Earnings call transcript Q1 2023

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Operator

Welcome to the Pentair First Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Shelly Hubbard, Vice President, Investor Relations. ahead. go please Shelly,

Shelly Hubbard

and Pentair's MJ, earnings quarter conference call. welcome you, first to XXXX Thank

with John this Chief me and call performance provide the On are first our release. Officer; today's we quarter's Bob details On on Chief outlined Stauch, and Fishman, press Officer. our in Financial as call, will morning's Executive President our

included a during provide intended can and slide performance release reconciliation the the items on to as On to measures substitute our between as understanding the superior non-GAAP our or supplement find GAAP Pentair and aid of investors should considered The Investor we in financial Relations results. earnings prepared financial today's to prepared differences company's of to with measures financial not accordance events remarks which addition further performance measures in the provided and a have will website, financial is call are additional non-GAAP be in you the and impact deck, clarifying reference. for They items these GAAP. that

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

plus opportunity questions. the up an open ask Following allow your to questions. our order then reenter for we up questions follow to call prepared Please everyone a to remarks, limit queue in the will one

is, and X a Pentair X Before earnings highlight glance I We believe this to strategic at in Pentair illustrate helpful our framework, I to for over through to wanted that it Slides who those a information hand is especially deck new Pentair our John, to overview. slide understanding Pentair.

purpose, provides companies. annual states as our solutions X which at framework on our us increases, – our a installed glance company, XX-year great Slide of water and record places dividend record performance, of values in a snapshot strategic our company. that XX-year Our our group a vision Pentair of mission, smart a performance our drive sustainable track small base track and

data disclosed segment. historical a Lastly, the was information ROS performance first Pentair slide. overview This our provides on X last and on is and level in sales quarter the Slide by on now consolidated supplemental illustrated one and section

you points see, years, consolidated the can we sales a annual by three of XXX rate basis have on a nearly over last expanded compound has by As XX% grown basis. ROS and growth

I over John. will now to call the turn

John Stauch

Thank you, Good morning Shelly. everyone.

with summary Slide begin results strong X. Let's our on QX in the executive

for in employees ROS for basis each shareholders. value thank EPS over million, pleased very life's as QX to $X post again improve, for a ROS income are achieved to performance, billion, with customers X% record XXX to and help XX.X%. to our over move, we creating to which and most nVent Segment We the $X.XX. Pentair talented the sustainably enjoy first to expanded sales rose fiscal while our XX% year strong Adjusted by rose income separation reflected levels water, resource. increased world I'd our essential segment start points once $XXX XXXX. X% quarter delivering like

strength of water Strong portfolio each reflect transformation our on and the greater our efficiencies across diversified progress initiatives, drove results which segment.

initiatives operational offset Solutions improved the more year-over-year. declines accelerated. ROS across realized enterprise or IFT, than Technologies, Flow segment as Water & We the Industrial expansion transformation our in and our in growth volume example, expected For and Pool efficiencies

realize are at the go-to-market ownership other which customer accountability these only also have We not to that identified. category revenue the and actions insights, and level, but the stream and savings or provides opportunities driving we

on IFT growth even across industrial primarily residential driven Slide our Highlights. irrigation and segment, move titled commercial, our Within QX was to Let's verticals. and X,

excited are margin about is as near segment We hold. our of profile and this growth the transformation term long taking and

We more are realized pricing, we drive offerings right opportunities the focused expansion. on ahead. and improved and capturing projects We excellence, expect margin sourcing in to operational with benefits

reduces COX. customer recapture We our also water usage had that sustainability-related for wins technology and

drove pump we in revenue replacement and aftermarket portfolio. our and Additionally, membranes

Solutions end-to-end complements well segment, Water segment to which to enabling The very solutions Solutions our to track, provide commercial ice us and was customers Manitowoc Water businesses, to on margins. progressed acquisition, filtration services. for Ice integration our water In we has accretive are our remains pleased with from

As for mentioned Pool expect last softer XXXX I to be quarter, our a we segment. year

decline has is inventory During channel we higher U.S. the volume. the first segment in unusual the strong last attractive years, quarter, Pool prior in three the base west, volume, declining grow market. continued over year-over-year and weather and the the an expected installed Despite year in contributed to the believe to demand

device. forward, installed have continue automated to roughly area an systems. their at look examples IntelliFloX time save directly XX% Pool automation, the consumers Flow control greatest the System. control in water known energy, their owners Variable Speed tip to IntelliCenter This look latest pools Today, invest the we helps and and pool as we pools innovations of fingers. to our as of pool and function enables are of Pump, also is we their and which opportunity As IFX specifically of leading their where from pool innovation, smart see Automation of the pool the Good maintain

and operation with built-in and over-the-air, features WiFi control installation OTA, the It updates. IFX setup also Our connectivity monitoring or first connectivity, simplifies Bluetooth for for pump which dealers. is IoT our remote and

start system technology flagship for feature-rich slower to to dealer improved a with the automation season. control and pool to the most been powered advanced the the Pump market have feedback scheduling pool easily Cloud seen pleased believe System Pool Market we're of AWS pools. IntelliCenter launch is and on positive, complex new system expandable reactions stability, is has we most connectivity, extremely The We and by even our and IFX reliability. despite overall demand the and Pool Automation the our

digital from lights pool quickly. and water for features automation multiple pool, customers Our centralizes more pumps. devices improve, times to us to technology products to enabling In to serve control continued our lead deliver our have better

