PNR - Earnings call transcript Q2 2021

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Operator

Good day and thank you for standing by. Welcome to the second quarter 2021 Pentair 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]. today's being that advised be conference recorded. is Please Instructions]. [Operator hand over to I would speaker conference to like Lucas. now your the today, Jim ahead. go Please

Jim Lucas

Thanks Pentair's call. to Michelle XXXX and conference earnings second quarter welcome

I second today's We you Chief Bob our President, FP&A details and performance, John Investor are and Fishman, Chief call, Financial outlined provide in is Lucas, With on today our could us. our Treasurer, me glad Relations. we Stauch, as Senior will am quarter morning's join Executive Vice On release. press Jim Officer. President and Officer this

Before to during of risks forward-looking factors certain we uncertainties we listeners recent and We predict our expectations. statements begin, actual These can statements. our materially let risk presentation control make to advise difficult me Form differ subject release. and and Pentair. remind XX-K generally and beyond the cause uncertainties, these in from you review will risks and to that results today's Form current are our that XX-Q many Listeners most of cautioned are are to carefully today, the which

GAAP will the can certain also Reconciliations comparable measures. these be measures We to of directly most found non-GAAP non-GAAP in Pentair's section Investor the Relations of website. reference measures

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

John Stauch

face thank in the the cash flow the results, unprecedented to inflation. year. for four half free We first greater adjusted I material Pentair over even pleased and teams up helping titled morning than quarter over growth good everyone. XX%, Summary. in like to and XX% with turn these of shortages were second would Please $XXX slide Jim and you number sales deliver our to Thank deliver EPS of strong up Executive million

Our order to the and but past gives quarters backlog us grow into next built also momentum ability not ended have will believe at second our gives our the increased trajectory our continued confidence the that quarter topline We we several the growing it in year. orders us to carry half record over levels. comfort only

work transformation strong built Our across of enterprise. on track is and a we the pipeline initiatives

in inflationary current increases we the and cost implemented price half. environment, price the Regarding narrow we further the have gap to expect second further

remained balance a is robust cash Our our sheet and in flow solid position. very

initiatives to pipeline we M&A plan have and disciplined our to with growth strategic strong We a remain our allocation. tied capital

introducing third are more quarter once full We in give detail our raising later will again, the expectations call. on guidance which Bob year and

expectations materially. we material nor better have and our shortages current than Our the tools proven that focus believe forecast navigate in we had that reflects visibility and We they are manufacturing going not gives our environment. us will to last and improve sourcing away the inflation the have quarters around few

sales Consistent for adjusted we for CAGR including XX%-plus Day, basis Investor targets XXXX of and our growth, Record expansion to single several June margin At introduced mid mentioned recovering earlier, industrial to Building five backlog continued to slide businesses strong as our our residential seasonally our encouraged are We remaining turn and businesses Track support and Please see growth. commercial a and Growth. XXXX, points digit EPS. XXth XXX labeled

June guidance which again XX, Our once are targets performance. were raising second our strong based as on of we XXXX our following quarter

guidance. of target our longer be now revised based Investor Our off provided would term at Day

future. into We since created have of the half second have experienced growth continue the that we XXXX and believe momentum we significant the foreseeable will

well-positioned many a secular that to portfolio positive believe we continue benefiting from We trends. have

flow residential large base business a and large serves technologies quality attractive for pumps. solve some a helps the addition biogas to industrial issues installed Water and in treatment pool water like niches And base. installed serves commercial Our customers.

to to creation, our believe businesses in we not do are cyclical. be a create to expanding the closer the initiatives and While Wile value we consistent accelerate biogas in further These seasonal, focus our topline. include investing services the is carbon are treatment growth capture few water consumer them core and strategic technologies. getting pool, flow within on into to driving industrial and consumer

more both transformation entire the help ROS this growth drive broadly drive that across will we fund expansion expect enterprise, and we As initiatives.

to to results great strategic in to a will turn provides after our further over tied sheet strategic balance an detail, our provide more would Bob through our now update which our initiatives. position. on Bob? call believe to flexibility discuss and performance the overall like primarily upside, drive degree I we to Finally, of growth M&A financial I our

Bob Fishman

Thank John. slide Please Pentair six you labeled QX turn XXXX to Performance.

