Q1 2024 Pentair PLC Earnings Call

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Operator: Hello and welcome to the Pentair first quarter 2024 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. And to withdraw from the question queue, please press star, then two. As a reminder, this conference is being recorded. I would now like to hand the call to Shelly Hubbard, Vice President, Investor Relations.

Speaker Change: Hello, and welcome to the Pentair first quarter 'twenty 'twenty four earnings conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

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

Speaker Change: Ask a question you May press Star then one on your telephone keypad and to withdraw from the question queue. Please press Star then two.

Speaker Change: A reminder, this conference is being recorded.

Speaker Change: I would now like to hand, the call to Shelley Hubbard, Vice President Investor Relations. Please go ahead. Thank.

Shelly Hubbard: Thank you, and welcome to Pentair's first quarter 2024 earnings conference call. On the call with me are John Stauch, our president and chief executive officer, and Bob Fishman, our chief financial officer.

Shelly Hubbard: Thank you and welcome to Pentair first quarter 2024 earnings conference call on the call with me are John Stokes, Our President and Chief Executive Officer, and Bob Fishman Chief Financial Officer on today's call. We will provide details on our first quarter performance as outlined in this morning's press release.

Shelly Hubbard: On today's call, we will provide details on our first quarter performance as outlined in this morning's press release. 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. 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.

Shelly Hubbard: 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.

Shelly Hubbard: 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.

Shelly Hubbard: 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. 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. 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.

Shelly Hubbard: 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.

Shelly Hubbard: 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.

Shelly Hubbard: 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.

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

Shelly Hubbard: We advise listeners to carefully review the risk factors in our most recent Form 10-K and Form 10-Q. Following our prepared remarks, we will open the call to questions. Please note that we will limit your questions to two, after which we ask you to re-enter the queue in order to allow everyone an opportunity to ask questions. Additionally, note that we have now published our Pentair Investor Overview on our IR website, which includes the overview slides we previously included in our quarterly earnings presentation. Please visit our Pentair Investor Relations website and click on events and presentations to find this new overview. I will now turn the call over to John.

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

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

Shelly Hubbard: Note that we have now published our pentair investor overview on our IR website, which includes the overview slides. We previously included in our quarterly earnings presentation.

Shelly Hubbard: Please visit our Pentair Investor Relations website.

Shelly Hubbard: Click on events and presentations to find this new overview.

Shelly Hubbard: I'll now turn the call over to John.

John L. Stauch: Thank you, Shelly, and good morning, everyone. First, I want to thank all of you who attended our 2024 Investor Day in New York. We appreciated your time and your insightful questions as we dove deeper into the business and provided our path to 24% ROS by full year 2026, with the potential for upside. Now, let's begin with our strong Q1 results on slide 4. For the 8th consecutive quarter, we continue to drive margin expansion.

Unknown Attendee: Thank you Shelly and good morning, everyone.

Unknown Attendee: First I want to thank all of you who attended our 2024 Investor Day in New York last month. We appreciate your time and your insightful questions. As we go deeper into the business and provided a path to 24% of our west by full year, 'twenty 26, with the potential for upside.

Unknown Attendee: So let's begin with our strong Q1 results on slide four.

Unknown Attendee: The eighth consecutive quarter, we continued to drive margin expansion.

John L. Stauch: In Q1, ROS expanded 90 basis points despite sales being down slightly against peak channel inventory challenges in our residential segment. We exceeded our first quarter guidance as our Pentair teams drove solid execution across all three segments. In the first quarter, segment income and adjusted EPS also increased year over year.

Unknown Attendee: In Q1, or less expanded 90 basis points, despite sales being down slightly against pig channel inventory challenges and our residential segments.

Unknown Attendee: We exceeded our first quarter guidance as our pentair teams drove solid execution across all three segments.

Unknown Attendee: In the first quarter segment income and adjusted EPS also increased year over year.

Unknown Attendee: Our transportation transformation initiatives remained on track to deliver margin expansion as we highlighted at our recent Investor day.

John L. Stauch: Our transformation initiatives remained on track to deliver margin expansion, as we highlighted at our recent Investor Day. Approximately 50% of our total revenue has adopted and implemented value-based pricing as part of our strategic pricing initiative. We are well into wave two of our sourcing initiatives, which we expect to begin to drive benefits in the second half of this year, and we have continued to drive operational footprint optimization and plan to continue this going forward.

Unknown Attendee: Approximately 50% of our total revenue is adopted and implemented value based pricing as part of our strategic pricing initiatives.

Unknown Attendee: We're well into wave two of our sourcing initiatives, which we expect to begin to drive benefits in the second half of this year and we've continued to drive operational footprint optimization plan to continue this going forward.

John L. Stauch: Moreover, we have recently introduced 80-20 trading to 50% of Pentair's revenue streams and have identified some quick wins and larger-term opportunities. Lastly, we are encouraged by signs that we are returning to a more normal operating environment for the first time in nearly four years. Both our lead times and our backlog have been normalizing, and our order rate trend has been in line with our expectations. As we expect to return to a more normal operating environment, we have seen a mix of trends across our residential, commercial, and industrial verticals within our three segments.

Unknown Attendee: And we have recently introduced 80 20 trading to 50% of pentair as revenue streams and have identified some quick wins and larger term opportunities.

Unknown Attendee: Lastly, we are encouraged by signs that we are returning to a more normal operating environment for the first time in nearly four years.

Unknown Attendee: With our lead times and our backlog had been normalizing in the order rate trend has been in line with our expectations.

Unknown Attendee: As we expect to return to a more normal operating environment, we have seen a mix of trends across our residential commercial and industrial verticals within our three segments.

John L. Stauch: For example, in flow, commercial and industrial verticals performed well in Q1, while higher interest rates continued to impact residential and agricultural verticals. Within Water Solutions, our commercial businesses servicing the food service and hospitality verticals performed as expected. We believe residential will improve as year-over-year challenges moderate. Lastly, in pools, a majority of our revenue is in the sunbelt states with a focus on higher-end in-ground pools. In Q1, high-rent pools and the Sunbelt States remained resilient, with the exception of California, where weather had a slight impact.

Unknown Attendee: For example, inflow commercial and industrial verticals performed well in Q1, while higher interest rates continue to impact residential and agricultural verticals.

Unknown Attendee: Within water solutions, our commercial businesses servicing the foodservice and hospitality verticals performed as expected.

Unknown Attendee: We believe residential improve as year over year challenges moderate.

Unknown Attendee: Lastly in pool, a majority of our revenue is in the Sun belt States with a focus on higher end in ground pools in Q1 high rent pools in the Sunbelt States remained resilient with the exception of California, where weather had a slight impact.

John L. Stauch: From our recent dealer survey, remodeled pool projects appear to be increasing, and servicers we surveyed were optimistic about the aftermarket. Now, let's turn to slide 6. Last week, we published our 2023 Corporate Responsibility Report with an update on our progress. At our Investor Day last month, our leader of ESG and sustainability, Karla Robertson, provided a preview of our 2023 results on this slide. I'm very proud of the work Karla and our sustainability team are doing and the progress our teams throughout the company are making against our strategic targets.

Unknown Attendee: Our recent dealer survey remodeled pool projects appear to be increasing and Servicers. We surveyed were optimistic about the aftermarket.

Unknown Attendee: Let's turn to slide six.

Unknown Attendee: Last week, we published our 2023 corporate responsibility report with an update on our progress.

Unknown Attendee: At our Investor Day last month, our leader of ESG and sustainability Carla Robertson provided a preview of our 2023 results on this slide.

Unknown Attendee: I'm very proud of the work Carlin, our sustainability team are doing and the progress our teams throughout the company are making against our strategic targets.

John L. Stauch: Before I turn it over to Bob, let's turn to slide 7. We delivered another quarter of quality earnings with better than expected results. Our Investor Day key themes remain on track. Our 80-20 training and workshops are underway with what we believe are promising early readouts, and we are reiterating our full year 2024 outlook while introducing strong Q2 guidance with adjusted EPS midpoint up 13% compared to the same period last year. All in, we continue to build a strong foundation to drive long-term growth and profitability across our diverse water portfolio. I will now pass the call over to Bob, who will discuss our performance and financial results in more detail.

Unknown Attendee: Before I turn it over to Bob Let's turn to slide seven.

Robert P. Fishman: We delivered another quarter of quality earnings with better than expected results, our Investor day key themes remain on track. Our 80 20 training and workshops are underway with what we believe are promising early readouts.

Robert P. Fishman: And we are reiterating our full year 2024 outlook, while introducing strong Q2 guidance with an adjusted EPS midpoint up 13%.

Robert P. Fishman: Compared to the same period last year.

Robert P. Fishman: All in we continue to build a strong foundation to drive long term growth and profitability across our diverse water portfolio.

Robert P. Fishman: I'll now pass the call over to Bob who will discuss our performance and financial results in more detail.

Robert P. Fishman: Thank you, John, and good morning, everyone. Let's start on slide 8. With sales over $1 million, we delivered another strong quarter of quality earnings; return on sales or Roth expanded 90 basis points, Spike sales being down 1% versus last year's record Q1. Core sales were down 1% year over year, driven primarily by growth in water solutions, which was more than offset by slight declines in flow and pool. Sales across all three segments increased sequentially from Q4.

Robert P. Fishman: Bob.

Robert P. Fishman: Thank you John and good morning, everyone.

Robert P. Fishman: Let's start on slide eight.

Robert P. Fishman: With sales over $1 billion, we delivered another strong quarter of quality earnings.

