Pentair plc ($PNR)

Okay. Moving along here with Nick and John from Pentair. Guys, thanks for making it.

Thanks for having us.

So maybe just start at the top here, talk about -- I would assume you guys don't really have any like maybe just Middle East and any like exposure there just to kind of check the box on that one in the macro to get that kind of out of the way?

Yes. Really, no exposure in the supply chain to the Strait, no near-term concerns with what's going on over there as far as supply chain goes.

Right. I guess.

We did confirm our guidance at Investor Day on March 4, both for Q1 and full year, and there's no new updates to that, either of those two guidances. I will just make sure that's understood.

Okay. So nothing in the last 2 weeks necessarily. Can you just talk about -- starting with pool, just talk about what you're seeing in the various disciplines, new aftermarket remodel start there?

Yes. About 80% of our pool revenue, as you know, Steve, comes from the installed base with an aging installed base continue to provide valued products and services to our distributors, to our dealers, and we feel good about those relationships. Our sticky products, particularly with the adoption of automation in the U.S., in the pool pad. We're continuing to see an increase in automation adoption. Our automation platform is really sticky, brings our products along. And like I said, we continue to see that adoption increasing. So we feel pretty good about that.

And as far as your guidance this year on new versus remodel and aftermarket, how do we kind of see that from a volume perspective?

We modeled effectively a similar '26 to '25 as far as the volumes of new pools go. We did see a little bit of an uptick, the back part of 2025. As far as permits goes for new home construction, we'd expect to see a decent attachment rate for pools with that new construction. When we thought about 2026, we thought decremental volume for the first quarter, and then we start to see that volume pick up with the seasonality of the pool builds for about flat volume, 2026 over 2025 with a couple of points of price.

And maybe just talk about the age of the installed base and how we should see this phasing when you think about the big boom that happened during COVID. And then maybe talk about the useful life of the bigger chunks of that pool pad and how we could see that play out how that gets updated.

Yes, a little over 5 million pool installed base in North America. With an approximate average age of that installed base of about 23 years for pools. Equipment life anywhere from 5 to 10 years, you did see an installed boom during COVID. And so if you think about that COVID boom of 2020, 2021 with equipment life of 5 to 10 years, you should expect to see that repair, replace cycle starting to pick up here in the near term. But again, we didn't model that uptick in 2026. We modeled it much like 2025 as far as the volume goes.

And can you just talk about the various parts of the pool pad and maybe in that 5- to 10-year range, what's at the lower end, what's at the higher end? And what is kind of the richest replacement for you guys when it comes to the components of the pool pad.

It'd be the upgrades and automations. So as people automate their pool pads, that generally drives the attachment or stickiness to our entire pool product portfolio. And so really excited about the continued adoption of automation. And even if people adopted automation a few years ago, 5-plus years ago, the upgrades that are available, much like if you bought an iPad 5 years ago, you might not even be able to put the latest apps on your iPad, right, because the technology just grown leaps and bounds. Our automation technology is similar in that when that customer experiences the increase in the ability to control their whole pad, their heat, their lights, their flow, people really like that app and the stickiness that it brings. And so we're excited about the continued adoption of automation and the repair and replace of automation.

And to answer the second part, Steve, filters last the longest. Think about 10 to 15 years on a filter, talking about the vessel itself, the filters inside them get replaced every 6 to 12 months. And then probably on the shorter life cycle, you have things like chlorinators and the IntelliChem types of dosing for chemicals, and then pumps would be and heaters are somewhere in between, depending on the pump you bought and the life of that pump.

And I think in your long-term guidance, you guys were pretty cautious on resi recovery, maybe talk about the mindset there and what is your calculus around that? What's embedded? And then just talk about that hedge.

For pool in particular, we did not assume a robust residential recovery in our guide through 2028 back at Investor Day just a couple of weeks ago. What we did assume was a couple of points of volume a couple of points of price and a little bit of share take between now and 2028. So very modest recovery from a volume perspective built into the guide to 2028.

Right. And then maybe just taking a step back because it kind of like jump the gun getting to the wonkiness of the pool pad. But maybe what do you want the message to be coming from the Investor Day?

