Good day, and thank you for standing by. Welcome to the Q2 2021 Pentair Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question- and- answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then zero. I would now like to hand the conference over to your speaker today, Jim Lucas. Please go ahead. Thanks, Michelle, welcome to Pentair's Q2 2021 earnings conference call. We're glad you could join us. I'm Jim Lucas, Senior Vice President and Treasurer at Pentair and Investor Relations. With me today is John Stauch, our President and Chief Executive Officer, and Bob Fishman, our Chief Financial Officer. On today's call, we will provide details on our Q2 performance as outlined in this morning's press release. Before we begin, let me remind you that during our presentation today, we will make forward-looking statements. 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, and today's release. We will also reference certain non-GAAP measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in the investor relations section of Pentair's website. We will be sure to reserve time for questions and answers after our prepared remarks. I would like to request that you limit your questions to one and a follow-up in order to ensure everyone an opportunity to ask their questions. I will now turn the call over to John. Thank you, Jim, and good morning, everyone. Please turn to slide number four, titled Executive Summary. We were pleased to deliver a strong Q2 with sales up over 30%, adjusted EPS growth greater than 40%, and free cash flow up over $100 million in the first half of the year. I would like to thank our Pentair teams for helping deliver these results, even in the face of unprecedented material shortages and inflation. Our orders continued to grow and our backlog ended the quarter at record levels. We believe our order trajectory gives us increased confidence, not only in our ability to keep growing in the second half, but it also gives us comfort that the top-line momentum we have built the past several quarters will carry over into next year. Our transformation work is on track, and we have built a strong pipeline of initiatives across the enterprise. Regarding the current inflationary environment, we have implemented further price increases, and we expect the price-cost gap to further narrow in the second half. Our cash flow remained robust, and our balance sheet is in a very solid position. We have a strong M&A pipeline tied to our strategic growth initiatives, and we plan to remain disciplined with our capital allocation. We are introducing Q3 guidance and raising our full-year expectations once again, which Bob will give more detail on later in the call. Our forecast reflects our expectations that material shortages and inflation are not going away, nor will they improve materially. We believe we have better visibility than we have had in the last few quarters, and that our proven focus around manufacturing and sourcing gives us the tools to navigate the current environment. We are encouraged to see our commercial and industrial businesses recovering and our residential businesses remaining seasonally strong. As mentioned earlier, our backlogs support continued growth. Please turn to slide 5, labeled Building a Track Record of Consistent Growth. At our June 10th Investor Day, we introduced several targets for 2022-2025, including mid-single-digit sales growth, 300 basis points margin expansion, and a 10%+ CAGR for adjusted EPS. Our 2025 targets were based on our guidance as of June 10th, which we are raising once again following our strong Q2 performance. Our longer-term target provided at Investor Day would now be based off of our revised guidance. We have experienced significant growth since the second half of 2020. We believe the momentum that we have created will continue into the foreseeable future. We continue to believe that we have a well-positioned portfolio benefiting from many positive secular trends. Our pool business serves a large installed base, water treatment helps solve water quality issues for residential and commercial customers, and Industrial & Flow Technologies serve some attractive niches like biogas, in addition to a large installed base of pumps. While our consumer businesses are seasonal, we do not believe them to be cyclical. While our focus is on driving the core to create consistent value creation, we are investing in a few strategic growth initiatives to accelerate the top line. These include getting closer to the consumer and pool, expanding water treatment further into services, and biogas and carbon capture within Industrial & Flow Technologies. As we drive transformation more broadly across the entire enterprise, we expect that this will drive both ROS expansion and help fund growth initiatives. Finally, we believe our balance sheet provides a great degree of flexibility to drive further upside, primarily through M&A tied to our strategic growth initiatives. I would now like to turn the call over to Bob to discuss our performance and our financial results in more detail, after which I will provide an update on our overall strategic position. Bob? Thank you, John. Please turn to slide 6, labeled Q2 2021 Pentair Performance. Q2 sales grew 32%, with core sales increasing 28%. Consumer Solutions grew core sales nearly 40%, and Industrial & Flow Technologies delivered core sales growth of 12%, the second consecutive quarter of growth. Segment income was up 40%, and return on sales expanded 110 basis points to 18.6%. Adjusted EPS increased 42% to $0.84. Consistent with our guidance, the Q2 did not see price fully offset inflation, as we saw higher inflation that we have