Robert P. Fishman: Return on sales or Ros expanded 90 basis points, despite sales being down 1% versus last year's record Q1.

Robert P. Fishman: Core sales were down 1% year over year, driven primarily by growth in water solutions.

Robert P. Fishman: Which was more than offset by slight declines in flow and pool.

Robert P. Fishman: Sales across all three segments increased sequentially from Q4.

Robert P. Fishman: Total sales in Q1 exceeded Q4, 2023 sales, which in turn exceeded Q3 2023 sales.

Robert P. Fishman: Full sales in Q1 exceeded Q4 2023 sales, which in turn exceeded Q3 2023 sales, as we had guided to last October. First quarter segment income increased 3% to $217 million, and return on sales expanded 90 basis points year over year to 21.4%. These results were driven by favorable mix.

Robert P. Fishman: As we had guided to last October.

Robert P. Fishman: First quarter segment income increased 3% to $217 million and return on sales expanded 90 basis points year over year to 21, 4%.

Robert P. Fishman: These results were driven by favorable mix.

Robert P. Fishman: Price More than Offsetting inflation as well as transformation, Ross improved sequentially from Q4 and approached the Q2 2023 record of 21.6%. We delivered adjusted EPS of $0.94, which exceeded our guidance and was up 3% year over year. As John previously mentioned, we are excited to be entering what we believe to be a more normal operating environment for the first time in nearly four years. Please turn to slide 9. Low sales declined 2% year over year.

Robert P. Fishman: More than offsetting inflation as well as transformation.

Robert P. Fishman: Ross improve sequentially from Q4 and approach the Q2 2020 theory record of 21, 6%.

We delivered adjusted EPS of <unk> 94 cents.

Robert P. Fishman: Which exceeded our guidance and was up 3% year over year.

Robert P. Fishman: As John previously mentioned, we are excited to be entering what we believe to be a more normal operating environment for the first time in nearly four years.

Robert P. Fishman: Please turn to slide nine.

Robert P. Fishman: Low sales declined 2% year over year <unk>.

Robert P. Fishman: Commercial sales growth of 9% and industrial sales growth of 2% were more than offset by a decline in residential sales of 12%. As our residential sales are more closely tied to the overall housing and agriculture market, segment income grew 19%, and return on sales expanded 350 basis points to 20.1%, marking the first time Ross has reached or exceeded 20%. The strong margin expansion was a result of price and mix exceeding inflation and continued progress on our transformation initiatives. Please turn to slide 10.

Robert P. Fishman: Commercial sales growth of 9% and industrial sales growth of 2% were more than offset by a decline in residential sales of 12%.

Robert P. Fishman: Our residential sales are more closely tied to the overall housing and agriculture markets.

Robert P. Fishman: Segment income grew 19% and return on sales expanded 350 basis points to 21%, marking the first time Ross has reached or exceeded 20%.

Robert P. Fishman: Our strong margin expansion was a result of price and mix exceeding inflation.

Continued progress on our transformation initiatives.

Robert P. Fishman: Please turn to slide 10.

Robert P. Fishman: In Q1 water solutions sales were up slightly to $273 million driven by commercial sales up approximately 1% and residential sales down approximately 1%.

Robert P. Fishman: In Q1, water solution sales were up slightly to $273 million, driven by commercial sales up approximately 1% and residential sales down approximately 1%. Segment income grew 6% to $56 million, and return on sales expanded 110 basis points to 20.4%, driven primarily by favorable mix and transformation continuing to drive operational efficiency. This is the eighth consecutive quarter of Roth's expansion, and margins have nearly doubled from 10.8% in Q1 2022 to 20.4% in Q1 2024.

Robert P. Fishman: Segment income grew 6% to $56 million and return on sales expanded 110 basis points to 24% driven primarily by favorable mix and transformation continuing to drive operational efficiencies.

Robert P. Fishman: This is the eighth consecutive quarter of Ros expansion.

Robert P. Fishman: Margins have nearly double from 10, 8% in Q1, 2022% to 24% in Q1 2024.

Robert P. Fishman: Within our residential business and water solutions, we have continued to see improvement in our year over year sales rate for the last five quarters.

Robert P. Fishman: Within our residential business in Water Solutions, we have continued to see improvement in our year-over-year sales rate for the last five quarters. Within our commercial business and water solutions business, both filtration and ice drove sales growth, which was offset by lower services revenue due to project life cycles. Please turn to slide 11. In Q1, pool sales declined 1% to $359 million.

Robert P. Fishman: Within our commercial business and water solutions, both filtration at ice drove sales growth, which was offset by lower services revenue due to project lifecycle.

Robert P. Fishman: Please turn to slide 11.

Robert P. Fishman: In Q1 pool sales declined 1% to $359 million.

Robert P. Fishman: However, Q1 sales improved nearly 7% sequentially from Q4 2023, as expected, segment income of $111 million was down 5%, and return on sales decreased 110 basis points due to lower volume, an increase in cost as we prepared for the peak pool season in Q2, and investment in transformation. We expect pool margins to expand each quarter year on year for the remainder of 2024. Please turn to slide 12.

Robert P. Fishman: However, Q1 sales improved nearly 7% sequentially from Q4 2023 as expected.

Robert P. Fishman: Segment income was $111 million down, 5% and return on sales decreased 110 basis points due to lower volume.

Robert P. Fishman: An increase in costs as we prepared for the peak pool season in Q2.

Robert P. Fishman: And investment in transformation.

Robert P. Fishman: We expect pool margins to expand each quarter year on year for the remainder of 2024.

Robert P. Fishman: Please turn to slide 12.

Robert P. Fishman: At our investor day in March, we updated our three-year margin targets to reflect margin expansion through full year 2026, extending our plan by a year. With contributions from all four of our key transformation initiatives, pricing, sourcing, operations, and organization, we are targeting Roth to expand by 540 basis points to 24% as compared to full year 2022 and have the opportunity to do even better, as we discussed during our investor day. In full year 2023, we achieved a Ross of 20.8%. I expect to continue to drive margin expansion to approximately 22% by year end. Please turn to slide 13.

Robert P. Fishman: At our Investor day in March we updated our three year margin targets to reflect margin expansion through full year 2026, extending our plan by a year.

Robert P. Fishman: With contributions from all four of our key transformation initiatives pricing sourcing operation and organization, we are targeting Ross to expand by 540 basis points to 24% as compared to full year 2022 and have the opportunity to do even better as we.

Robert P. Fishman: During our Investor day.

Robert P. Fishman: And full year 2023, we achieved the wrath of 28% and expect to continue to drive margin expansion to approximately 22% by year end.

Robert P. Fishman: Please turn to slide 13.

Robert P. Fishman: This runway provides context of when we expect each wave to deliver margin expansion in our reported results. Note that we expect our transformation benefits to compound with each additional wave and the entire process to begin to repeat in 2027, creating a continuous cycle of ongoing savings. Please turn to slide 14.

Robert P. Fishman: This runway provides context of when we expect each wave to deliver margin expansion in our reported results.

Robert P. Fishman: Note that we expect our transformation benefits to compounds with each additional wave and the entire process to begin to repeat in 2027, creating a continuous cycle of ongoing savings.

Robert P. Fishman: Please turn to slide 14.

Robert P. Fishman: In Q1, we used $127 million in cash, which is consistent with the prior year quarter. Q1 is predominantly a cash use quarter and typically followed by strong cash generation in Q2, our seasonally highest quarter. Our net debt leverage ratio was 2.1 times, down from 2.6 times in Q1 a year ago. Our RRIC was 14%. We continue to target high teens return on invested capital. We plan to remain disciplined with our capital and continue to focus on debt reduction amid the higher interest rate environment, along with Sherry Purchases to Offset Dilution. With a net debt leverage ratio within our target range, we have additional flexibility to strategically allocate additional capital to areas with the highest shareholder return. Moving to slide 15.

Robert P. Fishman: In Q1, we used $127 million in cash, which is consistent with the prior year quarter.

Robert P. Fishman: Q1 is predominantly a cash use quarter. It's typically followed by strong cash generation in Q2 are seasonally highest quarter.

Robert P. Fishman: Our net debt leverage ratio was two one times down from two six times in Q1, a year ago.

Robert P. Fishman: Our our IC was 14%.

Robert P. Fishman: We continue to target high teens return on invested capital.

Robert P. Fishman: We plan to remain disciplined with our capital and continue to focus on debt reduction and made the higher interest rate environment.

Robert P. Fishman: Along with share repurchases to offset dilution.

With a net debt leverage ratio within our target range, we have additional flexibility to strategically allocate additional capital to areas with the highest shareholder returns.

Robert P. Fishman: Moving to slide 15.

Robert P. Fishman: For the full year, we are maintaining our adjusted EPS guidance range of $4.15 to $4.25, which is up roughly 12% at the midpoint. Also, for the full year, we continue to expect sales to be up approximately 2% to 3% with flow sales to be up approximately low single digits, water solution sales to be approximately flat, and Pool Sales to be approximately 7% for the full year. We also expect segment income to increase 8% to 11%.

Robert P. Fishman: For the full year, we are maintaining our adjusted EPS guidance range of $4 15 to $4 25, which is up roughly 12% at the midpoint.

Robert P. Fishman: Also for the full year, we continue to expect.

Robert P. Fishman: <unk> to be up approximately 2% to 3% with flow sales to be up approximately low single digits.

Robert P. Fishman: Water solutions sales to be approximately flat and.

Robert P. Fishman: Core sales to be approximately 7% for the full year.

Robert P. Fishman: We also expect segment income to increase 828% to 11%.

