Pentair plc (PNR) Earnings Call Transcript & Summary

We are very excited to have Pentair Corporation with us. We've got Bob Fishman, who is still the CFO, right? Still the CFO right now.

CFO.

And Nick Brazis, who's the incoming CFO; and then De'Mon Wiggins, who is the EVP and President of Pentair Flow and Water Solutions. And so with that, I'm going to turn it over to Bob just for a couple of prepared remarks, and then we'll get into Q&A.

Yes, absolutely. Thank you again for allowing us to come to Florida here. Pentair, so we help our customers move, improve and enjoy water, $4 billion pure-play water company that has performed exceptionally well. We had announced my retirement effective March 1. And so Nick will come in and be my successor officially on March 1. And De'Mon, who has run our Flow segment over the last few years, now has responsibility for Water Solutions and our Flow segment. So you'll hear more from Nick and De'Mon today.

Great. So very succinct, Bob. So obviously, as we just talked about, you're in the middle of a CFO transition. So maybe this is for Nick. I mean Bob has obviously played a very formative role in Pentair's transformation. So maybe you could talk about what you've learned from Bob through the transition. Is there anything that you'll do differently? What would be your areas of focus?

Yes. Thank you for that. I think I've gotten to work closely with Bob, John, De'Mon, Jerome, Adrian and the entire executive team for almost 3 years now and have worked really closely with Bob, especially in these last 5 months during the transition. My takeaways from Bob are many. I wouldn't have time to summarize them here today, but our focus on driving operational excellence and transformation is most certainly one of them. And then also our approach to disciplined and balanced capital allocation. I think that I'm going to carry forward most certainly. And one thing that will be a little different going forward is that transformation now works directly in -- under the CFO. And so we're really excited about driving that into the organization even further and accelerating some of those benefits with the ISE and transformation in finance. So we're really excited about that.

That's interesting, Nick. And I know you guys just reported a couple of weeks ago, but I got to ask this question. Anyway, anything new in your markets? I think in Pool and Water Solutions, you're supposed to start a little slowly. I think sell-in in 1Q a little bit slow in Pool and still weak international commercial markets in Water Solutions. But anything you're now seeing in those segments and conversely with the strength of your flow business. So maybe De'Mon can get involved here, too.

Yes. I'll just mention. So we guided really a balanced approach across our 3 segments for our incremental income and EBITDA in 2026 across our Move, Improve and Enjoy segments. And when we look at the pool business, we talked on the earnings call about how Q4 sell-in versus -- sell-in versus sell-out. We had a little more sell-in than sell-out, but we think that's going to be balanced in Q1 and that will right itself in Q1. And then the rest of the year, we start to see more flat volume across the Q2 and incremental volume in the back half of the year leading to that flat volume for Pool in 2026 with a little bit of incremental margin and 3% aggregate revenue for Pool. Did you want to take Flow & Water Solutions?

Yes. And Andy, I appreciate the question. I think it's a great opportunity to talk about a lot of the great work that was done in Flow. And I think we had strong momentum coming out of 2025. And I'm excited to continue to see our disciplined approach to drive growth and excited around what '26 has to offer. Water Solutions, I think we've got strong brands and continue to focus on those opportunities in our current spaces, but in some nice adjacent opportunities also. So again, getting back to what we guided, getting back to growth in that business, we see that happening.

That's helpful, De'Mon. So just maybe -- I don't know if this is for Bob or Nick. Like in terms of transformation, obviously, you'll be updating us at the Investor Day. We know that. That's just in a couple of weeks. But it's been quite a success story for you guys. Maybe the main driver of delivering your 26% ROS target, what you're expecting in '26. And can you give any incremental color about how to think about normalized incremental margin going forward? Obviously, you're still high in '26 around 50%. I mean, should we get used to that kind of incremental moving forward?

Yes. We're excited about what the transformation tools have delivered for Pentair and what we think they're going to continue to deliver across our abilities to price, our sourcing capabilities, operational excellence, organizational excellence and our 80/20 tools. I would suggest that I think what we've told before is about 40% plus on incremental pool volumes and 30% to 35% in that flow -- commercial flow and water solutions space.