continued to implement price increases to help offset. The second half should see price costs start to even out. An unprecedented amount of material and wage inflation, coupled with robust demand, has contributed to price reading out at a slower pace. Corporate expense was $26 million in the quarter as we recorded higher levels of compensation expense, given the performance our businesses have delivered this year. Our tax rate was 17.4% in the quarter, as we now expect the full-year tax rate to approximate 16%. This is due primarily to higher levels of North American income as our residential businesses continue to grow at strong double-digit levels. Please turn to slide 7, labeled Q2 2021 Consumer Solutions Performance. Consumer Solutions sales growth was 44%, as both businesses delivered strong double-digit growth. Segment income increased 48%, and return on sales expanded 80 basis points to 24.9%. Consumer Solutions experienced significant inflation during the first half as demand continued to grow. Pool experienced sales growth of 50% in the quarter. While we have seen significant growth two quarters in a row to start the year, we believe pool dealers are doing their best to keep up with robust demand. The theme of consumers investing in their backyards continued. The pool team has significantly increased capacity, even in the face of material shortages and inflation. Backlog remains at record levels, and orders have more than doubled. Even with the record year, we believe the improvement in orders and strong backlog gives us improved visibility that growth will continue looking ahead to next year. The macro trends continue to be favorable, and the installed base of pools continued to grow. Demand for new pools remains strong, with many builders reporting backlogs into next year. We believe consumers remain committed to enhancing their at-home quality of life, and enjoying a pool is a major part of the experience for many consumers. In addition to new pool construction, aftermarket growth remains strong as consumers have used their pools more. Water treatment delivered 35% sales growth as residential demand remained robust and commercial showed strong signs of post-pandemic recovery. Our residential business grew nearly 20%, and our commercial business grew sales by over 40%, excluding the contribution from KBI in the quarter. Overall, we believe Consumer Solutions is well-positioned to deliver continued double-digit growth in the second half based on strong order and backlog trends. We expect price to read out further in the second half and close the gap on the higher inflation experienced in the first half. Please turn to slide 8, labeled Q2 2021 Industrial & Flow Technologies Performance. Industrial & Flow Technologies increased sales 17% in the quarter as its end markets further recovered and the business continued to execute its strategy. Segment income increased 30%. Return on sales expanded 160 basis points to 15.7%. Residential Flow grew at a double-digit rate for the third consecutive quarter. Orders continued to exceed sales. We expect this seasonal business to end the year well-positioned within all of its channels. Commercial Flow increased sales 11% and further built backlog. The commercial recovery has gained momentum with orders continuing to improve. We expect growth to continue for this smaller part of the segment. Industrial Filtration delivered 14% sales growth as the shorter cycle aftermarket showed further signs of improvement, particularly within food and beverage. We experienced double-digit increases in both orders and backlog. Industrial & Flow Technologies remains focused on reducing complexity, selective growth, and margin expansion. Please turn to slide 9, labeled Balance Sheet and Cash Flow. Free cash flow continued to be a great story, with over $100 million improvement year-over-year. We generated $340 million of free cash in the first half. We have returned $117 million to shareholders through dividends and buybacks in the first half. We also repaid a $104 million bond that matured during the quarter and paid approximately $80 million to acquire KBI. We continued to invest our capital wisely, we ended the quarter at just under one times leverage. We are extremely proud and excited to see our return on invested capital exceed 18%. As we look at our cash flow needs going forward, we plan to remain disciplined in our capital allocation approach. We plan to continue working the M&A pipeline and to buy back at least $150 million of our shares this year. Please turn to slide 10, labeled Q3 and Full Year 2021 Pentair Outlook. We are initiating Q3 and updating our full year 2021 guidance. For the quarter, we expect sales to grow 16%-19%, segment income to grow 18%-23%, and adjusted EPS to grow 16%-21%, to a range of $0.81-$0.85. Our forecast reflects our expectations that material shortages and inflation are not going away, nor will they improve materially. For the full year, we expect sales to grow 21%-23%, segment income to increase 30%-34%, and adjusted EPS to grow 32%-36% to a range of $3.30-$3.40. Embedded in our full-year sales guidance is anticipated growth in Consumer Solutions around 30%, with pool expected to be up nearly 40% and water treatment up over 20%, as commercial is expected to further recover and KBI is expected to contribute in the second half. Also incorporated in the revised guidance is anticipated low double-digit growth for Industrial & Flow Technologies. Below the operating line, we expect corporate expense to be around $80 million, given the higher levels of compensation expense in 2021, given the record performance expected this year. We expect corporate expense to go back to more normalized levels next year. We now expect net interest to be in a range of $15 million-$16 million and our tax rate to be around 16%. We anticipate the share count to average between 167 million and 168 million shares for the full year. Capital expenditures are expected to be around $60 million, while depreciation and amortization is anticipated to be around $80 million. We continue to target free cash flow to be greater than or equal to net income. I would now like to turn the call over to Michelle for Q&A, after which John will have a few closing remarks. Michelle, please open the line for questions. Thank you. Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. We ask that you limit yourself to one question and one follow-up question before reentering the queue. To withdraw your question, please press the pound key. Our first question comes from the line of Mike Halloran with Baird. Your line is open. Please go ahead. Hey, good morning, everyone. Thanks for taking the questions. Can you just give some context behind the incremental confidence you're seeing in the pool trajectory from here? Maybe just how far is the backlog stretching out, maybe a little more detail on some of the commentary you're getting from the channel, inventory levels, and any more context would be great. Well, as we said in the prepared remarks, the backlog is at record levels. Demand at an all-time high and remains very strong. We see pool builds into next year and beyond. The metrics around demand are very strong. Certainly, with what we see now, we have confidence that the growth will continue for a variety of reasons, everything from second homes being built to people spending more time in their backyards and a number of different products coming out. I believe that will continue. We have confidence into next year. Inventories are still catching up. We're working through that to satisfy our distributors and dealers. Just in that question, how far out is your backlog specifically tracking at this point, or is it just meeting what's available in the channel? Mike, this is John. First of all, we look at the pool season as coming to a completion at the end of September. Then we start the next pool season when we get to October. Our first goal is to get the backlogs and the inventories related to this pool season out. As Bob mentioned, we feel like we're in a really strong position regarding that. Then we've got to work on next year, which we feel is also going to be strong demand. I think another level of confidence is we've been able to start to attract labor and keep labor in our pool factories, which was harder to do three to four months ago. We're starting to manage the supply chain, the uniqueness of that, availability of product, and being able to demonstrate the agility in the factories to get product out to customers. Those are the differences of how we feel. As far as higher confidence or not, Mike, I think we've always been confident this is a good business and that this is a good demand. We wanted to make sure we were able to make progress on meeting that demand throughout the year. That makes a lot of sense. On the other side of the business, just maybe some incremental commentary on the recovery cadence you're seeing in the IFT. Sustainability, what customers are saying, how it's tracking versus normal seasonality, any incremental color there would be great. Yeah, I'll start with that one. We were very pleased again to see the IFT growth return. The residential piece of the business within Flow continues to be strong. The recovery in commercial has also helped the Flow business. Within industrial, food and beverage has been a nice growth area for us. It continues to grow. To be able to guide to the full year low double-digit growth for us is exciting after the challenging year last year. We expect the momentum to continue as well in IFT. Mike, I would just add that we saw our commercial on filtration businesses and water treatment finally get back to levels that they saw in 2019. Obviously, it was an easy compare in 2020 coming off the dip that we had there. We're encouraged on those trends, and we're encouraged as more restaurants and hotels and hospitality open globally, that we'll continue to see sequential improvement there. Appreciate it. Thanks, John. Thanks, Bob. Thank you. Thank you. Thank you. Our next question comes from the line of Joe Giordano with Cowen. You guys, good morning. Morning. Morning. Hey, can you kind of just talk us through regionally how if you had to scale 1- 10 how crazy pool has been regionally? Are certain markets just more out of whack from a go-forward basis? I live in New Jersey, so I know Northeast new pool installations is probably at levels that have never been seen before. Can you kind of scale how this is in more traditional markets? Maybe it's more balanced than some of these growth rates might appear when you normalize this for the comps. Yeah. We had a couple things going on this year, as you probably know. One, we had the Department of Energy changeover from single speed to variable. We're already expecting that we're going to see strong growth in that particular product line. Obviously the acceleration of new pools and remodeled pools is really putting a significant demand nationally on that product, and that is the same product generally sold in all of the pool regions. State by state, you've got these disruptions like Texas that has been disruptive for everybody, and the fact that all of that aftermarket demand still needs to be satisfied off of what happened with the freezers. The rest of the markets, I would say that they're just