Pentair plc (PNR) Earnings Call Transcript & Summary

We're very excited to have Pentair with us, and that's going through -- has gone through a significant transformation. We're very excited to have Bob Fishman, who is the EVP, CFO, CAO of Pentair. And we've got Jerome Pedretti, who is the EVP and CEO of Pool. So with that, I'm going to walk over here. Bob, and I'm going to turn it to you for a couple of prepared remarks.

Yes. Thanks, Andy, and I couldn't be more pleased to be here. So thank you for hearing the Pentair story. We are a large, balanced pure-play water company. We help our customers Move, Improve and Enjoy Water. So within our Move segment, that's our flow business. So think small pumps and large pumps. Our Improved water is roughly 1/3 residential, 2/3 commercial in terms of providing restaurants and coffee houses with filtration and meeting their ice needs as well as on the residential side. And then on the Enjoy Water, that's our pool business, of which Jerome is the CEO. So really good 2024 for Pentair. We had our earnings call 2 weeks ago. We were able to talk to returning to growth for the company and continuing on with our transformation and ROS expansion story. We drive significant free cash flow that gives us a lot of optionality around capital allocation. So again, really pleased to be here, Andy.

Bob, thanks for that. So look, just to get out of the way, I don't know if there's going to be any big updates after 2 weeks. But maybe you can talk about, Jerome, since we have you, anything going on in Pool, it's winter, so I assume not too many changes yet. But -- and then like, Bob, you have a tough comp in Manitowoc Ice, which you've talked about in Q1 that gives you a tough comp for overall Water Solutions. I would imagine not too much change in flow either. But anything you're seeing sort of across the businesses that we need to talk about?

Yes. No, we -- again, as I mentioned, just recently had our earnings call. Again, we're pleased with the return to top line growth. If you pick the midpoint of our guidance, we're at about 125 basis point improvement. We expect to see balanced ROS expansion across our 3 segments. So again, pleased with the guidance that we gave at the beginning of the year. We continue to work through tariffs like a lot of industrial companies. That's all embedded in our guidance, including the latest tariffs around steel and aluminum and any adjacent commodities or products. So that's all built into the EPS guide that we gave.

Jerome, maybe just a simple question, just like in terms of your view, like going into this pool season coming up versus last pool season, like the dynamics. I mean last pool season, right, you had an easy comp. This one maybe not quite the same. So how do you think about it sort of.

Yes. I think the pool business or for industry overall, it's not going to be a stellar year, but I think that we've really hit a low bottom on new pool construction remodel. So we think that it's going to be about more in the low single-digit growth for this year. If you look at our channel distributor, but also the dealers, which are so important, I think they have some more confidence, I would say, as we enter 2025 versus 2024, where that confidence was kind of going down. But the change in administration and how they see the overall macro, I think they have a bit more confidence than last year.

Got it. Even with like the higher for longer rates, you sense it like...

Yes, the higher for longer rates have been here for some time. That's something you can delay for some time, maybe not just a new pool construction, but you have to remodel your pool. The average age of the pool in the U.S. is over 20 years, and that's why we -- that's when we have to do something. So you can delay it for a year or 2, maybe 3, one moment you have to do the work.

That's very helpful, Jerome. So Bob, like I want to talk about transformation because it's been a couple of years now and margins are up significantly. But then people would say to me like, well, what can Pentair do from here? I mean you raised the target to 26% in '26 now. But for a lot of companies, they talk about it, and it is hard to do. For you guys, you've kind of done it maybe. So talk about why it seems so enduring and why you still think you have upside going forward?