Okay. That's helpful. And then I want to hone in on 80/20 for a second. You've delivered $250 million of net productivity savings in '23, correct me if I'm wrong with any of this stuff. You got to $70 million in '26, driven by sourcing waves 1 and 2 and implementing wave 3. So I think you've mentioned you have good line of sight to the $70 million. But -- basically because you're revisiting prior waves. But could you talk about how you're accelerating your strategy? Like what are you doing?

Yes. I'll start, maybe if you want to add on. But our 80/20 journey really started about 2 years ago now after we had already deployed some of the tools of transformation. And one of the things that we've done with our 80/20 tools is we've exited some Quad 4 customers. We've had some SKU rationalization. And as we move incremental volume into Quad 1, we start to see that relationship with Quad 1 deliver incremental sales, but it also puts more of the volume across a smaller number of SKUs. So you can get incremental sourcing benefit as you revisit waves 1 and 2 and as you introduce some of the make-buy dynamics and exploring that and bringing that into our sourcing transformation lever.

Yes. When we talk about 80/20, a lot of times, people think cost and taking cost out. But it is truly a growth lever, and we're seeing that play out, especially in the flow business. A lot of the work that was done in 80/20 where we removed the focus on the Quad 4, now you focus on Quad 1 that allows you to actually have different conversations with your customer. We're now talking about innovation, additional products they want from us, adjacencies that we can move into. So that's what 80/20 has allowed us to shape is a pathway to growth with our top customers and setting new innovations because of it.

De'Mon, you're almost answering my next question. So I'll just ask you, like do you expect now 80/20 to almost be a tailwind to growth in Flow in '26? I mean, obviously, we kind of are familiar with walkaway. It seems like you're done with that.

Yes. We've made a concerted effort to get the walkaway done early. And you'll see less of that in '26, almost minimal. And it's all about how you drive growth now. And we are seeing real opportunities because of that, specifically in certain businesses like our food and beverage business. You see that in our commercial building strategy. And so as we continue to bolt on those opportunities, you will see more growth because of that. So yes, it will be more of a tailwind.

Yes, that's helpful. And then I want to move a little bit more into your segments. So maybe just starting in Pool. New pool installs in '25 bounce along the bottom, as you guys know, comparable to 2009 levels. We know interest rates are higher for longer, maybe that's hurt demand a little bit. But you're guiding for new pools, remodels, aftermarket levels in '26 to be similar to '25. So why does it seem like such an extended period of normalization? And I'd throw in there, like isn't it getting close to where like heaters are going to start to break from the pandemic, things like that?

It's a great question. So -- when we guided for '26, we assumed that our 2026 was going to look a lot like 2025 as far as volumes being in that mid-50,000s for new pool starts, similar breakdown between new, repair and remodel. We did not assume that we were going to see North America residential recovery in our guide. We also, as you noted, during the COVID year, we saw a large spike in pool equipment demand. And typically, we see about a 5- to 7-year repair, replace cycle. And so we did not bake that 5- to 7-year replace cycle into our 2026 guide. And so we think those are both potential upsides to the year.

Got it. And again, correct me if I'm wrong, Nick, but you're forecasting 3% organic growth. It's basically all price. But there was, I mean, kind of a freeze, maybe not excess freeze from a few years ago, but it's pretty bad in the south for a while. I don't think you're baking any of that in, but have you seen any activity like that in pool? Or how to think about that?

Yes. I'll give you a real-life example. My brother-in-law lives in Texas, and he sent me -- they had the freeze in the Dallas area, and he's got a Pentair pool, and he sent me a video of the freeze happening to his pool. And of course, that led to some discussions about buying a new IF3. So absolutely, we just didn't bake that into our guide. So when we look at the freeze dynamic that happened in the southern states, that could definitely lead to some additional repair and replacement.

I should ask you, Nick, the opposite of that, right? If it's cold in the south, people don't use their pools as much. So is there any impact to worry about there? Or like how do you think about the channel, that kind of stuff?

