PNR - Earnings call transcript Q1 2021

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day and thank you for standing by. Welcome to the Q1 2021 Pentair Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Jim Lucas. Thank you. Please go ahead.

James Lucas

to Quarter welcome Call. Earnings and Stephanie, Pentair's XXXX First Conference Thanks, glad us. could We're join you Lucas, Vice Jim I'm Senior Relations. and Investor President, Treasurer, FP&A Executive is President our With Stauch, Financial Officer; Chief Chief today Fishman, and me Officer. Bob John and our on we outlined performance, morning's release. details this first quarter On today's provide our call, press will as in

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

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

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

sure be for now after prepared the to time will We answers call would to turn remarks. like to questions our John. I and over reserve

John Stauch

up blockages, on ongoing period strong, thank EPS of last started first year. their of all XXXX our decreases in XX%, our made of XX% comparable free and the supply you, consumers the canal meet to good our of improving significantly despite with Jim, partners commitments the us the working year, momentum and South, Please and, and would everyone. last to to opportunity start X from effects they course, with Thank chain to pandemic. constraints titled flow suppliers Building and efforts I Summary. our cash adjusted by morning, to and patience deliver off commitments for Slide the to from increasing the thanking stakeholders. help like the all organization we entire global to Executive Pentair sales turn our contributions this and I like would take also and channel have

as increase has a a announced all as experienced to reliable is in to continue in and channel. strategic We led development, growth all Encouragingly, that Ken's business be Technologies full XX% a treatment three provides bolt-on to offered and Solutions our Consumer installation Ken's we the business. commercial service a Beverage the Flow first well Our the manage week. dedicated & to sales. to service best We to products time residential return from Industrial this way for network quality a direct saw most provides to We products matched acquisition believe this the seamlessly important are sales, as sales year. businesses us we in earlier service expand to of believe an ensure position a from Pentair platform experience applications. in over valuable national will the water This product network the customer our for acquisition opportunity commercial expand in grow with

well positioned are With of fund guidance start range to strong capital are full raising inorganic shareholders a opportunities return $X.XX we and Our EPS we growth adjusted to our dividends and shape, a repurchases. to balance our to the share growth excellent in through remains opportunistic organic sheet year, and and year to $X.XX.

will across year disciplined to growth have our continued we of Expectations. signs to to strategic half balance XXXX The in high, will initiatives, businesses. the Pentair. for sheet. continue of expect that invest labeled We Equally Slide that price turn selling increases portfolio commercial five in are Execution remain us our strong help a the remains in plan start have the While number strong the Residential and mitigate the to second in to inflation we inflation confidence and another strength year. Please our important businesses of instituted growth gives year with and our of we recovery industrial we

of delivering build at our understand the remain As the year, the we last and focus also of on making while importance our end core we future. been has consistently commitments. we highlighted will The

the Our actual residential results very significantly quarters better in has for expectations past have three our been demand as come than strong.

been flow have at EPS future XX focusing Building our experienced and on June improved forward depth our to cash the things robust also our providing strongest We sales our our sheet are that and Day. While the means topic this growth, look on more it's have we in is balance within control. we years. Investor

is It starts a the segment. years. our the initiatives growth work have several we Consumer this continuation for with hard Solutions past of in undertaking However, focus primarily our been

We expanded filtration have in continue treatment, solutions. automation, area into water this systems residential include the position. Within better and are and we both and connected industry, our we a build energy from solutions, on services commercial. leader offerings efficiency within pool in Investments now to leading components and and smart

our expect to ESG we must or for to deliver productivity and generating consistent expansion and organization, building the We significant drive also are maximize growth Transformation to flexible. and complexity we have embark that to both that ability value more our in journey can we and We investments plan margin recently our We expanding as created growth flow. our agile believe on reach. made cash and we recognize a our capabilities that have our brand digitally transformation investments, while means while office being while margin This expansion is have innovation, We better in for internal fund complexity. many but not to reducing positioned reduction either to shareholders. drive We through culture will growth initiatives and and to we the efforts. these deliver to order driving create and customers strong a accelerating strategy, technology an meanings. grow leadership But us, many and leveraging and. of accelerate digital by it right continue and

be to our more discuss shareholders and customers, like Our strategic consistently performance to employees, an overall detail. now and goal delivering After continues our the to our our the has and I'll results which, Bob? I position. financial in Bob environment. for on call provide update would turn to been over

Robert Fishman

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

sequential sequential XX% to the an quarters. jumped should remarkable to income saw Adjusted growth sales quarter dealers the to the Europe teams basis of on strong impressive significantly freeze growth the core within Traditionally, to Consumer the to supply especially & would water China. branded to sales demand This Pool Pentair capacity. points XX%, quarter. year and our remains growth builders later the acquisition strong inflation grew Slide continue. sales for variable good of QX will new with we and tanks, of increased residential of only First remained strong up in improvement. faucets. our at healthy strong as quarter many we Industrial in for XX%, businesses. Water led We residential the levels. to many Pool the possible in investing high-volume continue is the stages the sales consecutive historically residential demand the strong maintenance Solutions earlier become experienced third drop-through, saw on was Segment XXXX quarter. experienced increasing nationally time We've demand. quarters, Solutions. Solutions offerings saw and EPS as as channel by five businesses during growth strong and strong delivered We three as pockets in treatment the Rocean, without to oasis and home Segment of equipment. industrial We commercial and their backyard freezing consecutive turn broader sales businesses caused upcoming growth believe was brand Water experience, as we orders. performance, growth. double-digit production We as for and first very their XX%, premature Please pool pumps encouraging in volumes sales see the saw X, up Technologies going was growth. as progress Demand growth continue XX% this our not grew was increase actual $X.XX. best with ability part U.S. heaters in do pumps enhance and expanded pool return and the and demand we first strong XX%. productivity Performance. we be we delivered experience further return the Consumer bookings new to into price greater remained we and execute first and first adoption continued. decline both continuously increased the to XXX were in equipment in XX%. forward. of and in of labeled of sales we almost momentum XX% XX% pool our U.S., into basis The our flow part some XX% stronger space the double-digit residential An early XX.X%. to within points offset pools believe current We're to expanded quarter growth pleased quarter just showed pool consumers saw our products, excess services, strong demand believe in returned preparing due trusted, to speed and Within Demand improvement integrating keep grew showing of capacity Consumer failures XXX growth our strong DOE income with through on double-digit season, nearly conversion commercial as this past product effect the and But operations as saw Flow season. but quite in Southern theme for high, have robust robust Solutions for our the has but pitchers for well their leads transition quarter our journey valves, already and experienced this goes a in sales made and continued Within regulation year.

