Summary of Pentair (NYSE: PNR) FY Conference Call - September 11, 2025 Company Overview - Pentair is a pure-play water company focused on moving, improving, and enjoying water through three segments: flow, water solutions, and pool business [2][6] - The company has been on a transformation journey, successfully expanding return on sales and anticipating top-line growth as it approaches 2026 [2][4] Segment Performance Pool Business - Generated $1.5 billion in revenue, with 75% from the five Sunbelt states [4] - Revenue breakdown: 20% from new pool builds, 20% from remodels, and 60% from break/fix services [4][8] - Experienced five consecutive quarters of growth, but facing a decline in new pool builds due to rising interest rates, with only 57,000 new builds expected this year compared to 80,000 pre-COVID [7][8] Water Solutions Business - Comprises one-third residential (water softeners, filtration) and two-thirds commercial (filtration and ice equipment) [5] Flow Business - A $1.6 billion business, with growth driven by commercial and infrastructure sectors, particularly in fire suppression and water supply pumps [27] - Expected mid-single-digit growth, with potential expansion into data center cooling technologies [27][28] Financial Performance and Transformation - The company has driven $190 million in savings over the last two years through a transformation program focused on sourcing, operational efficiency, and cost reduction [9][10] - Targeting a return on sales (ROS) of 26% by next year, up from 17% in 2020 [23] - The 80/20 initiative aims to focus on top customers and products, resulting in a loss of 2-3% of revenue but enabling better service and growth opportunities [11][12] Pricing Strategy and Tariff Impact - The company has successfully offset tariff impacts through price increases, initially estimating a $140 million impact, later revised to $75 million [16][17] - Pricing strategy has shifted from cost-plus to value-based, allowing for more strategic price increases [39][40] Capital Allocation and M&A Strategy - Focused on debt reduction, increasing dividends (49 consecutive years), and share repurchases [32][34] - Actively looking for bolt-on acquisitions, particularly in the pool and commercial water spaces [34][37] - Emphasis on high-quality companies with strong growth profiles and return on sales [36][47] Market Outlook and Consumer Sentiment - Anticipates a recovery in residential construction as interest rates stabilize, with a lag of 6-9 months for consumer reinvestment in home improvements [50] - The company is positioned for growth as it has transformed during low revenue years, expecting to benefit from improved consumer confidence and reduced uncertainty [55] Key Takeaways - Pentair is well-positioned for growth with a focus on transformation, operational efficiency, and strategic pricing - The company is navigating challenges in the pool business due to interest rates but sees potential for recovery - Continued emphasis on M&A and capital allocation strategies to drive long-term growth and shareholder value

Financial Data and Key Metrics Changes - Bookings grew 18% year-over-year to $1,200 million, while revenue increased by 5% [4] - Adjusted gross margins expanded by 80 basis points to 33.5%, and adjusted operating margins reached 12.8%, resulting in incremental margins of over 50% [4] - Adjusted earnings per share was $0.72, reflecting a nearly 25% increase compared to the previous year [4][20] Business Line Data and Key Metrics Changes - Aftermarket bookings reached a record of almost $690 million, marking the fourth consecutive quarter above $600 million [6] - Nuclear bookings exceeded $100 million for the third consecutive quarter, with power bookings up more than 45% year-over-year [7] - FPD segment saw bookings growth of 21% and adjusted operating margin of 17.7%, while FCD segment experienced bookings growth of 10% and sales growth of 14% [22][24] Market Data and Key Metrics Changes - The company reported strong asset utilization in large process industries, with maintenance spending continuing as expected [14] - April bookings remained healthy across run rate and aftermarket business, with limited project deferrals observed in select industries [15] - The backlog stood at $2,900 million, providing a level of certainty for future revenues [16] Company Strategy and Development Direction - The company is focused on navigating the current tariff environment while building on strong first-quarter results [5] - Emphasis on the 8020 program to reduce complexity and improve margins, with expectations of 200 basis points of margin expansion by 2027 [18] - The company is leveraging its global footprint to optimize work locations and mitigate tariff impacts [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to execute at a high level despite macroeconomic uncertainties [5] - The company is monitoring customer behavior closely, with expectations of continued capital spending unless the macro environment worsens [42] - Overall visibility into project pipelines remains strong, particularly in the nuclear sector, which provides long-term revenue assurance [90][92] Other Important Information - The company repurchased $53 million of shares year-to-date at an average cost of $45 per share, viewing its share price as undervalued [27] - Adjusted primary working capital as a percentage of sales increased to 29.8%, with expectations for significant improvement in cash flow and working capital efficiency [26] Q&A Session Summary Question: Sustainability of bookings and outlook for the second half - Management noted strong aftermarket bookings and a healthy project funnel, but acknowledged potential uncertainties due to tariffs and macroeconomic conditions [36][42] Question: Guidance for Q2 and impact of tariffs - Management indicated that Q2 results are expected to be similar or slightly better than Q1, with some mix headwinds anticipated [45][48] Question: Competitive footprint and pricing power - The company highlighted its regional manufacturing advantages and noted that pricing actions have been well-received, with expectations for continued pricing power [52][60] Question: Visibility into project pipeline and potential pushouts - Management confirmed strong visibility into project pipelines, particularly in nuclear, with limited signs of project pushouts at this time [88][90] Question: Mitigation of tariff impacts - The company plans to offset tariff impacts through pricing actions and supply chain repositioning, with expectations to mitigate the full $90 to $100 million impact [94][96]