Yes, Steve, I talked to you after earnings call. I intentionally tried to guide to what I thought was an acceptable pool outlook that was inclusive of what people thought would difficult market or a fatigue around waiting for residential recovery. So I said, let's just accept that. Let's put pool as we think pool's going to come out, and let's have inside of the pool number a continued investment which we have to put into pool for NPI, for sales and marketing and brand building to make it and continue to have it be our best business. And let's share that the other businesses, Flow and Water Solution, can more than offset what a 5% pool growth rate would be in the year. And we put together what I thought was a strong guide. I think I actually have to reflect on that fed into fears about some thing going on in pool, Steve. And I want the message to be that there's nothing going on in pool. We have a great business. That business is well positioned for the long-term recovery of residential and high-end consumers who are buying pools. And we have two other businesses that now have to demonstrate the strength of the portfolio, which is Water Solutions and Flow, and they're both going to have great years and contribute to Pentair while Pool invests in the longer-term future. That's what I wanted the narrative to be and somehow that didn't come out the way it should have.

Right. And you would look at the year as highly achievable and then if we get a little bit of a resi recovery in the second half, that's upside for you guys?

Yes. And I want people to see the strength of the portfolio and the strength of transformation across the portfolio and start to see and build confidence that we're going to have a lifting of organic growth as a company and begin to prove that one discipline out that we haven't proved in the past across the portfolio.

Okay. When we think about this resi recovery, what is kind of your targeted content for the pool pad? If I was going to replace the entire thing today and throw automation in there, what is the average ticket that you guys would be looking at?

Our sales would be roughly around $15,000 on a full pad to the distributor. And then it'd be marked up and it would go through distributor dealers and probably close to $35,000 to $50,000 at the consumer level, right.

And the automation aspect of that, what is that kind of kicker to you guys versus what you may have gotten in the past?

We're probably roughly on average 3,000 to distribution, 6, 000 at the consumer for the highest end automation unit. And then you're probably going to be -- our IntelliFlo 3 today can actually run a basic pad. If you put in a new IF3 pump, you can run a heater lighting and that pump all off of our app for free, right? So that sit within that spectrum. And then you're going to be in the few thousand dollar range to upgrade a basic pad to some level of automation.

And your attachment rate on those upgrades now, like do you think of -- what are you seeing as -- obviously, we're at a low level of replacement. But what is that attachment versus maybe, I don't know, pre-COVID?

Yes, we're 98-plus on an attachment rate IntelliCenter. And when you get someone to automate, they generally affiliate with what the app is that they put on or whatever the automation devices that they're automating to.

Okay. When we think about this dance with distribution, I guess, I'll call it, where do inventories sit today with your distributors, normal, low, high and then follow up on that.

Yes. Historically, we see variation in kind of sell in, sell out cyclically every some goes up, some comes down. So we would say that it's been pretty normal. And our early buy programs we cap with our distributors. And so we don't allow them to go over certain dollar amount for the early buy, and we were well within that cap last year we plan to be again this year.

So there's no real kind of like inventory to eat through. It's pretty normal and as sales grow for them, your sales should grow as well?

Yes. I mean, we said in our Q4 earnings call that we thought that we slightly outpaced so mean sell-in was slightly higher than sell-out, which is normal for what happens in early buy. What will really be important is as the product starts to leave distribution into dealers in Q1 and Q2 and what's that build and what's the rate of pools, we'll start to identify did the industry get the buys right? Or did the industry be slightly more optimistic than they should have been. But I think it's generally within normal trends.

And more strategically and higher level, what is the relationship with somebody like POOLCORP right now? I know they're kind of pushing hard. They've got some competition coming in. You guys are partners, obviously, to a degree as well as supply and demand engagement. What what's that like today? And how are you kind of assisting them in their efforts to?

Listen, the industry needs a healthy POOLCORP. We need a healthy POOLCORP. And I'm going to do everything to work with Pete and the POOLCORP team to help drive sell-through and help make sure the industry has the products and technology it has. I mean I think if you're them and you're asking a Pentair who's a leader in the industry, we have to continue to grow the total available market. We have to have new innovation, new products that grow the TAM. So what we don't have is just people fighting over the existing TAM. And that's our responsibility as an industry leader. And I understand that, and we're moving really fast to try to make sure that we continue to do that. We invented the variable speed pump. We brought in LED lighting. We brought in the dosing chemicals capability and the IntelliChem. We need to continue to have that innovation in the industry. And I think the last couple of years, the supply chain fighting and all the aspects that's been going on, in the loom of pricing and offsetting that, we haven't had that same level of innovation that we should have had. Now we've got some exciting products coming out here in '26. We're going to have exciting ones come out in '27. And that's our responsibility in the industry.