Yes. It certainly can impact the pool purchases in the south. But as I mentioned, we see that as a potential upside to our guide, where, again, we've got that sell-in, sell-out dynamic in Q1, but then we see growth then after that in volumes leading to the flat volume for the year and then that 2 to 3 points of price.

Yes. And then, Nick, you already commented this. But like I think investors after you reported were like, oh, sell-in is lower in Q1. We're worried about that. Is it another destock? Like so maybe we could just talk about that. Is it really just a rightsizing because we went to the pool show in Atlantic City and it seemed fine in terms of inventory, but then we heard you and -- well, let's clarify what's going on?

Yes. I think we thought of Q4 early buy as being really a relatively normal year that we've had for the last couple of years. And Bob's got, what, 6 pool seasons under his belt now. So welcome his input as well. But it was really a pretty normal early buy program for us. And we just -- as we mentioned, we saw that sell-in, sell-out dynamic just in Q4.

Yes. I think because we're getting such a strong balanced contribution, Andy, across the 3 segments, we don't have to over rely on pool like might have been done in the past. So we cannot count on the resi recovery. And if it does happen, we can capture that. We're pleased that the sell-in, sell-out disconnect rectifies itself in Q1, and then we move on with volume growth in the second quarter.

Yes.

Got it. No, that's helpful. And I think maybe the other investor concern about pool was comments around pricing. You guys -- I mean, the whole pool industry has put a lot of price through over the last few years. We understand that. And so it's like now there's still some lingering inflation. Can you get more pricing through? So maybe clarify, can you get more pricing through if commodity inflation lingers? Like how do you think about that?

Yes. I think the team has done a phenomenal job demonstrating over the last few years that we have been able to take price where appropriate and where especially connected to tariffs or commodity price increases, we've got really high quality, high service, high differentiation in our offerings, and we found those prices to remain sticky in our channel and with our dealers. And our dealers are extremely loyal to Pentair. We've got great relationships with them. And when we look out into the year and we think about commodity increases or potential inflation, there's really only that one headwind that we see right now with ruthenium. But as we've talked about, we think we could take price for that, and that's just isolated to that one product in the chlorinators.

Right. And so maybe, Nick, you can comment then on where we are like midway through Q2 -- sorry, Q1. Like have you seen lingering inflation? Are you going to do more price? Like any thoughts?

Yes. We'll continue to monitor it. And what our guide is that we expect price to offset inflation.

Okay. I got it. And then maybe just the competitive environment. There's been some questions to me about Chinese competition, sort of what's going on with that. So maybe you can just sort of address that when it comes to pricing.

Yes. The Chinese competition or any of the low-cost entrant for that matter had been around for a long time. And this isn't a new dynamic. Our customers value the product, the product quality, the service, the serviceability, the relationship with the dealers. And so we've been able to successfully navigate that for a long time. And now that's not to say with some kind of hubris that new entrants won't come in that we have to navigate. But I think our team is well prepared to do that. And only about 50% of North America pools are -- have an automation feature. And as automation adoption increases, we see that stickiness with our Pentair products connected to that automation just continue to increase. And we were having a conversation with somebody earlier that owns a pool and has an automated Pentair pad. And they said they don't even know that their dealer would even consider using any other product of Pentair when they're servicing that pad. So it's really that stickiness with our dealers and our customers, that differentiated product and playing in that more luxury premium space than in the lower cost space.

Well, Nick, I think we went around together a couple of months ago. I think what I heard from you guys is pretty significant new product intros in Pool actually for '26 and like a real focus on growth. So you kind of spurred me when you talked about more automation, whatever. I think you've got a focus on that. So how much can new products help? Like would you expect a bigger year in '26 than '25 on that front?

Yes. We'll talk more about that at Investor Day here on March 4. We're excited to talk about some of the new innovations, product launches and capabilities that we're going to bring to market. But I'll just remind everyone, we've had great transformation journey and the transformation savings have been net of investments. So we've been continuing to invest in our businesses that we think are poised for growth and differentiated growth, and we're going to talk more about that at Investor Day.