consecutive grew XXX not XX% fully we quarter quarter $X.XX. higher up price was expanded core industrial the inflation solutions and on of sales have income flow XX% core to to continued sales offset Segment quarter XX% Second points increasing second implement Adjusted help EPS did and with see our XX%. growth. and second with to as XX% delivered Consumer nearly sales sales core increased inflation basis to guidance, sales of and offset. with grew return XX% price XX.X%. growth saw increases technologies Consistent we

with in reading amount price of this we but $XX levels unprecedented recorded see million the inflation performance businesses and start as a has the higher expense cost was demand at should Corporate compensation out pace. expense, half of coupled given even delivered slower wage contributed year. second out, quarter robust The material to price our

businesses XX due tax as higher approximate basis growth demand as year levels experienced in during American XX.X% grow. growth. continued points expanded first both XX%. sales XX% delivered Segment sales to businesses solutions Consumer QX growth the full as residential is in was grow inflation solutions the Pool income Solutions double we primarily to North quarter. now XX.X%. double levels. return slide rate of Consumer sales to seven and Consumer as Performance. XXXX continued XX% income tax strong half to was our on This to experienced Please strong of increased to rate XX% expect the significant labeled digit turn quarter at the Our digit

than visibility backlog for we ahead keep new two growth The best strong the of row continued. next at their is be improvement installed the will Backlog The continue continued when improved favorable we backyards their While grow. to have pool in with seen in theme dealers pool enjoying pool many that life increased Even up for and record to start the quarters and macro strong for of are backlogs investing to consumers. we year, a doing shortages with a doubled. orders in pools remain continues year, orders robust part and Demand in the have into builders looking to base significant team growth many year. record believe year. their gives trends believe consumers capacity us even believe next of inflation. major consumers and We committed demand. to have significantly the pool of remained face more the remains the reporting material quality of at-home enhancing experience The and levels

post-pandemic XX% consumers have treatment to demand robust construction, residential new commercial delivered sales remains showed strong used their growth recovery. remains pool addition more. and pools signs as growth In as aftermarket of Water strong

from sales over by strong business in commercial Overall, business digit is XX%, and our contribution backlog half solutions the grew grew consumer deliver we order XX% on nearly residential trends. KBI in the the well-positioned continued Our excluding second and to double quarter. believe growth based

quarter the further its points end out return we Residential flow the further read The the business sales experienced XX.X%. strategy. in has commercial and in the close digit double continuing with to quarter. all price expect QX expanded consecutive the sales built and recovered business and continued Segment year momentum to expect recovery basis a eight sales well-positioned Technologies XX% the increased Orders gained on the exceed technologies labeled to increased grew sales at We turn further half and second backlog. to rate within and end-markets XXX Commercial half. for Industrial flow its seasonal continued slide to to Flow the execute and XXXX first and Please Performance. flow income gap higher increase inflation XX% third in XX% and of Industrial the improve. channels. on to its orders

digit We smaller generated complexity, great in over continued showed expansion. for and growth focused increases million of particularly experienced growth beverage. nine Cash segment. the orders and food free to with flow of filtration XX% the delivered to remains We sales signs further Flow. growth part slide selective half. Balance a double aftermarket and reducing improvement labeled continue to $XXX million technologies year-over-year. both expect Industrial and turn and Please first story in the improvement, on cycle We Industrial the Free flow short within cash Sheet of backlog. be cash $XXX margin as

have to through the $XXX in first We half. buybacks returned dividends million and shareholders

million We KBI. $XX acquire also that to during million matured $XXX approximately quarter a repaid the paid and bond

capital under one continue the just we our times to invest at As ended we wisely, leverage. quarter

excited capital proud invested extremely to are We see XX%. and exceed on our return

XXXX remain needs least labeled disciplined our Please flow M&A this approach. pipeline to XX year. look Pentair working $XXX to capital continue to of slide buyback we We going plan and As million to Outlook. our at Year Full plan in at we and our forward, cash QX the shares allocation turn

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

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

and expectations shortages our Our inflation they reflects away that forecast improve are going will material materially. not nor

XX% in to up year, a as double line, further nearly income solutions around to this expected XX% is the pool flow the to we $X.XX. over compensation up technologies. to and to expense commercial and $XX the in million, is be adjusted in grow year expect to half. $X.XX treatment corporate and Xo to expense expected segment digit to be the for increase record low growth guidance full growth XXXX, consumer EPS levels around expect incorporated to grow performance XX% of and Embedded expected we the XX% in year. revised in XX% is KBI given the full of industrial our with Also XX% sales recover XX%, second higher is operating sales Below anticipated contribute XX% For guidance range expected water to XX% to given anticipated

expense million We $XX around to million, expected be anticipate full while the Capital year. around million to $XX and million. be average XXX are is for shares the XXX of to depreciation count back expect anticipated We and now interest between to our and share amortization normalized rate be to year. expenditures more to levels tax million corporate to net range expect next go $XX be a million in We to around XX%. $XX

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

Operator

[Operator Instructions].

from first line Baird. with the Our of question Mike Halloran comes

open. is go Please line Your ahead.