recurring number new preventative services, service of programs. services, warranty and revenue plumbing programs, a extended including change-outs launching bolt-ons are for cartridge maintenance We

forward. We consistent, finding going believe that are seeing commercial We get foundational more predictable leading easier continued comps coming expect these is building growth. of to and to together, blocks a bottom demand signs finally

to grew increased these strong led believe quarter Slide our build to flow flow for flow, Technologies of Technologies and QX offerings. income and XX funnel, Segment a X% sales in another Ken's ag Industrial rate quarter. and growth Beverage second points the We management quarter irrigation in to XXXX growth demand XX.X%. will spray. continue the filtration and quarter, help a Please the residential Residential expanded Flow remains consecutive in increased addition modest as sales both new total commercial on of & residential, posted water Flow X business strong labeled at & industrial double-digit XX%, encouragingly particularly return by We offerings. Industrial double-digit turn the for basis Performance. strengthen across

Pro with backlog growth, We also experienced Commercial flow growing for many time growth strong channels. in to retail, quarters. and across first returned OEM the

remains were soft, by pleased infrastructure growth quarter backlog industrial to see its a in improve We encouraged were commercial. we both While sequentially. and to within year-over-year growing and the return backlog first filtration

for including due improvement Within While are see in a our we component food orders our capital stabilization. in for system demand. beer businesses business, longer-cycle saw systems, to investments, to headwinds remain beverage solid new larger caution we and beginning membrane our in beer filtration short-cycle

In IoT continue existing our expand addition, we customers. offering with beer to

by a we & and labeled Sheet top our Flow turn selective and improving for and and Flow. have the the substantial start Industrial to complexity, we X, reducing Slide year. margin increase Balance in on growth biogas Technologies expansion, systems. Cash seen bottom encouraged backlog focused line remains to are Finally, Please

due This of our usage improved year the by business first were seasonal built, was being capital and we working to and primarily over a only usage very million is pleased period minimal year-over-year driven quarter While historically linearity. see cash improvement. this pool to $XXX flow

disciplined quarter by times driven strong the capital at good ended working expect and was strong free a return on We invested X.X continued and year another demand our of flow capital We leverage, XX.X%. management. cash

we dividend. our forward, quarter, As maturing we in the going be we will second a look needs paying bond at our cash quarterly flow and have

buyback continue will in disciplined the continue have our we least and allocation $XXX to we shares labeled our year. Slide of to work XXXX our of to that, in pipeline, Outlook. Beyond this continue a M&A plan at as Pentair QX capital Please to and turn Year we Full be XX million

updating guidance. and year quarter second our initiating are XXXX We full

sales expect XX% a grow to $X.XX. we grow XX% XX% adjusted to to to of range to second and the XX% to income to grow $X.XX to For quarter, XX%, EPS segment XX%

expect grow grow to increase to XX% X% full year, a sales XX% adjusted income $X.XX and segment EPS to of the XX% we to For to XX%, range $X.XX. to to to XX%

We We in taken believe and second through year material that inflation the first shortages continue half that to quarter. pricing mitigate the work will help impacting actions pressures. is inflationary our full

Ken's not we mid-teens Beverage Embedded high digits, we digits Technologies, top low-to-mid residential expect the with full the & Flow single double are Consumer awaiting to to single into with guidance forecast up double-digit finalization water low anticipated average. digits. up and the Within up treatment be above be line of segment our factored low in in We as have in year to Solutions, our sales is growth pool expected transaction. Industrial

the are yet experiencing capital are seen around commercial to XXX share million million, is $XX we corporate be the be to and expenditures have industrial our $XX average the our parts is a range for Below the and full shares be anticipated expect increase we count short-cycle to to expense and and million for spending of $XX interest larger depreciation between to million $XX orders operating to in tax while XXX around amortization of line, we $XX XX%, While about year. to around be million, not in businesses, materialize. rate million, an million. be expected Capital net expected

or flow line will equal Stephanie Thank target few John remarks. Stephanie, to the After income. net for continue than We cash over be for which, to the would a to greater turn I to free like now questions. call to Q&A. please you. closing open have

Operator

Your first Kaplowitz Citigroup. Instructions] [Operator line from comes Andy question with the of

Andy Kaplowitz

Nice guys. quarter. morning, Good

John Stauch

you. Thank

Andy Kaplowitz

in are I lower would be all versus pool for color from think seasonality, that than on did down get the you're normal was second, year-over-year sequentially Texas QX is your pool in a reason all Or understand QX? overall that John, much seasonally just you you just see worried some us strong still there Maybe give your in any QX boost worse? focusing but a strongest despite growth more QX could because forecasting How QX? QX guide company, weather-related issues usually supply we for easier unusually why constraints comparisons. at in of

John Stauch

Bob understand. that I'm Andy, totally answer have going to one.

