunities, it growth in or of gears expect around spends? these kind up is

JohnStauch

Yes, invest of we're automation about feel about R&D. I that work ability innovation center best where lot global will R&D done around platforms many when automation, said across excited roadmap we And a solution produce has expect step feel be the really that utilized. excited our really we and we enterprise, would I've to up. in about the think that to the our a one have going a Pentair And the roadmap. more better to have investment you're marketing work times we'll that

water excited. the then about into the X filtration and acquisition treatment, ultra out flow CPT technologies Center, very nano and Innovation our And excited residential both and commercial, treatment business, our of and around expanding really those

downs team, XXXX. earlier that XXXX going double to and I'm technology of end that takes the And of we're in accelerate probably And gives I capability are encouraged solution. mentioned the for overall other building investment. excited the and that that the then as Those products by and systems investment the and me and

Operator

from Brian Sachs. with Your Lee Goldman question comes next the line of

BrianLee

guys, point on next here that in clarify past Hey, think the I to back of going the early morning. good back bit questions. pricing we year? But spillover or to settle just next years, price Thanks a just the for in assume early was first to reasonable know somewhere in the around and enough three the where for the a part normal like year bit. I with one you know XXXX. price we've to Maybe XXXX do of points for taking into year late still there's was it's some topic seen this it's year,

JohnStauch

Yes.

around higher to something was a prior seen, years X% it than about for that, XXXX X%. so it prior right call But think I that the been would normal. range in to I we've few that, slightly range what a that With in line a basis so low, rounded be on X% is historically probably with more like XX that the points. historically bit that little

was that how mean, do. out the said, think pricing and too well those said that I Mark a we’re businesses early were I stick, I the that and it's as and see out received customers, to we'll Okay. overall there others September range Mark say. saw we by generally in The we more went mean, and in then normal,

BrianLee

back of did year you, the second know through growth to of through core Okay, you a Flow question I just up and for sort walk and that to walking great. second. outlook then kind That's the you for year segment going last helpful. opposite a it years. And the back

So you'd a for grow XXXX, along how it's all about with do you year, given you is year-on-year here just XQ then lumpy been this business? to as Thanks. overall how de-risk the the view and think expect segment

MarkBorin

to is at benefit they organic and the as drive QX upside with guide in from things I up this quarter, quarter come doesn't year. did it And able the and QX we'll next that de-risk. in can't previous just it year. trends, and you call tell we any then of incremental last how produce are multiple when next being sequentially QX off we can I then the growth of business confident see of look some QX growing year-over-year there it you how represents

Operator

Your next question the from comes of Vertical Linzey Partners. Research line with Brett

BrettLinzey

Hi, good wanted come to morning, Hey, guys. just I to back Aquatics.

pool. some growth you and about You of and have technology talked there priorities the

you some relief top the also moderating, next but year range ROS normal incremental and more incremental other on be spending. and margin thinking right think a price those about see should line? maybe about as As we we What's costs

JohnStauch

a efficient process. This really it's because business And manufacturing sizable wise and material drop has a through. fairly sales

into nice well. we'd I not want around Pentair. and to have pools. contributor covering as value channel. to aftermarket here answer do is a with new I good And invest this. And pipeline put through. sales in So job in because I really we pools drop back think going remodel the to technologies exciting I'm you a think our the give some we really investment huge to like channel Primarily an this side, some dealer both

services I down think and services being to the them pipeline for channel, and XXXX cycle we the well. making as the believe that we technology choice drive need more say And have advanced be significantly we an those go new opportunity And through are also that further today. play. company the leader, but is a our to investment then be back we with to the thesis I'd we're will still technologies consumers product aftermarket used and making we in that roots than phase, and development our we and and sure of for are sure

BrettLinzey

more Did Do spending most of Okay, And in budgeting to in quarter, it I the into you just quarter? standpoint? $X over think took see million then million then and you last that about some QX? the restructuring, get of great. from that shifting realized payback? this Thanks. thinking Are And saving $X XXXX quarter. rolling

JohnStauch

include don't those restructuring But necessarily I see And would restructuring, we and expectation how of really would reading out investments now. would wouldn't in about made be XXXX. this in the and that those restructuring incremental part we think year but So in our around some anticipate there again guidance be QX. we've

Those we're some payoff little mentioned, the bit of a the factories have just to to structural some longer the business. attacking tend and Mark than of efforts factories. As the within changes

a right always geographically we we it than is have do need footprint and perfect. larger we So investments, have a

opportunity side, of for while flow seeing more the road. addressed still mentioned. an the margin some I So improvement, the we're there's as we've And especially margin that Mark think improvement down

BrettLinzey

focused Okay. where were geographically those costs restructuring? And

JohnStauch

Little bit everywhere. Yes.

of End Q&A

Operator

I time, our back there the to turn questions. remarks. speakers over for And further call are At no closing will this

John Stauch

you joining today. Thank for us

our encouraged We our and to in improvement business. as in quarter continue serve further the to our and capabilities in our saw by key build continue see core We've of better further productivity stabilization enterprise customers. performance, to on and culture. we'll continue are invest we well quarter to our digital strong third We strategies, signs investing we been growth as

the We strategy have a Dorothy, strong capital structure, cash we your will invest to in residential leading continued you our Thank solid be for to call. commercial can interest. free and flow conclude water continue the you treatment company.

Operator

conclude you, conference you Thank today's your gentlemen. lines. ladies you and call. please does That We ask that your thank disconnect and for participation

Jim Lucas	SVP, IR & Treasurer
John Stauch	President & CEO
Mark Borin	CFO
Steve Tusa	JPMorgan
Nathan Jones	Stifel
Joe Giordano	Cowen & Company
Mike Halloran	Baird
Jeff Hammond	KeyBanc Capital Markets
Deane Dray	RBC Capital Markets
Josh Pokrzywinski	Morgan Stanley
Saree Boroditsky	Jefferies
Julian Mitchell	Barclays
Walter Liptak	Seaport Global
Brian Lee	Goldman Sachs
Brett Linzey	Vertical Research Partners

Pentair (PNR) 23 Oct 192019 Q3 Earnings call transcript