Mike Halloran

morning everyone. Hi. Good taking the Thanks for questions.

you more the a backlog stretching behind confidence from context are just in Inventory getting incremental channel? be on commentary the trajectory can the details how the year? great. levels? context Maybe out? pool from Maybe Any you more give is So the little just some some would of you seeing far

Bob Fishman

build beyond. in said pool and time into high remains very at record backlog the Well, remarks, at all We levels, as next year strong. demand and is the see prepared

So their what a second that the to of number strong. more now, people backyards the growth a coming have products around confidence we different demand out. continue being variety metrics in are see reasons, spending from for will homes built and with time on Certainly we everything of very

So I continue. believe that that will

year. We Inventories, are still into up. are catching confidence next they

So we satisfy through working our to dealers. are and distributors that

Mike Halloran

your question, at how is backlog Or specifically meeting tracking And then, this point? available the just in that in is just out it with channel? what's far

John Stauch

Yes.

is this Mike, John. So

October. And the completion next First start when of to of we we season then September. the all, at look to a coming season end at pool we is pool the get

then backlogs going first Bob we as to And feel pool our be we strong is in this and on really got out. which get demand. inventories position regarding the season to is strong a work goal like we related So to And the to next we that. are also feel year, mentioned,

to which was been think to labor labor of the our do I we to have starting factories manage to supply attract ago. three And and we able chain, get to is, and uniqueness level in in agility to of product being are the demonstrate the the that, factories out because customers. to product another months able availability four keep start pool confidence harder to

we of So those how feel. differences the are

think I this demand to confidence, we demand. As make that higher good to meeting far as we and business were But is we this sure a progress been is year. good that always confident wanted a throughout have the able on make Mike,

Mike Halloran

That lot the of sense. side the other a on makes of And business. then

Just seasonality? you IFT? maybe will great. cadence Any recovery are some there normal incremental seeing commentary How be customers on are Sustainability, the what versus it's color tracking saying? incremental in

Bob Fishman

to will has business. I business industrial, that the very, Yes. And of piece to very in growth The see growth strong. also nice within with then were the been recovery a has be We return. start residential area us. and flow pleased IFT flow one. continues again the beverage commercial The food helped for within

growth for the is full last in as And year. to digit IFT. able be for to to year low year the challenging continue grow us momentum well to continues it we after double guide exciting So the expect

John Stauch

And are But our had will and wasn't the we Mike that are levels sequential finally back improvement on compared trends and hotels saw hospitality filtration up more we restaurants there. open to globally and businesses that easy coming there. encouraged XXXX. water as add commercial would we we XXXX see encouraged dip in I just that that treatment to in Obviously, we to they it continue get saw those in

Mike Halloran

it. John. Thanks I Bob. appreciate Thanks

John Stauch

you. Thank

Bob Fishman

you. Thank

Operator

Thank Giordano question from you. comes the And Joe Cowen. line our of with next

go Your line ahead. is Please open.

Joe Giordano

Hi guys. morning. Good

John Stauch

morning. Good

Joe Giordano

Jersey. a like to whack a just one markets forward how regionally? XX, like, more basis? from just of kind pool certain in of crazy if had has you us New been regionally you scale, I through how Can Like Are out talk go live

than more is Northeast that So normalize it's you inflation these at have in new probably maybe And kind might more traditional this growth the like seen levels businesses is how can of markets? I appear for some scale balanced know of before. been you comps? rates pool when But

John Stauch

Yes.

of had a we year, on we variable. One, going know. couple changeover single this from engineering of department you the things So probably to as speed had

So satisfied of all say markets, that that then what And the meaning accelerated, demand of aftermarket the would we rest these fact And across acceleration they disruptive really that for see just still the obviously And traditionally particular line. product. is needs want replacement the And more happened pools I on are nationally the be product pool is Texas to in you going state-by-state, are strong remodel the of in disruptions demand new that has to expecting pad, we or freezes. with generally like a then new And putting demand in that the that of builds the products product states. rate of already Sunbelt consistent that the growth the I and cycles been those have are significant aftermarket areas. then then that that same and regions. sold the all across been got pools additive, of my everybody are

and not are catch partners demand all our to I and right say is supply the So through we demand that easing up now, trying with do to work that. would

Joe Giordano

one just apologies point-of-view with could I I it But timeline these on if from of if Rocean? of very and missed new update sneak in like in-home product like the beginning. some introductions And systems like any in

John Stauch

and year. try to technology somewhere to year, to that launch to the throughout product we of end a up year Yes. and the ramp introduction part up that expect then launch speed the with get as That's us then work early next next year next of for our that soft around

Joe Giordano

Great. Thanks guys.