accelerated, meaning that the rate of new builds are consistent across those areas. The aftermarket demand replacement cycles or the additive, I want more products in my pad, have been traditionally across the Sun Belt states. Right now, I would say the demand is not easing, and we're all trying to catch up with that demand and work through our supply partners to do that. If I can just sneak one in, and apologies if I missed it in the very beginning. Any update on timeline of new product introductions from some of these in-home point-of-use systems like with Rocean? Yeah, that's a next-year product introduction for us as we work to try to get the technology up to speed and one launch that somewhere around the end of the year, the early part of next year with a soft launch, and then expect to ramp that up throughout next year. Great. Thanks, guys. Thank you. Thank you. Our next question comes from the line of Brian Lee with Goldman Sachs. Your line is open. Please go ahead. Hey, guys. Good morning. Thanks for taking the questions. Just to follow-up on Joe's question, just any initial views on the new pool market for 2022? I know it sounds like from listening to other supply chain players, the general expectation for about 110,000 or so call it this year. Wondering if you think that number grows next year. With respect to backlog trends, I know you're at record, kind of what sort of visibility can you quantify to any degree you have with builders currently heading into next year? I think builds will continue to grow. I think it's capacity constrained generally by labor and product availability beyond just pool equipment as we have to do the landscaping in those backyards. We continue to think that 2022 will be a robust year there. Additive to that number, we always look at remodels. The pools that need to also be done in addition to those new pools. Where we're really pleased is the penetration rate of the products on the pad, and more and more awareness of heaters, automation, salt-based chlorinators. Those types of products is where we've really seen the acceleration. I think we want to continue to grow from here, and we believe that we have right now enough visibility to feel like 2022 is a growth year. All right. Fair enough. Just my follow-up on the price increase. You mentioned the latest price increase. Can you give us some quantification around what that level was, when that was implemented, or when that's going into effect? What parts of the portfolio here? If I look at your Consumer Solutions segment for the back half, it seems like you're implying kind of a 20%, 25% year-on-year growth number for the back half year. How much of that is price? How much of that is volume? I'm assuming a lot of that's going through that part of the portfolio here. Thanks, guys. What I'll do is just share a little bit of color around price and inflation overall for Pentair. In Q2, price was a two-point benefit for us. Inflation was quite high, close to five points. As we move into the back half, think of inflation in that five to 5.5 point range, so slightly higher. Think of price reading out at closer to four points in the back half. We improve from Q2 and narrow the gap, but it continues to be a challenge. The whole material shortages is a challenge for our ops and supply team, and we're really appreciative of all of the work that that team has done. In the Q2, they really did a nice job helping us drive that 32% sales growth. They did have the luxury of more raw material sitting in that opening inventory. As we move into Q3 and Q4, the challenge for the team is really to deal with the lumpiness of the material shortages. Every week is interesting as they plan the production schedule, and the team is doing a remarkable job to achieve the numbers that we've guided to. Just to follow-up on your price question. We have three general business models. In a dealer distributor short cycle businesses, obviously it's easier to work with the supply chain and then work with the channel partners to raise price in those areas, and they usually get through relatively quickly. We have our more OEM related businesses or our larger company programs, which takes time. We've got the projects that you quote, and you're basically dealing with the cost of inflation until you quote that next set of projects. That's the other color I'd bring across those three business models, and it all blends to the numbers that Bob shared with you. All right. Thanks, guys, for all the color. Pass it on. Thank you. Our next question comes from the line of Jeff Hammond with KeyBanc Capital Markets. Your line is open. Please go ahead. Hey, good morning, guys. Morning. Hey, the incrementals in the quarter were certainly better than I thought. I think, how you guys guided on the June Analyst Day, I think that was a concern. Seems like price is more of a help in the back half, but what kind of surprised you to the better in the Q2, and how should we think about incrementals in the back half? I think we got some of the IFT productivity that we were expecting, and it read out, and we feel like that's generally sustained, which was definitely better. Then, obviously, when we get more pool product out the door, it generally drives higher levels of margins for Pentair. We were able to get capacity levels up in pool, and we benefited from that. Okay. Just on this view into 2022, just in the strength here in pool, where do you think some pull forwards happening or stuff that maybe isn't repeatable? I know there's good demand trends on new and remodel, but where have you seen maybe the most kind of pull forward in terms of consumer attitudes? Well, I think every single