Yes, I'll go ahead and start, and Jerome, if you want to add. It really is a process now within the company. About 2 to 3 years ago, we brought in third parties that trained just a lot of people across the company. I'm talking hundreds of people building cross-functional teams around value-based pricing, around sourcing savings. And we made it very broad. So outside of pricing and sourcing, we also added on our operational footprint, where we think about 4-wall lean and automation in the factories as well as our OpEx spend, primarily around G&A. Below our 3 segments and 6 business units sits our categories of revenue. So I think 15 to 18 GMs that now have the tools in their toolkit to drive that sustainable ROS expansion. Not just 2 years ago, we saved $70 million, last year, around $107 million. We just guided to $80 million this year, but creating that sustainable runway around ROS expansion. And that's in an environment where revenue was relatively flat. So to be able to guide this year to 0% to 2%, roughly half of our revenue at Pentair is residential. So as interest rates improve or as people move house or buy new homes, we'll be able to drive volume leverage off those higher ROS rates as those businesses return to growth. So we think we're in a really good position around driving the ROS with the tools we've provided. In addition to that, we added 80/20. So that's all about reducing our lower-margin revenue in Quad 4 and then over serving our customers in Quad 1 to drive net growth through 80/20. Anything you'd like to add to that?

No, I think you're right. Quad 4, we say is about 4% of our revenue and the math works in your different businesses. But there is a lot of, I would say, cost that goes or focus that goes also in growing with smaller customers or both parts that you don't really want to sell. Moving those resources, moving the focus on serving our largest customer, I think that's really why [ 80/20 ] drives growth for us and it's the right thing to do.

So to that point, like just honing in on the 80/20 a little, as you said, right, Quad 1 and Quad 4 actions are operational now. I think Bob you said you did $107 million in savings last year just with the greater transformation program, guiding to $80 million in '25, $70 million in '26. But as you've ramped up the 80/20, the flywheel probably accelerate. So like is there any chance of getting higher than that $80 million or $70 million? Or how do you sort of think about that as you go forward?

Yes. So we're pleased. Back at Analyst Day, which was at the beginning of last year, we talked about driving to a 24% ROS in 2026. We just upped that to 26% in 2026 based on the strength of that transformation program. And now you're asking for...

I'm always asking for the nature of the...

So what I would say is we're building funnels in all the areas that I mentioned. For now, the 26% in '26 has a nice ring to it, but we're continuing to try to drive upside and more efficiency. Again, what I like about going forward is the balance, the growing the top line along with that ROS expansion is really going to create a positive EBITDA story for us. And again, I would say Jerome has run a great play in 80/20, where he's talking about net growth in the pool business. So some of Quad 4 has moved to distribution. Some has moved to Quad 3, but it's all about overserving those customers in Quad 1. So putting our best service team with those customers, on-time delivery, shortened lead times, really seeking perfection for those top customers.

Look, and I think it's a very important point, Bob, because like we see 80/20 a fair amount in our companies. But some of the companies that are known for 80/20 or at least 1 or 2 of them, like they struggle to grow a little bit. And you guys have only talked about a 1% headwind on growth in '25. Do you think, first of all, that fades in '26? And you've also talked about 80/20 as a growth tool. Like I understand that, right? You focus more on the customers that matter. But at the same time, again, in practice, sometimes it's hard. So how would you sort of react to that?

Well, I would say it's working already. Jerome talked about a 4% potential haircut. We've only said that the headwind in 2025 will be 1%. And we're not even quantifying the art of the possible with those overserved customers in Quad 1. So we feel good that the resources are being redeployed to serve our top customers and to drive that growth.

And the way you've structured the program, do you think it's only a '25 headwind? Or does it kind of -- in terms of that 1%? Or does it go into '26?

Yes, definitely, it goes into '26, and that's where you'll see the benefit from those top customers. So everything we do today, whether products being made in our factories, we know if that product is going out to our top customers. When we think about new product introductions, we can reduce the number of new products that were introduced, but make the new products more impactful for our top customers. So really redeploying those resources where it has the biggest bang.

Got it. That's helpful. And then Jerome, we started talking about pool, but maybe like digging in a little bit more, right? So just trying to understand your guide, right? You got a couple of points from the acquisition. And then you got low single-digit growth basically on the core pool business. Is that mostly break and fix and remodel? Like when you look at those 2 pieces, you got low single-digit growth in both pieces. Is that the way to think about it?

