Q2 2024 Watts Water Technologies Inc Earnings Call

August 8, 2024

Operator: We will address questions related to the information covered during the call. Today's webcast is accompanied by a presentation, which can be found in the Investor Relations section of our website. We will reference this presentation throughout our prepared remarks. Any reference to non-GAAP financial information is reconciled in the appendix to this presentation.

Diane McClintock: We will address questions related to the information covered during the call. Today's webcast is accompanied by a presentation, which can be found in the Investor Relations section of our website. We will reference this presentation throughout our prepared remarks. Any reference to non-GAAP financial information is reconciled in the appendix to this presentation.

Operator: We will address questions related to the information covered during the call.

To the information covered during the call.

Diane McClintock: Today's webcast is accompanied by a presentation, which can be found in our Investor Relations section of our website. We will reference this presentation throughout our prepared remarks. Any reference to non-GAAP financial information is reconciled in the appendix to this presentation.

Operator: Today's webcast is accompanied by a presentation which can be found in our investor relations section of our website. We will reference this presentation throughout our prepared remarks. Any reference to non-gap financial information is reconciled in the appendix to this presentation.

Operator: accompanied by a presentation which can be found in our investor relation section of our website we will reference this presentation throughout our prepared remarks any reference to non-gaap financial information is reconciled in the appendix to this presentation

Operator: I'd like to remind everyone that during this call, we may be making certain comments that constitute forward-looking statements. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially. For information concerning these risks, see Watts publicly available filings with the SEC. The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Diane McClintock: I'd like to remind everyone that during this call, we may be making certain comments that constitute forward-looking statements. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially. For information concerning these risks, see Watts' publicly available filings with the SEC. The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. With that, I will turn the call over to Bob.

Diane McClintock: i'd like to remind everyone that during this call we may be making certain comments that constitute forward-looking statements these statements are subject to numerous risks and uncertainties that could cause actual results to differ materially

Diane McClintock: for information concerning these risks heawatts publicly available filings with the sec

Diane McClintock: The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Diane McClintock: The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. With that, I will turn the call over to Bob.

Bob Pagano: With that, I will turn the call over to Bob.

Diane McClintock: With that, I will turn the call over to Bob. Thank you, Diane.

Bob: Thank you, Diane, and good morning, everyone. Please turn to slide three, and I'll provide an overview of the second quarter. Our second quarter results were better than expected, including record sales, adjusted operating income, and earnings per share. I'd like to extend my gratitude to the entire Watts team for their dedication to serving our customers worldwide and delivering another record quarter. Organic sales were flat in the quarter, which was ahead of our expectations, with solid growth in Americas and Apnea, partly due to project timing, offset by weaker than expected sales in Europe.

Bob Pagano: Thank you, Diane.

Bob Pagano: Good morning, everyone. Please turn to slide three, and I'll provide an overview of the second quarter. Our second quarter results were better than expected, including record sales, adjusted operating income in earnings per share. I'd like to extend my gratitude to the entire Watts team for their dedication to serving our customers worldwide and delivering another record quarter. Organic sales were flat in the quarter, which was ahead of our expectations, with solid growth in the Americas and Atnea, partly due to project timing, offset by weaker-than-expected sales in Europe. The Americas region also benefited from incremental sales from our acquisitions of Bradley and Josam, which are both performing ahead of expectations and continue to help drive our long-term success.

Robert Pagano: Good morning, everyone. Please turn to slide three, and I'll provide an overview of the second quarter. Our second quarter results were better than expected, including record sales, adjusted operating income in earnings per share. I'd like to extend my gratitude to the entire Watts team for their dedication to serving our customers worldwide and delivering another record quarter. Organic sales were flat in the quarter, which was ahead of our expectations, with solid growth in the Americas and Atnea, partly due to project timing, offset by weaker than expected sales in Europe.

Bob: Thank you, Diane, and good morning, everyone. Please turn to slide 3, and I'll provide an overview of the second quarter.

Bob: The Americas region also benefited from incremental sales from our acquisitions of Bradley and Joe Sam, which are both performing ahead of expectations and continuing to help drive our long-term success. Adjusted Operating Income and Margin Exceeded Expectations Primarily Due to Incremental Volume in the Americas and Apnea Productivity and Cost Controls Which More Than Offset Incremental Investments in European Volume Delay. Free cash flow for the first half was solid, and we expect it to be seasonally stronger in the second half.

Speaker Change: Our second quarter results were better than expected, including record sales, adjusted operating income, and earnings per share. I'd like to extend my gratitude to the entire Watts team for their dedication to serving our customers worldwide and delivering another record quarter.

Bob: Organic sales were flat in the quarter, which was ahead of our expectations, with solid growth in the Americas and apnea, partly due to project timing, offset by weaker-than-expected sales in Europe .

Robert Pagano: The Americas region also benefited from incremental sales from our acquisitions of Bradley and Josam, which are both performing ahead of expectations and continue to help drive our long-term success. Adjusted operating income in margin exceeded expectations primarily due to incremental volume in the Americas in Atnea, productivity and cost controls, which more than offset incremental investments in European volume de-muffering. Pre-cash flow for the first half was solid, and we expect to be seasonally stronger in the second half.

Bob: the america's region also benefited from incremental sales from our acquisitions of bradley and josm which are both performing ahead of expectations and continue to help drive our long-term success

Bob Pagano: Adjusted operating income in margin exceeded expectations primarily due to incremental volume in the Americas in Atnea, productivity, and cost controls, which more than offset incremental investments in European volume de-muffering. Pre-cash flow for the first half was solid, and we expect to be seasonally stronger in the second half. Our balance sheet remains robust, and along with our extended credit facility, will allow for continued flexibility in our disciplined capital allocation strategy. Moving operations, the integrations of our Bradley, Josam, and NWARE acquisitions are progressing well. Synergy identification, realization are ahead of schedule, and are all on track to meet our financial criteria for acquisitions.

Bob: adjusted operating income in margin exceed expectations primarily due to incremental volume in the americas in apia productivity in cost controls which more than offset incremental investments in european volume de leveric

Bob: Free cash flow for the first half was solid, and we expect to be seasonally stronger in the second half. Our balance sheet remains robust, and along with our extended credit facility, will allow for continued flexibility in our disciplined capital allocation strategy.

Bob: Our balance sheet remains robust and, along with our extended credit facility, will allow for continued flexibility in our disciplined capital allocation strategy. Moving operations, the integrations of our Bradley, JOSAM, and NWARE acquisitions are progressing well. Synergy identification and realization are ahead of schedule and are all on track to meet our financial criteria for acquisition.

Robert Pagano: Our balance sheet remains robust, and along with our extended credit facility will allow for continued flexibility in our discipline capital allocation strategy. Moving operations, the integrations of our Bradley, Josam, and NWARE acquisitions are progressing well. Synergy identification, realization are ahead of schedule, and are all on track to meet our financial criteria for acquisitions. Additionally, our teams have done a good job driving productivity and price to offset inflation in investments. As previously mentioned, we're in the process of implementing a new SAP ERP system across our Americas and Atnea regions.

Bob: Moving to operations, the integrations of our Bradley, JOSAM, and NWARE acquisitions are progressing well. Synergy, identification, and realization are ahead of schedule and are all on track to meet our financial criteria for acquisitions.

Bob Pagano: Additionally, our teams have done a good job driving productivity and price to offset inflation in investments. As previously mentioned, we're in the process of implementing a new SAP ERP system across our Americas and Atnea regions. We have a highly capable team equipped with the best-in-class resources executing this implementation, and we're currently on schedule and budget. The new SAP system will reduce our ERP instances, drive productivity, and support our smart and connected strategy.

Bob: Additionally, our teams have done a good job driving productivity and prices to offset inflation in investment. As previously mentioned, we're in the process of implementing a new SAP ERP system across our Americas and APNEA regions. We have a highly capable team equipped with the best-in-class resources executing this implementation, and we are currently on schedule and budget. The new SAP system will reduce our ERP instances, drive productivity, and support our smart and connected strategy.

Bob: additionally our teams have done a good job driving productivity in price to offset inflation in investments

Robert Pagano: We have a highly capable team equipped with the best in-class resources executing this implementation, and we're currently on schedule and budget. The new SAP system will reduce our ERP instances, drive productivity, and support our smart and connected strategy.

Bob: As previously mentioned, we're in the process of implementing a new SAP ERP system across our Americas and APNEA regions.

Bob: We have a highly capable team, equipped with the best-in-class resources, executing this implementation, and we are currently on schedule and budget. The new SAP system will reduce our ERP instances, drive productivity, and support our smart and connected strategy.

Bob Pagano: Next, I'd like to provide an update on our own markets. Global GDP, which is considered a leading indicator for our repair and replacement activities, continues to be lower compared to 2020. But remains positive in our key markets. ERP's residential and non-residential new construction markets have further weakened. The reductions of energy incentive programs in Germany and Italy continue to unfavorably impact OEM volume and drive destocking activity, especially in the heap of markets. Inc. In the Americas, single-family new construction was down sequentially in June and is expected to remain soft at least until interest rates begin to ease.

Bob: Next, I'd like to provide an update on our end market. Global GDP, which is considered a leading indicator for our repair and replacement activities, continues to be lower compared to 2023, but it remains positive in our key markets. Europe's residential and non-residential new construction markets have further weakened. The reductions of energy incentive programs in Germany and Italy continue to unfavorably impact OEM volume and drive destocking activities, especially in the heat pump market.

Robert Pagano: Next, I'd like to provide an update on our own markets. Global GDP, which is considered a leading indicator for our repair and replacement activities, continues to be lower compared to 2020. But remains positive in our key markets. ERP's residential and non-residential new construction markets have further weakened. The reductions of energy incentive programs in Germany and Italy continue to unfavorably impact OEM volume and drive destocking activity, especially in the heap of markets.

Bob: next i'd like to provide an update on our end markets

Bob: Global GDP, which is considered a leading indicator for our repair and replacement activities, continues to be lower compared to 2023, but remains positive in our key markets.

Bob: europe's residential and nonresidential new construction markets have further weakened the reductions of energy andincentive programs in germany and italy continueed to unfavorably impact oem volume and drive destocking activity especially in the heap um market

Robert Pagano: Inc. In the Americas, single-family new construction was down sequentially in June and is expected to remain soft at least until interest rates begin to ease. Multi-family new construction indicators, including starts and permits, have been down double digits for the past several quarters and pretended to decline in multi-family new construction for the second half of 2024. On a positive note, America's institutional new construction is holding steady and light industrial, including data centers and mega projects continue to show strength.

Bob: In the Americas, single-family new construction was down sequentially in June and is expected to remain soft at least until interest rates begin to ease. Multifamily new construction indicators, including starts and permits, have been down double digits for the past several quarters and portend a decline in multifamily new construction for the second half of 2024. On a positive note, America's institutional new construction is holding steady, and light industrial, including data centers and megaprojects, continue to show strength.

Bob: In the Americas, single-family new construction was down sequentially in June and is expected to remain soft at least until interest rates begin to ease.

Bob Pagano: Multi-family new construction indicators, including starts and permits, have been down double digits for the past several quarters and pretended to decline in multi-family new construction for the second half of 2024. On a positive note, America's institutional new construction is holding steady, and light industrial, including data centers and mega projects, continue to show strength. These trends are expected to continue in the second half of the year. America's non-residential new construction indicators are indicating softness for the second half of 2024. The ABI has been down below 50 for several quarters, and the second quarter E&R construction industry competence index get back below 50. Growth in certain sub-verticals, including retail, office, and recreation, is expected to be challenged.

Speaker Change: mulultifamily new construction indicators including starts impermits have've been down double digits for the past several quarters and pretendendeda decline in mulultifamily new construction for the second half of two thousand and twenty four

Bob: On a positive note, America's institutional new construction is holding steady and light industrial, including data centers and megaprojects, continue to show strength.

Bob: These trends are expected to continue in the second half of the year. America's non-residential new construction indicators are indicating softness for the second half of 2024. The ABAI has been down below 50 for several quarters, and the second quarter E&R Construction Industry Confidence Index dipped back below 50.

Robert Pagano: These trends are expected to continue in the second half of the year. America's non-residential new construction indicators are indicating softness for the second half of 2024. The ABI has been down below 50 for several quarters and the second quarter E&R construction industry competence index get back below 50 growth in certain sub-verticals including retail, office, and recreation is expected to be challenged. In the Asia-Pacific region we continue to anticipate growth in China and markets driven by data centers and in the Middle East due to strong project activity. We also expect growth in Australian New Zealand with GDP expected to be positive and strength in institutional.

Bob: These trends are expected to continue in the second half of the year.

Speaker Change: america's non residential new construction indicators are indicating softness for the second half of two thousand and twenty four the abbi has been down below fifty for several quarters in the second quarter e in rour construction industry confidence index getit back below fifty

Bob: Growth in certain sub-verticals, including retail, office, and recreation, is expected to be challenging. In the Asia-Pacific region, we continue to anticipate growth in China and markets driven by data centers and in the Middle East due to strong project activity. We also expect growth in Australia and New Zealand, with GDP expected to be positive in strength and institution. Now, an update on our outlook for the remainder of the year. We are maintaining our full-year outlook.

Bob: growth in certain subverticals including retail office and recreation is expect ev challenged

Bob Pagano: In the Asia-Pacific region, we continue to anticipate growth in China and markets driven by data centers and in the Middle East due to strong project activity. We also expect growth in Australian New Zealand with GDP expected to be positive and strength in institutional.

Bob: In the Asia-Pacific region, we continue to anticipate growth in China and markets driven by data centers and in the Middle East due to strong project activity. We also expect growth in Australia and New Zealand, with GDP expected to be positive in strength and institutional.

Bob Pagano: Now an update on our outlook for the remainder of the year. We are maintaining our full-year outlook. We believe our solid first half performance will offset continued weakness in Europe new construction in lower OEM volume from the reductions in energy incentives in related heat pump destocking. We continue to monitor the geopolitical uncertainty in the US, Europe, and the Middle East in where position to proactively address any developments that may impact our operations. In addition, we're accelerating two million of the incremental investments into 2024, which will increase full year investments to 22 million from the 20 million previously communicated.

Robert Pagano: Now an update on our outlook for the remainder of the year. We are maintaining our full year outlook. We believe our solid first half performance will offset continued weakness in Europe new construction in lower OEM volume from the reductions in energy incentives in related heat pump destocking. We continue to monitor the geopolitical uncertainty in the US, Europe and the Middle East in where position to proactively address any developments that may impact our operations.

