PNR - Earnings call transcript Q4 2019

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Operator

Ladies and gentlemen, thanking for standing by, and welcome to the Q4 2019 Pentair PLC Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions]

to Lucas. conference like speaker to now Jim today, would hand over the your I you. Thank go Please ahead.

Jim Lucas

Thanks, quarter call. XXXX and earnings Mariama, welcome conference to Pentair's fourth

We and Treasurer. Financial And I me today our us Vice could Chief Stauch, Officer. of Officer; with are our and John Lucas, Borin, President President and Jim Executive Senior today. Relations Investor is glad you Chief am join Mark

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

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

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

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

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

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

the now turn call over to will I John.

John Stauch

to Executive expectations. top good Slide as Thank company. our leading results you, in continued We titled, beginning few performance, line the year further positioning turn we made treatment of very stabilized at quarter very progress good we macro believe a X to water deliver our in invest Please and in Despite and we fourth pleased priorities, Pentair full and Jim, everyone. morning, were Summary. to with a challenges XXXX,

marketing, brand that our During made building we closer around to in growth great the accelerating strides XXXX, innovation. strategic completed move us two consumer investments we allowed acquisitions to and and

our PIMS foundation Integrated company. been our Pentair we a or Management strong System While has operate for how

PIMS make it an well to culture. just performance continue driving go growth operational evolve beyond We to integral of high the part excellence and

with the strategy better and we and continue moving our As our to sound year better are becoming with segments. we customer water to I detail our we strategies important will greater two to believe approach reporting just new two organization the a as to anniversary company, is be align discuss play structure base, must pure we agile in shortly. of align segment our

XXXX performance. growth growth, return introducing strong we are segment guidance with cash income core to for and to expect sales EPS today We and flow solid along and

resigning wanted I comment issued in we company. an Pentair is to take informed to accept also us morning. has from moment that that second he Borin CFO at press Mark as leadership operational this employee-owned opportunity to private a a release a

a Mark building and been last trusted an strong partner Pentair. a twelve has finance at for leader in has years foundation important been the

the Mark search career. success CFO a be will and assist to the transition. he Mark in we with through chapter process to remain as role for moves of next commenced have continued We his him orderly new and and to Pentair an wish search his with our missed plans truly

we water to installed with and have the significant existed that base Please years a strategy turn to labeled a ago, embarked When as Slide few Consistent increase large leading cool were on company number a significant a at opportunity serve to we excited therefore Executing play franchise, content. a X Strategy. a pure we opportunities

on we our commercial and continue build a opportunities identified exciting also water to number of and We foundation. residential strong in treatment

consumers solve made component to solutions needs. supplier notable a offering to water in systems being and from have progress help We quality migration the their

the great and the around water. to and world’s increasing safe broad globe regarding challenges services and many solve have access is of clean, of tasting we a to awareness portfolio help technologies Sustainability

XXXX, made During strategic we the to two acquisitions disclosed consumer. that we

about short the a year consumer solve to and needs updating these We have to you time expect business throughout look further preferences learned forward in we consumer directly desires. as and to our lot a we expand

and We and have pool priorities shared water Pentair; past commercial identified the for with that we advanced you in two key growth residential treatment. accelerate

We our and well our to XXXX. We to last most of building These year growth digital lot brand. as our attractive we as plan made out overall fund build in investments are these continue transformation, fund base head as continue a initiatives the capabilities. to progress around into and opportunities technology we now innovation,

During one increase in which Pentair.com, year. web a resulted XXXX, XX% consolidated the we for in XX traffic websites to

We are early transformation. the stages still of digital in our

We have are can more what we pleased are the very progress in and made short time with we about excited a we do.

to Also is launch in and strategy our better businesses XXXX, share digital Salesforce.com customers. to our had we information an enabling that linked with various of is enterprise-wide

company completed identified in to initiatives. its pipeline XXXX development new pleased we productive development improve are a our the As was need technology XXXX, and that separation a product we our year for

to IoT-connected next the we on the months, we and give progress you have our journey we solutions exciting XX solutions. of a on today, treatment smart expect are develop XX to to Over major an to water introduce new number made proud update

our past the develop investments and industrial year, significant talent cloud supports to that partnerships applications. IoT build our internal and strategic residential, we made commercial architecture to This

Pentair IoT on and two our the platform, Pentair for App the for developed this Based Pro App consumer Apps, the we Home dealers.

control residential soon XXXX a two new an softening throughout a valve, water connect apps flow smart We including pool and entire expect systems, automation products. of host total residential of these launch to in suite products. Ten to seamlessly

go product Considering the breadth key this the become major new to awareness competitors. role will consumers company as brand raise water of platform water We our for differentiator to play IoT products, this solving category new platform consumer a single needs. residential for our with we Pentair’s is believe a

sales dealer new as customer generating increased well service to improved it offerings. We leads, by easily loyalty loyalty more will attainable as also believe create

products Finally, being to enable to monthly services, platform additional well we avenue Pentair. directly of and recurring as Pentair to sales services revenue drive expect as this also improved

also have commercial industrial and applications. significant We in beverage made and food both progress