Robert Fishman

Yes.

guide half. an versus We're And the circuit resins, most it in while well prior the over will why weeks, business, key that While material we're do prices, out of increased with is boards. the that, not in couple couldn't inflationary improvement seeing read we some on we pleased components, facing we us have quarter. year, versus of with we at the impact back second have it's the shown motors, And also as to we're quarter. second that an done last shortages the pressures QX while the some that the demand QX. We lost in face overall look sequentially pool, not in have and just

to doing catch in there we're this supply increased are second but satisfy and quarter. are can So we basically that up challenges the everything facing some we demand,

Andy Kaplowitz

labor Bob. was these issues to And your availability you over for offsetting is despite seems focusing inflation, like a offset you prices inflation we actually talked the able nice know Thanks, but productivity for about QX that you've price get in it the stay productivity guidance more in inflation, constraints? the productivity of possible on past. ahead plus the in And just you all to past It than to in it maybe then been looks uptick inflation. and got and

Robert Fishman

challenge. mentioned have in year, chain. to of you a the congratulate up the head saw and the half XXXX supply production, inflation the operations issues A ramped really we as lot in is Obviously, certainly what goal. back I the our for want our the of job. nice team, just the addressed that we we on second is quarter, That But did we goal. did

improvement base fixed and the leverage lot really a driving productivity manner. efficiencies is cost-effective over that a in the So cost of a driving

Andy Kaplowitz

to labor this need the you're ramp meet up? able you Bob, to And get

Robert Fishman

continues -- it's the a Labor places that guidance it's challenge, on should to to many -- business, in be be It's to by impacted of our challenge, radar not address. something certainly a totally honest. our that, But and need we it's we be screen. but

Andy Kaplowitz

Appreciate it, guys.

Operator

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

Brian Lee

Hey, guys. for quarter. Great Good job morning taking and thanks the the on questions.

John Stauch

you. Thank

Brian Lee

what in markets like prepared how having sense? But needing sounds kind of a that. to during of that's the pools are pool you that kind them? is near-term I Texas? driven of there some your, the top freeze alluded country, this, quantify that into to parts You pool can busy in but bit give for three the it you outright people exposure can And push even We go specific winter of some the are us of their to things the guess, it's John, Texas replace to fallout do to but other indexing and you know one just country, with to see that's your the versus of remarks, XXXX fix demand, and and backlogs dealers or some

John Stauch

Yes.

it say there's to working constraint pool builders, pool to the we're dealers, consumer think of demand. industry overall that it's the I relates an availability the always to in that capacity as the fair that

we the on the be most get QX, in also break far What term alluded shipments. that in fix a the did are coming resins back produced also getting I that As but many will in to as Texas referencing that Texas happened And of what little in but to Bob was It's related in some that material here the as day, normal more every course of online. challenges, and satisfied well. that's goes, nearer was -- is that of -- better QX of area those chain country. supply and capacity of

can't with or pool QX either always serve. we that a net, call the QX. for overall state being demand And win So goes into I large I Texas a that it just think

Brian Lee

retrofit, second That's just We've steadily a pool Can market enough. the it give housing I you here of years, -- percent have Fair past of versus for but you're number a seen an through sense good next especially to late? how that has of Okay. the aftermarket-levered, And balance of up new do on know year? of seen I'll new several the we've recently. expectation trend question helpful. bit kind maybe here. guess, that even little then a here new here and I ticking pool Clearly, pass us And on. you pool a shift mix heavily and changed continuing into much the year toward

Robert Fishman

that one. take can I Yes.

Our mix XX%, roughly XX%, remains and remodel; aftermarket. XX%, fairly new pool; constant: roughly

John Stauch

every to and in impact the The large up new opportunity new the put it's to year-over-year continuing pool adds want trend basis, goes new we as those that those still as overall that an to content build and pool the the a all That make well. convince pools later continuing. we business, remodeling definitely in, And aftermarket on us. to that are for consumers being see growth growth the the to aftermarket dealers beneficial as not But automated as said, and pools. and smart

Brian Lee

Thanks lot, Alright. guys. a

John Stauch

Thank you.

Operator

Your from with question Mike next Baird. is Halloran

Mike Halloran

Hey. Good morning, everyone.

John Stauch

Mike. Hey,

Mike Halloran

to one would how the be chain may the least. you're imply little more seems just year what that some of to at half from in mean, Not inventories, industry. muted second pool I XQ the why guide on throughout of the the here, the think you But demand understand answer the a are constraints first like channel, away. perspective. do year. good lean balance a then? So Obviously, XQ questions relative some of the out kind Supply plays into like there's through it rampant implying that mean goes pushouts I bit that

of quarters, not year of maybe as challenges how you what you're few can to with the thinking equate about So some and the these all just help cadencing just and move next over XQ. the

Robert Fishman

in half, In QX we look over some it what compares. year, implies has guided slight for for the growth and when the what that big the revenue pretty back terms you of at --

So in business year. did well last back half the

we're So pleased Potentially. better? see do to growth. we Can

of expansion. margin. For back continuing price the us, while overall on of but XXXX effect And money win it's a benefit a strategic impact be in will bit on that we also putting the does little pool overall well on half margin war, our to think an an element we're side, in focused margin there growth have and that are cost investments the are spent the in will beyond, expansion. space, treatment our We primarily water that

Mike Halloran

of on sequentials pool normal Are you Just from of the side? the a pretty on year into clarification first the of half back point part that. XQ implying the

John Stauch

the up got now could since year. you I to we're up. say QX, We've think to relatively in the that is in in channel I as we've as We channel think, is catching in levels. the trying And inventory to inventory continue -- do the probably see last demand Mike, still QX. right we're met catch low. catch up way been demand QX our mean I'd the I QX it and -- sell-through those rebuild we to well with best made