channel partner we have is spending a disproportionate amount of time trying to work with us to get product to the next job they're doing right on the new build side. When you see the increase in the new build simultaneously with the demand for aftermarket, you're trying to balance those two things at the same time. I think some of the traditional filter and pump are obvious because every pool pad needs those, and they have to be repositioned to where the jobs are and how do you get the inventory where you need. Then some of the more nice-to-haves in the pool that can be deferred and/or added later is really where we think the majority of the backlog gets repositioned for next year. Okay. Thanks, John. Thank you. Thank you. Our next question comes from the line of Bryan Blair with Oppenheimer. Your line is open. Please go ahead. Thanks. Good morning, guys. Morning. I was hoping you could offer a little more color on KBI integration and how the service network is influencing your commercial water treatment recovery and prospects going forward. KBI is a really exciting acquisition for us that closed in the Q2. We now are able to provide services within the commercial space. It's a business that we can learn from and then leverage to help grow in that area. Really strong start for us in that business and exciting to see the footprint and the opportunity within that area that we really haven't been able to drive into. That's excellent. I think you said 40% total growth for commercial treatment in the quarter. I apologize if I missed it. Did you cite the organic figure? Yeah. The growth for the full year in water treatment. Well, it was 35% in the slides, I think, Bob, right, for Q2. Then there's just a modest contribution from KBI in the quarter. Then for the year, in the full year outlook that Bob gave, I'm thinking of roughly $20 million a quarter for KBI. Okay. Appreciate that. John. Yeah. The growth that we gave for the Q2 excluded the 40%, excluded the contribution from KBI. It did. Okay. Appreciate that clarification. Thank you. With that momentum, John, you stated the last couple of quarters that it's unlikely that commercial demand would recover to 2019 levels. With the pace, the momentum that you have in the business now, does that change your mind? Well, actually, as I said, I think we're at 2019 levels now. We took a dip last year, and now we're recovering to modestly growing versus 2019. We do believe that starts to accelerate from here, but we need the rest of the world to continue to open. Primarily hospitality would be the one area that is not yet as robust, driven by global travel primarily. Once that gets going, I think we feel like we're growing off of 2019 levels again. That's great. Thanks. I'm good. Thank you. Our next question comes from the line of Nathan Jones with Stifel. Good morning, everyone. Morning. I'm just going to follow-up on the discussion there on commercial water treatment being back to 2019 levels. I can't imagine that the market is actually back to 2019 levels. Can you talk about where you think you've gained share in this market? What's driving your ability to get back to 2019 levels when I can't imagine that the market could possibly be back to that level yet? Yeah, there's some spaces that we have a higher participation rate in, Nathan, like quick-serve restaurants. Also you got gas station service. Those are beverage hotspots, as you can imagine. We participate in both filtering the ice and also filtering the beverage dispense. That is an area that has definitely picked up faster than it was in 2019. The rest of the full-service restaurants and hospitality have been slower to recover, but it's still recovering. Okay, your mix is more skewed to stuff that does have a market level back to where it is. Yeah, we benefit from that, yes. Got it. Volume-based, right. I've got to follow-up on that price-cost equation as well. Narrowing the gap in the second half, pretty big gap there in the first half. In the unlikely event that we get kind of stable input prices, would you expect to be net price-cost positive in 2022 as you make up these deficiencies from 2021? Don't know yet. We definitely have learned a lot about inflation. The sourcing inflation is usually easier to predict and see, and I think we've done a relatively good job on that one. Where I think we've still been playing catch up this year is labor inflation and the amount of wage increases that have occurred throughout the year, Nathan. We're making sure that we're using best practices as we quote the next projects and next year's projects ahead of time, and then we're making sure that we keep agility in focus as we think about how to price more effectively on the shorter cycle businesses. Great. Thanks for taking my questions. Yep. Thank you. Our next question comes from the line of Ryan Connors with Boenning & Scattergood. Your line is open. Please go ahead. Great. Thanks for taking my questions. I had a big quick- picture question on sort of the aftermarket opportunity. You alluded earlier to this idea that there are so-called nice-to-haves on a pool pad that maybe aren't going in right now because of the supply chain constraints. My question is, how should we think about the growth in the installed base over a couple of nice years here on new builds and what that does to the structural aftermarket opportunity in the next several years, three to five years out? Is that meaningful, that expansion in aftermarket? Presumably, that's a good thing from a mix perspective. Can you just give us your thoughts there? Yeah. We look at it as every new pool that goes in is additive to the 5.3 million in-ground pools that exist