Q1 2025 Pentair PLC Earnings Call

Operator: Good morning, everyone, and welcome to the Pentair Q4 2025 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please email a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your touchscreen telephones. To withdraw your questions, you may press star and two. Please note today's event is being recorded. At this time, I'd like to turn the conference call over to Shelly Hubbard, Vice President of Investor Relations. Please go ahead.

Speaker Change: Good morning everyone and welcome to the Pentair first quarter 2025 earnings conference call.

Speaker Change: All participants will be in a listen only mode. Should you need assistance, please send your comfort specialist by pressing the star key followed by zero.

Speaker Change: After today's presentation there will be an opportunity to ask questions. Ask a question you may press star and then one on your touchpad telephone to withdraw your questions you may press star and two.

Please note today's event is being recorded.

Speaker Change: At this time, I'd like to turn the conference call over to Shelly Hubbard, Vice President of Investor Relations. Please go ahead.

Operator: Thank you, Operator, and welcome to Pentair's Q1, Q2 earnings conference call. On the call with me are John Stauch, our President and Chief Executive Officer, and Bob Fishman, our Chief Financial Officer.

Speaker Change: Thank you, Operator, and welcome to Pentair's first quarter, 2025 earnings conference call. On the call with me are John Stauch, our President and Chief Executive Officer, and Bob Fishman, our Chief Financial Officer. On today's call, we will provide details on our first quarter performance as outlined in this morning's press release.

David Brown: On today's call, we will provide details on our Q1 performance as outlined in this morning's press release. On the Pentair Investor Relations website, you can find our earnings release and slide deck, which is intended to supplement our prepared remarks during today's call and provide a reconciliation of differences between GAAP and non-GAAP financial measures that we will reference. The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP. They are included as additional clarifying items to aid investors in further understanding the company's performance, in addition to the impact these items and events have on the financial results. Before we begin, let me remind you that during our presentation today, we will make forward-looking statements, which are predictions, projections, or other statements about future events.

Shelly Hubbard: On today's call, we will provide details on our Q1 performance as outlined in this morning's press release. On the Pentair Investor Relations website, you can find our earnings release and slide deck, which is intended to supplement our prepared remarks during today's call and provide a reconciliation of differences between GAAP and non-GAAP financial measures that we will reference. The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP. They are included as additional clarifying items to aid investors in further understanding the company's performance, in addition to the impact these items and events have on the financial results. Before we begin, let me remind you that during our presentation today, we will make forward-looking statements, which are predictions, projections, or other statements about future events.

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

Speaker Change: The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance.

Speaker Change: Prepared in accordance with GAAP. They are included as additional clarifying items to aid investors in further understanding the company's performance, in addition to the impact these items and events have on the financial results.

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

David Brown: Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of Pentair. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to carefully review the risk factors in our most recent Form 10-Q and Form 10-K. Following our prepared remarks, we will open the call up for questions. Please limit your questions to two and re-enter the queue if needed to allow everyone an opportunity to participate. I will now turn the call over to John. Thank you, Shelly, and good morning, everyone. Let's turn to the Q1 executive summary on slide seven. We delivered our 12th consecutive quarter of margin expansion and another strong quarter of earnings growth while operating in a dynamic environment.

Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of Pentair. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to carefully review the risk factors in our most recent Form 10-Q and Form 10-K. Following our prepared remarks, we will open the call up for questions. Please limit your questions to two and re-enter the queue if needed to allow everyone an opportunity to participate. I will now turn the call over to John.

Speaker Change: Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of Pentair. These risks and uncertainties can cause actual results to differ materially from our current expectations. Thank you very much.

Speaker Change: We advise listeners to carefully review the risk factors in our most recent form 10Q and form 10K.

Speaker Change: Following our prepared remarks, we will open the call up for questions. Please limit your questions to two and re-enter the queue if needed to allow everyone an opportunity to participate.

Thank you, Shelly, and good morning, everyone. Let's turn to the Q1 executive summary on slide seven. We delivered our 12th consecutive quarter of margin expansion and another strong quarter of earnings growth while operating in a dynamic environment.

I will now turn the call over to John .

John Stauch: Thank you, Shelly. Good morning, everyone. Let's turn to the Q1 Executive Summary on Slide 7.

John Stauch: We delivered our 12th consecutive quarter of margin expansion and another strong quarter of earnings growth, while operating in a dynamic environment.

David Brown: Our businesses and functional teams continue to execute with agility across our move, improve, and enjoy water segments to mitigate tariff impacts, launch innovation, win awards, generate new accounts, expand existing key accounts, deliver margin expansion driven by transformation, and continue to implement 80/20. I am very grateful for how our teams continue to rise to the challenge and deliver for customers while creating value for shareholders. In the first quarter, sales were down 1% and were better than expected, with pool growing 7%, offset by difficult comparisons in commercial water within water solutions and continued challenges in residential and irrigation markets within flow. Adjusted operating income increased 12% to $243 million. ROS expanded by 260 basis points to 24%, and adjusted EPS was $1.11, up 18%. We repurchased 50 million of shares and increased our dividend for the 49th consecutive year, further solidifying our Dividend Aristocrat status.

John Stauch: Our businesses and functional teams continue to execute with agility across our move, improve, and enjoy water segments to mitigate tariff impacts, launch innovation, win awards, generate new accounts, expand existing key accounts, deliver margin expansion driven by transformation, and continue to implement 80/20. I am very grateful for how our teams continue to rise to the challenge and deliver for customers while creating value for shareholders. In the first quarter, sales were down 1% and were better than expected, with pool growing 7%, offset by difficult comparisons in commercial water within water solutions and continued challenges in residential and irrigation markets within flow. Adjusted operating income increased 12% to $243 million. ROS expanded by 260 basis points to 24%, and adjusted EPS was $1.11, up 18%. We repurchased 50 million of shares and increased our dividend for the 49th consecutive year, further solidifying our Dividend Aristocrat status.

John Stauch: Our businesses and functional teams continue to execute with agility across our move, improve and enjoy water segments.

to mitigate tariff impacts, launch innovation, win awards, awards,

John Stauch: Generate new accounts, expand existing key accounts, deliver margin expansion driven by transformation, and continue to implement 80-20. I am very grateful for our teams continue to rise to the challenge and deliver for customers while creating value for shareholders.

John Stauch: Adjusted operating income increased 12% to 243 million, ROS expanded by 260 basis points to 24% and the adjusted EPS was $1.11 plus 18%.

John Stauch: We repurchase 50 million of shares and increased our dividend for the 49th consecutive year.

Further solidifying our dividend aristocrat status.

David Brown: Lastly, we maintained our full year 2025 sales and Adjusted EPS guidance of $4.65 to $4.80, which is up approximately 9% at the midpoint year over year. Let's move to the tariff and inflation update on slide eight. We are remaining agile in a rapidly changing environment. Bob will provide more detail on our estimated tariff impact and mitigation strategies in a moment. Our initial guidance on 4 February 2025 incorporated estimated impacts from tariffs and an expectation that volume would likely decline as prices rose. As a result, while the tariff amounts by country have changed since our last earnings call and some tariffs have been paused, we feel comfortable maintaining our initial 2025 sales and Adjusted 2025 EPS guidance with the current tariff impacts.

Lastly, we maintained our full year 2025 sales and Adjusted EPS guidance of $4.65 to $4.80, which is up approximately 9% at the midpoint year over year. Let's move to the tariff and inflation update on slide eight. We are remaining agile in a rapidly changing environment. Bob will provide more detail on our estimated tariff impact and mitigation strategies in a moment. Our initial guidance on 4 February 2025 incorporated estimated impacts from tariffs and an expectation that volume would likely decline as prices rose. As a result, while the tariff amounts by country have changed since our last earnings call and some tariffs have been paused, we feel comfortable maintaining our initial 2025 sales and Adjusted 2025 EPS guidance with the current tariff impacts.

John Stauch: Lastly, we maintained our full-year 25 sales and adjusted EPS guidance of $4.65 to $4.80, which is up approximately 9% at the midpoint year over year.

John Stauch: Let's move to the tariff and inflation update on slide 8. [inaudible]

We are remaining agile in a rapidly changing environment.

John Stauch: Bob will provide more detail on our estimated turf impact and mitigation strategies in a moment.

John Stauch: Our initial guidance on February 4th, incorporated estimated impacts from tariffs and an expectation that volume would likely decline as prices rose.

John Stauch: As a result, while the tariff amounts by country have changed since our last earnings call and some tariffs have been paused, we feel comfortable maintaining our initial 2025 sales and adjusted 2025 EPS guidance with the current tariff impact.

David Brown: We have taken several steps to mitigate tariffs across our portfolio and continue to position our businesses to be successful in both the short term and the long term. We believe we have multiple advantages, including a two-step distribution model representing about 75% of our sales that generally enables us to pass along price increases when we are not unique in dealing with inflationary pressures, a high recurring revenue base generated from a majority of non-discretionary replacement products, a global supply chain with reduced reliance on China, a strong US manufacturing footprint, strong free cash flow, a solid balance sheet, and a well-balanced capital deployment strategy across debt repayment, dividends, share repurchases, and M&A. We are also applying our prior inflationary learnings to manage our channel and maximize our performance. Let's turn to slide nine.

We have taken several steps to mitigate tariffs across our portfolio and continue to position our businesses to be successful in both the short term and the long term. We believe we have multiple advantages, including a two-step distribution model representing about 75% of our sales that generally enables us to pass along price increases when we are not unique in dealing with inflationary pressures, a high recurring revenue base generated from a majority of non-discretionary replacement products, a global supply chain with reduced reliance on China, a strong US manufacturing footprint, strong free cash flow, a solid balance sheet, and a well-balanced capital deployment strategy across debt repayment, dividends, share repurchases, and M&A. We are also applying our prior inflationary learnings to manage our channel and maximize our performance. Let's turn to slide nine.

John Stauch: We have taken several steps to mitigate tariffs across our portfolio and continue to position our businesses to be successful in both the short term and the long term.

John Stauch: We believe we have multiple advantages including a two-step distribution model representing about 75% of our sales that generally enables us to pass along price increases when we are not unique in dealing with inflationary pressures.

John Stauch: A high recurring revenue base generated from a majority of nondiscretionary replacement products.

A global supply chain with reduced reliance on China. [inaudible]

a strong U.S. manufacturing footprint. [inaudible]

John Stauch: Strong free cash flow, a solid balance sheet, and a well-balanced capital deployment strategy across debt repayment, dividends, sharey purchases, and M&A.

John Stauch: We are also applying our prior inflationary learnings to manage our channel and maximize our performance.

David Brown: Despite a dynamic environment, we continue to deliver on our transformation goals to drive margin expansion. In 2023 and 2024 combined, we saved $174 million due to our transformation initiatives, and we expect to deliver another $80 million this year net of investments. We expect our sourcing waves one and two to continue to contribute to these savings. We are implementing wave three, which we expect will begin to add another layer of savings in 2025 and beyond. Looking at operational excellence, we are driving operational efficiency with our factories through lean practices, automation, and digital transformation, and optimizing our operational footprint. We expect to rapidly accelerate productivity when volumes within our core markets return to normalized levels. As we continue to implement 80/20, we expect to drive high-value core sales growth long-term by overserving our best customers and optimizing the rest.

Despite a dynamic environment, we continue to deliver on our transformation goals to drive margin expansion. In 2023 and 2024 combined, we saved $174 million due to our transformation initiatives, and we expect to deliver another $80 million this year net of investments. We expect our sourcing waves one and two to continue to contribute to these savings. We are implementing wave three, which we expect will begin to add another layer of savings in 2025 and beyond. Looking at operational excellence, we are driving operational efficiency with our factories through lean practices, automation, and digital transformation, and optimizing our operational footprint. We expect to rapidly accelerate productivity when volumes within our core markets return to normalized levels. As we continue to implement 80/20, we expect to drive high-value core sales growth long-term by overserving our best customers and optimizing the rest.

Let's turn to slide 9.

John Stauch: Despite a dynamic environment, we continued to deliver on our transformation goals to drive margin expansion.

John Stauch: In 2023 and 2024, combined, we saved $174 million due to our Transmation Initiatives, and we delivered another $80 million this year, net of investment.

John Stauch: We expect our sourcing ways one and two to continue to contribute to these savings [inaudible]

John Stauch: We are implementing Wave 3, which we expect will begin to add another layer of savings in 2025 and beyond.

John Stauch: Looking at operational excellence, we are driving operational efficiency with our factories through lean practices, automation and digital transformation, and optimizing our operational footprint. [inaudible]

John Stauch: We expect to rapidly accelerate productivity when volumes within our core markets return to normalize levels.

John Stauch: As we continue to implement 80-20, we expect to drive high value core sales growth long term by over serving our best customers and optimizing the rest.

David Brown: We have taken actions to transition our Q3 and Q4 lower-margin customers to purchase directly from our top distributors or accept new terms and conditions that we expect to enable us to become a larger and more profitable business. We are also optimizing the selection of products we offer to reduce complexity within our operations and advance productivity. Additionally, 80/20 actions have helped us to absorb higher inflationary costs. We see 80/20 as an enabler to transformation by reducing complexity and streamlining our businesses. Let's turn to slide ten. Before I hand the call over to Bob, I wanted to reiterate some key takeaways. We had solid execution across all three of our segments. In Q1, pool grew 7% while transformation and strong execution drove triple-digit margin expansion and double-digit earnings growth for Pentair. We delivered better-than-expected productivity savings from transformation despite lower volumes.

We have taken actions to transition our Q3 and Q4 lower-margin customers to purchase directly from our top distributors or accept new terms and conditions that we expect to enable us to become a larger and more profitable business. We are also optimizing the selection of products we offer to reduce complexity within our operations and advance productivity. Additionally, 80/20 actions have helped us to absorb higher inflationary costs. We see 80/20 as an enabler to transformation by reducing complexity and streamlining our businesses. Let's turn to slide ten. Before I hand the call over to Bob, I wanted to reiterate some key takeaways. We had solid execution across all three of our segments. In Q1, pool grew 7% while transformation and strong execution drove triple-digit margin expansion and double-digit earnings growth for Pentair. We delivered better-than-expected productivity savings from transformation despite lower volumes.

