Financial Data and Key Metrics Changes - The company reported a record adjusted EBITDA margin of 21.8%, up 100 basis points year over year [7][12] - Adjusted EPS grew by mid-teens percentage compared to the previous year [7] - Revenue growth was strong at 6% in the quarter, driven primarily by outperformance in Measurement and Control Solutions (MCS) [12][19] - Year-to-date free cash flow decreased by $61 million year over year, mainly due to outsourced water projects and timing of tax payments [13] Business Line Data and Key Metrics Changes - **Measurement and Control Solutions (MCS)**: Orders grew 12% organically, with revenue up 10% driven by energy metering demand [14] - **Water Infrastructure**: Revenue grew 4%, with demand led by treatment solutions, although orders declined by 2% due to funding delays in the UK and Canada [15] - **Applied Water**: Orders rose 4% for the sixth consecutive quarter, with revenue increasing by 5% [16] - **Water Solutions and Services**: Orders increased by 5%, with revenue growth also at 5% [17] Market Data and Key Metrics Changes - Demand for products and solutions remains resilient, particularly in smart metering, which saw double-digit growth [8] - The backlog remains strong across all segments, except MCS, which is being normalized [12] - The company noted ongoing economic challenges in China, with orders down approximately 18% year over year [54] Company Strategy and Development Direction - The company is focused on executing its transformation plan laid out at the Investor Day, which includes simplifying operations and enhancing portfolio for growth [10][22] - Recent acquisitions in advanced treatment are aimed at strengthening the growth engine and enhancing capabilities [26] - The company is committed to mitigating tariff impacts through pricing actions and supply chain adjustments [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering strong performance for the remainder of 2025, despite macro uncertainties [20][22] - The company raised its full-year revenue guidance to $8.9 billion to $9.0 billion, reflecting 4% to 5% total growth [19] - Management acknowledged potential impacts from tariffs and FX movements but emphasized strong demand and backlog execution [20] Other Important Information - The company has made significant progress in its simplification initiatives, which have improved productivity and customer responsiveness [9][10] - The integration of Evoqua is ahead of schedule, with strong traction on cost and revenue synergies [22][23] Q&A Session Summary Question: Update on MCS order outlook and destocking - Management noted resilient demand across the board, with expectations for MCS to return to positive book-to-bill by year-end [34] Question: Progress on simplification initiatives - Management reported tracking ahead of the timeline for simplification, with improved decision-making and customer metrics [36] Question: Applied Water segment performance and eightytwenty impact - Management highlighted strong orders and revenue growth, with eightytwenty helping to focus on growth while simplifying operations [48] Question: Municipal utility funding concerns - Management expressed confidence that Congress will appropriate funds to maintain healthy state revolving fund levels, despite concerns [90] Question: MCS legacy energy business margin drag - Management indicated that legacy projects would pressure margins in the near term but expect sequential improvement in Q4 [106]

Financial Data and Key Metrics Changes - The company reported record results in Q2, with sales increasing by 2% to $1.1 billion, adjusted operating income rising by 9% to $297 million, and adjusted EPS increasing by 14% to $1.39 [7][15] - Return on sales (ROS) expanded by 170 basis points to 26.4%, driven primarily by transformation initiatives and pricing strategies [7][15] - Free cash flow reached a record $596 million, up 14% year over year, with a net debt leverage ratio decreasing from 1.6 times to 1.2 times [20][21] Business Line Data and Key Metrics Changes - **Flow Segment**: Sales were flat year over year, with residential sales down 1% due to higher interest rates impacting the residential market, while commercial sales rose by 1% [16][18] - **Water Solutions Segment**: Sales declined by 4% to $298 million, primarily due to lower volume, with commercial sales down 3% and residential sales down 6% [18][19] - **Pool Segment**: Sales increased by 9% to $427 million, driven by price increases, volume growth, and the acquisition of Gulfstream [19][20] Market Data and Key Metrics Changes - The company anticipates flow sales to grow in the low single digits, while water solutions are expected to decline in the mid single digits, and pool sales are projected to increase by approximately 6% to 7% for the full year [22][23] - The company noted a softer residential end market, which has allowed for a focus on improving overall business operations [11][12] Company Strategy and Development Direction - The company is focused on driving long-term shareholder value through transformation initiatives and strategic growth investments, including talent acquisition and product innovation [10][13] - The company has committed to achieving $80 million in transformation savings for 2025, with expectations for continued margin improvement beyond 2026 [12][13] - The company is adapting to a rapidly changing macroeconomic environment and is optimistic about future demand recovery as interest rates potentially decrease [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to execute its strategy despite a challenging environment, with expectations for sales growth