Got it. But I mean, to your point, like we still should be able to grow margin in Pool if price cost is relatively neutral. You've got new products going through even in kind of a relatively flat market. Is that fair?

Yes, we agree.

Okay. And then moving on to Flow, maybe this is for De'Mon. Like so the start of '25, industrial solutions revenue started off quite light. And there were some delays in food and beverage, but double-digit growth in the second half, very strong. And it seems like that business returned to good growth. So kind of what happened? And can you talk about what's going on in that business for '26?

Yes. And Andy, I'm very proud of that business, first of all. We put a very much of a focus on the business model itself. And it was a heavy project business when we first started where we would go out and win large projects and that create a lot of lumpiness in our performance. As I got into the business and worked with the team, we found opportunities to find where we create value. And instead of being the full integrator of a project, be a component provider that adds value to the end user and help with uptime reliability inside their business. So what that allowed was consistent revenue, recurring revenue and being more of a partner to that end user. And so as we continued to do that, they created a really nice profile for the business that we can continue in future quarters and drive that moving forward and not have the lumpiness that was in the business before. What that also created was an ability to -- now that we're not doing large projects, the resources needed to keep that going, i.e., large engineering staff or customer service staff just to support the project implementation. Now you have a more standardized functioning business. And so now you saw the profitability get better and you see growth behind it because in the 80/20, now we're talking to our top customers more. The discussion has moved from tactical to more strategic innovation, new portfolio and adjacencies that we could actually bring into. So that's the exciting part about that industrial business, not focused as much on CapEx, but even benefiting when you're more focused on OpEx.

Yes. No, that's super interesting. So like how much of the business actually becomes kind of recurring in nature or what have you?

Yes. We've moved that up. It's definitely more of the percentages on the higher side of us doing that. I want to give a full percentage. But as we're moving to -- that's more the core of the business versus the project. The project is only there to get you to installed base.

Got it. And like sort of changing trends with like your customers and stuff, has that helped you with industrial solutions, too?

It actually has. And especially we talk about food and beverage. If you think about those trends, and you'll hear a lot because people aren't drinking as much beer as they used to, but they're still...

Protein drinks.

Yes, other protein drinks, they move into other carbonated beverages, other types of beverages, which we've actually navigated with our customers. And so it's actually given us a tailwind because when they do that, there's a need to move from just the product line they have today to a new product line or additional components that they have to add. That's been a benefit for us.

Yes. No, that's good. And then maybe within the commercial piece, can you talk about some of the growth avenues you started. If I look at your results, commercial was up, I think, low double digits for the quarter, mid-single digits for the year. So it seems like -- I think I remember from the last Investor Day, you talked to us about sort of focusing on key growth businesses. So like this is driving your fire suppression systems business and data centers, things like that. So where have you been successful?

Yes. So we actually looked at owning the commercial building. And there could be different types of buildings. It could be a hotel, it could be educational, it could be institutional-type opportunities and data centers. So when we focus on that, fire suppression was the lead product, which is the pumps you need for protecting the build from thermal event. But on top of that, we had other pumping opportunities around moving water throughout the building. So it was a pool of bringing those products into that building. And so we've seen those opportunities to navigate those different spaces depending on where you can have growth tailwinds to ensure that we're getting our products into those spaces. And we're working with our channel, especially our distributors to work to be more specified in those applications because the work that we've done inside of the business, reducing lead times and the service level appreciating has made us one of the main providers and that people want to work with because of our speed to help them with their install.

Right, right. And I imagine that helps with pricing, too, because you become more focused, differentiated, all that kind of stuff?

Yes. It has helped a lot on our -- the focus then you know exactly where your value is and you get to this value-based pricing versus just pricing across the board. So that's...

And the momentum in the commercial side expected to continue in '26, feel good, still kind of, I think, led by data centers or is there other stuff going on?