Mike Halloran

your starting more part. to level some see yet, curve starting more optimism thinking there that. right we're cyclical here a better. to are just you imply of business at parts to where Maybe prepared And the trends today? bigger remarks for a and that The switching sit about but now. some little few of headwinds, progression had a that thoughts stuff gears Obviously, Thanks least where cyclical what are you the you've get progress. then different recovery on is Aren't seeing how

John Stauch

Yes.

good drive commercial this we going of said we that full referenced I least where starting again. and for to filtration And up not particular starting openings it still better. level was, to things to sequentially it's see is at catch biggest see to it's filtration to it move the nice year, the is I commercial to space think but optimism think

sequentially sell-through better encouraging We So some and that QX, that gets year. in better than continually think the quarter. we saw throughout the was

we break and and the activity, & far recovery backlog As think order we to see those more and in move really quote fix activity as of spaces. to fix and break also sequentially, But start some Industrial I of the Flow, saw Mike. started certainly,

those was where encouraging, weren't that I sequentially bottom ready and call ourselves now earlier, we seeing saying the think definitely referring are come So IFT in to the to and side. that we're I think I off we're

Mike Halloran

Good good stuff. one. it. a Appreciate Have

John Stauch

you. Thank

Operator

Your Steve next question Tusa with from is JPMorgan.

Steve Tusa

Hi, guys. Congrats on the execution in a I kind of guess. a challenging supply environment,

are for Just all, year? first of what you the for assuming price

Robert Fishman

We in X.X% an to, call X%. to improvement should see price it,

in down I were we low probably think earlier the year, the in Xs.

are we nice So uptick there. seeing a

Steve Tusa

a Okay. are timing of price going there of at that the of Is bites Like in? And one increase done you increases? of the are and what's spring? in the timing a couple kind apple kind of Or the when there here? is -- the

John Stauch

we're its QX. to. of you Yes. but bit little more prices I'll we're the the board some have on pricing take going those increased give across through Steve, backlog works first details, that the in we've But way where Bob I'll servicing a part. old the still

those So we and QX. fully price until don't expect QX increases to realize

Robert Fishman

in Yes, I start QX. see them, to that. agree We'll would with Steve,

Steve Tusa

in] the the you the that are be when -- though? Like [guide guys guy when putting When -- would when through, channel? it would would

John Stauch

-- we're that that QX. Steve. servicing took orders already put We the in increases, bought the still we're so product preprice yes, still at -- servicing -- people we it we're have But backlog, still through,

Steve Tusa

maybe of across me second are I the the second on looks price you mean mean, with on just kind in like then board, kind I like of kind flat flat half, mean year-over-year. lower a guys might half, sales, the I And midpoint through flat margins actually, I profits. tick at the [Indecipherable] of -- price on on Okay. just think be be kind us to coming it of -- year, would right, give that that the to there that productivity expect the -- just is the neutral for for just that what margin price kind the year, expect give that productivity equation? annual, the be sorry, front. of there better would kind just productivity what inflation you us you things is Maybe with -- of a Or inflation.

Robert Fishman

Yes.

half higher the you back we've headwind continued facing will the year, we're when look with But at the headwind. productivity For seeing, what inflation. that offset we of is done price the so are inflationary the we and

guidance down growth, comes show what margin our if really the we're the So growth of half. impacted revenue end to expansion is that by does making some really, the higher in strategic but it is investments the back

Steve Tusa

one to half, if Got complexion reasonably guess the of just one second you're the this you. for it. I And then of kind consumer. comps be going in last obviously flat, toughest are

So if that about think should consumer Is the and we being the as flat, is your up business down? right kind second of business being IFT profile for half?

Robert Fishman

Yes.

is And mentioned, half. have back will full the for I we of a in year, For Consumer half have the question, good can and second end we as will The guidance, the is half, higher see think, grow. IFT, overall, our again, see. then better to drive if the Solutions now we you take which back you grow right

of get to that natural many ourselves, of ahead continues in demand businesses. the again, so wanting have our not we And

So at on the can is this prudent top point, the is very line. our I better. question guidance we think And do

Steve Tusa

Yes, great. Thanks, the guys. Appreciate details.

John Stauch

Stephen. you, Thank

Operator

next Pokrzywinski Josh is with Morgan Your Stanley. question from

John Stauch

Hey, Day. Earth Josh Pokrzywinski. Happy

Josh Pokrzywinski

the for Earth John. Happy Day, question. Thanks taking

of start always of off kind what's of versus of pool of just on much surface Yes, maybe and strength XX% volume right somewhere. -- seeing out as with I into versus speaks of unique that guys have breakage. don't way appreciate lot that front. around the about pad share of growth. the to is a side kind of last of equation? play day, it the kind at upsell comps to replacement whether of kind surprise. that like-for-like it's much we've talk new In the the under can the end the theory, spinning stuff as year wallet more utilization I happening But I or here about is that versus well. if talking Any seen So in the now how guess a that kind you're yes, been to know the environment, you has No kind the there, pool of been

John Stauch

shared that right? a that we've good weather than the more the Yes. before the is well, the happening. upgrades mean a we got climates spot water question, we've I self-chlorination That's Josh. We've two to sale better in mostly homes also And warm doubt, it's upgrades, people penetration seen been the done have a and excited on automation really self-saltwater got and things of get destination candidly. a as Without so a and where change people and weather vacation we've and their they to warm using we've And more become seen backyard I are make we've sure seen lot push So this, as extend want as much climates. and their not they energy-efficient season the their think big traveling want. aware. the around capability. pool the seen lighting, is the But temperature we've ever to

side the maintenance the is well, of pool Josh. So

more that expand sustain. I aware, think to And we really the that's people it, were the a that's good trend the they more the talk been about made consumers the it's expands, offering. going more believe because we situation a So those we more able think to and

Josh Pokrzywinski

toss-up guys Got could if on results? but how the Like Might it. a hard a worth? be holding maybe what that Bob supply little is That's bottlenecking for much to And XQ. infinite then get helpful. chain or you near-term supply, that element question and a is back answer, you between