The shops, service and high-end new incorporate system system including maintenance and other next of IoT for RO to monitoring the generation is to coffee predictive for while food components filtration performance pumps our now elements. applications of key leading enabled real-time and features

industry-leading beverage and business, in Finally, enable membrane filtration cloud, IoT food brewer of our and solution monitoring developed implemented the for an we the beer systems. service to our

The the adoption of a is innovative helping with accelerate XX/X includes the service and analysis. use BMF IoT to IoT The to support, proactive of and contracts enable the efficiently solution real-time scale reporting. monitoring service

been customer demonstrate with also By brewing customers. strong able using increases focus stronger, new Ultimately, efficiency our believe our IoT this both for service brewer production partners, we’ve opening and relationships for the helps cloud strategic service we opportunities application to platform, up solution products.

remaining the to of cash plan The organically lead capital to aristocrat. allocation. final use that dividend inorganically and and increases committed the ratings. disciplined mark of being around our recently company will returning our element We in dividend year opportunities XXth our We strategy as which our growth mindful shareholders both continue flow is still most to consecutive XXXX investment-grade rather fund a attractive to a while capital to Pentair announced places

Evolving X Slide labeled Please to Attain turn Our Vision. to

North In X,XXX and we that information analysis completed consumers detailed decisions. products. journeys make past the provided a on Pentair Over segmentation codifying the us year, person our customer American how has purchases essence, with

base. how decision informed us move our customer portfolio with on our our forward helped to with an This to align better strategies and position

with segments, our Industrial of inform Flow Consumer We must Solutions into and helped varying This & a Technologies. urgency in move business the us needs supporting segmentation greater sense two reorganized we customers. data as of

have are various customers, of to had While and influencers always businesses market go more the business closely parts our different strategies, aligned.

Consumer core pursue new productivity business-to-business alignment into our a primarily upon more consumer-focused business growth strengths, aggressively Technologies, teams Flow to our profitability. our the opportunities, We a to enhance segment, & build Industrial and segment, better positions driven believe increase Solutions,

into our all with customers, stakeholders enthusiasm. and exceed The ultimate can and other is forward we expectations do But goal that believe moved XXXX to the we have that. we great of

detail up Historically, we what pool now of historically the and Commercial solutions. part majority Aquatic Solutions expand as comprised what more Solutions made was Solutions that segment. the are. our water two refer comprised and segments Let pool Solutions Residential of Consumer prior of segment, is the Water Filtration is in to me while Filtration

Asia the believe Southeast income, grow components, end-to-end on China’s of team for Consumer Consumer accelerate the branding are objectives and is build business growth capability. our and an to consists to expanded region. the Solutions and Solutions Water experiences, services and enhance The our services consumer significant. revenue focus We opportunity systems, Solutions

businesses. three of up made is IFT or Technologies Flow & Industrial

Solutions first is are and remainder previously the The in segment. beverage piece businesses food a IFT what in including focused Industrial of Filtration, on of These filtration. strong the was niche Filtration

two focused other small of The is BXB previous and larger primarily engineered are The Flow, Flow and the Technologies comes Flow, This on pieces big, pumps. is from two pumps Infrastructure businesses which Irrigation Residential segment. Commercial segment IFT primarily customers.

incremental this make we structure segment realize up that value similar technology, this in areas businesses IoT these solutions, and sourcing, and businesses can innovation combining the support. engineering, The new of believe in regional have characteristics operational

drive to better service segment product around type new customer on focused experience customer structure growth. our profitable and and alignment by Our is offerings the maximize

teams’ ability resources, opportunities, go this and to and expect allocate structure optimally our to maximize We market each accelerate services, prioritize improved innovate to further processes, develop strategies. new products new decision-making to

detail. focus turn I on to call would to to now like results more over Mark? Mark financial our in the

Mark Borin

to XXXX Please QX turn X Thank Performance. John. you, Slide labeled Pentair

X%. For We'll individual X% down provide the XX%. with color X% performance increased EPS shortly. overall the more grew quarter, on sales and income increased fourth segment adjusted core sales Segment

quarter million. spread full expense in lower and the an tax to as year a net million shares average during XXXX income over of rate result and the being higher $XXX.X income was a anticipate quarter adjusted strategies rate XX.X%, tax our we other would interest, in lower of Below level and in the the expect rate $X.X we XXXX of were grow. for tax the tax saw we our line, The

For better quarter, the inflation and than third or quarter. strong in consecutive line was was price in the productivity