today. As people use their pools more and more, the number one thing they look to is the water chemistry of their pools. How do they make it more enjoyable and comfortable as an experience? Those things tend to drive higher degrees of automation and consumer awareness, and also then lead you to figure out what else you can do to either self-manage or self-monitor your pool or control heat and/or the other comfort aspects of your pool. We look at all this as good news to build out the long-term demand in the channel. Okay. My other one was, I just want to get your reaction. There's a lot in the news about this global minimum tax rate and a lot of movement on sort of tax rates. I know you've got the unique jurisdiction as a corporate. Any thoughts there on how that could impact Pentair, or not from a tax rate standpoint, depending on how that plays out? We're in the process of assessing what the impact would be. Still too early to really give a perspective. From our early view here is that there would be some upward drift in the tax rate, but not significantly higher at this point. Certainly better than a number of our competitors. Yep. Okay. Fair enough. Thanks for your time. Thank you. Our next question comes from the line of Andy Kaplowitz with Citigroup. Your line is open. Please go ahead. Hey, good morning, guys. Morning. John, you mentioned you were excited about how much smart automation and heaters and really new pool pad products in general are adding to remodel and aftermarket growth. Can you give us a little more color into how much these new upgrades to the pool pad are maybe more secular? Have you invested enough in your sales and product capability to take advantage of this trend? What do they tell you about the longer-term growth potential in pool? How much do you think they could contribute to longer-term growth? Great question. The industry's been stuck, and we've been with it somewhere around just modestly in the double- digits of automation. I think just with the recent trends and more mesh networks and getting Wi-Fi into the backyard on a more dependable basis, it creates more opportunities for more automation. You really need awareness, and you need people to use the pool or to care to really drive that behavioral change, and that's what we're most encouraged by. There's also better technology at great price points that we're participating in to manage and monitor water chemistry, and then to begin to determine what's necessary to balance those water areas. That's where I'm really super excited. We also saw, and we share this openly, that as people use their pools more, the heater matters. That was always a nice-to-have on the pad and on the older builds, as most people remodel now, they're putting those heaters in, both for the spa and for the pool. We've seen the trends in lighting earlier. We saw the trends working around some of the variable speed pump penetration. We're now starting to see that extend to the other capabilities around the pool. I think it's a few points of overall pad penetration for the industry over the next several years, and that encourages us and excites us. John, I might have missed this in the prepared remarks, but at your Analyst Day, you had mentioned that you're right in the middle of a 12-week sprint to come up with ideas to form more of the basis of the transformative plan that you laid out at the Day in terms of margin improvement. Maybe you could update us on what sort of ideas have come out of that. Any sort of interesting observations you would make? My official report out is this Thursday with the executive team, and I'm looking forward to that set of brainstorming actions. We've engaged a lot of people so that we've got a voice from the broader organization. It's required patience on my part to not jump and kind of know what the answers are. I'm not going to jump ahead of that. I have seen the funnel, and I've seen the list of ideas, and I would say that it's more sizable than I originally thought. Now it's about how do we put the programs around it to action them and to think about sequencing them to derive the value from them. Really encouraged right now on the participation of the organization and the ideas that are starting to surface. Yeah [crosstalk] John, I've probably been a little less patient than John. I would confirm that the pipeline of opportunities is very robust. A lot of complexity reduction initiatives. There's huge opportunities to drive margin expansion and to really help with those Analyst Day numbers. We said in the prepared remarks that even with a higher guide this year, we're going to go ahead and add on to this year the 300 basis points of margin expansion into the future, while revenue will grow at that mid-single digit plus number that we shared at Analyst Day. Transformation will be a big part to us achieving those results. Embedded in all of this is ease of doing business with Pentair. It'll be a much better situation for our distributors and dealers as well. Appreciate it, guys. Thank you. Our next question comes from the line of Josh Pokrzywinski with Morgan Stanley. Your line is open. Please go ahead. Good morning, guys. Hey, Josh. John, just on some of the inventory commentary out there in distribution or in the kind of dealer channel. Any sense for what that's like kind of on a, I guess, a normalized basis, maybe absolute levels versus 2019? I think days on hand are probably pretty low, just given how strong the growth pace is. If we were to sort of dial that back a little bit or normalize that, would inventory sort of be in the right zip code, or would they still be kind of low on an absolute basis? Josh, without