Bob: Now, an update on our outlook for the remainder of the year.

Bob: We believe our solid first-half performance will offset continued weakness in European new construction and lower OEM volume from the reductions in energy incentives in related heat pump destructions. We continue to monitor geopolitical uncertainty in the U.S., Europe, and the Middle East, and we're positioned to proactively address any developments that may impact our operations. In addition, we're accelerating $2 million of incremental investments into 2024, which will increase full-year investments to $22 million from the $20 million previously communicated. The additional investments will fund new product development, including smart and connected initiatives.

Speaker Change: we are maintaining ing our full year outlook we believe our solid first half performance will offset continued weakness in europe new construction and lower oem volume from the reductions and energy incentives in related heat pumplythe stocking

Bob: We continue to monitor the geopolitical uncertainty in the U.S., Europe , and the Middle East, and we are positioned to proactively address any developments that may impact our operations.

Robert Pagano: In addition we're accelerating two million of the incremental investments into 2024 which will increase full year investments to 22 million from the 20 million previously communicated. The additional investments will fund new product development including smart and connective initiatives.

Bob: In addition, we're accelerating $2 million of incremental investments into 2024, which will increase full-year investments to $22 million from the $20 million previously communicated. The additional investments will fund new product development, including smart and connected initiatives.

Bob Pagano: The additional investments will fund new product development, including smart and connective initiatives.

Bob Pagano: On slide four, I'd like to comment on our most recent sustainability report and the progress we have made. In early July, we published our 2023 sustainability report, which highlights the accomplishments in progress we've made within our four sustainability pillars: footprint, hamprint, social responsibility, and corporate governance. We have worked hard to exceed the goals we established back in 2018. We believe our triple play of solutions addressing safety and regulation for energy efficiency and water conservation enable our customers to achieve their sustainability goals and remain a top priority for Watts. Additionally, we establish new long-term goals, including an absolute carbon emissions reduction commitment, which will help advance our sustainability mission while improving our operations.

Bob: On slide four, I'd like to comment on our most recent sustainability report and the progress we have made. In early July, we published our 2023 Sustainability Report, which highlights the accomplishments and progress we've made within our four sustainability pillars, footprint, handprint, social responsibility, and corporate governance. We have worked hard to exceed the goals we established back in 2018. We believe our triple play of solutions addressing safety and regulation, energy efficiency, and water conservation enables our customers to achieve their sustainability goals and remain a top priority for Watts.

Bob: On slide four, I'd like to comment on our most recent sustainability report and the progress we have made. In early July, we published our 2023 sustainability report, which highlights the accomplishments and progress we've made within our four sustainability pillars, footprint, handprint, social responsibility, and corporate governance. We have worked hard to exceed the goals we established back in 2018. We believe our triple play of solutions addressing safety and regulation, energy efficiency, and water conservation enables our customers to achieve their sustainability goals and remain a top priority for Watts.

Robert Pagano: On slide four I'd like to comment on our most recent sustainability report in the progress we have made. In early July we published our 2023 sustainability report which highlights the accomplishments in progress we've made within our four sustainability pillars footprint hamprint social responsibility and corporate governance. We have worked hard to exceed the goals we established back in 2018. We believe our triple play of solutions addressing safety and regulation for energy efficiency and water conservation enable our customers to achieve their sustainability goals and remain a top priority for Watts.

Bob: On slide four, I'd like to comment on our most recent sustainability report and the progress we have made.

Bob: In early July , we published our 2023 Sustainability Report, which highlights the accomplishments and progress we've made within our four sustainability pillars—footprint, handprint, social responsibility, and corporate governance.

Bob: We have worked hard to exceed the goals we established back in 2018. We believe our triple play of solutions addressing safety and regulation of energy efficiency and water conservation enable our customers to achieve their sustainability goals and remain a top priority for Watts.

Bob: Additionally, we established new long-term goals, including an absolute carbon emissions reduction commitment, which will help advance our sustainability mission while improving our operation. Sustainability is a core commitment at Watts that extends into all aspects of our business. I'm proud of the progress our global team has made and invite you to read more about it in our sustainability report, which can be found on our investor relations website. With that, I'll turn the call over to Shashank, who will address our second quarter results and our third quarter and full year outlook. Shashank?

Robert Pagano: Additionally we establish new long-term goals including an absolute carbon emissions reduction commitment which will help advance our sustainability mission while improving our operations. Sustainability is a core commitment that extends into all aspects of our business. I'm proud of the progress our global team has made and invite you to read more about it in our sustainability report which can be found on our investor relations website.

Bob Pagano: Sustainability is a core commitment that extends into all aspects of our business. I'm proud of the progress our global team has made and invite you to read more about it in our sustainability report, which can be found on our investor relations website.

Shashank: Sustainability is a core commitment at what's that extends into all aspects of our business I am proud of the progress our global team has made and invite you to read more about it in our sustainability report, which can be found on our Investor Relations website.

Shashank Patel: With that, I'll turn the call over to Shushank, who will address our second quarter results and our third quarter in full year outlook.

Shashank Patel: With that I'll turn the call over to Shushank who will address our second quarter results and our third quarter in full year outlook. Shushank. Thanks Bob, and good morning everyone.

Shashank: With that I'll turn the call over to Shashank, who will address our second quarter results and our third quarter and full year outlook Shashank.

Shashank Patel: Shushank. Thanks, Bob, and good morning everyone. Please turn to slide five, and I will review the second quarter's consolidated results. Tales of $597 million were up 12% on a reported basis and flat organically. Solid organic growth in the Americas and Atmia offset a challenging quarter in Europe. In America's in Atmia, we did benefit from project timing into the second quarter from the third quarter. The acquisitions of Bradley and Joseph contributed approximately $65 million or 12%, and foreign exchange, primarily driven by a weaker year old, decreased sales by approximately $2 million versus the second quarter of 2023.

Shashank Patel: Thanks, Bob, and good morning, everyone. Please turn to slide 5, and I will review the second quarter's consolidated results. Sales of $597 million were up 12% on a reported basis and flat organic. Solid organic growth in the Americas and Apnea offset a challenging quarter in Europe. In Americas and APMEA, we did benefit from project timing into the second quarter from the third quarter. The acquisitions of Bradley and JOSEM contributed approximately $65 million, or 12%, and Foreign Exchange, primarily driven by a weaker euro, decreased sales by approximately $2 million compared to the second quarter of 2023.

Shashank Patel: Thanks, Bob, and good morning, everyone. Please turn to slide 5, and I will review the second quarter's consolidated results. Sales of $597 million were up 12% on a reported basis and flat organically. Solid organic growth in the Americas and Apnea offset a challenging quarter in Europe. In Americas and APMEA, we did benefit from project timing into the second quarter from the third quarter. The acquisitions of Bradley and JOSEM contributed approximately $65 million, or 12%, and Foreign Exchange, primarily driven by a weaker euro, decreased sales by approximately $2 million versus the second quarter of 2023.

Shashank: Thanks, Bob and good morning, everyone.

Shashank Patel: Compared to the prior year period, adjusted operating profit of $112 million increased 8%, and adjusted operating margins of 18.8% were down 70 basis points. Adjusted EBITDA of $126 million increased 10%, and adjusted EBITDA margin of 21% was down 50%. Operating margin benefited from price and mixed productivity, which was more than offset by inflation, volume de-leveraged, acquisition dilution of approximately 80 basis points, and incremental investments of $6 million. The decline in operating margin is also partially due to a very difficult comparison in the second quarter of 2023 when margins exceeded 19%.

Shashank Patel: Please turn to slide five and I will review the second quarters consolidated results. Tales of $597 million were up 12% on a reported basis and flat organically. Solid organic growth in the Americas and Atmia offset a challenging quarter in Europe. In America's in Atmia we did benefit from project timing into the second quarter from the third quarter. The acquisitions of Bradley and Joseph contributed approximately $65 million or 12% and foreign exchange, primarily driven by a weaker year old, decreased sales by approximately $2 million versus the second quarter of 2023.

Shashank Patel: Please turn to slide five and I'll review, the second quarter's consolidated results.

Shashank Patel: Sales of $597 million were up 12% on a reported basis and flat organically.

Shashank Patel: Solid organic growth in the Americas, and EMEA offset a challenging quarter in Europe.

Shashank Patel: In Americas, and EMEA, we did benefit from project timing into the second quarter from the third quarter.

Speaker Change: The acquisitions of badly and Joseph <unk> contributed approximately $65 million or.

Shashank Patel: Our 12% and foreign exchange, primarily driven by a weaker euro decreased sales by approximately $2 million versus the second quarter of 2023.

Shashank Patel: Compared to the prior period, adjusted operating profit of $112 million increased 8%, and adjusted operating margins of 18.8% was down 70 basis points. Adjusted EBITDA of $126 million increased 10%, and adjusted EBITDA margin of 21% was down 50 basis points. Operating margin benefited from price, mix, and productivity, which was more than offset by inflation, volume de-laborage, acquisition delusion of approximately 80 basis points, and incremental investments of $6 million. The decline in operating margin is also partially due to a very difficult comparison. The second quarter of 2023 when margins exceeded 19%. Adjusted earnings per share of $2.046 increased 5% versus last year, with growth driven by operational performance and solid contribution from our acquisitions.

Shashank Patel: Compared to the prior period, adjusted operating profit of $112 million increased 8% and adjusted operating margins of 18.8% was down 70 basis points. Adjusted EBITDA of $126 million increased 10% and adjusted EBITDA margin of 21% was down 50 basis points. Operating margin benefited from price, mix and productivity, which was more than offset by inflation, volume de-laborage, acquisition delusion of approximately 80 basis points, and incremental investments of $6 million. The decline in operating margin is also partially due to a very difficult comparison.

Shashank Patel: Compared to the prior year period, adjusted operating profit of $112 million increased 8% and adjusted operating margins of 18, 8% was down 70 basis points.

Shashank Patel: Adjusted EBITDA of $126 million increased 10% and adjusted EBITDA margin of 21% was down 50 basis points.

Shashank Patel: Operating margin benefited from price mix and productivity, which was more than offset by inflation volume deleverage acquisition dilution accretion of approximately 80 basis points and incremental investments of $6 million.

Shashank Patel: The decline in operating margin is also partially due to a very difficult comparison.

Shashank Patel: The second quarter of 2023 when margins exceeded 19%. Adjusted earnings per share of $2.046 increased 5% versus last year with growth driven by operational performance and solid contribution from our acquisitions. The adjusted effective tax rate was 25.2% of 50 basis points compared to the prior period, primarily due to the reduction of foreign taxes associated with the repatriation of funds that occurred in the second quarter of 2023. For gap purposes, we incurred approximately $4 million of restructuring and acquisition related charges.

Shashank Patel: The second quarter of 2023, when margins exceeded 19%.

Shashank Patel: Adjusted earnings per share of $2.46 increased 5% versus last year with growth driven by operational performance and a solid contribution from our acquisition. The adjusted effective tax rate was 25.2%, a 50 basis points compared to the prior year period, primarily due to the reduction of foreign taxes associated with the repatriation of funds that occurred in the second quarter of 2023. For gap purposes, we incurred approximately $4 million of restructuring and acquisition-related charges. These charges were partially offset by a $3 million non-recurring gain on the sale of a building in the Americas.

Shashank Patel: Adjusted earnings per share of $2 46, <unk> increased 5% versus last year with growth driven by operational performance and solid contribution from our acquisitions.

Shashank Patel: The adjusted effective tax rate was 25.2% of 50 basis points compared to the prior period, primarily due to the reduction of foreign taxes associated with the repatriation of funds that occurred in the second quarter of 2023. For gap purposes, we incurred approximately $4 million of restructuring and acquisition-related charges. These charges are partially offset by a $3 million non-recurring gain on the sale of a building in the Americas. Free cash flow year-to-date was $120 million compared to $89 million in the comparable period last year. The cash flow increase was probably due to higher net income, lower working capital investment, and the contribution from our acquisitions.

Shashank Patel: Adjusted effective tax rate was 25, 2% up 50 basis points compared to the prior year period, primarily due to the reduction of foreign taxes associated with the repatriation of funds that occurred in the second quarter of 2023.

Shashank Patel: These charges are partially offset by a $3 million non-recurring gain on the sale of a building in the Americas. Free cash flow year-to-date was $120 million compared to $89 million in the comparable period last year. The cash flow increase was probably due to higher net income, lower working capital investment, and the contribution from our acquisitions. We expect sequential improvement in our free cash flow and are on track to achieve a full-year free cash flow conversion goal of greater than or equal to 90% of net income as previously communicated.

Shashank Patel: For gap purposes, we incurred approximately $4 million of restructuring and acquisition-related charges. These charges were partially offset by a $3 million non-recurring gain on the sale of a building in the Americas. Our free cash flow year to date was $120 million compared to $89 million in the comparable period last year. The cash flow increase was probably due to higher net income, lower working capital investment, and the contribution from our acquisition. We expect sequential improvement in our free cash flow and are on track to achieve our full-year free cash flow conversion goal of greater than or equal to 90% of net income, as previously communicated. The balance sheet remains robust and provides us with ample flexibility.

Shashank Patel: For GAAP purposes, we incurred approximately $4 million of restructuring and acquisition related charges.

Shashank Patel: These charges were partially offset by a $3 million nonrecurring gain on the sale of a building in the Americas.

Shashank Patel: Our free cash flow year-to-date was $120 million compared to $89 million in the comparable period last year. The cash flow increase was probably due to higher net income, lower working capital investment, and the contribution from our acquisition. We expect sequential improvement in our free cash flow and are on track to achieve our full-year free cash flow conversion goal of greater than or equal to 90% of net income, as previously communicated. The balance sheet remains robust and provides us with ample flexibility.

Shashank Patel: Our free cash flow year to date was $120 million compared to $89 million in the comparable period last year.

Shashank Patel: The cash flow increase was primarily due to higher net income lower working capital investment and the contribution from our acquisitions.

Shashank Patel: We expect sequential improvement in our free cash flow and are on track to achieve a full-year free cash flow conversion goal of greater than or equal to 90% of net income, as previously communicated. The balance sheet remains robust and provides us with ample flexibility. Our net debt decapitalization ratio at quarter-end was negative 1%, and our net leverage was negative 0.1. A strong cash flow, healthy balance sheet, and the recent extension of our credit facility through July 2029 continued to give us capital allocation optionality.

Shashank Patel: We expect sequential improvement in our free cash flow and are on track to achieve our full year free cash flow conversion goal.