XXXX Slide Making responsibility strategic corporate that targets. X, Essential. released we Moving social XX, titled report on have on we responsibility We are our to and progress recently April on made our Better excited

our world for people on to the create better a products water We future are planet sustainable a solutions advancing innovation focused and smart, sustainable on through through in solutions.

greenhouse XX, Turning a to compared gas XXXX XXXX. Social Strategic In which compared X titled baseline reduction emissions we decreased and Slide Scope by represents X.X% to to Targets. reduced our as withdrawal, XX% Responsibility our and we water X XXXX,

scorecard sustainability for each a Pentair product implemented sustainability development better also and us We opportunity process new new of to help the product. all impact understand

solutions Slide renewable products our examples efficiency Impacts we and continued total energy progress from XX, and electricity came water are sustainable Solutions, from our sources A Positive include made and solutions. titled Moving our we towards Pentair's XX% few support proud operations XX% in and of Products XX% to of have usage support efficiency. and of the

pumps EPA. ENERGY of For has Manitowoc This the in the eleventh Pentair the pool Ice recognizes consecutive Award energy STAR from the award and Partner year, Year received Pentair efficiency. excellence

billion hours million our saved Pentair nearly kilowatt manufacturer COX was to fact, XX a for pumps pool ENERGY Since XX.X saved reduced the of first this receive $X tons of and for in gas U.S. our of XXXX, cumulative equipment billion operating over have costs by In pumps. certification consumers. pool pool savings, greenhouse energy STAR emissions

CEO We diversified over Slide portfolio company delivered quality XX, to creation. turn positioned for titled Before sustained turn and Summary. our earnings let's I it value the to Bob, across

reflected strong QX and fiscal to by ahead growth ROS diverse was Our efficiencies well expectations. Manitowoc well driven assimilated transformation. as expansion which Ice portfolio of as a has a performance contributed water and sales our start from year,

and Bob in XXXX our quarter detail. will year discuss more second full guidance

on share our to current wanted outlook. I of some my with you thoughts However,

of the monitor developments environment. continue to operating look to we we remain and XXXX, an As uncertain remainder mindful of macroeconomic closely

focusing transformation company. the in risk-mitigation while We are investing implementing necessary is strategies, growth our funnels of and long-term accelerating on

our performance and QX lower previously to headwinds, due sell-through uncertainty our inventory and expectations, expansion, economic in margin revenue pool expected the progress. a reflecting reduced expected confidence reflecting both while We've transformation increasing our

as We Water XXXX also expect Solutions backlog performance and continue informed by to transformation efficiencies. and throughout IFT orders,

to adjusted EPS a our EPS $X.XX, guidance reflecting of end the midpoint As adjusted the our range while QX guidance high at our strong maintaining $X.XX. performance are we result, raising of

to are we business and drive strategy anticipate returns. in our continue shareholder water our long-term We diversified model, transformation which initiatives, confident will

increases. being to teens and our successful disciplined consecutive year capital long And we XXth record track of targeting a year high are strong have generating longer allocation. back of getting flow cash dividend term, This marks with ROIC. We

the team, We the advantages to have purpose, believe the to right the We to a right market. in win the very right competitive have this foundation strategy portfolio continue we right and solid succeed. and

to pass discuss Bob? will results and who I will now over the Bob, financial performance in call detail. our more

Bob Fishman

you, morning, and Thank everyone. John, good

QX our first residential titled by which delivered three partially We segments our declines offset across quarter Manitowoc pricing by on the acquisition, in contribution start Let's better-than-expected Pentair Ice growth X% Performance. of benefits driven XXXX and XX, sales Slide businesses. all were of volume

by better after slightly IFT and in XX% declined Our Water of primarily performance QX mainly in to offset and sales by the QX decrease in driven Pool offset growth weather sales last XX% X% unusual higher-than-expected X% by core in IFT in XX% West. driven and due in our lower-than-expected quarter were Solutions, in Core XXXX, Pool sales in Pool grew segment, in Water a Solutions. year's partially XX% of by the

productivity our year-over-year initiatives Manitowoc quarter XX%, XXX driven than more Ice margins accretive from from acquisition. our and on expanded and points basis sales First by offsetting XX.X%, to benefits return inflation, increased income price segment transformation

mentioned, hit John income in ROS QX record both segment nVent. post As of levels separation and

prior tax of other interest quarter expense with XXX.X X% million, We adjusted the of year. million. and rate XX% adjusted was delivered and the share was $XX $X.XX, during better-than-expected Net up count a EPS versus our

better-than-expected higher Our and initiatives. price offsetting sales, income by our better were transformation segment driven EPS and adjusted contribution from inflation

sales progress led points solutions, all by along was greater was our commercial of with across basis driven continued to growth strong equal included XX, or expansion margin XXX third of and Performance. the price X% IFT of XX%, Technologies points FX grew headwinds. Slide quarter sales Industrial in to XX% XXXX Please basis Core & QX Flow of expanded sales turn XXX labeled increased and income which on consecutive XX.X%, growth transformation improvement. industrial flow. points IFT businesses, in in to and result the than on inflation offsetting The Sales return segment flow quarter, two marking initiatives. increased a residential

the to Please was grew three Performance. product XXXX continued basis residential increased and points points to turn Solutions Slide channels. Core many of efficiencies income return volume The as transformation inventory QX, decline our driven as labeled Water primarily by Ice acquisition In sales on lines and in sales XXX%, expanded from acquisition XX.X%, well Manitowoc initiatives. Solutions XXX ICE driven XX% Water correction grew sales XX, QX our by our to due price. across Segment X%. our