Year to XXXX Pentair looks Please labeled This Pentair’s performance. at X Slide year Full slide Performance. full turn

the the while year, slow stabilization performance. sales saw to very For with quarters, we our continued sales we improvement overall in in a X%, were and subsequent start XXXX, an experienced down flat core

average adjusted $X.XX of EPS rate represented tax was and net Price ended at income X% basis on return momentum the XX.X%. as and year and for points to XX built the sales other the progressed. the XX%, modest share million. full For count a million declined $XX The segment increase. year, Adjusted XXX.X year the productivity down interest nearly year offset for inflation was full was full year-over-year

to early Segment turn X returned fourth out to three Please Pentair the Systems’ programs XX.X%. historical more core sales basis patterns. slide return impressive lays increased points Performance. sales buy income on to XXXX quarter QX This as Slide Aquatic of labeled grew performance our X% an Segment grew and XXX segments; Aquatics for normal X%

see we have levels. While channel how inventory that closer normal historical to encouraged season we spring more our wait are to unfolds, to the appears

return we moving saw and is sales There believe parts positioned to Solutions, X% Filtration Solutions a decline number sales to Filtration continues but XXXX. XX.X%. points XXX better core overall, business exiting of be contract X%, basis income fall the segment on to

and Pelican made throughout progress Aquion and On the side, the year. commercial the integration good residential of

softness grow systems in nicely, In which impart saw the the continued components offset business. core we business,

Within the certain Industrial large some shipment was orders. to during of the timing the due softness quarter there business,

We performance impact income the the did residential some quarter. during the and business, had which continue in invest on to commercial

going However, we believe this business the forward. better positions

X%. core decline saw Technologies Flow sales

income grew and expanded basis However, points XX.X%. to on XX% segment return XXX sales

the strong easier ROS While contributed the within and Technologies, and Flow mixed improved pricing in to the top-line quarter. inflation comp strong remain income productivity and expansion

made a help Technologies that Year. to in in carry investments of expect XXXX we Flow improve number into to momentum and would New productivity We the

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

rate and flow debt, year great in and cash comfortably a for leverage sheet below average were balance year borrowing below shape disappointed in of the two-times, just results. X%. Free clearly we just mix below fixed and ended well-balanced our the was variable the $XXX Our million with

the than conversion to flow of one-time most that and nature income. would greater cash net believe we expect XXXX see were in factors we to XXX% return contributing of However,

performance left side the table two other shows, slide cash contributing biggest the flow factors the on capital the of and to As working the weaker were accruals.

capital within comfort biggest working around timing. payables was The

our of XXXX Just XXXX. subsequent The as timing actions increases timing experienced prices balance slip from we help some of inflation, the material unprecedented suppliers. our from beginning similar into come increased had the payables to many end on of mitigate of these we and saw of and the phenomenon a the sheet inventory of

as With that to of termination added a tax swing we the funding pension were of a of now were that but the Within timing to and working capital and included number collectively factors behind be swing. accruals, This normalize expect includes forward. big not payments year-over-year an us, not individually, up other there going to annuity. of contribute big one-time that

working Similar to the category cleaned the in and up volatility of this capital, comment long-term have less going liabilities we on we forward. the balance most on now would expect sheet

strengthened to The XXXX. free overall profile Our to balance unchanged committed long-term our has of and structure remained lot we cash capital greater delivering flow sheet and throughout a cash are income. net we our be than flexibility

QX Outlook. labeled Pentair XX XXXX Slide to turn Please

sales For up X% to the we core expect be to first X%. quarter,

Consumer driven would a April by strong years performance overall, you some pool March We remind to half. We to the on in X% pool. expect depending that up season XX% expect pool varies a be weather, first the Solutions but we in start to from

flattish to on & Technologies slightly by Irrigation recovery our sales. Industrial Residential We be softer Industrial reflecting offset business, Flow expect modest

to We improved and better solid growth, approximately segment cost productivity. to income X% expect be up driven XX%, by price volume

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

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

We expect first adjusted quarter XX%. be to tax rate our around

million million. expense be XXX of expect $X and also approximately XXX net We interest to to million shares other roughly

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

For Industrial Technologies. X% we sales from X% X%, X% driven to core by the Solutions up an & Consumer to full expect be and relatively year, in expected top-line to increase Flow performance flattish

income up be around segment X%. expect We X% to to

range We $X.XX are to introducing an $X.XX adjusted guidance per of share. of EPS

$XX tax guidance of the share and for XXX include, $XX net in shares. million corporate XX%, of year million items rate other $XX to embedded million, of our adjusted expense an expense of average million, interest, approximately Other expected an million XXX to count

XXX% We stock million net than to million. amortization of million, approximate expenditures and income, are depreciation targeting and free $XX cash capital non-cash greater compensation $XX approximately $XX flow expense around of

Pentair. moment to ensure Q&A, here. I strategy is I John believe I turn everyone, a received about we a like that become strong over excited excited will opportunity and support Before my an we with I call the the what would tenure at I company. to thank Pentair’s transition am orderly I to have and for take to through especially, the am about an built have leader help to operating private employee-owned long

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

Operator

Markets. [Operator Instructions] Hammond Capital Your question comes Jeff first with from KeyBanc

Your line is open.