John Stauch: We have taken actions to transition our Quad 3 and 4 lower margin customers to purchase directly from our top distributors, or accept new terms and conditions that we expect to enable us to become a larger and more profitable business.

John Stauch: We are also optimizing the selection of products we offer to reduce complexity within our operations in advanced productivity.

John Stauch: Additionally, 80-20 actions have helped us to absorb higher inflationary costs.

John Stauch: We see 80-20 as an enabler to transformation by reducing complexity in streamlining our businesses.

Let's turn to Slide 10.

John Stauch: Before I hand the call over to Bob, I wanted to reiterate some key takeaways.

We had solid execution across all three of our segments.

John Stauch: In Q1, pool grew 7% while transformation strong execution drove triple-digit margin expansion and double-digit earnings growth for Pentair.

We delivered better than expected-rooted tibities savings from transformation despite lower volumes.

David Brown: We are maintaining our initial sales and Adjusted EPS 2025 guidance provided on 4 February, which includes estimated tariff impacts, mitigation strategies, and the use of our 80/20 and transformation toolkit. We continue to build a foundation of optimal operational efficiency that can be leveraged when volume returns to normal. We have a balanced water portfolio with a capital-light business model and the ability to mostly pass along price. And finally, we have a strong key free cash flow, a solid balance sheet, a low net debt to EBITDA leverage ratio, and a balanced capital deployment strategy.

We are maintaining our initial sales and Adjusted EPS 2025 guidance provided on 4 February, which includes estimated tariff impacts, mitigation strategies, and the use of our 80/20 and transformation toolkit. We continue to build a foundation of optimal operational efficiency that can be leveraged when volume returns to normal. We have a balanced water portfolio with a capital-light business model and the ability to mostly pass along price. And finally, we have a strong key free cash flow, a solid balance sheet, a low net debt to EBITDA leverage ratio, and a balanced capital deployment strategy.

John Stauch: We are maintaining our initial sales and adjusted EPS 2025 guidance, provided 9 February 4th, which includes estimated tariff impacts, mitigation strategies, and the use of our 80-20 in Transpiration Toolkit.

We continue to build a foundation of optimal operational efficiency.

John Stauch: That can be leveraged when volume returns normal. We have a balanced water portfolio with a capital-like business model and the ability to mostly pass long price. And finally we have a strong key free cash flow, a solid balance sheet, a low net debt to EBITDA leverage ratio, and a balanced capital deployment strategy. [inaudible]

David Brown: As a water company providing solutions to move, improve, and enjoy water, we continue to believe that we are well-positioned to address opportunities from favorable secular trends by getting water to where it needs to be and away from where it doesn't, and by filtering and improving water for people to drink and enjoy. I will now pass the call over to Bob, who will discuss our performance and financial results in more detail. Bob? Thank you, John, and good morning, everyone. Let's start on slide 11. We delivered another strong quarter of quality earnings with triple-digit margin expansion and double-digit adjusted income and EPS growth despite lower volume. Sales, margin, and adjusted earnings outperformed our expectations. In Q1, sales were $1 billion, down 1%. Adjusted operating income increased 12% to $243 million.

As a water company providing solutions to move, improve, and enjoy water, we continue to believe that we are well-positioned to address opportunities from favorable secular trends by getting water to where it needs to be and away from where it doesn't, and by filtering and improving water for people to drink and enjoy. I will now pass the call over to Bob, who will discuss our performance and financial results in more detail. Bob?

John Stauch: As a water company providing solutions to move and prove and enjoy water, we continue to believe that we are well-positioned to address opportunities from favorable secular trends by getting water to where it needs to be and away from where it doesn't

John Stauch: and by filtering and improving water for people to drink and enjoy.

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

Bob Fishman: Thank you, John, and good morning, everyone. Let's start on slide 11. We delivered another strong quarter of quality earnings with triple-digit margin expansion and double-digit adjusted income and EPS growth despite lower volume. Sales, margin, and adjusted earnings outperformed our expectations. In Q1, sales were $1 billion, down 1%. Adjusted operating income increased 12% to $243 million.

Bob Fishman: Thank you, John , and good morning, everyone. Let's start on slide 11.

Bob Fishman: We delivered another strong quarter of quality earnings with triple-digit margin expansion and double-digit adjusted income and EPS growth despite lower value.

Sales, margin, and adjusted earnings outperformed our expectations.

Bob Fishman: In Q1, sales were a billion dollars, down 1%, adjusted operating income, increased 12% to $243 million.

David Brown: ROS expanded 260 basis points to 24%, driven primarily by transformation, and adjusted EPS increased 18% to $1.11. Core sales were down 1% year over year, driven by 4% growth in Pool, which was offset by a 3% decline in Flow and a 4% decline in Water Solutions. Pool and Water Solutions outperformed our expectations while Flow was in line with our guidance. Please turn to slide 12. Flow sales declined 4% year over year. Within Flow, residential sales were down 6% as higher interest rates continued to pressure residential end markets. Commercial sales rose 3%, marking the 11th consecutive quarter of year-over-year sales growth. Industrial sales were down 9%, driven by a focus on profitable and higher-margin business. Segment income grew 8%, and return on sales expanded 260 basis points to nearly 23%. The strong margin expansion was a result of continued progress on our transformation initiatives.

ROS expanded 260 basis points to 24%, driven primarily by transformation, and adjusted EPS increased 18% to $1.11. Core sales were down 1% year over year, driven by 4% growth in Pool, which was offset by a 3% decline in Flow and a 4% decline in Water Solutions. Pool and Water Solutions outperformed our expectations while Flow was in line with our guidance. Please turn to slide 12. Flow sales declined 4% year over year. Within Flow, residential sales were down 6% as higher interest rates continued to pressure residential end markets. Commercial sales rose 3%, marking the 11th consecutive quarter of year-over-year sales growth. Industrial sales were down 9%, driven by a focus on profitable and higher-margin business. Segment income grew 8%, and return on sales expanded 260 basis points to nearly 23%. The strong margin expansion was a result of continued progress on our transformation initiatives.

Bob Fishman: Ross expanded 260 basis points to 24% driven primarily by transformation.

and adjusted EPS increased 18% to $1.11. . .

Bob Fishman: Core sales were down 1% year over year driven by 4% growth and pool which was offset by a 3% decline in flow and a 4% decline in water solutions.

Bob Fishman: Cool and water solutions outperform their expectations while flowed within line with our guidance.

Pleased turn to slide 12.

Bob Fishman: Low sales declined 4% year over year. Within flow, residential sales were down 6%, as higher interest rates continued to pressure residential and markets. [inaudible]

Bob Fishman: Commercial Sales rose 3%, marking the 11th consecutive quarter of year-over-year sales growth.

Bob Fishman: and Industrial Sales were down 9% driven by a focus on profitable and higher margin business.

Bob Fishman: Segment income grew 8% and return on sales expanded 260 basis points to nearly 23%.

Bob Fishman: The strong margin expansion was a result of continued progress on our transformation initiatives.

David Brown: Flow continued to benefit from changes the segment made in its go-to-market strategies over the last two years and its focus on complexity reduction. Please turn to slide 13. In Q1, Water Solutions sales declined 5% to $258 million, which outperformed our expectations. Sales and Commercial Filtration increased year over year, while Ice performed as expected, and residential performed better than expected. As a reminder, the Ice business faced difficult year-over-year comparisons as Q1 in the prior year included a larger rollout in China. We expect Ice to begin to return to more normalized growth rates going forward. Segment income grew 9% to $61 million, and return on sales expanded 310 basis points to 23.5%, driven by higher productivity from transformation and 80/20 actions in Q1. Please turn to slide 14. In Q1, Pool sales increased 7% to $384 million, driven by price, volume, and our Q4 2024 acquisition.

Flow continued to benefit from changes the segment made in its go-to-market strategies over the last two years and its focus on complexity reduction. Please turn to slide 13. In Q1, Water Solutions sales declined 5% to $258 million, which outperformed our expectations. Sales and Commercial Filtration increased year over year, while Ice performed as expected, and residential performed better than expected. As a reminder, the Ice business faced difficult year-over-year comparisons as Q1 in the prior year included a larger rollout in China. We expect Ice to begin to return to more normalized growth rates going forward. Segment income grew 9% to $61 million, and return on sales expanded 310 basis points to 23.5%, driven by higher productivity from transformation and 80/20 actions in Q1. Please turn to slide 14. In Q1, Pool sales increased 7% to $384 million, driven by price, volume, and our Q4 2024 acquisition.

Bob Fishman: Flow continues to benefit from changes the segment made in its go-to market strategies over the last two years and its focus on complexity reduction.

For more information, visit www.FEMA.gov

Please turn to Slide 13.

Speaker Change: NQ-1 water solution sales declined 5% to $258 million, which outperformed our expectations.

Speaker Change: Sales and commercial filtration increased year-over-year while ICE performed as expected and residential performed better than expected.

Speaker Change: As a reminder, the ICE business phase difficult year-over-year comparisons as Q1 in the prior year included a larger rollout in China. We expect ICE to begin to return to more normalized growth rates going forward.

For more information, visit www.fisheries.noaa.gov

Speaker Change: Segment income grew 9% to $61 million and return on sales expanded 310 basis points to 23.5% driven by higher productivity from transformation and 80-20 actions in Q1.

Please turn to slide 14.

Speaker Change: In Q1, pool sales increased 7% to $384 million, driven by price, volume, and our Q4 of 2024 Acquisition.

David Brown: Segment income was $126 million, up 14%, and return on sales increased 200 basis points to 32.8%, driven by sales growth and transformation. Please turn to slide 15. We are well into our transformation journey and continue to see strong results. Last quarter, we increased our 2026 ROS target from 24%, as provided in our March 2024 investor day, to 26%. Our goal is to drive incremental sales growth through value-based pricing and 80/20, and to deliver return on sales of 26% in 2026, or margin expansion of over 700 basis points since 2022, utilizing the four pillars of transformation. We achieved 23.5% in 2024 and expect to deliver approximately 25% in 2025. We've made great progress as our teams have continued to successfully implement those initiatives. Please turn to slide 16.

Segment income was $126 million, up 14%, and return on sales increased 200 basis points to 32.8%, driven by sales growth and transformation. Please turn to slide 15. We are well into our transformation journey and continue to see strong results. Last quarter, we increased our 2026 ROS target from 24%, as provided in our March 2024 investor day, to 26%. Our goal is to drive incremental sales growth through value-based pricing and 80/20, and to deliver return on sales of 26% in 2026, or margin expansion of over 700 basis points since 2022, utilizing the four pillars of transformation. We achieved 23.5% in 2024 and expect to deliver approximately 25% in 2025. We've made great progress as our teams have continued to successfully implement those initiatives. Please turn to slide 16.

Speaker Change: Segment income was $126 million, up 14% and return on sales increased 200 basis points to 32.8% driven by sales growth and transformation.

Please turn to slide 15.

Speaker Change: We are well into our transformation journey and continue to see strong results.

Speaker Change: Last quarter we increased our 2026 Ross target from 24% as provided in our March 2024 investor day to 26%

Speaker Change: Our goal is to drive incremental sales growth through value-based pricing in 80-20 and to deliver return on sales of 26% in 2026.

Speaker Change: or Margin Expansion of over 700 basis points since 2022 utilizing the four pillars of transformation.

Speaker Change: We achieved 23.5% in 2024 and expect to deliver approximately 25% in 2025.

Speaker Change: We've made great progress as our teams have continued to successfully implement those initiatives.

Please turn to slide 16.

David Brown: Our balance sheet remains strong, and our return on invested capital continued to improve, nearly reaching 16% in Q1. Long-term, we continue to target high teens ROIC. Our net debt leverage ratio is 1.6 times, down from 2.1 times a year ago. During the quarter, we repurchased $50 million of shares. Over the last two years, our strong free cash flow has enabled us to deploy approximately $1.4 billion in capital via debt paydown, dividends, share repurchases, and our strategic acquisition. We plan to remain disciplined with our capital and have additional flexibility to strategically allocate capital to areas with the highest shareholder returns. Let's turn to our outlook on slide 17. For the full year, we are maintaining our adjusted EPS guidance of approximately $4.65 to 4.80, which is up roughly 7% to 11% year over year.

Our balance sheet remains strong, and our return on invested capital continued to improve, nearly reaching 16% in Q1. Long-term, we continue to target high teens ROIC. Our net debt leverage ratio is 1.6 times, down from 2.1 times a year ago. During the quarter, we repurchased $50 million of shares. Over the last two years, our strong free cash flow has enabled us to deploy approximately $1.4 billion in capital via debt paydown, dividends, share repurchases, and our strategic acquisition. We plan to remain disciplined with our capital and have additional flexibility to strategically allocate capital to areas with the highest shareholder returns. Let's turn to our outlook on slide 17. For the full year, we are maintaining our adjusted EPS guidance of approximately $4.65 to 4.80, which is up roughly 7% to 11% year over year.

Speaker Change: Our balance sheet remains strong, and our return on invested capital continue to improve, nearly reaching 16% into one.

Long term, we continue to target high teens ROIC.

Speaker Change: Our net debt leverage ratio is 1.6 times, down from 2.1 times a year ago. .

During the quarter, we repurchased $50 million of shares. [inaudible]

Speaker Change: Over the last two years, our strong free cashflow has enabled us to deploy approximately $1.4 billion in capital via debt paydown, dividends, share repurchases, and a strategic acquisition.

Speaker Change: We plan to remain disciplined with our capital and have additional flexibility to strategically allocate capital to areas with the highest shareholder returns.

Let's turn to our outlook on slide 17.

Speaker Change: For the full year, we are maintaining our adjusted EPS guidance of approximately $4.65, the $4.80, which is up roughly 7% to 11% year over year.

David Brown: Also, for the full year, we are maintaining our sales guidance of approximately flat to up 2%, which assumes FX and tariff-related price increases are roughly offset by anticipated tariff-related volume declines. We expect adjusted operating income to increase approximately 6% to 9%, which includes the assumption that price increases are offset by higher tariffs, net of mitigation actions, and associated volume drop-through. We continue to expect to drive approximately $80 million in transformation savings this year, net of investments. For the second quarter, we expect sales to be up approximately 1% to 2%. We expect Pool sales to be up approximately mid-single digits, and Water Solutions and Flow sales to be roughly flat. We expect second quarter adjusted operating income to increase approximately 5% to 8%, and we expect margin expansion across all three segments in Q2.