And is that something that is -- is that -- that's incremental investment that's fully embedded in the margin trajectory you guys put out for the next 3 years.

Yes.

Okay. And as far as measuring that kind of NPI, is there like a vitality index you watch or any kind of KPIs we can look for as far as that vitality is concerned?

Yes. We look at our percent of sales that's coming from new products. We look at age of products that are in the field and then we listen to our customers. where do they want to see innovation. We listen to our dealers, where do they want to see increased automation, increase stickiness? What are some of the products or the adjacencies on the pad that they think would drive value. So we're trying to really drive a customer-obsessed view of both new technology development and introduction and our entire NPD life cycle.

And I guess on the automation side, you talked about $150 million to $200 million like revenue opportunity I think at the Investor Day?

Over the cycle, yes.

Is the attachment rate on new pools like every new pool put in has some degree of automation or around 80%?

Ok, not. So there are still some single body pools where someone makes a choice that they don't need the automation for the pool itself, and they choose not to. I mean, sadly, it's hard to go back and retrofit in automation. So we like that attachment rate to be 100%.

Okay. And then can you talk about the pool dealer engagement model, what precisely you're kind of doing there?

Yes. I mean our pool dealers are the heart, blood of our pool business. I mean the brand affiliations, we understand them as private business owners who are subcontractors to builders, their reputations on the line with every customer build. They rely on us. And then one of the things that I don't think people really understand or appreciate is we've got 150 infield specialists that are technology savvy that work with our key dealers and make sure they're side by side with them on buckets on jobs and fixing challenges and problems. And that's been a really value-add to us. We do that at our cost embedded in our margins, and we help that dealer be successful when there's something technical that they can't figure out. And then we honor, if our products aren't living up to their expectations, we honor that with dealer swap-outs at our cost. Because this is a sell the product industry. It's not a repair the product industry. And what I mean by that is they're not looking to repair a pump, they're not looking to repair a heater, they're going to sell it, they're going to get the margins. So if the product doesn't work, we take the product back within the warranty period, and we let them have full margins on a new install, which has always been the stickiness that we create with dealers. And again, that's all embedded in our margin profile and embedded in our cost model. And I think those are hard hills to climb, if you're our competition to get that capability and have that capability in the field and also absorb that cost on behalf of your dealers, which is why even when we tend to lose a dealer we tend to get that dealer back in a year or 2 time frame because they realize the value of that customer service model.

Yes. And just to double-click on that, too. When we talk about the investments in pool, for clarity, it's not just investments in products and NPD. It's investments in new customer service centers, new dealer centers, new servicing capabilities so that we bring in these dealers, train them on how to use our automation, how to use our technology how to use our products and service it well, and that relationship with the dealers is extremely valued, and it brings a lot of stickiness to the Pentair brand with those dealers who are interacting with the end customer.

And then just to be clear on the pool pad and kind of the whole value of that pool pad. On the replacement side and in the aftermarket, if you will, I mean, like there's -- it's pretty rare for them to replace the entire pad. Is that correct? It's usually something. It's usually product by product, right? So just to be clear on that. And I haven't really heard of repair as much of a factor in this industry, I mean with HVAC, it is because it's a unit that sits outside and you can put a compressor or a motor or something in it. How prevalent is really repair in your in pool?

It doesn't tend to be the choice because of exactly what you said. Products tend to break at different times because they're putting their -- they run an independently as they combine to make a system, but they're independent products. And so they're generally swapped out. They're not usually repaired. You might see some repairs and heaters and certainly the high end heaters at the cost. But again, those are going to be unique products to the original equipment manufacturers. So our two equipment manufacturing competitors will have their own product specs in there, and we'll have our own product specs. So they tend to be our parts that are purchased to do that. And obviously, there's margins that are pretty high there, and then you've got labor dollars that go into it. So sometimes swapping it out is just a better answer.

And just remind us, as of the end of last year, how much of your business is new and then how much is remodel and how much is aftermarket of the pool business.

Yes, it's about 70% of the business is going through aftermarket. A little over 70%.

Got it. And most of that is like I mean we call it remodel, but most of that is like replacement, just basic replacement of parts, okay, of the parts of the pool pad. I have to ask about competition. There's been some discussion about lower end products coming in from China. Maybe if you could just address how you guys are defending your pretty strong moat.