Jeff Hammond

good Hey, guys. morning

John Stauch

morning, Jeff. Good

Mark Borin

Jeff. morning, Good

Jeff Hammond

levels segment coming little normal. versus Would a you or mentioned that the is bit inventory can us how growth suggest you X%? a of kind with Just And change, give then, core there high year? better the that sense still Thanks. pool thinking you lean into Filtration of X% to about within Mark, are approaching

John Stauch

Sure.

to So, the higher moderated side, full Systems the growth Residential Solutions growth assume being that year more first core and but contributing is the little higher majority core for driven that by pool you also the in Filtration growth. their can bit Commercial the first side business quarter core within with Consumer on of

back now forward. those to as year, the side, comment about see and not we inventories to would the was and On having in line on objective levels come levels going the and inventory back we saw yes, talked inventory we really throughout we’ve so, that normalized anticipate more

Jeff Hammond

entitlement margin looks about maybe we like just the do segments? in at Okay, Thanks. looking be – on think allocation, great. two two the pretty start how new just segments, within And think the segments, simplification should capital where comment it portfolio differential, then, and the margins you

John Stauch

revenue consumer really where ability focus Solutions Yes, opportunities digital I pool the the think by the water the perspective. geography, also the about marketing huge pool. drinking and share to those messaging put had are you think, of to strategies states the across from have one when mentioned businesses and was we together to We about reasons a all is the water branding, and utilize opportunity Water we and like

strategic a on is lot Consumer there the Solutions of So opportunities growth side.

side, On a business. we both we operational that lot a have we the think we of IFT drive – can the it’s way global efficiencies in very

project that in So we PIMS capability and And the each to understood can also from way to have to of a expand learnings the has efficient projects the base. better businesses think we our end-customer geographical that optimized. be be Jeff to more footprint we opportunity we deliver better

feel have So, line-up. margin we opportunities. Both really good about ultimately, this

I are see heavily the while to in the higher side, going know, you think but out side have starting more in build in the margin you short invest Solutions IFT to ROS Consumer level. a the we Consumer the Solutions businesses run, expansion consumer as

Jeff Hammond

guys. Thanks Okay.

John Stauch

Thank you, Jeff.

Operator

from JPMorgan. Your comes question Steve with Tusa next

Your open. line is

John Stauch

mute the Steve? Steve. Steve? button Maybe

Operator

Tusa, is line Steve Your open.

John Stauch

Steve? Should back we come to

Jim Lucas

to Yes. the We’ll go next question.

Operator

next with Lee comes Brian Your Goldman question Sachs. from

open. Your line is

Brian Lee

morning. Hey good guys,

John Stauch

Hey, good morning.

Mark Borin

Good morning.

Brian Lee

Morning.

I moving some on drives bit assumptions average is just a Just but you I half, embedded for there guidance, of out move X% that year? to to fading and the through from as versus us assume QX a year fade the your to XX% the through guess imply back the little is of give that tougher half the maybe of kind for else what sense in first that comps bit the in or to a income the X% growth in XXXX, question segment would for the QX X% it a starting quite is full seem year.

John Stauch

get some the believe the you we what half in are we Yes, first and I that to given our comparisons the around of to year normal overall demand expecting we we than nailed are mean, seasonality going think business. back it. have easier I

got you So, it.

opportunities The second of continue assumption but half that it’s is, investment is invest are and to that we continued to muting our growth of back core one the going performance. year, kind in all in

Brian Lee

expect services here there? give infrastructure for And what you place Fair speaking investments of in Can sort then, timing about is making new you to the today there? water of and opportunity John, some have you What in and context, Okay. are the then, maybe investment, enough. more us opportunity And reasonable talked that? resi commercial. revenue you

I could on And if where ranges lastly, the sense stacks to of then Thanks just portfolio one respect ROS opportunity in versus any of that that margins, of maybe with guys. squeeze the just the in rest up offerings? of terms

John Stauch

drinking Yes, so, Pentair in-home the gave the what to able comp can their us move think we we And end-to-end want infrastructure to the purchased in give Water which of use residential we to be integrated supplier good fully and under quality the we experience what that home. point water Solutions. have, solutions would at Pelican consumers we to forward be

think We where our expertise also can really expertise water that and commercial expand and expand we you to and you live. utilize where capability our work into commercial

that are and we A digital. that’s out of lot infrastructure capability. building So,

carbonation and/or rest the solutions The capabilities either to through solve home or the of the it’s ability commercial really applications. bringing application highly free those and/or are chilled around in water our salt we technical in around

both basis. on about where been would growth existing margins we’ve and XX%-ish a highly that’s infrastructure the that we we businesses So time. investment around the and in believe start also out our Think nice these say spending really really leverages have. I the that

Brian Lee

Thanks guys. right. All

John Stauch

Thank you.

Operator

Tusa comes Your with next from Morgan. JP Steve question

Your open. line is

Steve Tusa

you missing calling. – sorry that missing about Hey, guys

John Stauch

No problem, Steve.

Mark Borin

Steve. Hey,

Steve Tusa

have that moving year, inflation, the of you price these is you said next the of expecting can you kind clarify for know, of kind year? bridge the XXXX? productivity, just what when buckets of kind and kind investment are big magnitude roughly parts you next just then For you The of some for

Mark Borin

sure, try to it, through walk Sure, let me Steve.