Also, for the full year, we are maintaining our sales guidance of approximately flat to up 2%, which assumes FX and tariff-related price increases are roughly offset by anticipated tariff-related volume declines. We expect adjusted operating income to increase approximately 6% to 9%, which includes the assumption that price increases are offset by higher tariffs, net of mitigation actions, and associated volume drop-through. We continue to expect to drive approximately $80 million in transformation savings this year, net of investments. For the second quarter, we expect sales to be up approximately 1% to 2%. We expect Pool sales to be up approximately mid-single digits, and Water Solutions and Flow sales to be roughly flat. We expect second quarter adjusted operating income to increase approximately 5% to 8%, and we expect margin expansion across all three segments in Q2.

Speaker Change: which assumes FX and tariff-related price increases are roughly offset by anticipated tariff-related volume declines.

Speaker Change: We expected just an operating income to increase approximately 6% to 9%

Speaker Change: which includes the assumption that price increases are offset by higher tariffs, net of mitigation action and associated volume drop through.

Speaker Change: We continue to expect to drive approximately $80 million in transformation savings this year, net of investment.

Speaker Change: For the second quarter, we expect sales to be up approximately 1% to 2%.

We expect pool sales to be up approximately mid-single digits. Thank you very much.

and Water Solutions and Flow Sales to Be Roughly Flat.

Speaker Change: We expect second quarter adjusted operating income to increase approximately 5% to 8% and we expect margin expansion across all three segments in Q2.

David Brown: We're also introducing Adjusted EPS guidance for the second quarter of approximately $1.31 to 1.35, up roughly 7% to 11%. Let's turn to slide 18. The purpose of this chart is to highlight the estimated tariff impact based on what we know today. The estimated tariff impact of roughly $140 million net of mitigation actions is primarily from China, as you can see on the left-hand side of the chart. The remainder of the tariffs includes smaller amounts from Mexico, Europe, the rest of the world, and the steel and aluminum tariff. In our initial 2025 guidance, we had included an estimated impact of enacted and potential tariffs, and we began taking actions in Q1 to mitigate risk. We've taken further actions to mitigate the impacts of tariffs. Some examples of these include tariff-related price increases, inventory prebuys, and capping orders to optimize our supply chain, inventory, and production.

We're also introducing Adjusted EPS guidance for the second quarter of approximately $1.31 to 1.35, up roughly 7% to 11%. Let's turn to slide 18. The purpose of this chart is to highlight the estimated tariff impact based on what we know today. The estimated tariff impact of roughly $140 million net of mitigation actions is primarily from China, as you can see on the left-hand side of the chart. The remainder of the tariffs includes smaller amounts from Mexico, Europe, the rest of the world, and the steel and aluminum tariff. In our initial 2025 guidance, we had included an estimated impact of enacted and potential tariffs, and we began taking actions in Q1 to mitigate risk. We've taken further actions to mitigate the impacts of tariffs. Some examples of these include tariff-related price increases, inventory prebuys, and capping orders to optimize our supply chain, inventory, and production.

Speaker Change: We're also introducing adjusted EPS guidance for the second quarter of approximately $1.31 to $1.35 up roughly 7% to 11%.

Let's turn to slide 18.

Speaker Change: The purpose of this chart is to highlight the estimated tariff impact based on what we know today.

Speaker Change: The estimated tariff impact of roughly $140 million net of mitigation actions is primarily from China as you can see on the left hand side of the chart.

Speaker Change: The remainder of the tariffs include smaller amounts from Mexico, Europe , rest of the world, and the steel and aluminum tariffs.

Speaker Change: In our initial 2025 guidance, we had included an estimated impact of enacted and potential tariffs, and we began taking actions in Q1 to mitigate risk.

We've taken further actions to mitigate the impacts of tariffs.

Speaker Change: Some example of these include terra-related price increases, inventory pre-bites, and capping orders to optimize our supply chain, inventory and production.

David Brown: Over 90% of goods that we import to the US from Mexico qualify under the current USMCA. Through our transformation sourcing initiatives, we have already lowered our supply and production from China over the last three years. We also expect that we can pass along pricing through our channel as 75% of our sales are to two-step distribution, in which we sell into distribution, who then sells to dealers, and ultimately the end consumer. As a reminder, over 75% of our sales are also aftermarket or break-fix-related revenue. We continue to monitor the rapidly changing landscape and remain agile to quickly adjust as necessary. We believe that we are taking the right actions to mitigate tariff impacts. We have a strong balance sheet and a balanced capital allocation strategy.

Over 90% of goods that we import to the US from Mexico qualify under the current USMCA. Through our transformation sourcing initiatives, we have already lowered our supply and production from China over the last three years. We also expect that we can pass along pricing through our channel as 75% of our sales are to two-step distribution, in which we sell into distribution, who then sells to dealers, and ultimately the end consumer. As a reminder, over 75% of our sales are also aftermarket or break-fix-related revenue. We continue to monitor the rapidly changing landscape and remain agile to quickly adjust as necessary. We believe that we are taking the right actions to mitigate tariff impacts. We have a strong balance sheet and a balanced capital allocation strategy.

Speaker Change: Over 90% of goods that we import to the U.S. from Mexico qualify under the current U.S.

Speaker Change: And through our transformation, sourcing initiatives, we have already lowered our supply and production from China over the last three years.

Speaker Change: We also expect that we can pass along pricing through our channel as 75% of our sales are to two-step distribution in which we sell into distribution who then sells to dealers and ultimately the end consumer.

Speaker Change: As a reminder, over 75% of our sales are also aftermarket, or break fix related revenue.

Speaker Change: We continue to monitor the rapidly changing landscape and remain agile to quickly adjust as necessary. We believe that we are taking the right actions to mitigate tariff impacts. We have a strong balance sheet and a balanced capital allocation strategy.

David Brown: Our significant free cash flow enables us to continue to pay down debt, increase our dividend, repurchase shares, and remain strategic on M&A. We plan to continue to deploy capital in areas that drive the highest return for our shareholders while being mindful of protecting capital during periods of macroeconomic and geopolitical uncertainty. I would now like to turn the call over to the operator for Q&A, after which John will have a few closing remarks. Operator, please open the line for questions. Thank you. Ladies and gentlemen, at this time, we'll begin the question-and-answer session. If you would like to ask a question, you may do so by pressing star and then one using a touch-tone telephone. We do ask that you please pick up your handset before pressing the keys to ensure the best sound quality.

Our significant free cash flow enables us to continue to pay down debt, increase our dividend, repurchase shares, and remain strategic on M&A. We plan to continue to deploy capital in areas that drive the highest return for our shareholders while being mindful of protecting capital during periods of macroeconomic and geopolitical uncertainty. I would now like to turn the call over to the operator for Q&A, after which John will have a few closing remarks. Operator, please open the line for questions. Thank you.

Speaker Change: Our significant free cash flow enables us to continue to pay down debt, increase our dividend, repurchase shares, and remain strategic on M&A.

Speaker Change: We plan to continue to the Boy Capital, an area that drive the highest return for our shareholders, while being mindful of protecting capital, their periods of macroeconomic and geopolitical uncertainty.

Speaker Change: I would now like to turn the call over to the operator for Q and A, after which John will have a few closing remarks.

Operator, please open the line for questions.

Operator: Ladies and gentlemen, at this time, we'll begin the question-and-answer session. If you would like to ask a question, you may do so by pressing star and then one using a touch-tone telephone. We do ask that you please pick up your handset before pressing the keys to ensure the best sound quality. We do ask that you please limit yourselves to a single question and a follow-up. To withdraw your questions, you may press star and two. Once again, that is star and then one to join the question queue. Our first question today comes from Julian Mitchell from Barclays. Please go ahead with your question.

Thank you.

www.fishingtacklesale.co.uk

Speaker Change: Ladies and gentlemen, at this time we'll begin the question and answer session. If you would like to ask a question, may do so by pressing star and then one using a touch down telephone.

Speaker Change: We do ask the police pick up your handset before pressing the keys to ensure the best sound quality.

David Brown: We do ask that you please limit yourselves to a single question and a follow-up. To withdraw your questions, you may press star and two. Once again, that is star and then one to join the question queue. Our first question today comes from Julian Mitchell from Barclays. Please go ahead with your question. Hello? Julian, your line is open. Hi, good morning. Sorry about that. Maybe just my first question would be around the assumptions on organic sales as you're going through the year. And help us understand the volume assumption embedded in the organic sales guide. Do you assume a sort of offset, one for one of higher price of, say, three points offset by lower volume?

Speaker Change: We do ask that you please limit yourselves to a single question and a follow up.

So withdraw your questions, you may press star and two.

Speaker Change: once again that is star and then one to join the question queue.

Drayman, Drayman,

Speaker Change: Our first question today comes from Julian Mitchell from Barkley's. Please go ahead with your question.

Julian Mitchell: Hello? Julian, your line is open. Hi, good morning. Sorry about that. Maybe just my first question would be around the assumptions on organic sales as you're going through the year. And help us understand the volume assumption embedded in the organic sales guide. Do you assume a sort of offset, one for one of higher price of, say, three points offset by lower volume?

Hello?

Julian, your line is open.

Hi, good morning. Sorry about that.

Speaker Change: Maybe just my first question would be around the assumptions on organic sales as you're going through the year.

Speaker Change: You know, and help us understand the volume assumption embedded in the organic sales guide to assume a sort of offset you know one for one of higher price of say three points offset by lower volume. [inaudible]

David Brown: Yeah, Julian, as a reminder, I think when we started this year, we did not anticipate that we would see recovery in the North American residential housing, which is roughly 50% of our revenue. We counted on it a little bit last year and thought we'd see lower interest rates. When we entered this year, we've kind of put that on the upside to our original guide. As you take a look at the way tariffs are coming through, they're different than what we anticipate on February 4th, but they still are going to lead to higher prices through the channel. We think we could see defeaturing. We think we could see consumers defer. We're anticipating that. We don't know that, but that is the assumption in our current guide, is that the more price goes up, the more volume we'll likely see start to soften.

John Stauch: Yeah, Julian, as a reminder, I think when we started this year, we did not anticipate that we would see recovery in the North American residential housing, which is roughly 50% of our revenue. We counted on it a little bit last year and thought we'd see lower interest rates. When we entered this year, we've kind of put that on the upside to our original guide. As you take a look at the way tariffs are coming through, they're different than what we anticipate on February 4th, but they still are going to lead to higher prices through the channel. We think we could see defeaturing. We think we could see consumers defer. We're anticipating that. We don't know that, but that is the assumption in our current guide, is that the more price goes up, the more volume we'll likely see start to soften.

Speaker Change: Yeah, Julian is a reminder I think when we started this year we did not anticipate that we would see recovery.

Speaker Change: and the North American residential housing, which is roughly 50% of our revenue. We counted on it a little bit last year and thought we'd see lower interest rates. When we entered this year, we kind of put that on the upside to our original guide. As you take a look at the way tariffs are coming through, they're different than what we anticipate on February 4th, but they still are going to...

Lee, to hire prices to the panel. [inaudible]

Speaker Change: and we think we could see defeaturing, we think we could see consumers defer, so we're anticipating that. We don't know that, but that is the assumption in our current guide is that the more price goes up, the more volume we'll likely see start to soften.

David Brown: That's helpful. Thank you. And then just to understand on the tariff element, the sort of $140 million gross, is that an annualized number, or is that sort of in-year in fiscal 2025? And any help you could give us on differences in sort of phasing of the offsets through the year or differences in sort of offsets by segment? Any sort of color around that, please? Yeah, I'll start off, and I'll give it to Bob. I mean, you're right on your assumption. It is the in-year 2025 number. I mean, I think it would be slightly higher on an annual basis. We are getting some small benefits related to mitigation of buy-aheads and the things that we bought in Q1, and also the fact that we do have inventory on hand.

Julian Mitchell: That's helpful. Thank you. And then just to understand on the tariff element, the sort of $140 million gross, is that an annualized number, or is that sort of in-year in fiscal 2025? And any help you could give us on differences in sort of phasing of the offsets through the year or differences in sort of offsets by segment? Any sort of color around that, please?

Speaker Change: That's helpful, thank you. And then just to understand on the tariff element, the sort of 140 million gross, is that an annualized number or is that sort of in year, in fiscal 25? And any help you could give us on...

Speaker Change: differences in sort of phasing of the offsets through the year or differences in sort of offsets by segment, any sort of color around that please.

John Stauch: Yeah, I'll start off, and I'll give it to Bob. I mean, you're right on your assumption. It is the in-year 2025 number. I mean, I think it would be slightly higher on an annual basis. We are getting some small benefits related to mitigation of buy-aheads and the things that we bought in Q1, and also the fact that we do have inventory on hand.

Speaker Change: Give it to Bob, I mean, you know, you're right on your assumption, it is the end year, 2025 number.

Speaker Change: I mean, I think it would be slightly higher on an annual basis. We are getting some...

Speaker Change: and the things that we are bought in Q1 and also the fact that we do have inventory on hand, so.

David Brown: So as you think about the tariffs, it'll mostly hit the second half of the year as it unfolds. And then our pricing is staged between April actions, May actions, and potentially June actions if necessary. And so those, as we head into 2026, more than offset the tariffs, and they more than offset this year as they phase in, Julian. And then Bob, you want to give it back to segment? Yeah, I think the only thing I would add is that we think of that $140 million net of mitigating actions as split about 1/3, 1/3, 1/3 between Flow, Water Solutions, and Pool. And our next question comes from Andy Kaplowitz from Citigroup. Please go ahead with your question. Hey, good morning, everyone. Hi, Andy. How are you? Good.

So as you think about the tariffs, it'll mostly hit the second half of the year as it unfolds. And then our pricing is staged between April actions, May actions, and potentially June actions if necessary. And so those, as we head into 2026, more than offset the tariffs, and they more than offset this year as they phase in, Julian. And then Bob, you want to give it back to segment?