Shashank Patel: Greater than or equal to 90% of net income as previously communicated.

Shashank Patel: The balance sheet remains robust and provides us with ample flexibility. Our net debt decapitalization ratio at quarter-end was negative 1%, and our net leverage was negative 0.1. A strong cash flow, healthy balance sheet, and the recent extension of our credit facility through July 2029 continued to give us capital allocation optionality.

Shashank Patel: The balance sheet remains robust and provides us with ample flexibility.

Shashank Patel: Our net debt-to-capitalization ratio at quarter-end was negative 1%, and our net leverage was negative 0.1. A strong cash flow, healthy balance sheet, and the recent extension of our credit facility through July 2029 continue to give us capital allocation optionality. Please turn to slide six, and I'll provide a few comments on the regional results.

Shashank Patel: Our net debt-to-capitalization ratio at quarter end was negative 1%, and our net leverage was negative 0.1. A strong cash flow, healthy balance sheet, and the recent extension of our credit facility through July 2029 continue to give us capital allocation optionality. Please turn to slide six, and I'll provide a few comments on the regional results.

Shashank Patel: Our net debt to capitalization ratio at quarter end was negative 1% and our net leverage was negative 0.1.

Shashank Patel: Strong cash flow healthy balance sheet and the recent extension of our credit facility through July 2029 continued to give us capital allocation optionality.

Shashank Patel: Please turn to slide six, and I'll provide a few comments on the regional results. America's organic sales are up 5%, and reported sales are up 22% year-over-year. Organic sales are ahead of our expectations as a result of higher volume, partly due to project shipping earlier than X. We saw solid growth in our core valve products and our heating and hot water solutions. The acquisitions of Bradley and Joseph added $65 million or 17% to America sales in the quarter. Adjusted operating income increased 19% while adjusted operating margin decreased 60 basis points. The operating margin decline was primary driven by acquisition delusion, inflation, and incremental investments, which more than offset price volume leverage.

Shashank Patel: America's organic sales are up 5%, and reported sales are up 22% year over year. Organic sales are ahead of our expectations as a result of higher volume, partly due to project shipping earlier than expected. We saw solid growth in our core valve products and our heating and hot water solutions. The acquisitions of Bradley and Josem added $65 million, or 17%, to America's sales in the quarter. Adjusted operating income increased 19% while adjusted operating margin decreased 60 basis points; Europe organic sales were down 15%, which is slightly worse than we expected.

Shashank Patel: Please turn to slide six and I'll provide a few comments on the regional results. America's organic sales are up 5% and reported sales are up 22% year-over-year. Organic sales are ahead of our expectations as a result of higher volume, partly due to project shipping earlier than x- We saw solid growth in our core valve products and our heating and hot water solutions. The acquisitions of Bradley and Joseph added $65 million or 17% to America sales in the quarter. Adjusted operating income increased 19% while adjusted operating margin decreased 60 basis points. The operating margin decline was primary driven by acquisition delusion, inflation and incremental investments, which more than offset price volume leverage.

Shashank Patel: Please turn to slide six and I'll provide a few comments on the regional results.

Shashank Patel: Americas organic sales were up 5% and reported sales were up 22% year over year.

Shashank Patel: Organic sales are ahead of our expectations as a result of higher volume, partly due to projects shipping earlier than expected.

Shashank Patel: Solid growth in our core valve products at our heating and hot water solutions.

Shashank Patel: The acquisitions of Bradley and JOSEM added $65 million, or 17%, to America's sales in the quarter. Adjusted operating income increased 19% while adjusted operating margin decreased 60 basis points. The operating margin decline was primarily driven by acquisition dilution, inflation, and incremental investments, which more than offset price, volume leverage, favorable mix, and productivity. Europe's organic sales were down 15%, which is slightly worse than we expected. Reported sales were down 16% and included a 1% unfavorable impact of the foreign exchange movement.

Speaker Change: The acquisitions are badly and Joe Sam added $65 million or 17%.

Shashank Patel: <unk> sales in the quarter.

Shashank Patel: Adjusted operating income increased 19%.

Shashank Patel: Adjusted operating margin decreased 60 basis points.

Shashank Patel: The operating margin decline was primary driven by acquisition dilution inflation and incremental investments, which more than offset price volume leverage favorable mix and productivity.

Shashank Patel: Favourable next and productivity. Europe organic sales were down 15%, which was slightly worse than we expected. Reported sales were down 16% and included a 1% unfavourable impact of foreign exchange movements. Growth in our trades business was more than offset by declines in wholesale plumbing in France, Penalox and Scandinavia, as well as our OEM businesses in Germany and Italy, where heat pump destocking had a significant impact. Operating income decreased 48%, and operating margins decreased 620 basis points. Price favorable mix and productivity did not offset inflation and the significant impact of volume delivery due to our high fixed cost base in Europe.

Shashank Patel: Favourable next and productivity. Europe organic sales were down 15% which was slightly worse than we expected. Reported sales were down 16% and included a 1% unfavourable impact of foreign exchange movements. Growth in our trades business was more than offset by declines in wholesale plumbing in France, Penalox and Scandinavia, as well as our OEM businesses in Germany and Italy where heat pump destocking had a significant impact. Operating income decreased 48% and operating margins decreased 620 basis points.

Shashank Patel: Europe organic sales were down, 15%, which was slightly worse than we expected.

Shashank Patel: Reported sales were down 16% and included a 1% unfavorable impact of foreign exchange movements.

Shashank Patel: Growth in our drains business was more than offset by declines in wholesale plumbing in France, Benelux, and Scandinavia, as well as our OEM businesses in Germany and Italy, where heat pump destocking had a significant impact. Operating income decreased 48%, and operating margins decreased 620 basis points. Price, favorable mix, and productivity did not offset inflation and the significant impact of volume deleverage due to our high fixed cost base in Europe. APMEA organic sales were up 18%, and reported sales growth of 16% was negatively impacted by 2% from unfavorable foreign exchange movements. We saw growth across China, Australia, New Zealand, and the Middle East. Project Timing contributed to the growth in China and the Middle East.

Shashank Patel: Growth in our drains business was more than offset by declines in wholesale plumbing in France, Benelux and Scandinavia as well as our OEM businesses in Germany, and Italy, where heat pump Destocking had a significant impact.

Shashank Patel: Operating income decreased 48% and operating margins decreased 620 basis points.

Shashank Patel: Price favorable mix and productivity did not offset inflation and the significant impact of volume delivery due to our high fixed cost base in Europe. Apnea organic sales were up 18% and reported sales growth of 16% was negatively impacted by 2% from unfavourable foreign exchange movements. We saw growth across China, Australia, New Zealand, and the Middle East. Project timing contributed to the growth in China and the Middle East. Adjusted operating margins increased 70 basis points as volume and productivity more than offset inflation, incremental investments and the deluded effect of the environment.

Shashank Patel: Price favorable mix and productivity did not offset inflation and the significant impact of volume deleverage due to our high fixed cost base in Europe.

Shashank Patel: Apnea organic sales were up 18%, and reported sales growth of 16% was negatively impacted by 2% from unfavourable foreign exchange movements. We saw growth across China, Australia, New Zealand, and the Middle East. Project timing contributed to the growth in China and the Middle East. Adjusted operating margins increased 70 basis points as volume and productivity more than offset inflation, incremental investments, and the deluded effect of the environment.

Speaker Change: <unk> organic sales were up 18% and reported sales growth of 16% was negatively impacted by 2% from unfavorable foreign exchange movements.

Shashank Patel: We saw growth across China, Australia, New Zealand and the Middle East.

Shashank Patel: Timing contributed to the growth in China, and the Middle East.

Shashank Patel: Adjusted operating margins increased 70 basis points as volume and productivity more than offset inflation, incremental investments, and the dilutive effect of the NWER acquisition. Slide 7 provides our assumptions about our third quarter and full year outlook. First, let's cover the third quarter outlook. On a reported basis, we expect sales to increase between 5 and 8 percent. Organically, we expect sales to decrease between four and seven percent. Organic sales are expected to be down low single digits in the Americas and down low double digits in Europe, partially offset by apnea, which is expected to be up low single digits. In the Americas, we anticipate weakening in multifamily and non-residential new construction.

Shashank Patel: Adjusted operating margins increased 70 basis points as volume and productivity more than offset inflation incremental investments and the dilutive effect of the <unk> acquisition.

Shashank Patel: Sight 7 provides our assumptions about our third quarter and full-year outlook. First, let's cover the third quarter outlook. On a reported basis, we expect sales to increase between 5% and 8%. Organically, we expect sales to decrease between 4% and 7%. Organic sales are expected to be down low single digits in the Americas and down low double digits in Europe, partially offset by Apnea, which is expected to be up low single digits. In the Americas, we anticipate weakening in multi-family and non-residential new construction. In addition, our third quarter guidance includes the unfavourable impact of project timing in the Americas in apnea, where we saw projects deliver in the second quarter, which was earlier than anticipated.

Shashank Patel: Sight 7 provides our assumptions about our third quarter and full year outlook. First, let's cover the third quarter outlook. On a reported basis, we expect sales to increase between 5% and 8%. Organically, we expect sales to decrease between 4% and 7%. Organic sales are expected to be down low single digits in the Americas and down low double digits in Europe, partially offset by apnea, which is expected to be up low single digits.

Shashank Patel: Slide seven provides our assumptions about our third quarter and full year outlook.

Shashank Patel: First let's cover the third quarter outlook.

Shashank Patel: On a reported basis, we expect sales to increase between five and 8%.

Speaker Change: Organically, we expect sales to decrease between four and 7%.

Speaker Change: Our organic sales are expected to be down low single digits in the Americas and down low double digits in Europe, partially offset by apnea, which is expected to be up low single digits.

Shashank Patel: In the Americas, we anticipate weakening in multi-family and non-residential new construction. In addition, our third quarter guidance includes the unfavourable impact of project timing in the Americas in apnea, where we saw projects deliver in the second quarter, which was earlier than anticipated. It also includes a soft start to the quarter resulting from a reduction in safety stocks at some of our channel partners in the Americas due to our normalized lead times.

Shashank Patel: In the Americas, we anticipate weakening in multifamily and nonresidential new construction.

Shashank Patel: In addition, our third-quarter guidance includes the unfavorable impact of project timing in the Americas at NAFNIA, where we saw projects deliver in the second quarter, which was earlier than anticipated. It also includes a soft start to the quarter, resulting from a reduction in safety stocks at some of our channel partners in the Americas due to our normalized lead. Gear markets are expected to remain soft, partly due to continued heat pump and related product restocking.

Shashank Patel: In addition, our third quarter guidance includes the unfavorable impact of project timing in the Americas it not be.

Shashank Patel: We saw projects deliver in the second quarter, which was earlier than anticipated.

Shashank Patel: It also includes a soft start to the quarter resulting from a reduction in safety stocks at some of our channel partners in the Americas due to our normalized lead times. Here at markets are expected to remain soft, partly due to continued heat pump and related product destalking. We expect incremental sales in the Americas from acquisitions to be between 60 and 62 million dollars. Third quarter adjusted EBITDA margins are expected to be in the range of 18.7 to 19.3%, or down 70 to down 130 basis points. Third quarter adjusted operating margins should be in the range of 16.2 to 16.8%, or down 120 basis points to down 180 basis.

Shashank Patel: It also includes a soft start to the quarter resulting from a reduction in safety stocks at some of our channel partners in the Americas due to our normalized lead. We are estimating a 1.09 euro US dollar exchange rate, which is flat compared to the third quarter of 2023. Our full-year adjusted operating margins should be between 17.1% to 17.7%, or down 70 basis points to down 10 basis points.

Shashank Patel: It also includes a soft start to the quarter, resulting from a reduction in safety stock at some of our channel partners in the Americas due to our normalized lead times.

Shashank Patel: Here at markets are expected to remain soft, partly due to continued heat pump and related product destalking. We expect incremental sales in the Americas from acquisitions to be between 60 and 62 million dollars. Third quarter adjusted EBITDA margins are expected to be in the range of 18.7 to 19.3% or down 70 to down 130 basis points. Third quarter adjusted operating margins should be in the range of 16.2 to 16.8% or down 120 basis points to down 180 basis.

Shashank Patel: Different markets are expected to remain soft partly due to continued heat pump and related product destocking.

Shashank Patel: We expect incremental sales in the Americas from acquisitions to be between $60 and $62 million. Third quarter adjusted EBITDA margins are expected to be in the range of 18.7 to 19.3%, or down 70 to down 130 basis points. Third quarter adjusted operating margin should be in the range of 16.2 to 16.8 percent or down 120 basis points to down 180 basis points. Acquisition dilution of 90 basis points, incremental investments of $6 million, and volume de-leverage, particularly in Europe, will all have an unfavorable impact. A few other items related to the third quarter. Corporate costs should be approximately $14 million, and net interest expense should be approximately $2 million. The adjusted effective tax rate should be approximately 25%.

Shashank Patel: We expect incremental sales in the Americas from acquisitions to be between 60% and $62 million.

Shashank Patel: Third quarter adjusted EBITDA margins are expected to be in the range of $18 seven to 19, 3% or down 72 down 130 basis points.

Shashank Patel: Third quarter adjusted operating margins should be in the range of 16, 2% to 16, 8% or down 120 basis points to down 180 basis points.

Shashank Patel: Dispoints. Packed position delusion of 90 basis points, incrementally investments of $6 million and volume view average, particularly in Europe, will all have an unfavorable impact. A few other items related to the third quarter. Corporate cost should be approximately $14 million, and net interest expense should be approximately $2 million. The adjusted effective tax rate should be approximately 25%. We are estimating a 1.09 euro U.S, dollar exchange rate, which is flat compared to the third quarter of 2023.

Shashank Patel: The acquisition dilution of 90 basis points incremental investments of $6 million and volume deleverage, particularly in Europe will all have an unfavorable impact.

Shashank Patel: A few other items related to the third quarter. Corporate cost should be approximately $14 million, and net interest expense should be approximately $2 million. The adjusted effective tax rate should be approximately 25%. We are estimating a 1.09 euro U.S. dollar exchange rate, which is flat compared to the third quarter of 2023.

Shashank Patel: A few other items related to the third quarter.

Shashank Patel: Corporate costs should be approximately $14 million and net interest expense should be approximately $2 million.

Shashank Patel: The adjusted effective tax rate should be approximately 25%.