Do you mind I would just say new entrants, Chinese or otherwise is not new to the pool industry. This has been going on years. And we've been able to demonstrate the ability to take price, deliver innovative products and leverage our brand for a very long time with those entrants coming and going over the years. And so certainly, there are new entrants, but our ability and our relationships with our distributors and with our dealers remains really strong, and our pipeline of innovation is stronger than it, even was just over the last couple of years. So I think we feel good about our position in the market. Does that mean we're like high-end mighty on our ivory tower and saying no one is going to touch us, absolutely not. Like we have to continue to get better. We have to continue to innovate, and we have to continue to be a more valued provider to our distributors and our dealers, but we've demonstrated the ability to do that, and we think we're going to continue to do that.

And can you address it more specifically like where you're seeing it today? And then what kind of scale and size are these guys coming it at because to your point, it's not new, and this isn't billions of dollars here. We're talking, I think, low millions of like very, very low millions of dollars. So maybe just a little more.

Yes. Just to make sure everybody understands the pool business model really quickly is embedded in our net sales. So we sell on a gross basis, we have that. Think about close to very high teens, what we'd call discount and rebates that we pass along to the channel. Those rebates go to distribution for the amount of volume that they sell. And then -- so we sell the old distribution at the same dollar basis and then we discount them at the end of the year based upon the amount of revenue that they move through the channel. Dealers are incentivized the same way. So when dealers buy from whatever distributor they buy from they're going to get a rebate from Pentair. So the large builder side generally is always affiliated with an OEM brand, and it's very sticky because missing out on your rebates would be a loss in margin perspective. Where the potential risk is in the replacement cycle to these competitors that we talk about is on a service tech who might not be affiliated with any brand. They're generally there for the water chemistry, maintenance of the pool, and they'll see an equipment that goes down and then they're going to make a decision how to replace the equipment. Those are where the challenges could be. That's probably a nonautomated pool. And it's probably an aged pool and it's probably a family that doesn't use the pool very often. And so we've always said that we expected and we have seen about $10 million to $15 million of what I would say, decremental share loss in an aftermarket pad, to what we'd say a lesser like-for-like product would be primarily on filters and now rumored to be maybe on lower-end pumps. I think the differential between the price of that competitive product to the consumer and ours or the margin to the dealer doesn't warrant the dealer to switch. And so we got to continue to fight from a standpoint of technology, proving the brand loyalty out and making sure we stay on our toes.

And your total pool sales remind us last year?

Close to $1.6 billion, $1.5 billion. billion. Yes. Yes. So it seems like a point like.

Yes, like not that huge of an issue. But thanks for all the color on that. Can we move to Water Solutions and just talk about the main end markets there and what you're seeing from a demand perspective?

Yes, you've got partial residential through our water quality management business so that you can think of that as point-of-use filtration, point-of-entry filtration for the home, some pumps, well pumps, things like that. And then we've got our commercial water business, which includes our Everpure brand, so you go to drive-thru and you get your diet coke, it's probably filtered by Everpure for water, and it probably has Manitowoc Ice in the cup. So you've got both Everpure and Manitowoc. Both of those end markets been a bit challenged the last couple of years from a fast food, fast service industry perspective. You've also seen a little bit of a pivot into more of these like gas stations where people are going there instead of a McDonald's or potentially a Starbucks, somebody like that for their beverage or for a snack. And we've got a really great entry into those more convenience centers with our Manitowoc and our Everpure brands. So we feel pretty good about where those two businesses sit going into 2026.

And I guess from a...

Return to growth and they're both at healthy profitability.

Right I was going to get to the margins. You know, might as well touch on the margin. So your margin construct for the longer-term outlook is really pool very high level, but still improving just not as much as the others. This one has some pretty robust margin expansion dialed in. Maybe talk about the visibility around that and what the drivers are?

Yes, driver for the commercial side of the Water Solutions business on margin would be through volume. So as that volume grows to drop through is really healthy, around 40%. And then you have the Water Quality Management business, and that business has a lot of structural cost opportunity remaining within it as we've brought the residential pieces of water together. And so you can think about it, it's about $1 billion of revenue, but it has an oversized portion of our labor and overhead costs and G&A. And so as we're getting after that structural cost opportunity, that drives margin improvement Water Quality Management, and we expect that to be the most robust margin profile enhancement over the next couple of years.

