Q2 2023 Pentair PLC Earnings Call

July 27, 2023

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Good morning, and welcome to the Pentair second quarter 2023 earnings Conference call.

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

All participants will be in a listen only mode for the duration of the call and should you need any assistance. Please signal a conference specialist by pressing the star key followed by zero.

Thank you Joe and welcome to Pentair second quarter 2023 earnings conference call on.

On the call with me are John <unk>, our President and Chief Executive Officer.

After todays presentation, there will be an opportunity to ask questions.

And Bob Fishman, Chief Financial Officer on today's call. We will provide details on our second quarter's performance as outlined in this morning's press release.

To ask a question you May press Star then one on your telephone keypad.

To withdraw your question. Please press Star then two.

Please also note that this event is being recorded today.

On the <unk> Investor Relations website, you can find our earnings release and slide deck, which is intended to supplement our prepared remarks during today's call and provide a reconciliation of differences between GAAP and non-GAAP financial measures that we will reference.

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

Thank you Joe and welcome to Pentair second quarter 2023 earnings Conference call.

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

The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP.

They are included as additional clarifying items to aid investors in further understanding the company's performance. In addition to the impact these items and events have on the financial results.

On the Pentair Investor Relations website, you can find our earnings release and slide deck, which is intended to supplement our prepared remarks during today's call and provide a reconciliation of differences between GAAP and non-GAAP financial measures that we will reference.

Before we begin let remind you that during our presentation today, we will make forward looking statements, which are predictions projections or other statements about future events.

The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP.

Listeners are cautioned that these statements are subject to certain risks and uncertainties many of which are difficult to predict and generally beyond the control of pentair. These risks and uncertainties can cause actual results to differ materially from our current expectations.

They're included as additional clarifying items to aid investors in further understanding the company's performance. In addition to the impact these items and events have on the financial results.

We advise listeners to carefully review the risk factors in our most recent Form 10-Q and Form 10-K.

Before we begin let me remind you that during our presentation today, we will make forward looking statements, which are predictions projections or other statements about future events.

Following our prepared remarks, we will open up the call for questions. Please note that we will limit your questions to two after which we ask you to then reenter the queue in order to allow everyone an opportunity to ask questions.

Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of pentair.

Before I hand, it over to John I wanted to highlight slides four through seven and our earnings slide deck.

Risks and uncertainties can cause actual results to differ materially from our current expectations.

That include our strategic framework pentair at a glance, a pentair overview and our newest slide illustrating our ESG highlights and progress there.

We advise listeners to carefully review the risk factors in our most recent Form 10-Q and Form 10-K filed.

These four slides provide a good snapshot of who pentair is especially for those new to our company.

Our strategic framework States, our purpose vision mission vision and values that drive our performance as a smart sustainable water solutions company Pentair at a glance on slide five provides a great snapshot of our company our performance our installed base and our 47 year track record of annual dividend increases, which places us in a small group of <unk>.

Before I hand, it over to John I wanted to highlight slides four through seven in our earnings slide deck.

That include our strategic framework pentair at a glance at Pentair overview, and our newest slide illustrating our ESG highlights and progress. These four slides provide a good snapshot of who pentair is especially for those new to our company.

Companies the.

<unk> overview on slide six provides our historical sales and <unk> performance on a consolidated level and by segment.

Lastly, our ESG highlights and progress shown on slide seven are a testament to the important work our teams do to integrate sustainability into our operations product innovation and long term strategy. We are very proud of our achievements to date, especially considering the early stages of our program, which began just about three years ago.

The picture overview on slide six provides our historical sales and RASK performance on a consolidated level and by segment Lastly, our ESG highlights and progress shown on slide seven are a testament to the important work our teams do to integrate sustainability into our operations product innovation and long term.

I will now turn the call over to John .

Thank you Shelly and good morning, everyone.

Let's begin with our record Q2 results and the executive summary on slide eight.

In Q2, we achieved record sales segment income return on sales.

And free cash flow following the separation of <unk> from home care in 2018.

The strategy, we are very proud of our achievements to date, especially considering the early stages of our program, which began just about three years ago.

Specifically in Q2 sales increased 2% to nearly $1 1 billion.

I will now turn the call over to John .

Segment income increased 14% to $234 million.

Thank you Shelly and good morning, everyone, let's begin with our record Q2 results and the executive summary on slide eight.

Ross expanded by 230 basis points to 21, 6% driven by margin expansion across all three segments.

In Q2, we achieved record sales and segment income return on sales EPS and free cash flow following the separation of invent some pentair in 2018.

Adjusted EPS rose, 1% to $1 three.

And free cash flow was $433 million.

With another strong quarter financial results, we are raising our 2023 adjusted EPS range to $3 65 to $3 75, which increases the midpoint of our range to $3 77.

Specifically in Q2 sales increased 2% to nearly $1 1 billion segment income increased 14% to $234 million.

Our west expanded by 230 basis points to 21, 6% driven by margin expansion across all three segments adjusted.

We also continue to strengthen our balance sheet and reduced our net debt leverage ratio to two two times EBITDA at quarter end down from two six times in Q1.

Adjusted EPS rose, 1% to $1, three and free cash flow was $433 million.

We believe our record second quarter performance demonstrates the power of our global diversified water portfolio and strong execution across all three segments.

With another strong quarter financial results, we are raising our 2023 adjusted EPS range to $3 65 to $3.75, which increases the midpoint of our range to $3.70.

Water solutions and pool.

Our strategy to help the world sustainably move improve and enjoy water life's most essential resource is proving its resilience.

We also continue to strengthen our balance sheet and reduced our net debt leverage ratio to two two times EBITDA at quarter end down from two six times in Q1.

For example, like last quarter sales growth in our Iot and water solutions segments more than offset the expected sales volume declines in pool year over year.

We believe our record second quarter performance demonstrates the power of our global diversified water portfolio and strong execution across all three segments <unk> water solutions and pool.

Margin expanded across all three segments, driven primarily by price.

Cost actions to right size, our direct labor and pool, the elimination of 2022 manufacturing and supply chain inefficiencies and continued progress on our transformation initiatives that are beginning to readout.

Our strategy to help the world sustainably move improve and enjoy water life's most of central resource is proving its resilience.

For example, like last quarter sales growth in our Iot and water solutions segments more than offset the expected sales volume declines in pool year over year.

Lastly, I want to thank our employees across the globe for their hard work dedication and contribution to delivering another strong quarter for customers and shareholders.

Margin expanded across all three segments, driven primarily by price.

Let's move on to slide nine titled Q2 segment highlights.

Cost actions to rightsize, our direct labor and pool, the elimination of 2022 manufacturing and supply chain inefficiencies and continued progress on our transformation initiatives that are beginning to read out.

Within Iot, we achieved record sales driven by double digit growth across our commercial and industrial businesses.

Commercial and infrastructure flow delivered strong sales growth across all categories, primarily due to our strong backlog aftermarket and replacement sales in our pump portfolios carryover pricing actions from 2022 and stabilization in the supply chain.

Lastly, I want to thank our employees across the globe for their hard work dedication and contribution to delivering another strong quarter for customers and shareholders.

Let's move on to slide nine titled Q2 segment highlights.

Industrial solutions also delivered strong sales growth driven by global key account expansion, new business partnerships and aftermarket and replacement sales in our components and membranes portfolios.

Within ice tea, we achieved record sales driven by double digit growth across our commercial and industrial businesses commercial and infrastructure flow delivered strong sales growth across all categories, primarily due to our strong backlog aftermarket and replacement sales in our pump portfolios carryover pricing actions from 2000.

Record margins in Q2 were primarily driven by price and transformation. In addition to implementing our transformation initiatives in Iot. We are also focused on capturing the right projects with improved offerings to drive margin expansion.

22, and stabilization in the supply chain.

And water solutions, our commercial offerings drove very strong sales growth and margin in Q2, which benefited in part from the continued recovery of foodservice and hospitality venues post the pandemic and a shift in consumer behavior from products to services and.

Record margins in Q2 were primarily driven by price and transformation. In addition to implementing our transformation initiatives and ice tea. We are also focused on capturing the right projects with improved offerings to drive margin expansion.

In fact in 2023, the number of locations of the top 500 chain restaurants in the U S. Now exceeds the 2019 benchmark. According to the Technomic top 500 chain restaurant 2023 report.

Also saw strength in commercial filtration sales in North America.

Our Manitowoc ice acquisition continued to outperform our expectations delivering strong sales and margins that were accretive to the water solutions segment.

Over the last few years Manitowoc ice has expanded its sales driven by a focus on its consumer with a targeted go to market strategy.

The us now exceeds the 2019 benchmark according to the Technomic top 500 chain restaurant 2023 report.

<unk> management of macro supply chain challenges and reliability and its supply chain to deliver product with better lead times.

We also saw strength in commercial filtration sales in North America.

We're very pleased with the acquisition and how it complements our commercial water solutions businesses, enabling us to provide end to end water solutions for customers from filtration to ice to services.

Our Manitowoc ice acquisition continued to outperform our expectations delivering strong sales and margins that were accretive to the water solutions segment.

Over the last few years Manitowoc ice has expanded its sales driven by a focus on its consumer with a targeted go to market strategy effective management of macro supply chain challenges and reliability and its supply chain to deliver product with better lead times.

Lastly, we believe that the residential water treatment is nearing the bottom of the cycle. We believe our residential business is stabilizing and lead times have improved.