Shashank Patel: We are estimating a 1.09 euro US dollar exchange rate, which is flat compared to the third quarter of 2023. Now, let's cover the full year outlook. For full year 2024, we are maintaining our store consistent with our previous guidance. Reported sales are expected to increase 70 percent to 12 percent, and organic sales are expected to range from down 4 percent to up 1 percent. Full-year incremental sales from Bradley & Joseph should be between $210 million and $215 million.

Shashank Patel: We are estimating a 1.09 euro U S dollar exchange rate, which is flat compared to the third quarter of 2023.

Shashank Patel: Now, let's cover the full year outlook. For full year 2024, we are maintaining our outlook consistent with our previous guidance. Reported sales are expected to increase 7% to 12%, and organic sales are expected to range from down 4% to up 1%. Full year incremental acquired sales from Bradley and Joseph should be between $210 million and $215 million. Our full year adjusted EBITDA margins should be between 19.6% and 20.2%, or down 30 basis points to up 30 basis points. Our full year adjusted operating margins should be between 17.1 to 17.7%, or down 70 basis points to down 10 basis points.

Shashank Patel: Now, let's cover the full year outlook. For full year 2024, we are maintaining our outlook consistent with our previous guidance. Reported sales are expected to increase 7% to 12%, and organic sales are expected to range from down 4%, to up 1%. Full year incremental acquired sales from Bradley and Joseph should be between $210 million and $215 million. Our full year adjusted EBITDA margins should be between 19.6% and 20.2%, or down 30 basis points to up 30 basis points.

Shashank Patel: Now, let's cover the full year outlook.

Shashank Patel: For full year 2024, we are maintaining our outlook consistent with our previous guidance.

Shashank Patel: <unk> sales are expected to increase 17% to 12% and organic sales are expected to range from down 4% to up 1%.

Shashank Patel: Full year incremental acquired sales from Bradley and Joe Sam should be between $210 million and $215 million.

Shashank Patel: Our full-year adjusted EBITDA margin should be between 19.6% and 20.2%, or down 30 basis points to up 30 basis points. Our full-year adjusted operating margins should be between 17.1 to 17.7 percent, or down 70 basis points to down 10 basis points. A better than expected second quarter, including acquisition performance, is expected to offset second half weakening in Europe, as previously mentioned. As a reminder, the operating and EBITDA margin guidance includes an increase in incremental investments of $2 million and acquisition dilution of 60 basis points.

Shashank Patel: Our full year adjusted EBITDA margin should be between 19, 6% and 22% or down 30 basis points to up 30 basis points.

Shashank Patel: Our full year adjusted operating margins should be between 17.1 to 17.7%, or down 70 basis points to down 10 basis points. Our better than expected second quarter, including acquisition performance, is expected to offset second half, weakening in Europe as previously mentioned. As a reminder, the operating and EBITDA margin guidance includes an increase in incremental investments of $2 million and acquisition demolition of 60 basis points. Our free cash flow expectation remains in line with our previous outlook as we expected the number of free cash flow conversion of greater than or equal to 90% of net income in 2024.

Shashank Patel: Our full year adjusted operating margins should be between 17, 1% to 17, 7% or down 70 basis points down 10 basis points.

Shashank Patel: Our better than expected second quarter, including acquisition performance, is expected to offset second half weakening in Europe, as previously mentioned. As a reminder, the operating and EBITDA margin guidance includes an increase in incremental investments of $2 million and acquisition demolition of 60 basis points. Our free cash flow expectation remains in line with our previous outlook, as we expected the number of free cash flow conversion of greater than or equal to 90% of net income in 2024. For the full year, we are assuming a 1.09 average euro US dollar effects rate versus the average rate of 1.08 in 2023.

Shashank Patel: Our better than expected second quarter, including acquisition performance is expected to offset second half weakening in Europe as previously mentioned.

Shashank Patel: As a reminder, the operating and EBITDA margin guidance includes an increase in incremental investments of $2 million.

Shashank Patel: And acquisition dilution of 60 basis points.

Shashank Patel: Our free cash flow expectation remains in line with our previous outlook as we expect to deliver free cash flow conversion of greater than or equal to 90% of net income in 2024. For the full year, we are assuming a 1.09 average US dollar FX rate versus an average rate of 1.08 in 2023. This would imply an increase of 1% year over year and would equate to an increase of $5 million in sales and $0.02 per share in EPS for the full year versus the prior year. Other key inputs for the full year can be found in the appendix. Now, let me turn the call back over to Bob before we begin our Q&A.

Shashank Patel: Our free cash flow expectation remains in line with our previous outlook as we expect to deliver free cash flow conversion of greater than or equal to 90% of net income in 2024.

Shashank Patel: For the full year, we are assuming a 1.09 average euro US dollar effects rate versus the average rate of 1.08 in 2023. This would imply an increase of 1% euro per year and would equate to an increase of $5 million in sales and 2 cents per share in EPS for the full year versus the prior year. Other key inputs for the full year can be found in the appendix.

Shashank Patel: For the full year, we are assuming a 1.09 average euro U S dollar FX rate versus the average rate of 1.08 in 2023.

Shashank Patel: This would imply an increase of 1% euro per year and would equate to an increase of $5 million in sales and 2 cents per share in EPS for the full year versus the prior year. Other key inputs for the full year can be found in the appendix.

Shashank Patel: This would imply an increase of 1% year over year and would equate to an increase of $5 million in sales and <unk> <unk> per share in EPS for the full year versus the prior year.

Shashank Patel: Other key inputs for the full year it can be found in the appendix.

Bob Pagano: Now let me turn the call back over to Bob before we begin Q&A.

Robert Pagano: Now let me turn the call back over to Bob before we begin Q&A. Bob. Thanks, Shashank.

Shashank Patel: Now, let me turn the call back over to Bob before we begin Q&A Bob.

Bob Pagano: Bob.

Bob: Thanks, Shashank. On slide 8, I'd like to summarize our discussion before we address your questions. Our second-quarter performance was better than we anticipated, with record sales, adjusted operating income, and earnings per share due to better than expected performance in our Americas and Appia regions. We are maintaining our full-year outlook with a solid first-half performance expected to offset second-half weakness, especially in Europe. Our portfolio is agnostic to end markets, and we are well-positioned to pivot to growing subverticals as needed.

Bob Pagano: Thanks, Shashank. On slide 8, I'd like to summarize our discussion before we address your questions. Our second quarter performance was better than we anticipated, with record sales, adjusted operating income, and earnings per share due to better than expected performance in our Americas and Appia regions.

Speaker Change: Thanks to shrink on slide eight I'd like to summarize our discussion before we address your questions.

Robert Pagano: On slide 8, I'd like to summarize our discussion before we address your questions. Our second quarter performance was better than we anticipated with record sales, adjusted operating income, in earnings per share due to better than expected performance in our Americas and Appia regions. We are maintaining our full year outlook with a solid first half performance expected to offset second half weakness, especially in Europe. Our portfolio is agnostic to end markets and we are well positioned to pivot to growing sub verticals as needed.

Shashank Patel: Our second quarter performance was better than we anticipated with record sales adjusted operating income and earnings per share due to better than expected performance in our Americas and Appia regions. We are maintaining our full year outlook with a solid first half performance expected to offset second half weakness, especially in Europe.

Bob Pagano: We are maintaining our full year outlook with a solid first half performance expected to offset second half weakness, especially in Europe. Our portfolio is agnostic to end markets, and we are well positioned to pivot to growing sub verticals as needed. Our business model includes a large repair replacement component that provides a durable base and drives steady revenue and cash flow. The integration efforts at Bradley, Joe Sam, and NWARE going well. We are pleased with the progress today and excited about their growth potential.

Shashank Patel: We are maintaining our full-year outlook, with a solid first-half performance expected to offset second-half weakness, especially in Europe.

Shashank Patel: Our portfolio is agnostic to end markets and we are well positioned to pivot to growing sub verticals as needed or business model includes a large repair and replacement component that provides a durable base and drive steady revenue and cash flow.

Bob: Our business model includes a large repair and replacement component that provides a durable base and drives steady revenue and cash flow. The integration efforts at Bradley, JOSAM, and NWARE are going well. We are pleased with the progress today and excited about their growth potential. Our balance sheet remains robust and, with the proactive extension of our credit facility, provides ample flexibility to support our disciplined capital allocation priorities. We are well-positioned financially, operationally, and commercially, but I'm confident in our team's ability to execute despite the uncertain environment, which will enable us to continue creating value for our shareholders. With that, Operator, please open the line for questions.

Robert Pagano: Our business model includes a large repair replacement component that provides a durable base and drives steady revenue and cash flow. The integration efforts at Bradley, Joe Sam and NWARE going well. We are pleased with the progress today and excited about their growth potential.

Speaker Change: The integration efforts at Bradlee, Joe Salmon and were going well, we're pleased with the progress to date and excited about their growth potential.

Operator: Our balance sheet remains robust, and with a proactive extension of our credit facility, provides ample flexibility to support our discipline capital allocation. We are well-positioned financially, operationally, and commercially, but I'm confident in our team's ability to execute despite down certain environments, which will enable us to continue creating value for our shareholders. With that operator, please open the line for questions.

Robert Pagano: Our balance sheet remains robust and with a proactive extension of our credit facility provides ample flexibility to support our discipline capital allocation We are well-positioned financially, operationally and commercially, but I'm confident in our team's ability to execute despite down certain environments which will enable us to continue creating value for our shareholders.

Shashank Patel: Our balance sheet remains robust and with a proactive extension of our credit facility provides ample flexibility to support our disciplined capital allocation priorities.

Shashank Patel: We are well positioned financially operationally and commercially but I am confident in our team's ability to execute despite the uncertain environment, which will enable us to continue creating value for our shareholders with.

Operator: With that operator, please open the line for questions. In order to ask a question, press star than the number one on your telephone keypad.

Speaker Change: With that operator, please open the line for questions.

Ryan Connors: In order to ask a question, press star, then the number one on your telephone keypad. Your first question comes from the line of Ryan Connors with North Coast Research; your line is open.

Operator: In order to ask a question, press star, then the number one on your telephone keypad. Your first question comes from the line of Ryan Connors with North Coast Research. Your line is open.

Speaker Change: In order to ask a question press Star then the number one on your telephone keypad.

Ryan Connors: Your first question comes from the line of Ryan Connors with North Coast Research, your line is open. Good morning, thanks for taking my questions. Good morning, Ryan. Good morning. Yes, so I want to talk about this issue. You mentioned project timing as a driver behind the strength and the quarter in both America's end at me. If I think back, I don't recall project timing being something you've mentioned much in the past, except maybe around data centers a little bit, and generally don't think of Watts as, you know, a project-oriented company.

Shashank Patel: First question comes from the line of Ryan Connors with Northcoast Research. Your line is open.

Ryan Connors: Good morning. Thanks for taking my question. Good morning. Good morning.

Ryan Connors: Good morning, thanks for taking my questions.

Speaker Change: Good morning, Thanks for taking my questions.

Bob Pagano: Good morning, Ryan. Good morning.

Ryan: Good morning, Ryan.

Ryan Connors: Yeah, so I want to talk about this issue. You mentioned project timing as a driver behind the strength in the quarter in both Americas and Appian. If I think back, I don't recall project timing being something you've mentioned much in the past, except maybe around data centers a little bit, and generally don't think of Watts as, you know, a project-oriented company. So can you just expand on exactly what that is, what types of projects those were that were pulled forward into the second quarter?

Ryan Connors: Yes, so I want to talk about this issue. You mentioned project timing as a driver behind the strength and the quarter in both America's end at me.

Speaker Change: Good morning, guys. So I wanted to talk about this issue you mentioned project timing as a driver behind the strength in the quarter in both Americas and App, if I think back I don't recall project.

Bob Pagano: If I think back, I don't recall project timing being something you've mentioned much in the past, except maybe around data centers a little bit, and generally don't think of Watts as, you know, a project-oriented company. So can you just expand on exactly what that is, what types of projects those were that were pulled forward into the second quarter? Yeah, there are. And so again, Apnea, and actually the data center business five, six years ago was virtually nothing, and we've been growing from a small base. But we've been growing at double digits. It's a significant significant.

Speaker Change: Project timing being something you've mentioned much in the past, except maybe around data centers, a little bit and generally don't think of watches.

Speaker Change: Project oriented company. So could you just expand on exactly what that that is what types of projects. Those were that were pulled forward into the second quarter.

Robert Pagano: So can you just expand on exactly what that is, what types of projects those were that were pulled forward into the second quarter? Yeah, there are. And so again, Apnea, and actually the data center business five, six years ago was virtually nothing and we've been growing from a small base. But we've been growing at double digits. It's a significant significant. It's a reasonable part of our business globally, quite significant in the apnea region.

Shashank Patel: Yeah, right. So in APMEA, and actually, the data center business, five, six years ago, it was virtually nothing. And we've been growing from a small base, but we've been growing at double digits.

Bob: Yeah, Ryan. So in APMEA, and actually, the data center business five, six years ago, it was virtually nothing. And we've been growing from a small base, but we've been growing at double digits.

Speaker Change: Yes, Ryan so in apnea and actually the data center business five six years ago, there was virtually nothing and we've been growing from a small base, but we've been growing at double digits. So it's a significant significant its a reasonable part of our business globally quite significant in the region. So in the <unk> region, we had data centers.

Bob Pagano: It's a reasonable part of our business globally, quite significant in the Apnea region. So, in the apnea region, we had data centers in China.

Robert Pagano: So in the apnea region, we had data centers in China. And those projects with scheduled for third quarter, they got pulled into the second quarter. And in the America is is primarily in the heating hot water solutions business, the commercial water bottle of boiling it is. There's some large projects that customers needed in the second quarter. That we shipped in the second quarter combination of both of those is about $78 million of sales that were pulled into the second quarter. Got it. OK.

Speaker Change: China and those projects are scheduled for third quarter, they've got pulled into the second quarter and in the Americas is primarily in the heating and hot water solutions business the commercial water bottle.

Bob Pagano: And those projects with scheduled for third quarter, they got pulled into the second quarter. And in the America is is primarily in the heating hot water solutions business, the commercial water bottle of boiling it is. There's some large projects that customers needed in the second quarter. That we shipped in the second quarter, combination of both of those is about $78 million of sales that were pulled into the second quarter. Got it.

Shashank Patel: So it's a significant, significant part of our business globally, and quite significant in the APMEA region. In the APMEA region, we have data centers in China. And those projects were scheduled for the third quarter; they got pulled into the second quarter. And in the Americas, it's primarily in the heating hot water solutions business, commercial water boilers. There were some large projects that customers needed in the second quarter that we shipped in the second quarter. Combination of both of those is about $78 million of sales that were pulled into the second quarter.

