Pentair (NYSE: PNR) FY Conference Summary Company Overview - **Company**: Pentair - **Date**: February 19, 2026 - **Key Speakers**: Bob Fishman (retiring), Nick Brazis (new CFO), De'Mon Wiggins (Flow business) Core Industry Insights - **Industry**: Water Solutions and Flow business - **Market Dynamics**: - Strong demand in commercial buildings, particularly in sectors like education, healthcare, and data centers [12][14] - Residential market remains flat, with no expected recovery in 2026 [19][22] - Pool business anticipated to have flat volumes with a slight price increase of 2-3% [22][24] Key Business Segments 1. **Flow Business**: - Experienced growth and profit expansion [9] - High single-digit growth expected for 2026 with margin expansion [24] - Focus on automation and connected systems to enhance customer experience [31] 2. **Water Solutions**: - Expected low single-digit growth with margin expansion due to operational improvements [24] - Integration of residential filtration and pump businesses to enhance water quality [11] Demand Outlook - **Commercial Sector**: - Consistent demand for pumps and fire suppression systems [14] - Shift from project-oriented to recurring revenue models [14] - **Residential Sector**: - Market is flat, with no recovery expected in 2026 [19] - Opportunities identified through strategic initiatives like the 80/20 program [18] Pricing Strategy - Price increases in the pool business are expected to offset inflation [27] - Competitive landscape remains stable, with Pentair focusing on high-quality, innovative products [29][30] - Pricing power is linked to the value provided to customers, moving from tactical to strategic conversations [82][84] Transformation and Margin Expansion - Ongoing transformation initiatives are expected to continue beyond 2026, with significant margin expansion opportunities identified [92] - Each business segment is on a unique journey towards capturing more margin [52][54] - The company aims to balance top-line growth with margin expansion, particularly in higher-margin businesses [55][62] Capital Deployment Strategy - Disciplined capital allocation strategy focusing on share buybacks, M&A, and investments in business growth [99][100] - Recent acquisitions include Gulf Stream and Hydra-Stop, enhancing product offerings [96][98] - Future M&A will focus on bolt-on opportunities that complement existing capabilities [100] Investor Sentiment - General sentiment towards Pentair is neutral, with a focus on core growth as a key factor for valuation [108] - The appropriate PE multiple for Pentair is considered to be in the high teens [108] Conclusion - Pentair is positioned for balanced growth across its segments, with a strong focus on innovation, customer value, and operational excellence. The company is committed to maintaining a disciplined approach to capital deployment while pursuing margin expansion and strategic growth opportunities.

Financial Data and Key Metrics Changes - The company achieved record sales, operating margin, and earnings per share for both Q4 and the full year 2025, with organic sales rising 8% and reported sales up 16% in Q4 [3] - Adjusted operating margin climbed 220 basis points to 19% in Q4, while for the full year, adjusted operating margin improved by 190 basis points to 19.6% [3][14] - Free cash flow reached a record $356 million for 2025, up 7%, with a conversion rate of 105% [4][16] Business Line Data and Key Metrics Changes - In the Americas, organic sales grew by 10% and reported growth was 17%, driven by favorable pricing and volume [11] - Europe saw organic sales rise by 1% and reported sales increase by 10%, benefiting from favorable pricing and positive foreign exchange effects [11] - APMEA experienced organic sales growth of 9%, with acquisitions contributing an additional 6% for a total reported sales growth of 15% [12] Market Data and Key Metrics Changes - The Americas region showed strong performance, while Europe faced challenges with a 5% decline in organic sales for the full year [14] - The company anticipates a mixed outlook for non-residential new construction in the Americas, with indicators suggesting subdued market conditions [7] - In Europe, new residential and non-residential construction is expected to remain sluggish due to uncertainties surrounding inflation and trade policies [7] Company Strategy and Development Direction - The company continues to focus on strategic M&A, high-return organic investments, competitive dividends, and steady share buybacks [4] - The data center initiative is a key growth area, with an addressable market exceeding $1 billion and sales from this sector growing at a double-digit rate [9] - The company plans to phase out underperforming products, identifying $10-15 million of European sales and $25-30 million in the Americas to eliminate during 2026 [6] Management's Comments on Operating Environment and Future Outlook - Management expects reported sales growth of 8%-12% and organic sales growth of 2%-6% for 2026, with pricing and repair/replacement activity driving growth [17] - The company anticipates challenges in Europe, projecting organic sales to range from a 4% decline to flat [18] - Management remains cautious about the operating environment, particularly in Europe, while expressing confidence in the company's ability to leverage its strengths for growth [62] Other Important Information - The company completed two acquisitions, Superior Boiler and Saudi Cast, which are expected to be accretive to adjusted EPS in 2026 [4][5] - The company returned $83 million to shareholders through dividends and share repurchases, increasing the annual dividend payout by approximately 20% [16] Q&A Session Summary Question: M&A Strategy and Revenue Contribution - Management emphasized that M&A is a key part of the strategy, with a focus on targets that fit the company's culture and financial criteria [27][28] Question: Data Center Growth - Management indicated that the data center market is a key focus, with expectations for high growth driven by ongoing construction [30][31] Question: Organic Growth Guidance - Management confirmed that the 80/20 revenue is included in the organic growth guidance, with expectations for price to be low single digits and volume to be muted [39][41] Question: Product Rationalization - Management clarified that the product rationalization efforts are focused on underperforming channels, not divestitures [88][89] Question: Capacity to Meet Data Center Demand - Management stated that they are leveraging global supply chains and facilities to meet demand from the data center market [100]