Yes. So we think about pool business like being 20% -- about 20% on your new pools, 20% on remodel and 60% in aftermarket. For 2025, what we see since new pools and remodel were more at the bottom, we see some low single-digit growth also for these pieces. And aftermarket has always been kind of close to 0, a bit more growth or some -- so we see low single digit for all these 3 elements. That's what we see right now. So we are pretty confident that we can have that.

And Jerome, to that point, like I think you model a bit of a second half recovery versus the first half. But again, it's always hard to think about, right, because pool is seasonal, right? So do you expect -- where do you see it is just a seasonal demand pickup? Like -- or where do you -- how does the second half get better versus?

I think we're going to be pretty balanced on the pool side between the first half and the second half. We guided about 4% to 5% for the full year, maybe 3% to 4% for Q1, but I think that's...

Kind of...

We don't see a lot of changes there.

Yes. We have more of the back end with some of our other residential businesses, the resi water, the resi flow, where we benefit when people buy new homes or move houses, we think that could happen more in the back half. Again, not large increases, but as people learn to live with this higher rate environment, we think those businesses will do better in the back half of the year.

Got it. So it's not really in pool. It's more in the other resi business.

That's right.

Okay. That's helpful. And then, Jerome, just I want to follow up on -- so pool sales were up 5% in Q4 '24, 7% for '24 itself. You didn't mention some extra demand, unfortunately, from the devastating hurricanes, like there's potential demand from California wildfires. Did you embed any of that potential demand in that 2% to 3% organic forecast for '25? Or maybe is there a way to frame how much hurricane-related revenue you're getting or will get?

I think it's difficult to frame this. What we see on the hurricane side is it's very -- even the fires, which, by the way, feel really bad for all these people and what they went through. It's very localized, I would say. So you're going to have maybe a part of one market or a part of Florida was going to grow, a part of Georgia, where the hurricane went through. For California, it's going to be some parts of L.A. Is that going to be a tailwind? Yes, but it's not going to happen at the same time. Some of the discretionary spend is going to happen earlier, for example, after the hurricane, the nondiscretionary spend is going to take some more time. Same thing with the fires. It might be a tailwind, but I think it's going to take a number of years. I don't think nobody can really kind of pin down what is going to happen.

Got it. And Jerome, I wanted to flesh out in a different way, sort of your 2% to 3% organic guide for this year, because a lot of that's price, obviously.

A part of that is price. I wouldn't say a lot of that is price. I think price is a bit between 1% and 2%.

Okay. So half approximately is price. So like if you look at channel inventory, you talked about your channel partners feeling a little bit better. Like is that just conversations? If you look at the channel versus normal, like where are we in terms of normal? Like how do you think about that?

We look at those numbers in detail for our largest partners, and we know that the inventory level on the Pentair side is absolutely back to historical levels. So it's not like just conversation that happened. We track that, and we've seen that back to historical normal inventory levels. So we feel good about that one as well.

Got it. That's helpful. And then I think there was a conversation on the call about different sort of avenues of growth within pool. So things like water treatment systems, optimized energy solutions, IoT, there's always been this conversation about automation. So how do you think about that in terms of like does it create a stickier business model for you? Can it lead to more growth? Are you seeing any more growth on that side? How do you think about that?

For sure, the automation is going to help us more growth. What we see is on the new pool side, about 60% to 70% of new pools have automation, but only 1/3 of the installed base has automation. So people have a bit more integrated system. Once you put automation because the experience is so much easier for a homeowner, you see the value of the pad goes up because they're going to put more equipment that's easier to manage because the automation doesn't work for you. And over the lifetime also of that pad, we see that Pentair is going to benefit for it because people are going to stick with the kind of the same brand because the experience is so much better. So automation is going to help us. And then the other one that we agree with is on the water quality system. It's still a bit difficult for people to understand water quality. So the more we can help them solve this, the easier it is going to be for them, right? Right now, they use to take a little bottle, they go to the dealer or a strip band they're trying to understand. It's not the easiest thing for them to figure out. So we can do some more work, and I think it's going to drive some sustainable growth for Pentair.