Awareness of DFAST or forever chemicals that have been found in drinking water continues to rise. We are proud to say that we have products today for residential consumers that reduce P. Fast to current certification levels and we continue to drive new innovation and invest in R&D to be able to provide more products that are certified to reduce PFS.

We are very pleased with the acquisition and how it complements our commercial water solutions businesses, enabling us to provide end to end water solutions for customers from filtration to ice to services.

Lastly, we believe that the residential water treatment is nearing the bottom of the cycle. We believe our residential business is stabilizing and lead times have improved.

We believe we have positioned the company well to be a leader in this space.

Within pool 2023 has been softer in difficult year, as we expected given the higher than historical demand in 2021, and 'twenty two coupled with supply chain challenges that disrupted our lead times during those periods. Our lead times have returned to approximately five days on most of our products. However.

Awareness of P fast or forever chemicals that have been found in drinking water continues to rise. We are proud to say that we have products today for residential consumers that reduce P. Fast to current certification levels and we continue to drive new innovation and invest in R&D to be able to provide more products that are certified to reduce P. Bass.

The channel continues to work through higher inventory, creating a sell in versus sell through and balance for pentair and 2023 <unk>.

We believe we have positioned the company well to be a leader in this space.

Within pool 2023 has been a softer in difficult year as we expected given the higher than historical demand in 2021, and 'twenty two coupled with supply chain challenges that disrupted our lead times during those periods. Our lead times are returned to approximately five days on most of our products. However.

Despite these lower volumes in Q2, we drove significant margin expansion from price cost actions to rightsize labor to lower volumes.

Eliminated 2022 sourcing and manufacturing inefficiencies and delivered transformation savings.

We continue to expect Q3 to reflect the bottom and pool volume for pentair as we expect higher channel inventories to correct, allowing for sell in to be more closely aligned with sell through.

The channel continues to work through higher inventory, creating a sell in versus sell through and balance for pentair and 2023.

Despite these lower volumes in Q2, we drove significant margin expansion from price cost actions to rightsize labor to lower volumes eliminated 2022, sourcing and manufacturing inefficiencies and deliberate transformation savings.

We have noted in the past our typical pool sales mix reflects 40% from new and remodeled pools and 60% from the aftermarket brake and fixed replacement sales, while the number of new pools. This year is lower than the elevated number of new pools built during the pandemic. The installed base of U S. Pools has continued to grow despite.

We continue to expect Q3 to reflect the bottom in pool volume for Pentair, as we expect higher channel inventories to correct, allowing for sell in to be more closely aligned with sell through.

Despite the short term reset in 2023, we believe pool remains an attractive market.

Before I turn it over to Bob Let's turn to slide 10, titled CEO summary.

We have noted in the past that our typical pool sales mix reflects 40% from new and remodeled pools at 60% from the aftermarket brake fixed replacement sales, while the number of new pools. This year is lower than the elevated number of new pools built during the pandemic.

We delivered another quarter of quality earnings with Ros expansion across all three segments, our IFC in water solutions segments more than offset pool volume declines and our transformation initiatives are well underway.

Stall base of U S pools has continued to grow.

Our strong first half resulted in another 2023 guidance increase and we believe our pool business is well positioned for return to growth following the channel inventory correction, which we expect to be completed by Q3 quarter end.

Despite the short term reset in 2023, we believe pool remains an attractive market.

Before I turn it over to Bob Let's turn to slide 10, titled CEO summary.

All in we are building a strong foundation to drive long term growth and profitability across our diverse water portfolio.

We delivered another quarter of quality earnings with our west expansion across all three segments, our IFC in water solutions segments more than offset pool volume declines and our transformation initiatives are well underway.

We were introduced in Q3 guidance and raising the full year adjusted EPS range to $3 65 to $3 75.

The midpoint of $3 70 is up <unk> from prior guidance due to strong Q2.

We've also updated our segment sales expectations to reflect stronger sales in <unk> and water solutions driven by a strong first half of 2023 and lower expected sales in our fuel segment.

All in we are building a strong foundation to drive long term growth and profitability across our diverse water portfolio.

We continue to closely monitor macroeconomic developments and remain mindful of an uncertain operating environment we.

We were introduced in Q3 guidance and raising the full year adjusted EPS range to $3 65 to $3 75, the midpoint of $3.70 is up five from prior guidance due to strong Q2. We have also updated our segment sales expectations to reflect stronger sales in <unk> and water solutions.

We continue to implement risk mitigation strategies, and we are accelerating transformation funnels as necessary, while focusing on investing in the long term growth of our company.

We remain confident in our diversified water business model long term strategy and our transformation initiatives, which we expect to continue to drive shareholder returns. We have a long successful track record of generating strong cash flow and being disciplined with capital allocation. We have achieved 47 consecutive years of dividend increases and our <unk>.

Driven by strong first half of 2023 and lower expected sales in our core segment.

We continue to closely monitor macroeconomic developments and remain mindful of an uncertain operating environment.

We continue to implement risk mitigation strategies, and we are accelerating transformation funnels as necessary, while focusing on investing in the long term growth of our company.

<unk> high teens ROIC.

We have a strong balance sheet and an enviable five year track record and financials.

Main confident and our diversified water business model long term strategy and our transformation initiatives, which we expect to continue to drive shareholder returns. We have a long successful track record of generating strong cash flow and being disciplined with capital allocation. We have achieved 47 consecutive years of dividend increases and our <unk>.

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

Thank you John and good morning, everyone.

Let's start on slide 11, titled Q2, 2023 Pentair performance.

We delivered record second quarter sales of nearly $1 1 billion up 2% year over year.

We're getting high teens ROIC C. We have a strong balance sheet and an enviable five year track record in financials.

This is compared to our previous sales record in last year's Q2, a $1.06 billion post the separation of invent from pent there in 2018.

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

Our IMT and water solutions segments continued another quarter of strong sales performance, which more than offset lower pool volumes.

Thank you John and good morning, everyone.

Let's start on slide 11, titled Q2, 2023 Pentair performance.

We delivered record second quarter sales of nearly $1 $1 billion up 2% year over year.

Sales growth in Q2 included strong price contribution and the Manitowoc ice acquisition, which closed in July of 2022.

This is compared to our previous sales record in last year's Q2, a $1.06 billion post the separation of invent from pentair in 2018.

The volume decline in Q2 was primarily related to our pool and other residential businesses.

Which was partially offset by strength within commercial and industrial.

Our I S T and water solutions segments continued another quarter of strong sales performance, which more than offset lower pool volumes.

Please note that we're I referenced record results I'm, referring to pentair performance post the separation of advent from pentair in 2018.

Sales growth in Q2 included strong price contribution and the Manitowoc ice acquisition, which closed in July of 2022.

Core sales improved 9% in both Iot and water solutions with pool declining 28%.

The volume decline in Q2 was primarily related to our pool and other residential businesses.

Compared to the prior year periods pool sales increased 19% in Q2, 2022, and 49% in Q2 2021.

Which was partially offset by strength within commercial and industrial.

Please note that we're I referenced record results I'm, referring to pentair performance post the separation of advent from pentair in 2018.

Second quarter segment income increased 14% to a record $234 million and return on sales expanded 230 basis points year over year to a record 21, 6%.

Yeah.

Core sales improved 9% in both Iot and water solutions with pool declining 28%.

Compared to the prior year periods pool sales increased 19% in Q2, 2022, and 49% in Q2 2021.

This improvement was driven by price more than offsetting inflation accretive.

Segment margins for Manitowoc ice acquisition.

The elimination of 2022 manufacturing and supply chain inefficiencies and.

Second quarter segment income increased 14% to a record $234 million and return on sales expanded 230 basis points year over year to a record 21, 6%.

And productivity benefits from our transformation initiatives.

We delivered record adjusted EPS of $1 <unk>.

Net interest expense was $33 million and our adjusted tax rate was 15% during the quarter with a share count of $166 1 million.

This improvement was driven by price more than offsetting inflation occur.

Accretive segment margins for Manitowoc ice acquisition.

The elimination of 2022 manufacturing and supply chain inefficiencies and.

Please turn to slide 12, labeled Q2, 2023, industrial and flow technologies performance.

And productivity benefits from our transformation initiatives.

Industrial flow technologies sales increased 9% year over year, driven by commercial sales growth of 28%.

We delivered record adjusted EPS of a dollar and three cents net interest expense was $33 million and our adjusted tax rate was 15% during the quarter with a share count of $166 1 million.

In industrial sales growth of 13%.

Which more than offset a decline in residential sales up 4%.

Segment income grew 27% and return on sales expanded 250 basis points to 18, 2%.

Please turn to slide 12, labeled Q2, 2023, industrial and flow technologies performance.

The fourth consecutive quarter of equal to or greater than 200 basis points of improvement.

Industrial flow technologies sales increased 9% year over year, driven by commercial sales growth of 28%.

The strong margin expansion was a result of price offsetting inflation and continued.

In industrial sales growth of 13%.

Good progress on our transformation initiatives.

More than offset a decline in residential sales of 4%.

Please turn to slide 13 labeled Q2 2023 water solutions performance.

Segment income grew 27% and return on sales expanded 250 basis points to 18, 2%.

In Q2 water solutions sales increased 51% to $336 million driven by our Manitowoc ice acquisition volume and price.

The fourth consecutive quarter of equal to or greater than 200 basis points of improvement.

Manitowoc ice has continued to exceed our expectations.

Our strong margin expansion was a result of price offsetting inflation.

And continued progress on our transformation initiatives.