Please XX, XX%, a The and Western helped primarily volume and offset QX, in volume prior quarter below labeled to QX points of to comparison. U.S. the year, points The decline benefit corrections year in XX weather declined was prior the XX slightly in Performance. which this Pool QX XXXX to first turn was In from carryover decline partially strong year's pricing the due the inventory our of year. Slide of unusual sales due expectations. Pool was this

on expanded initiatives. due lower Despite and return XXX inflation, lower rightsizing XX.X% significantly price from sales benefits points our year-over-year, to to sales to offsetting volumes basis transformation

Please Transformation to Slide XX, turn Expectations. labeled

realized progress regarding with make in sourcing, successes expansion. QX on We and margin pricing continue which to our drove transformation

expansion to As we by compared drive shared over expect XXXX. of XXXX we with quarter, XXX last year-end to as you points ROS basis

different foundation at for and pricing, a them. looking strategic in our playbook. one, wave across This which our strategies creates As dealer I programs and includes go-to-market pricing to we quarter, a pricing established last distributor mentioned better completed optimize new

this data We to use gain drive and better insight profitability continue by our forecast. and into customer to product category

a We believe pricing remains big opportunity.

building see are benefits and materialize. to capabilities We starting

of include expect categories. product pricing playbook We all waves implementation to of the future our across a

in along initiatives. furthest strategic are sourcing We our

mentioned material XX% previously, I've costs our roughly represent of As revenue.

focused XX% opportunities. that packaging, in negotiations like We have categories logistics castings, wave motors completed over MRO. electronics, one drives, on and of spend one Wave saving and included key material identified and XX% roughly

executive-level supplier supplier-dedicated and relationships supply through solutions, inventory value reduction, unlocked have We base resources, rebate enhanced programs.

for QX finished In spend groups, to two fleet was workshops and in QX, Wave plastics as team material supplies. spend such and process. cross-functional over and XX% wave XXX members transportation, of covers metals, goods, launched another implementation the Pentair and management purchased attended IT, begin as one molding, such office indirect commodity

We will XXXX. a and for XXXX this savings expect create funnel of

excellence, lean we out driving XXXX operations. longer-term operations and processes are build the In reducing across funnel. not We believe presents until as we our but beyond opportunities focused all on complexity this and

focusing organizational in Lastly, excellence portfolio on realignment skills across within top ample From a entire reduction our an to priorities. we and effectiveness standpoint, complexity our needed opportunities we and organization. the are sales organizational simplify functional remain for believe of

expansion targets. and material we to expect to We to more margin our contribute continue move to longer-term from benefits funnel transformation execution,

value-creation Pentair. transformation believe that large opportunity We continue initiatives for a will be to our

sheet Please at of with Manitowoc the flow. year. This and turn times. XX, the balance last the X.X of labeled acquisition July cash at leverage end We quarter slide pro to reflects forma the Slide ended of closing

Our swap Manitowoc ROIC with debt debt. contribution. entered Ice rate agreements was We interest order collar and rate of the our acquisition fixed Manitowoc expect and to at to from in variable XX/XX reminder a approximately the be by of of to XX.X%, hedge recently this X/X QX. EBITDA only closer the includes as into end now We to mix variable debt

five We and out our years. debt for in have maturing to the loans no years, is the next going majority significant of few three term almost debt long-term

million $XXX free of We seasonality in cash than roughly flow prior reflects year. QX, $XX typical and which was better million the used

We higher second reminder, interest expect quarter our the of continue to and performance free we capital to a income. our debt of with of reduction XXX% flow full on free cash As disciplined rate remain is in highest and quarter to environment. line typically the flow net the cash year historical focus be year, plan our with amid

titled XX, Slide year to XXXX Moving QX outlook. full Pentair and

For year for Also are the to sales be midpoint. approximately adjusted the year roughly $X.XX, full to X% updating we down $X.XX flat. the full guidance EPS expect raising we to to

net million, segment million, share income XX% million. XXX tax of million approximately increase corporate $XX expect interest to expense $XXX to approximately of and adjusted a count with to We rate and expense XXX XX% X% of roughly of

the sales our expect year's and last the businesses. to commercial approximately Ice businesses second expected For contribution and be volume versus Manitowoc offset of down to we are residential industrial our X% quarter, to flat expected QX as help from declines

to We to are $X.XX of introducing $X.XX, adjusted due of X% year-over-year which represents EPS volumes. lower pool approximately guidance a to primarily decrease approximately X%,

QX. improvement expect EPS versus quarter We adjusted in $X.XX an the the second in of

to expect expense XX% XXX income expense million, We XXX a of $XX interest share segment with around net million. million, of corporate to count million $XX tax approximately increase and X% coming roughly of rate to adjusted in X% and

we to be At approximately total XXXX expect X%. XX, year midpoint. Pentair Moving guidance down midpoint, the to titled at Slide full sales

as assumptions from new expectations compared mix We to now Solutions be Pool our expect now ago low-double sales the IFT sales expected the to to mid-teens approximately has due sales with sales in economic and lower be be original changed, midpoint digits, uncertainty mid-teen digits We days have. pool we our than to up and Pool construction. sales previously. and IFT and perform not range expect unchanged better to to sales XX decline down Water up low-single increased down While to

approximately new remodels aftermarket. and discussed we the Pool previous of our of in roughly assumptions compared we quarters, inventory sales be to down down remodels XX% and previous pools, with to and XX% prior expect of guidance, inventory versus XX% XX% have to relating down approximately consist XX% decline from current to new Within assumptions Pool the aftermarket down XX% approximately pools XX% of corrections. be now As from in our from two-thirds

more Pool price current carryover do year. to expect in return normalized expect XXXX to We in We headwinds after the demand absorbing roughly digits. mid-single significant of

as points increase XX.X% is XXX quarter. to X% to compared now to approximately nearly XX.X% income X% expansion ROS Segment to basis of compared expected with as previously last