John Stauch

Yes.

team, to that think one, I we've everything and raw team and So of just -- mean doing just first try to all, tag foremost, first want materials to material can we Josh. access supply thank been we need. just, I I we'll and our the that

time the bringing mean, mean I I'm I I so spending because referenced here. really which art much will we're And two to the into on volume And possible as of seeing out. we're that can things up not to as inflation the time issues get get Bob we trying doing the spending give think happen. everything available we're negotiations leads earlier. you And Bob on material, that we're then

Robert Fishman

started to $XXX seeing question backlog of we why we top million we guidance the -- was the million. see is and is the QX. And our our that with closer did the we're just couldn't end $XXX with Where demand, that Yes. in

$XX So to $XX as if view the the the weren't art in space, of supply that we shortage there. really the million it possible as million

and that Now team a two echo because materials. they're doing for was the congratulate and allocation that ago, again, those John's we're of getting improving I'll nice number comments the job double, supply weeks

quarter. I inflationary seeing how headwinds Then view the of that's the that top is that second So it. we're in on

Josh Pokrzywinski

awesome is there, the appreciate That it. Really color detail. guys. Got

Robert Fishman

Thanks, Josh.

Operator

question next Wertheimer Research. Your from with Melius Rob is

Rob Wertheimer

Hey, good morning, everybody.

John Stauch

Hey, Rob.

Rob Wertheimer

resi et characterize commercial you. you on a and I or talk about penetration, whether just Thank drivers said, on split of if just stabilizing, can lot there. a breakdown know treatment, know went things more in don't isn't through a right which So you think. I on little you're bit easy. the water cetera, wanted just growing I I managing quarter. this sustainable there And nicely. the is path

John Stauch

has by flow seen I they're doing Yes. I overshadowed residentially demand. treatment of business well side pool I R&I mean in exposed. I think obviously, you. IFT also Thank a would water and appreciate being it, pop say And and success our Rob. the has the on the nice strength pool. also is to really relative been

and several about to these a their spent water home our improve either So benefits or things people time overall trying in water. We've make I either it's to base are we've mean reasons to independent doing for on. more -- better, great regarding their the it products aware the to of think they're to try around the definitely dealer days, to things channel. got Rob. lot capability our going And talk upgrading of to it, sell I

portfolio a the and So the we've also, the direct the We've interest, RainSoft, affiliate and consumer the to expanding of building been be our lot we've got acquisitions to through Pelican more out access ourselves. we channel services purchased, that and/or through consumer-friendly. through have network

a progress great we're there, on that excited. thank to our We and we're services I And noticing that's put about why you ability And sell of for now so growth. Ken's. making top mean I'm we products just customer excited into extension ability and care that the take us the to needs always of end-to-end product the create And to we've solutions, space, up. a allows foodservice show the of service when to offering. inclusive customer the nice had us feel where

and like out work. and the really that the momentum, part fruits seeing So portfolio, we the really we're of of the building

Rob Wertheimer

you Thank Great. so much.

John Stauch

Thank you.

Operator

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

Jeff Hammond

guys. Hey,

those them So a all before in Solutions it incrementals how you're lot kind of about moving just moving you remind pieces Can and same, pieces? given of around inflation thinking and Is that, supply chain now, or worse? better investments. how about thinking us Consumer you're

John Stauch

comfortable squeeze. is the vary same, it then the Bob QX. cost in We're based actually which only the in thing the drop-through, upon XX% accelerated did of might half back mentioned. bit Jeff. we investments those price as generally And little that a year different the that's in It's And

So of solutions, and it. smart are those set. why We're is the assets with And tight I investments in skill like anything we to to, digital, It's not get at chasing might IoT, labor trying lot a those that that's people you differently. we're the people delayed. those same place connected did ask markets mean,

So more And timing the also of then that in. to issue it's put them serving. a expanding markets just we're we're

only so it that really half we're that about incremental think of then investments as talking and Bob the is We investment back mention the by the drop-through, about year. XX% it's And that muted any in that's

Jeff Hammond

a that new new just later? million, is Or a into to this is of And today? XQ up? buy And then more the of paradigm Okay. Great. kind early do you a we're kind shifted early Is the on bit industry in buy structure the or little that it function $XX XQ catch you you do environment of just a persistently like the as for where demand the XQ. seems shift just think from

John Stauch

second the chain. we're answer we're that one And not, get that to we The when is we hopeful if be to expecting QX early the supply yes. up throughout catch We're quarter.

As muted of we matter It's solve how getting day. just a better Bob QX. it to able of to end the by issue every be supply single chain said, is the them or enough mitigated

cyclical early is trying necessarily to pool. seasonable far buy, where this we're our we buy mean, capacity As It's business. the And manage early mean, do the I remind not I just in you, a as levels.

not then spiking and the off. our labor we're So laying labor

when there to to you're the get trying ongoing you're meet And full you that this really season, buy out Jeff. working those and basically, to labor isn't type work of room demand, So fulfill outlets. through trying because demand we for early that

say didn't didn't and happen, would mean right. it the shift. it feels you're It to got I to market just I necessarily So to just it that need like the sell need.

Jeff Hammond

Thanks. Great. Okay.

John Stauch

you. Thank

Operator

Your with next from Jefferies. Boroditsky comes question Saree

Saree Boroditsky

Hi, good morning.