Q2 sales were approximately $135 million up roughly 30% compared to the prior year period.

Please turn to slide 13 labeled Q2 2023 water solutions performance.

Segment income grew 130% to $75 million and return on sales expanded 760 basis points to 22, 2% driven primarily by our Manitowoc ice acquisition.

In Q2 water solutions sales increased 51% to $336 million driven by our Manitowoc ice acquisition volume and price.

Manitowoc ice has continued to exceed our expectations.

As well as efficiencies from our transformation initiatives.

Q2 sales were approximately $135 million up roughly 30% compared to the prior year period.

Within our residential business, we are seeing North America stabilized.

We have also been evaluating our SKU mix and reducing complexity.

Segment income grew 130% to $75 million and return on sales expanded 760 basis points to 22, 2% driven primarily by our Manitowoc ice acquisition.

Please turn to slide 14 labeled Q2 2023 pool performance.

In Q2 pool sales declined 28% to $334 million. The volume decline of 36 points was primarily due to channel inventory corrections in Q2. This year, our strong Q2, 2022 comparison and cooler and wetter than usual U S weather.

As well as efficiencies from our transformation initiatives.

Within our residential business, we are seeing North America stabilize.

We have also been evaluating our SKU mix and reducing complexity.

The pricing benefit of eight points helped partially offset the volume decline.

Please turn to slide 14 labeled Q2 2023 pool performance.

Despite lower pool sales in Q2 2023 return on sales expanded 190 basis points due to price significantly offsetting inflation.

<unk> direct labor to align with lower volumes, the elimination of 2022 manufacturing and supply chain inefficiencies and benefits from our transformation initiatives.

The pricing benefit of eight points helped partially offset the volume decline.

Please turn to slide 15 labeled pentair pool sell in versus estimated industry sell through.

Despite lower pool sales in Q2 2023 return on sales expanded 190 basis points due to price significantly offsetting inflation.

This slide provides an illustration of our pool sales sell in and the estimated comparison to industry channel sell through since 2019.

Right sizing direct labor to align with lower volumes, the elimination of 2022 manufacturing and supply chain inefficiencies and benefits from our transformation initiatives.

Here you can see the imbalance of sell in and sell through beginning in 2020 and continuing to expand in 2021, and 2022 due to record inflation and supply chain disruption.

Please turn to slide 15 labeled pentair pool sell in versus estimated industry sell through.

In 2023, we have returned to normal lead times and sell through was returning to normalized levels.

This slide provides an illustration of our pool sale sell in and the estimated comparison to industry channel sell through since 2019.

We expect sell in and sell through to rebalance by 2024.

Here you can see the imbalance of sell in and sell through beginning in 2020 and continuing to expand in 2021, and 2022 due to record inflation and supply chain disruption.

Following approximately $150 million of channel inventory correction in 2023.

We expect this 2023 inventory correction to become a tailwind in 2024.

In 2023, we have returned to normal lead times and sell through was returning to normalized levels.

Please turn to slide 16 labeled transformation initiatives.

Our transformation initiatives focus on four key themes.

We expect sell in and sell through to rebalance by 2024, following approximately $150 million of channel inventory correction in 2023.

Pricing excellence strategic sourcing.

Operations excellence and organizational effectiveness.

As we've mentioned in past quarters, we expect strategic pricing actions to benefit the top line.

We expect this 2023 inventory correction to become a tailwind in 2024.

All three of our segments.

We expect our other three transformation initiatives to help improve our overall cost structure.

Please turn to slide 16 labeled transformation initiatives.

As a result, we are targeting Ross of approximately 23% by the end of fiscal 2025 <unk>.

Our transformation initiatives focus on four key themes.

Pricing excellence strategic sourcing.

Expanding margins over 400 basis points as compared to fiscal 2022.

Operations excellence and organizational effectiveness.

As we've mentioned in past quarters, we expect strategic pricing actions to benefit the top line of all three of our segments.

Please turn to slide 17 labeled transformation runway.

As you look at each of the four key themes you can see that the work within these transformation initiatives is in various different stages.

We expect our other three transformation initiatives to help improve our overall cost structure.

As a result, we are targeting Ross.

For example in 2023, we are beginning to see early readouts from wave one within pricing sourcing and operations.

We are beginning wave two within each of these three themes and expect margin benefits to read out in 2024.

Worse call. Please hold and operator will be with you shortly.

You can see how each new wave compounds on the other to drive expected margin expansion year over year through 2025 and beyond.

[music].

And pricing excellence the strategic pricing playbook has been developed which is planned to be rolled out by category within each segment.

Welcome to chorus call. Please hold and operator will be with you shortly.

We have completed internal training and plan to implement these actions over the next few months.

[music].

And strategic sourcing the implementation of wave one is underway with savings currently reading out.

We expect to kickoff wave two later this summer with Readouts beginning in 2024.

The first and last name.

Incremental to our strategic sourcing waves, we have seen benefit from a rapid renegotiation process that is part of our transformed sourcing excellence work.

Theres been developed which is planned to be rolled out by category within each segment.

We have completed internal training and plan to implement these actions over the next few months.

And strategic sourcing the implementation of wave one is underway with savings currently reading out.

In operations Excellence, we have completed the consolidation of two facilities, while continuing our execution on lean transformation plans across our sites.

We expect to kick off wave two later this summer with Readouts beginning in 2024.

And organizational effectiveness, we are in the earliest stages with wave one.

Incremental to our strategic sourcing waves, we have seen benefit from a rapid renegotiation process that is part of our transformed sourcing excellence work.

And expect margin benefits to be realized beginning in 2024.

Due to the staggered nature of these transformation initiatives you can see that what we expect wave three to begin to read out post 2025, and operations excellence and organizational effectiveness.

In operations Excellence, we have completed the consolidation of two facilities, while continuing our execution on lean transformation plans across our sites.

Overall, we are excited about the savings we have begun to realize from the early waves and remain confident that our teams can execute on pricing actions and savings we have identified particularly in sourcing.

And organizational effectiveness, we are in the earliest stages with wave one.

And expect margin benefits to be realized beginning in 2024.

Due to the staggered nature of these transformation initiatives.

Please turn to slide 18 labeled balance sheet and cash flow.

You can see that what we expect wave three to begin to read out post 2025, and operations excellence and organizational effectiveness.

With our record free cash flow in Q2 of $433 million up $144 million from the prior year period.

And the repayment of debt, we have lowered our pro forma net debt leverage ratio to two two times down from two six times in Q1.

As a reminder, our second quarter is typically our highest free cash flow quarter.

Please turn to slide 18 labeled balance sheet and cash flow.

We expect our full year free cash flow to be in line with our historical performance of approximately 100% net income.

With our record free cash flow in Q2 of $433 million up $144 million from the prior year period.

Our return on invested capital was 14, 9%.

And the repayment of debt, we have lowered our pro forma net debt leverage ratio to two two times down from two six times in Q1.

Which includes debt from the Manitowoc ice acquisition, but only approximately four quarters of Manitowoc EBITDA contribution.

Our target ROIC is high teens.

As a reminder, our second quarter is typically our highest free cash flow quarter.

In Q2, we entered into interest rate swap and caller agreements in order to hedge our variable rate debt.

We expect our full year free cash flow to be in line with our historical performance of approximately 100% net income.

Our variable to fixed debt is now, 48% and 52% respectively with an average rate of approximately five 3%.

Our return on invested capital was 14, 9%.

Which includes debt from the Manitowoc ice acquisition, but only approximately four quarters of Manitowoc EBITDA contribution.

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

Our target ROIC is high teens.

We plan to remain disciplined with our capital and continue to focus on debt reduction amid the higher interest rate environment.

In Q2, we entered into interest rate swap and caller agreements in order to hedge our variable rate debt.

Our variable to fixed debt is now, 48% and 52% respectively with an average rate of approximately five 3%.

Moving to slide 19, titled Q3, and full year 2023 Pentair outlook.

For the full year, we are raising our adjusted EPS guidance to approximately $3 65 to $3 75.

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

We plan to remain disciplined with our capital and continue to focus on debt reduction amid the higher interest rate environment.

Increasing the midpoint to $3 70.

Also for the full year, we expect sales to be roughly down 2% to flat, which is unchanged from our prior guidance in Q1.

Moving to slide 19, titled Q3, and full year 2023 Pentair outlook.

Segment income to increase 10% to 12% as.

As compared to up 7% to 10% in prior guidance.

For the full year, we are raising our adjusted EPS guidance to approximately $3 65 to $3 75.

With corporate expense of approximately $80 million net interest expense of roughly $125 million and adjusted tax rate of approximately 15%.

Increasing the midpoint to $3 70.

Also for the full year, we expect sales to be roughly down 2% to flat, which is unchanged from our prior guidance in Q1.

And a share count of $165 million to $166 million.

Our assumptions on corporate expenses net interest expense adjusted tax rate and share count.

Segment income to increase 10% to 12%.

Main unchanged from guidance provided last quarter.

As compared to up 7% to 10% in prior guidance.

For the third quarter, we expect sales to be down approximately 7%.

With corporate expense of approximately $80 million net interest expense of roughly $125 million and adjusted tax rate of approximately 15% and.

Versus last year's near record Q3.

This is mainly attributable.

To lower year over year pool sales.

And a share count of $165 million to $166 million.

As we expect the channel inventory correction.

Our assumptions on corporate expenses net interest expense adjusted tax rate and share count remain unchanged from guidance provided last quarter.

To be completed by quarter end.