John Stauch

you. Thank

Operator

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

open. is line ahead. Please Your go

Brian Lee

the question. on Thanks a morning. Joe's Good for follow-up just taking Hi questions. Maybe guys.

initial you backlog degree into what Just for about you I so, kind like listening quantify are to know think views of you if that builders for trends, new can But number respect to the with it And season? chain visibility grows I year. heading next know record the market supply general but with have players, other at pool any then next sounds XXXX? on XXX,XXX is sort it, you this currently year? call from to wondering or expectation any of

John Stauch

think builds continue grow. to will I

and just it's landscaping beyond I those constrained capacity availability in we labor pool you product do equipment think the backyards. generally after by

XXXX be that to continue to additive we then robust And So, number, there. think always will a that have remodels. year we

pools the the seen the of the penetration in So that then those where new addition are pleased really more the and really on where products pools. effects we salt-based and pad needs also heaters, done be of we have is to to automation, awareness chlorinators, those products of rate acceleration. are more And

we want we have and feel here believe up now that think I year. is to XXXX like a So to from grow right visibility continue growth to we enough

Brian Lee

on enough. That's my And increase. price the fair follow-up just

are Can your quantification level that You was the then effect? segment seems he into volume? you here? back that the of latest consumer what If that of Thanks number the that's solutions mentioned growth am that at through year-on-year look kind And for give much like assuming implying implemented? price back the of here? portfolio portfolio of that's I some us parts of the price? I part year. guys. for a that How is going increase. half lot around much what it Or is How XX% XX%, was? going you of when half, When

Bob Fishman

for just close us point to high, I bit QX, two was What price share a for In quite points. overall of a five do color was Pentair. around is little will benefit inflation price and inflation and

out but higher As of half. we that point four the back five points inflation the reading half, think range, the closer to by think X.X move of in slightly back at in into price so to

it shortages material gap appreciative whole a supply and our continues QX of are challenge. be of the really So for we And is and ops from and narrow to improve a challenge but done. we team the they the have materials opening quarter, more raw that of luxury really inventory. did us a nice XX% the growth. that sales helping that that all the in drive work did second They sitting team In has job

QX So lumpiness with team challenge as is of deal we material the the really QX, the move and shortages. the for to into

team is guided they to remarkable and production week that job the doing we numbers achieve a every schedule have interesting So plan the as is the to.

John Stauch

price your just to And on follow-up then question.

In more our chain easier have models. the areas. the usually work our inflation partners obviously, in general Then We business quickly. got projects. the or takes of those work are OEM then raise basically and then that They with quote and short-cycle related channel next And larger three until have businesses projects company quote with of supply dealer-distributor set time. with our which that to the you it's you have we relatively we cost programs, businesses, get you to through price dealing

that's with other to those blends I three So that all Bob color the the across you. it and business numbers bring models shared

Brian Lee

All guys color. it right. pass for will Thanks on. all I the

Operator

question of our from Capital you. Hammond next And Markets. line Thank KeyBanc Jeff comes with the

is Your open. Please go line ahead.

Jeff Hammond

guys. morning Good Hi.

John Stauch

Good morning.

Jeff Hammond

the of about in back-half? seems incrementals what in I thought we June think help in better were more price the back on It second and quarter to the Analyst kind I was the incrementals like in quarter certainly the started a a how you surprised the concern. So half. should and you is of But the think think better that guys how than I and Day

John Stauch

got and generally Pentair. generally then obviously, door, for capacity get which of higher think the that definitely that. from productivity some in product able benefited the that's sustained, when were pool levels better. out out we we And it get Well, read was more feel And and pool and levels we like we were have expecting up we margins IFT we it of to drives I

Jeff Hammond

this And XXXX. Okay. guess, then I view just on, into

there in maybe seen good consumer pull-forwards I maybe the in think new in off terms on where is pool, strength that trends and repeatable? some attitudes? Just stuff you do demand pull-forward here isn't have where remodel. the But or know you most happening of

John Stauch

to we product the there on partners amount is to I a every single channel you think new disproportionate are work get with time spending side. to trying have us right, build job next doing, Well, of the

new the you aftermarket, for balance when simultaneously see the at those demand things builds are same time. with increase the So to trying two in you

pool nice need. be repositioned pool is So filter And obvious I for traditional how and are to deferred pump and have the really to of you added to the needs where to the pad think next the is get majority where that think and can inventory the then those some every more they some we of year. in repositioned and/or where are be jobs the backlog later the of haves because

Jeff Hammond

Okay. Thanks John.

John Stauch

you. Thank

Operator

from Bryan Thank the our question with comes next you. Blair And line of Oppenheimer.

open. is Please line Your go ahead.

Bryan Blair

morning Good Thanks. guys.

John Stauch

Good morning.