Jerome, maybe one more question because I have you like your margins have always been good, but they are high. Like how do you keep pushing. And I think back in the early days of transformation, we talked a lot about price, right? So when you say to me, 1 and 1.5, it's fine. It's like nothing is spectacular. But how do you -- has transformation 80/20 really helped you hone price, so you really feel good about continued good incremental margins in the business or...

Part of the transformation is about pricing, and we've been very strategic, but also going down at the SKU level to understand how the pricing all different products. So it helps on the price, like Bob said, helps on the sourcing, it helps on the manufacturing and driving automation. So building both funnels, plus the growth that will come, which will have a pretty good drop-through, I think is going to continue to help our margin going forward.

Yes. Pool is interesting because when people were spending a lot of money at home during the early COVID years, pool grew 40%, then 15%, then they were down mid-teens as we had the glut in the channel. Even the growth last year of 7%, that was really on the heels of the inventory correction. The market was down last year. Historically, pool has been a mid-single-digit plus grower. Even this year, a couple of points coming from volume and price, but most of it being 2 points from the acquisition. We are waiting for those 5 million installed pools, which are on average 20 years old to get back to that mid-single-digit plus growth. And when it does, it will be at that 33% ROS and probably better as we drive higher incrementals. So we haven't seen a normal pool here really for the last 4 or 5 years. We think that's going to start to return just because of the age of the installed base and the innovations that we've made, whether it's the LED lighting, whether it's really across the board within pool. So we're excited about our most profitable business growing at historical rates into the sustainable future.

Great. So let's move to Flow, Bob. Like so Flow has a few pieces. You mentioned a couple of residential pieces I want to talk about them too. But like just Industrial Solutions, I know it's a smaller business, but one of the businesses is geared toward food and beverage. You talked about $200 million of revenue recently in that business. I know you said you don't have much recovery baked in there, but could you talk about -- there's been delays in projects. When do you think they kick in? Like -- or is it just kind of we expect kind of delays to continue?

Yes. So we talked about our Enjoy Water segment, which was pool. Now we've moved on to the Move piece, which is small pumps and large pumps and also an industrial piece. That's about $1.5 billion business, the Flow business. 1/3 is in resi flow, where we've guided to roughly flat, again, very highly correlated with the residential market. Our commercial water business, again, another 1/3. Think about larger pumps that has done extremely well and continue to do well in 2025. The industrial business is really made up of 4 different businesses. On the food and beverage side, where we provide kind of the membrane technology, whether it's beer companies or dairy companies, they have pushed out their capital spend. As that starts to return, that business will benefit. But for now, we're being very cautious around that capital being deployed.

That's helpful. And to the other points in Flow, there's resi, ag. Looking at the latest results, for instance, you mentioned commercial was up high single digits. You're done that part to be up low single digits. So it seems like you've been able to drive pieces of that commercial business, whether it's fire suppression, there's a data center business in there. So maybe talk about the momentum that you have on the commercial side of that business.

Yes. On the commercial side, we often lead with the fire suppression pump, but then we have a really nice offering within our blue pumps. So water supply, water disposal for a wide array of commercial buildings. That's really what's driven the growth for us.

Got it. I wanted to just forgot to ask you, like when you go back to Industrial Solutions, there are times where, again, there's a debate about whether it's core or not, it's a Pentair. So like how do you weigh in on that these days to that business?