We are also introducing adjusted EPS guidance for the third quarter of approximately 84 to 89.

For the third quarter, we expect sales to be down approximately 7%.

We expect segment income to decrease 1% to 6% with corporate expense of approximately $21 million.

Versus last year's near record Q3.

This is mainly attributable to <unk>.

Net interest expense of roughly $31 million and adjusted tax rate of approximately 15% and a share count.

Lower year over year pool sales.

As we expect the channel inventory correction to be completed by quarter end.

Of $165 million to $166 million.

We are also introducing adjusted EPS guidance for the third quarter of approximately 84 to 89.

Moving to slide 20, titled full year 2023 guidance at midpoint.

At the midpoint, we continue to expect total pentair sales to be down approximately 1% to approximately $4 $1 billion.

We expect segment income to decrease 1% to 6% with corporate expense of approximately $21 million net.

Net interest expense of roughly $31 million and adjusted tax rate of approximately 15% and a share count of $165 million to $166 million.

Due to strong Q2 performance and IFC in water solutions, we have updated our segment sales assumptions are as follows.

We now expect <unk> sales to be up approximately mid single digits.

Moving to slide 20, titled full year 2023 guidance at midpoint.

Up from low single digits.

Within Iot, we expect residential to be down approximately mid single digits, and commercial and industrial to be up low double digits.

At the midpoint, we continue to expect total pentair sales to be down approximately 1% to approximately $4 1 billion due to strong Q2 performance and IFC in water solutions. We have updated our segment sales assumptions are as follows.

Water solutions sales are expected to be up high teens versus mid teens.

<unk> is expected to rise approximately 50% with residential sales down roughly 10%.

We now expect <unk> sales to be up approximately mid single digits up from low single digits.

And the expected pool sales range remains unchanged at approximately down mid teens, although we now expect sales to be down at the higher end of this range due to a softer Q2.

Within <unk>, we expect residential to be down approximately mid single digits, and commercial and industrial to be up low double digits.

Water solutions sales are expected to be up high teens versus mid teens.

As we have discussed in prior quarters. Our pool sales consists of approximately 40% from new and remodeled pools and 60% from aftermarket.

Commercial is expected to rise approximately 50% with residential sales down roughly 10%.

Within our current pool guidance, we now expect new pools, and remodels to be down approximately 25% to 30%.

And the expected pool sales range remains unchanged at approximately down mid teens.

Versus previous assumptions are down approximately 25%.

Although we now expect sales to be down at the higher end of this range due to a softer Q2.

And inventory and aftermarket to be down roughly 20%.

As we have discussed in prior quarters. Our pool sales consists of approximately 40% from new and remodeled pools and 60% from aftermarket.

Unchanged with approximately two thirds of the decline related to inventory corrections.

We expect price to be up roughly mid single digits.

We expect pool sales to return to more normalized sell in in 2024 after absorbing significant inventory correction headwinds in.

Within our current pool guidance, we now expect new pools, and remodels to be down approximately 25% to 30% versus previous assumptions of down approximately 25%.

In the current year.

Segment income is now expected to increase approximately 11% at the midpoint as compared to 9% previously with Ros expansion of over 200 basis points to 29% up 40 basis points from our Q1 guidance.

And inventory and aftermarket to be down roughly 20% unchanged with approximately two thirds of the decline related to inventory corrections.

We expect price to be up roughly mid single digits.

We expect pool sales to return to more normalized sell in in 2024 after absorbing significant inventory correction headwinds.

Overall, we are excited about the future.

We believe the diversification of our portfolio has proven that we can weather challenges in one segment, while continuing to grow total pentair sales and.

In the current year.

Segment income is now expected to increase approximately 11% at the midpoint as compared to 9% previously with Ros expansion of over 200 basis points to 29% up 40 basis points from our Q1 guidance.

And expand margins across all three segments.

Despite significant volume declines in our residential businesses.

We are seeing progress in our transformation initiatives.

Generating strong free cash flow and further strengthening our balance sheet with the repayment of debt.

Overall, we are excited about the future.

We believe the diversification of our portfolio has proven that we can weather challenges in one segment, while continuing to grow total pentair sales and expand margins across all three segments.

Before I turn the call over for Q&A.

Wanted to highlight why we believe that pentair is a compelling investment opportunity.

Please turn to slide 21.

Despite significant volume declines.

There are six distinguishing characteristics that we believe <unk> Pan Thera part.

In our residential businesses.

We are seeing progress in our transformation initiatives.

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

Generation strong free cash flow and further strengthening our balance sheet with the repayment of debt.

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

Before I turn the call over for Q&A.

I wanted to highlight why we believe that pentair is a compelling investment opportunity.

Our ESG focus is on making life better for people and the planet with our smart sustainable water solutions.

Please turn to slide 21.

There are six distinguishing characteristics that we believe sets Pan thera part.

We recently published our 2022 corporate responsibility report high.

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

Highlighting progress towards our strategic targets.

We have favorable secular trends.

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

Driving end market growth.

We have a strong balance sheet and cash flow, which we expect to drive additional value creation.

Our ESG focus is on making life better for people and the planet with our smart sustainable water solutions.

And we are a dividend aristocrat with 47 consecutive years of increased dividends.

I'd now like to turn the call over to the operator for Q&A.

We recently published our 2022 corporate responsibility report highlighting progress.

After which John will have a few closing remarks.

Progress towards our strategic targets.

Joe Please open the line for questions. Thank you.

We have favorable secular trends.

Okay.

Driving end market growth.

We will now begin the question and answer session.

We have a strong balance sheet and cash flow, which we expect to drive additional value creation.

In the interest of time, we ask that you. Please limit yourself to one question and one follow up.

To ask a question you May press Star then one on your telephone keypad.

And we are a dividend aristocrat with 47 consecutive years of increased dividends.

Using a speakerphone please pick up your handset before pressing the keys and to withdraw your question. Please press Star then two.

I'd now like to turn the call over to the operator for Q&A.

After which John will have a few closing remarks.

At this time, we will pause momentarily to assemble our roster.

Joe Please open the line for questions. Thank you.

Okay.

And our first question here will come from Julian Mitchell with Barclays. Please go ahead.

We will now begin the question and answer session.

In the interest of time, we ask that you. Please limit yourself to one question and one follow up.

Thanks, Good morning.

My first question I suppose was really around.

To ask a question you May press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys and to withdraw your question. Please press Star then two.

When we're looking at a couple of the guidance increases in the non pool Division.

Divisions.

Just wanted to try and understand.

At this time, we will pause momentarily to assemble our roster.

The cadence of sales a little bit better through the back half.

If I look at the water business for example, it looks like the guide implies a pretty heavy sequential declines in Q3 and four just wanted to make sure I understood that.

And our first question here will come from Julian Mitchell with Barclays. Please go ahead.

Thanks, Good morning.

My first question I suppose was really around them.

Right and then also within IFC.

We're looking at a couple of the guidance increases in the non the pool Division.

Guides, implying year on year gross evaporates in the back half is that just a function of comps or something changing in the end market sell through.

Divisions.

Just wanted to try and understand.

The cadence of sales a little bit better through the back half.

If I look at the water business for example, it looks like the guide implies a pretty heavy sequential declines in Q3 and four just wanted to make sure I understood that.

I think we would describe it as more moderating Julien I think clearly our manitowoc performance from a year over year basis. There is a huge acquisition component year over year, but theres also their organic growth.

All right and then also within I S T.

Nearly 30% as Bob mentioned in his comments.

Guides, implying year on year gross evaporates in the back half is that just a function of comps or something changing in the end market sell through.

Those are the result of industry demand and our ability to fulfill those industry demand and eventually we start to moderate and compare against year over year comps that then a more normalized.

I think we would describe it as more moderating Julien I think clearly our manitowoc performance from a year over year basis, Theres, a huge acquisition component year over year, but theres also their organic growth.

And the Iot side I think what we're seeing is really strong growth in commercial industrial again backlog related that we'll again moderate in the back half of the year.

Moving to what I would say is more normalized growth rates that we would expect.

Nearly 30% as Bob mentioned in his comments.

On a longer term basis Julien.

Those are the result of industry demand and our ability to fulfill those industry demand and eventually we start to moderate and compare against year over year comps that then a more normalized in.

Understood. Thank you and then just my quick follow up on the pool.

Segment.

On that point on inventories. So there was obviously the sort of the weather impacts early in the second quarter, which had been very well.

In the <unk> side I think what we're seeing is really strong growth in commercial industrial again backlog related that we'll again moderate in the back half of the year.

Flagged for months now.

Is your point that that you know.

It may be delayed the requisite inventory depletion early on but what's happened say so far in Q3. That's why you feel confident that the inventory depletion is on track to be finished by the end of September maybe just any color on how your conversations with channel partners.

Moving to what I would say is more normalized growth rates that we would expect.

On a longer term basis Julien.

Understood. Thank you and then just my quick follow up on the pool.

Segment.

On that point on inventories. So there was obviously the sort of the weather impacts early in the second quarter, which had been very well.

And what you see on the sell through how has that evolved in the last two to three months.

Flagged for months now.

Is your point that that you know may be delayed the requisite inventory depletion early on but what's happened say so far in Q3. That's why you feel confident that the inventory depletion is on track to be finished by the end of September maybe just any color on how your conversations.

I think just on the Q2 numbers for pool I mean, it's solely in my opinion related to more inventory coming out of the channel.

We expected I think the channel has done an amazing job of.