Speaker Change: As you think about the tariffs, it'll mostly hit the second half of the year as it unfolds and then our pricing is staged between April actions, May actions, and potentially June actions if necessary. And so those as we head into 2026.

Speaker Change: more than offset the tariffs and they more than offset this year as they phase in.

Bob Fishman: Yeah, I think the only thing I would add is that we think of that $140 million net of mitigating actions as split about 1/3, 1/3, 1/3 between Flow, Water Solutions, and Pool.

and Bob, you want to give it back to your segment? [inaudible]

Speaker Change: Yeah, I think the only thing I would add is that we think of that $140 million net of mitigating actions has split about a third, a third, a third, a third between flow water solutions and pool.

Operator: And our next question comes from Andy Kaplowitz from Citigroup. Please go ahead with your question.

Speaker Change: And our next question comes from Andy Kaplowitz from City Group. So you go ahead with your question.

Andrew Kaplowitz: Hey, good morning, everyone.

John Stauch: Hi, Andy. How are you?

Andrew Kaplowitz: Good.

Hey, good morning, everyone.

David Brown: John and Bob, you're assuming you could absorb the entire $140 million of incremental tariffs in your margin guidance, which I think is decently higher than your original tariff assumption from last quarter. I think today, Bob, you got it to the higher end of your margin range, 25%. Is that basically all with prices that gets you there? Do you have higher embedded productivity in your forecast, and how much of it all is currency helping you in terms of tailwind? Yeah, from a, I'll start with the last one. Currency helps a little bit. I think of it as being roughly 50 basis points, but not much help to the income or the bottom line. I would say that to John's point, it's primarily us pricing to exceed the tariffs, a volume drop that's roughly in line with that. We do benefit slightly from mix.

Andrew Kaplowitz: John and Bob, you're assuming you could absorb the entire $140 million of incremental tariffs in your margin guidance, which I think is decently higher than your original tariff assumption from last quarter. I think today, Bob, you got it to the higher end of your margin range, 25%. Is that basically all with prices that gets you there? Do you have higher embedded productivity in your forecast, and how much o

I Andy, how are you? [inaudible]

John Stauch: Good. John and Bob, you're assuming you could absorb the entire 140 million of incremental tariffs in your margin, guys, which I think is decently higher than your original tariff assumption from last corn, I think.

Speaker Change: Today, Bob, you got it to the higher end of your margin range, 25%. Is that basically all the prices that get you there? Do you have higher embedded productivity in your forecast and how much of it all is currency helping you in terms of talent? [inaudible]

Bob Fishman: f it all is currency helping you in terms of tailwind? Yeah, from a, I'll start with the last one. Currency helps a little bit. I think of it as being roughly 50 basis points, but not much help to the income or the bottom line. I would say that to John's point, it's primarily us pricing to exceed the tariffs, a volume drop that's roughly in line with that. We do benefit slightly from mix. That's helping us out a little bit. But overall, we feel good that we're closer to that 25% ROS as we've run the different scenarios.

Speaker Change: Yeah, from me, I'll start with the last one. Currency helps a little bit, I think of it as...

Speaker Change: You know, being roughly 50 basis points, but, you know, not much help to the income or the bottom line.

John Stauch: I would say that, you know, to John's point, it's primarily us pricing to exceed the tariffs.

A volume drop that, you know, roughly...

in line with that.

John Stauch: We do benefit slightly from mix, that's helping us out a little bit. But overall, we feel good that we're closer to that 25% Ross as we run the different scenarios. Thank you.

David Brown: That's helping us out a little bit. But overall, we feel good that we're closer to that 25% ROS as we've run the different scenarios. It's helpful. And then, John, you didn't change your pool forecast growth for 2025, but maybe give us a little more color into what you're seeing as the selling season develops here in Q2. The rates, as you know, they look like they want to stay relatively high. Is 60,000 new pool still the right number? Positive break and fix? Just any color would be helpful on the year. Yeah, and I think we saw, as we normally see, if there was any movement in Q1, most of the movement that we saw on the sell-through sell-in was more what we think is weather-related in certain regions getting off to a slower start.

Andrew Kaplowitz: It's helpful. And then, John, you didn't change your pool forecast growth for 2025, but maybe give us a little more color into what you're seeing as the selling season develops here in Q2. The rates, as you know, they look like they want to stay relatively high. Is 60,000 new pool still the right number? Positive break and fix? Just any color would be helpful on the year.

John Stauch: helpful and then John you didn't change your pool forecast growth for 25 but maybe give us a little more color into what you're seeing as the selling season develops here in Q2. The rates as you know they look like they want to stay relatively high. Is 60k new pool still the right number? Positive break and fix? Just any color would be helpful in the year.

John Stauch: Yeah, and I think we saw, as we normally see, if there was any movement in Q1, most of the movement that we saw on the sell-through sell-in was more what we think is weather-related in certain regions getting off to a slower start.

John Stauch: Yeah, and I think we saw, you know, as we normally see, you know, if there was any movement in Q1, most of the movement that we saw on the South through Selling was more what we think is weather related in certain regions getting off to a slower start.

David Brown: As we head into Q2, we're thinking that we're right in line with where we thought we were before. As the season unfolds, most of those pools were already being built or the permits were in place, and they needed to get finished. And then I think we would anticipate in this particular outlook that we would see some softening in either the remodeling aspect of the pool or, as I said earlier, some discretionary push-outs on some larger ticket items as it relates to even the break and fix in the back half of the year. So those price increases will go in, and then we would expect that consumers will look for the best timing of when they should replace their product. So I think that's a fair, balanced approach.

As we head into Q2, we're thinking that we're right in line with where we thought we were before. As the season unfolds, most of those pools were already being built or the permits were in place, and they needed to get finished. And then I think we would anticipate in this particular outlook that we would see some softening in either the remodeling aspect of the pool or, as I said earlier, some discretionary push-outs on some larger ticket items as it relates to even the break and fix in the back half of the year. So those price increases will go in, and then we would expect that consumers will look for the best timing of when they should replace their product. So I think that's a fair, balanced approach.

John Stauch: As we head into Q2, we're thinking that we're right in line with where we thought we were before as the season unfolds. Most of those pools were already being built or the permits were in place and they needed to get finished.

John Stauch: And then I think we wouldn't anticipate in this particular outlook that we would see some softening in either the remodeling aspect of the pool or as I said earlier some discretionary pushouts on some larger ticket items. [inaudible]

John Stauch: As it relates to even the break and fix in the back out the year, so those price increases will go in and then we would expect that consumers would look for the best timing of when they should replace their product.

John Stauch: So I think that's a fair balanced approach. I think it's still a good...

David Brown: I think it's still a good industry in the sense that we're at more of a historical low level. So significant downside from here is hard to see. And we're going to have to work harder on getting consumers and getting our dealers to sell the high-end features that we want within this environment. Thanks, John. Appreciate it. Thank you. Our next question comes from Deane Dray from RBC Capital Markets. Please go ahead with your question. Thank you. Good morning, everyone. Morning, Dean. Hi, Dean. Hey, I was hoping to get some more color regarding your pre-positioning of inventory ahead of tariffs. What was the impact there? And then in the release, you talk about also capping orders for customers. Just what's the strategy there? How has that played out? And I was curious if any of your suppliers were capping any of your orders for pre-positioning.

I think it's still a good industry in the sense that we're at more of a historical low level. So significant downside from here is hard to see. And we're going to have to work harder on getting consumers and getting our dealers to sell the high-end features that we want within this environment.

John Stauch: industry in the sense that you know we're at a more of a historical low level so you know significant downside from here is hard to see and we're going to have to work harder on getting consumers and getting our dealers to sell the high-end features that we want within this within this environment.

Andrew Kaplowitz: Thanks, John. Appreciate it.

Operator: Thank you. Our next question comes from Deane Dray from RBC Capital Markets. Please go ahead with your question.

Thanks, John . Appreciate it. Thank you.

Speaker Change: Our next question comes from Deane Dray from RBC Capital Markets. Please go ahead with your question.

Deane Dray: Thank you. Good morning, everyone. Morning, Dean. Hi, Dean. Hey, I was hoping to get some more color regarding your pre-positioning of inventory ahead of tariffs. What was the impact there? And then in the release, you talk about also capping orders for customers. Just what's the strategy there? How has that played out? And I was curious if any of your suppliers were capping any of your orders for pre-positioning.

Dean Dre: Pre-positioning of inventory had a tariff, so what was the impact there? It's a tariff.

Dean Dre: and then there's in the release you talk about also capping orders for customers. Just, you know, what's the strategy there? How has that played out? And I was curious if anyone...

Dean Dre: Any of your suppliers were capping any of your orders for pre-positioning.

David Brown: Yeah, Deane, I mean, just on the mitigating thing, think about a couple of months of inventory being pretty basic throughout the channel. Given the fact that we're talking about the substantial tariffs coming from China, most of the things are pre-ordered and on their way. So it's a modest amount of number, but it does help you from a timing and a delay perspective, especially given the fact that most of it is raw materials, which is a subcomponent of a subcomponent. I wouldn't say it's really any action we took on. It's just the normal part of the supply chain that we were dealing with.

John Stauch: Yeah, Deane, I mean, just on the mitigating thing, think about a couple of months of inventory being pretty basic throughout the channel. Given the fact that we're talking about the substantial tariffs coming from China, most of the things are pre-ordered and on their way. So it's a modest amount of number, but it does help you from a timing and a delay perspective, especially given the fact that most of it is raw materials, which is a subcomponent of a subcomponent. I wouldn't say it's really any action we took on. It's just the normal part of the supply chain that we were dealing with.

Dean Dre: Yeah, you know, Dean, I mean, I just on the mitigating thing, think about a couple months of inventory being pretty basic throughout the channel. And, you know, given the fact that we're talking about the substantial tariffs coming from China, you know, most of the things are preordered and on their way.

and so that's...

Dean Dre: It's a modest amount of number, but it does help you from a timing and a delay perspective, especially given the fact that most of it is raw materials, which is a subcomponent of a subcomponent. So I wouldn't say it's really any action we took on. It's just the normal port of the supply chain that we were dealing with. But you know, as far as the. [inaudible]

David Brown: As far as the overall environment of what we're looking at, I would say that we're capping the order strategy primarily as a learning from the last supply chain issue we had, where if we let the channel just buy whatever it wants to buy, it's going to try to get ahead of all of the potential increases, and you can create shadow inventory and inventory. So we're working with our top customers and giving them an ability to order at sell-through rates, which then gives them the necessary inventory they have to meet the demand, but doesn't get us in a situation where we get behind or disruptive in the supply chain again. Just a learning from the last go-around. Got it. Then just broadly, what's your expectation for the businesses? Any demand destruction that's happened from all the tariff uncertainty?

As far as the overall environment of what we're looking at, I would say that we're capping the order strategy primarily as a learning from the last supply chain issue we had, where if we let the channel just buy whatever it wants to buy, it's going to try to get ahead of all of the potential increases, and you can create shadow inventory and inventory. So we're working with our top customers and giving them an ability to order at sell-through rates, which then gives them the necessary inventory they have to meet the demand, but doesn't get us in a situation where we get behind or disruptive in the supply chain again. Just a learning from the last go-around.

You know

Dean Dre: The overall environment of what we're looking at, I would say that...

Dean Dre: You know, we're we're capping the order strategy primarily is a learning from the last supply chain issue we had where if we let the channel just buy whatever it wants to buy it's going to get try to get ahead of all of the potential increases and you can create shadow inventory and inventory. [inaudible] We're doing a lot of work. We're doing a lot of work.

Dean Dre: So we're working with our top customers and giving them an ability to order at shelter rates which then gives them the necessary inventory they have to meet the demand but doesn't get us in a situation where we get behind or disruptive in the supply chain again. Just the learning from the last last go around.

Deane Dray: Got it. Then just broadly, what's your expectation for the businesses? Any demand destruction that's happened from all the tariff uncertainty? Are you seeing any project push-outs, cancellations, anything that would be material in your outlook?

Dean Dre: Got it, then just broadly, what's your expectation for the businesses?

Speaker Change: Any demand destruction that's happened from all the tariff uncertainty? Are you seeing any project pushouts, cancellations, anything that would be material in your outlook?

David Brown: Are you seeing any project push-outs, cancellations, anything that would be material in your outlook? Not yet, Deane. I mean, we are definitely looking for the fact. I mean, we are a small part of usually a project, and we are definitely more of the break and fix than the needed components. But we're keeping an eye out on the future projects where a large project could be paused or deferred. And this would be more on the food and beverage side and/or the large infrastructure pump sides. We have not yet seen anything, but we're keeping an eye on it and making sure that we're looking through sell-throughs and making sure we're looking at front-log orders to make sure we're not in an adverse position there. Now, most of those projects are local for local, and so they're not necessarily impacted by huge tariffs.

John Stauch: Not yet, Deane. I mean, we are definitely looking for the fact. I mean, we are a small part of usually a project, and we are definitely more of the break and fix than the needed components. But we're keeping an eye out on the future projects where a large project could be paused or deferred. And this would be more on the food and beverage side and/or the large infrastructure pump sides. We have not yet seen anything, but we're keeping an eye on it and making sure that we're looking through sell-throughs and making sure we're looking at front-log orders to make sure we're not in an adverse position there. Now, most of those projects are local for local, and so they're not necessarily impacted by huge tariffs.

Speaker Change: Not yet, Deane. I mean, we are definitely looking for the fact. I mean, we are small...

Speaker Change: Part of usually a project and we are definitely more of the break and fixer than needed components, but we're keeping an eye out on the future projects where a large project could be paused. [inaudible]

Speaker Change: Or Deferred, and this would be on more in the food and beverage side and or the large infrastructure pump sides. We have not yet seen anything but we're keeping an eye on it and making sure that we're looking through cell throes and making sure we're looking at front-log orders to make sure we're not in a...

Speaker Change: in an adverse position there. Now most of those projects are local for local and so they're not necessarily impacted by huge tariffs.