Yes. I would say we love the portfolio we have. We have -- we are one of the largest pure-play water companies with a forecasted $1.1 billion of EBITDA. There's always going to be in a portfolio something that might not be exactly the fit. There's probably a couple of hundred million dollars of non-water-based business within that Industrial Solution. But overall, the portfolio feels great for us. And we like the leverage really across the 3 segments. We're really good at at pumps. Think about it as $1.5 billion of our $4 billion of revenue, could be the variable speed pumps and Jerome's business, the some pumps and well pumps or some of the largest pumps in the world through that commercial business. Then we're also very strong across the 3 segments of filtration and separation technology. The same technology that allows a big beer manufacturer to meet its needs is also helping out Jerome's business in terms of providing cleaner pools or our Water Solutions business. And then finally, we have heating and cooling technology. So we think there's a really nice fit across the portfolio with those 3 technologies.

That's helpful. And I just want to ask you about the ag, [ this breaks the business ] because my understanding is it's pretty high margin. It's been tough for the last couple of years. Is that business bottoming out yet? Or how do you think about that business?

Yes. The ag business is bottoming out, but think of it as roughly $100 million of our portfolio of $4 billion, so small in relation to even the resi flow business and certainly in terms of the overall context of Pentair.

Got it. Helpful. And then last but certainly not least in terms of your segments is Water Solutions, right? So you've guided the segment to be flat. We've got, again, some moving pieces. Like one thing that caught our attention is you got this first commercial PFAS certified filtration system. Maybe talk about that. And you're seeing -- if you step back and think about the business on the commercial side, like how does it look for 2025?

Yes. So we've talked about the move and the enjoy sitting in the middle is the improved. So think about $1.1 billion of revenue, 1/3 of that is residential. So think about providing filtration to homeowners, whether it's the components business with tanks and valves or whether it's systems business around water softeners as an example. The other 2/3, though is commercial, where we provide filtration and ice to some of the largest quick service restaurants in the world as well as some of the largest coffee houses. So to be able to go into a commercial quick service restaurant and a coffee house and say, we've got solutions that meet your biggest pain point, which is water quality and ice, we're able to do that, so that they can make more margin off their beverages, which is one of their most profitable areas of their businesses. PFAS for us, we provide solutions within residential today. And recently, we've been asked by more commercial customers about PFAS solutions that we're also starting to provide to quick service restaurants as an example.

So you mentioned Manitowoc -- well, now your ice business. So it was down mid-single digits in '24 after 2 years of 20% growth, right? So I know you're thinking about growth returning to more mid-single-digit levels, I think, after Q1 as China comparison headwinds subside. But maybe give us more color in your confidence in that turn. And can you talk about the cross-sell synergies that you've done so far with Everpure because that's one of the big parts of your strategy to buy Manitowoc Ice.

Yes. You picked up on 2 businesses, filtration and ice, which are right on the heels of Jerome's 33% ROS business. So excited about those 2 businesses. The Ice business, Manitowoc Ice, which we acquired a couple of years ago, saw 2 years of 20% growth. as it was expanding into China and also driving through some larger backlogs. Last year, they were down this year, returning to mid-single-digit growth once we get through a more difficult compare in Q1 when they were still rolling out some of the backlog and also rolling out China. So we get back on that mid-single-digit trajectory similar to pool, we get on that normalized growth, which is going to be really nice for that business.

And then just in terms of the synergies moving forward, like does it accelerate from here? Like where are you in the process would you say?

Yes, we have the ability to use that Everpure filtration technology in ice machines because there's nothing worse than having a clean quality glass of water and then dropping a dirty ice cube in there. So providing filtration for ice machines, going to distributors that sell Manitowoc Ice today and providing that every per filtration as well, has provided synergies last year and will continue to provide synergies in the future. Again, it's one-stop shopping for these customers, filtration as well as ice to meet their needs.

Bob, how do you guys get sort of visibility on the business? Like it seems like restaurants are doing okay, but like it's hard for us to gauge like the health of the business. How do you guys do it just out of curiosity?

Yes, we look at foot traffic. The nice thing about some of these quick service restaurants is they do pretty well when a recession or higher interest rates. People still eat at these type of restaurants. The foot traffic is high. We saw during COVID that we have good demand even through higher interest rate environments.