Working and moving and migrating the inventory around branches to where it's needed and are aggressively working to eliminate that extra inventory from the channel I think as we as we talk to our channel partners for Q3 and Q4, we continue to believe that all of the inventory of the excess inventory.

With channel partners and what you see on the sell through how has that evolved in the last two to three months. Yeah. I think just on the Q2 numbers for pool I mean, it is solely in my opinion related to more inventory coming out of the channel than we expected I think the channel has done an amazing job of.

It will be worked out in Q3.

Reflecting our current guide and we will be talking on more normal early buy discussions as we ramp into Q4.

Working and moving and migrating the inventory around branches to where it's needed and they are aggressively working to eliminate that extra inventory from the channel I think as we as we talk to our channel partners for Q3 and Q4, we continue to believe that all of the inventory or the excess.

As we anticipate the 2020 for demand and coming back to a more normalized seasonal performance that being said pool is in our opinion really low in Q3 from our revenue forecast as it deals with that volume decline for us related to that inventory and channel correction.

<unk> will be worked out in Q3.

Reflecting our current guide and we will be talking on more normal early buy discussions as we ramp into Q4.

And our next question here will come from Andrew Kaplowitz with Citigroup. Please go ahead.

As we anticipate the 2020 for demand and coming back to more normalized seasonal performance that being said pool is in our opinion really low in Q3 from our revenue forecast as it deals with that volume decline for us related to that inventory and channel correction.

Hey, good morning, everyone.

And Andy.

John and Bob maybe you can give us a little more color into the progress on transformation because.

You look at the segments, obviously, you'll have tea for example, 18.2 seems quite a bit ahead of plan. So what has gone right for you guys here over the last couple of quarters and you would would you expect that progress to continue.

And our next question here will come from Andy Kaplowitz with Citigroup. Please go ahead.

I would say, we're very pleased with the.

Morning, everyone.

Wave one.

Andy.

Across our across the board, particularly pleased within our sourcing.

John and Bob maybe you can give us a little more color into the progress on transformation because if you look at the segments. Obviously, you'll have tea for example.

As a reminder, wave one consisted mainly of.

Our motors and drives casting electronics logistics packaging.

$18 two seems even quite a bit ahead of plan. So what has gone right for you guys here over the last couple of quarters and you would would you expect that progress to continue.

And then wave two you can think of that as being metals resins.

Purchased finished goods and component of indirect spend.

I would say, we're very pleased with the wave one across our across the board, particularly pleased within our sourcing.

We've seen a lot of benefit within the transportation area.

Within wave one.

And 2024 is setting up for benefits.

As a reminder, wave one consisted mainly of.

And the other components of the wave one spend.

Our motors and drives casting electronics logistics packaging and.

One of the areas that we've done a really nice job.

And then wave two you can think of that as being metals resins.

Is capturing deflation, particularly across residence plastics motors metals and castings.

<unk> finished goods and a component of indirect spend.

Where our team went in and did.

We've seen a lot of benefit within the transportation area.

And expedited response to what they saw in the global market place, we're able to strengthen our relationship with suppliers and actually take advantage of.

Within wave one.

And 2024 is setting up for benefits.

Our pricing that was coming down in a number of different commodity groups.

And the other components of the wave one spend.

One of the areas that we've done a really nice job.

I would say within kind of the ocean space the expedited air on the air consumption, that's down over 50% from where it was last year.

Capturing deflation, particularly across resins plastics motors metals, and castings are where our team went in and did.

And ocean rates are down from 65%.

And expedited response to what they saw in the global marketplace were able to strengthen our relationship with suppliers and actually take advantage of of our pricing that was coming down in a number of different commodity groups.

The final thing I would say is that we've done a really nice job of right sizing.

Two the volumes that we expected from a direct labor perspective, and that's all about having headlights into the business and taking the corrective action.

I'd say within kind of.

The ocean space, the expedited air on the air consumption, that's down over 50% from where it was last year and ocean rates are down from 65%.

And then finally, there were a lot of inefficiencies in 2022.

<unk> buys expedites partial truckloads partial completion of products, where we'd have to push a 90% complete product off the line and wait for a part to come in.

The final thing I would say is that we've done a really nice job of right sizing.

We had over time attrition, we've done a really nice job of addressing those inefficiencies as part of the transformation as well so across the board, we're very pleased and I'm very thankful to the team that works on this every day.

Two the volumes that we expected from a direct labor perspective, and that's all about having headlights into the business and taking the corrective action.

And then finally, there were a lot of inefficiencies in 2022.

Spot buys expedites partial truckloads partial completion of products, where we'd have to push a 90% complete product off the line and wait for a part to come in.

Bob its good color and then maybe somewhat related question around pricing and particularly in pool.

I know, it's one of your initiatives there too, but maybe you could talk about your ability to hold price given the way. The markets are have you seen any deterioration obviously margins are still good and how would you think about poor margin moving forward.

Yes, so I think as we head into 2024.

We're certainly pleased with the way prices held up in 2023.

Bob its good color and then maybe somewhat related question around pricing and particularly in pool.

In relationship to with.

What Bob said and I think thats indicative of the way our Ros expansion has unfolded I think would go to a more normalized pricing environment now Andy and I think that that means that we have to rely on those price increases and work hard on the productivity aspects to drive the margin.

I know, it's one of your initiatives there too, but maybe you could talk about your ability to hold price given the way. The markets are have you seen any deterioration. Obviously your margins are still good and how would you think about poor margin moving forward.

And I think we're going to see normal and then I think it depends on how these industries fare as to what would be the expected hold rate or the realization rate of those price increases in 2024 and its way too early to tell.

Yes, so I think as we head into 2024.

Certainly pleased with the way prices held up in 2023 in relationship to.

What Bob said and I think that's indicative of the way there are west expansion has unfolded I think we're going into a more normalized pricing environment now Andy and I think that that means that we have to rely on those price increases and work hard on the productivity aspects to drive the margin.

And our next question here will come from Bryan Blair with Oppenheimer. Please go ahead.

Thank you good morning, everyone. Good morning, good morning.

I wanted to ask you about the transformation, obviously driving pretty strong results already in use you've noted that your early stage in the respective waves in some of those initiatives.

As we look to your 2025 Ross target to level set what are you baking in for core growth between now and then and then what level of reinvestment as contemplated. The reason I ask is that just the simple math, if we assume any core growth.

And our next question here will come from Bryan Blair with Oppenheimer. Please go ahead.

Thank you good morning, everyone. Good morning, good morning.

I wanted to ask you about the transformation, obviously driving pretty strong results already in use you've noted that your early stage in the respective waves and so of those initiatives.

It kind of moderate utilization of the sourcing opportunity that you've identified that that seems to drive.

Ross above the targeted range and then the other leverage you know imply pretty solid upside.

And as we look to your 2025 Roz targets to level set what are you baking in for core growth between now and then and then what level of reinvestment as contemplated. The reason I ask is that just the simple math, if we assume any core growth and you can.

Yes, I think Thats fair, Brian I think I would talk about is as Bob mentioned, we're really pleased on the early indications and transformation. As a reminder, we are using outside partners to give us benchmark looks at what's possible and working with us to give us breakthrough thinking and putting in establishing core price.

Kind of moderate utilization of the sourcing opportunity that you've identified that that seems to drive you know.

Offices to drive this transformation, so we feel like it's going to be consistent and predictable.

Ross above the targeted range and then the other levers you know imply pretty solid I'm sorry.

One.

Thing that I would share with you, though as you look at our targets is there also inclusive of the investments and we have a lot of energy around investing in our channels, our obsession around customer experiences improving those customer experiences and investing in innovation and those are offsets to the transformation benefits that we would expect.

Yeah, I think that's fair, Brian I think I would talk about is as Bob mentioned, we're really pleased on the early indications and transportation. As a reminder, we are using outside partners to give us benchmark looks at what's possible and working with us to give us breakthrough thinking and putting in establishing poor price.

As you can imagine pool has been an innovation leader for many years, it's been playing a little bit of defense lately and we want to put our.

Offices to drive this transformation, so we feel like it's going to be consistent and predictable.

One.

Saying that I would share with you, though as you look at our targets is there also inclusive of investments and we have a lot of energy around investing in our channels, our obsession around customer experiences improving those customer experiences and investing in innovation and those are offsets to the transformation benefits that we would expect and as you can imagine.

Foot to the pedal there and really drive on both product innovation and go to market innovation, So expect us to invest back in our businesses.

Understood all makes sense I appreciate the color.

And I know your attention focused on debt reduction since the Manitoba is close to.

On your balance sheet.

Paul has been an innovation leader for many years has been playing a little bit of defense lately, and we want to put our foot.

Pretty solid shape, you're generating really robust cash flow.

Given your financial position and.

Foot to the pedal there and really drive on both product innovation and go to market innovation, So expect us to invest back in our businesses.

Clearly successful integration of man I'm, just wondering if your team will get back to bolt on tuck in M&A over the near term.

I would say that the focus for this year continues to be on debt pay down where interest rates are we think thats. The why is this use of the capital and then that creates optionality going into 2024 around share repurchase and M&A.

Understood all makes sense I appreciate the color.

And I know your attention focused on debt reduction since the Manitowoc ice close them their balance sheets are in.

Pretty solid shape, you're generating really robust cash flow.

Given your financial position and.

Clearly successful integration of man and I'm, just wondering if your team will get back to bolt on tuck in M&A over the near term.

Our next question here will come from Mike Halloran with Baird. Please go ahead.