We expected initiatives, are the which of of momentum Ice of by encouraged the Manitowoc are to significant drive and diversity our transformation portfolio, expansion. margin integration continued the our

the turn wanted we call I Q&A, is highlight over compelling Pentair believe for a I investment why opportunity. Before to that

Please turn to characteristics Slide that sets XX. There apart. six Pentair are distinguishing we believe

are three segments. a We diversified leader an innovation across driving on industry a with and all brand portfolio focus

efficiencies expected drive We margin have is a operational expansion. that to transformation strategy and

We focus have progress strategic provide people, responsibility targets. to highlighting XXXX corporate towards an solutions. water And we ESG published sustainable the smart, report, recently planet on just our governance our and

We have driving trends growth. end-market secular favorable

strong dividends. expect We and a sheet creation. to drive increasing are a XX years aristocrat we consecutive balance And of which cash with value we have flow, dividend additional

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

Operator

Thank you.

Mike now [Operator begin first session. question Today's Instructions] Please comes Halloran from Baird. question-and-answer will ahead. go with the We

Mike Halloran

everyone. Hi. Really really nice Good morning quarter. nice quarter,

of couple here. a So questions

First kind you have? how and of a things. you're visibility of of just on context from looking bit of talk Maybe are about that? then a side seeing you're What at What Man context bit can you Ice the little outlook? customers kind outperformance forward the around the on also little Any saying? where

Bob Fishman

– significant See been Manitowoc our the I perspective. get the often has question. We asked from Ice performance

is in $XX as And that's business. roughly of a have they sales from versus $XX and margin I million backlog business So doing think year, in them helped of one perspective. that this would around the XXs year. million thing we high again, in QX, Manitowoc, we drove filtration our that's significant plus say about business, more up plus than But that that is the go-to-market importantly, to if in one ice strategy, my services has one helped the way really adds that. and probably you business. commercial combine the to view and as opportunity three, go-to-market more think clearing They're last one

Mike Halloran

the on frame, on little around of know volume side then you? things, the levels particularly transformation, pool you provide we ahead little still then I where Maybe of how a more a volume can we're sustainability obviously, drivers the margin just range, that? particularly this margins of you that. were detail given you of given price And have on should think more of the behind bit context commented impressive the at. variability a but lot And

John Stauch

tag this think the factories. inefficiencies volume of And to team get couple in our not running out I'll our openly we to Mike, aligned I Yes. process came our talked years as from freight premiums one. the in inefficiencies And well that demands. supply about as from product we manufacturing last were having in those chain overtime the and

the inefficiencies the we some and going ups the benefits benefits in savings we're ongoing confidence confidence addition efficiencies realize around able of to As of inefficiencies. later to we to in regarding that clarity we huge transformation really Mike, are the were lot impacts most have positive spot saw demand more quarters of transformation big a piece away. a to are and of that. are getting that as the because pool, eliminate able we're in throughout these going the dealing we share operational in while buys and the were most have those too, and what what of with, visibility on really QX our channel, I those And we sourcing

Bob Fishman

channel those last seeing ahead a only us, I QX of correction pool volumes. nice did of back think in of and nice they to QX, lower really would a has rightsizing thing add the job job is done The year I

Mike Halloran

Bob. Thanks it. and John I appreciate

John Stauch

Mike. Thanks

Operator

from go comes Bryan Please with Oppenheimer. question ahead. next Blair The

Bryan Blair

morning Thank you. everyone. Good

Bob Fishman

morning. Good

John Stauch

morning. Good

Bryan Blair

of up outperformance. the ahead to follow wanted plan. Mike's Actually question Obviously, on Manitowoc on pacing

possible? strong the whether just XXs to for phasing figure, willing forma about range year, high EBITDA And on new you year-on-year. to XXXX? the pro mentioned think speak clarify margin Is And through that? are should You there's an accretion we growth to a ROS or lift how that

Bob Fishman

Ice our is is our It portfolio. first question. business answer And your as is an to that extremely number part well-run of Manitowoc a view ROS again,

the high have with transformation goal them get of business don't But is we in want to either. that advantage to to range margins ahead Our the of as and ourselves take continue keep XXs initiatives well. that

performance the well. now, exceptionally is For going

John Stauch

evolved, still took but our of And and in really across Everpure COVID both And as restaurants, portfolio, with mean, So that's in that we're a hits operations the also foodservice performance, global we're hospitality, the cetera. reminder, et openings as one I driving our Pentair our the when gyms, trends right? space dealing of well. operations, bigger the with services with Manitowoc filtration

customers got So some really solve feel this with space a make those customer continue that to to in in work visibility coming good that way that we're us. we've and solutions to together want

Bryan Blair

to within hear. offer, And Solutions, trends you All channel channel whether start makes more in and Any of to insight update may that of sense. It's be over couple year, obviously the into inventory? Water resi balance good can we anticipated. next was weakness quarters, in current terms the

John Stauch

Yes.

for delta negative residential most As seeing you can of modest our your our core when encouraging direct-to-consumer had channels, And – a still of they're at of across we're the growth when positive underlying part this people looking is and still But reminder, initiatives. are their best across trends, driven you end the have our by water in exits year-over-year water treatment look we've look that as they channels. homes.