You margins the there? maybe any with on provide So and Could service about just more commentary not on about some guidance, some the a follow-up detail? the said talked built other in but business? You to us sales on benefit, it's Ken's. you're you in excited what but color

John Stauch

Yes. levels, he's expand part prepared about our our the and expanding just mentioned as I needs our and I and built and his them excited customer treatment team to and his of I'll you a customers do a intimacy ability remarks, I this. more have had help we as that Ken career, growing to foodservice it's And think admire the beyond water this projects thing. with need time. want we around to provides. let the his not some us and real built give set we say is products can which do. going insights offering to come those I for and we're have And with the And one Ken's he's be that us someone over worked having to Bob business he sell those what that partner his details. partnership in customers. just with my other service for It's services customers also and in

strategically. So I'm really excited

the And to line, to just to we're of the finish willing the... some that get part of us do deals really Pentair you Bob, be he the happy and want And longest trusted family. the take best he's to and give

Robert Fishman

in need We the mentioned sales. minimally as of in spent things the Ken's. We we'll that in be believe We foundational platform $XX press it's And contribution X Yes. XXXX, really spending then that about do EPS -- accretive. million bigger we from invest an million Think that about it's times it's to $XX or the future. release in perspective, growth for in for business.

contribution we're XXXX. in So about thinking that's how Ken's

Saree Boroditsky

positive space you're you. up. Thank been on the We've from restaurant helpful. then us on the comments things maybe seeing That's you And have opened foodservice could what side. pretty update just some as obviously hearing

John Stauch

that pre-pandemic as And the sometime seeing keep were to anywhere levels. definitely to mean we're I we percentages feel I I right? where where exciting, Yes. us back in be we're things things sequentially, want just up, think we XXXX we frame, reminding near time seem But were. not And better. expect the to open

But were sometime not year. United While to and restaurants to in before. we'd that hopefully been getting hospitality where toward But States, were next like to a the that in have are one the they way see, the opening we seen the bit little slower that's the yet opening and levels China. also back opening sequentially, open they're hotels our very to definitely across working play, we've rapidly Europe. They better

Saree Boroditsky

Thanks the Perfect. for call.

Operator

question Giordano Cowen. comes Your with Joe from next

Joe Giordano

Can me? hear you you me, Can hear guys? Hello.

John Stauch

can. we Yes,

Joe Giordano

like feel talk, is share being business touch wanted of building, throughout you've a just a that, backlog on I feel like mean to comfortable coming to Do couple companies you to I the back. bit good maintained? So see of it's listening years. made Because last lot changes all more that over little it other of sounds that industrial. and like to is I just spending

how as about you guys business. So maintenance being I share but are that just feel you cautious to you know transition here, curious

John Stauch

Yes.

and of some want our growth of we with for aftermarket first do. of that's we projects because, win discipline not all, to projects, or could use to times, capability specification chase provide So Jerome and as here We really team said lower-margin I'm order we to that and I to proud the I either what mean, the margin opportunities to that the meet potential want want invest in. our configure many

there's and we're want focused, I be to a of say our And disciplined. So capabilities had don't we're core growth I opportunities the think lot and to better for us and a produce think projects we're We've that that going compete because trying margin These to we're profitability to sets. right around skill right to profiles that business And we muting they to focusing. cost where really here. be businesses we that's quote. the you actual a the produce in what I that where all skill profile, have of back we win, that are the we're that's set And come doing all to strong. and and serve gets for lead then then more your higher And nature sets, these will get our cyclical the desire. meet that sudden, that's and of comfortable seen one. these are not projects, with and And than feel with confident to

Joe Giordano

Yes. That's me. for Last fair.

small. you've I some guys a done trying deals and strategic are lot accomplish, of seem very the you Just make of what here interesting, sense fairly think to for

strategic appetite fit your right And at is profile target meet sheet, to now? balance that environment of your assets kind the there Are -- out in with just larger look I when larger So what's there M&A. curious there? for what out your

John Stauch

organic my been capability team's out I focus mean some we've areas the carved we I got to focus we has has specific grow. been think to think want think really grow. we and that that Maybe. our And we've

we brand always skill our that's we really large spaces, a don't and you one available. we ourselves? Are better When you there's off versus the reach, that needed? we not doing the at buy, sometimes need, large the are don't right? the or we sets. isn't have one a better have there really have capability channel look buying to Or it Sometimes make Now trade the

we're accelerate from kind to hopeful the more path like capability I and that we're but I'm that to embarking our distract and these start they of on, of add don't upon. that the so strategy And us

Joe Giordano

how quick kind to down? like buybacks leverage that's capital of we point getting a about do more standpoint? If from a at that. so like aggressive follow-on allocation just the -- you think just are -- -- And do what Like yes, comfortable you

John Stauch

flow mean I we've with progress the made. I generation Yes. cash really pleased think we're

and now, little year. of I deals think strategic that we still we term. But had committed flow a have this gives I think we available we near given And Bob we're where cash that bolt-on I maturing bond -- couple mentioned in had his to right think a we QX. we usually that cash bit remarks, buyback we in any to prepared need, utilize in said would capacity us sit become do the the and

Joe Giordano

guys. Thanks,

John Stauch

you. Thank

Operator

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

Deane Dray

everyone. morning, you. Thank Good

John Stauch

Deane. Hey,

Deane Dray

love would expecting? the receptive really I that it launch How rate? been pulling quarter. a to Hey. the about products What's last pool many rate that that get update through -- an talked soft on installations? the you app And you were is at

John Stauch

Yes.

new yes, we've just exciting the sink mean, and and got mean, under the I launched tweaks. Easy it's progress we've we're and pains? side. launched. sensor was pleased those a pool and new the servicing a Yes, good treatment And where the to new we app got side. had that's So that with clarify, the Growing -- And couple about been We We're Deane, on I we've ScreenLogic there, on right? app water that the we've we've out always got pool got connectability. products. salt And we've Flow, customer, of feel our

it make that successful, I work but the as I we've consumer now a think to product describe of the launch, to desires. bit got would soft little the do ultimate

Deane Dray

had launches? introduction any Any the you new number Good a updates XXXX? new impact to about then of And hear. product I how year? on think there expectations on talked IoT about for And products.