Bob: So it's a significant, significant part of our business globally, and quite significant in the APMEA region. In the APMEA region, we have data centers in China. And those projects were scheduled for the third quarter; they got pulled into the second quarter. And in the Americas, it's primarily in the heating hot water solutions business, commercial water boilers. There were some large projects that customers needed in the second quarter that we shipped in the second quarter. The combination of both of those is about $78 million of sales that were pulled into the second quarter.

Shashank Patel: It is there are some large projects that customers needed in the second quarter.

Speaker Change: That we shipped in the second quarter combination of both of those is about $7 million to $8 million of sales that were pulled into the second quarter.

Shashank Patel: Got it. Okay. And in America, what types of

Bob: Got it. Okay. And in America, what types of non-residential construction projects are there? So those aren't really data center related; those are more general.

Speaker Change: Got it okay.

Ryan Connors: OK.

Ryan Connors: And in America's, what types of non-residential construction projects are those that aren't really data center related. Those are more general. Yeah, we're starting to get into data centers in North America. So we're seeing a little bit of that.

Robert Pagano: And in America's what types of non-residential construction projects are those aren't really data center related. Those are more general. Yeah, we're starting to get into data centers in North America. So we're seeing a little bit of that. But this was mainly in the heating and hot water heat pump section of our business. Teap pumps. OK.

Speaker Change: And in Americas, what types of.

Speaker Change: Nonresidential construction projects are those arent really data center related those are more general.

Shashank Patel: Yeah, we're starting to get into data centers in North America, so we're seeing a little bit of that. But this was mainly in the heating and hot water heat pump section of our business.

Bob: Yeah, we're starting to get into data centers in North America, so we're seeing a little bit of that. But this was mainly in the heating and hot water heat pump section of our business.

Speaker Change: Yes, we're starting to get into data centers in North America. So we're seeing a little bit of that but this was mainly in the heating and hot water.

Ryan Connors: But this was mainly in the heating and hot water heat pump section of our business. Teap pumps. OK.

Shashank Patel: Heat pump section of our business.

Bob: And my other one was just around pricing. It's been a hot topic. Some companies out there talking about some deflation. Any update on pricing in your business there and any discounting going on on some product lines? And also, you know, any shift to, as price gets more of a discussion, any shift to the online sales platforms you have like Backflow Direct?

Speaker Change: Okay and my other one was just around pricing, it's been a hot topic. Some companies out there talking about some deflation any any update on on pricing in your business there.

Bob Pagano: And my other one was just around pricing. It's been a hot topic. Some companies out there talking about some deflation. Any update on pricing in your business there and any discounting going on on some product lines or? And also, you know, any shift to, as price gets more of a discussion, a shift to the online sales platform. Do you have like backflow direct. Yeah, in general, so pricing was favorable about one point in the quarter. Certainly, on large projects, they are very competitive. So we see that. And certainly, our online business with Backflow Direct is up.

Robert Pagano: And my other one was just around pricing. It's been a hot topic. Some companies out there talking about some deflation. Any update on pricing in your business there and any discounting going on on some product lines or. And also, you know, any shift to as price gets more of a discussion a shift to the online sales platform. Do you have like backflow direct. Yeah, in general, so pricing was favorable about one point in the quarter.

Speaker Change: Any discounting going on on some product lines are.

Speaker Change: And also any shift to as price gets more of a discretionary shift to the online sales platforms you have like backflow direct.

Bob: Yeah, in general, so pricing was favorable about one point in the quarter. Certainly on large projects, they are very competitive, so we see that, and certainly our online business with Backflow Direct is up. So we continue to drive e-commerce where our customers need it, but pricing, you know, has been, like I said, up one percent in the quarter.

Robert Pagano: Certainly on large projects, they are very competitive. So we see that. And certainly our online business with backflow direct is up. So we continue to drive e-commerce where our customers needed. But pricing, you know, has been like I said, up 1% in the quarter. Good to hear.

Speaker Change: Yes in general so pricing was favorable about one point in the quarter certainly on large projects. They are very competitive so we see that and certainly our online business with backflow direct is up so we continue to drive e-commerce, where our customers need it but.

Ryan Connors: So we continue to drive e-commerce where our customers needed. But pricing, you know, has been, like I said, up 1% in the quarter. Good to hear.

Speaker Change: Pricing has been like I said up 1% in the quarter.

Ryan Connors: Good to hear. Thanks for your time. Thank you.

Speaker Change: Good to hear thanks for your time.

Ryan Connors: Thanks for your time. Thank you.

Speaker Change: Thank you.

Jeffrey Hammond: And your next question comes from the line of Jeff Hammond with Key Bank Capital Markets.

Operator: And your next question comes from the line of Jeff Hammond with KeyBank Capital Markets. Your line is open.

Jeff Hammond: And your next question comes from the line of Jeff Hammond with KeyBank Capital Markets. Your line is open.

Jeffrey Hammond: And your next question comes from the line of Jeff Hammond with key bank capital markets. Your line is open. Hey, good morning guys. Good morning. OK, appreciate the color on the poll forward and quantification. I think you talked about a number of headwinds, kind of 2Q to 3Q, some destock, non res multi family, maybe just rank order, you know, those headwinds and maybe a little more color on that destock impact. Thanks for your time.

Speaker Change: And your next question comes from the line of Jeff Hammond with Keybanc capital markets. Your line is open.

Jeffrey Hammond: Your line is open. Hey, good morning, guys. Good morning.

Operator: Okay.

Jeff Hammond: Hey, good morning, guys.

Jeff Hammond: Good morning.

Bob Pagano: OK, appreciate the color on the poll forward and quantification. I think you talked about a number of headwinds, kind of 2Q to 3Q, some destock, non-res multi-family, maybe just rank order, you know, those headwinds and maybe a little more color on that destock impact. Thanks for your time. Mr. Jeff, on the destocking, that's probably basically our in the wholesale channel our customers because we now have normalized lead times. They've been reducing their safety stock levels; we saw that in the month of July. That's approximately $78 million so far that's happened in the third quarter. The rest of it on the milking family, this is what we expect with all the double-digit declines we had in new starts.

Jeff Hammond: Okay, appreciate the color on the pull forward and quantification. I think you talked about a number of headwinds, kind of two Q to three Q, some D stock non-res, multi-family. Um, maybe just rank order those headwinds and maybe a little more color on that, on that destock impact.

Jeff Hammond: Okay I appreciate the color on the on the pull forward and quantification I think you've talked about.

Speaker Change: A number of headwinds kind of <unk> some destock.

Speaker Change: Non res multifamily.

Jeff Hammond: Maybe just rank order those headwinds and maybe a little more color on that on that destock impact.

Bob: This is Jeff. On the de-stocking, that's probably basically in the wholesale channel. Our customers, because we now have normalized lead times, have been reducing their safety stock levels. We saw that in the month of July. That's approximately $7 million to $8 million so far that happened in the third quarter. The rest of it on the multifamily, this is what we expect with all the double-digit declines we had in new starts on the construction side of it, because there is a lag.

Jeffrey Hammond: Mr. Jeff, on the destocking, that's probably basically our in the wholesale channel our customers because we now have normalized lead times they've been reducing their safety stock levels, we saw that in the month of July. That's approximately $78 million so far that's happened in the third quarter. The rest of it on the milking family, this is what we expect with with all the double digit declines we had in new starts. On the construction side of it because there is a lag we expect that to downturn in the second half, which we have factored in when we set the guidance early on and we still expect to see that and what was the third part of the question again.

Operator: Yeah, So Jeff on the on the Destocking and that was primarily basically are in the wholesale channel our customers because we now have normalized lead times, they've been reducing their safety stock levels. We saw that in the month of July.

Jeff Hammond: That's approximately $7 million to $8 million.

Speaker Change: So far that's happened in the third quarter the rest of it on the multifamily. This is what we expect that with all of the.

Speaker Change: Double digit declines we add in new starts.

Bob Pagano: On the construction side of it, because there is a lag, we expect that to downturn in the second half, which we have factored in when we set the guidance early on, and we still expect to see that. And what was the third part of the question again? I guess it's non-resident general. Yeah, non-resident again, and that's the ABI indicators, right? They've been flashing red below 54 for over a year, and on the non-residential side, you know, we've seen weaknesses in, you know, again, office, retail, restaurants, all those sort of those sub-segments, but strength in the institutional side. So again, we factored that into the guide as well for the second half.

Speaker Change: On the construction side of it because there is a lag we expect that to downturn in the second half, which we have factored in when we set the guidance early on and we still expect to see that.

Bob: We expect that to downturn in the second half, which we had factored in when we set the guidance early on, and we still expect to see that. And what was the third part of the question again?

Speaker Change: What was the third part of the question again.

Jeff Hammond: I guess just non-res in general.

Jeff Hammond: I guess just non-res in general. Yeah, non-residential.

Jeffrey Hammond: I guess it's non-resident general. Yeah, non-resident again and that's the ABI indicators right they've been flashing red below 54 over a year and on the non residential side you know we've seen weaknesses in you know again office retail restaurants all those sort of those sub segments but strength and strength in the institutional side so again we factored that into the guide as well for the second half. Okay, and then Europe. I guess one if you know it sounds like you're going to continue to see weakness can you hold double digit margins into the second half.

Jeff Hammond: I guess, just non res in general.

Jeff Hammond: Yeah, non-residential, and that's the ABI indicators, right? They've been flashing red below 50 for over a year. And on the non-residential side, you know, we've seen weaknesses in, you know, again, office, retail, restaurants, all those sort of, those sub-segments, but strength in the institutional side. So again, we factored that into the guide as well for the

Speaker Change: Yes, non res again and Thats, the Abi indicators right they've been flashing red below 50 for over a year and on the nonresidential side, we've seen weaknesses in.

Speaker Change: Again office retail restaurants, although sort of those sub segments, but strength and strength in the institutional side. So again, we factored that into the guide as well through the second half.

Bob Pagano: Okay, and then Europe. I guess one if you know it sounds like you're going to continue to see weakness. Can you hold double digit margins into the second half?

Jeff Hammond: Okay, and then Europe... I guess one, if it sounds like you're going to continue to see weakness, can you hold double-digit margins into the second half? What else is weakening in Europe besides the European heat pump, and then finally, just... Any signs that we're hitting bottom or stabilizing or ending this destock on the heat pump side?

Speaker Change: Okay, and then Europe.

Jeff Hammond: I guess one, if it sounds like you're going to continue to see weakness, can you hold double-digit margins into the second half? What else is weakening in Europe besides the European heat pump, and then finally, just... Any signs that we're

Jeff Hammond: I guess, one if it sounds like Youre going to continue to see weakness can you hold double digit margins into the second half.

Bob Pagano: What else is weak weakening in Europe besides the European heat pump and then and then finally just any signs that were hitting bottom or stabilizing or any misty stock on the heat pump side. So on the heat pump side, I'll take that first. I don't think you're going to get any clarity to the potentially end of the first quarter of next year related to heat pump that there's our channel check showing a bunch of heat stock or heat pump inventory. You know in the channels, and they've got to bleed that off. In general, when we look at Europe, just think about new construction; it is very limited there, given the uncertainties, the economic challenges, and the geopolitical.

Jeffrey Hammond: What else is weak weakening in Europe besides the European heat pump and then and then finally just any signs that were hitting bottom or stabilizing or any misty stock on the heat pump side. So on the heat pump side I'll take that first I don't think you're going to get any clarity to the potentially end of the first quarter of next year related to heat pump that there's our channel check showing a bunch of heat stock or heat pump inventory.

Jeff Hammond: What else is weak weakening in Europe, Besides the European heat pump and then finally just.

Speaker Change: Any signs that were.

Speaker Change: Having bottom or stabilizing or any miss destock on the heat.

Jeff Hammond: Sean.

Bob: So on the heat pump side, I'll take that first. I don't think you're going to get any clarity until the potentially end of the first quarter of next year related to heat pumps. There are our channel checks showing a bunch of heat stock or heat pump inventory, you know, in the channels, and they've got to bleed that off. In general, when we look at Europe, just think about new construction being very limited there, given the uncertainties, the economic challenges, the geopolitical issues, etc.

Speaker Change: So on the heat pump side I'll take that first I don't think youre going to get any clarity to the potentially end of the first quarter of next year related to heat pump.

Speaker Change: Our channel checks, showing a bunch of heat stock or heat pump inventory.

Jeffrey Hammond: You know in the channels and they've got to bleed that off in general when we look at Europe just think about new construction is very limited there given the uncertainties the economic challenges the geopolitical. Issues etc so that's something I've been concerned about for a while here and we certainly saw it in Q3 and we're expecting to see it again in Q4 but some of our channel checks and everybody else once this heat pump goes through some of the you know easier compares into next year you know they believe they're starting to bottom out as we exit this year.

Speaker Change: In the channels and they've got to bleed that off in general when we look at.

Speaker Change: Europe, just think about new construction is very limited there given the uncertainties of the economic challenges the geopolitical issues et cetera. So that's something I've been concerned about for a while here and we certainly saw it in Q3 and were expecting to see it again in Q4, but some of our channel checks and everybody else wants this heat pump goes through.

Bob: So that's something I've been concerned about for a while here, and we certainly saw it in Q3, and we're expecting to see it again in Q4. But some of our channel checks and everybody else, once this heat pump goes through some of the, you know, easier comparisons to next year, they believe they're starting to bottom out as we exit this year.

Bob Pagano: Issues, etc. so that's something I've been concerned about for a while here, and we certainly saw it in Q3, and we're expecting to see it again in Q4. But some of our channel checks and everybody else, once this heat pump goes through some of the, you know, easier compares into next year, you know, they believe they're starting to bottom out as we exit this year.

Jeff Hammond: Through some of the easier compares into next year.

Speaker Change: They believe theyre starting to bottom out as we exit this year.

Bob Pagano: And just to know there is one area of strength right in our drains business on the commercial marine side, as well as food and beverage drains. Actually, it had a good quarter in the second quarter, so we do see pockets of opportunity, all be small.

Bob: And just to note, there is one area of strength, right, in our drains business on the commercial marine side, as well as food and beverage. Drains actually had a good quarter in the second quarter, so we do see pockets of opportunity, albeit small.