It's still strong. And I will also shift to the other part of our commercial business, which gets into that infrastructure and the need of our current infrastructure in the U.S. is -- it needs to be worked on, and we've got to improve the system that's in place today. And we have products that actually help with that. And if you think about the addition of Hydra-Stop into our business, that's a really nice business for us. And that's our valve replacement business, insertion valve. And we know a water main breaks every 2 minutes. And so now this gives us an opportunity to quarantine where that water is being lost and make sure that we keep mission-critical applications up and running like the hospitals, schools. And so those are, again, that reoccurring revenue that I was speaking about, this is where we're seeing that also and not just being lumpy related to projects.

De'Mon, because we have you here, like we often bother Bob about Man Ice and Everpure synergies. So maybe we'll talk about Hydra-Stop for a second, like and sort of what you've been able to do because I think it's interesting, you guys are pretty good at that.

Yes. What I like about the Hydra-Stop business is their ability to understand the needs of the end user. They sell a lot direct, and they work with the municipalities and not only the municipalities, but PEs that are working in that space. So we see that as a real opportunity for growth, and we're learning from that in our existing business of how to help our channel get to those end users and that being a multiplier for us in the long run. So seeing those sales processes, implementing those processes across Pentair and specifically in that system, in that ecosystem is going to be a really nice win for us in the long run.

It's really encouraging to me, Andy, too. We used to talk about Flow being low single digits, complexity reduction, ROS expansion to have the discussion around the top line and flow for at least a couple of years, De'Mon kept telling me they've got to earn the right to grow. And so there was some blocking and tackling that needed to be done to build the business to where he was comfortable to let the teams grow. And now that's starting to show through.

Yes. Bob, and that's a great point because one of the major reasons I wanted to do that, I want to ensure that our margin profile would stay consistent even with growth that would come behind that. So now we have that, we feel really confident that the current margin profile and even opportunity to expand that will continue as we bring more growth in because we're making the right decisions. That's why I remember at last Investor Day, you asked me how can we be better than low single-digit growth? And we're...

Yes, yes. Here we go.

Very nice. I'm going to open it up to the audience in a second. But De'Mon, I want to ask you one sort of ag spray tips, it's kind of a one-off business for you guys a little bit, but I think it's been kind of weak for a while. Is it troughing? Like how do you think about it? It's a pretty high-margin business, if I remember correctly.

Yes. And it's interesting. The spray business, spray tip business or what we call spray specialty is a nice business, kind of unique to our portfolio. It's one I like a lot. I ran it for a while, and it's a nice space. I love the technology. So basically, what we have is the macro has been more of the challenge there. It's not the business itself. The business actually has really strong technology being able -- because application is so important. You don't want run off and sustainability is a big piece. So the technology, what we're doing and how that business is performing is actually quite well for the situation it's in. It was very much an OEM-led business. And since the softening in the marketplace, they moved to more of an aftermarket sales. So less of the sprayers are being sold from an OEM standpoint. But now you have the repeat business that requires more of the used sprayers still in application have to be up kept, and that's where we're winning the opportunities there. So -- but still a nice little business. Look forward to the day where the farmers get a better opportunity to actually make the profits.

Not a huge business, about $200 million of revenue.

$150 million.

$150 million, but a really well-run business.

Well run, great business to train in. I learned a lot in that space, and that's why we like a lot. business.

Excellent. Any questions from the audience? Any questions?

Yes. Do you anticipate any meaningful changes in distribution in pool going forward?

Distribution pool?

I would say the short answer is no. We've got really good relationships with our distributors and our dealers, and we continue to lead with our distributors and our dealers. So the short answer would be no.

You're not seeing any changes since Home Depot bought one of those companies, right?

No. We work really closely with all of our distributors and work to bring them highly differentiated value-creating products for the dealers and for the customers. So no, we plan to continue to work across our distributors and channels.

Any other questions? Okay. So moving to Water Solutions. So you announced you talked about relocating residential flow into Water Solutions. And I know it's effective this quarter, and you talked about synergy realization materialize more significantly in '27. But maybe you can elaborate on specific channel growth opportunities from combining these businesses. To what extent do you anticipate operational scale? These businesses are pretty big together, 25% of total Pentair factory seems like a lot to me. So it seems like you can do a lot with that.