I would say that the focus for this year continues to be on debt pay down where interest rates are we think that's the wisest use of the capital and then that creates optionality going into 2024 around share repurchase and M&A.

Hey, good morning, everyone.

Good morning, good morning.

So couple of couple of commercial questions here first.

Manitowoc ice can you just give some context to.

What's going on in the channel right now I guess, a little from an inventory perspective, but more from what are the customers, saying from a demand perspective, how do you think about the sustainability of what youre seeing underneath the hood.

Our next question here will come from Mike Halloran with Baird. Please go ahead.

And then some comments on how.

<unk> is performing well.

Hey, good morning, everyone.

Great.

Yeah, I think if you look back at the eight years. Prior to 2019, you know seven eight years like this has historically been a 5% to 6% steady grower.

Good morning.

So couple of couple of commercial questions here first.

Manitowoc ice could you just give some context to.

What's going on in the channel right now.

With some years that might be slightly higher slightly lower based upon.

I guess, a little from an inventory perspective, but more from what are the customers, saying from a demand perspective, how do you think about the sustainability of what you're seeing underneath the hood.

How the restaurant and hospitality market unfolds.

Clearly if you take 19 as a starting point to where we expect 'twenty three to finish you know think about being high single digits.

And then some comments on how man ice is performing relative to peers it would be great.

What we want to remind people is there's a significant catch up to the significant downturn in hospitality industry has faced in and that's a big part of the startup and the demand as I referenced in my notes. We're now back slightly above the 2019 restaurant numbers. So I think we're going to see more of the historical <unk>.

Yeah.

I think if you look back at the eight years prior to 2019, you know seven eight years like this has historically been a 5% to 6% steady grower.

Some years that might be slightly higher slightly lower based upon.

How the restaurant and hospitality market unfolds.

<unk> pattern.

Clearly if you take 19 as a starting point to where we expect 'twenty three to finish you know think about being high single digits.

As we look forward in this business going forward our ability this year to grow faster with the share capture that was really based upon.

What we want to remind people is there's a significant catch up to the significant downturn in hospitality industry has faced in and Thats, a big part of the startup and the demand as I referenced in my notes. We're now back slightly above the 2019 restaurant numbers. So I think we're going to see more of the historical <unk>.

<unk> gone through the supply chain work that we're doing elsewhere in pentair.

Ironically in completely coincidentally Manitowoc is using the same outs.

<unk> partner that we're using on the rest of the pentair and started that sourcing initiative three years to four years earlier than us.

And so they were able to put the supply chain into place that allow them to be prepared and ready.

<unk> pattern.

As we look forward in this business going forward our ability this year to grow faster with the share capture that was really based upon <unk>.

To partner to get these increased demands and thats been a big benefit to the minutes of our business.

Having gone through the supply chain work that we're doing elsewhere in pentair Ironically.

And also very encouraging for us on what the rest of the pentair can realize as well.

Ironically in completely coincidentally Manitowoc is using the same outs.

Good point thanks.

Can I answer that I wasn't asking on the commercial question to the second part there on an outlet side. So let me pivot to the <unk>.

Source partner that we're using on the rest of the pentair and started that sourcing initiative three years to four years earlier than us.

No.

And so they were able to put the supply chain into place that allow them to be prepared and ready.

You can see the margin kind of tranche hirings last last couple of quarters.

To partner to get these increased demands and that's been a big benefit to the Manitowoc business.

And.

I was just hoping to get a little bit more context of how you think about.

What that progression forward looks like for a second and specifically how much impact the mix is going to have clearly the transformational piece is a core part of that progression and if there's any moving pieces globally.

We are also very encouraging for us on what the rest of the pentair can realize as well.

Oh no. Good point, Thanks, you kind of answered I wasn't asking the commercial question to the second part there on an outlet side. So let me pivot to the Iot piece.

You should think about as you look to the back half of the year there.

No.

To see the margin kind of tranche hire these last last couple of quarters.

A special callout to our commercial and infrastructure team on.

Getting to margins in <unk> quite frankly, Mike I didn't think were possible right and I think they are doing it while they are growing which is extremely encouraging that being said I think as we go forward, it's going to be about how we continue to win projects and jobs that have aftermarket and service component trees to them, how we can grow at mid single digits.

And.

I was just hoping to get a little bit more context of how you think about.

What that progression forward looks like from the segments, specifically, how much impact the mix is going to have clearly the transformational piece is a core part of that progression and if there's any moving pieces below the hood.

You should think about as you look to the back half of the year there.

May be more likely maintaining these margins.

A special callout to our commercial and infrastructure team on.

Because as you know when you get these tailwind in the industry, it's easy to be selective it's harder to be selective when the jobs get tougher to find and I think thats. The discipline, we're putting into the to the group, but it's really encouraging to see the progress. They made I think they still see opportunities to expand the gross but again. This is an area we'd wanted.

Getting to margins in our west is that quite frankly, Mike I didn't think were possible right and I think they are doing it while they are growing which is extremely encouraging that being said I think as we go forward, it's going to be about how we continue to win projects and jobs that have aftermarket and service component trees to them, how we can grow at mid single digits.

First in and as you know one of the things that has always talked about is blue water rights. So we're really strong in the fire pump side, and we've been able to find synergies by bringing the clean water side to some of the projects. We worked on and we've been able to do that the appropriate margins. So that's really encouraging to see that growth and the margins at the same time.

Maybe more likely maintaining these margins.

Because as you know when you get these tail winds in the industry, it's easy to be selective it's harder to be selective when the jobs get tougher to find and I think that's the discipline, we're putting into the to the group, but it's really encouraging to see the progress. They made I think they still see opportunities to expand the gross but again. This is an area we'd want to invest.

And our next question here will come from Brian Lee with Goldman Sachs. Please go ahead.

First in and as you know one of the things that has always talked about is blue water rights. So we're really strong in the fire pump side, and we've been able to find synergies by bringing the clean water side to some of the projects. We worked on and we've been able to do that the appropriate margin. So it's really encouraging to see that growth and the margins at the same time.

Hey, guys. Good morning, Thanks for taking the questions.

A lot of mine have been covered but I had a couple of maybe modeling specific one.

I guess on the record Rois when I look at the full year guide I know this might be a little bit just timing related or.

And maybe a little bit.

Picking but it seems like the implied Ross is down here in <unk> can you kind of walk us through some of the puts and takes just exiting the year.

And our next question here will come from Brian Lee with Goldman Sachs. Please go ahead.

Or do you think about.

Driving more expansion into 'twenty four is your comment suggested.

Hey, guys. Good morning, Thanks for taking the questions.

A lot of a lot of mine have been covered but I had a couple of maybe modeling specific ones.

The guidance that we've given actually has us expanding ross year over year, both in Q3, and even more significantly in Q4. So that is one of our rallying cries is to continue to expand Ross a year on year.

I guess on the record Rois when I look at the full year guide I know this might be a little bit just timing related or.

Maybe a little bit of nitpicking, but it seems like the implied Ross is down here in <unk> can you kind of walk us through some of the puts and takes just exiting the year as you think about.

Again, a little bit less in Q3 because of the the headwind of the pool business, but overall.

Driving more expansion into 'twenty four is your comment suggested.

Transformation continues to read out in the back half of the year.

Okay understood, Yes, we'll go back and take a closer look at the model and then maybe just on pool it sounds like.

You're pretty confident around trends bottoming here inventory sell through sell in normalization. So.

Again, a little bit less in Q3 because of the the headwind of the of the pool business, but overall.

I know, it's probably too early to tell but any initial thoughts around what all of that points to the rest of this year kind of goes according to plan and pool.

<unk> transformation continues to read out in the back half of the year.

Are we thinking about a reasonable base case back to like mid single digits.

Okay understood Yeah, we'll go back and take a closer look at the model and then maybe just on pool it sounds like you.

Volume may be low single digit type pricing tailwind in 2004, just sort of what's the setup as you think about what that normalization.

You're pretty confident around trends bottoming here inventory sell through sell in normalization. So.

And how quickly it plays out gets you to in terms of a reasonable base case to get back to normal growth trends in 'twenty four potentially.

I know, it's probably too early to tell but any initial thoughts around what all of that points to the rest of this year kind of goes according to plan and pool or are we thinking about a reasonable base case back to like mid single digit.

One of the reasons why we added that extra chart was with to try and give some view of the headwinds this year and what could be a potential tailwind for next year. So we did quantify the inventory correction at about $150 million.

Volume, maybe low single digit type pricing tailwind in 2014 sort of what's the setup as you think about what the normalization.

And so that will not repeat next year. So in itself that's $150 million good guy.

And how quickly it plays out gets you to in terms of a reasonable base case to get back to normal growth trends in 'twenty four potentially.

In 2024.

One of the reasons why we added that extra chart with to try and give some view of the headwinds this year and what could be a potential tailwind for next year. So we did quantify the inventory correction at about $150 million.

We're not giving any view as to what you know aftermarket might grow still too early from that perspective, but from an overall pricing perspective, you know price has been sticky.

From our perspective and that we do expect price increases as we go into next year.

And so that will not repeat next year. So in itself, that's that's $150 million good guy.

And our next question here will come from Andrew <unk> with Deutsche Bank. Please go ahead.

In 2020 for them, we're not giving any view as to what you know aftermarket might grow still too early from that perspective, but from an overall pricing perspective, you know price has been sticky.

Hi, Thanks, good morning, everyone.

Wanted to go back to water solutions here the margins were very strong in the second quarter and historically they've had a nice sequential step up going into <unk>. So I know men and talk kind of changing our mix a bit but do you still expect a meaningful increase sequentially there for the margin.