Bryan Blair

a you hoping and network little service recovery how commercial your offer more going could color I water is influencing on process integration the and was KBI forward? treatment

John Stauch

really is for acquisition provide to grow space. KBI to from services us, that an us for we second and area. within quarter. exciting learn that a can leverage So that help able are the business now then It's We in the in closed commercial

start that and into. strong exciting area we see really and really been that business that in the within the haven't drive So able opportunity to to us for footprint

Bryan Blair

the I the XX% missed growth it. treatment organic for But I That's if think total quarter. in then you commercial figure? apologize excellent. you I cite And said did

Bob Fishman

we in the water The full year gave - Yes. growth for treatment,

John Stauch

It was in XX% slides. the

the think right, of the million year, modest is I there that for a a QX then the for Bob KBI in gave, roughly just for And Bob, and think KBI. outlook full quarter. quarter contribution then in year from $XX

Bryan Blair

appreciate then John, - I Okay. that. And

Bob Fishman

gave we excluded second for that XX%, quarter from KBI. growth the the excluded the the contribution Yes.

Bryan Blair

the It did, okay. I appreciate color.

Bob Fishman

Thank you.

Bryan Blair

of last the would levels. that unlikely recover you it's quarters with that couple John, demand over XXXX So to commercial that momentum, said

changes now, anything? have business pace, the you does momentum the With in the the

John Stauch

at as Right. now. are levels I Actually, XXXX we said,

that world yet we are going, that that from the took primarily. recovering need would as hospitality travel area a gets So to we feel continue growing the last modestly starts Primarily like year levels do now believe open. rest one to we we of XXXX XXXX. growing and by But driven We not here. think to robust dip off the are to accelerate Once we I is global again. be versus

Bryan Blair

That's great. guys. Thanks again

Operator

And you. with of question line our Stifel. Nathan from the Thank next Jones comes

open. go Your Please line ahead. is

Nathan Jones

Good morning everyone.

John Stauch

morning. Good

Nathan Jones

am on back XXXX water levels. I is commercial I the going being there treatment to to just imagine levels. actually follow-up the XXXX can't discussion to on that market back

So about can you you in market gaining level this talk think Or XXXX yet? are I back your be what's you ability to get levels where when share that to the could to driving market? possibly can't back imagine that

John Stauch

participation It's beverage And Yes. we the quickserve are beverage gas spaces higher dispensed. in, and you the And ice filtering participate hotspots that like imagine. a filtering those you restaurants both and the as have rate also service. in Nathan, we also station can got

is still that is fullservice recover than it So hospitality but was it have faster to rest that slow up has And area been recovering. the a in restaurants picked XXXX. definitely of the and

Nathan Jones

Okay.

where was? stuff is have mix to that more it a skewed to level does your So market back

John Stauch

Yes. from yes, right. that, We benefit

Nathan Jones

these And then big make would deficiencies of up as you in in cost equation input the as event first that stable a the gap XXXX? cost expect follow-up on in second price Narrowing the we be well. to from half, unlikely you gap pretty net there get half. kind the prices, In XXXX that positive price

John Stauch

think the good easier Where catch-up on inflation and I think one. year, we predicting yet. a is a lot I learned we relatively wage Nathan. the done I inflation that know we have have about increases year mean, mean inflation. definitely job amount occurred and the labor this is that the usually throughout have still playing been Don't I sourcing

next we practices the about sure quote how cycle time. agility ahead effectively best we price were to that as think more that focus projects then the are using projects keep And making and businesses. are sure We on shorter of we as next we making in year's

Nathan Jones

Great. for my taking Thanks questions.

John Stauch

Yes.

Operator

question comes & from the our Thank with line you. of And Scattergood. Boenning Connors Ryan next

Please line ahead. Your is open. go

Ryan Connors

picture of aftermarket had question the big Thanks my Great. sort opportunity. I questions. a taking on for

You alluded aren't right nice this of are chain in pad because that the the idea so-called on earlier to to there maybe supply haves that pool going constraints. now

next think the question base aftermarket that And does of opportunity on new here should the the a several a believe about thing we you structural thoughts of aftermarket? over in out? how is, years, what there? that perspective? And builds? couple Can is in growth a so you your good just three I mix installed years my give mean, from meaningful, nice to to five the do us that expansion And years that's

John Stauch

then what lead degrees how pool that today. And mean control look we exist use experience. to consumer their of then awareness self I to or manage to Yes. comfort and is pools. also can aspects figure is in pools or every their out more else heat and as, you at either monitor the it enjoyable million the higher of other and self to in-ground drive pool. to comfortable chemistry as the new that an people and it And pool those look your things thing do automation more additive you and/or tend X.X your more, one goes number And they they as do water pools make of the

is in it demand the good we the So channel. all to news look as, this long build term out

Ryan Connors

And then you want have sort a Okay. on global other your just tax of about a know I got rate the to my movement unique there this one as was, lot jurisdiction of of rates. tax lot and corporate. get the reaction, And minimum news is

impact that standpoint, on that how tax from not Pentair So plays could rate a how any there depending thoughts or out? on

John Stauch

We be trip would perspective. some But a higher early of better at are the there in this early impact of competitors. assessing process the certainly really tax upward our significantly view the would give here And then what not be. but a is rate our It's to point. than still too number that in

Ryan Connors

Yes.

for your Thanks enough. time. Fair Okay.