Yes. I'll start with the channel piece, which is if you think about these 2 businesses, we have one called residential irrigation and residential water treatment. Bringing those together, you bring more of a portfolio together. So you got products like your well pump, your sump pump coming together with your filtration, your softener, and we found from our channel that they were looking for an opportunity to have a one-stop shop as we think about treating the water in our homes. So your water quality, your water treatment is important. And if we can provide the one set of solutions that allow the plumber, the water treatment dealer or professional to be more successful and also work to educate the homeowner of how important this is, these businesses were perfect to be together. And so the biggest thing we're working through is how we make sure that, that goes smoothly with the channel, driving that through. And then to your point, there's a significant opportunity around transformation because there's a pretty significant factory footprint that we're going to be getting after one identifying where the opportunities are and then executing on making those improvements.

Got it. And then I think you're guiding to low single-digit organic growth for Water Solutions for '26. Maybe bridge your expectations for commercial versus residential. Residential is now greater than 50% of the segment. So after the resi flow move with no resi improvement assumed in the guide, what's embedded for sequential acceleration after flat core organic growth in Q1?

Yes. We expect to see really uniform or even contributions to incremental income from both those pieces of the Water Solutions business from the residential piece and from the commercial piece. Different levers to pull, right? And we're going to talk more about that at Investor Day across the portfolio. We expect to see margin expansion, but in different ways. Some pieces of the business prime for growth. And as we see some of that organic growth and that volume come through, that operating leverage creates really nice margin expansion. Other pieces like this water quality management business, where there's opportunity for both some top line and additional transformation savings.

Nick, just remind me, and maybe I should know this, but you were doing like I feel like some 80/20 on the residential water solutions side, you kind of finished that, I think. And then what can beverage kind of done with that too, right? Like is the business kind of where you want it to be now?

Yes. We don't expect to have any additional 80/20 related exits or portfolio pruning going forward. We're really focused on our Quad 1 customers and delivering that sticky relationship and then the incremental benefit that comes with it through those -- that Quad 1 focus. So I think that the Quad 4 exits are behind us. We're going to continue to use the tools of 80/20, but again, focus on that Quad 1.

Yes. I would agree. And we actually started to see some of that play out in '25, where we saw our top customers have shown significant growth, and then, as I said earlier, have an opportunity to have different types of discussions with them as we think about this is a good fit to, let's say, if you're talking about someone who's in that well water space of how do you bring filtration along with that. So those will be the growth drivers because we're bringing the full Pentair portfolio with us when we're having those discussions.

Yes. And then De'Mon or Nick, like I think you talked on the call that you're expecting Man Ice and Everpure to return to growth in '26. I want to dig in a little bit more because you mentioned on the call, international weak, North America holding up. So maybe talk about that because I feel like North America restaurants are kind of mixed at best. But what are you seeing there? And what are you expecting for '26?

Yes. And I think you hit it on the head. North American restaurants are mixed, but the reality is we have opportunities to continue to expand and grab share there. But also what we're seeing is opportunity in C-stores. And as we see that continue to grow, develop for them to have more of an offering as people are making that destination stops to get refueled, we have an opportunity to pull more of our Everpure and our Ice products into those spaces. And what excites me is our sales process to be able to drive that. So we're building funnels, executing on those funnels, and those are going to be the growth drivers that we see start in '26. What I'm also excited about is the innovation that we'll be bringing in '26 that layers into our future years because that's going to be the key, bringing innovation that drives future growth. But we're doing the right things to get back to growth in that business.

Got it. And I kind of remember you guys having a tough comparison in China. I think you're past that. But like how is that market? And maybe just talk about the EU, too. I know it's -- you're expected to be kind of weak in '26, but...

Yes. That -- to your point, we've gotten past that comp. The market itself still has some challenges. I think what we're going to do is just be wise in the large projects that we take on to ensure that if we take those on, those are long-term consistent so we can remove any kind of lumpiness we may see. So we will be vetting those and be very disciplined in how we approach those.