getting too specific, we are lower than we should be, and our customers and channel partners are asking us every single day to pick up the pace and get them more equipment. That's the way I would say it. It's exhausting to the plant teams to keep up with the demand, and the sell-throughs, you can articulate from other people's releases, and you see that we're trying to do what we can to catch up with it. Got it. That's helpful. Just touching on a last question that I think got asked on some of the other quasi-discretionary stuff, you mentioned heaters. How much were those up relative to the rest of the pool business? I would imagine a lot of that is more kind of first fit than necessarily replacement of an existing heater. Is that fair? Yeah. I mention it because we saw that really go into the back half of last year in a broader way, if you recall. Now when we think about anniversarying the back half, we're still growing on top of those levels, which gives us encouragement that these aren't necessarily one and done, but we're seeing long-term penetration of these product lines. Got it. Appreciate the color. Thank you. Thank you. Our next question comes from the line of Scott Graham with Rosenblatt. Your line is open. Please go ahead. Good morning, John, Bob, and Jim. I have a couple questions about price cost, and I was wondering, Bob, would you be willing to split out the labor piece of the inflation that you saw in the quarter? Roughly speaking, 2/3 material, 1/3 labor. Maybe help us maybe understand a little bit on the labor side. Are you talking about increases to the compensation pool for your current employees to retain them because your business unit heads are saying, "Hey, we're going to lose people," so you kind of got to get more aggressive there. Are these new employee adds? Could you put a little color on that, if you don't mind? Yeah. I think it's both. When you look at having to add to your labor base, you are confronted with what are the real market dynamics to add. You have to go back and you have to make sure that your existing loyal employees are paid at least that, if not more. It creates a dual impact. One, trying to get the new people, making sure that your current employee base is well taken care of. Thank you for that. On the productivity, particularly IFT, is that the beginning of some of the reduction in complexity, the $10 million? Is there a piece of that in there? Yeah, there's a big piece of that in there. I think we're really encouraged with their efforts around that, and we think that That's why Bob also mentioned transformation. I think we learned from certain categories that have done this. We've seen how it reads out in better efficiencies on sourcing, and also less complexity for customers. We're really encouraged on that trend, and we expect to bring that across the enterprise in a faster way. Okay. Thank you. Last question. This is a question you might not be able to answer, I'm just going to shoot anyway. The prices of assets are pretty inflated, speaking of. We have IFT, which is a business that we need to do some fixing, improve the margins there. It looks like, particularly as of Thursday, you're going to have a very clear path to do that. There was an acquisition announced in this space, I say in this space, in sort of a multis area, just in the last couple of days where it fetched them about 17x EBITDA, which is your multiple. I'm just assuming that the pool multiple is higher than the IFT multiple embedded within your valuation. Is there any thinking around IFT spinning that off at some point down the line, particularly with assets prices where they are now? Yes, Scott. The way I look at it is I think we have a really good IFT business that continues to demonstrate progress towards its goals. I'm really encouraged by the way it's growing. Double-digit core growth this quarter and starting to build out the order pipeline. I'm also encouraged about its focus, its complexity reduction, and its commitment to the margin expansion. Now I'm going to get to the transformation work, and I believe that this business has significant margin expansion in front of it. I believe the course of action is that it's going to create value for Pentair while it's part of our portfolio. It is a big, important part of our portfolio. Got it. Thank you both. Thank you. Our next question comes from the line of Rob Wertheimer with Melius Research. Your line is open. Please go ahead. Thank you. Good morning, everybody. You touched on this a couple times before, but water treatment seemed like it had a really nice cyclical rebound, but that there's less as of yet impact from product changes and, I guess, distribution changes in residential and commercial. Is that correct? Is some of the work you're doing underlying really kind of allows us to call some of that growth more structural than the nice rebound that we've had? Then just maybe just kind of reiterate for us the timeline of the impact you see from what you're doing there. Thank you. Just within water treatment, to remind you, roughly $800 million pro forma business. We have residential, and we have commercial, and the residential has been fairly strong. A little lumpy through COVID with the ability to get in people's houses or not as far as what we're trying to do there. Now it's at a point where I think we've got steady state growth. If you recall, when commercial happened, there was generally a closure of most restaurants and hospitality, and offices, where people drink water, and that was a huge setback to our business last Q2. That has slowly been recovering as people return to more of the normal of the way it used to be