David Brown: Our next question comes from Mike Halloran from Baird. Please go ahead with your question. Hey, good morning, everyone. Good morning, Mike. Hi, Mike. So a little bit of a follow-up to that. How's the channel reacting at this point? I know you're limited, and are limiting the amount they can pre-buy. Is there any sense that they're trying to take inventory down on any levels? How are they responding? And earlier, you mentioned about Salesforce having to be a little bit more proactive to upsell. Have you put that in place, and how are you interacting with the channel when it comes to managing a lot of these? I don't say this in a flip or a joking way. This is probably the most exhaustive quarter I can ever remember participating in.

Operator: Our next question comes from Mike Halloran from Baird. Please go ahead with your question.

Speaker Change: And our next question comes from Mike Halloran from there. Please go ahead with your question.

Michael Halloran: Hey, good morning, everyone.

Bob Fishman: Good morning, Mike.

John Stauch: Hi, Mike.

Michael Halloran: So a little bit of a follow-up to that. How's the channel reacting at this point? I know you're limited, and are limiting the amount they can pre-buy. Is there any sense that they're trying to take inventory down on any levels? How are they responding? And earlier, you mentioned about Salesforce having to be a little bit more proactive to upsell. Have you put that in place, and how are you interacting with the channel when it comes to managing a lot of these?

Mike Hellerin: Hey, good morning, everyone. I'm a little bit of a follow-up to that. How's the channel reacting at this point? I know you've limited, you know, I'm limiting the amount they can pre-buy. Is there any sense that they're trying to take inventory down on any levels? How are they responding and? I don't know. I don't know. I don't know.

and, you know, [inaudible]

Speaker Change: Earlier you mentioned about Salesforce having to be a little bit more proactive to upsell. You know, have you put that in place and how are you interacting with the channel when it comes to many of you? I don't think there's enough flipper joking way. This is probably the most exhaustive.

John Stauch: I don't say this in a flip or a joking way. This is probably the most exhaustive quarter I can ever remember participating in.

Carter, I can ever remember participating.

David Brown: I say that because we've run so many different scenarios and so many different alternatives of what this could be. I mean, think about the way this quarter played out. The way the announcements came, the way you heard about them, the reactions, the counter tariffs, the retaliatory tariffs are in. They're paused. And so I think the right answer to say is everybody's looking and seeking that solution. I think right now, as I mentioned, I think a lot of projects that are getting completed now were put in motion a while ago, and you're just to the stage where you're going to finish that pool or you're going to finish that particular need and that housing development. I think the bigger decisions and the way the channel is going to react is still out there in a couple of quarters, depending on what scenario we see play out.

I say that because we've run so many different scenarios and so many different alternatives of what this could be. I mean, think about the way this quarter played out. The way the announcements came, the way you heard about them, the reactions, the counter tariffs, the retaliatory tariffs are in. They're paused. And so I think the right answer to say is everybody's looking and seeking that solution. I think right now, as I mentioned, I think a lot of projects that are getting completed now were put in motion a while ago, and you're just to the stage where you're going to finish that pool or you're going to finish that particular need and that housing development.

Thank you for tuning in.

Speaker Change: I think that because we run so many different scenarios and so many different alternatives of what this could be. I mean, think about the way this quarter played out.

Speaker Change: You know, the way the announcements came, the way you heard about them, the reactions, the counter tariffs, the retaliatory.

Speaker Change: Charis are in, they're paused, and so I think the right answer to say is everybody's looking and seeking...

Speaker Change: and put in motion a while ago, and you're just to the stage where you're going to finish that cool or you're going to finish that particular need and that housing development. I think the bigger decisions and the way the channel is going to react is still out there in a couple quarters, like depending on what scenario we see play out.

I think the bigger decisions and the way the channel is going to react is still out there in a couple of quarters, depending on what scenario we see play out. Just being honest.

David Brown: Just being honest. Yeah. No, and that makes sense. And that makes sense. On the capital usage side, any change in how you're thinking about buy-backs in the short term? I'm guessing no shift on the M&A side, but if anything's interesting on that side, certainly curious there too. Yeah. You probably noticed that we did do a $50 million share buyback in Q1. That's a little unusual for us. Usually, we wait to our bigger free cash flow quarter in Q2, but we felt good about the free cash flow. It's that $70 million better than the prior year. But overall, I would say we're continuing to be disciplined around our capital allocation, continuing to do debt pay down, share buyback. We increased our dividend by 9% this year. And looking at strategic bolt-on M&A if they come our way.

Michael Halloran: Yeah. No, and that makes sense. And that makes sense. On the capital usage side, any change in how you're thinking about buy-backs in the short term? I'm guessing no shift on the M&A side, but if anything's interesting on that side, certainly curious there too.

just being honest.

No, and that makes sense. And that makes sense.

Speaker Change: I'm a capital usage side and any change in how you're thinking about buybacks in the short term, I'm guessing no shift on the M&A side, but if anything's interesting on that side, certainly curious there to. Thank you.

Bob Fishman: Yeah. You probably noticed that we did do a $50 million share buyback in Q1. That's a little unusual for us. Usually, we wait to our bigger free cash flow quarter in Q2, but we felt good about the free cash flow. It's that $70 million better than the prior year. But overall, I would say we're continuing to be disciplined around our capital allocation, continuing to do debt pay down, share buyback. We increased our dividend by 9% this year. And looking at strategic bolt-on M&A if they come our way.

Speaker Change: Yeah, you probably noticed that we did do a $50 million share buyback in Q1. That's a little unusual for us, usually we wait to our bigger free cash flow quarter in Q2, but we felt good about the free cash flow. It's that $70 million better than the prior year.

Speaker Change: But overall I would say we're continuing to be disciplined around their capital allocation.

Speaker Change: Continuing to do debt paydown, share buyback, we increased our dividend by 9% this year.

Speaker Change: and looking at strategic bullet on M&A if they come our way. That balanced approach has been good to us and I think we will continue to look at ROIC, which was close to 16% in the quarter, and stay very focused on shareholder returns.

David Brown: So that balanced approach has been good to us, and I think we'll continue to look at ROIC, which was close to 16% in the quarter, and stay very focused on shareholder returns. Our next question comes from Stephen Tusa from JPMorgan. Please go ahead with your question. Hey, good morning, guys. Hi, good morning. Can you hear me okay? Yes. Now we can. Yep. Hey, sorry about that. So I just wanted to make sure from an annual basis, you guys didn't provide the bridge, the profit bridge in the deck. Just wanted to make sure that the kind of $80 million of productivity is still there, kind of the core inflation number, I think it was roughly that, is also still there.

So that balanced approach has been good to us, and I think we'll continue to look at ROIC, which was close to 16% in the quarter, and stay very focused on shareholder returns.

Operator: Our next question comes from Stephen Tusa from JPMorgan. Please go ahead with your question.

Speaker Change: Our next question comes from Steve Tusa from JP Morgan. Please go ahead with your question.

Stephen Tusa: Hey, good morning, guys.

John Stauch: Hi, good morning.

Dr.

Operator: Can you hear me okay?

Hey, good morning guys.

Thank you. Thank you.

John Stauch: Yes. Now we can. Yep.

For more information visit www.FEMA.gov

Stephen Tusa: Hey, sorry about that. So I just wanted to make sure from an annual basis, you guys didn't provide the bridge, the profit bridge in the deck. Just wanted to make sure that the kind of $80 million of productivity is still there, kind of the core inflation number, I think it was roughly that, is also still there. And then I guess if we just assume the 140 gets entirely offset with price, that would get us to like a 5% year-over-year price number for the company in total. And then you just stick on the 140 of tariff headwind. Are those kind of the moving parts of the bridge, and then you back out volume?

Can you hear me okay? Yes.

Lincoln, yeah. Hey, sorry about that. [inaudible]

Speaker Change: So, I just wanted to make sure from an annual basis, you guys didn't provide the bridge, the profit bridge in the deck. Just wanted to make sure that the kind of 80 million of productivity is still there, kind of the core inflation number. I think it was roughly that is also still there. And then I guess if we just assume the 140.

David Brown: And then I guess if we just assume the 140 gets entirely offset with price, that would get us to like a 5% year-over-year price number for the company in total. And then you just stick on the 140 of tariff headwind. Are those kind of the moving parts of the bridge, and then you back out volume? Well, we didn't provide a bridge, but if we were, that would be pretty close to it. Yeah, Steve, I'd answer yes, yes, and yes. Your price assumption makes sense to us. The productivity has stayed at $80 million net of investment, and we're off to a pretty fast start here in Q1 versus certainly versus last year. And then the core inflation number prior to tariffs makes sense as well. Got it. Okay.

Speaker Change: gets entirely offset at the price, that would get us to like a five percent, you know, year-over-year price number for the for the company in total. Are those, and then you just stick on the 140 as a pair of headwind, is that, are those kind of the moving parts of the bridge and then you back out volume?

Bob Fishman: Well, we didn't provide a bridge, but if we were, that would be pretty close to it. Yeah, Steve, I'd answer yes, yes, and yes. Your price assumption makes sense to us. The productivity has stayed at $80 million net of investment, and we're off to a pretty fast start here in Q1 versus certainly versus last year. And then the core inflation number prior to tariffs makes sense as well. Got it. Okay.

Speaker Change: Well, we didn't provide a bridge, but if we were, that would be pretty close to it. Yeah, I see by the answer. Yes, yes, and yes.

Speaker Change: You know, your price assumption makes sense to us, the productivity.

Speaker Change: has stayed at 80 million net of investment and we're off to pretty fast start here in 2-1 versus certainly versus last year, and then the core inflation number prior to tariffs makes sense as well.

David Brown: And then just one last one, just on Pool. I'm not sure if I caught this before, but what is the channel telling you about? I think you would say that if you address these tariffs, you would expect some demand destruction. Any feedback on the channel on that so far? Not yet, Steve. I think we're well positioned to, I mean, 80/20 has been a great tool for us. Keep in mind, we're really only shipping to a handful of key distributors now directly as part of the 80/20 effort. And so it's a lot less channel partners that we have to work through. And I think from our perspective, we think all of them think they're being treated fairly. And I think right now, what you're hoping for is that you don't see large price increases that would be disruptive by having price decreases in the future.

Stephen Tusa: And then just one last one, just on Pool. I'm not sure if I caught this before, but what is the channel telling you about? I think you would say that if you address these tariffs, you would expect some demand destruction. Any feedback on the channel on that so far?

Speaker Change: Got it. Okay. And then just one last one, just on pool. I'm not sure if I caught this before, but what is the like channel telling you about? I think you would that if you address these tariffs, you would expect some demand destruction. Is any any feedback on the channel on that so far? Yeah.

John Stauch: Not yet, Steve. I think we're well positioned to, I mean, 80/20 has been a great tool for us. Keep in mind, we're really only shipping to a handful of key distributors now directly as part of the 80/20 effort. And so it's a lot less channel partners that we have to work through. And I think from our perspective, we think all of them think they're being treated fairly. And I think right now, what you're hoping for is that you don't see large price increases that would be disruptive by having price decreases in the future.

Speaker Change: Not yet Steve, I think we're well positioned. I mean, 80-20 has been a great tool for us. Keep in mind, we're really only shipping to a handful of T distributors now directly. You know, it's part of the 80-20 effort and so it's a lot less channel partners that we have to work through and I think in...

Speaker Change: From our perspective, we think all of them think they're being treated fairly and...

Speaker Change: and I think right now what you're hoping for is that you don't see...

Speaker Change: and a large price increase that would be disruptive by having price decreases in the future. And so we've paced out the price increases and I think we've done that in a thoughtful way. And I think so far it's given the channel a heads up on what's coming and I think they're prepared for it. [inaudible]

David Brown: And so we've paced out the price increases, and I think we've done that in a thoughtful way. And I think so far, it's given the channel a heads-up on what's coming, and I think they're prepared for it. Our next question comes from Jeff Hammond from Capital Markets. Please go ahead with your question. Hey, good morning, guys. Hi, Jeff. Hey, just the tariff detail is great. Can you just level set us on what percentage of your cost of goods sold sourced from China today versus three years ago? It seems like you've been moving it. And then if we kind of live in this world going forward, what are the big changes you're contemplating to your sourcing and manufacturing footprint long-term? Yeah, I mean, mathematically, Jeff, when you calculate, you'll see that it's just less than $100 million that's sourced from China.

And so we've paced out the price increases, and I think we've done that in a thoughtful way. And I think so far, it's given the channel a heads-up on what's coming, and I think they're prepared for it.

Operator: Our next question comes from Jeff Hammond from Capital Markets. Please go ahead with your question.

Speaker Change: Our next question comes from Jeff Hammond. I'll mark it. Please go ahead with your question.

Jeffrey Hammond: Hey, good morning, guys. Hi, Jeff. Hey, just the tariff detail is great. Can you just level set us on what percentage of your cost of goods sold sourced from China today versus three years ago? It seems like you've been moving it. And then if we kind of live in this world going forward, what are the big changes you're contemplating to your sourcing and manufacturing footprint long-term?

Hey, good morning, guys.

Thank you.

Speaker Change: Hey, just the terrif details great. Can you just level set us on what percentage of your cost of goods sold sourced from China today versus, you know, three years ago. It seems like you've been moving it and then. [inaudible]

Speaker Change: If we kind of live in this world going forward, what are the big changes you're contemplating to your sourcing and manufacturing footprint long term?

John Stauch: Yeah, I mean, mathematically, Jeff, when you calculate, you'll see that it's just less than $100 million that's sourced from China. Doesn't seem like a lot, but you put a pretty hefty tariff on there, and it starts to impact us. It also is one of those situations where very little of it's finished goods. And so a lot of it is a subset of a subset, which means it's spread across a lot of different products and a lot of different motors and items like that that take time to actually unwind, Jeff, in the sense that we have to get certifications, we have to get approvals, we have to re-engineer. So we're in a situation where even though it's not a lot, it's still enough to be annoying, and we're working through that.

Speaker Change: Yeah, I mean mathematically, Jeff, when you calculate, you'll see that it's just less than $100 million that's sourced from China. It doesn't seem like a lot, but you put a big pretty hefty caravan there and it starts to impact us.