Robert P. Fishman: For the second quarter, we expect sales to be up approximately 1% to 2% compared to last year's record Q2.

Robert P. Fishman: For the second quarter, we expect sales to be up approximately 1 to 2% compared to last year's record Q2. We expect strong growth and pool sales in Q2, somewhat offset by challenging comparisons in our water solution segment. We expect second-quarter segment income to increase 10% to 12% with significant Roth expansion. We are also introducing strong adjusted EPS guidance for the second quarter of approximately $1.15 to $1.17, up roughly 13% at the midpoint. I would now like to turn the call over to the operator for Q&A, after which John will have a few closing remarks. Operator, please open the line for questions. Thank you.

Robert P. Fishman: We expect strong growth in pool sales in Q2.

Robert P. Fishman: Somewhat offset by challenging comparisons in our water solutions segment.

Robert P. Fishman: We expect second quarter segment income to increase.

Robert P. Fishman: Sent to 12% with significant Ros expansion.

Robert P. Fishman: We are also introducing strong adjusted EPS guidance for the second quarter of approximately $1 15 to $1 17 up roughly 13% at the midpoint.

Speaker Change: I would now like to turn the call over to the operator for Q&A.

Speaker Change: After which John will have a few closing remarks.

Speaker Change: Operator, please open the line for questions.

Speaker Change: <unk>.

Speaker Change: Thank you we will now begin the question and answer session.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then two. We will now pause momentarily to assemble our roster. Today's first question comes from Mike Halloran with Baird. Please go ahead.

Speaker Change: I'll ask a question you May press Star then one on your telephone keypad.

Speaker Change: If you were using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: To withdraw your question. Please press Star then two.

Speaker Change: We will now pause momentarily to assemble Iraq there.

Speaker Change: Hum.

Speaker Change: Today's first question comes from Mike Halloran with Baird. Please go ahead.

Michael Patrick Halloran: Good morning, everyone. Thanks for the question. Two questions here. First one, just how are you thinking about the end markets as you work through the rest of the year? I mean, the overall top line guidance is really unchanged. So I guess the question is, are you seeing anything different today than you were thinking a few months back? And how are you thinking about the sequentials across your end markets?

Michael Patrick Halloran: Hey, good morning, everyone and thanks for the question so.

Michael Patrick Halloran: Few questions here first one just how are you thinking about the end markets as you work through the rest of the year I mean, the overall topline guidance really unchanged and so I guess the question is are you seeing anything different today than you were thinking a few months back.

Michael Patrick Halloran: And how are you thinking about the sequential from your across your end markets.

Michael Patrick Halloran: So far Mike I'd say things are playing out exactly like we thought and hoped for with the exception of maybe within our flow segment. The residential side in the AG side being a little weaker as we progress through the end of the year other than that everything's are generally in line with our previous expectations.

John L. Stauch: So far, Mike, I'd say things are playing out exactly like we thought and hoped for, with the exception of maybe within our flow segment, the residential side and the agricultural side being a little weaker as we progress through the end of the year. Other than that, everything's generally in line with our previous expectations.

Speaker Change: Thanks for that and then on the slow margins I'm awfully impressive and certainly seems a little a little different than I would've expected seasonally so.

Michael Patrick Halloran: Thanks for that! And then on the flow margins, awfully impressive, and certainly seems a little different than I would have expected seasonally. So maybe some thoughts on how you think those margins sequentially work from here, in particular, anything in the first quarter that's not repeatable from a mixed perspective or anything else? And is this just an example of the right foundation to build off of with all the work you guys are doing internally? It really is

Speaker Change: Maybe some thoughts on how you think those margins sequentially work from here.

Speaker Change: In particular or anything in the first quarter, that's not repeatable from a mix perspective or anything else and is this just an example of the right foundation to build off sold with all the work you guys are doing internally.

Speaker Change: It really is on the flow side, we were extremely pleased with the Ros expansion in Q1, and and again, we've said that they will be one of the main beneficiaries of the transformation program. So I expect the segment to continue to expand their Ross here year on year, because a lot of the play there.

John L. Stauch: It really is. On the flow side, we were extremely pleased with the ROS expansion in Q1. And again, we've said that they will be one of the main beneficiaries of the transformation program. So I expect the segment to continue to expand its ROS year on year because a lot of the play there is around strategic sourcing, pricing excellence, the operational footprint, and basically the complexity reduction play.

There is around strategic sourcing the pricing excellence, the operational footprint and basically the complexity reduction play.

Speaker Change: Thank you. The next question comes from Brian Lee with Goldman Sachs. Please go ahead.

Operator: Thank you. The next question comes from Brian Lee with Goldman Sachs. Please go ahead.

Brian K. Lee: Hey, guys. Good morning, kudos on the the solid execution here.

Brian K. Lee: Hey guys, good morning. Kudos on the solid execution here.

Brian K. Lee: I guess you know.

Brian K. Lee: I guess, you know, maybe, maybe as a follow-up to Mike's question. I mean, I think you know, the most eye-catching Metric was definitely the Ross and flow. Looks like both price, cost, and transformation benefits were driving a lot of this. I know it's a little bit lumpy if we look historically, but what is kind of the right run rate to think of in this segment coming off this 20% result? You want to outline, as we think about you know, you're on your improvements, and Roth's just particularly for flow.

Maybe maybe as a follow up to Mike's question I mean I think.

Brian K. Lee: The most eye catching.

Brian K. Lee: A metric was definitely the Ross and flow.

Brian K. Lee: Looks like both price cost and transformation benefits, we're driving a lot of this I know, it's a little bit lumpy. If we look historically, but you know what what is kind of the right run rate to think of in this segment coming off. This 20% result in Q1, how much more I guess price cost or transformation or anything else you want to outline as we think about you know year on year.

Brian K. Lee: Improvements in Ross, just particularly for flow.

John L. Stauch: Yeah, I mean, just to reiterate what Bob said, I think we've done a nice job refocusing the business and driving transformation. One thing that really kind of helps is that if you think about flow, there's a business inside of flow. It's our sustainable gas business, which last year had..., https://www.youtube.com.uk So, we do think this is a good starting point, and as we move through the year, we're going to continue to manage the mix and drive the transformation programs, and really pleased with the flow performance.

Speaker Change: Yeah, I mean, just to reiterate what Bob said I think we've done a nice job refocusing the business and driving transformation. One thing that really kind of helps us. If you think about flow. There is a business inside of flow, it's a sustainable gas business, which last year had.

Speaker Change: As you know several larger losing projects and we've been able to rightsize that business and bring those project execution is back up to you know, let's call. It low single digit margins, but we are getting a very favorable year over year comparison against those performance last year. So we do think this is a good starting point and as.

Speaker Change: We moved through the year, we're going to continue to manage the mix and drive the transformation programs and really pleased with the flow performance.

Brian K. Lee: Okay great helpful and then second question just when I look at pool again I know quarter to quarter this can this can kind of fluctuate but productivity sort of reversed in Q1 200 basis point headwind versus the tailwind you saw last quarter which was about the same 200 basis points is this all investment can you kind of break down you know or quantify how much it was this quarter it seems like it might have been a big spend quarter and should we expect this drag for a few more quarters or does Ross go you know right back up positive year-on-year I know you're saying growth is sequentially better throughout the year how about I guess margins and Ross in pool specifically as we think about the cadence thanks guys Yeah.

Speaker Change: Okay. Great helpful. And then second question just when I looked at pool again, I know quarter to quarter. This skin. This can kind of fluctuate, but productivity sort of reversed in Q1 200 basis point headwind versus a tailwind you saw last quarter, which was about the same 200 basis points is this all investment.

Speaker Change: Can you kind of break down you know.

Speaker Change: Oh to quantify how much it was this quarter it seems like it might've been a big spend quarter and should we expect this drag for a few more quarters or does Roscoe right back up positive year on year, I know, you're saying grosses sequentially better throughout the year how about that.

Speaker Change: Margins in Ross and pool, specifically as we think about the cadence thanks guys yeah.

Robert P. Fishman: Yeah, in my prepared remarks, I did mention that ROS and POOL will increase year on year for the balance of the year, so I'm pretty comfortable that we'll see ROS expansion within the POOL business.

Speaker Change: Yeah in my prepared remarks, I did mention that Ross and pool will increase year on year for the balance of the year. So comfortable that we will see Ros expansion within the pool business. I think you know Q1 was a little bit unusual in that the volume was declining but we have significant growth in in.

Operator: I think, you know, Q1 was a little bit unusual in that the volume was declining, but we had significant growth in Q2. And so some of the costs, the ramp-up of costs to service the strong Q2 obviously put a damper on the margins in the first quarter. We also are continuing to invest to drive growth, and transformation wasn't where we needed it to be within the POOL business. But those investments will pay off and further ROS expansion down the road. So again, comfortable with the ROS expansion in POOL for the remainder of the year. And again, as we ramp to significant growth in Q2, that will become a big manufacturing leverage play as well.

Speaker Change: Q2, and and so some of the cost the ramp up of cost to service. The strong Q2, obviously you put a put a damper on the margins in the first quarter. We also are continuing to invest to drive growth and transformation are wasn't where we needed it to be within the pool business.

Speaker Change: But those investments will pay off in further Ross expansion down the road, so again comfortable with Eros expansion in pools, and the remainder of the year and again as we ramp to significant growth in Q2 that will become a big manufacturing leverage play as well.

Speaker Change: Thank you. The next question comes from Damian Karas with UBS. Please go ahead.

Damian Karas: Thank you. The next question comes from Damian Karas with UBS. Please go ahead.