From our perspective and that we do expect.

Rice increases as we go into next year.

And our next question here will come from Andrew <unk> with Deutsche Bank. Please go ahead.

Yes.

Sequentially we.

Hi, Thanks, good morning, everyone.

I wanted to go back to water solutions here the margins were very strong in the second quarter and historically they've had a nice sequential step up going into <unk>. So I know men and talk kind of changing our mix a bit but do you still expect a meaningful increase sequentially there for the margin.

<unk> will be roughly in line I would say.

So may be slightly down because we just we just won't drive that that amount of volume in necessarily get the leverage that we saw from a nice perspective, but overall when we look at the different pieces, the filtration and as well as the residential piece within <unk>.

Yeah, we sequentially we.

Water solutions, we continue to see transformation, playing a big role so I would say year on year significant Ros expansion in Q3 for water solutions.

<unk> will be roughly in line I would say to maybe slightly down because we just we just won't drive that that amount of volume in necessarily get the leverage that we saw from a nice perspective, but overall when we look at the different piece.

Bit of pressure as you go from Q2 to Q3.

Because.

To John's earlier point season.

Seasonality does start to return to more normalized levels.

Says.

The filtration and as well as the residential piece within water solutions.

Okay, Great makes sense and I.

To the extent you're willing to comment.

We continue to see transformation, playing a big role so I would say year on year significant Ros expansion in Q3 for water solutions.

There seems like a normalized so far in July and just any comments you can give on July trends, so far for pool, and then maybe just for the broader company as well. Thank you.

Little bit of pressure as you go from Q2 to Q3.

Yes.

I hate to bring the weather word into the focus and as I said earlier I don't think it played as much into our Q2 pool softness as the inventory correction did well.

Just because to John's earlier point, you know seasonality does start to return to more normalized levels.

Okay, great makes sense and to the extent you're willing to comment.

Weather, usually intends to work its way out eventually.

Throughout the period, so I would say right now where we're seeing he trends that you know.

There seems like a normalized so far in July and just any comments you can give on July trends, so far for pool, and then maybe just for the broader company as well. Thank you.

Have some positives in certain areas to driving demand and at the same time when it gets this hot you don't necessarily need heaters. So.

Yeah.

I hate to bring the weather word into the focus and as I said earlier I don't think it played as much into our Q2 pool softness as the inventory correction did.

I would not bring weather into our forecast at all I think everything we know today from our weather forecasting has been included in our guide and we don't expect weather to be a big part of our discussion going forward.

Weather, usually intends to work its way out eventually.

Throughout the period, so I would say right now where we're seeing he trends that you.

Our next question here will come from Steve Tusa with Jpmorgan. Please go ahead.

Have some positives in certain areas to driving demand and at the same time when it gets this hot you don't necessarily need heaters. So I don't I would not bring weather into our forecast at all I think everything we know today from our weather forecasting has been included in our guide and we don't expect weather to be a big part of our discussion going forward.

Hey, guys. Good morning, how are you doing I see.

Not too bad.

I'm not going to ask you about the assumptions that underlie your on your weather forecast.

[laughter].

[laughter] yeah.

So just on the kind of phases of this transformation.

Our next question here will come from Steve Tusa with Jpmorgan. Please go ahead.

Mentioned logistics I mean, obviously the logistics prices in general are down how do you like disaggregate. What you guys are doing versus just like the normal deflationary cycles that are happening in these in these types of materials.

Hey, guys. Good morning, how are you doing I see.

Not too bad.

I'm not going to ask you about the assumptions that underlie your weather forecast.

[laughter].

But from our perspective.

[laughter] yeah.

And I'm not trying to be flipping here, but even in the deflationary environment. There there's work to be done we need to go back back to the suppliers and point out.

So just on the kind of phases of this transformation you mentioned logistics I mean, obviously the logistics prices in general are down how do you like disaggregate. What you guys are doing versus just like the normal deflationary cycles that are happening in these in these types of materials.

Commodity prices that are coming down so our view is that you know either through our.

Negotiation process either through the structure at 11 gate process within wave one wave two.

<unk>.

We have to understand the market first of all.

But from our perspective, and I'm not trying to be flipping here, but even in the deflationary environment. There. There's work to be done we need to go back back to the suppliers and point out you know.

Make sure we're asking for.

Price decreases or longer term price stability.

So it's all part from our perspective of that strategic sourcing initiative.

Commodity prices that are coming down so our view is that you know either through our.

Steve.

I agree everything Bob said, and we're happy but it is a benefit of the deflationary then work we do to negotiate but also we have reduced our carriers by almost two thirds and we did do a series of route optimizations and choose partners that are best to serve the routes and the lines that we need and that was a big part of that.

Negotiation process either through you know the structure at 11 gate process within wave one wave two.

We have to understand the market first of all.

Make sure we're asking for a price.

Price decreases or a longer term price stability and so it's all part from from our perspective of that strategic sourcing initiative.

<unk>, that's generating the savings.

Right.

That makes sense can you just remind us what the.

Steve just to get under that I agree everything Bob said, and we're happy but it is a benefit of the deflationary then work we do to negotiate but also we have reduced our carriers by almost two thirds and we did do a series of route optimizations and choose partners that are best to serve the routes and in the lines that we need and that was.

Benefit from transformation is for next year I'm not sure. If you mentioned that earlier in the call did.

Did not.

Can you just update us on what you expect that to be.

Well, what we've said up till now is we'll go for what will be roughly a 21% Ross this year to 23% by 2025, and our view is thats roughly linear as as we get to that 23%, So and transformation big plays a big big piece of that margin expansion.

A big part of the work that is generating savings.

Alright that does it makes sense can you just remind us what what the.

Benefit from transformation is for next year I'm not sure. If you mentioned that earlier in the call did.

What percentage.

The larger than that increase because we're also putting back investments and Steve So.

Did not.

Can you just update us on what you expect that to be.

Well, what we've said up till now is we'll go for what will be roughly a 21% Ross this year to 23% by 2025, and our view is that roughly linear as as we get to that 23% So and transformation big plays a big big piece of that margin expansion.

I think the next the next wave that will start to realize the significant.

Wave one benefits of the purchasing savings and direct material that we're doing and you could assume that as Bob said in prior comments that that's a double digit savings against about a third of the material buy.

What percentage.

Sorry, one more on all of this where would where will that show up in the bridges will that show up is in all parts of the bridges or productivity. So it won't be part of like inflation. If you. If you execute better on some of those purchasing initiatives maybe that shows up in net inflation youre, saying that the trash.

The larger than that increase because we're also putting back investments and Steve So.

I think the next the next wave that will start to realize the significant.

Through all the transformation will be bucket in that productivity.

Okay, Great price bar and productivity bar correct, the price bar as well while prices the transformation work, we're doing on the strategic price initiatives.

Sorry, one more on all of this where would where will that show up in the bridges will that show up is in all parts of the bridges or productivity. So it won't be part of like inflation. If you. If you execute better on some of those purchasing initiatives do you know maybe that shows up in net inflation, you're saying that the trash.

So it's a piece of the price contribution.

And then the productivity of the transformations a piece of the productivity contribution okay. Okay. That's helpful. Alright, Thanks, guys.

Through all the transformation will be bucket in that productivity.

Our next question will come from Jeff Hammond with Keybanc. Please go ahead.

Barbara.

Okay, Great price bar and productivity bar correct, the price bar as well well price of the transformation work, we're doing on the strategic price initiatives.

Hey, Good morning, guys. This is David Tarantino on for Jeff.

Good morning.

Maybe just to attack the margin split different Martin it's been pretty impressive the last couple of quarters could you parse out what the price cost tailwind is just kind of from carryover and normal pricing actions and what was kind of the early benefits from the transformation program.

So it's a piece of the price contribution.

And then the productivity of the transformations a piece of the productivity contribution okay. Okay. That's helpful. Alright, Thanks, guys.

Our next question will come from Jeff Hammond with Keybanc. Please go ahead.

Yeah, when you look at.

Price says right out nicely in the first two quarters that will moderate.

Hey, Good morning, guys. This is David Tarantino on for Jeff.

Good morning.

And in the back half and basically land around that mid single digit price benefit for for the year. We are taking advantage primarily of carryover pricing with that advantage and just as a reminder, there were many years or at least a couple of years, where we were catching up.

Maybe just to attack the margins bit different Martin has been pretty impressive. The last couple of quarters could you parse out what the price cost tailwind is just kind of from carryover and normal pricing actions and what was kind of the early benefits from the transformation program.

Yeah. When you look at you know price says right out nicely in the first two quarters that will moderate.

And price versus cost was a headwind it has been a tailwind over the last few quarters.

And in the back half and basically land around that mid single digit price benefit for for the year. We are taken advantage primarily of carryover pricing with that advantage and just as a reminder, there were many years or at least a couple of years, where we were catching up.

But think of that as mainly carryover pricing decisions. We made last year that benefited the first half.

Great. Thank you and then maybe just a cleanup one on pool, maybe outside of the destock how would you describe the sell through in the channel versus expectations. It seems like tens or maybe a bit softer and then on that kind of maybe could you level set us on what you would expect the magnitude of the <unk>.

And price versus cost was a headwind it has been a tailwind over the last few quarters.

By like what's implied in the guide given we've had an unusual recent couple of years.

But think of that as mainly carryover pricing decisions. We made last year that benefited the first half.