So, price maybe first cost. just thinking about

look range. of and we price normal being kind before, offsetting talked X% we cost kind at be a historical more X% back in As to to of that level, expect to

kind would – IFT would a the that’s of top on the to earlier, segment. the and through. see got expect mid-XXs productivity have range on We growth we core perspective, that, of XX% drop see of in we through drop referenced expect or the to Industrial so volume growth, and John And to out that’s embedded coming from then, volume productivity

then headwind XXXX And there in that have XXXX. coming we some offsetting out be do certainly are that, of things will

some incentive been expense think have If about that is other you items compensation XXXX. that lower really variable negative to would in headwind in and XXXX productivity

be the would the an that are actual businesses productivity So driving. to offset that

Steve Tusa

ultimately, on positive investments, or a basis, kind that what productivity kind still those Is of net that front? flat? on So, expect kind would is of you versus see that to of

Mark Borin

flattish of to kind it’s slightly positive. Yes,

Steve Tusa

going be on then, Okay. this big capital, net next the capital to income, you flow headwind a XXX greater XXX, the side, working a see to obviously said expect you expecting working And Are than cash do positive now that’s capital working year. you to as case? it’s if year,

Mark Borin

So, it on working a as year-over-year of a capital, I basis. positive think, think

at So, payables receivables this much primarily are level. it’s as And in just looking negatively the I I XXXX, year from XXXX comments, – back more into over a bit think normalized we little situation look XXXX. related well, that of is then at as said to and on to bleeding affected a and we and it’s timing my us

net we negative just are you or be expectation to capital what that’s do a on the adjusted clear cash think the see about big that there versus net frankly So the we of also recognize income, things are expenses part reasonable that so a on conversion as reflected the – XXX% shouldn’t guide in income basis. swings certain working a of our net and and we positive on of adjusted XXX% to around income know, either

XXX% on slightly the just But than greater net a basis, it’s guide less adjusted So, of XXX%. than be an income. something a would

Steve Tusa

it. a appreciate Thanks Great. lot guys. I Okay.

Mark Borin

Thanks, Steve.

John Stauch

Thanks, Steve.

Operator

Cowen. Your Giordano with from comes next Joe question

line Your is open.

Joe Giordano

guys, Hey morning. good

John Stauch

Hey, Joe.

Mark Borin

Good morning.

Joe Giordano

Hey, and so, segmentation. I the on wanted start to

of that’s ones happy or sort portfolio on are Or sale about? table? Is the some you or of change assets spin that’s within been even another like on thought you have one putting the seems and a it been of Is something optically, more business like that the a like. Just like business? that something bucket that is

John Stauch

No. when expect is allocation have. Solutions and as the can to it portfolio, we you of business of as capital far acquisition growth Consumer clearly, like comes operational more I mean, do as on I prioritizing to side. we the a the in this more efficiency the think the be across

as have far side. day-to-day IFT and the those And – on in businesses Solutions we well within as prioritize probably to the near-term Consumer But investments, have performed to growth that the side to we the space. prior want in continue the those IFT

So, question answer no. your to simply, don’t spin. just a say We anticipate

Joe Giordano

pretty understand the are within the business-to-consumer, but consumer, the versus like channels I the business-to-business different.

versus how changes pool resi how can – this like act that to the what you – so talk guys leveraging what what can with So, are out you filtration, in-home the or this? internally of you like you

John Stauch

pool year we to of starting the and and with a user very have more references about and a their Pentair.com billion despite comes a I $X there we website often, is sell million large Googling user products. really products installed that the in information pool an Yes, pools active branded we certainly X with over have point seeking right? So, that active mean,

their dealer of independent move our From homes. to consumers make needs to more consumers. also channels we the to and expect and to to those there, That of Pentair.com aware leads bring ability them do of gives those then types those water can things in - we us solve those and help take and their quality the of traffic

water when And solve then, people XX%. model, solutions. starting of are free that that we so, and just our with I web beyond And a drinking systems really that traffic A good to looking that lot offer. services things increased mention place expanding is they web our from do in-home are up is direct-to-consumer and to for or Pelican traffic we

can people next we and the or five that over I people to give differentiation And the we think think what code services have model consumer the focus build the national three we awareness right ability by years want. really to zip the that is and

Joe Giordano

then, I the maybe it the all me, beginning And for assume the I Industrial, Ag mean, embedded XXXX? year. what’s expectation helpful. easy be comp in to in in that’s That’s pretty from last of a particularly has going

what And or end Industrial of how – of of kind what’s the there? big was the business for XXXX? embedded business kind that in was So, percentage sales in growth

Mark Borin

So, want the business? Ag you

John Stauch

that Yes, talked we’ve bunch a this about yes. that it’s another year,

Mark Borin

– guide yes, an flattish. Ag overall the we’re assumption Yes, includes of being around

So, be and of right. is comps business IFT are you any big but terms are of of we segment. XX% easier kind overall, size, about should the in There not that just rebound anticipating

Joe Giordano

Okay. Thanks guys.

Mark Borin

Thank you.