pre-COVID. We're not yet back globally to where we expect it to be. I think our addition of KBI gives us the ability to add services components on top of products, which strategically is what we think our customers want. We're very encouraged about the early signs there. I think we're starting to return, and I think we're now in what I'd say every part of that portfolio growing versus being more residentially led as it was in the last several quarters. Thank you. Our next question comes from the line of Julian Mitchell with Barclays. Your line is open. Please go ahead. Hey, good morning. This is Trish on for Julian. Hey. Hey. Just on free cash flow, it's been very strong year-to-date. Under normal seasonality, I think second half free cash flow represents 50% or 60% of the full year free cash. Should we expect this normal seasonality to occur this year? Maybe if you could just walk us through the moving pieces there for the balance of the year. Yeah. Balance of the year free cash flow remains strong. What's really helping us is we get off to a fast start at the beginning of each quarter. The linearity is very strong. I expect another strong free cash flow year following last year, and we'll continue to drive it over 100% of net income. Great. Maybe one more on IFT. I know you guys have talked about the significant margin expansion opportunities there, but how should we think about inorganic opportunities there? Can you just remind us what end markets or products you might look to increase your exposure to within that segment? We hinted at Analyst Day. We really right now like the carbon capture and also the sustainable gas parts of that portfolio, and we feel like we've got a fairly good position there, and we would love to continue to scale and also be able to provide the regional partners the solutions they need. We are, at the heart of everything we do, a membrane-focused company. We like to look into filtration and have opportunities to expand our filtration capabilities as well. As a reminder, even though we use some of these technologies in the Consumer Solutions, they initiate those applications in IFT, and we cross-pollinate those across both segments. Those are the two areas that I would say are definitely areas of focus in the IFT portfolio. Great. Thanks, guys. Thank you. Thank you. Our next question comes from the line of Deane Dray with RBC Capital Markets. Your line is open. Please go ahead. Hi, this is [crosstalk] Tyler on for Deane. Well, hi, Tyler. On for Deane. Sorry if I missed this, could you discuss some of the supply chain issues that you guys are seeing? Obviously, you mentioned product availability in some of the prepared remarks, are you seeing other supply chain issues like port congestions or anything there? Yes, yes, and yes. I mean, everything that you're hearing, we're experiencing in some type of inconsistent way, right? We'd say that even though we've had availability of most of the supply we need, it's very inconsistent in its predictability of when and how it's coming, which has forced tremendous agility in our factories to rearrange in a lean way where we put the labor efforts. Sometimes we're producing 75% of a product and then coming back and finishing 25% later, to give you an example. That's why we're very complimentary of our teams, as Bob said, because it's required all kinds of different skills to be able to move forward. Main challenges to us would be chips, would be drives, would be motors. Those would be the areas that are in high demand for the products that we serve. Great. Thank you for that. Could you guys provide just any updates on some of your new IoT products that have launched recently or planning on launching? Yeah. We're excited by that. I think, first of all, really excited about the momentum we're building in IFT on a lot of their IoT-enabled services ability. We've launched products in the Consumer Solutions side that allow you to connect to our Pentair Home app, and we continue to add product capability to give you a better consumer experience. I'd say most of those have been soft launched in 2021, and we'll expect to accelerate in 2022 and beyond. I have to make a plug, because I know Deane would be very interested in this, Tyler, is we feel like we're really making some progress on some smarter filtration technology for pool as well, and we're excited, as we mentioned at Analyst Day, about the progress on that technology and making pools clearer and more visible and utilizing less chemicals to achieve the same outcomes. Great. Thank you very much. Thank you. Thank you. I'm showing no further questions, and I would like to turn the conference back over to John Stauch for any further remarks. Thank you, Michelle, and thank you for joining us today. 2021 is experiencing a phenomenal year of growth, and we believe the future continues to be bright for Pentair. We believe we have strong business platforms that are industry leaders in their designated spaces. We are in spaces that are growing faster than the overall global markets and are propelled by spectacular trends. We have carved out exciting strategic growth priorities in which we have already begun to demonstrate performance. Further, our transformation journey is designed to unlock value to allow us to grow faster than the industries that we participate in and help us to expand margins rapidly by 2025. Finally, our balance sheet is strong, and we believe we will continue to get stronger, supporting incremental value creation above and beyond what our base businesses can do on their own with tuck-in M&A. Michelle, you can conclude the call. This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.