And as far as the growth is concerned, I mean, it's been a bit disappointing in the last couple of years. Obviously, you mentioned those markets that are down. Is there any visibility to any catalysts that make you confident -- give you confidence that you can accelerate from this, I don't know, flat kind of volume to down volume to something...

Product in part with the commercial water business. We've had some really good innovations with our NEO offering, with the refrigerant changeover coming for the commercial ICE business. And we think we're ahead of the curve on a lot of that, and we're starting to see some of that read out in that business. So we're really excited about the products, our relationship with our dealers in the commercial water space that gives us a bit of confidence to see some organic growth there. We also grew the North American business last year despite the noise around quick-serve restaurants. We still grew like 3% to 4% from a volume perspective. The challenge has been the international and primarily China, and we've now got that to what I would say is a plateaued level where we don't see that those headwinds are going to affect the overall optics of the growth rates of the commercial water business going forward.

How big is China now for that business?

For that business, it's probably $30 million, $40 million in revenue.

But that's pretty...

But we saw a huge load-in '23-'24 time frame for luck-in China that took us almost double of that, and then it came back down because that was a big project fulfilled. And that type of lumpiness is behind us now, and you can see more of the organic growth profile of this business.

I'm not really a thematic guy, but when you think about these quick-serve restaurants and there could be new formats and more automation. Is that at all an influence on your business?

Yes. All that just drives any type of change drives demand. And obviously, the beverages -- or I shouldn't say obviously, and you guys probably know this, but beverage is the most profitable part of a restaurant's P&L. And so the beverage is what they're always trying to push on you. And ultimately, that's where ICE and our filtration plays. As Nick mentioned, the part that we need to get a deeper amount of share is in the convenience stores, which is the gas stations and the quick serve convenience model. Those are becoming a growing stop and replenishment aspect, and that's a huge opportunity for Pentair and Manitowoc and Everpure.

And then on the flow side, maybe the demand drivers there and what you're excited about on that front?

Yes. The first thing I'll mention is the U.S. infrastructure had a design life of 60 to 70 years and the average design -- excuse me, the average age of the water infrastructure now is north of 70 years. And so when you think about our commercial pump offerings, whether it be water supply, water disposal, or insertion valve technology through the Hydra-Stop acquisition, those specific businesses are well positioned to take advantage of that aged infrastructure, the repair and replace cycles that were already -- we've seen an uptick in that last half of last year and it's starting to read out again this year. So that aged infrastructure is going to be a nice tailwind for us. We have really proprietary sustainable process technology, sustainable gas technologies that are being leveraged across Europe that utilize our filtration technologies, our carbon recapture technologies. Those have been nice tailwinds. And then as you see in the food and beverage space, there's a move from really consumption of beer to consumption of other alternative carbonated, sometimes alcoholic beverages. And those end markets, the OEMs that are creating those beverages, they can't use the same line for a beer process as an alternative carbonated beverage. So as they put those lines in, our technology is there, and we're a good partner to them. So those are some of the end market, I think, tailwinds that I think...

There was an inflection in that market last night. A little it to...

Thank you for your home for helping us.

A little bit too late, just a blip. And as far as the margins there, that is another segment that has a pretty robust margin outlook. I know there is some -- perhaps some G&A and transformation benefits here, maybe.

That's right. continued structural cost opportunities. That business done a fantastic job of delivering the margin expansion even with modest growth, and we see that trajectory continuing. And we've got a pretty good pipeline both in sourcing and in the facility consolidation operational opportunities while we continue to drive the growth in that business. The other thing I'll mention, Steve, I think Flow has done a really good job moving from being more project-based to having aftermarket pull-through built into the products that they provide to those OEMs. So it's not a one and done. We may sell and upgrade to food and beverage, but then they're going to continue to buy the technologies and the products go with that initial capital install, whether it be through the carbonation part, the filtration part or the sustainable gas part.

Okay. Moving to the margin side, just on price. I know that you talked a little bit about the incremental competition and some investments in pool, pool has always been a good price capture market. I think the average over time has been about 2% net realized. You guys went to like as high as double digit during COVID. Even with all this kind of noise, is this still a 2% type price capture market in pool?

We think so, yes.

Okay. And how do you guys think about price cost? Any risk on the inflationary side? And then how do you manage that? Just remind people how you manage that on an annual basis?

