Pentair PLC

Welcome to the Pentair second quarter 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star and then two. Please note this event is being recorded. I would now like to turn the conference over to Jeff Thompson, Vice President, Investor Relations. Please go ahead.

Thank you, Operator, and welcome to Pentair's second quarter 2026 earnings conference call. On the call with me are John Stauch, our President and Chief Executive Officer, and Bob Fishman, our Interim Chief Financial Officer. On today's call, we will provide details on our second quarter performance as outlined in this morning's press release. On the Pentera Investor Relations website, you can find our earnings release and slide deck, which is intended to supplement our prepared remarks during today's call and provide a reconciliation of differences between GAAP and non-GAAP financial measures that we will reference. The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP. They are included as additional clarifying items to aid investors in further understanding the company's performance, in addition to the impact these items and events have on the financial results. Before we begin, let me remind you that during our presentation today, we will make forward-looking statements which are predictions, projections, or other statements about future events. Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of Pentair. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to carefully review the risk factors in our most recent Form 10-Q and Form 10-K. Please note that during the presentation today, we will be making references to record financial results. These references reflect the time period post the end-vent separation in 2018, unless noted otherwise. Following our prepared remarks, we will open the call up for questions. Please limit your questions to two and reenter the queue to allow everyone an opportunity to participate. I will now turn the call over to John.

Thank you, Jeff, and good morning, everyone. We appreciate you joining us today. As you saw this morning, in addition to our quarterly results, we announced that we have agreed to acquire Keiko Group Holdings, a market leader in hydronic and water-based solutions. This exciting transaction aligns with our strategic priorities and allows us to accelerate our growth trajectory. First, let's begin with an executive summary on slide four. The second quarter was slightly better than the July 14th pre-announcement and reflects efforts to realign pool channel inventory ahead of the 2027 pool season. Pool remains a fantastic business and we believe it is well positioned for return to robust growth in 2027. Importantly, Water Solutions and Flow remain on track to deliver full-year expectations and we expect to see improved revenue growth from these businesses in the second half of 2026. Lastly, the addition of TACO creates another platform in Water Solutions that aligns with Investor Day themes and accelerates our growth profile. Please turn to the Q2 overview slide on slide five. As we shared in the pre-announcement on July 14th, Q2 was a challenging quarter driven by the underperformance of our pool segment and specifically the acknowledgement that we would not realize the pool dealer growth that we had originally planned. While we are disappointed with the impact this had on our overall business, I want to emphasize two important points. First, our underperformance was concentrated in pool. The flow and water solutions businesses delivered record return on sales even when excluding the benefit of tariff refunds. further reinforcing the resilience of our balanced portfolio. Second, we believe the pool challenges are temporary and we remain confident in the attractive nature of the segment and our position as a market leader. As we'll discuss in the following slide, we have a clear plan to address the near-term challenges we are facing and return the business to robust growth as we have historically realized. Second quarter adjusted operating income included approximately 35 million of tariff refunds across our three reporting segments. During the quarter, we repurchased 150 million shares in the open market as we continue to put our capital to work to drive long-term shareholder returns. For full year 2026, we are reaffirming our adjusted EPS guidance range of $4.60 to $4.80 communicated through our pre-announcement on July 14th. Please turn to our pool overview and growth action plan on slide six. The year-over-year decline in pool sales was largely driven by a more pronounced inventory alignment with major channel partners than previously expected. Since learning the full magnitude of the inventory reduction during the quarter, we acted with urgency to address the issue and we are confident that the inventory levels will be optimized by the end of the Q3, setting us up nicely for the 2027 pool season. A smaller portion of the sales decline was related to moderating sell-through due to ongoing end market pressure across discretionary residential end markets in North America. In addition, we estimate modest movement in share on some older pool pads where we aren't capturing our fair share of replacement equipment installed 10 to 15 years ago. Our action plan includes initiatives to resolve this issue and increase aftermarket share moving forward. As these dynamics became clear throughout the course of the quarter, we initiated a comprehensive review of our pool business to determine how best to adapt to our current environment and ensure we are positioned for success heading into next year's pool season. This review showed us a few key points. First, we remain an industry leader with a premier brand, strong customer base, and a large installed base with leading positions in energy efficient and smart connected pool technologies. We believe the challenges we are facing are temporary and do not reflect a structural change in the pool market or our long-term opportunity and finally we need to deepen dealer engagement and accelerate customer driven innovation to deliver the value-added differentiated solutions that have become synonymous with the Pentair brand. We have a clear action plan to invest in our highest performing growth initiatives and position the pool business for return to more normalized performance in 2027. These actions include aligning the pool sales organization marketing strategies by region and realigning incentives with the industry growth priorities to ensure we have the right products and service levels in our most important geographic markets. Implementing a dealer-centric and segmented sales process to drive enhanced engagement with channel partners and increase aftermarket growth. And increasing investment in customer-driven innovation to expand core pool product categories with more differentiated value-added solutions. We are focused on the work underway and the opportunities ahead. Poole remains an attractive market with compelling profitable growth opportunities. We are confident the actions we are taking will strengthen the business and position it to deliver on those opportunities and we expect to build momentum throughout the rest of 26 and beyond. Now let's turn to the strategic rationale and benefits of TACO acquisition on slide seven. We believe TACO is a natural fit for our business. It advances our growth strategy and meets our discipline M&A criteria. Tayco broadens Pentair's innovative suite of water solutions, accelerating growth and strengthening our ability to serve more customers across more commercial, infrastructure, and residential applications. The combination also brings together Pentair's innovation engine and Tayco's strong engineering and product development capabilities. Together, we believe there are meaningful opportunities to develop new solutions that address customers' evolving water needs, including efficiency, reliability, and sustainability. Importantly, this transaction significantly strengthens our positions in attractive high-growth commercial end markets, including HVAC, data centers, and related infrastructure build-outs. Demand for solutions in these markets is supported by key secular trends, including infrastructure investment, digital infrastructure, and the AI revolution. Energy Efficiency, and Sustainable Water Management. Our increased exposure in these areas will allow us to create an attractive, diversified growth engine and enhance our resilience. During our investor day earlier this year, we identified the residential utility room and building a broader, more scaled offering for the North American plumber as a key growth priority. TACO expands the breadth and scale of our plumbing offering and positions us to increase share in this high growth category. TACO will also expand our channel network, creating compelling cross-selling opportunities. TACO is a strong manufacturer representative model and established relationships with OEMs, distributors, contractors, engineers, and end users. TACO's large installed base will allow us to leverage these channel opportunities to expand our aftermarket business. In fact, approximately 85% of its revenue is associated with replacement products, maintenance, and system upgrades. that durable demand will create more customer touchpoints and deepen those relationships, supporting growing recurring revenue streams and enhancing our resilience. This isn't just an opportunity to bring in an outstanding business into Pentair. It's an opportunity to bring in an outstanding growth-focused team. We look forward to welcoming the TACO team to Pentair, and we are confident that our shared values and commitment to excellence will allow us to seamlessly integrate our organizations as we work to capture the compelling opportunities ahead. With that, I'd like to welcome back Bob Fishman, who is rejoining Pentair as interim CFO while we search for a successor. Bob previously served as the Pentair CFO for six very successful years, and we couldn't be happier to have him back on the team. Bob will walk through our financial results in more detail. Bob?