Operator

line And comes Andy our you. from of Thank next Kaplowitz the with Citigroup. question

Your open. go Please ahead. line is

Andy Kaplowitz

Good morning Hi. guys.

John Stauch

Good morning.

Andy Kaplowitz

enough us John, a pool Have growth. longer And and more longer new to excited to this about of they in automation in heaters you little how the contribute are term capability think do pool you really maybe and in secular? are are to the much trend? growth color more your products mentioned could you your tell product into advantage do they general pad invested you what and upgrades sales term you the aftermarket to give pool? Can about new much growth? in pad How adding much how you take remodel smart potential

John Stauch

just Great think in has of been in creates the And more I modestly been into automation. and the with trends dependable more a we and somewhere getting stuck the the digits recent just I Wi-Fi it with been more networks industry opportunities have backyard mean it more question. have stuck for around basis, is we mesh automation. and in double

awareness use those and to with is determine behavioral great we really that pool price and to most need areas. we water And are what by. need to also really points monitor There water And care encouraged change. that what's You are manage drive to at that's into to participating balance people the necessary begin better to you technology chemistry. then

really am I excited. super what that's So

and most in, on And always the use heaters saw the people nice and shared say for their now more, spa the pools the putting openly the as that to they also was we on the those haves are this older builds We remodel I pad would that and pool. heater both matters.

around So we pump lighting the We in the variable penetration. trends earlier. of seen speed some trends saw working the have

to other see the the capabilities starting around now We extend are pool. that to

overall us the I penetration for points a of industry several think next the years. and And pad it's encourages over that excites us. So few

Andy Kaplowitz

your right you to is weeks Analyst transformative And mentioned John, sprint margin through in basis plan XX form come middle ideas the the that of missed remarks. But of prepared up had improvement. have with I you more might are the of to at you out the in this laid Day, that

could would sort of you sort what maybe ideas Any So update us on that? observations interesting out of come make? of of have sort you

John Stauch

Yes.

is Thursday actions. to the am So forward my that set team and looking this official I with brainstorming out executive of report

are. of and a my organization. got We the the what required broader have a to not for jump from engaged have lot answers we so know It's that part voice patience people

around jump list to would But originally I the value and was than really that that. seen on that to the programs I do them right that. ideas of say in more to that thought. But about going them it's encouraged surface. not about are to action seen And to the have put really, and participation of now am I we out I derive funnel I starting and sizable and a the how have the ideas So organization it from sequencing think the

Bob Fishman

probably Bob. And have been little patient than is This John. a less Yes. I

XXX margin even are this mid on complexity at of year, help is guide we go the that to we expansion Analyst this higher going at to the Day. year single Day confirm So huge where those basis There to the expansion plus and margin add I will number points future with prepared digit that a reduction ahead to of lot of A shared into that robot. grow revenue that really would that numbers. in and opportunity initiatives. the with pipeline drive remarks with said is opportunities very We Analyst

transformation ease of So situation distributors us well. all business better of results. big to a so much for embedded with this of as be is will and in our achieving Pentair, dealers part a doing And much, those

Andy Kaplowitz

guys. I appreciate it

Operator

question comes our And Pokrzywinski the Josh next you. with line of Stanley. from Morgan Thank

is open. line go Please Your ahead.

Josh Pokrzywinski

Good Hi morning guys.

John Stauch

Josh. Hi

Josh Pokrzywinski

or of the XXXX? that's what Maybe well, on of sense out is. the absolute just But or in inventory sort basis? would on there think of the And John, still strong an pace low be little how absolute if I that, that growth distribution just basis? for pretty be days Code of they of bit your on ZIP right kind commentary to were like normalized dial a or channel. sort probably hand some on would a kind given normalize levels back inventory versus were we in

John Stauch

see to plan to the you people's do we with and keep it. are getting get the up without and our be the catch day from up would specific, asking articulate are exhausting to us pick channel and teams trying more up every Josh, what it's to lower the can than releases to can That's we and partners sell-throughs that demand the single right. say it. then way customers equipment, are you should to I we and we pace other

Josh Pokrzywinski

of just touching stuff. some the discretionary helpful. on think got the other Got And on it. asked That's that last question quantified then I

imagine business? of than Is rest I You an kind mentioned pool would theater. heaters. replacement of more relative up How existing fit much of lot first the were is a those of that to fair? necessarily that

John Stauch

Yes. last year I saw we way, because of the that mentioned broader if you a it half really go into in recall. back

on think aren't which penetration of those top we us a one-and-done about back the seeing term are the gives still growing so And lines. long encouragement half, but necessarily anniversarying levels of that these when product we are we now

Josh Pokrzywinski

Got appreciate all. I it. it

John Stauch

Thank you.