of 1% to 2% and adjusted EPS guidance of $4.75 to $4.85 for the full year [8][22] - The management highlighted the importance of monitoring macroeconomic conditions and adjusting strategies accordingly, particularly in response to tariff impacts and inflation [24][25] Other Important Information - The company made an investment in a startup, Hope Hydration, which aims to provide free water through digitally connected refill stations, leveraging Pentair's technology [9] - The company strategically divested its small commercial services business to focus on higher-margin filtration and ice businesses [18][66] Q&A Session Summary Question: Insights on pool unit volumes and pricing sensitivity - Management noted that new pool builds are expected to be modestly down, with customers extending product life through repairs rather than new purchases, influenced by pricing increases [31][32] Question: Price versus cost outlook for the year - Management indicated that pricing strategies are designed to offset tariff impacts, with a net benefit from lower tariffs contributing to raised guidance [35][36] Question: Pool volume outlook and channel inventories - Management confirmed that while pool volume outlook remains modestly challenging, channel inventories are well managed and in line with historical levels [90] Question: Impact of tariffs on pricing and operational decisions - Management stated that the tariff situation has paused some decision-making but remains committed to localizing supply chains and optimizing operational efficiencies [85][86] Question: Future divestitures and cash flow performance - Management clarified that while there are no immediate divestitures planned, they are focused on product line exits that do not align with their strategic goals, and highlighted strong cash flow performance due to improved working capital management [100][101]

Financial Data and Key Metrics Changes - The company reported sales of $1 billion, down 1% year-over-year, with adjusted operating income increasing 12% to $243 million and adjusted EPS rising 18% to $1.11 [22][11][12] - Return on sales (ROS) expanded by 260 basis points to 24% [11][22] - The company maintained its full-year 2025 sales and adjusted EPS guidance of $4.65 to $4.80, representing a year-over-year increase of approximately 9% at the midpoint [11][33] Business Line Data and Key Metrics Changes - Core sales were down 1% year-over-year, with pool sales growing 7%, while flow and water solutions declined by 4% and 5%, respectively [22][23][26] - Pool segment income increased 14% to $126 million, with a return on sales of 32.8% [28] - Water solutions segment income grew 9% to $61 million, with a return on sales of 23.5% [27] Market Data and Key Metrics Changes - Flow sales declined 4% year-over-year, with residential sales down 6% due to higher interest rates, while commercial sales rose 3% [24] - The company noted that the ice business faced difficult year-over-year comparisons but is expected to return to normalized growth rates [27] Company Strategy and Development Direction - The company is focused on transformation initiatives to drive margin expansion, having saved $174 million in 2023 and 2024 combined, with an expectation of an additional $80 million in 2025 [15][29] - The implementation of the 80-20 strategy aims to optimize operations and focus on high-value core sales growth [17][20] - The company is maintaining a balanced capital deployment strategy, including debt repayment, dividends, share repurchases, and M&A [14][40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining guidance despite dynamic market conditions, including tariff impacts and inflation [11][33] - The company is monitoring the operating environment closely, particularly regarding potential demand destruction due to tariffs [72][73] - Management highlighted the importance of agility in responding to changing market conditions and maintaining operational efficiency [12][14] Other Important Information - The company repurchased $50 million of shares and increased its dividend for the 49th consecutive year [11][32] - The estimated tariff impact for 2025 is approximately $140 million, primarily from China, with mitigation strategies in place [36][39] Q&A Session Summary Question: Organic sales assumptions for the year - Management indicated that higher prices are expected to offset lower volumes, particularly in the North American residential housing market [47][48] Question: Clarification on tariff impact - The $140 million tariff impact is an in-year estimate for 2025, with expectations that it will primarily affect the second half of the year [49][50] Question: Absorbing tariff impacts in margin guidance - Management confirmed that pricing strategies are designed to exceed tariff impacts, with slight benefits from mix and currency [55][56] Question: Pool forecast growth and selling season - Management noted that while the pool market remains strong, there may be softening in remodeling and discretionary spending later in the year [60][61] Question: Inventory pre-positioning and order capping strategy - The company is capping orders to prevent shadow inventory and ensure supply chain stability, learning from past supply chain issues [69][70] Question: Competitive supply chain positioning - Management acknowledged that while some businesses may face margin challenges, others are positioned to exceed tariff impacts [103][104] Question: Transformation initiatives and future projects - The company is continuously evaluating transformation projects to enhance supply chain effectiveness, with benefits expected in 2026 and beyond [99][100]