Bryan Blair

Understood. I the color. appreciate

John Stauch

you. Thank

Operator

Brett The with Americas. from next question comes Mizuho ahead. Linzey Please go

Brett Linzey

Good Hi. all. morning

Bob Fishman

Good morning.

Brett Linzey

we of the transformation. sounds of like sort think It come to around a of about through or linear got With want as there to wave the the this to muscle two, XXXX? two anything is opportunities. phasing back wave you've these unique timing I wave the of lot Or one? to regards relative benefits of should Hi. organizational

Bob Fishman

as have have now. the transformation. They negotiations wave complete is different particular, four around waves, sourcing Yes. in the all And reminder, a just one initiatives in we major

$XXX time in same So of around million, we're at wave moving implementation, $XXX two. to parallel spend on the running activity the next million a the wave and one

in significantly and that really us it's in view our gives runway XXXX is nice but then more So XXXX, upside beyond. benefits also a

Brett Linzey

continues very assumption little strong if Okay. Was that with there upward might Got And for your a expectation? it. mean, be X% QX bit traction Or the there. full I be I'm better? year. on the little line in just realization price, tension curious to on just come QX in did a that

Bob Fishman

It little was the thought. quarter expected. we seen than better better come throughout be price bit than have slowly that discounting QX knew a always We would But we that would we year. less it and our down

certainly first of comfortable we're So with upside pricing and in had bit a little the quarter.

Brett Linzey

All quarter. right, got Great Thanks. it.

Bob Fishman

you. Thank

Operator

The Kaplowitz question Andy from ahead. comes with Citigroup. next go Please

Andy Kaplowitz

everyone. morning Good Hi.

John Stauch

morning. Good

Bob Fishman

Hi, Andy.

Andy Kaplowitz

I occurs, focused think of And pool back market do this impacted able have to much improved year pool on I been in QX markets take you've on am as Can to thinking QX? end And your Have in you supply chains or still that? you attempting share pool? for you equipment just focusing quarter? overall the normalization business pool how possibly a of second. quantify are the weather been

Bob Fishman

to So to weather relating it start QX. was in question, the of couple a points

that third did quarter. cause back what to be will are normal still us pool end it So belief of inventory the the slightly than thought. the We we season, which our levels to by is lower come – we in

So assumption that our there. be continues to

Third what? Andy, part of was your question,

Andy Kaplowitz

Share.

into have some get chains the have able sort supply As more of to share? market you take equipment gotten and better, been

John Stauch

the and excited those new product Yes. I about new mean industry market I focused offerings, on the again the getting mentioned, products. we're as and

want busy put and active, know in of more when of kind that you everybody to the things well. you just are very think I products is

built the itself, which and as full pump So automation that features we've actively channels really I my the first run dealer the been Bluetooth on Internet very product WiFi that IFX has the comments, be mentioned basic us allows pad. some the Pump, new training the which capability in and for into without was can

element of IntelliCenter have is one the to, then And new get both capability the about. we've still the improvement our which we're excited the we been third able coming for launched – excited filtration and that is second safety app, a again, The and we clarity IntelliCenter channel that in new space. about

talk about we the products it's getting if to bring the partnered the with again, those think going innovative most channel channel I having, come be the and new to and for to to from Pentair excited So products consumers. winning,

Andy Kaplowitz

businesses, conversations point of segment? John, What like then, your CapEx you talk with customers across Can the your such cycle? industrial look this as that strong. continues IFT about And durability at solutions, CapEx are to the

John Stauch

IFT Yes. both impressed to that lead the and Jerome's has De'Mon leadership continued he the with team I'm extremely when there way under was it.

want but also it know business on services what profitable is comes element brings aftermarket project Our leaders predictable that and growth growth the both the with that and we component.

then limited we've businesses. can So we on also Pentair bring the that for like bring we a to margin feel those growth and projects those at opportunity forward positive future

providing, which to are investments happening and the So we're I that again we think we the space, waste taking feel good about the engagements value. solutions have with customer the are

projects customers to So, value in are these investing while bringing end most cases, they it. our in are

we're an eye it. on keeping So,

can would remains But now, You slow strong. right see, investment. we that industrial to higher expect interest rates from the what pipeline

Andy Kaplowitz

Appreciate color, quarter guys. nice the

John Stauch

you. Thank

Operator

go Saree ahead. next with Please Jefferies. The Boroditsky comes question from

Saree Boroditsky

my questions. taking for Thanks

Just on bit kind building Pool. a little of

about season. the normalizing talked Pool You inventory after

early So the we into Thanks. just XQ and as you're you could if get buy get thinking as how potential should update into about what XXXX? look on we that like

Bob Fishman

levels We normalized was return to as out roughly normalized It at we to levels. closed expect early buy XXXX.

we return Pool we the significant from then more done season, by So growth. the be said, end Again, and correction as can difference perspective, our to normalized should no of inventory the there.