Operator

from Graham And our question of you. comes next with Thank line the Rosenblatt. Scott

Your ahead. line Please is go open.

Scott Graham

And about Bob that was in a John, piece and couple Bob, quarter? you questions Jim. have cost. of would Good questions, to we split I out morning inflation I willing the the be price labor wondering, the saw of

Bob Fishman

one-third labor. Roughly speaking, two-thirds material,

Scott Graham

understand help maybe the on maybe And little bit side. a us labor

to So for hey, saying, unit heads your because your people. are you we lose are increases are pool retain the talking compensation about current them to going employees business to

kind there? employee you you more adds? to new that, get mind? if a So you don't aggressive little give got Are these color on Could of

John Stauch

Yes.

base, think paid then I back existing are to add more. to to you that mean employees I you the not sure loyal to look have your at go are add. that, dynamics market are if with when your And it's you what labor to at confronted make having you have real and least both.

care people dual and new a impact. to well So employee making are creates trying of. then sure One, that it your the taken get base current

Scott Graham

Thank for that. you

in that the some is a the there? in is IFT, the of of that reduction piece particularly $XX there beginning complexity, productivity, of the On million,

John Stauch

big a there. is think that encouraged we we I really around piece think in also their And There transformation. Bob mentioned that. is, Yes. efforts are And why with of that that's that

learn categories certain dullness. of we from think I

less customers. seen on how have reads out and it better for also complexity sourcing efficiencies in We

So way. in faster enterprise that a and bring across the we we that expect encouraged to by are trend really

Scott Graham

Okay. Thank you. pretty am Last question margins have a like, to you there. the looks just to going prices The a is to assets And But a speaking shoot question are very inflated, as which business anyway. you some have that. particularly improve of. it might IFT, needs not we fixing be to able of do I to are going answer, but to Thursday clear is path of that

embedded As is it your last I And the announced now? say, Is any within valuation. IFT this with where point this a in which that would the them particularly asset I multiple in they than am thinking some around space, IFT just your the down acquisitions higher line, affects assuming of pool prices off there is multiple in about EBITDA couple XX that space just spinning multiple. at of the are in times multi-area sort days where

John Stauch

I I Yes. the commitment its way expansion. I growth its towards order mean its good a mean we is, pipeline. continues build way Double think Scott, have it focus, to about to and am to the progress starting and demonstrate I I the its goals. by core margin its at encouraged this that really also encouraged complexity growing. digit really the IFT look am quarter out And I business reduction

margin us. I believe has going get And business expansion transformation Now of am front work. this that significant I through in to the

for action value it I important our the of portfolio. create is, large a our portfolio. is of So course then And part Pentair, that's can a believe big part of

Scott Graham

Got it. Thank you both.

Operator

with our line Rob Melius And the question Thank from Wertheimer comes you. next Research.

Please open. ahead. go Your line is

Rob Wertheimer

you. Thank everybody. Good morning

couple the had? cyclical on the work really So just that nice seeing bit water is correct? as are before. growth doing just some have but more then you less we at that kind are treatment, will of this But of Thank looking you Is have commercial. in are rebound there? the impact that from you times some maybe reiterate a solution what a product the impact the And to you timeline changes Or a underlying and you. rebound of and of this residential talked of are you doing allow structural from we than

John Stauch

Yes.

to pro treatment billion $XXX water roughly within just forma So remind business. you,

to I We houses think we the what we steady-state ability lumpy or are the has trying have it's to do as fairly now strong. where in But Little been with point got we get And residential at there. commercial. COVID as not through people's far residential have growth. have and a

it was QX. If happened, when pre-COVID restaurants And we that water. business huge you hospitality where recall, last it step to back to globally the to drink and a people slowly used offices back there generally be yet recovering as we has the That of was most where closure a are and our been way return commercial people to but of more normal be. to of not expect

products I on customers signs components KBI think we us think our the are our gives want addition of what have the services with we top of early ability there. very encouraged strategically and about to

we led, in think several would every to it are portfolio I last starting what quarters. residentially more say, was part and are So we think as that growing now return versus I being I in, of

Rob Wertheimer

Thanks.