Operator

Our next from comes Baird. question Mike with Halloran

Your line is open.

Mike Halloran

Hey, morning gentlemen.

John Stauch

Good morning.

Mark Borin

Mike. morning, Good

Mike Halloran

you – So, I lot associated you first, the there discussion just in-depth core did. with obviously a whether side, more maybe the just was learned. work addressed staying segmentation on lessons know divestitures with a of the

to the early might based you where did. – of changing swing are where are up digital the on spring because dollars that allocating Obviously, capital to are already internally? Or you've investment you that you else would starting work? that are side Anything you are towards some the mentioned the of initiatives work capitalizing or investment point your

John Stauch

want to wait X,XXX internal script, how we engage people so mentioned we the buy use to the we consumers just they and where in we water may – did to go. Pentair as how think in. reform thank Yes, in team, of to engage that and as water and they my buy want Those to water United and I States are

on work consumer digital web the we the capabilities then need more to BXB consumer and or side, on need that satisfy dealer is a and the capabilities the portals consumer with and business the engagement to directly could we you type things As need. awareness, to related of imagine content, the have also dealer ability some to

same business. the shipments to day don’t We Also, got capability same shipments we that think need of side in and IFT to when side. you of type our next operationally, get the Consumer infrastructure day on

the we then So, segmentation to the businesses what capability we against inform spaces ourselves of can how how around differentiate these the competition build and create to about each business in we learned succeed. help the

that’s very do organized optimistic those what are what proud we these and we I and with two really excited am learned about am I can and we’ve of lessons Mike, very how organization. learned organizations. the

Mike Halloran

as Makes sense. look are about as sit M&A on capital opportunity And XXXX, the buyback how and thinking what’s then, just versus the acquisition about you like here environment think we side today? kind opportunity of allocation the the you

John Stauch

are generate in return I have like opportunistically well Yes, have to as to M&A right cash we think at today we the the participate organically and levels. continue doing so, I we and what we opportunities, are positioned and

There have us acquisitions think of over has when we I went here some have announced significant that deliver of ROIC kind been some have because we to acquisitions period to, a engage and time. been disciplined in we be and beyond

So, to shareowner have going ability value. continue I best options and disciplined gives think are those and options we be the to we the create

Mike Halloran

you. Thank it. Appreciate

John Stauch

Thank you.

Operator

Your comes Andrew from with next Kaplowitz question Citi.

line Your is open.

Eitan Buchbinder

Andy. this morning. is Buchbinder Hi, for on Good Eitan

John Stauch

morning. Good

Mark Borin

Good morning.

Eitan Buchbinder

have any the may coming you the positive. this ends forecast? that fourth expectation quarter, your during have What decline there out impacted core increases in and slightly So, of happened the initial an benefited sales quarter progression in price third And scheduled had are that Aquatics for may up sales? an segment

John Stauch

Sure.

forecast, of looking that is back than to in terms more better said getting back continued they really on the a did why normalized at I slightly sequential just just So what level. –

the perspective. really in from an quarter overall demand and solid nothing unusual demand good So,

Eitan Buchbinder

guide, Technologies, be to down sales are core within X year’s to they looking Okay. expected & towards X. up Industrial And next Flow

the relatively understanding the portfolio, Filtration comp segment the different of the off expected could you of albeit legacy is that in maybe for With part parse pieces? easy the performance coming

John Stauch

to year Solutions, full up X% right, sort of in X%. the So, for guided Consumer we

think in there the Solutions. I mid-single-digit type business being that of that’s then, kind and more the And of growth maybe by driven the pool be of of Filtration within portion the is that mid would piece Consumer mid-single-digit, is, high-single-digit. piece to kind of pool low

Eitan Buchbinder

you. Okay. Thank

Operator

question Jones next from Stifel. comes Nathan with Your

line Your open. is

Nathan Jones

everyone. Good morning,

Jim Lucas

Good morning.

Nathan Jones

down to savings two you cost that these But segments of the primary for for see to is reason two do come cost some guys so, could reductions I consolidating expecting typically, out of not us? know see if this kind and quantify Are combinations. to here consolidating segments. by you you

John Stauch

we years, across two of five and do main think driving businesses. efficiencies not to to see higher the doing this. to are three It’s I segments intent a efficiencies functional Nathan, going without over the doubt these

I back As identify the period, right can’t fact, segments into do adding But the differentiate ourselves and I we will we segments start to upon Nathan. to in But businesses these are a some and the capabilities can now, year based function-by-function, will that we have. how resources quantify five differential drive of and we a value. three matter think over needs

Nathan Jones

able any enough. more Do Fair aware little path couple you see out? be productivity you to should over has you're deliver to quarter this anything the that headwinds a last and or of? specific years like of be guys been discrete on a consistently now up Productivity quarter Are down. confident year that in, we

John Stauch

But the headwind. Mark mentioned

is tough going see like year the reinstatement compensation, headwind think the XXXX, I horizon. XXXX. in back into it a be to That’s in a we low thing extremely as come head to the there out of only we variable to tends which

development of over people and investments R&D, have form about X% the and revenue the last couple of as in of We mentioned. we sales of marketing, added the the years in

has those front. on we has read going go the big what productivity digital And continue. in and now the to think sizable for as invest continue and will side some mitigating forward to don’t that’s think do been level of of that investment I IoT I But we stabilize headwinds year-over-year you I that those we real the and advancements see been businesses.

growth. finally, get factories productivity. when back that to growth drive to you mean, a goes way get in and long growth, you core I volume And

ability input longer I stabilized sides year-over-year challenge. invest think be think to pay to the and I continue our have and So cost no will with an investment going dividends is a

And Nathan. growth, that getting we we to then, return mentioned, ourselves should the back to when productivity see you

Nathan Jones

Okay.

