Great. All right, moving along here with John Stauch from Pentair. I think, what's your—how many years you've been doing this particular job for?
Just over seven.
Wow.
20 and a quarters.
Twenty and a quarters. Pretty good. We are going to just talk about stuff. John, you want to maybe give a little bit of an overview and update, and then we will—
Yeah, first of all, thanks for having us. You always look forward to this conference, and I look to extract as much as I give. Hopefully we're not all talking about tariffs too much, but just thank you for having us. Pentair, you know, before this whole particular topic on tariffs, I just want to set the stage and share with you what our guide and outlook was. You know, we're a water company, $4 billion in size, been working significantly to unlock a lot of the value from a lot of integration from acquisitions that hadn't been there. Really just driving a transformation journey around income. 50% roughly of our revenue is exposed to North American housing. It's been a challenged environment for about two and a half years in that regard.
We have been able to generally put, if you go back to 2019, about 6% CAGR growth on the top line, and we have driven substantial value from the transformation and the growth leverage. As we entered the year, we thought that we would suggest that the markets are not going to recover this year for most of the industries that we serve because they are sluggishly tied to the mortgage rates relative to individuals being able to buy new housing. We gave what we think is a really, really realistic outlook that had revenue growth of somewhere between 1% and 3%. We also thought we would get double-digit EPS growth again from that. I still believe, even with all the turmoil that we have experienced, we are feeling good about those guides, and I will answer those questions regarding it. We've done a lot of work on tariffs, so I know just about every calculation you can imagine from every scenario imaginable. I'm also willing to answer all those questions today too, Steve.
Every scenario imaginable.
Yes, I think so. It's like a Rubik's cube. Just tell me which side you want to.
What if they tax hydropower coming down from Quebec, and then Trump does 50% tariffs on steel? You got that one?
Yes, zero, because we don't have any of that.
Okay, good. That's good. Maybe just walk through the three waves of tariffs and that detail, and then how that plays into your pricing strategy so we can—you brought it up, we can get it out of the way.
Yeah, so appreciate the question. Everybody's got to have a hypothesis. It doesn't mean my hypothesis is right, but I just want to tell you our working hypothesis. We're looking at the tariffs in what I'll call three waves, two of them connected, one not connected. We'll start with the two 10% tariffs on China and steel and aluminum at 25%. We believe in all scenarios that I'll talk through that those are going to be likely as permanent as permanent can be, meaning we think for the foreseeable future that those tariffs are going to go into play and stick. Just want to share with you transparently, we have about $125 million in purchases out of China. That's, you know, you can multiply that by the 20%. And roughly we buy about $100 million of steel and aluminum, not from U.S.-made product.
You can calculate that. Just over $50 million from those two particular tariff impacts. Effective April 1 and April 15, we're planning to go with price increases across the businesses to, I'll say, more than recover those, because as we work with distributor dealers, we want to put the price increases in, and we generally don't want to have to change those prices on a repetitive basis. Our wave two tariffs quickly would be about a $30 million impact to Pentair, and we're viewing those as the rest of the world reciprocal tariffs. The countries that have tariffs on American product coming into them, and if we were to instill the same tariff back, that would be roughly about a $30 million headwind.
Under both of those scenarios, the round one pricing that I suggested would be enough to cover both of those particular aspects. The third one, which has gotten all the attention, which is the one I'm going to call wave three, would be the Mexico and Canada tariffs. If they were to be implemented, and if we wouldn't be able to honor the current trade agreement that we're now being able to honor, that would be about another mid-80s, like $80 some million of impact to Pentair.
Right.
We would price that accordingly as well. Under that scenario, though, I want to acknowledge that that's a lot of price, and I think at some point in time we would start to expect the consumer to pull back on those particular price levels. We put all that into the guide, but that's the framework we used.
Right. There is a potential there if that does come, you would basically have some wiggle room on price. You may get the same amount of revenue, but more price.
Slightly less demand.
Slightly less demand. You hit on the incremental of less demand, but you're obviously covering the tariffs with price, and that's kind of within the band of your guidance range.
That's correct.
You would not be changing guidance if that were the case.
That's correct.
A more tweak in price.
That's correct.
Okay.