Got it. And then just going back to the residential side of Water Solutions. Like in the past, it's been a target of transformation, now maybe 80/20. So like what's the forward goal for that Residential Water Solutions business? What do you want to be and kind of grow the rest -- like the rest of the segment?

Yes. We think there's still significant improvement to be had with the return on sales. We still have too many SKUs, too many factories in those businesses. We can continue to drive a much leaner business, but also grow the top line. Again, that business does well when people are moving homes, when they're buying new homes or checking the water quality that might come from a life event. When that growth of that business starts to return and we've improved the ROS, that's where we'll get the most significant advantage.

Got it. So I do have -- if anybody has questions from the audience, I'll turn it to you in 1 second. Jerome, I just want to ask you because I've got you, like you're mostly U.S. pools, right? Like a little bit of Europe, bigger competitors there. Like does Europe kind of hold you down a little bit in '25? Or how do you think about that? Or because it was pretty bad in '24.

We mostly U.S.-based. So I think that's really about the U.S. dynamic. It's going to move the needle for us. I don't think Europe is a pretty small.

Yes. So not worried about that for you guys.

We primarily play within our pool business in the higher end luxury pools as well as in the Sunbelt states. That's really our sweet spot.

Yes. Any questions from the audience? Okay. So let me move over to balance sheet because you have a good one. So you've delevered, you're 1.5x. You've started -- actually, I shouldn't say started. You've been making acquisitions. Gulfstream is an interesting acquisition for you guys. So first of all, Jerome, maybe you can talk about what Gulfstream brings to the portfolio. And then after that, Bob, talk about sort of as you kind of get into 80/20 and you're kind of done with transformation, not the right words, but do you ramp up M&A now back?

Yes. So for us, Gulfstream was a pretty good acquisition because we are the leader in the U.S. So we have leading strength in different products. But the heat pumps, which is one of the heating technology was not one of them. And I think that Gulfstream reinforced our offering in Southern Florida in this area actually. And what we can do is take Gulfstream and bring into other parts of the U.S. and bring that technology. So pretty happy with Gulfstream, a small bolt-on, but fit right into where we are. So we'd be looking at other opportunities we have, building a funnel of opportunities in pool and see what makes sense for us to continue to look at and to buy.

So Jerome, to that point, you are a leader in pool, right? So is there any -- whether it's vertical integration or geographies or what have you, like are there any white spaces or things that you think about that really could help overall?

I think that we will lead with strategy. So anything that's going to help us being better on the automation side or help us on the water quality side, I think it's something that we should be looking at actively. So that would help us for future growth.

Got it.

Yes. I'd say on the M&A side, that's a great example of a bolt-on acquisition that we did in December, highly profitable business. I think it was a 30% ROS, bought at a very fair price that expands our portfolio within pool. From our perspective, when we did our last large acquisition, which was Manitowoc Ice, we had levered up to 2.7x. Because of the free cash flow generation of the company, we're fairly capital light. We've delevered down to 1.5x. And if we continued with no acquisitions and a share buyback that simply offsets dilution, we'll be at 1x at the end of this year. So we're a dividend aristocrat. We've increased our dividend for 49 years in a row. We increased our dividend by 9% in 2025. We've said the share repurchase will roughly offset dilution, which is only about $150 million. Staying investment grade is important, but the leverage ratio for us is the optimal one is 2x, plus or minus half a turn. So at 1 to 1.5x, doing more of these bolt-on acquisitions will continue to drive the top line and drive our ROS as well as there's been many years where we've done larger buybacks than just $150 million. And we think where the share price is today, share repurchase makes a lot of sense. So it's really as we paid down the debt, now it's more competing between bolt-on acquisitions and more share repurchases.