David Brown: Doesn't seem like a lot, but you put a pretty hefty tariff on there, and it starts to impact us. It also is one of those situations where very little of it's finished goods. And so a lot of it is a subset of a subset, which means it's spread across a lot of different products and a lot of different motors and items like that that take time to actually unwind, Jeff, in the sense that we have to get certifications, we have to get approvals, we have to re-engineer. So we're in a situation where even though it's not a lot, it's still enough to be annoying, and we're working through that. To answer your other question, it would have been about two and a half times that if we would have went back three or four years ago.

Speaker Change: It also is one of those situations where very little of its finish goods. So a lot of it is a subset of a subset which means it's spread across a lot of different products and a lot of different motors. It's very recent.

and items like that.

Speaker Change: Take time to actually unwind, Jeff, in the sense that we have to get certifications, we have to get approvals, we have to re-engineer.

To answer your other question, it would have been about two and a half times that if we would have went back three or four years ago.

Still enough to be annoying. [inaudible]

Speaker Change: and we're working through that. Tancy, your other question that would have been about two and a half times that if we would have went back three or four years ago.

David Brown: As we were looking through our transformation process, we were able to mitigate a lot of that single country exposure. Did not think this was going to come. I'm not going to say that's why we did it. We really just wanted to spread out the purchases across many different suppliers so that we weren't in any one single risk situation. Okay, that's helpful. And then, is there anything in the guide contemplated around restructuring actions you might take if you do see that demand destruction, and any kind of ability to pull forward or kind of ramp up transformation above that $80 million if we do start to see that demand destruction? Yeah, Jeff, we're in the process of looking at all that.

As we were looking through our transformation process, we were able to mitigate a lot of that single country exposure. Did not think this was going to come. I'm not going to say that's why we did it. We really just wanted to spread out the purchases across many different suppliers so that we weren't in any one single risk situation.

Speaker Change: and as we were looking through our transformation process, we were able to mitigate a lot of that single country exposure.

Speaker Change: Did not think this was going to come. Not going to say that's why we did it. We really just wanted to spread out the purchase by across many different suppliers so that we weren't in any one single risk situation.

Jeffrey Hammond: Okay, that's helpful. And then, is there anything in the guide contemplated around restructuring actions you might take if you do see that demand destruction, and any kind of ability to pull forward or kind of ramp up transformation above that $80 million if we do start to see that demand destruction?

Speaker Change: Okay, that's helpful. And then, is there anything in the guide?

Contemplated around

Speaker Change: You know, restructuring actions you might take if you do see that demand destruction and any kind of ability to pull forward or kind of ramp up transformation above that 80 million if we do start to see that demand destruction. Yeah, Jeff, we're in the process looking at all that, you know, we don't forecast. Okay.

Jeffrey Hammond: Yeah, Jeff, we're in the process of looking at all that. We don't forecast the actual transformation impact, but I think the next wave of projects would be probably related to how do we reposition our supply chains and how do we reposition our factories to be more effective. Most of that would be realized in 2026 and beyond because it would take time to actually benefit from that cost out.

David Brown: We don't forecast the actual transformation impact, but I think the next wave of projects would be probably related to how do we reposition our supply chains and how do we reposition our factories to be more effective. Most of that would be realized in 2026 and beyond because it would take time to actually benefit from that cost out. Yeah, and from a transformation perspective, we're always working on a funnel that's two to three times higher than our commit. And so that gives us the flexibility to use transformation as we need to. Our next question comes from Nathan Jones from Stifel. Please go ahead with your question. Good morning, everyone. Good morning. I'll start with a question on competitive differences. I'm sure your supply chain is not always exactly the same positioning as your competitive supply chains.

Speaker Change: Most of that would be realized in 2026 and beyond, because it would take time to actually benefit from that cost out.

Bob Fishman: Yeah, and from a transformation perspective, we're always working on a funnel that's two to three times higher than our commit. And so that gives us the flexibility to use transformation as we need to.

Speaker Change: Yeah, and from a transformation perspective, we're always working on a funnel that's two to three times higher than our commit and so that gives us the flexibility to use transformation as we need to.

Operator: Our next question comes from Nathan Jones from Stifel. Please go ahead with your question.

Operator/Moderator: Our next question comes from Nathan Jones from Stiefel. Please go ahead and raise your question.

Nathan Jones: Good morning, everyone.

John Stauch: Good morning.

Good morning, everyone.

Nathan Jones: I'll start with a question on competitive differences. I'm sure your supply chain is not always exactly the same positioning as your competitive supply chains. Are there places where you see either risks or opportunities given an advantaged or disadvantaged supply chain relative to your competitors?

Good morning. I'll start with a question on competitive differences.

David Brown: Are there places where you see either risks or opportunities given an advantaged or disadvantaged supply chain relative to your competitors? Yes. I mean, and it is why I chose the wording I chose in that second bullet on the slide that we're going to position ourselves to be the best for our businesses in the short run and the long run, meaning some of our businesses don't have the ability to just pull the price lever. They're going to have to compete, and we're likely to see some margin challenges there as we work through the longer-term actions. And some of our businesses are in a situation where the price might actually exceed the tariffs. Okay. And I guess then on the China sourcing, it's less than it used to be, but it's still, when you put 145% tariff on it, pretty material.

John Stauch: Yes. I mean, and it is why I chose the wording I chose in that second bullet on the slide that we're going to position ourselves to be the best for our businesses in the short run and the long run, meaning some of our businesses don't have the ability to just pull the price lever. They're going to have to compete, and we're likely to see some margin challenges there as we work through the longer-term actions. And some of our businesses are in a situation where the price might actually exceed the tariffs.

Yes.

Operator/Moderator: I mean, it is why I chose the wording I chose and that second bullet on the slide that we're going to position ourselves to be...

Operator/Moderator: The best for our businesses in the short run and long run, meaning some of our businesses don't have the ability to just pull the price lover. They're going to have to compete and we're likely to see some margin challenges there as we work through the longer term actions and some of our businesses in our situation where the price that might actually exceed the tariffs. [inaudible]

Nathan Jones: Okay. And I guess then on the China sourcing, it's less than it used to be, but it's still, when you put 145% tariff on it, pretty material. Are there already plans enacted to move more of that supply chain out of China? Can you get the whole lot out of China? Are there things that you can only get from China? How should we think about that? I know you said that's probably until 2026, and you can't snap your fingers and make it happen.

Speaker Change: Okay, and I guess then on the China saucing, you know, it's less than it used to be, but it's still when you put 145% power on it, pretty material.

David Brown: Are there already plans enacted to move more of that supply chain out of China? Can you get the whole lot out of China? Are there things that you can only get from China? How should we think about that? I know you said that's probably until 2026, and you can't snap your fingers and make it happen. Yes, yes, and yes to what you just said. There's things we can only get from China. We're going to have to make a determination if customers still want that product. So embedded in some of that volume, which is some of the mitigating aspects, is we just might not be able to carry that product line going forward because we can't be competitive. It's the only place it could be sourced at. And then that addresses the mixed issue that Bob said.

Speaker Change: Are there already plans enacted to move more of that supply chain out of China? Can you get the whole lot out of China are there things that? [inaudible]

Speaker Change: You know, you can only get from China. How should we think about that? I know you said, you know, that's probably until 2026, and you can't connect because it could happen. Yes, yes, to what you just said there's things. [inaudible]

John Stauch: Yes, yes, and yes to what you just said. There's things we can only get from China. We're going to have to make a determination if customers still want that product. So embedded in some of that volume, which is some of the mitigating aspects, is we just might not be able to carry that product line going forward because we can't be competitive. It's the only place it could be sourced at. And then that addresses the mixed issue that Bob said.

Speaker Change: We can only get from China. You know, we're going to have to make a determination as customers still want that product. So, you know, embedded into some of that volume, which is some of the mitigating. [inaudible]

Speaker Change: You know, aspects is we just might not be able to carry that product line going forward because we can't be competitive in the place it could be sourced at. And then that's that addresses the mix issue to Bob said how do we move somebody to a. [inaudible]

David Brown: How do we move somebody to a - it might be a more expensive product line on a normalized basis, but probably less expensive given the tariffs, and probably provides a better solution. And then that helps free up what the supply chain could look like in the future, and then we could start to assess what we need to do longer term. Our next question comes from Bryan Blair from Oppenheimer. Please go ahead with your question. Thank you. Morning, everyone. Hi, Bryan. Obviously, you're pacing ahead of the $80 million in transformation benefit for the year. If we assume that $80 million is the number and that does not move higher, how should we think about the phasing or cadence of the remaining $56 million or Q2 to Q4? And how does that shake out by segment? That $56 million would be pretty evenly spread for each of the quarters.

How do we move somebody to a - it might be a more expensive product line on a normalized basis, but probably less expensive given the tariffs, and probably provides a better solution. And then that helps free up what the supply chain could look like in the future, and then we could start to assess what we need to do longer term.

Speaker Change: You know, it might be a more expensive product line on a normalized basis, but probably less expensive, given the tariffs and probably provides a better solution. And then that helps free up what the supply chain could look like in the future, and then we could start to assess what we need to do longer term.

Operator: Our next question comes from Bryan Blair from Oppenheimer. Please go ahead with your question.

Speaker Change: Our next question coach from Brian Blair from Oppenheimer, please go ahead with your question.

Bryan Blair: Thank you. Morning, everyone.

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John Stauch: Hi, Bryan.

Thank you, everyone.

Bryan Blair: Obviously, you're pacing ahead of the $80 million in transformation benefit for the year. If we assume that $80 million is the number and that does not move higher, how should we think about the phasing or cadence of the remaining $56 million or Q2 to Q4? And how does that shake out by segment?

Brian , Brian ,

Speaker Change: Obviously, you're pacing ahead of the 80 million and got a transformation benefit for the year. If we assume that 80 million is the number and that that does not move higher, how should we think about the phasing or cadence of the remaining 56 or Q2 to Q4, and how does that shake out by segment?

Bob Fishman: That $56 million would be pretty evenly spread for each of the quarters. By segment, it continues to be a Flow play. Water Solutions also has some complexity reduction. So I usually look at Flow and Water Solutions first. And then Pool; this will be if they drive the growth that we forecasted in Q2, this will be their fifth consecutive quarter of top-line growth, and that certainly helps the leverage. So again, feel good about all three segments participating in the transformation.

Speaker Change: That 56 would be pretty evenly spread for each of the quarters.

David Brown: By segment, it continues to be a Flow play. Water Solutions also has some complexity reduction. So I usually look at Flow and Water Solutions first. And then Pool; this will be if they drive the growth that we forecasted in Q2, this will be their fifth consecutive quarter of top-line growth, and that certainly helps the leverage. So again, feel good about all three segments participating in the transformation. Understood. Appreciate the detail. You maintained the consolidated ROS outlook for the year, actually signaled the higher end of the range, which is encouraging. Is there any change in expectation by segment? You had last quarter, I believe, broken out around 100 basis points in Pool, roughly equal contribution from the other segments. Just curious with everything that's going on and the moving parts of navigating this environment if the platform-level expectations have shifted. Not really.

Speaker Change: and by segment it continues to be a flow play.

Speaker Change: Water Solutions also has some complexity reduction. So I usually look at flow and water solutions first and then.

Speaker Change: Paul, this will be, if they drive the growth that we forecasted in Q2, this will be their fifth consecutive quarter of top line growth and that certainly helps the leverage. So, again, feel good about all three segments participating in the transformation.

Bryan Blair: Understood. Appreciate the detail. You maintained the consolidated ROS outlook for the year, actually signaled the higher end of the range, which is encouraging. Is there any change in expectation by segment? You had last quarter, I believe, broken out around 100 basis points in Pool, roughly equal contribution from the other segments. Just curious with everything that's going on and the moving parts of navigating this environment if the platform-level expectations have shifted.

Speaker Change: Understood, appreciate the details and you maintain the consolidated Ross Outlook for the year, actually signaled the higher end of the year.

Speaker Change: and Paul, roughly equal contribution from the other segments. Just curious with everything that's going on and moving parts of navigating this environment, if the platform little expectations have shifted. [inaudible]

Bob Fishman: Not really. Those estimates continue to track well for this forecast.

David Brown: Those estimates continue to track well for this forecast. Understood. Thank you again. Our next question comes from Andrew Krill from Deutsche Bank. Please go ahead with your question. Hi, thanks. Good morning, everyone. I'm going to step back and take a slightly longer-term view, but I know you mentioned again your 2026 targets, including the 26% margin. And I think as of last earnings, you said low single-digit growth this year, and next year was kind of the path and assumption to get there. So just what's your level of confidence in still hitting that margin target in 2026? And let's say we did have some form of a mini recession here, do you still think you have enough contingency in those plans to get to that 26% margin next year? Thanks. Yeah, we continue to feel good about that 26%.

Speaker Change: Not really, those estimates continue to track well for this forecast.

Bryan Blair: Understood. Thank you again.

Bob Fishman: Our next question comes from Andrew Krill from Deutsche Bank. Please go ahead with your question.

Understood, thank you again.

Speaker Change: Thank you for watching. Please like, comment, and subscribe. See you next time.

Speaker Change: Our next question comes from Andrew Krill from Deutsche Bank. Please go ahead with your question.

Andrew Krill: Hi, thanks. Good morning, everyone. I'm going to step back and take a slightly longer-term view, but I know you mentioned again your 2026 targets, including the 26% margin. And I think as of last earnings, you said low single-digit growth this year, and next year was kind of the path and assumption to get there. So just what's your level of confidence in still hitting that margin target in 2026? And let's say we did have some form of a mini recession here, do you still think you have enough contingency in those plans to get to that 26% margin next year? Thanks.

Andrew Curl: Hi, thanks, good morning everyone. So step back and take a lightly longer-term view, but I know you mentioned again in your 2026.

Andrew Curl: Targets, including the 26% margin, and as of last earnings, and I said, low single digit growth this year, and next year was kind of a path and assumption to get there. So just let's your level of confidence in still hitting. [inaudible] I'm sorry, I'm sorry, I'm sorry

Andrew Curl: that margin target in 2026, and let's say we did have some form about many a recession here, like you still think, you know, you have enough contingency in those plans to get to that 26% margin next year. Thank you.