Jeffrey Hammond: And just to know there is one area of strength right in our drains business on the commercial marine side as well as food and beverage drains actually had a had a good quarter in the second quarter so we do see pockets of opportunity all be small. Okay and then and then final one can you just you mentioned data center and how it's been growing can you just size that business as a percentage of sales now.

Speaker Change: And just to know there is one area of strength right in our drains business on the commercial marine side as well as food and beverage drains that Canada had a good quarter in the second quarter. So we do see pockets of opportunity, albeit small.

Jeffrey Hammond: Okay, and then, and then final one, can you just, you mentioned data center and how it's been growing, can you just size that business as a percentage of sales now. You know can you speak to how you it looks it sounds like most of that's in Asia how you bring that product or how you enter the North America data center market. And then finally, there seems to be this big shift to liquid cooling, you know, which requires, you know, water, etc., in a data center versus, you know, traditional air cooling, and I'm wondering. If we, as we move there, if there's an incremental content opportunity for you.

Jeff Hammond: Okay, and then, and then final one, can you just You mentioned the data center and how it's been growing. Can you just size that business as a percentage of sales now? You know, can you speak to how you, it sounds like most of that's in Asia, how you bring that product or how you enter the North American data center market? And then finally, there seems to be this big shift to liquid cooling, you know, which requires, you know, water, et cetera, in a data center versus, you know, traditional air cooling. And I'm wondering, as we move there, if there's an incremental content opportunity for you.

Jeff Hammond: Okay, and then final one can you just.

Jeff Hammond: You mentioned the data center and how it's been growing. Can you just size that business as a percentage of sales now? You know, can you speak to how you, it sounds like most of that's in Asia, how you bring that product or how you enter the North American data center market? And then finally, there seems to be this big shift to liquid cooling, you know, which requires, you know, water, et cetera, in a data center versus, you know, traditional air cooling. And I'm wondering, as we move there, if there's an incremental content opportunity for you.

Speaker Change: You mentioned data center and how it's been growing can you just size that business as a percentage of sales now.

Jeffrey Hammond: You know can you speak to how you it looks it sounds like most of that's in Asia how you bring that product or how you enter the North America data center market. And then finally there seems to be this big shift to liquid cooling you know which requires you know water etc in a data center versus you know traditional air cooling and I'm wondering. If we as we move there if there's a incremental content opportunity for you.

Jeff Hammond: Can you just speak to how you it looks it sounds like most of that's in Asia.

Jeff Hammond: How do you bring that product or how you enter the North America data center market and then finally.

Jeff Hammond: There seems to be this big shift to liquid cooling.

Speaker Change: Which requires water et cetera in a data center versus traditional air cooling and I'm wondering.

Jeff Hammond: If we as we move there if there is a an incremental content opportunity for you.

Shashank Patel: Yeah Jeff, so certainly, our initiative of data centers did start in China several years ago, and we've been bringing that to North America and even Europe. So these are growing opportunities. I would say, in total, it's less than 2% of our overall watt sales, but it went from nothing three years ago to about 2% of our sales, and, as you can imagine, it's a lumpy business. As you get into liquid cooled versus air cooled, certainly, there's more content for our valves and our products, and you know, from our point of view, we're bundling our solutions.

Bob: Yeah Jeff, so certainly, our initiative of data centers did start in China several years ago, and we've been bringing that to North America and even Europe. So these are growing opportunities. I would say, in total, it's less than 2% of our overall watt sales, but it went from nothing three years ago to about 2% of our sales, and, as you can imagine, it's a lumpy business. As you get into liquid cooled versus air cooled, certainly, there's more content for our valves and our products, and you know, from our point of view, we're bundling our solutions.

Bob Pagano: Yeah, Jeff, so certainly our initiative of data centers did start in China several years ago, and we've been bringing that to North America and in Europe. So these are growing opportunities. I would say in total less than 2% of our overall watt sales, but it went from nothing three years ago to about 2% of our sales. And, as you can imagine, it's lumpy business. As you get into liquid cooled versus air cooled, certainly there's more content for our valves and our products. And, you know, from our point of view, we're bundling our solutions. It's not just, you know; it includes leak detection, backflow, the whole gamut of products.

Jeffrey Hammond: Yeah, Jeff, so certainly our initiative of data centers did start in China several years ago and we've been bringing that to North America and in Europe. So these are growing opportunities. I would say in total less than 2% of our overall watt sales, but it went from nothing three years ago to about 2% of our sales. And as you can imagine, it's lumpy business. As you get into liquid cooled versus air cooled, certainly there's more content for our valves and our products.

Jeff Hammond: Yes, Jeff So certainly our initiative of data centers did start in China several years ago, and we've been bringing that to North America and even Europe. So these are growing opportunities I would say in total it's less than 2% of our overall watch sales, but it went from nothing three years ago to about 2% of our sales.

Shashank Patel: And as you can imagine it's lumpy business as you get into liquid cooled for versus air cooled certainly there's more content for our valves in our products and from our point of view, we are bundling our solutions, it's not just.

Jeffrey Hammond: And, you know, from our point of view, we're bundling our solutions. It's not just, you know, it includes leak detection, backflow, the whole gamut of products. So it's an opportunity to offset some of the, you know, softness we're seeing in the traditional markets that we've been in and something we've been flexing towards and growing, you know, very quickly on a small base. And as you said, the market is shifting to liquid cooling. So we are developing the products for liquid cooling. We sell liquid cooling a little bit of the marketing China's already there. So we're into that market. Okay, thanks for the time. Thank you.

Shashank Patel: It's not just leak detection, backflow, the whole gamut of products. So it's an opportunity to offset some of the you know softness we're seeing in the traditional markets that we've been in and something we've been flexing towards and growing very quickly on a small base.

Bob: It's not just leak detection, backflow, the whole gamut of products. So it's an opportunity to offset some of the you know softness we're seeing in the traditional markets that we've been in and something we've been flexing towards and growing very quickly on a small base.

Shashank Patel: It includes leak detection backflow, the whole gamut of products. So it's an opportunity to offset some of the <unk>.

Bob Pagano: So it's an opportunity to offset some of the, you know, softness we're seeing in the traditional markets that we've been in and something we've been flexing towards and growing, you know, very quickly on a small base. And as you said, the market is shifting to liquid cooling. So we are developing the products for liquid cooling. We sell liquid cooling; a little bit of the marketing. China's already there. So we're into that market.

Shashank Patel: Softness we're seeing in the traditional markets that we've been in and something we've been flexing towards and growing.

Shashank Patel: Growing.

Shashank Patel: Very quickly on a small base and as you said the market is shifting delinquent cooling. So we are developing the products for liquid cooling, we sell liquid cooling a little bit of the market in China is already there. So we are into that market.

Shashank Patel: And, as you said, the market is shifting to liquid cooling, so we are developing products for liquid cooling. We sell liquid cooling. A little bit of the market in China is already into liquid cooling, so we're into that partnership.

Bob: And as you said, the market is shifting to liquid cooling, so we are developing products for liquid cooling. We sell liquid cooling. A little bit of the market in China is already into that.

Jeffrey Hammond: Okay, thanks for the time.

Jeff Hammond: Okay, thanks for the time. Thank you.

Speaker Change: Okay. Thanks for the time.

Bob Pagano: Thank you.

Speaker Change: Thank you.

Nathan Jones: And your next question comes from the line of Nathan Jones with Stifle.

Operator: And your next question comes from the line of Nathan Jones with Stifle. Your line is open.

Nathan Jones: And your next question comes from the line of Nathan Jones with Stifle. Your line is open.

Robert Pagano: And your next question comes from the line of Nathan Jones with stifle. Your line is open. Good morning, everyone. Morning. I want to follow up on the bee stocking question. I'm a little just a little surprised to hear that there's still a bunch of inventory in the channel for certain products. At this point in the recovery, I would have thought that your lead times would have already been back to normal. So maybe any more color on what those products are.

Speaker Change: And your next question comes from the line of Nathan Jones with Stifel. Your line is open.

Nathan Jones: Your line is open.

Bob Pagano: Good morning, everyone. Morning.

Nathan Jones: Good morning, everyone.

Nathan Jones: I want to follow up on the de-stocking question. I'm just a little surprised to hear that there's still a bunch of inventory in the channel for certain products. At this point in the recovery, I would have thought that your lead times would already be back to normal. So maybe more color on what those products are and if there's anything in your portfolio that still has extended lead times that could lead to us seeing some de-stocking in the future?

Nathan Jones: Good morning.

Nathan Jones: I want to follow up on the bee stocking question. I'm a little, just a little surprised to hear that there's still a bunch of inventory in the channel for certain products. At this point in the recovery, I would have thought that your lead times would have already been back to normal. So maybe any more color on what those products are. And if there's anything in your portfolio that still has extended lead times that could lead to us seeing some date stucking in the future.

Nathan Jones: I wanted to follow up on the Destocking question.

Nathan Jones: I'm, a little just a little surprised.

Nathan Jones: To hear that there is still a bunch of inventory in the channel for certain products.

Nathan Jones: At this point in the recovery I would've thought that your lead times sort of already being back to normal so maybe any more color on what those products are in and if there is anything in your portfolio that still has extended lead times that could lead to a saying some de stocking in the future.

Robert Pagano: And if there's anything in your portfolio that still has extended lead times that could lead to us seeing some date stucking in the future. Nathan, I think it was just across the board. I think everybody's looking at reducing inventory, it's just like we are. And I think it's just a natural thing. It's quite interesting though is we saw it in July and it spiked out. So I think everybody looked at their June 30th balance sheet and said they need to start reducing inventory.

Bob: Nathan, I think it was across the board. I think everybody's looking at reducing inventories just like we are, and I think it's just a natural thing. It's quite interesting, though, that we saw it in July, and it spiked out. So, I think everybody looked at their June 30th balance sheet and said they needed to start reducing inventory. So we're watching it carefully. Our lead times are probably the best they've ever been, even pre-COVID, so there are no major problems there. But we're watching this closely and adjusting accordingly. So, just something we wanted to call out because we had a softer than expected July. Kind of a one-time reset working.

Bob Pagano: Nathan, I think it was just across the board. I think everybody's looking at reducing inventory; it's just like we are. And I think it's just a natural thing. It's quite interesting, though, if we saw it in July and it spiked out. So I think everybody looked at their June 30th balance sheet and said they need to start reducing inventory. So we're watching it carefully. Our lead times are probably the best they've ever been, even pre-COVID. So no major things there, but we're watching this closely and adjusting accordingly.

Speaker Change: Nathan I think it was just across the board I think everybody is looking at reducing inventories just like we are and I think it's just a natural thing it's quite interesting, though as we saw in July and it spiked out and so I think everybody looked at their June 30 balance sheet and said they need to start reducing inventory. So we're watching it carefully.

Robert Pagano: So we're watching it carefully. Our lead times are probably the best they've ever been even pre-COVID. So no major things there, but we're watching this closely and adjusting accordingly. So just something we wanted to call out because we had a softer than expected July. It's kind of a one time reset working time working capital optimization.

Bob: Our lead times are probably the best they've ever been even pre COVID-19. So no major things there, but we.

Bob: We're watching this closely and adjusting accordingly, so just.

Bob Pagano: So just something we wanted to call out because we had a softer than expected July. It's kind of a one-time reset working time working capital optimization.

Bob: Just something we wanted to call out because we.

Bob: We had a softer than expected July and kind of a onetime reset working working capital optimization.

Bob: Kind of a one-time reset working capital optimization.

Nathan Jones: Kind of a one-time reset working capital optimization.

Nathan Jones: Follow up question on the repair and replace out of the business. I think the general expectation from the macro guys is that you're going to see a slowdown in GDP as we get towards the end of the year to four quarters specifically. Can you talk about kind of what you've baked into the guidance from repair and replace. I know your business is correlated to GDP. So just any call you can give us on what you're thinking that. Yeah, it's a very low single-digit range, right? Either right, Nathan, in that GDP will continue tracking software is by the best way to put it.

Nathan Jones: Follow up question on the repair and replace side of the business. I think the general expectation from the macro guys is that you're going to see a slowdown in GDP as we get towards the end of the year, the fourth quarter specifically. Can you talk about kind of what you baked into the guidance from repair and replace? I know your business is correlated to GDP. So, just any color you can give us on what you're thinking there.

Bob: Follow up question on the repair and replace side of the business. I think the general expectation from the macro guys is that you're going to see a slowdown in GDP as we get towards the end of the year, the fourth quarter specifically. Can you talk about kind of what you baked into the guidance from repair and replace? I know your business is correlated to GDP. So, just any color you can give us on what you're thinking there.

Robert Pagano: Follow up question on the repair and replace out of the business. I think the general expectation from from the macro guys is that you're going to see a slowdown in GDP as we get towards the end of the year to four quarters specifically. Can you talk about kind of what you've baked into the guidance from repair and replace. I know your business is correlated to GDP. So just any call you can give us on what you're thinking that.

Speaker Change: Follow up question on the repair and replace side of the business I think the general expectation for them from the macro guys is that youre going to say a slowdown in GDP as we get towards the end of the year. The fourth quarter, specifically can you talk about kind of what you've baked into the.

Nathan Jones: Guidance from repair and replace I know your business is correlated to GDP. So just any color you can give us on what youre thinking there.

Bob: Yeah, it's a very low single-digit range, right? You're right, Nathan, in that GDP will continue to track softer is probably the best way to put it. And that's what we factored into our guide, lower numbers on GDP. And remember, it's going from, you know, two and a half, three percent to maybe one. There are a lot of small numbers. It's not a big number, right?

Nathan Jones: Yeah, it's a very low single-digit range, right? You're right, Nathan, in that GDP will continue to track softer is probably the best way to put it. And that's what we factored into our guide, lower numbers on GDP. And remember, it's going from, you know, two and a half, three percent to maybe one. There are a lot of small numbers. It's not a big number, right?

Robert Pagano: Yeah, it's a very low single digit range, right? Either right Nathan in that GDP will continue tracking software is by the best way to put it. And that's what we factored into our guide is lower numbers on GDP. And remember it's going from, you know, two and a half, three percent to maybe one. It's a small number. It's not a big number, right? Yeah, perfect. Thanks for that.

Speaker Change: Yeah, it's a very low single digit range right.

Operator: My question. Thank you.

Bob: Nathan and that GDP will continue tracking software is probably the best way to put it and Thats, what we factored into our guide is lower numbers on GDP and remember its going from two 5% maybe one it's the law of small numbers, it's not a big number right.

Bob Pagano: And that's what we factored into our guide: lower numbers on GDP. And remember it's going from, you know, two and a half, three percent to maybe one. It's a small number. It's not a big number, right? Yeah, perfect.