And Bob, just stepping back, you mentioned to us at the beginning of the conversation, like it changes every day. So how are you guys sort of keeping up or like do we need to worry about steel and aluminum for you guys? Like I think there was a lot of questions on the call on it. So maybe just talk about what you're monitoring. You've got some exposure to the Mexico, Canada, China, like that kind of stuff.

Yes. We monitor that on a daily basis. So we're fortunate that with 75% of our business going through 2-step distribution, we have the ability to raise price. So on the earnings call, we talked about the fact that we have roughly $300 million of spend in Mexico. And we're still not sure. That got pushed out a month. Is it a 10% tariff? Is it a 25% tariff. Our view is that we would cover that through the inventory position that we had, doing purchases ahead of the tariff going into place. So we have the luxury of an additional month prebuys around raw materials, for example, and then we have the ability to price. Our Canada business is very small. The China business was already included in the walk that we gave. And the steel and aluminum and the adjacent commodities associated with that, the inflation associated with that around maybe buying motors is only about $20 million for Pentair. And again, we think we can cover that with pre-buys, inventory and any pricing that's required. So our EPS range included the impact of tariffs in there. So we feel good about the midpoint. And then we'll just continue to try to get ahead of this through the actions in the various businesses that we have.

And Bob, to that point, you can -- because of your distribution channel, you can just raise price quickly, right? There's no delay in quotes for these tariffs or like.

Well, there's often 30 to 60 days, but the way you get ahead of that is by sending letters to your customers and saying, if this does happen, this is what we expect to do. In some of the businesses where we don't have the 30, 60 days, we've already gone out with price increases. So it's really a different strategy across the board. But the goal is to move as quickly as we can to offset those tariffs.

Got it. And do you have flexibility if you needed to move from Mexico to the U.S. in some capacity or anything about that?

We do because we have -- roughly half of our factories are in the U.S. But again, that's a longer-term play where we have to think through our supply chain strategy. Again, it worked pretty well before all these tariffs were announced. We want to make sure we don't have a knee-jerk reaction, but we're thinking about all the strategies, both short term, medium term and long term.

Okay. So I ask this question of every company. What are the top 2 or 3 innovations and structural changes affecting your company over the next 5 years? And are there any emerging industry trends that are perhaps being overlooked in the current discourse?

No, I think the innovation for us, we talked about that before as we on the automation side on the water quality on the pool. If we solve the pool owner problems and we have that and we give them a good value proposition and do that to that channel as well, distribution and dealers, I think that, that's where we're going to drive innovation in the market. I don't see any major disruption coming up in our industry. So we feel good about the long-term prospect of pool, and that's why we think that the market is going to go back to that kind of mid-single-digit growth that we've talked about.

Yes. For me, we can really, with 80/20 pinpoint our innovation. We think about industry changes, the focus on water quality, perhaps more people moving to the south, a number of ones that are in place. We continue to innovate in commercial water, commercial flow within resi water. PFAS is a focus area of ours. So again, anything around water quality, there's an aged infrastructure out there within commercial water. We want to be able to take advantage of that as well. So that's how we think about it as significant opportunity in the years ahead.

And Bob, just to that point, like there's obviously changing regime or there has been a changing regime in the U.S. So like sometimes I think of water and I think regulation is good and deregulation is not. Like how do you sort of respond to that? Because it seems like -- have you heard anything from your customers like in terms of the changes and stuff, are you pretty confident still in the growth in terms of water businesses?

Yes. For us, again, water quality is the main theme, whether there's regulation or not, people are checking their water quality, both residential and commercial. The aged infrastructure for us is something that will need to get addressed at some point, whether it's through regulation or it's people just doing the responsible thing. You look at the 5.3 million pools in the ground on average, 20 years old, that will drive a replacement cycle. You look at the ice machines that are out there, a very large installed base. People want more filtration. So a lot of the fact that we have a replacement cycle at Pentair, we have large installed bases is what's going to drive the significant part of the growth.

Got it. So we only have a minute to go. So we probably should end it there . We appreciate the time. Thank you very much.

Thank you.