Bob Fishman: Yeah, we continue to feel good about that 26%. So something around 25% this year, 26% led by transformation next year. So I had that in my prepared remarks, and we continue to feel good about the 26 in 26.

Andrew Curl: Yeah, we've continued to feel good about that 26% so something around 25 this year.

David Brown: So something around 25% this year, 26% led by transformation next year. So I had that in my prepared remarks, and we continue to feel good about the 26 in 26. Okay, great. And on just April, I know it's early in the quarter, but just anything noteworthy in the first week or two you might have some information on, on April trends? Thanks. I know our guide includes all that. Obviously, we'll expect to see a lot of different order patterns here in Q2, depending on how the channels are working through the various tariff impacts. And we're looking at sell-through, we're looking at all the data, and we think our Q2 is the best practical guide we have, and full year is the best practical guide we have. Our next question comes from Joe Giordano from TD Cowen. Please go ahead with your question. Hey, good morning, guys.

Andrew Curl: 26% led by transformation next year. So I had that in my prepare remarks and we continue to feel good about the 26 in 26.

Andrew Krill: Okay, great. And on just April, I know it's early in the quarter, but just anything noteworthy in the first week or two you might have some information on, on April trends? Thanks.

Andrew Curl: Okay, great. And on just April , I know it's early in the quarter, but just any, you know, anything don't worry in the first week or two, you might have some information on on April Trans. Thanks.

Bob Fishman: I know our guide includes all that. Obviously, we'll expect to see a lot of different order patterns here in Q2, depending on how the channels are working through the various tariff impacts. And we're looking at sell-through, we're looking at all the data, and we think our Q2 is the best practical guide we have, and full year is the best practical guide we have.

Andrew Curl: NR, our guide includes all that, obviously, you know, we'll expect to see...

Andrew Curl: A lot of different order patterns here in Q2, depending on how the channels are working through the various tariff impacts, and we're looking at cell through, we're looking at all the data, and we think our Q2 is the best practical guide we have in full years, the best practical guide we have.

Operator: Our next question comes from Joe Giordano from TD Cowen. Please go ahead with your question.

Speaker Change: Our next question comes from Joe Giordano from TD Cowan. Please go ahead with your question.

Joseph Giordano: Hey, good morning, guys.

David Brown: Morning. Hi, Joe. John, you were around during the Tyco days, so to say that this is the most exhausting quarter you can remember is a strong statement. That is true. And I had a dual job back in those days too, but yes, it is the most exhausting. And by the way, I don't mean that for me. I worry about all the finance, operations, and sourcing teams. I mean, you're doing transformation and then layer on top of that, relooking at the supply chain again and all the different impacts. Couldn't be more proud and grateful for the work that the entire team has done. So just curious, on these price increases, are they different than normal ones? How specifically tied are they to tariffs? If something happened tomorrow and tariffs go away, do you have to go back out and cancel these price increases?

John Stauch: Morning.

Bob Fishman: Hi, Joe.

Hey, good morning, guys.

Joseph Giordano: John, you were around during the Tyco days, so to say that this is the most exhausting quarter you can remember is a strong statement.

Morning. Hi, Joe.

Speaker Change: John , you are around during the PICO days, so to say that this is like the most exhausting quarter you can imagine. You remember, it's a strong state. That is true and I had a dual job back in those days too, but yes, it is the most exhausting. By the way, I don't mean that for me, I worry about all the finance teams and the operations of the source. I don't know. I don't know. I don't know.

John Stauch: That is true. And I had a dual job back in those days too, but yes, it is the most exhausting. And by the way, I don't mean that for me. I worry about all the finance, operations, and sourcing teams. I mean, you're doing transformation and then layer on top of that, relooking at the supply chain again and all the different impacts. Couldn't be more proud and grateful for the work that the entire team has done.

Speaker Change: Jason Thames, you're doing transformation and then layer on top of that, re-looking at the supply chain again and all the different impacts. Couldn't be more proud and grateful for the work that the entire team has done.

Joseph Giordano: So just curious, on these price increases, are they different than normal ones? How specifically tied are they to tariffs? If something happened tomorrow and tariffs go away, do you have to go back out and cancel these price increases?

Speaker Change: So just curious, on these price increases, are they different than normal ones like how specifically tied are they to tariffs? If something happened tomorrow and tariffs go away, do you have to go back out and cancel these price increases? Yes.

David Brown: No. I mean, we generally don't have a channel that loves the word surcharge or a specific incremental amount that's tied to a particular product line. It's easier to do more across-the-board types of actions. What I would say is different this time, and we are pacing them out. So we have more of 30-day increments, which allows us to continue to react to what's known and to anticipate what could happen. And I think that allows the channel to generally get ahead a little bit of where they need to be. So there's about 75% of the price actions to cover everything's included, or it's been actioned already, and the rest has been notified that it's still coming. Yeah, we really like the phased approach around pricing. It allows us to react to the changing circumstances.

John Stauch: No. I mean, we generally don't have a channel that loves the word surcharge or a specific incremental amount that's tied to a particular product line. It's easier to do more across-the-board types of actions. What I would say is different this time, and we are pacing them out. So we have more of 30-day increments, which allows us to continue to react to what's known and to anticipate what could happen. And I think that allows the channel to generally get ahead a little bit of where they need to be. So there's about 75% of the price actions to cover everything's included, or it's been actioned already, and the rest has been notified that it's still coming.

No, I mean, we...

Speaker Change: We generally don't have a channel that loves the word surcharge or...

Speaker Change: You know, a specific incremental amount that's tied to a particular product line. It's easier to do more across the board, types of actions.

Speaker Change: What I would say is different this time and we are pacing them out, so we have more of 30 day increments.

which allows us to continue to react. [inaudible]

Speaker Change: to what's known and to anticipate what could happen, and I think that allows the channel to generally get ahead a little bit of where they need to be. [inaudible]

Speaker Change: So there's about 75% of the price actions to cover everything is included or it's been actioned already and the rest has been notified that it's still coming.

Bob Fishman: Yeah, we really like the phased approach around pricing. It allows us to react to the changing circumstances. I would say that's something different than what we've done in the past.

Speaker Change: Yeah, we really like the phase approach around pricing. It allows us to react to the changing circumstances. So I would say that's something different than what we've done in the past.

David Brown: I would say that's something different than what we've done in the past. Is there exposure we need to consider on stuff that's currently on hiatus, like some of the electronics that are on temporary exclusions from tariffs that may need to come in? Would that be already contemplated in the price increases you've announced? I think it's not meaningful. I would tell you I had a worst-case scenario at one point, and it literally said worst-case scenario, and then this exceeds the worst-case scenario. I won't say that this is a final, final. I think we're going to see lots of movements, and we're going to have to capture by channel, by product line, and by source what those movements are and react accordingly.

Joseph Giordano: Is there exposure we need to consider on stuff that's currently on hiatus, like some of the electronics that are on temporary exclusions from tariffs that may need to come in? Would that be already contemplated in the price increases you've announced?

Speaker Change: Is there something, is there exposure we need to consider on stuff that's currently on hiatus, like some of the electronics that are on temporary exclusions from tariffs that may need to come in? And would that be already contemplated in the price increases you've announced?

John Stauch: I think it's not meaningful. I would tell you I had a worst-case scenario at one point, and it literally said worst-case scenario, and then this exceeds the worst-case scenario. I won't say that this is a final, final. I think we're going to see lots of movements, and we're going to have to capture by channel, by product line, and by source what those movements are and react accordingly. I do think if more tariffs come in, there's a likelihood that maybe some tariffs go away, and we'll have to look at what the net-net of those impacts are.

For more information visit www.FEMA.gov

You know, I think it's not meaningful.

Speaker Change: You know, I would tell you I had a worst case scenario at one point and it literally said worst case scenario and then this is exceed the worst case scenario, so I won't say that this is a final final. I think we're going to see lots of movements and we're going to have to capture by channel and by product line and by source what those movements are and react accordingly. [inaudible]

David Brown: I do think if more tariffs come in, there's a likelihood that maybe some tariffs go away, and we'll have to look at what the net-net of those impacts are. Our next question comes from Brian Lee from Goldman Sachs. Please go ahead with your question. Hi, everyone. This is Nick Cash on for Brian Lee. Can you guys hear me? Yes. Hi, Nick. Hey, just wanted to circle back on one of the 80/20 questions earlier. I guess what impact are you seeing, if any, on progress in relation to the tariffs and timing? And not sure if we're thinking about this the right way, but if you're mitigating tariffs with price, and one of the tactics is to move from Quad 4 customers to Quad 3 or push them out by raising prices, could this potentially accelerate 80/20 in that sense? Any color would be helpful. Thank you.

Speaker Change: I do think if more tariffs come in, there's a likelihood that maybe some tariffs go away and then we'll have to look at the net net of those impacts are.

Operator: Our next question comes from Brian Lee from Goldman Sachs. Please go ahead with your question.

Brian Lee: Our next question comes from Brian Lee from Goldman Sachs. Please go ahead with your question.

Nick Cash: Hi, everyone. This is Nick Cash on for Brian Lee. Can you guys hear me? Yes. Hi, Nick. Hey, just wanted to circle back on one of the 80/20 questions earlier. I guess what impact are you seeing, if any, on progress in relation to the tariffs and timing? And not sure if we're thinking about this the right way, but if you're mitigating tariffs with price, and one of the tactics is to move from Quad 4 customers to Quad 3 or push them out by raising prices, could this potentially accelerate 80/20 in that sense? Any color would be helpful. Thank you.

Speaker Change: Hi everyone, this is Nick Cash on for Ryan Lee. Can you guys hear me? Yes.

Speaker Change: Hey, just wanted to circle back on one of the 80-20 questions earlier. I guess you know what impact are you seeing if any on progress in relation to the tariffs and timing and not sure if we're thinking about this the right way, but if you're mitigating tariffs with price and one of the tactics is to move from quad for customers to quad three or push them out by raising prices, could this potentially accelerate 80-20 in that sense? Any color would be helpful. Thank you. Yeah. Let's eat.

David Brown: Yeah, it does. It will get captured in the volume. I don't think it's an intentional acceleration of letting our customers go. It's the natural reaction to we want to take care of Quad 1, which is our best customers and our best products. And that's where the majority of the 80s are, and that's our focus. So we want to get that right. And we can't necessarily continue to make or produce or source a lot of the Quad 4 product because of the impact that tariffs have on it. So discontinuing it, which is part of the volume drop, is one solution. Raising those prices and moving the customers around the quadrants is another solution, but feel really good about having the 80/20 toolkit at our disposal. And I'm really happy that's part of the Pentair business system, given what we're dealing with. Awesome.

John Stauch: Yeah, it does. It will get captured in the volume. I don't think it's an intentional acceleration of letting our customers go. It's the natural reaction to we want to take care of Quad 1, which is our best customers and our best products. And that's where the majority of the 80s are, and that's our focus. So we want to get that right. And we can't necessarily continue to make or produce or source a lot of the Quad 4 product because of the impact that tariffs have on it. So discontinuing it, which is part of the volume drop, is one solution. Raising those prices and moving the customers around the quadrants is another solution, but feel really good about having the 80/20 toolkit at our disposal. And I'm really happy that's part of the Pentair business system, given what we're dealing with.

Speaker Change: It does, and it will get captured in the volume. I don't think it's an intentional, you know, acceleration of letting our customers go. It's the natural reaction to we want to take care of quad one, which is our best customers and our best products. And that's where the majority of the, you know, 80s are and that's our focus. So we want to get that right. And that's where we want to get that right. And that's where we want to get that right.

Speaker Change: and that we can't necessarily continue to make or produce or source. [inaudible]

Speaker Change: A lot of the quad for products because of the impact that terrors have on it. So just, just continuing it, which is part of the volume drop. [inaudible]

Speaker Change: is one solution, raising those prices and moving the customers around the quadrants is another solution, but feel really good about having the 80-20 tool kit at our disposal, and I'm really happy that's part of the Pentair business system, given what we're dealing with.

Nick Cash: Awesome. I appreciate that, caller. That is all for me. Thank you.

David Brown: I appreciate that, caller. That is all for me. Thank you. Thank you. Our next question comes from Andrew Buscaglia from BNP Paribas. Please go ahead with your question. Hi, good morning, guys. Morning. Morning. So just based on holding guidance and some of your commentary, I would assume you probably have some negative pool volumes going forward or slightly negative, but your pricing is strong. So how do you think about being able to expand margins, especially relative to the comps you have in the back half of this year? Is that the goal here still? Yeah, we still feel good about that approximately 100 basis points improvement in Pool's return on sales. Again, there's not just the volume, but in addition to that, a number of the transformation pillars that they've been working on as well.

Speaker Change: Awesome. I appreciate that color. That is all for me. Thank you. Thank you.

John Stauch: Thank you.

Operator: Our next question comes from Andrew Buscaglia from BNP Paribas. Please go ahead with your question.

Speaker Change: Our next question comes from Andrew Buscaglia from BMP Parable. Please go ahead with your question.

Andrew Buscaglia: Hi, good morning, guys.

John Stauch: Morning.

John Stauch: Morning.

Andrew Buscaglia: So just based on holding guidance and some of your commentary, I would assume you probably have some negative pool volumes going forward or slightly negative, but your pricing is strong. So how do you think about being able to expand margins, especially relative to the comps you have in the back half of this year? Is that the goal here still?

Good morning, guys. Good morning.

Morning.

Speaker Change: So just based on holding guidance and some of your commentary, I would assume you probably have some negative pool volumes going forward or slightly negative, but you're pricing strong. So how do you think about? Thank you.

Speaker Change: You know, being able to expand margins, especially relatives of the comps you have in the back half of this year, is that goal here still?

Bob Fishman: Yeah, we still feel good about that approximately 100 basis points improvement in Pool's return on sales. Again, there's not just the volume, but in addition to that, a number of the transformation pillars that they've been working on as well.

Speaker Change: Yeah, we still feel good about that, you know, approximately a hundred basis point improvement in pools.

Speaker Change: Return on Sales. Again, there's not just the volume but in addition to that a number of the transformation pillars that they've been working on as well.