Nathan Jones: Yep, perfect. Thanks for taking my question. Thank you.

Nathan Jones: Yeah perfect. Thanks for taking my questions.

Nathan Jones: Thanks for that. My question. Thank you.

Nathan Jones: Thank you.

Operator: And, as a reminder, if you'd like to ask the question, press star, the number one on your telephone keypad.

Operator: And as a reminder, if you'd like to ask the question, press star the number one on your telephone keypad.

Operator: And as a reminder, if you would like to ask a question, press star, then number one on your telephone keypad. Your next question comes from the line of Mike Halloran with Baird. Your line is open.

Mike Halloran: And as a reminder, if you would like to ask a question, press star, the number one on your telephone keypad. Your next question comes from the line of Mike Halloran with Baird. Your line is open.

Speaker Change: And as a reminder, if you'd like to ask a question Press Star then the number one on your telephone keypad. Your next question comes from the line of Mike Halloran with Baird. Your line is open.

Michael Halloran: Your next question comes from the line of Mike Halloran with Baird.

Michael Halloran: Your next question comes from the line of Mike Halloran with Baird. Your line is open.

Michael Halloran: Your line is open.

Bob Pagano: Good morning, everyone. Good morning.

Robert Pagano: Good morning, everyone. Good morning. Just a question on how you're thinking about the back half of the year in terms of sequentials and then also where you previously have a guy that certainly understand that the weekning comments in Europe and the OE and then the how projects can swing things either way. If you look at the underlying dynamics, let's focus on Americans here. Has there been a change in your thinking at all as you move to the back half of the year.

Mike Halloran: Hi, good morning, everyone.

Mike Halloran: Good morning.

Bob Pagano: Just a question on how you're thinking about the back half of the year in terms of sequentials and then also where you previously have a guy that certainly understand that the weekning comments in Europe and the OE and then the how projects can swing things either way. If you look at the underlying dynamics, let's focus on Americans here. Has there been a change in your thinking at all as you move to the back half of the year? I know you already had some concern embedded in that outlook going into the second quarter. Curious if that's changed, and then if you normalize for everything, are you just thinking kind of almost sequential as you would be the back half?

Mike Halloran: Just a question about how you're thinking about the back half of the year in terms of sequentials and then also where you previously had a guide. I certainly understand that the weakening comments in Europe and the OE and then the how projects can swing things either way. If you look at the underlying dynamics, let's focus on America here. Has there been a change in your thinking at all as you've moved to the back half of the year?

Mike Halloran: Just a question on how you are thinking about the back half of the year in terms of sequential and then also where you previously had the guidance certainly understand the weakening comments in Europe.

Mike Halloran: And then how projects can swing things either way if you look at the underlying dynamics, let's focus on Americans here.

Speaker Change: Has there been a change in your thinking at all as you've moved to the back half of the year I know you've already had some some concern embedded in that outlook going into the into the second quarter. I'm curious if that's changed and then if you normalize for everything or you're just thinking kind of normal sequential as you move to the back half.

Robert Pagano: I know you already had some some concern embedded in that outlook going into the second quarter. Curious if that's changed and then if you normalize for everything, are you just thinking kind of almost sequential as you would be the back half? So, so Mike, I think, you know, for the most part, Europe is a little softer that we were expecting America is kind of in the same maybe 1% softer based on this, you know, adjustment and destocking that happened in July.

Mike Halloran: I know you already had some concern embedded in that outlook going into the second quarter. I'm curious if that's changed, and then if you normalize for everything, are you just thinking kind of normal sequentials as you move to the back half?

Bob: So, Mike, I think, you know, for the most part, Europe is a little softer than we were expecting. America's kind of in the same place, maybe 1% softer based on this, you know, adjustment in de-stocking that happened in July.

Bob Pagano: So, so Mike, I think, you know, for the most part, Europe is a little softer than we were expecting. America is kind of in the same, maybe 1% softer based on this, you know, adjustment and destocking that happened in July. But when you look at overall, I just want to remind everybody we had a days issue in the first quarter of the year, right? And that will negatively impact us in the fourth quarter. So that's 6% 6 points of growth in the fourth quarter. So just keep that in mind. But in general, we expected the markets to slow based on the leading indicators.

Speaker Change: So Mike I think for the most part Europe is a little softer than we were expecting Americas kind in the same maybe 1% software based on this.

Speaker Change: Adjustments in Destocking that happened in July, but when you look at overall I just want to remind everybody. We had a days issue in the first quarter of the year right and that will negatively impact us in the fourth quarter. So that's 6% six points of growth in the fourth quarter. So just keep that in mind, but in general.

Bob: But when you look at it overall, I just want to remind everybody, we had a days issue in the first quarter of the year, right? And that will negatively impact us in the fourth quarter. So that's 6%, 6 points of growth in the fourth quarter. So just keep that in mind, but in general, we expected the markets to slow based on the leading indicators, and, you know, we're adjusting accordingly. So it's not a major shift. It's kind of seeing some of the things that we were anticipating all along in our previous

Bob: But when you look at the overall picture, I just want to remind everybody, we had a days issue in the first quarter of the year, right? And that will negatively impact us in the fourth quarter. So that's 6%, 6 points of growth in the fourth quarter. So just keep that in mind.

Robert Pagano: But when you look at overall, I just want to remind everybody we had a days issue in the first quarter of the year, right? And that will negatively impact us in the fourth quarter. So that's 6% 6 points of growth in the fourth quarter. So just keep that in mind. But in general, we expected the markets to slow based on the leading indicators. And, you know, we're adjusting accordingly. So it's not a major shift.

Mike Halloran: But in general, we expected the markets to slow based on the leading indicators, and you know, we're adjusting accordingly. So it's not a major shift. It's kind of seeing some of the things that we were anticipating all along in our previous guidance.

Bob: We expected the market to slow based on the leading indicators and.

Bob Pagano: And, you know, we're adjusting accordingly. So it's not a major shift. It's kind of seeing some of the things that we were anticipating all along in our previous guidance.

Bob: We're adjusting accordingly, so it's not a major shift it's kind of seeing some of the things that we were anticipating all along in our previous guidance.

Robert Pagano: It's kind of seeing some of the things that we were anticipating all along in our previous guidance. And at this point, Bob, when you think about some of the leading indicators, you guys have seen out there that we've all seen that point is some concern. Are those at the point where they would even impact this year are those things that are more relevant for next year? Well, the multifamily we were seeing some of that, and I think that's some of the wholesale, you know, desocking is happening where we said we probably see that in the second half of this year.

Bob: And at this point, Bob, when you think about some of the leading indicators you guys have seen out there that we've all seen that point to some concern, are those at the point where they would even impact this year, or are those things more relevant for next year?

Bob Pagano: And at this point, Bob, when you think about some of the leading indicators, you guys have seen out there that we've all seen that point is some concern. Are those at the point where they would even impact this year, or are those things that are more relevant for next year? Well, the multifamily we were seeing some of that, and I think that's some of the wholesale, you know, desocking is happening where we said we probably see that in the second half of this year. And I think we're, that's holding true. I think in the retail, which is a very low percentage of our business, OEMs or the retail big boxes are low in their inventories.

Bob: And at the end at this point, Bob when you think about some of the leading indicators you guys have seen out there that we've all seen that point to some concern.

Bob: Are those at the point, where they would even impact. This year are those things that are more relevant for next year.

Bob: The multifamily, we're seeing some of that, and I think that's some of the wholesale, you know, de-stocking that's happening. We said we'd probably see that in the second half of this year, and I think that's holding true. I think in retail, which is a very low percentage of our business, OEMs or the retail big boxes are lowering their inventories. So, in general, I think it's slowing, and as we anticipated. I think, you know, in this market, in any commercial construction market, new construction, uncertainty always leads people to slow down projects, right, and define.

Mike Halloran: Well, the multifamily, we're seeing some of that, and I think that's some of the wholesale, you know, de-stocking that's happening. We said we'd probably see that in the second half of this year, and I think we are. That's holding true. I think in retail, which is a very low percentage of our business, OEMs or the retail big boxes are lowering their inventories. So, in general, I think it's slowing, and as we anticipated. I think, you know, in this market, in any commercial construction market, new construction, uncertainty always leads people to slow down projects, right, and define.

Bob: Well.

Speaker Change: The multifamily were seeing some of that and I think that's some of the wholesale channel.

Bob: Destocking, that's happening, where we said, we'd probably see that in the second half of this year and I think that's holding true I think in the retail which is a very low percentage of our business Oems or.

Robert Pagano: And I think we're, that's holding true. I think in the retail, which is a very low percentage of our business, OEMs or the retail big boxes are low in their inventories. So in general, I think it's slowing. And as we anticipated, I think, you know, in this market, in any commercial construction markets, new construction, uncertainty always leads people to slow down projects right and defined. So I think until the elections are over clarity on interest rates, maybe some of the geopolitical risk.

Bob: Retail big boxes are lowering their inventories so in general.

Bob Pagano: So, in general, I think it's slowing. And as we anticipated, I think, you know, in this market, in any commercial construction markets, new construction, uncertainty always leads people to slow down projects, right and defined. So I think until the elections are over, clarity on interest rates, maybe some of the geopolitical risk. I think some of this stuff is just being held in at this point in time. But there's a lot of shovel-ready projects out there to be released at some point in time. But we are hearing projects are on hold and being deferred until next year.

Bob: I think its slowing and as we anticipated I think.

Bob: In this market and any commercial construction markets, new construction uncertainty always leads people to slow down projects right and defined so I think until the elections are over clarity on interest rates, maybe some of the geopolitical risks I think some of this stuff is just being held.

Bob: So I think until the elections are over, clarity on interest rates, maybe some of the geopolitical risks, I think some of this stuff is just being held at this point in time. But there are a lot of shovel-ready projects out there to be released at some point in time, but we are hearing projects are on hold and being deferred until next year. So we're starting to hear that and see that versus, I think, the first half of the year, there was a solid backlog with everybody. I think some of this stuff is just starting to catch up.

Mike Halloran: So I think until the elections are over, clarity on interest rates, maybe some of the geopolitical risks, I think some of this stuff is just being held at this point in time. But there are a lot of shovel-ready projects out there to be released at some point in time, but we are hearing projects are on hold and being deferred until next year. So we're starting to hear that and see that versus, I think, the first half of the year, there was a solid backlog with everybody. I think some of this stuff is just starting to catch up.

Robert Pagano: I think some of this stuff is just being held in at this point in time. But there's a lot of shovel ready projects out there to be released at some point in time. But we are hearing projects are on hold and being deferred until next year. So we're starting to hear that and see that versus I think the first half of the year, there was a solid backlog with everybody. I think some of this stuff is just starting to catch up.

Bob: At this point in time, but theres a lot of shovel ready projects out there.

Robert Pagano: And last one on my side, thanks for that.

Bob: To be released at some point in time, but we are hearing projects are on hold.

Bob: Being deferred until next year. So we're starting to hear that and see that versus I think the first half of the year. There was a solid backlog with everybody I think some of this stuff is just starting to catch up.

Bob Pagano: So we're starting to hear that and see that versus I think the first half of the year, there was a solid backlog with everybody. I think some of this stuff is just starting to catch up.

Bob: And last one on my side, thanks for that. What do you see in the M&A outlook? Obviously, your balance sheet is in great shape. How's that pipeline looking, and how actionable do you think the pipeline is at this point? Yeah, so we continue to work to possibly

Bob Pagano: And last one on my side, thanks for that. Just how would you see the MNA outlook? Obviously, you're bouncing in great shape. How's that pipeline look, and how flexible do you think the pipeline is at this point? Yeah, so we continue to work the pipeline. It's a strong pipeline. As you know, we have you never convert it timing of acquisitions, and all I can assure you is we'll be disciplined like we always have that, and but we're continuing to have discussions in the space.

Speaker Change: And then last one on my side thanks for that.

Robert Pagano: Just how would you see the MNA outlook? Obviously, you're bouncing in great shape. How's that pipeline look and how flexible do you think the pipeline is at this point? Yeah, so we continue to work the pipeline. It's a strong pipeline. As you know, we have you never convert it timing of acquisitions and all I can assure you is we'll be disciplined like we always have that and but we're continuing to have discussions in the space.

Bob: How would you see on the M&A outlook, obviously your balance sheet.

Michael Halloran: Thanks. Appreciate it.

Speaker Change: Great shape.

Operator: Thanks, Mike.

Speaker Change: How does that pipeline look and how actionable do you think the pipeline is at this point.

Bob: Yeah, so we continue to work the POP pipeline. It's a strong pipeline. As you know, you never can predict the timing of acquisitions, and all I can assure you is we'll be disciplined like we always have been, but we're continuing to have discussions in the space. Thanks.

Mike Halloran: Yeah, so we continue to work the POP pipeline. It's a strong pipeline. As you know, we can never predict the timing of acquisitions, and all I can assure you is we'll be disciplined like we always have been, but we're continuing to have discussions in the space. Thanks.

Operator: Thank you.

Bob: Yeah. So we continue to work the pipeline is a strong pipeline as you know we you never can predict timing of acquisitions and also I can assure you is we'll be disciplined like we always have been and.

Bob: But we're continuing to have discussions.

Bob: In the space.

Michael Halloran: Thanks. Appreciate it. Thanks, Mike. Thank you.

Speaker Change: Thanks I appreciate it.

Mike Halloran: Thanks, Mike.

Joseph Giordano: And your next question comes from the line of Joe Gordano with TD Cohen.

Operator: And your next question comes from the line of Joe Gordano with T.D. Cohen. Your line is open.

Joe Giordano: And your next question comes from the line of Joe Giordano with T.D. Cohen. Your line is open.

Joseph Giordano: And your next question comes from the line of Joe Gordano with TD Cohen. Your line is open. Hey guys, good morning. Good morning. Hey, I mean, it's small change, but I notice the M&A dilution is being reduced here a little bit. Can you tell us like what you're finding on the acquisitions here? Is it just better execution? You're finding incremental synergies that you're able to take advantage of earlier, just like what's what's driving that?

Speaker Change: And your next question comes from the line of Joe Giordano with TD Cowen Your line is open.

Joseph Giordano: Your line is open.

Operator: Yeah.