Yes, I will take the first one I think sell through as a whole this year through the first couple of quarters is slightly behind our original expectations.

Great. Thank you and then maybe just a cleanup one on pool, maybe outside of the destock how would you describe the sell through in the channel versus expectations. It seems like trends, where maybe a bit softer and then on that kind of maybe could you level set us on what you would expect the magnitude of that.

And I think that is a combination of.

Some of the pre buys.

That happened in previous periods. It's also probably discretionary items that are being pushed out as consumers are.

Pre buy like what's implied in the guide given we've had an unusual our recent couple of years.

Dealing with the rest of their finances, and then as has been mentioned from the industry I think some of the finance pools are slower than they were originally anticipated as we go forward and you look at early by we talked about normalized early buy.

Yeah, I will take the first one I think sell through as a whole this year through the first couple of quarters is slightly behind our original expectations.

And I think that is a combination of.

And.

About half of our Q4 shipments fall into those early by categories.

Some of the pre buys.

That happened in previous periods. It's also probably discretionary items that are being pushed out is as consumers are.

And the rest of the Q4 shipments are generally more standard orders.

And we work those programs through the end of Q3 into Q4.

And generally we know what those those orders are and would know what those orders are at the Q3 earnings call.

And our next question here comes from Damian turns with UBS. Please go ahead with your question.

Hey, good morning, everyone.

And the rest of the Q4 shipments are generally more standard orders.

Maybe in the spirit of the summer a couple of follow up questions on pool.

And we work those programs through the end of Q3 into Q4.

That business is obviously operating at a really healthy level of profitability. Despite the demand pricing pressures you're facing now just curious how youre thinking about.

And generally we know what those those orders are and would know what those orders are at the Q3 earnings call.

Right.

You're up just a little bit.

And our next question here comes from Damian turns with UBS. Please go ahead with your question.

I apologize can you hear me.

If you wouldn't mind repeating the question please.

Hey, good morning, everyone.

Yeah, absolutely. So I just wanted to ask you about margins I mean.

Maybe in the spirit of the summer a couple of follow up questions on pool.

Very profitable right now despite the volume pressures.

That business is obviously operating at a really healthy level of profitability. Despite the demand pricing pressures you're facing now just curious how you're thinking about.

Thinking about what that trajectory should look like next year as you know the.

Tori headwinds reverse and you get a demand recovery we have another question.

We're going to bring it up just a little bit.

I apologize can you hear me.

If you wouldn't mind repeating the question please.

We'll move onto our next question comes from Nathan Jones with Stifel. Please go ahead.

Yeah, absolutely. So I just wanted to ask you about a pool margins I mean.

Good morning, everyone. Good morning, Amit.

Yes, okay great.

Very profitable right now despite the volume pressures.

I want to ask one on the I S T a.

Thinking about what that trajectory should look like next year as you know the inventory headwinds reverse and you get a demand recovery we have another question.

Volume has been pretty flat overall for the last couple of quarters you've talked about.

Most likely bond projects.

I'm wondering if you could talk a little bit about how much the growth is where you want to grow the us is maybe how much the decline where youre not looking to grow.

We'll move onto our next question comes from Nathan Jones with Stifel. Please go ahead.

But when you think of flow.

Good morning, everyone. Good morning.

Nathan you got to remind us that we got a residential.

Yes, okay great.

Business around pumps and that has been slow wind down and soft right.

I want to ask one on the I S. T. A volume has been pretty flat overall for the last couple of quarters, but you've talked about.

<unk> the residential trends in the water.

Water solutions as well as in school and so when we talk about flows and overall growth. What we're really seeing is growth in infrastructure commercial as a reminder, commercial buildings aren't just office buildings. They also include data centers. They include warehousing. They include any type of infrastructure that would require a need fire.

More selective on projects.

I Wonder if you could talk a little bit about how much the growth is where you want to grow the us is maybe how much the decline where youre not looking to grow.

But when you think of flow.

Nathan you got to remind us that we got a residential.

Business around pumps and that has been slow wind down and soft right and that's reflecting the residential trends in the water.

Pumps as well as.

Water coming into that building and wastewater exiting that building and so that has been a strategic point of ours and we want to grow in those spaces were strong in those spaces and so really what you've got is a residential commercial and infrastructure mix here.

Okay, maybe then.

Just one more on the water solutions business I think you that'd be some inventory destocking going on.

Pumps as well as.

Right well that you had expected to probably ending <unk> is that the case and we're quite a bit more back to sell and matching sell through in that business.

We're actually through most of the inventory challenges in the residential water solutions.

Out of the business data and what we have as a reminder, as we exited.

Okay, maybe then.

Just one more on the water solutions business I think you that'd be some inventory destocking going on.

Direct to consumer businesses that we had and we did that in Q4 of last year and so we're working through those year over year comps related to those decisions and so the underlying growth of our core.

Dara as well that you had expected to probably ending to cure is that the case and we're quite a bit more back to sell in matching sell through in that business.

Systems in our core components business is moderating, but it doesn't yet have the inventory challenges doesn't have inventory challenge.

Yeah, we're actually through most of the inventory challenges in the residential water solutions.

Out of the business days and what we have as a reminder, as we exited.

And our next question here will come from Joe Giordano with Cowen. Please go ahead.

Hey, good morning, guys. Good morning, Hi, Joe.

So yes, we've kind of touched on this but <unk>, so like more than a 100% of the growth was price right now and the volumes were modestly negative.

As you look into the second half priced moderate.

Volume from where we are today do you expect that as the year progresses to further deteriorate or does that start to pick up some of the likely moderation of price.

We continue to believe on the flow side, I remember <unk> T as an industrial solutions business as well as flow flow has traditionally we would think it is a low single digits to mid single digit contributor and we're moderating back to those growth.

Growth rates as we get to the second half, which we believe is normal and then what we've got to do is make sure the mix of the businesses start.

Start to contribute more to the margin expansion side.

And we've got a lot of productivity and a lot of strategic projects.

Projects out of C&I, but as a reminder, ini tends to be the higher margin side of that business and so we would expect that contribution get more normalized.

As we go forward.

Maybe medium volumes.

Which we believe is normal and then what we Gotta do is make sure the mix of the businesses start to contribute more to the margin expansion side.

Don't necessarily inflect higher in the second half.

That's correct yes.

Okay and then.

You guys are you commented on pool that you've done well and Mike adjusting head count appropriately to the lower levels here.

And we'd gotten a lot of productivity and a lot of strategic.

Projects out of CNI, but as a reminder, or an eye tends to be the higher margin side of that business and so we would expect that contribution get more normalized.

Yes.

Sizable revenue declines in margins up nicely, how do we think about margins as the volume starts to come back like.

As we go forward.

As you need to add head count like is this a good level to build off of just like you know 30 something percent rate or could there be kind of like.

Meaning meaning volumes like.

Don't necessarily reflect higher in the second half my reading.

Correct, yes.

For lack of a better way to say it like a lack of incremental margin expansion on revenue growth in.

Okay. And then you guys are you commented on pool that you've done well and like adjusting headcount appropriately to the lower levels. Here you know you have.

And flex is a good basis to build off of.

As we grow from here, we begin to get volume leverage on the on the overhead structure of the business. The only thing that would be an add back is rebates and commissions that would be relative to selling the product.

Sizable revenue declines in margins up nicely Uhm, how do we think about margins as the volume starts to come back like.

You need to add head count like is this a good level to build off of dislike you know 30 something percent rate or.

Throughout the channel, but when you take all of that.

Could there be kind of like for.

Growth is a really good thing and this is a really good level Tomatoe office.

Sort of like a better way to say it like a lack of incremental margin expansion on revenue growth is that in flex. Its a good basis to build off of you know as as as we grow from here, we began to get volume leverage on the on the overhead structure. The business. The only thing that would be an add back is rebates and commissions that would be realm.

Okay well this concludes.

With that I'd like to provide some closing comments.

Thank you to everybody for joining us today.

I wanted to reiterate our earnings call key themes first we had solid execution within our diversified portfolio along with pricing transformation.

To selling the product.

Throughout the channel, but when you take all that growth is a really good thing and this is a really good level to model off of.

These initiatives drove Q2 sales growth with margin expansion across all three segments.

We continue to expect strength in our Iot and water solutions segments as well as transformation efficiencies to offset lower pool volume in 2023 third we raised our 2023 guidance due to strong Q2, and our confidence in the sustainability of our performance driven by diversified portfolio enforce our transformation initiatives are reading out.

Okay. When this is concluded.

But that I would like to provide some closing comments.

Thank you to everybody for joining us today.

I wanted to reiterate our earnings call key themes first we had a solid execution within a diversified portfolio along with pricing transformation.

And expected to drive greater benefits beginning of Q4 and beyond as we implement actions towards identified savings and finally, we expect to continue to deliver value creation beyond this fiscal year. Thank you everyone have a great day.

That these initiatives drove Q2 sales growth with margin expansion across all three segments second we continue to expect strengthen our ice tea and water solution segments as well as transportation efficiencies to offset lower pool Valium of 2023 third we raised our 2023 guidance due to strong Q too that our confidence in the sustainability of our.

The conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect your lines.

<unk> driven by diversified portfolio and fourth our transportation initiatives or reading out and expect to drive greater benefits beginning a Q4 beyond as we implement actions towards identified savings and finally, we expect to continue to deliver value creation beyond this fiscal year. Thank you everyone have a great day.

The conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect your lines.

Q2 2023 Pentair PLC Earnings Call

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