Operator

comes our Thank And with Julian line from you. question the of Barclays. Mitchell next

Please Your open. line ahead. go is

Trish Gorman

for on Julian. Trish, is This morning. Good Hi.

of seasonality, this for So or to this Should just the full we XX% you second free on normal could cash. if occur free cash XX% represents us through And think free there cash very normal maybe I flow, pieces Under year? walk it's year? moving balance year-to-date. half of just the been flow expect strong year the the seasonality

Bob Fishman

flow linearity that Yes. strong. of strong. is, get beginning Balance at off really cash each remains What's of fast us we quarter very start helping the year free to the is the

I strong cash XXX% And following flow we free continue of So drive year year. expect another it income. to last net over will

Trish Gorman

inorganic you how you maybe the that segment? what significant we think there? talked or should might I to there. within Can one more. us to margin opportunities have about Great. end-market about just On you remind know IFT, guys exposure then increase look expansion But products your opportunities And

John Stauch

Yes.

and carbon capture they Day. to the fairly of at sustainable the feel also And position gas hinted provide would Analyst now that good the we able to right we a like need. we to there the also got we love be So like have continue solutions and scale and parts We portfolio. really partners regional that

do. heart we at of are everything We the

membrane We focused company. a are

the as have cross-pollinate And and applications expand solutions, consumer IFT even those opportunities into reminder, our a look use to filtration we some these to those technologies as So we in of filtration both we and like initiate though they segments. well. across in capabilities

areas would two of that say are definitely the the are in areas focus those IP I portfolio. So a

Trish Gorman

guys. Thanks Okay.

John Stauch

Thank you.

Operator

of question the our Thank Deane with Dray line Capital next comes you. RBC management. from And

Your line go open. Please ahead. is

Dean Tyler

Dean on Tyler, This is Hi. for Deane.

John Stauch

Well, hi for Tyler, Deane. on

Dean Tyler

But prepared missed are remarks. issues guys if mentioned availability anything in seeing? like of Sorry I could port or some you issues chain discuss of you congestions Obviously, the you there? the some supply are but other that you chain this, supply seeing product

John Stauch

are I in mean hearing, are inconsistent we way, type experiencing Yes, you of right. yes. and that some everything yes

most that even factories the efforts. it's and way very So say of tremendous supply had labor a agility in it's which in the when its how of availability though coming, our we have in need, we is to would we lean where predictability of rearrange inconsistent we forced put

us give we then example. we back complementary would in motors, chips, coming and to sometimes XX% all you Bob the be you said, be drives, demand why be that high later, the areas that be able serve. forward. would skills are to Main That's to it's to of for as and And very are are fishing we the product of move required would are products because an kinds teams, those XX% different producing challenges of

Dean Tyler

you that of planning provide IoT your you or guys launched have new just on could some on for updates products Thank that. recently Great. And any launching?

John Stauch

Yes.

really So on about of And of we we first all, in ability. IFT that. by lot are excited services the their IoT enabled are think, momentum I excited building

products on product solutions allow Home connect give capability Pentair a launched And continue to you our experience. to better you side add we We consumer have consumer to app. to that the

know the and are is be very of outcomes. I visible achieve interested would some making and we XXXX the and clearer say, we a making more technology mentioned XXXX for beyond. would of will And progress we as pool utilizing in like excited Tyler, have filtration to in that Analyst some launched accelerate I most Day in plug on and been soft because Deane I expect feel really progress we are to this, same the then So well we at and and smarter those take as technology about on chemicals pools less

Dean Tyler

much. Great. very Thank you

John Stauch

Thank you.

Operator

John Thank back am further to remarks. questions and for conference would I over turn the any like showing Stauch further I no you. And to

John Stauch

for you Michelle believe platforms continue their you is year strong phenomenal Thank we thank Pentair. future a experiencing We joining for today. in and leaders designated industry to have XXXX and spaces. bright of growth we us believe are the that business

expand to are that unlock beyond to by Michelle, base we do faster value balance and stronger, incremental participate propelled have by believe can continue can we is growing we businesses will We exciting already with overall have us transformation carved what is trends. the And are rapidly out our help than And that demonstrate XXXX. in that industries spaces tuck-in growth performance. journey finally, strategic are markets and begun on M&A. conclude Further, own value creation the and strong we get than to their in call. we above you faster sheet secular the to margins supporting global priorities are attractive and in allow designed to which our grow us

Operator

today's you conference Thank for concludes call. This participating.

great disconnect. a have day. You now may Everyone

Pentair (PNR) 27 Jul 212021 Q2 Earnings call transcript