John Stauch

it. and I a side stream were be pool, excited really appreciate focused. you where I and in soft product filtration basis. I'm this about launched mean Deane, might a in one launch Yes. We

And CPT demonstrated far what putting applications application. X-flow So that regular smart the water the we're seeing as have results. that pool launch amazing a we in has the by really results side capability of pool soft the of the filter superior clarity as on was membranes filter

is about because seen then Solutions connecting mentioned we really Consumer I'm some on that a launches, smart side, one for app category this more in will the the acquisition, that next later we introductions then to POU we one, the or either pool year. time. we a that technologies. So really that And it's this have and that launched the new purchased around of really haven't product that's early be Rocean, that year product exciting And most excited period countertop unit of

Deane Dray

about analyst Great. the any preview on And format, upcoming day? sneak for how topics

John Stauch

talk well-positioned that XX. because on incremental about and going to and June give we the previously can going a you balance want to But office I'm of and some you strong can to I'm share going good some that think we the And you do I we've little that a the investments little along give we we we're businesses. expect leading progress Well, we're we're to show do indications think want growth we there going investments create insights fact help value well. you we're feel transformation I great on think and how got that probably sheet, Deane, to bit to transformation strategic a talk you create organic way. I the as here, how use wait value have with make how you then balance why sheet growth. as about highlighted that of bit making, this fund these that the about and

no going course, Day the sharing excited talk the previews Dr. we're to longer-term what technology of probably investments. fulsome would Investor Pentair without So that technology Phil and to were And you some why that's we're bring we're be about at with sneak about. going

Deane Dray

Thank to you. it. Looking forward

John Stauch

Thank you.

Operator

Oppenheimer. is question next from Your Bryan Blair with

Bryan Blair

guys.Great start the year. to Hi,

John Stauch

Hi, Bry.

Robert Fishman

Bry. Hey,

Bryan Blair

hoping sense of the in give commercial that could QX. out how quarter and a was in parse you us water treatment cadence through sales I core monthly progressed decline the the

John Stauch

that mean know, digits still single you Bob, -- in don't I if exact. down I treatment. I QX water in we're mean have commercial Yes. the

is is inching to filtration steep mean, and year-over-year QX comparison. as mean got deep, we took easier a year to think an just as compare And decline. first remind muted our where we're you in I last QX, hopefully, impact expecting I QX commercial COVID, that was I be candidly. then this far the

but rate. QX them to going nice run QX, pretty in where you're levels getting XXXX for growth were, a near the rate at see it's the off So nowhere but better

Bryan Blair

Okay. level pro set commercial scale water on And for a just forma treatment.

then KBI, is core back at get prepandemic, point? demand that continues that to and plus to layering two normalize in XX As volume

John Stauch

Regarding two when water the XX, you're say commercial piece? you treatment talking actual about

Bryan Blair

revenue treatment point. water commercial at Yes, that

John Stauch

-- I'd that's I say directionally Yes. mean yes. correct, that's

Bryan Blair

Okay. Excellent. you. Thank

John Stauch

you. Thank

Operator

next Your question from comes Barclays. Mitchell with Julian

Julian Mitchell

back morning. wanted Hi, Maybe just to circle to I the good investment spend.

to toward. You've some it you understand just investment a toggling spend help of being color scale is year mentioned next for gets sort looking incremental perhaps it bunch Or function sort better the That's what the wanted you're this level you the areas that just of investment And margin think sort of to the in But that Or solve into me times. of much of are catch-up right some And as gave well? those second dispersed do spend, of that understand. of good that for? that deferral I funds the you medium maybe a whether is half. about year pushing to term?

John Stauch

Yes.

So spending me it and we're where tell strategically you why. let

how Pentair, the you channel. on available connect site understand our do in you our pool we really a you it's around So through and then to brands destination to pool, pad into be bring what's help

want both connecting your well might making steadily you to into seeing to answer someone challenges consumer phone traditionally to as We around and service to making service learn distributors And through dealer for more that's there's And our in particular we've seen and going services you pool come So you, dealers dealer upon help channel. or what's we the directly services been that that go well you sure work we've as available been and you the network. the where demand. want inquiries to network around our chat our with our there's with mindset to got you consumer no than as desire solve then to we've to need to has continue a sure but that pull investment as you. the

as So transacting. rate a and shift being traditionally about where we've And IFT treatment, we've before, should nice side, build years. And we up. upgrading and the grow offering, And to to again, And do mentioned you into have investments that that sustainable the residential a more our nice offering the In services augment then European on it's effortless had digitally building that accelerating we business brand gas those read been our to water with, as over several which been. got North side. we've that's us gas. biogas to think believe got run ahead and to we on sustainable capability investments want America, that we next which the of

that's do So filled those of with are obviously, And the where on instead investments And then far which focused. to just the it as buy platform in categories, the was actual dollars, trying a as own. of one Bob? acquisition of Ken's, we our investment

Robert Fishman

Yes.