Saree Boroditsky

a we about when seen? I new entering the you should demand normalize thinking versus we on are And about the high we've XXXX, And think pool that construction talk normalizing are Thanks. how know you but about does increases, macro how then for environment? if aftermarket levels it's color price after really any recent early, weaker

Bob Fishman

that perspective, pools pool of XX% new new be that kind would a construction assume that we From we in to down mentioned XX% range.

we're So, new about again, estimating kind XX,XXX to this declined XXX,XXX; construction and XX,XXX XXXX, that XXXX back pool year, XXXX, around think and mark XXX,XXX pools; around new XX,XXX in in to XXXX, of of range. that and

view the aftermarket, do next this demand is is macroeconomic across the of that rates interest really inventory a more and on normalized new in the year, we environment, predicated Our pools but growth lot correction done. expect

when XXXX So, you headwinds. that significant normalized think has are you growth about looking at XXXX, against

are we Pool. turn XXXX, for the in we So, we here that story corner have positive optimistic a as

the $XXX just about we digits. that year We as a think started year. double to the down million thought a what of down be about that, headwind mid-teens. And of than more the low would did Pool reminder, if assumption we that And low we at you had absorbing beginning change are saying

double take of you million of low a you think through this there take work we again, and XXXX. if high end is ourselves mid-teens, $XXX up better So, year, digit its the setting down will for the way end that

we pleased great our of And even year. is Ice why of that, the the to one the able we guidance Manitowoc headwind were again, to midpoint this of and year bring increase IFT, with that reasons the that the were to start with up strength

Saree Boroditsky

color. the I Thank appreciate you.

Operator

ahead. from Jones next comes Stifel. go The with question Nathan Please

Nathan Jones

morning everyone. Good

John Stauch

morning. Good

Nathan Jones

difficult of backlog? backlog much performance from a Can reduction comp we going the talked you the down Follow-up And XX about in be talking was start burning year in about working quarter. Ice next that first that to backlog to off to there that are them how contributing quarter? with quantify with, the kind of to XX, increasing on sales Manitowoc Bob, you

Bob Fishman

don't I Nathan, the backlog, was between backlog. was have piece what split A

been commercial very July. And As Ice – been consistent in business overall, Manitowoc strong acquired the to we But only backlog at and but go-to-market we our has since Ice this Manitowoc with year, not with has is the grower. filtration a services. view historically, mentioned business in last

So will perform to our is Manitowoc continue well. view Ice

John Stauch

continue would the where as the to that suggest we'll at exit down right backlog levels. the same work order we that rates, and Yes. But you back these in look that Nate, at space. we order maintain to would and there order rates strong our now, begin the to year. getting ship I don't ice growth organic we're if our the to at is think normal will in rates business be at being able rates visibility believe today,

Nathan Jones

more a the fair across back to see and lead your about Thank, stuff by lead that then You're all we order than COVID normalization And down lot rates, normalization where the have about across were times be year? of Are times lead of times businesses? this that's timeframe? helpful. across end of We've that broad a they kind bit to Are of longer businesses XXXX a businesses. one going you talked the done there normalized are inventory coming levels, talking the of maybe basically should before still portfolio.

John Stauch

across the businesses SKUs, back the specialized of We a are of the In have fewer but majority normalized lead becoming quarter-by-quarter. we're few our high-running and and times. fewer to still those majority SKUs, products

Nathan Jones

the for color. Great. Thanks

John Stauch

Thank you.

Operator

Sachs. Brian with ahead. from comes Goldman Lee question next The Please go

Unidentified Analyst

question, Hey just for I Brian. everyone. level. had on This one maybe is Miguel high

if in anything – for your out real time on have everything the you seen given there, all? on banking I going are For the any just with concerns what at seeing commercial end guess, you sector? Thanks. markets, financing there

John Stauch

pressure I the commercials Pentair the don't that pumps we're offering into the a that we're mean, REITs think, the will have fire and back building challenges building I higher it. generally all those it's aspects. expecting because And into yes, own of and them modest just a we aftermarket And space. pumps have have that then in we then there. business water of city service space. think, that We anticipating the interest going offering. the that provide commercial be But do connect buildings huge the size pumps the I We rates put some to impact on to of Yes. and

Unidentified Analyst

Thanks I’ll on. fair Okay, a enough. it pass lot.

Operator

Steve ahead. JPMorgan. go is Tusa from question Please with next The

Steve Tusa

morning. good guys, Hi

John Stauch

are Steve how you? Hi

Bob Fishman

Steve. Hi

Steve Tusa

there bit. know the and the color were and went you like up mid-teens. might IFT industrial that you that a it any at I growth, through on it of little why guys markets beginning On driving so I more was commercial the like the strong? end Any call, can types the growth but missed give deeper the have solutions of

John Stauch

Yes.

again, talking teens mean, be. roughly Steve, the so focused. basis size, just for growth markets, has that into we we're into And industrial XXX primarily frame we're all, these about won first also markets. those the end what aftermarket, as I are I services. And would the think wastewater, on relative I to we're change commercial being focus two an us, to would and buildings. this So really been into We're be around and our irrigation, of mentioned, projects That around the larger business annualized some

Steve Tusa

Okay. had And the that was those quarter? stronger Is than expected were that in – guys I think right? you

John Stauch

historical it's it's but with line averages. stronger think than expectations, probably our Correct. in Well, I

Steve Tusa

and there? to the okay. seasonally And given EPS-wise? customers far pre-buy would but of then your the goes us any the the side, as this the of seasonally to XQ Right, out question like color how on you guide, I guess XQ fourth expect note the to quarter, Pool the XQ as in you've and play on quarter? And third behavior kind of anything kind fourth