Bob Pagano: Hey guys, good morning. Good morning. Hey, I mean, it's small change, but I notice the M&A dilution is being reduced here a little bit. Can you tell us like what you're finding on the acquisitions here? Is it just better execution? You're finding incremental synergies that you're able to take advantage of earlier, just like what's driving that? It probably better synergies, right? If you remember for the Bradley acquisition, we had a synergy target of 12 million, with about 40% realization in year one. It's running slightly ahead, so we baked that into the guide and a little bit more on the Joe San acquisition as well.

Joe Gordano: Hey, guys good morning.

Operator: Yes.

Joe Gordano: Hey, I mean, it's a small change, but I noticed the M&A dilution is being reduced here a little bit. Can you tell us about what you're finding in the acquisitions here?

Joe Giordano: Hey, I mean, it's a small change, but I noticed the M&A dilution is being reduced here a little bit. Can you tell us about what you're finding in the acquisitions here?

Joe Gordano: I mean, a small change, but I noticed the M&A dilution is being reduced here a little bit can you tell us like what you are finding on the acquisitions here or is it just.

Bob: Or is it just better execution? Are you finding incremental synergies that you're able to take advantage of earlier? Just like what's driving it?

Speaker Change: Better execution, you finding incremental synergies that youre able to take advantage of earlier, just like what's what's driving that.

Bob: And probably better synergies, right? If you remember, for the Bradley acquisition, we had a synergy target of $12 million with about 40% realization in year one. It's running slightly ahead, so we baked that into the guide and a little bit more on the JOSEM acquisition as well.

Joseph Giordano: It probably better synergies, right? If you remember for the Bradley acquisition, we had a synergy target of 12 million with about 40% realization in year one. It's running slightly ahead, so we baked that into the guide and a little bit more on the Joe San acquisition as well. Better execution all around I would say. On the institutional side of the U.S., I mean, I noticed you mentioned like it's holding in pretty well.

Speaker Change: Probably better citizens right. If you remember for the Bradley acquisition, we add as soon as your target of $12 million with about 40% of realization in year. One is running slightly ahead. So we baked that into the guide and a little bit more on the Joseph acquisition as well.

Bob Pagano: Better execution all around, I would say. On the institutional side of the U.S., I mean, I noticed you mentioned, like, it's holding in pretty well. Like if you look at some of the, like, the sense of that, at least for construction, put in place for institutional, it's definitely positive, but trending down. Are you like incrementally seeing that shift? Like even if we're in positive territories, like getting kind of progressively worse? Is that consistent with what you're seeing on the ground? We haven't seen that yet. We've seen, you know, institutional business is held up fairly well at this point in time.

Joe Gordano: Better execution all around, I would say.

Joe Giordano: Better execution all around, I would say.

Speaker Change: Better execution, all around I would say.

Bob: On the institutional side of the U.S., I mean, I noticed you mentioned it's holding in pretty well. Like, if you look at some of the census data, at least for construction put in place for institutions, it's definitely positive, but trending down. Are you like incrementally seeing that shift? Like, even if we're in positive territory, it's like, getting kind of progressively worse. Is that consistent with what you're seeing on the ground? We haven't seen that yet.

Joseph Giordano: Like if you look at some of the like the sense of that at least for construction, put in place for institutional, it's definitely positive, but trending down. Are you like incrementally seeing that shift? Like even if we're in positive territories, like getting kind of progressively worse? Is that consistent with what you're seeing on the ground? We haven't seen that yet. We've seen, you know, institutional business is held up fairly well at this point in time. But we're watching certainly with the leading indicators just like you are, but that's a bright spot for us right now.

Speaker Change: On the institutional side in the U S. I mean, I noticed you mentioned like it's holding in pretty well.

Bob: Unlike if you look at some of the like the census that at least for construction put in place for institutional is definitely positive but trending down.

Bob: Are you like incrementally seeing that shift like you even if we're in positive territory. It's like.

Bob: Getting kind of progressively worse is that consistent with what youre seeing on the ground.

Joe Giordano: We haven't seen that yet. We've seen, you know, institutional businesses holding up fairly well at this point in time, but we're watching certainly with the leading indicators just like you are, but that's a bright spot for us right now.

Bob: We haven't seen that yet. We've seen, you know, institutional businesses holding up fairly well at this point in time, but we're watching certainly with the leading indicators just like you are, but that's a bright spot for us right now.

Speaker Change: We haven't seen that yet we've seen.

Bob: Institutional bid.

Bob: Business has held up fairly well at this point in time, so, but we're watching certainly with the leading indicators just like you are and but that's a bright spot for us right now.

Bob Pagano: But we're watching certainly with the leading indicators, just like you are, but that's a bright spot for us right now.

Joseph Giordano: Thanks, guys. Thank you.

Speaker Change: Okay. Thanks, guys.

Joseph Giordano: Thanks, guys. Thank you. And as a reminder, if you would like to ask a question, please press the star then the number one on your telephone keypad.

Speaker Change: Thank you.

Operator: And, as a reminder, if you would like to ask a question, please press the star, then the number one on your telephone keypad.

Operator: And as a reminder, if you would like to ask a question, please press the star and then the number 1 on your telephone keypad.

Speaker Change: And as a reminder, if you would like to ask a question. Please press. The Star then the number one on your telephone keypad.

Walter Liptak: Our next question comes from the line of Walter Litt talk with Seaport Research Partners.

Walter Liptak: Our next question comes from the line of Walter Litt talk with seaport research partners. Your line is open. Hey, good morning, guys. What do you want to ask about the Europe business you guys have been, you know, when we've been talking about the, you know, Europe, the, you know, heat pump flowing for some time. Was it below your expectations in the quarter or is it the destocking kind of going the way that you have been thinking that it would?

Speaker Change: Our next question comes from the line of Walter Liptak with Seaport Research Partners. Your line is open.

Walter Liptak: Your line is open.

Bob Pagano: Hey, good morning, guys. What do you want to ask about the Europe business you guys have been, you know, when we've been talking about the, you know, Europe, the, you know, heat pump flowing for some time. Was it below your expectations in the quarter, or is it the destocking kind of going the way that you have been thinking that it would? So we have, you're right, right early in the year when we gave guidance, we expected the destocking to happen; quite frankly, it now looks like it's going to be longer. As Bob said, Q 125 is the latest view we have, and it is worse than we anticipated.

Speaker Change: Hey, good morning, guys.

Operator: I wanted to ask about the European business. You guys have been, you know, and we've been talking about the, you know, European, the, you know, heat pump flowing for some time. Was it below your expectations in the quarter, or is the de-stacking kind of going the way that you have been thinking?

Walter Liptak: Good morning, guys. Good morning, Walter. I wanted to ask you guys about the European business. You guys have been, you know, and we've been talking about the, you know, European, the, you know, heat pump, it's been blowing for some time. Was it below your expectations in the quarter, or is the de-stacking kind of going the way that you have been thinking?

Speaker Change: Wanted to ask good morning.

Speaker Change: Wanted to ask about the Europe business you guys have been.

Operator: And we've been talking about.

Operator: Europe.

Speaker Change: Heat pump slowing for some time.

Speaker Change: Was it below your expectations in the quarter or is that is the destocking kind of going the way that you have been thinking that it would.

Bob: So we had, you're right, right? Early in the year, when we gave guidance, we expected the destocking to happen. Quite frankly, it now looks like it's gonna be longer. As Bob said, Q1 2025 is the latest view we have, and it is worse than we anticipated. So that's why, when you look at Europe, Europe did come in softer in the second quarter than we had anticipated. We recalculated the third quarter and the balance of the year, but it is worse than we had anticipated.

Walter Liptak: So we have, you're right right early in the year when we gave guidance, we expected the destocking to happen quite frankly, it now looks like it's going to be longer. As Bob said, Q 125 is the latest view we have and it is worse than we anticipated. So that's why when you look at Europe, Europe did come in softer in the second quarter than we had anticipated. We recalibrated the third quarter and the balance of the year, but it is so it is worse than we had anticipated.

Speaker Change: So we had a you're right right early in the year. When we gave guidance we expected the destocking to happen quite frankly, it now looks like it's gonna be longer as Bob said Q1, 2025 is the latest view, we have and it is worse than we.

Shashank Patel: So that's why, when you look at Europe, Europe did come in softer in the second quarter than we had anticipated. We recalibrated the third quarter and the balance of the year, but it is so it is worse than we had anticipated.

Bob: Anticipated. So that's why when you look at Europe Europe did come in softer in the second quarter than we had anticipated we recalibrated the third quarter and the balance of the year, but it is it is worse than you had anticipated.

Bob Pagano: Okay, great. And can you remind us, you know, the, you know, the positives around the European heat pump, I think, was driven by incentives. Are those incentives? Is there another round of incentives coming through, or is that it? Are we back to like sort of a normal consumer market for those products? No, so the incentives are obviously the incentive levels change, right? We had talked earlier. Italy had incentives of 110% and then last March, they dropped them to 60%, but they weren't; instead, they were over five year tax speed, etc. So the incentives are there, but they're different and less.

Operator: Okay, great. And can you remind us that the, you know, the positives around the European heat pump, I think, were driven by incentives. Are those incentives, is there another round of incentives coming through? Or is that it? Are we back to, like, sort of a normal consumer market for those products?

Walter Liptak: Okay, great. And can you remind us that the, you know, the positives around the European heat pump, I think, were driven by incentives. Are those incentives, is there another round of incentives coming through? Or is that it? Are we back to, like, sort of a normal consumer market for those products?

Speaker Change: Okay, Great and can you remind us.

Walter Liptak: Okay, great. And can you remind us, you know, the, you know, the positives around the European heat pump, I think, was driven by incentives. Are those incentives, is there another round of incentives coming through or is that it, are we back to like sort of a normal consumer market for those products? No, so the incentives are obviously the incentive levels change, right? We had talked earlier. Italy had incentives of 110% and then last March, they dropped them to 60% but they weren't instead they were over five year tax speed, etc.

Operator: The positives around the European heat pump I think was driven by incentives.

Operator: Are those incentives is there another round of incentives coming through or is that are we back to.

Operator: Normal.

Speaker Change: <unk> market for those products.

Bob: No, obviously, the incentives, obviously the incentive levels change, right? We talked earlier about Italy having incentives of 110%, and then last March they dropped them to 60%, but they weren't instant, they were over a five-year tax period, etc. So the incentives are there, but they're different and less. Similarly, with Germany and France, they've solidified their incentive programs. But I think the situation is that there was a huge buildup of heat pumps across Europe, and that's why we got into a situation where, even today, there's about a nine-month inventory of heat pumps in the European market. So that's got to be bled through, and that's where that Q1 2025 number comes in. But the incentives are there. They're less obvious, but they're still there.

Bob: No, obviously, the incentives, obviously, the incentive levels change, right? We talked earlier about Italy having incentives of 110%, and then last March, they dropped them to 60%, but they weren't instant, they were over a five-year tax period, et cetera. So the incentives are there, but they're different and less. Similarly, with Germany and France, they've solidified their incentive programs, but I think the situation was there was a huge buildup of heat pumps across Europe, and that's why we got into a situation where, even today, there's about a nine-month inventory of heat pumps in the European market. So that's got to be bled through, and that's where the Q1 2025 number comes in. The incentives are there, they're less, but they're still there.

Speaker Change: No. So the incentives obviously the incentive levels changed right. We had talked earlier, Italy at incentives of 110% and then last March they dropped them to 60%, but they want instead they were over.

Bob: Five year tax speed et cetera. So the incentives are there, but they are different and less.

Walter Liptak: So the incentives are there, but they're different and less. Similarly with Germany and France, they've solidified their incentive program. But I think the situation was there was a huge build up of of heat pumps across Europe. And that's why we got into situation where even today, there's about a nine month inventory of heat pumps in the European market. So that's got to be bled through and that's where that queue on 2025 number comes in.

Bob Pagano: Similarly, with Germany and France, they've solidified their incentive program. But I think the situation was there was a huge build up of heat pumps across Europe. And that's why we got into a situation where even today, there's about a nine-month inventory of heat pumps in the European market. So that's got to be bled through, and that's where that queue on 2025 number comes in. But the incentives are there. They're less, but they're still there.

Bob: Similarly, with Germany, and France, they have solidified their incentive program, but I think the situation was there was a huge buildup of heat pumps across Europe, and that's why they got into a situation where even today, there's about a nine month inventory of heat pumps in the European market. So that's got to be bled through and that's the way that Q1 2025 number comes.

Bob: And so the incentives are there they are less but they're still there.

Walter Liptak: But the incentives are there. They're less, but they still there. Okay, great. Okay, good. Okay, thanks. I'll take it off one from here. Thanks. Okay, thanks. Thank you. And there are no further questions at this time.

Walter Liptak: Okay, great. Okay, good. Okay, thanks.

Operator: Okay, great. Okay, good. Okay, thanks. I'll take it offline from here. Thanks.

Walter Liptak: Okay, great. Okay, good. Okay, thanks. I'll take it offline from here. Thanks.

Speaker Change: Okay great.

Bob: <unk>.

Operator: Okay. Good okay. Thanks.

Walter Liptak: I'll take it off one from here. Thanks. Okay, thanks. Thank you.

Operator: I'll take it offline from here thanks.

Bob: Okay, thanks. Thank you.

Operator: Okay. Thanks, Thank you.

Operator: And there are no further questions at this time.

Bob: And there are no further questions at this time. Bob Pagano, I turn the call back over to you.

Bob: And there are no further questions at this time, Bob Pagano I'll turn the call back over to you.

Bob Pagano: Bob Pagano, I turn the call back over to you. Thank you for taking the time to join us today. We appreciate your continued interest and walks and look forward to speaking with you again during our third quarter hearings call.

Robert Pagano: Bob Pagano, I turn the call back over to you. Thank you for taking the time to join us today. We appreciate your continued interest and walks and look forward to speaking with you again during our third quarter hearings call. Have a good day and stay safe.

Operator: And this concludes today's conference call. You may now disconnect.

Speaker Change: Thank you for taking the time to join US today. We appreciate your continued interest in watts and look forward to speaking with you again during our third quarter earnings call have a good day and stay safe.

Bob: Thank you for taking the time to join us today. We appreciate your continued interest in Watts and look forward to speaking with you again during our third quarter earnings call. Have a good day, and stay safe.

Operator: And this concludes today's conference call. You may now disconnect.

Operator: Have a good day and stay safe.

Operator: And this concludes today's conference call. You may now disconnect.

Speaker Change: And this concludes today's conference call you may now disconnect.

Operator: Okay.

Operator: Yeah.

Operator: Okay.

Operator: Yeah.

Q2 2024 Watts Water Technologies Inc Earnings Call

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