Yes. We actively manage the price cost. But I think as importantly, perhaps is we've got value-based pricing tools through our transformation and Pentair Business System toolkit that we deployed across the enterprise. And so our teams don't just look at price cost. Obviously, it's an important indicator for sure. But we're also working closely with customers and with the channel to understand that real value that's delivered so that we're doing value-based as well.

And any risk around inflation here this year? You feel pretty good about being able to offset?

Nothing beyond what's already in the guide.

Okay. And then just from an 80/20 perspective, like where are you -- how far are you down this journey and where are you going to...

Early stages. Okay. But Nick, you can -- you lead it, so why don't you go ahead? .

It's never -- 80/20 is never over, right? Like a good 80/20 process constantly looking at your portfolio, your footprint and you're deploying the tools of 80/20. But I would say that with that, the exits in the portfolio due to 80/20 are behind us. We feel good about portfolio we have now, both from a product rationalization and a portfolio rationalization perspective. And so we're driving 80/20 to continue to gain efficiencies, but we don't expect to have headwinds from a volume perspective that we did over the last few years because of the 80/20 exits.

Okay. So you're on your front foot on that and get some benefits less revenue slippage.

That's right, leaning hard into Quad 1 within some of the businesses, and we talked about at Investor Day, we have businesses that are prime for the Quad 1 growth based on where they're at with the key ratio, looking at the material margin versus spend. Those businesses are front foot leaning in Quad 1 growth. And then we have other pockets that are more optimized. But again, that's not exit. It's more around the footprint, getting our processes and our SIOP ready provide that premium Quad 1 customer experience that we're developing and working through.

And then when we launched it, as I said, we didn't have -- when we launched transformation, primarily the sourcing piece transformation, we had not yet implemented 80/20, there's this huge opportunity to utilize the combination of 80/20 and sourcing again, primarily around those AAs and the upper Quad-1 to go out again and benefit from the sourcing or create, make versus buy strategic opportunities for Pentair. So I'm excited by that because that's a whole another wave that we would add to the transformation cycle.

Any updates on tariffs from recent news at all?

I haven't checked my Twitter, so I'm not sure that I have anything all that up to date.

But I mean, the latest round would provide a slight benefit to the second half of the year. Mostly, everything is locked in for the first half of the year, and we're not going to have to give back pricing or anything in our industries related to that adjustment or change. So we're slightly benefiting from that. We probably got a slight headwind on oil and what it could do to the second half on freight and things of that nature. And so net-net, we're still in a pretty good position, but wait and see with what's going to happen with the 301 investigations and what that could add back. Feel good about the pricing model though, again, 75% going through distribution, we would take the same tools we used in the past, and we would pass those tariffs or increased tariffs back through the industries that we play in.

And just to kind of back up a little bit, I mean, the 100 bps of margin expansion per year is the target and that's a pretty good one that gets you to high single-digit operating profit growth over the next couple of years, which I think is differentiated.

And we have a lot of cash.

Yes. One last one. Great segue. Capital allocation with maybe tell everybody that you're just going to buy back a ton of stock, and then we'll spend 10 seconds on acquisitions.

Go ahead. Go ahead. I don't know that I can tell everyone that we're going to buy a bunch of stock. But what I can tell you is we're going disciplined in looking at the capital allocation opportunities. We're going to be potentially 1x levered by the end of the year. We throw off a lot of cash, about 100% free cash flow conversion from net income. We're going to be opportunistic and strategic in the buybacks and compare any M&A deal to the value that could be created for shareholders through the buybacks. And we like the optionality that we have the year.

Yes, the stock really is like officially cheap. And I think you guys you do not get the credit for the cash conversion. Nobody everybody is mucked up their numbers adjustment wise, and nobody is really converting it 100% anymore. So your cash yield is also very attractive.

Till haven't found a way to do adjusted cash yet. Steve, so...

No, no, they haven't.

That's interesting. I look at cash is cash, and I do think that it's going to be hard for an acquisition right now to outpace the hurdle rate of what biometric stock would do. Yes, that's the way I look at it. .

Yes. Well, we're -- we think it's a cheap stock, and we're recommending it. So we were talking last night about I think you've been CEO now for 8 years, and there's definitely been a lot of change in my sector. So you're definitely one of the more tenured guys. So congrats on the run and keep it going, and thanks for joining us.

Appreciate it. Thanks Steve.

Thank you.