Speaker Change: Yeah.

John L. Stauch: Hi, good morning, everyone. Good morning.

Damian Karas: Hi, good morning, everyone. Good morning.

Damian Karas: My first question is on the pool business you'd mentioned in your slide deck, a remodel inquiries are up.

Damian Karas: My first question is on the pool business. You mentioned in your slide that remodel inquiries are up. Could you give us a sense for, you know, how much are we talking about here? Is that kind of across the board? Or was that also just like on the high end side of the market? And is your expectation for remodels still kind of down low single digits for the year and your guidance? Yes.

Damian Karas: Could you give us a sense for how much are we talking here is that kind of across the board or was that also just like on the high end side of the market.

Damian Karas: And is your expectation for Remodels still kind of down more like low single digits for the year in your guidance yet.

John L. Stauch: Yes to the second one. But we do feel there's some encouraging trends that will give us a feeling that our dealers will start to take more orders, which would extend those into 25 and 26. I think with all the new pools being built, there probably wasn't as much attention being spent on getting the remodel sequenced and completed. And I think we're encouraged that we're now seeing that part of the market get some demand from our customers. And again, this is primarily in the key Sunbelt states and more on aged pools.

Damian Karas: Yes to the second one, but we do feel there's some encouraging trends that will give us a feeling that our dealers will start to take more orders, which would extend it was into 25 and 26 I think with all the new pools being built there probably wasn't as much attention being spent to get any remodels sequenced and completed and I think we're encouraged.

Damian Karas: We're now seeing that part of the market get some demand from our customers and again. This is primarily in the Sun belt states and more on aged pools.

Speaker Change: Okay, that's encouraging to hear.

Damian Karas: Okay, that's encouraging to hear. And then could you just help us think about the water solutions and that 9% comp year over year? You know, how are you thinking about the second quarter for the segment, kind of both in terms of top line and segment margin?

Speaker Change: And then could you just help us thinks about the water solutions in that 9% comp year over year Hum.

Speaker Change: Are you thinking about this the second quarter for this segment you know kind of both in terms of a.

Speaker Change: Hotline and and and segment margin.

Robert P. Fishman: From a top line perspective, it's important to remind everyone what a large quarter Q2 was last year, especially within the ice business. So we do see a decline year on year within water solutions as they bump up against that tough compare. So think of the ice business and services having a bit of a headwind and then the filtration business continuing to grow nicely.

Speaker Change: From a a topline perspective, it's important to remind everyone. What a large quarter Q2 was last year, especially within the the ice business.

Speaker Change: So so we do see you know a decline a year on year within water solutions as they bump up against that tough compare so.

Speaker Change: Think of the ice business in services, having a bit of a headwind and then the filtration business continuing to grow nicely.

Speaker Change: Thank you. The next question is from Andy Kaplowitz with Citigroup. Please go ahead.

Operator: Thank you. The next question is from Andy Kaplowitz with Citigroup. Please go ahead.

Andrew Alec Kaplowitz: Hey guys, how are you? Good, how are you? Good. John and Bob, maybe following up on water solutions, like, is Manitowoc ice hanging in there a little bit more than you would have thought? Obviously, comps are tough, as you just talked about.

Andrew Alec Kaplowitz: Hey, guys how are you.

Andrew Alec Kaplowitz: Good John about just maybe following up on water solutions like isn't mannitol guys hanging in there a little bit more than you would've thought obviously comps are tough as you just talked about I think your guidance for commercial water was up low single digits for this year is that still what it is and then what happened in services and you know would you.

John L. Stauch: I think your guidance for commercial water was up low single digits for this year. Is that still what it is? And then what happened with services? And, you know, would you expect that to sort of come back as the year goes on?

Andrew Alec Kaplowitz: But that just sort of come back as the year goes on.

John L. Stauch: So yes on ICE. I think ICE is going to play out right now the way we expected it to. And as a reminder, as Bob said, tough, tough comparing Q2. But overall, I think it's going to come in line with our expectations. And, you know, it still has resilience in the end industry. And we're feeling good about our filtration penetration, combined with that BU to drive it. We are going to dial down our services business into more profitable annuity-based services as we exit some of the larger programs that we were doing with some of the large fast food companies.

Speaker Change: So yes, I think I said, it's going to play out right now the way we expected it to and as a reminder, as Bob said tough a tough compare in Q2, but overall I think it's going to come in line with our expectation and you know still as resilience in the industry and we're feeling good about our filtration penetration.

Speaker Change: Combined with that a b to drive it we are going to dial our services business into more profitable annuity based services as we exited some of the larger programs that we were doing with some of the large first.

Speaker Change: Food.

Speaker Change: Companies and some of those were not very profitable and we want to refocus the business into a simpler mix of of service are more geared to the products that we install and so we will see that be a little lumpy throughout the year as well.

John L. Stauch: And some of those were not very profitable. And we want to refocus the business into a simpler mix of service, more geared to the products that we install. And so we will see that be a little lumpy throughout the year as well.

Andrew Alec Kaplowitz: It's helpful guys, and then Bob, are you still thinking 75 million in productivity this year, even with the slower start and pull and the four million in total and productivity for Yeah, we were again pleased.

Speaker Change: That's helpful guys and then Bob are you still thinking $75 million in productivity. This year, even with the slower start in pool, and a $4 million in total and productivity for Q1.

Robert P. Fishman: Yeah, again, we were pleased with the transformation readout in flow and water solutions, but it was offset somewhat by the negative productivity and pool as we ramp up for Q2. Still feeling very comfortable with the $75 million number, and think of that as being fairly linear over the next three quarters. Thanks.

Robert P. Fishman: Yeah. We again, we were pleased with the transformation readout in inflow and water solutions, but it was offset somewhat by the negative productivity in pool as we ramp up for Q2 are still feeling very comfortable with the 75 million dollar number and think of that as being fairly linear.

Robert P. Fishman: Or over the next three quarters.

Operator: Thank you. The next question is from Steve Tusa with JPMorgan. Please go ahead. Hey guys, good morning. Uh, just to follow up on that, uh, that.

Robert P. Fishman: Thanks.

Robert P. Fishman: Thank you. The next question is from Steve Tusa with J P. Morgan. Please go ahead.

Robert P. Fishman: Okay.

Charles Stephen Tusa: Hey, guys. Good morning, good morning, Steve I see.

Charles Stephen Tusa: Just a follow up to that that bridge question for the year can you just update us on what Youre thinking on a price and then just the spread.

Charles Stephen Tusa: Hey guys, good morning. Just to follow up on that bridge question for the year.

Charles Stephen Tusa: On price cost and price inflation for the year.

John L. Stauch: Yeah, I think we're still hopeful we can get price to offset cost. I mean, we did see a little incremental inflation start to enter Q1 and Q2. I think it's primarily around what we'd call freight and probably specifically copper. So we're monitoring that, Steve. If needed, we would go back out and see what we could recover from a price standpoint. And our goal is for the full year to try to offset price and cost.

Charles Stephen Tusa: Yeah, I think we're still hopeful we can get price to offset cost I mean, we did see a little incremental inflation start to enter Q1 into Q2, I think it's primarily around what we'd call freight and probably specifically copper. So we're monitoring that Steve if needed. We would go back out and see what we could recover from a price standpoint, and our goal is to.

Charles Stephen Tusa: For the full year or tried to offset price and cost.

Charles Stephen Tusa: Okay, and two 2% ish of price for the year is that still kind of in there or what what what are you did three in the first quarter.

Robert P. Fishman: Yeah, we're still in that 2% price range and think about 3% inflation on the cost base. Those two would roughly offset from a dollar perspective.

Charles Stephen Tusa: Yeah, we're still in that 2% for a price in and think about 3% inflation on the cost base.

Charles Stephen Tusa: Those two what would roughly offset from a dollar perspective.

Operator: Thank you. The next question comes from Brian Blair on behalf of Oppenheimer. Please go ahead.

Charles Stephen Tusa: Thank you. The next question comes from Bryan Blair with Oppenheimer. Please go ahead.

Bryan Francis Blair: Thanks. Good morning, everyone. So, let's start. Good morning.

Bryan Francis Blair: Thanks, Good morning, everyone. So let's start.

Bryan Francis Blair: Good morning.

Bryan Francis Blair: A quick follow up on productivity and ER and transformation read through but you said step up.

Bryan Francis Blair: Quick follow-up on productivity and transformation read through. You said step up, you know, somewhat radical, the next three quarters to get to 75 million. Given the moving parts of Q1 and, you know, divergence and segment contribution, how should we think about, you know, how that drop through shakes out for

Bryan Francis Blair: You know somewhat ratable over the next three quarters to get to the $75 million.

Bryan Francis Blair: Given the moving parts of Q1, and you know divergence and secondly contribution how should we think about you know.

Bryan Francis Blair: How that the drop through shakes out for.

Bryan Francis Blair: For the segments.

John L. Stauch: We expect Poole to have a very significant contribution in Q2, given its rate of growth and the fact that we, as Bob mentioned, we had some incremental investments to get the product prepared to ship in Q2, so think about that as labor being roughly flat from Q1 to Q2, but getting a lot more revenue in Q2, so that would be a huge contribution. Corporate's always a timing issue, also, Bob didn't mention that, but we have higher corporate expenses that run in Q1, typical in the industry, and so that usually comes down as it heads into Q2 as well, but I think the rate of contribution will be the same for the other segments, and then we get the step up in Poole.

Bryan Francis Blair: Spec pool to have a very significant contribution in Q2.