Got it. And then I want to shift to the balance sheet a bit. You've obviously done quite a bit of work here to get leverage down. You're underlevered, I think, now. Free cash conversion is 100%. So it gives you good flexibility to do stuff. So where are you focused now? Because you have a bunch of different avenues. I'm sure you'll talk to us at the Investor Day about this, but where are you focused now?

Well, yes. I know you bring up a couple of great points, Andy. We levered up to about 2.5x with the purchase of Manitowoc. Over the last few years, we've done a really good job servicing that debt, and we ended 2025 around 1.4x. We've got really great free cash flow conversion from net income. We've had the portfolio pruning, the 80/20 exits. Now when we look into 2026 and beyond, hopefully sitting around 1x levered this year, we've got a really great balance sheet that we can deploy either towards organic growth M&A, bolt-on M&A or through share buybacks. And as we started the conversation, we're going to be really disciplined around our approach with capital allocation like we have been for quite some time now. And we're excited to weigh the differences between bolt-on M&A and share repurchases, focusing on that bolt-on M&A in the commercial water space, the pool space and in pockets of the commercial flow business.

Nick or Bob, are there any lessons learned on capital allocation from Ken's or some of the residential foray that you did in Water Solutions? Because I do get that question sometimes is like how do we think about -- because Man Ice is a good deal, but these others were a little tougher. So what did you kind of learn from these other deals?

Well, again, I buy into the, if you're going to fail, fail fast, acknowledge it. And we're a 2-step distribution business. To try to run a services business with wage inflation, with electrification of vehicles. It's just -- and the scale, it's just a tough business to be in. So we do best when we're selling to our distributors and understanding what our dealers need to be successful. I would say that's the lesson we've learned.

Yes. I would just add, after Manitowoc, we had a really nice bolt-on that continues to be a value creator for us with Gulfstream in the pool business. As De'Mon mentioned, we acquired Hydra-Stop not too long ago. It's been a really nice addition to the commercial and infrastructure business within Flow, and we've managed to delever during that time period. We see probably 100 deal opportunities for every one we even engage in. So we've got a really disciplined process at exploring M&A. It's got to be aligned to our strategy. It's got to be value creating for shareholders. And so I think we've done a really good job of that the last couple of years.

And the whole executive team is paid on return on invested capital. So it just makes sense to make smart decisions in terms of how you want to utilize your cash.

And I think it's important to -- when you make that decision to do that, it meets the need and fills out your portfolio. I think that is key because if you do that, that's going to be something that you can continue to build on as part of your foundation.

Yes. And then without you guys telling me all the targets that you're going to tell me on March 4, like just maybe the flavor of the Investor Day. It feels like in talking to you guys that it's kind of like a pivot to growth with still good transformation opportunities, but I'm putting your words in your mouth, so you tell me.

Yes. I think you should come to March 4, first of all. We're excited to talk about the fact that we've got a balanced water portfolio. We move, improve and enjoy water, and we've got different levers to deploy across that portfolio. We're going to talk about the 12 revenue streams and how each of those different revenue streams can generate incremental margin and dollars for us using volume, organic growth and then the tools of transformation, but applied potentially differently across the portfolio, some more operational, some more sourcing, others with that incremental volume. We're also excited to talk about we've got -- we've done a really good job, I think, investing in the businesses and our transformation savings have been net of those investments. So we've got some really cool innovations and product displays to show you guys at Investor Day that we think are going to be really, really impactful long term.

Helpful. And so just last question, I've asked you this every year. 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?

Changes, innovation changes that we see across the business.

Yes. I would say, from an innovation standpoint, we're always looking for things that actually continue to enhance our customers' business, business management and productivity and how we continue to utilize, whether that's AI and other scenarios to support that.

When you look at what knits the 3 segments together, it's the pump technology, it's filtration and separation and it's heating and cooling. So anything really in those 3 technology areas is a great place for us to innovate to share across the businesses.

Absolutely.

You don't have a lot of software, so you're okay with that.

That's right.

Exactly right.

Yes. Look, we really appreciate the time, guys.

Thank you, Andy.

Nick, De'Mon, thank you very much.

Thank you, Andy.