We we the the last does quantify it bit of toward Just as that on to X% in little our ramp that, But talked spent being quarter. we back John revenue. first of about as the that mentioned, help of you year. roughly call, spend a head

the majority bit more and of in but QX. So about think QX, spend, QX in that little a

Julian Mitchell

at sort does then the right Or at year? next of up it level And go see. medium term? I that point, you're again

John Stauch

No.

jump-started of right basis. got I programs, flatten in see from And because more would we're year-over-year percentage level, of then then, a think the we've to standpoint expect sales these that a in. people that more at we

Julian Mitchell

look And I of pieces then separation company announcing the of you. group, sort quick follow-up. two and into one at recently. another multi-industry a just If sort fairly across Thank Colfax

around, public look company? separation isn't Hayward Or two from creation view that between as is Just portfolio, you're of kind wondered forth, and value peers overlaps divisions. your any now And latest synergies sort a that there of obvious of the sort anyway. three more it you the are thoughts that of on of when there like the years stand-alone kind the so

John Stauch

move pumping And application. billion it. mean, I way understand -- but through of any asked side the side here's And IFT application the We the with is correlates We time, like without water hard all phrase. help improve that enjoy water. some we produce portfolio that to at the -- directly get we and important there. water $X very look the our that I question. the And it's type I moving move the move, your on you

we've talk set industrial of working we that also, treatment and filter a pool the the on hopefully, foundation The in that team salt-free And be there this some industrial We have in got then servicing about Jerome next we'll on. which are comfortable several it really nice I an I'm opportunity side and mentioned the expand really that improve to that focus margins, and it, years. assets, is that for membranes the water and cross-utilization. our softener membranes the is are introduce will

more lot a cross synergies. -- cross there's think I So

we think its about where with the to IFT ROS and making I side, levels focusing it's grow. and it, returning historical how grow sure we're with we that disciplined

Julian Mitchell

you. That's hear. good Thank to

John Stauch

you. Thank

Operator

Graham Rosenblatt Securities. with from Scott next Your is question

Scott Graham

Nice quarter. Hey. Jim. Good John, Bob, morning,

Robert Fishman

Scott. Thanks,

John Stauch

you. Thank

Scott Graham

my this more maybe apologize I for throughout I quarter. prices price materials you're for the mind raw increased wanted saying, what cost. to square But maybe first beating on up. specifically

the you that need we So points, for with you the the materials goes on that just of XXX inflation? price from can little Steve's saying, plus saying are emphasis thinking basis number probably in second year, up from are the X% question, of pricing, quarter And bit inflation a see that, productivity? for raw Or help first what I'm that And here. offset X.X% half. you're to to maybe you saying

John Stauch

we material -- we risen and a fulfilling, what it. are are at in and therefore, said. QX price QX a catching we're in than new imagine, a new channels, has and selling as QX. and And And and you're see of price you perspective. headwind price sold pre rapidly carries in still pretty the both see cost the in offset That's up we contribution supply productivity here from QX we most positive the to in beyond there full Everything levels, more with inflation need year. your for that's the QX, orders of what -- when price We

Scott Graham

Thank you. Yes. that. Understood

also sustain the quarter. level? the is And productivity can So that? that jumped initiatives? the something I'm there wondering, in that And Is you G&A than more

Robert Fishman

of our number a of come I spending combination mean OpEx had year not a things. really It's from the of prior down. QX

benefiting last and drove into expedites from volume, we production. of last really at And good a the and efficiencies the leverage. in of We're is But as lines also we're better production the the create that also doing so last driving more from half year. issues inefficiencies around year were much to number we ramped year extra this a lot driving a team job that and

that's in across that the really QX. it's So benefit driving productivity board

Scott Graham

Got it. Last question from me.

resources they the things Obviously, have large get think you top they as market? competitor? are you how on a resources, Hayward competitor's now What IPO, do more thinking going that. about and more can of in changes the forward that With

John Stauch

may think mean to have I a point, I more they're -- competitor. always I be And competitor. formidable think been formidable your they a

single way it we competitors. pool it, down. the think way slow through to can't agility if way we We to is against business Scott, it of at compete flexibility works our set the its as And and transformation. business was our it I with day that's got the a every this think the have treat independent look about I

Consumer stay they Mario they continue to need pool make team, Solutions we're So in doing is our to really to this leadership in and have working sure front. what with

welcome the challenge. we so And

it's company. I put we'll going our in forward competition better. to And makes rate. better start will make kick butt, I a because a this think certainly want moving you And strong faster us at think and ultimately that a generally you

Scott Graham

thanks. Appreciate responses, your

John Stauch

Thank you.

Operator

with question Stifel Your next Nathan from Jones is

Adam Farley

Farley This Yes, good morning. is for. Adam on

John Stauch

Adam. Hey,

Adam Farley

running there require any Is labor Or is -- capacity? management increase shifts? and additions? the to is pool back does within permanent Going additional pool. investment to capacity capacity it any this the just mainly additional And business

Robert Fishman

made look combination increased current there good last couple investments We've some example, demand. production shifts. lines, of a be Certainly, to a for again heaters, we -- shape so also in would going forward, for of It's things. as out number to added we're second required. that of years, investment the we the in We've satisfy year, year,

Adam Farley

then shifting over I&FT. to And Okay.

business, are Within out color called seeing but improvement? some the specific think industrial could cycle, on provide in you you markets I some what end strength short some

John Stauch

simply need the think to Yes. that more capital investment demand. that I our mean I put, capital-intensive businesses, industrial, spur

we're Those we're of in that infrastructure by more our on industrial seeing side then the trends. areas will So it's side commercial in movement seeing pop. a business. we're the in our some two the industrial and side the -- really be the encouraged flow And

Adam Farley

Thanks for taking questions. Alright. my

John Stauch

you. Thank

Operator

remarks. time. There would John Thank over at closing turn for additional questions to back this no it you. to like I are

John Stauch

today. you in future. believe space Thank you, us the Stephanie, we believe for and thank Pentair have well-positioned We great We for right joining the is businesses.

us investments accountability drive higher levels our transformation important is well We higher-growth, us, to Transformation focused, are accelerating performance. and on help our resources focus business will leading as pool growing of that treatment priorities. Transformation business. expansion. drive better believe includes as strategic and and in efforts margin our water This longer-term our we should our allocate

our sheet balance look remains for believe Day your creation. sharing strong, story we value of quite we interest, this Investor June on you forward to continued of and call. Stephanie, Thank at our conclude Our XX. more additional and can provides an the lever you

Operator

Remarks] Closing [Operator

Pentair (PNR) 22 Apr 212021 Q1 Earnings call transcript