David Brown: So to drive the ROS improvement, continuing to be very focused on costs and the mix of the business as well. I'd add to it that we look at this as net of investment, and there's a fair amount of growth investment in the transformation number. And those growth investments are what we call sales plays, where we will sample a particular sales play in a different region, and then we'll scale it. And clearly, Water Solutions, parts of Flow, and Pool have the majority of that. If it's an environment where no matter what effort we're trying to put at it, we're not going to see that incremental volume, then that's another lever that we have at our disposal as the year unfolds. Okay. Okay. And then I was surprised to see the commentary around your distributors and raising prices. I would think you'd have some pushback.

So to drive the ROS improvement, continuing to be very focused on costs and the mix of the business as well.

Speaker Change: You know, to drive the Ross improvement, continuing to be very focused on, you know, costs and the mix of the business as well.

John Stauch: I'd add to it that we look at this as net of investment, and there's a fair amount of growth investment in the transformation number. And those growth investments are what we call sales plays, where we will sample a particular sales play in a different region, and then we'll scale it. And clearly, Water Solutions, parts of Flow, and Pool have the majority of that. If it's an environment where no matter what effort we're trying to put at it, we're not going to see that incremental volume, then that's another lever that we have at our disposal as the year unfolds.

Clearly water solutions, parts of...

Speaker Change: Flo and pool had the majority of that. If it's an environment where no matter what effort we're trying to put at it we're not going to see that incremental volume then that's another lever that we have in our disposal as the year unfolds.

Andrew Buscaglia: Okay. Okay. And then I was surprised to see the commentary around your distributors and raising prices. I would think you'd have some pushback. So, I guess my question is, do you?

Okay.

Speaker Change: Okay, and then, you know, as a surprise to see, you know, the commentary around your distributors and raising prices, that would think you'd have some pushback.

David Brown: So, I guess my question is, do you? Nobody wants them, I'll be honest. I think it's about, first of all, do we have to do them? And if you have to do them, are they being fairly implemented? And is everybody still feeling like they're getting the best possible price for their relationship? And that's what I'm responding to, not that anybody welcomes them or wishes for them. Yeah, I guess I was wondering the difference between the price increases and then the actual price realization. It doesn't seem like there's a big delta there. The distributors are generally taking it without a ton of, yeah, pushback is what the takeaway is. Yeah, because everybody's doing it. And I think we're all in a situation where we're getting hit with these are stunning numbers, right?

John Stauch: Nobody wants them, I'll be honest. I think it's about, first of all, do we have to do them? And if you have to do them, are they being fairly implemented? And is everybody still feeling like they're getting the best possible price for their relationship? And that's what I'm responding to, not that anybody welcomes them or wishes for them.

Speaker Change: So I guess my question is do you want to be honest? Yeah.

Speaker Change: It's a mouth, you know, first of all, do we have to do them? And if you have to do them, you know, are they being fairly implemented and is everybody still feeling like they're getting the best possible price for their relationship? And that's, that's what I'm responding to, not that anybody welcomes them or wishes for them.

Andrew Buscaglia: Yeah, I guess I was wondering the difference between the price increases and then the actual price realization. It doesn't seem like there's a big delta there. The distributors are generally taking it without a ton of, yeah, pushback is what the takeaway is.

Speaker Change: Yeah, I guess I was wondering the difference between the price increases and then like, the actual price realization. It doesn't seem like there's a big delta there. The distributors are generally taking it and without a ton of. [inaudible]

John Stauch: Yeah, because everybody's doing it. And I think we're all in a situation where we're getting hit with these are stunning numbers, right?

Yeah, it's pushback is what the takeaway is. [inaudible]

David Brown: And when they come at you this quickly, I mean, there's only one way to respond. Then I think they'll be looking for longer-term solutions and wanting to make sure that we're partnering to give the best possible value to their customers and their customers' customers, which is still an obligation we have as we go forward into 2026 and 2027. Our next question comes from Scott Graham from Seaport Research Partners. Please go ahead with your question. Hey, good morning. Thanks for taking the question. I wanted to understand something. You guys said that you were sort of gapping out, pacing the pricing, but you also said 75% have been actioned, 25% notified. Can you explain what you mean by that? Yeah. We went out with significant price increases in April across all the different businesses.

And when they come at you this quickly, I mean, there's only one way to respond. Then I think they'll be looking for longer-term solutions and wanting to make sure that we're partnering to give the best possible value to their customers and their customers' customers, which is still an obligation we have as we go forward into 2026 and 2027.

You know, these are stunning numbers, right? [inaudible]

Speaker Change: When they come at you this quickly, I mean there's only one way to respond and then I think they'll be looking for longer term solutions and wanting to make sure that we're partner to give the best possible value to their customers and their customers customers, which is still an obligation we have as we go forward into 26 and 27.

Operator: Our next question comes from Scott Graham from Seaport Research Partners. Please go ahead with your question.

Speaker Change: Our next question comes from Scott Graham from Seaport Research Partners. Please go ahead with your question.

Scott Graham: Hey, good morning. Thanks for taking the question. I wanted to understand something. You guys said that you were sort of gapping out, pacing the pricing, but you also said 75% have been actioned, 25% notified. Can you explain what you mean by that?

Scott Graham: Hey, I'm good morning. Thanks for taking the question. I wanted to understand something. You guys said that you were sort of gapping out, pacing the pricing, but you also said 75% have been action, 25% notified. Can you explain what you mean by that?

John Stauch: Yeah. We went out with significant price increases in April across all the different businesses.

Speaker Change: Yeah, we went out with significant price increases in April across all the different businesses and we have...

David Brown: And we have, as we mentioned, between both mitigating things, having the inventory on hand, and also the timing of the tariffs, notified that if things don't change, and the assumption here is they don't, then we would be back out with modest price increases in May. Then if things don't change again, we'd have more modest increases in June. 75% actioned and the other 25% still coming in May and June timeframe. That's clear. That's much clearer. Thank you. Last time we talked about the pool market's components, your thinking on the market was a low single digit for the three components. I'm assuming that with sales potentially having a little bit of destruction demand-wise, that do all three of them come down, or is it more focused on the remodeling side? Don't know. I mean, right now, we're guessing at what that impact would be.

And we have, as we mentioned, between both mitigating things, having the inventory on hand, and also the timing of the tariffs, notified that if things don't change, and the assumption here is they don't, then we would be back out with modest price increases in May. Then if things don't change again, we'd have more modest increases in June. 75% actioned and the other 25% still coming in May and June timeframe.

As we mentioned, the string between both mitigating. [inaudible]

Speaker Change: Things having the inventory on hand and also the timing of the tariffs notified that if things don't change and the assumption here is they don't [inaudible]

Speaker Change: Then we would be back out with modest price increases in May, and then if things don't change again, we'd have more modest increases in June .

Scott Graham: That's clear. That's much clearer. Thank you. Last time we talked about the pool market's components, your thinking on the market was a low single digit for the three components. I'm assuming that with sales potentially having a little bit of destruction demand-wise, that do all three of them come down, or is it more focused on the remodeling side?

Ah, that's clear. That's much clearer. Thank you.

Speaker Change: You know, last time we talked about the pool market's components, your thinking on the market was a low single digit for the three components.

I'm assuming that you know with sales potentially. [inaudible]

having a little bit of destruction, demand wise, that...

Speaker Change: Do all three of them come down or is it more focused on the remodeling side?

John Stauch: Don't know. I mean, right now, we're guessing at what that impact would be.

For more information visit www.FEMA.gov

David Brown: So we have very limited volume growth in this particular forecast. We're expecting that break and fix will still happen, and the new pool side is relatively flat. If we see softness, as I mentioned earlier, it might be in the remodeling side, or it might be in what I'd call a discretionary purchase. I think we'll have more clarity as the year unfolds, obviously, but right now, it's way too early in the season to tell. And our next question comes from Nigel Coe from Wolfe Research. Please go ahead with your question. Oh, thanks. Good morning. Just a couple of quick ones for me. So just to double clarify on the pricing actions, John, that these are regular price actions, not surcharges. And just the question really is, if there's a de-escalation in these China tariffs, that the prices would remain intact? That is correct. Hello? Hello?

So we have very limited volume growth in this particular forecast. We're expecting that break and fix will still happen, and the new pool side is relatively flat. If we see softness, as I mentioned earlier, it might be in the remodeling side, or it might be in what I'd call a discretionary purchase. I think we'll have more clarity as the year unfolds, obviously, but right now, it's way too early in the season to tell.

Speaker Change: We're expecting that, you know, break-and-fix will still happen and the new pool side is relatively flat. If we see softness we, as I mentioned earlier, might be in the remodeling side or might be in what I'd call it discretionary. We, um,

Speaker Change: Curtis. I think we'll have more clarity as the year unfolds, obviously, but right now it's way too early in the season to tell.

Operator: And our next question comes from Nigel Coe from Wolfe Research. Please go ahead with your question.

Nigel Coe: And our next question comes from Nigel Coe from Wolf Research. Please go ahead with your question. Oh thanks good morning. Just a couple of cook ones for me.

Nigel Coe: Oh, thanks. Good morning. Just a couple of quick ones for me. So just to double clarify on the pricing actions, John, that these are regular price actions, not surcharges. And just the question really is, if there's a de-escalation in these China tariffs, that the prices would remain intact?

Nigel Coe: So just to just to double clarify on the pricing actions, John , that these are regular price actions not surcharges. And just the question really is, you know, if there's a de-escalation in new China tariffs, that the prices would remain in fact.

John Stauch: That is correct. Hello? Hello? Oh, I'm here. I said that is correct.

David Brown: Oh, I'm here. I said that is correct. Can you hear me? Yes, I can. Okay. Did you get the question? Yes. And I agreed with you. I said that is correct. Your assumption is correct. Okay. Okay. Sorry, you didn't come through. Okay, great. And then just maybe again, I'm sorry if I missed this. Kind of how should we think about capital allocation in light of the balance sheet strength that you have carrying into the year, especially with the pullback in the stock price? Just wondering if obviously I saw $50 million of share purchases this quarter or last quarter. Any thoughts on that? Yeah. I think the previous question, we discussed the balanced capital allocation strategy. So again, nice mix of debt paid down, share repurchase. We've increased the dividend.

Hello. Hello. I'm here. I said, that is correct.

Nigel Coe: Can you hear me?

John Stauch: Yes, I can.

Nigel Coe: Okay. Did you get the question?

Can you hear me? Yes, I can.

Okay.

John Stauch: Yes. And I agreed with you. I said that is correct. Your assumption is correct.

Nigel Coe: Did you get the questions? Yes, and I agreed with you. I said that is correct. You're

Nigel Coe: Okay. Okay. Sorry, you didn't come through. Okay, great. And then just maybe again, I'm sorry if I missed this. Kind of how should we think about capital allocation in light of the balance sheet strength that you have carrying into the year, especially with the pullback in the stock price? Just wondering if obviously I saw $50 million of share purchases this quarter or last quarter. Any thoughts on that?

Okay.

Nigel Coe: Okay, sorry, he didn't come through. Okay, great. And then just maybe, again, I'm sorry if I missed this. How should we think about...

Nigel Coe: Kappa location and live at the balance sheet strength that you have carried into the year, especially with the pullback and stock prices, wondering if, you know, I was there to 50 million dollars of share purchases, this quarter or last quarter, any editor's on that.

Bob Fishman: Yeah. I think the previous question, we discussed the balanced capital allocation strategy. So again, nice mix of debt paid down, share repurchase. We've increased the dividend.

Nigel Coe: Yeah, in a previous question, we discussed the balance capital allocation strategy. So again, nice mix of debt pay down, share repurchase.

David Brown: Then if the opportunity comes up for bolt-on M&A, maybe similar to what we did in Q4, all four of those make a lot of sense to us. Ladies and gentlemen, at this time, we've reached the end of the question and answer session. I'd like to turn the floor back over to John Stauch for any closing remarks. Thank you for joining the call today. In closing, I wanted to reiterate some key themes on slide 19. We delivered our 12th consecutive quarter of margin expansion and Pool grew its top line 7%. We maintained our sales and adjusted 2025 EPS outlook. We expect a long runway of productivity savings driven by transformation in 80/20. Our focused water strategy and strong execution continue to build a solid foundation to drive long-term growth, profitability, and shareholder value.

Then if the opportunity comes up for bolt-on M&A, maybe similar to what we did in Q4, all four of those make a lot of sense to us.

Nigel Coe: We've increased the dividend, and then if the opportunity comes up for Bulletin M&A, maybe similar to what we did in Q4, all four of those make a lot of sense to us.

Operator: Ladies and gentlemen, at this time, we've reached the end of the question and answer session. I'd like to turn the floor back over to John Stauch for any closing remarks.

Drayman, Drayman, Drayman

Thank you.

Nigel Coe: And ladies and gentlemen, at this time, we've reached the end of the question and answer session. I'd like to turn the floor back over to John Stauch for any closing remarks.

John Stauch: Thank you for joining the call today. In closing, I wanted to reiterate some key themes on slide 19. We delivered our 12th consecutive quarter of margin expansion and Pool grew its top line 7%. We maintained our sales and adjusted 2025 EPS outlook. We expect a long runway of productivity savings driven by transformation in 80/20. Our focused water strategy and strong execution continue to build a solid foundation to drive long-term growth, profitability, and shareholder value.

Nigel Coe: Thank you for joining the call today and closing I want to reiterate some key themes on slide 19.

Nigel Coe: We delivered our 12th consecutive quarter of margin expansion and pool grids, co-pliant 7%. We maintain our sales and adjusted 2025 VPS outlook. We expect a long runway of productivity savings driven by transformation in 80-20.

Nigel Coe: Our focused water strategy and strong execution continue to build a solid foundation to drive long-term growth, profitability, and shareholder value. And we believe we are well positioned to effectively manage the challenges from the current volatility.

David Brown: We believe we are well-positioned to effectively manage the challenges from the current volatility. Thank you, everyone. Have a great day. Ladies and gentlemen, that concludes today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.

We believe we are well-positioned to effectively manage the challenges from the current volatility. Thank you, everyone. Have a great day.

Thank you everyone, have a great day.

Operator: Ladies and gentlemen, that concludes today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.

Speaker Change: Ladies and gentlemen, that concludes today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.