Bryan Francis Blair: Given its rate of growth and the fact that we you know as Bob mentioned, we had some incremental investments to get the product prepared to ship in Q2, and you know sort of think about that as labor being roughly flat from Q1 to Q2, but you're getting a lot more revenue in Q2, so that would be a huge contribution corporates always a timing issue.

So you know Bob didn't mention that but we have higher corporate expenses that run in Q1.

Bryan Francis Blair: Typical in the industry and so that usually comes down as it heads into Q2 as well, but I think the rate of contribution will be the same for the other segments and then we get the step up in the pool.

Robert P. Fishman: Yeah, appreciate the detail and understand that debt reduction is the priority near term throughout the capital deployment. And although with your second quarter cash flow, I suspect by June, July timeframe, you'll be, you know, under two, two times leverage, any color you can offer on your M&A pipeline. And, you know, whether we may see, you know, any deal flow in the second half of this year, it's better to anticipate, you get back to that growth lever, you know, more in the 2025 timeframe.

Speaker Change: I appreciate the detail and I understand that debt reduction is the priority near term capital.

Bryan Francis Blair: Women.

Bryan Francis Blair: Although with your second quarter cash flow.

Bryan Francis Blair: It's backed by June July time frame, you'll be under two times Levered any color you can offer on your M&A pipeline and.

Bryan Francis Blair: You know, whether we may see you know any deal flow in the second half of this year, it's better to anticipate.

Bryan Francis Blair: You get back to that gross will ever be a more 2025 time frame.

Speaker Change: I agree with the comment that the the cash flow is providing strong optionality for for US. Yeah. What was interesting is we started the year thinking there would be three rate cuts. We've now built into our guidance of $100 million of interest expense no right.

Robert P. Fishman: I agree with the comment that the cash flow is providing strong optionality for us. You know, what was interesting is we started the year thinking there would be three rate cuts. We've now built into our guidance of 100 million of interest expense with no rate cuts. So we think that's prudent.

Speaker Change: So we think that's prudent we were able to keep the interest expense the same as our previous guide primarily because of the free cash flow was happening earlier in the year. So we look forward to a strong Q2 and free cash flow to your point, where we're right within our target range are we think there continues to be a a debt reduction.

Robert P. Fishman: We were able to keep the interest expense the same as our previous guide, primarily because the free cash flow is happening earlier in the year. So we look forward to a strong Q2 and free cash flow. To your point, we're right within our target range. However, we think there continues to be a debt reduction play to help the EPS. We'll restart the share repurchases to offset dilution, and then there remains optionality in terms of what drives the highest shareholder value.

<unk> play to help E. P. S. A will restart the sharp share repurchases to offset dilution and then there remains optionality in terms of what drives the highest shareholder value.

Speaker Change: Thank you. The next question is from Julian Mitchell with Barclays. Please go ahead.

Operator: Thank you. The next question is from Julian Mitchell with Barclays. Please go ahead.

Julian C.H. Mitchell: Hi, Good morning, maybe just wanted to put a finer point on that second quarter sales guide so in total it's up.

Julian C.H. Mitchell: Hi, good morning. Maybe just wanted to put a finer point on that second quarter sales guide. So, in total, it's up one to two points year on year. Based on your comments, Bob, is it right to think about waters maybe down mid single digits, you know, flow is flattish, and then you've got to pull up 10% plus? Is that the right sort of framework for Q2 sales?

Julian C.H. Mitchell: One to two points year on year based on your comments Bob is it right to think about waters, maybe down mid single digits. You know flow is flattish and then you've got pool up 10% plus is that the right sort of framework for Q2 sales.

Robert P. Fishman: I would agree with those numbers, Julian.

Robert P. Fishman: I would agree with those numbers Julien.

Julian C.H. Mitchell: That's very helpful. Thank you. And then just my second question would really be around sort of, you know, the inventory situations. I think your own inventories, flattish sequentially in March, down a lot year on year, maybe help us understand kind of how you're assessing inventories and the customer and channel partner level. And how do you assess your own sort of inventory rate versus kind of history for where we are in the year?

Speaker Change: That's very helpful. Thank you and then just my second.

Speaker Change: Second question would really be around sort of.

Speaker Change: Inventory situations I think your own inventories are flattish sequentially in March down a lot year on year, maybe help us understand kind of how you're assessing inventories on the customer and channel partner level.

Speaker Change: And how do you assess your own sort of inventory rate post is kind of history for where we are in the year.

Robert P. Fishman: From our perspective, inventory from days on hand is still significantly higher. We go back to 2019 and see that each of the segments has room for improvement. That being said, year on year, we were down, you know, roughly 10 days from an inventory on hand perspective. So we're moving in the right direction to bring down those inventories. Volume will certainly help in the second quarter, but we're not quite where we want to be.

Speaker Change: From our perspective inventory from a days on hand is still significantly higher we go back to 2019 and see each of the segments has room for improvement there.

Speaker Change: That being said our year on year, we were down roughly 10 days are from a inventory on hand perspective. So we're moving in the right direction to bring down those those inventories that the volume will certainly help in the second quarter, but we're not quite where we want it to be.

Speaker Change: And then on the channel side I think were at normal levels I think right now we're working with our channel partners and we're generally are shipping through in the same quarter whats being bought so.

John L. Stauch: And then on the channel side, I think we're at normal levels. I think right now we're working with our channel partners, and we're generally shipping through in the same quarter what's being bought. So I feel like all that's behind us here in Q2.

Speaker Change: I feel like all of that's behind US here in the Q2.

Speaker Change: Thank you. The next question comes from Jeff Hammond with Keybanc capital markets. Please go ahead.

Operator: Thank you. The next question comes from Jeff Hammond with KeyBank Capital Markets. Please go ahead.

Jeffrey David Hammond: Hey, good morning, guys, Hey, Jeff Okay.

Jeffrey David Hammond: Hey, good morning, guys. Just on pool. I mean, John, you seem a little more confident about how things are shaping up, at least from the survey work. And I think you talked about, you know, kind of having these added costs to ramp up. And so just wondering, you know, what it takes for you guys to kind of, you know, lift expectations there. And then just also any early reads on the start of the pool season here. I know I know weather was pretty disruptive last year.

Jeffrey David Hammond: Just on pool, I mean, John you seem.

Jeffrey David Hammond: Little more confident in and how things are shaping up at least from our survey work and I think you've talked about.

Jeffrey David Hammond: So kind of having having these added costs to ramp and so just wondering you know what it takes for you guys to kind of lift expectations. There and then just also any early read.

Jeffrey David Hammond: On the start of the pool season here I know I know weather was pretty disruptive last year.

John L. Stauch: Yeah, Jeff, I appreciate the question. I mean, just a reminder, pool, pool markets are and sell through, you know, on a normal market basis to still be down mid single digits. So we're benefiting from those easier year-over-year comparisons as we ramp up and no longer have those inventory headwinds. And then I feel like we've got better insights into the sell through. And the way that we can now work to get those shipments out in five days, we're more tying the shipments to the sell through. So yes, it does make us feel better and feels more normal, which is why we use the word normalized for a period of time. So I feel good about that.

Speaker Change: Yeah, Jeff I. Appreciate the question I mean, just a reminder, I mean pool pool markets are and the sell through on a normal market basis would still be down mid single digits. So we're benefiting from those year over year easier compares as we ramp up and no longer have those inventory.

Speaker Change: Inventory headwinds and then I feel like we've got better insights and into the sell throughs and the way that we know can work to get those shipments out in five days, where war tying the shipments to the sell throughs. So yes, it does feel better and it feels like more normal which is why we use the word normalize for a period of time, so I feel good about.

Speaker Change: That.

Speaker Change: You know interest rates are gonna be pesty, husky and I I think it's affecting the financing it's affecting dealer financing in the sense of you know where are they getting their working capital loans from it is going to continue to challenge the industry.

John L. Stauch: You know, interest rates are going to be pesky. And I think it's affecting the, you know, financing, it's affecting dealer financing, and the sense of, you know, where are they getting their working capital loans from is going to continue to challenge the industry. And also, when the interest rates are like this, we don't see movement from people selling their house and buying another house, which is what our business tends to like. You know, the water doesn't taste the same, and then you invest in a water filtration system.

Speaker Change: And also when the interest rates are like this we don't see movement from people.

Speaker Change: Selling their house and buying another house, which are what our business tends to like you know the water doesn't taste. The same and then you invest in a water filtration system. So Jeff we could use it was lower interest rates at some point to send a signal that you know things are going to be brighter and I think that that's what we're reflecting in the.

John L. Stauch: So, Jeff, we could use those lower interest rates at some point to send a signal that, you know, things are going to be brighter. And I think that that's what we're reflecting in our current hold of the full-year forecast. And then we feel confident we have transformation and we have cost-out initiatives to make up the gaps if we continue to see this be challenged as we head to the back.

Speaker Change: And our current hold over the full year forecast.

Speaker Change: And then we feel confident we have transformation and we have cost out initiatives to make up the gaps. If we continue to see this be challenged as we head to the back half of the year.

Speaker Change: Okay and then just.

Jeffrey David Hammond: Okay, and then just, um, you know, Home Depot is buying kind of a number two player in pool. And I'm just wondering if that drives any change in behavior or, you know, kind of tougher customer to kind of deal with. I think this year, short term, no, you know, clearly, deals can take a while to complete. I mean, I think all we can do right now is take Home Depot and SRS Heritage at their word.

Speaker Change: You know home depot is buying kind of or what you know the number two player in PAH.

Speaker Change: Cool and I'm just wondering if you think you know that drives any any change in behavior or you know kind of tougher customer to the kind of deal with it.