So a just plateau investment the there on have side, you reached now.

level spending That's not it's not comfortable there. high, of what are right forward? You too have you going It's too kind low. you anticipate that the

John Stauch

and up in are have invest vary over years at products down we and to innovative going little to around Nathan, continue the we going to same bit, three it’s to some time, R&D. G&A more mean, but the I a opportunity five probably next

that’s move step going So, quarter-to-quarter grow investment to year-to-year. required that to our from overall, existing change of the are don’t see a But lines couple or a businesses. we

Nathan Jones

very taking much Great. Thanks for questions. my

John Stauch

you, Nathan. Thank

Mark Borin

you. Thank

Operator

from question next comes Your Saree with Jefferies. Boroditsky

open. line is Your

Saree Boroditsky

good you, morning. Thank

John Stauch

Good morning.

Saree Boroditsky

for Ag, the business? comment Could just season. what your to side last planting on the on precision comments headwinds on the of back Going expectations year, saw you that some from are late side you the

Mark Borin

earlier of tracking Sure, into flattish. sort of sort it about of expectation Ag as being for the XXXX, was I thinking coming

But it is embedded So down to last terms and in guidance significant any nothing and of anticipating in returning year recovery. was not flat. really

Saree Boroditsky

in you I And any you along growth expectations saw in some some Okay. Did these then, some moderating could the geographically. believe what next quarter color talked Europe continued last and you with China. trends quarter growth year? about for continue in provide on

John Stauch

the I commentary similar terms very had Yes, from of quarter in last would geographic really split.

lines. Europe in product So, some in softness certain

see the takes and We North of remainder coming then, America. continued to good momentum China out of the and in puts

Saree Boroditsky

for questions. Great. Thanks taking my

John Stauch

Thank you.

Operator

Your next with Graham Rosenblatt Scott Securities. from question comes

line open. Your is

Scott Graham

Thanks good call. for my morning. Hey, taking

John Stauch

Hey, Scott.

Scott Graham

luck good Mark. you, to And

Mark Borin

Thanks, Scott.

Scott Graham

the So, one businesses. in that question effects of a inventory two into by the excess the would And was in about last guess, were other in talking channels unpack the you, for impacts size year first little half. really about had non-pool business am the decline be, the bit questions quarter I you my and in things – the are how hoping of margin the the that feeling first the you you those? you carryover secondly, can of then, Filtration I issue same

John Stauch

as take it that that sell think are are the vehicle be me the Mark. take vehicle of and and at a to we is in able in We actual consumer a called look see salesperson in over we a what the center. let hand retail mean, Pentair to doing Filtration impact I’ll in margin the adding global so I Water Solutions Yes, what’s rest in helps a the itself. trying action product product that to

rate of people road those investment We of are sales training accelerating new on and vehicles right. putting the those organizations, those the and

revenue now, So, months we in in $X that’s think of right being million three that significantly investment a that year revenue been around somewhere of targeting generate. a ahead of XX are vehicle from or place greater. And they for quarters the

to ramp a up to that and that And have takes working. so it level to while

ahead that some is value, the a for So Filtration you take probably that is continue long-term time we doing primary we drive investment as push right that’s of of can Mark, things but period growth. that and to second there believe continuing the are of cost please? the in we’ll

Mark Borin

Sure, and go back to the just question. to inventory of sort

buy happened some So, pool point. in We the to it’s some a XXXX. other it relates inventory as good and that the of talk pool the back half business of both then the or ahead about in of

a price things we’ve XXXX, So, the as tied was but ahead and our comps it helps that also on comp to basis, performance QX XXXX of into the increase. year-over-year that a tougher that the buy guidance got couple for that explain introduces factors XXXX to are in related

Scott Graham

okay businesses? as that with to we the am XXXX those are in mean you in translating the channels I So, inventories enter

Mark Borin

correct. That’s correct. That’s

really across businesses. on comment applied of the my normalized sort of be all would inventory So, levels

Scott Graham

you investments, if I Or Thank drove the other were only your you. item that the John, well revisit there as the just Filtration? talked in that margin? about could is And response, factors down

John Stauch

we different business margin Yes, I about profiles. is a on talked a mean, is pieces to Filtration, that of lot historical with that different basis, there

a to So, related the product we of some as look sales makeup just the other just in is that quarter quarters mix in the at a of quarter. fourth

Scott Graham

That’s great. Thank you.