Bob Fishman

turning down that a QX down more quarter. will than in should that the fourth and face then little doubt will the No QX that They XX%. be pool and be corner in

the think an improve be kick and QX we of initiatives challenging a improve. will and most So, then from then will lot probably transformation to quarter, EPS EPS Pool QX starts as these in perspective,

Steve Tusa

more… One

John Stauch

their anticipate is are the that in Steve, the there sense And obviously, more any they anymore. working do financing in pay they channel bill of the they hardly cycle. in don't are out that paying, of same inventory how jobs the dealer we and

we'd be to distributors. and normalized upon And sequentially QX a of be try we the and normal. of will referring growing for we're the everybody Pool And behind to based end expect all aligned there so continue QX is meaning is to mean and by XXXX. grow inventory end to conversations, by the channel from us, to inventory burn are as inventory and the lower from gone our which then And for QX then QX, feedback than would we that that QX, us through lot head

Steve Tusa

maybe is capture the that a that comes into with aggressive there that assume past? in is the there more you signs And than normal One have pricing, we in price year on there to getting exit pockets? you rate this capture? it differently that's are any next Should approaching are – price are When people your downturn question. – like year? Or the what's

John Stauch

I areas, think normal to we would back be really going Steve.

Steve Tusa

percent? is Which what, a of like couple

John Stauch

like digits, in handle going too you're commodity selling mean the that normalized I labor it, your to upon you're sure being and and way able early I based or single pricing to you're out any mean, general Low you're effectively call fluctuations wages. but – more assumptions making that value, are

Steve Tusa

for always. color as Thanks Great. okay. Yes, the

John Stauch

you. Thank

Operator

The ahead. Graham next go from with comes Capital question Loop Scott Markets. Please

Scott Graham

the Pool Hey was Slide for just good morning taking you break for – down all. the you Thank on year. I my view question. XX, where

So quarter the the that this how XX% from already of remodel to new of much of happened? I down there, much is what's was first versus was How weather XX%. year mean, rest sort the of went

Bob Fishman

was It really wasn't higher weather-related as as much interest the economic rates. it uncertainty, just the

it assumption So remodel that that and to was was by new bringing was our related down X%, that. more

John Stauch

all to QX but of Yes. this Scott, not and related in and QX. adjustment QX most QX West and QX QX, weather, it's QX, mean, the QX. is And then, I

Scott Graham

Last out to Could inventory. of it. that inventory. were give quarter, sort kind not well you of between end, that Got to parse time? sense. this on And versus the you aftermarket impacts the same, Okay. aftermarket the some enough color same Makes

Bob Fishman

Yes.

that, the or think years, a to and bought heaters, Our third aftermarket relating correction XX% so the of mix view those is in the items products. down of types advance over is roughly lighting, the inventory were of last two-thirds so that to relating couple the

Scott Graham

in you Thank us, of that Yes. is some and I bought have, you in what lined have the for leverage Got this, business We've tell to and with but doing you. and distribution water. kind channels Everpure you right last now varying of you doing into three And what up we're pieces is What now to know Ice when going business? this starts commercial question you kind this had guys in kind fits of of in of different you thing. Manitowoc kind sort it. plans back the really first that Could the commercial? you. are market of

John Stauch

on and the the appreciate I I to where all about more side. first the market experimenting always to Global think starts are question. to trying fits how business residential of Yes. and go differently. I'd mean, say to or We're just consistent convinced strategy channel, now channel, with that's as residential, their accepting pro and we be with forward. going pro to channel, leads pro in our drive we our are partner that go that's

is we've with wider a to that a we and filtration really capability into RO And strength that side, offering of and systems strong selection customers. the added our core customers. able discuss in What the brings always across we're end-to-end commercial had drive value productivity our Manitowoc to OEM solutions commercial products our Everpure On and sell customers. the ultimately,

we're very and under believe and progress. customers. to that's using integrated leadership combined as excited I very strategies that we've go-to-market value run team, with the And reminder, drive our that So for pleased one the a to mean, sustained team going And Manitowoc all I those business.

Scott Graham

Thanks a lot.

Operator

from Dray comes Deane RBC question The next with Please ahead. Capital Markets. go

Deane Dray

Good morning you. everyone. Thank

John Stauch

Deane. morning, Good

Bob Fishman

Deane. Hi

Deane Dray

cleanup couple questions here. of Just a

it water financing. there's dealer to on side the maybe of Pool hearing banking the in construction. regard with consumer impact a if or side, question, you sort commercial any answered follow-up Just turmoil Interested on

personal customers a loan. construction Some pool with finance a

anything there out is would margin you there? that Just at call the

John Stauch

Yes.

going geography think demographics. I and to it's vary by

think that consumers I rates us believe impact current turmoil some all home come because used interest lot could form that has of varying that slightly the is the buyers. there from do And I economic that's of and type think in and new the sales. it have serve lower channel, we're I to of expectation the equity or see remodeling as Bob's Deane, well some these it space think it. degrees a of impacting pools some of to of those remodel Pool Also, borrowing going might on

and what they out. is uncertainty bigger rates the think when are I to where settle happens interest

hopeful will clarity and what the that predict as get year people we're longer-term interest can So be. we rates this exit we