Speaker Change: And I think this year short term no clearly deals can take a while to complete I mean I.

Speaker Change: I think all we can do right now is take home depot and Srs heritage on their words, and what they're saying right. Now is they expect to run that independently and continue to service the pro channel and.

Jeffrey David Hammond: And what they're saying right now is that they expect to run that independently and continue to service the pro channel. For now, that's the way we would see it unfolding, and therefore, not a short-term impact. Thank you.

Speaker Change: For now that's the way, we would see it unfolding and therefore, not a short term impact that we anticipate.

John L. Stauch: Thank you. The next question is from Nathan Jones with People. Please go ahead. Mr. Jones, your line is open.

Speaker Change: Thank you. The next question is from Nathan Jones with Stifel. Please go ahead.

Speaker Change: Yeah.

Speaker Change: Okay.

Nathan Hardie Jones: Mr. Jones Your line is open.

Nathan Hardie Jones: Oh, sorry take off mute.

Operator: Oh, sorry, take off your mute. Good morning, everyone.

Nathan Hardie Jones: Good morning, everyone. Good morning.

Nathan Hardie Jones: Question on water solutions. You talked about some verticals there that are expected to improve as year-over-year challenges moderate. Is there an expectation that demand is actually improving sequentially here, or is that just a comment that you know you run into some easier comparisons as the year goes by, and those comparisons just get easier in the second half of the year?

Nathan Hardie Jones: A question on water solutions. You you are you talked about some verticals that are expected to improve as year over year challenges moderate is there an expectation that demand is actually improving sequentially here or is that just a comment that you know you are you run into some easier comparisons did you guys buy in those comparisons.

Nathan Hardie Jones: Just get easier in the second half of the year.

John L. Stauch: From an overall end market perspective, I would say it's more the latter, Nate and Nathan, in terms of we can't, with interest rates the way they are and people not buying new homes, get too much ahead of ourselves on the residential side. So pleased to see that the decline year on year is improving for the last four or five quarters, but again, it's not as robust as we would like it to be.

Nathan Hardie Jones: From a overall end market perspective, I would say, it's more more of the latter Nate Nate's then in terms of we cant with with interest.

Nathan Hardie Jones: That's the way they are and people not buying new homes get get too much ahead of ourselves on the residential side. So you know pleased to see that the decline year on year is improving for the last four or five quarters.

Nathan Hardie Jones: But again, it's it's not as robust as we would like it to be.

Speaker Change: Okay, and then are you seeing any positive those channels that we've talked a lot about the pool of inventory channel, but any any parts of the channel at water solutions that might still be reducing their own inventory. I mean, you guys have talked about reducing your inventory father.

Nathan Hardie Jones: Okay, and are you seeing any parts of those channels, I know we've talked a lot about the pool inventory channel, but any parts of the channel at water solutions that might still be, you know, reducing their own inventory? I mean, you guys have talked about reducing your inventory further. So, you know, potentially, is there any de-stocking still continuing in any channel, whether it's water solutions or, I guess, across the portfolio? Not that we're aware of.

So you know potentially is there any destocking still continuing and in any channel, whether it's water solutions or I guess across the portfolio.

Speaker Change: Not that we're aware of.

John L. Stauch: Not that we're aware of, but right now, we would say that sell-throughs are matching sell-in, generally across the industry.

Speaker Change: Right now we would say that.

Speaker Change: Sell through is matching sell in are generally across the industry.

Speaker Change: Thank you. The next question is from Deane Dray with RBC capital markets. Please go ahead.

Operator: Thank you. The next question is from Deane Dray with RBC Capital Markets. Please go ahead.

Deane Michael Dray: Thank you good morning, good morning, good morning, Mike.

Deane Michael Dray: Morning, morning. Hey, can we circle back on the opening comments you talked about? That you're halfway through value-based pricing. I would love to hear some of the early read on the traction and whether there are any disruptions, and then I guess it's a related question, the same thing on 80-20, just you know any success stories there, and any kind of product shakeouts, product lines that you know might be de-emphasized. Any color there would be helpful, yeah.

Deane Michael Dray: Can we circle back on the opening comments you talked about.

Deane Michael Dray: Now that you're halfway through value based pricing would love to hear some of the early read on the traction and weather any disruptions and and then I guess, it's a related question. The same thing on 80 20, just yep any success stories, there and any kind of prop.

Speaker Change: <unk> shake outs product lines that you might be D emphasized any color there would be helpful. Thanks, Yeah. So.

John L. Stauch: Yeah, so, you know, we're doing a good job utilizing the pricing playbooks that we have, and I'm really proud of the businesses utilizing those tools to affect outcomes strategically in their business. And again, this is just more strategic pricing and more thoughtful value-based pricing. That being said, I said this on investor day, and I have now gone through a full session of training. I kick myself for not having done 80-20 sooner, because what we're learning from 80-20 is that the complexity in the portfolio is all being treated equally.

Speaker Change: We're doing a good job utilizing the pricing playbooks that we have and I'm really proud of the businesses utilizing those tools to affect outcomes strategically in their business and again. This is just for strategic pricing and we're thoughtful value based pricing that being said I said this in Investor day, and I have now gone through a full session.

Speaker Change: Training I kick myself for not having done 80 20 sooner because what we're learning from 80 20 is the complexity in the portfolio as all being treated equally and what we need to do is think of our a parts of our top parts to our top customers getting differential treatment and that's where we can be more innovative that's where we can spend our energies for sourcing.

John L. Stauch: And what we need to do is think of our A parts, or our top parts for our top customers, getting differential treatment. And that's where we can be more innovative. And then we get, like most companies, all the complexity that you introduced over time, either the secondary parts to those top customers or the secondary parts to what you call the lower-end customers that drive the complexity in the organization and drive too many resources where there's very little impact that you can have. I mean, Deane, I'll give you this.

Speaker Change: Pricing effectively and then we get like most companies you get all the complexity that you introduced over time, either the secondary parts of those top customers or secondary parts to what you'd call. The lower end customers that drive the complexity.

Speaker Change: The organization and drive too many resources, where there's very little impact that you could have I mean, Dean I'll give you. This I mean think about any regulatory change and thinking about how you treat that equally it should really just be focused on your top parts to your top customers. Your top regions right. So we're going to get a lot of value from that and I think it comes from the complexity reduction, but I think it's really.

John L. Stauch: I mean, think about any regulatory change and think about how you will treat that equally. It should really just be focused on your top parts, your top customers, and your top regions, right? So we're going to get a lot of value from that, and I think it comes from complexity reduction. But I think it's really more of a growth tool because it's going to allow us to double down and really focus our innovative efforts on the top products that we have and to the top end markets that we have with our best customers.

Speaker Change: More of a growth tool because it's going to allow us to double down and really focus our innovative efforts to the top products that we have into the top end markets that we have with our best customers.

Deane Michael Dray: That's really helpful. I think we talked about it at analyst day. It's less about cutting lines, and it's more about optimizing growth.

Dean: That's real helpful. I think we talked about at the analyst day, it's less about cutting lines and it's more about optimizing growth is that right that is correct alright.

John L. Stauch: Is that right? Yes, that is correct. All right, good. And then just, I've asked about this before, because I just kind of hear the voice of the customer on the pool side is all this interest in automation, the extent to which you can automate testing, and any sort of updates on the pool chemicals, and so forth, you know, operation of the equipment. Just where does automation stand in terms of the take rate of your customers?

Speaker Change: Alright, good and then just I've.

Speaker Change: I've asked about this before because I just kind of the voice of the customer on the pool side is all of this interest in automation, the extent to which you can automate testing and any sort of updates on the pool chemicals and so forth operation of the equipment, just where does automation stand in terms of.

The take rate.

Speaker Change: Of your customers.

Deane Michael Dray: I mean, it's still

John L. Stauch: I mean, it's still about where it used to be Dean, and I think we think this year will be a higher level of penetration as people have time to think, and our dealers have time to get caught up and learn, and then be more productive in how they help the end customers get what they need. I think we have to make it simpler, and we have to take the complexity out of that portfolio as well, and then I think we also have to think about how we bring the right value proposition for the overall user, and I think those two things will help us really change and accelerate that penetration.

Speaker Change: I mean, it's still about where it used to be Dean Hum and I think we think this year will be a higher level of penetration as people have time to think and our dealers have time to get caught up in and learn and then be more productive and how they help them. The end customers get what they need I think we have to make it simpler.

Speaker Change: And we have to take the complexity out of that portfolio as well and then I think we also have to think about how do we bring the right value proposition.

Speaker Change: For the overall pad and I think those two things will help us really change and accelerate that penetration rate.

Speaker Change: Thank you. The next question comes from Brett Linzey with Mizuho. Please go ahead.

Operator: Thank you. The next question comes from Brett Linzey with Mizuho. Please go ahead.

Brett Logan Linzey: Hey, good morning everybody. Morning. Hey, I want to come back to pool. So just some of the pre-order activity received as most of that shipped out in the fourth and first quarter, or do you have some feathering into the second quarter? Just try to think about, you know, any revenue visibility there.

Brett Logan Linzey: Hey, good morning, everybody good morning.

Brett Logan Linzey: Hey, I wanted to come back to pool. So just some of the pre ordering activity received is most of that shipped out in the fourth and first or do you have some feathering that into the second quarter, just trying to think about.

Brett Logan Linzey: Any any revenue visibility there it's strongly in the second to be honest I mean, it balances out between Q4 and Q1, but most of this is about servicing the.