John Stauch

Thank you.

Mark Borin

you. Thank

Operator

with question next Drab comes from Your Blair. Brian William

Your line is open.

Joseph Aiken

is of on end-markets you right some today. end-markets now. are start Brian wondering more you there? particularly what of Are talk side, are for This was on little you some Joe about right across the more Industrial your Good now? seeing morning. I to seeing could off stability if those And Aiken you a demand bit seeing in level

John Stauch

questions. two Well, different

So me to let try address.

look I in take to a think of QX, seen of QX year when to at categories. linearity look from QX at to significant – most our revenue the we throughout and have QX of product a our stability you moving we all

the see still and of sentiment basically Where slower yes, resilience things consumer gotten incremental we have see we are I a mean, residential quarter-to-quarter of still shown we trajectory. little strong we have had but Industrial have, lot exposure, In product more growth of exposing the flattening a We don’t demand. commercial, driving globally. lines a Industrial, a

Joseph Aiken

some you for growth business your know of the revenue levels, terms And in inventory then, non-pool mentioned what Thanks. Okay. normalized just on business, residential I XXXX? are in expectations that

Mark Borin

comment tied Filtration would That kind on of my really be business. the to

rate. of growth sort So, low mid-single-digit the

Joseph Aiken

Okay.

for taking Thanks great. Okay, questions. my

John Stauch

Thank you.

Mark Borin

you. Thank

Operator

comes Mitchell next Julian from Your question with Barclays.

open. line now Your is

Unidentified Analyst

on morning. for [Ph] Julian. Hey, Trish good is This

I distributions? Just of any that Consumer go know if difference ecommerce through for the margins and you a point? Solutions have just between ecommerce percentage quick there on segment, what at other any one sales and significant of kind then And this don’t target in

John Stauch

we right? have make and consumer primarily than – a what consumer would channel. bringing to professional partners them. a I affiliated providing So, of in us aware which look through the to trying the And is, at through available that services are their Yes, trying the or is different to target are all that, I gauge it those BXC, options don’t either of we consumer-enabled do channel to our we then different bring the event for are trying

they and Our direct-to-consumer business what today Pelican did before. is it’s just

that of product of to I a is in million services. sold form million think to that $XX us gives little bit rest it’s of all $XX maybe, the the a

Unidentified Analyst

Okay. last anything Great. That’s maybe App? then launched but early quarter, the I helpful. there? Pentair And just, on home it’s know feedback any

John Stauch

suite excited. evolve the launch continuing are is a not be integrated There And we we we of needs. products those and want of would consumer trying to lead other make take will water to Yes, area, platform. be to But are consumer home whole help that in soft aware we'll capability companies the we more and their it. then, into and well, platforms. We want tie did who the obviously that have a feedback to but you

that’s or scheduled am launch. dealers an with of I and the about provide consumer the connectability excited consumer dealer request really on what service though on allow right? application most a as excited efficient their to get are Where side, is also the that we way we the and App by most that then in follow-up experience, And

Unidentified Analyst

Thanks, guys. Great. Okay.

John Stauch

Thank you.

Mark Borin

Thank you.

Operator

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

is open. Your line

Brett Linzey

good all. Hey, morning

Mark Borin

Morning.

Brett Linzey

want Hey, just come guidance to margin. I the around just back XXXX to specific

for what you by said to of year-over-year? segment? targeting are any for incrementals for total both performance company. restructuring this the XX are So year? And XX then, are expecting color you up think What you on margin core you Do

John Stauch

we not now, margin major to both expansion or restructuring right targeting segments. restructure. And any are Yes or in forecasting

Brett Linzey

there looks sold? looks are divestiture the place in in later like some It it what’s Solutions. you X% takes guiding well maybe color rationale year, being just then, strategic it a And like Consumer Okay.

Mark Borin

just net and of clarify, Sure, to in kind so a on there is QX. going

Pelican So XXXX Aquion that this coming there lapses and is from and quarter. the timing of acquisition into

then, the of previously. So is sale of million rest and agriculture that’s the the we about business $XX it had announced that

XXXX. assumption that that sale business So ongoing has been divested in that the guide has so, the reflects been and

Brett Linzey

Great. Okay. I’ll Thanks. along. it pass

Mark Borin

you. Thank

Operator

this I to questions further time. no closing the remarks. call are now will There at the over back for company turn

John Stauch

progress to strategy more opportunities of Pentair a with efficiently we challenging customer-centric have and us build our to growth greater services shared structure culture. ready believe us vision XXXX, with support a the the to of to and urgency. for our start ahead and joining platform, respect sense great you advance with are significant we We we Despite performance high today. Thank made further

say speak are the continued can the near and all create XXXX in your the you conclude optimistic when future, Pentair value key to call. and our full Mariama, I for for for I team motivated we you stakeholders interest. excited Thank longer-term. about about

Operator

concludes this gentlemen, Thank call. and you Ladies participating. conference today's

You now disconnect. may

Pentair (PNR) 28 Jan 202019 Q4 Earnings call transcript