Deane Dray

you all And fill just able Yes. That's supply construction to were that on of it thinking clarify That's ago we Where about Is the – all this they Is to been of labor so are way helpful. a we've part the the talking demand? year number were the equation? the on stand? at really constrained of supply or does Pool outlook, capacity. about it. how

John Stauch

they're more, up and backlog sell believe had and us and out pools to on the that probably us finishing areas. into normalized be pool bring more will that dealer pre-bought the what equipment, our consumers. value remodeled upgrades for trying We our pattern channel the back mean, then call provide think of I at Yes. the that the they'll they works I was normal how which to I they're

Deane Dray

just high-quality what have And carryover expectations. if – color to is But above pricing? answer. margin through impact significantly maybe Gross give to last I there, was Great. for could the just know us take you a Bob. problem our was, please? that's one how me, for a you Just do there

Bob Fishman

couldn't it Yes. pleased been future. should perspective, was different expansion. drivers a margin I have margin number the our drive From more in that of expansion the with sustainable

last better the of job removing to made, did year. that existed we much So the a earlier inefficiencies point

and better think didn't discounting out air have even in we the Again, So think perhaps put lower as volumes pricing carryover transformation as that got in an that expected to about price forward. think had things read about QX go all logistics, in good assumption because had at be then we out significantly all but Those buy do rightsizing spot how we felt our from we about better getting to nature Manitowoc; quarter. read of the about those done. just including we than freight, the in first electronics, on initiatives, pool. activities should that the are accretive better finally, and The sustainable

Operator

Mitchell question next ahead. go Please Julian The from Barclays. with comes

Julian Mitchell

EBIT I just got you've morning. laid bridge out. at look Good assumptions the of Hi. the sort to that wanted

got at in at million $X narrow $XX you've looking that productivity headwind to I'm tailwind sort XX, for from to very million. inflation, the close understand, quarter Slide on trying first that when year the of Just quarter the

out two whole, those at look year? thinking we productivity through on Sort narrow headwind inflation steadily year could you the As please? steadily? anything two as and about a those move up the of as flesh inflation Does are of a you go pieces, kind as and productivity, you how pieces,

John Stauch

you it. nailed think I

put and in quarters it starts think headwinds continue productivity got year-over-year to last getting sequentially off we slide price starts you anniversary contribution that it; And to as price here inflation through to some it better. midyear to. year-over-year see around of I our three think we increases the wraps year. away compares And on we've

Julian Mitchell

of about And that your XX the I down there's then not just year-on-year. it, kind my different been for quick follow-up. what market, but just it's realized on did questions pool The guide year, revenue from in mid-teens you QX

of like to QX. that normal steep of only So makes trying of those getting sort the everything exit rates, year-on-year residential of we decline of say, guided assuming the understand have the by and I comps you kind XX% XX%, kind QX through the and sort cadence, the just – sales in rate the what's of The declines has to in understand down the there, you're that water else. inventories Because year sense can so rate the back succeeded given year noticed piece QX QX? in down narrowing in, beginning

in down Just understand mid-teens that of about QX mid-teens Pool down want we to kind off already? the how in think

John Stauch

we'd slightly of as the we to inventory last buy will challenges head some about but positive. in be tailwind impact being still not biggest Yes. to have year, and of QX just burn Think XXXX. that We'll the having run the into up year-over-year expect early headwinds QX QX experiencing. inventory that the then of generally we're And with

Operator

The last with ahead. go Giordano Cowen. question Joe TD Please comes from

Joe Giordano

guys. morning good Hey,

John Stauch

morning. Good

Joe Giordano

I macro margin exclusively top driven here. uncertain is But going interesting environment have expansion in mean, the on have by line on price you quarters can IFT, that obviously there a on to the So now. it's three by like been what's

to want market than be to how to So of a on type we an up-cycle a get capitalize flat we that into like do able on down-cycle? like as growth rather different eventually now position where portfolio you side, capitalizing right the see

John Stauch

projects to don't. several our there's mean your in higher I ones are quickly. we've ones the revenue what our start very you'll we being basis critical that point yes, expectations work And price we this which And real produce being mean that on as contribution. line be and of being a focus digits, our I to customers, to streams see on got able regular more on, to Yes. I IFT. a think low-single we're less with value. business value we take And with do in with

Joe Giordano

that's possible the Fair this, then around that, of up, like danced Pool organically? And fourth enough. in right, in but we've kind quarter

Bob Fishman

It's possible.

after its roughly through our view Our makes flat QX. that now and slightly correction way to view, QX would in be inventory up

Joe Giordano

had. I Thanks all That’s Yes. guys.

Bob Fishman

you. Thank

John Stauch

in day. All call. us. know is part just reiterate you want some our to thank missed busy key I right. joining this a We themes of call Well, earnings our for case earnings

expansion our across three First, drove diversified QX segments. with and margin portfolio all sales initiatives transformation growth

Water expect segments upside. as IFT we drive well efficiencies transformation as our in Solutions Second, to strength and

and expected. And expect continue drive the initiatives identified to deliver start year implement while Third, we to had our strong beyond, that actions guide creation midpoint adjusted the beyond expected as as our be we of than savings. raised EPS acknowledging to value our Pool to we expect we QX's XXXX this to transformation our are year. initially of XXXX well due greater fiscal in Fourth, towards benefits full and confidence softer performance, in later we sustainability

your everyone, you, Thank day. enjoy and

Operator

for has you now Thank concluded. your conference The participation.

now disconnect. may You

Pentair (PNR) 27 Apr 232023 Q1 Earnings call transcript