John L. Stauch: It's strongly in the second, to be honest. I mean, it balances out between, you know, Q4 and Q1. But most of this is about servicing the pool channel in the season, which would be Q2, and then adjusting within the season, which would be Q3 for us.

Brett Logan Linzey: Pool channel in the season, which would be Q2, and then adjusting within season, which would be Q3 for us.

Speaker Change: Okay, and then just just back to capital allocation certainly deals are episodic, but I guess at what point if deals arent coming into view do you lean a little bit heavier into repo is that is that an H two event or do you think you can assess M&A for the for the course of 'twenty four and we should think of incremental repurchases.

Brett Logan Linzey: Okay, and then just just back to capital allocation, I certainly think deals are episodic. But I guess at what point, if deals aren't coming into view, do you lean a little bit heavier into repo? Is that is that an h2 event? Or do you think you assess M&A for the for the, you know, the course of 24? And should we think of incremental repurchase as more of a 25 event? Well, we're going to

Speaker Change: More of a 25 of them.

John L. Stauch: Well, we're going to have... strong cash flow in Q2, we expect, as we normally seasonally do. And then, as Bob mentioned, I think our first step is we just got to reinstate buybacks to offset dilution and, you know, get that back as part of the capital allocation strategy. And then we're always looking at potential bolt-on M&A and are pleased that we're at least seeing some things now. But whether we can transact them or get them over the finish line is yet to be determined. And, you know, we've got valuations, and we've got performance that has to be looked at. But ultimately, I think we're excited that we're at least looking at things now.

Speaker Change: Well, we're gonna have.

Speaker Change: Strong cash flow in Q2, we expect as we normally seasonally do and then as Bob mentioned I think our first step is we just got to reinstate buybacks to offset dilution.

Speaker Change: Get that back as part of the capital allocation strategy and then we're always looking at potential bolt on M&A and you know pleased.

Speaker Change: Pleased that we're at least seeing some things now and if we can transact them or get them over the finish line, that's yet to be determined and we get valuations. We've got performance. It has to be looked at but ultimately I think we're excited that we're at least looking at things.

Operator: Thank you. The next question comes from Andrew Buscaglia with BNP Paribas. Please go ahead.

Speaker Change: Thank you. The next question comes from Andrew Buscaglia with BNP Paribas. Please go ahead.

Andrew Alec Kaplowitz: Hey, good morning, guys. Good morning, good morning.

Andrew Alec Kaplowitz: I just wanted to check, you know, on the flow side, you had mentioned resi weaker than expected; I was down about 12%. Can you just remind us what's behind that comment? What's driving that? And then any concerns, you know, that all your markets are different, but that leads into other areas?

Andrew Alec Kaplowitz: I just wanted to check on the flow side.

Andrew Alec Kaplowitz: You had mentioned rather the weaker than expected it was down about 12% can you just remind us what what.

Andrew Alec Kaplowitz: What's behind that are kind of on whats going on with whats driving that and then any concern.

Andrew Alec Kaplowitz: All of your markets are different but that that leads into other areas.

John L. Stauch: Two particular markets; it's water supply and water disposal. North America, which specifically is in-ground well pumps and what you'd say is pivot spray irrigation. That's it. I think it was just clear to us within the quarter that it's not worth running any promos or specials or thinking about dealer stockouts, that we really just have to understand that the market's going to be softer and work within that softer market to drive the transformation levers that we need.

Andrew Alec Kaplowitz: Two particular markets its water supply water disposal.

North America was specifically is in groundwater pumps, and what you'd say is pivot spray irrigation that's it.

Andrew Alec Kaplowitz: I think it was.

Andrew Alec Kaplowitz: Just clear to us within the quarter that it's not worth running any promos or specials or thinking about dealer stock outs on that we really just have to understand that the market is going to be softer and work with them that softer market to market to drive the transformation levers that we need.

Andrew Alec Kaplowitz: Yeah.

Andrew Alec Kaplowitz: And then yeah, and then on the topic of You know, areas of weakness in Rezi outside of flow. Cool sounds strong, but I guess.

Andrew Alec Kaplowitz: And then and then on the topic of areas.

Andrew Alec Kaplowitz: Areas of weakness and Ramsey outside of flow.

Speaker Change: Ooh sounds strong, but I guess.

Speaker Change: Got it.

John L. Stauch: Pool's got the year-over-year inventory tailwinds, which are which are helpful again, still, you know, mid single-digit down from a market perspective, and then residential water treatment saw severely severe drops in their outlook last year. And so they're really more sequentially flat as they're moving throughout the year here, which [inaudible] Thank you. The next question is from Saree.

Speaker Change: Yeah, Paul it's got the year over year inventory tail winds, which are which are helpful. Again still you know mid single digit down in from a market perspective, and then residential water treatment sauce severely severe drops in there their outlook last year, and so theyre really more sequentially flat as there are moving throughout the year.

Speaker Change: We're here, which you know if you said that's a sign of positive they're not down substantially but are you know, they're not seen signs of improvement either as some of those higher end systems require financing to move them.

Speaker Change: Thank you. The next question is from Saree <unk> with Jefferies. Please go ahead.

Operator: The next question is from Saree Boroditsky with Jeffreys. Please go ahead. Thanks for taking my question. So you made the comment that was positive about remodels and the aftermarket pool. Could you just update us on how you're thinking about that?

Saree: Thanks for taking my question. So you made the comment that was positive on Remodels. After that can pool could you just out there and how youre thinking about new pool construction for the year.

Saree: Right now we're thinking about exactly the same as in our original guide.

Saree: It's it's down versus historical standards.

Saree Emily Boroditsky: Right now, we're thinking about exactly the same as in our original guide, down versus historical standards. But I think overall, you know, from an industry perspective, we're working within that context. No update at this time.

Saree: But I think overall from an industry perspective, we're working within that context.

No update at this time.

Saree: And thank God. It's in place you realize about 50% of your own in second half, but I guess I would have expected to be slightly higher given the pool recovery and transformational benefits. So you know what.

Saree: What's kind of the offset to that that's driving second half earnings to be similar to the first half.

Speaker Change: Yeah again, we're pleased that at the <unk> on our last earnings call, we talked about EPS being down slightly.

John L. Stauch: Yeah, again, we're pleased that on our last earnings call, we talked about EPS being down slightly in the first half, and now we're at the point where it's roughly 50-50. So again, the strength of the first half is reading out, and we feel strongly strongly that momentum will continue in the second half. That's in line with, traditionally, how the business is operated roughly 50-50.

Speaker Change: Slightly in the first half and now we're at the point, where it's roughly 50 50. So again the strength of the first half is reading out and and we feel strong strongly that our momentum will continue in the second half that's in line with Ah traditionally are how the business is operated roughly 50 50.

Speaker Change: Thank you. The next question is from Andrew Krill with Deutsche Bank. Please go ahead.

Operator: Thank you. The next question is from Andrew Krill with Deutsche Bank.

Andrew Jon Krill: Hey, thanks. Good morning, everyone.

Andrew Jon Krill: Yeah, Hey, thanks, good morning, everyone.

Andrew Jon Krill: I just wanted a quick follow-up on that EPS seasonality question. I think it makes sense on the 50-50 split. I'm just wondering about 3Q versus 4Q. I think historically those are somewhat similar. Should we be expecting that, or is there any reason maybe it's a little more 4Q heavy as more of the transformation benefits flow through?

Andrew Jon Krill: Quick follow up on that EPS seasonality question I think it makes sense on a 50 50 split.

Andrew Jon Krill: Just wondering for three <unk> versus four <unk> I think historically those are somewhat similar should we be expecting that or is there any reason, maybe it's a little more <unk> heavy at more of the transformation benefits flow through.

John L. Stauch: You know, I think I would, um... Just to say the normal cadence of our business would be generally the same, if not more skewed a little bit more to Q3 versus Q4. Most of our dealer trade businesses, which is 75% of what we do, don't see a very strong close to the year. Most people don't want them inside their homes during the holidays. And we don't have that normal industrial cycle where there's a push to ship everything by the end of the year.

Andrew Jon Krill: You know I I think I would.

Andrew Jon Krill: Did you say the normal cadence of our business would be generally the same or if not more skewed a little bit more to Q3 versus Q4, most of our dealer trade businesses, which is 75% of what we do don't see a very strong close to the year.

Andrew Jon Krill: Most people don't want them in side their homes during the holidays and then you know.

We don't have that normal industrial cycle, where there's a push to ship everything by the end of the year. The things that will skew that is depending on you know what the pool season is for the subsequent.

John L. Stauch: The things that will skew that are depending on what the pool season is for the subsequent year, and then that sometimes leads to stronger, earlier shipments in Q4, and we have no idea what that's going to look like at this stage.

Andrew Jon Krill: Subsequent year, and then that sometimes leads to stronger earlier shipments in Q4, and we have no idea what that's going to look like at this stage.

Speaker Change: Okay, great very helpful.

Andrew Jon Krill: Okay, great, very helpful. And quick follow-up just on backlog, and I know you're more of a book and ship business, but with lots of comments about, you know, kind of a more normalized cycle patterns, etc. Just, is it reasonable to expect the small backlogs the segments have now that you think are lower kind of exiting this year, and that should be the more normal run rate into 2025? Thanks.

Speaker Change: <unk>, followed us for on backlog and I know, you're more of a book and ship in there such as with lots of clients about you know kind of a more normalized cycle patterns et cetera.

Speaker Change: Is it reasonable to expect like the small backlog in this segment have now you think are lower kind of exiting this year and that should be the more normal run rate into 2025.

John L. Stauch: We would agree with that, that the majority are shorter cycles, and that backlogs would be lower at the end of this year as the more normal operating conditions continue.

Speaker Change: We would agree with that that you know the majority is the shorter cycle and that our backlogs would be lower at the at the end of this year as the more normal operating.

Speaker Change: Condition and conditions continue.

Operator: Thank you. The next question comes from Scott Graham with Seaport Research. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Question comes from Scott Graham with Seaport Research. Please go ahead.

Scott Graham: Hey, good morning. Thanks for taking the question. I have two of them.

Scott Graham: Hey, good morning, Thanks for taking the question I have two of them. The first one is on the strategic pricing, maybe a little bit more finer to the point.

Scott Graham: The first one is on the strategic pricing, maybe a little bit more finer to the point. You know, with the pricing guide that you've given gave on the call here earlier suggests a little bit of a bleed off in pricing for the rest of the year, notwithstanding if you increase prices, of course, what is strategic pricing due to the pricing number? In other words, let's say that leads off to 2% for the balance of the year. Does that sustain 2% into next year, the pricing initiatives? Yes.

Scott Graham: With the pricing guide that you've given that you gave on the call here earlier suggests a little bit of a bleed off in pricing for the rest of the year. Notwithstanding if you increase prices of course.

Scott Graham: What is strategic pricing due to the pricing number in other words, let's say that bleeds off to 2% for the balance of the year.

Scott Graham: Does that sustain 2% into next year.

Scott Graham: Initiatives, yes.

John L. Stauch: Yes, strategic pricing would do two things. First of all, it helps you have confidence that the price you set is the right value that you should expect, meaning you looked at the features, and you priced accordingly. The second thing it allows you to do is hold firmer on your rebate structures. So that's usually where the net pricing benefit comes in. So there's list price, which is usually higher, and then what did you net, or what did you realize?

Speaker Change: Yeah strategic pricing would do two things first of all it helps you have confidence that the price you said is the right value that you should expect many if you looked at the features and you priced accordingly. The second thing. It allows you to do is hold firmer on your rebate structures. So that's that's usually where the net pricing benefit comes on so this list.

Speaker Change: Missing, which is usually higher and then what did you do that or would you realize I I don't know if we have next year's dialed in yet, but we usually drive it to be as Bob said price offsetting cost and when we take a look at material inflation and costs, we're going to try to drive enough pricing actions to at least be neutral along those two.

John L. Stauch: I don't know if we have next year's dialed in yet, but we usually drive it to be, as Bob said, price offsetting cost. And when we take a look at material inflation and cost, we're going to try to drive enough pricing actions to at least be neutral on those two elements.

Speaker Change: Elements.

Scott Graham: Thank you. My follow up question is around the margin guide. I know, you know, 22%. It just happened that the first quarter was a really strong margin quarter, and you didn't really get any benefit from volume. You had no benefit, you had a little bit of benefit from mix, but it wasn't necessarily in pool, right? So the rest of the year you have building strategic savings, you know, the transformation, you have building mix and pool, which could be material with volume. I'm just sort of wondering if, you know, 22%. It just seems like you should be able to get there fairly easily. Are you thinking higher than that? Possibly.

Speaker Change: Okay.

Thank you my follow up is around margin guide.

Speaker Change: I know you know 22% at just the first quarter was really strong margin quarter and you had no really no benefit from volume no.

Speaker Change: <unk> got a little bit of benefit from mix.

Speaker Change: It wasn't necessarily pool right. So the rest of the year you have building strategic savings you can see that the transformation you have building mix in pool, which is could be material with volumes.

Speaker Change: I'm just sort of wondering if you know 22%. It just seems like you should be able to get there fairly easily are you thinking higher than that.

Speaker Change: Potentially.

Speaker Change: I would start by saying the midpoint of our guide does suggest that were slightly higher than the 22% and an overall for the reasons you mentioned.

Robert P. Fishman: I would start by saying the midpoint of our guide does suggest that we're slightly higher than the 22%. And overall, for the reasons you mentioned, there's potential upside on that Ross expansion. So like the idea that that price is going to offset inflation transformation and then drive that Ross expansion. And then you know, mix can play in it plus or minus. We saw some favorable mix in Q1. But, you know, having a slightly lower ice business, that's a profitable business as an example. So, you know, price offsetting inflation, factoring in mix, and then transformation, potentially reading out better, could drive an improved Ross expansion story.

Speaker Change: There's potential upside on that Ross expansion so.

Speaker Change: Like the idea that prices can offset inflation transformation, then drives that Ross expansion.

Speaker Change: And and then you know mix can play in at plus or minus we got we saw some favorable mix in Q1, but you know having a slightly lower ice business. That's a profitable business as an example, so price offsetting inflation factoring in mix.

Speaker Change: And then transformation potentially reading out better could drive unimproved Ros expansion story.

Speaker Change: Thank you. The next question comes from Joe Giordano with Cowen. Please go ahead.

Operator: Thank you. The next question comes from Joe Giordano with Cohen, please.

Joseph Craig Giordano: Hey, good morning, guys.

Joseph Craig Giordano: I think most questions have largely been asked already, but just kind of curious, like, the bigger picture, you know, EPA comes out with regulations on PFAS. This is something that you guys were thinking about doing, like, potentially, like, an in-home product. I'm just curious how those kind of strategies, kind of, how you weigh those against kind of the 80-20 and the simplicity and, you know, wanting to focus on things that you know have a real market and how does that dynamic play out in your thought process? Great question.

Good morning morning.

Joseph Craig Giordano: I think I'm. Most question has largely been asked already but just kind of curious like bigger picture you know EPA comes out with regulations on on <unk>. This is something that you guys were thinking about doing like potentially like an in home product.

Joseph Craig Giordano: Product I'm, just curious how those kinds of strategies.

Joseph Craig Giordano: You weigh those against kind of the 80 20, and the simplicity and wanting to focus on things that you know have a real market and kind of how does that dynamic play.

And your thought process for funding its a great question I think you know 80 20 helps optimize the current revenue streams you have but it also.

John L. Stauch: I think, you know, 80-20 helps optimize the current revenue streams you have, but it also needs to apply to your focus on what you think you can do to make a larger impact in the future. You know, I think we're getting better at choosing fewer, more impactful innovation projects. And I'm still behind what we're doing with the whole home system that we're working on, and I do believe that there's strong progress around that.

Joseph Craig Giordano: Needs to apply to your focus on what you think you could do to make a larger impact in the future and you know.

Joseph Craig Giordano: I think where we're getting better at choosing fewer more impactful innovation projects and I'm still behind what we're doing with the whole home system that we're working on and I do believe that there's a.

Joseph Craig Giordano: Strong progress around that and the more awareness, we get in water and homes and the more people are concerned about what they're consuming and drinking I think that's better for us.

John L. Stauch: And the more awareness we get in the water and homes, and the more people are concerned about what they're consuming and drinking, I think that's better for us. The reason I don't get all, you know, pounding the table on the movements on the regulatory side is we just don't see people running out right now to buy the current products that we have that actually create or solve the problems today. So there has to be something else that occurs to get the consumer focused. And you know, as you look at the longer term, I think we're very energetic. I think in the shorter term, we're less optimistic that we're going to see a short-term recovery.

Joseph Craig Giordano: The reason I don't get all you know pounding the table on the movements on the regulatory side is we just don't see people running out right now to buy the current products that we have that actually create or solve the problems. Today. So there has to be something else that occurs to get the consumer focused.

Joseph Craig Giordano: And you know as you look at the longer term I think we're very energetic I think the shorter term, we're less optimistic that we're going to see a shorter term impact.

Speaker Change: Fair enough thanks, guys.

Speaker Change: Thank you.

Speaker Change: Thank you today's final question is a follow up from Steve Tusa with J P. Morgan. Please go ahead.

Charles Stephen Tusa: Hey, guys, sorry, just one last quick one on on the on the <unk> do we just assume that basically that entire call. It I don't know $25 million to $30 million that's effectively from you.

Charles Stephen Tusa: You know the.

Charles Stephen Tusa: Transformation.

Charles Stephen Tusa: For the <unk>.

Charles Stephen Tusa: Yeah in terms of reading out we've captured for the 75 and then our.

Our view is that the remaining 70 is fairly linear over the next three quarters right.

Charles Stephen Tusa: Alright, so that that basically accounts for all the year over year profit improvement like roughly for the second quarter.

Speaker Change: Yeah with pools incremental volume growth being offset a little bit by a year over year impacts in water solutions, but you're not far off.

Speaker Change: Alright cool thanks, guys. Thank you. Thank you.

Speaker Change: Thank you. This concludes today's question and answer session I would now like to turn the conference back over to John stuck for closing remarks.

Unknown Attendee: Thank you for joining us in closing I want to reiterate our key themes first solid execution across our balanced water portfolio drove significant margin expansion for the eighth consecutive quarter.

Unknown Attendee: We are reiterating our full year 2024 guidance, which reflects confidence in our strategy, while continuing to monitor uncertainty across the macroeconomic and geopolitical landscape.

Unknown Attendee: We are mitigating risk, where we can and be more agile as we expect to achieve new performance records in 2024 and drive long term shareholder value third we are pleased with our progress on our transformation initiatives, which we expect to continue to drive strong margin expansion.

Unknown Attendee: And finally, we expect to continue to deliver value creation beyond the 2020 for fiscal year. Thank you, everyone and have a great day.

Speaker Change: The conference has now concluded. Thank you for your participation you may now disconnect your lines.

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Speaker Change: Okay.

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