Does that make sense? I mean, I just wanted to throw it all out there. You know, obviously knowing, you know, the supply chain, know how it affects you. You know, we've been on a transformation journey, so we know our suppliers, we know where we supply from. We are in the process of unwinding out of China supply, you know, as part of our global supply chain initiatives on our transformation journey. The awareness of all of this is step one, and then what you do with it business by business is the pricing in the step two that we're doing. You know, we're not receiving any pushback or competitors are generally in the same position we are. That's the math, or what you could say in the Excel column, where price would offset cost. Don't have any aspect of what that does overall to the demand in the industry.
Right. Are you, when you look at your competitors, any differences in footprint that allow you to, you know, maybe be opportunistic and share anything like that, or is everybody kind of on the same boat?
On the China and the steel and aluminum, I'm guessing we're generally all on the same playing field. I think business by business, depending on what happens to Europe and happens to Canada and Mexico, I think you're going to be slightly different on certain product lines than others. Generally what we'd be doing is across the board price increases, and therefore working to sell the product that we can make the most amount of profit from.
Okay. Just turning back to the top line and demand.
I'm not saying this is a positive thing. You know, you spend about five, ten minutes of whining, and then you get on with it. You know, it doesn't matter if it's supply chain disruptions, COVID. I mean, we all have playbooks, right? You just have to lean into the playbooks and, you know, make sure that we're winning against competition and make sure we're satisfying our customers the best way possible.
If you go through, like, you know, the tariff goes into place, you put price, an incremental line of price through, and then, you know, he wakes up on May 2nd and says, just kidding, do you, like, the channel will know that that cost is going away. Does this make these price creates a little bit different because it's more visible, or do you think you, you know, you can, you will just hold that price and everybody will be happy and margins will be high?
I know there's other industries like ours, Steve. I mean, we're about 75% of what we call distributor. So our product goes to a distributor, and distributor goes through the professional trade channel. In those elements, it is extremely disruptive to reduce price to your distributor. It causes a write-down of the particular inventory. The trickiness is getting certainty that these tariffs are going to stay and making sure that whatever we price, we're going to hold and we're going to honor those prices to the distributor. If we were to see that volatility, it would more show up on the way that we probably incentivize a dealer to pull the product through the channel than it would on an actual reduction in price.
Interesting. That's kind of a big difference to, in my view, from like just the inflationary stuff that's a bit less visible to these guys. I guess we'll just see how this plays out.
Yeah, I really don't think that's the scenario that we're going to be facing, though. I think that, you know, ultimately, if we end up on the path where we're going to, you know, push those tariffs through China or through Mexico and Canada, I think, you know, most of us are going to say we had a trade agreement, and that trade agreement was what we chose to do our investments in. I think ultimately, you know, you saw it with this last, you know, adjustment that those of us that have been honoring that trade agreement are going to continue to be able to operate under it. The way I feel that way is because I think you got to have a tariff on Mexico and Canada if Mexico and Canada don't honor the tariffs that we put on the rest of the world.
If you're a non-U.S. company, you could be buying out of China, buying out of Europe, and have a competitive advantage against a U.S. company to compete in the U.S. I think when you look at that framework, you start to get a little logic of maybe where the thought process is going, and it generally makes some sense.
Are you, when, you know, as you're thinking about it, the CEO in a boardroom, are you, do you think this is disruptive enough to your confidence to start pulling back some of your investments, or are you going to kind of give this a longer period of time to play out before you say, all right, now we have to act, this is kind of something that I don't really, you know, that I wasn't really signed up for? It seems like CEOs are kind of less cautious near term, but all of them tend to have like faith that this is kind of being done for like the right reasons.
Yeah. We're more broke, at least, you know, I lost a lot of money in the last three, four weeks. I'm sure everybody's looking at that as, you know, how's their confidence level in their investment. You know, we don't have a lot of big capital projects on the horizon, and we have less than about 15% of our businesses tied to large capital projects. It doesn't matter if it's large scale water infrastructure pumps or if it's, you know, food and beverage types of products. I mean, less than 15% of our overall business is tied to it. We started to see a slight pullback in the order rates on those particular product lines in Q4, and we called that out on our earnings call and our guide. I don't expect we're going to see those projects to be reinstated or to be accelerated until there's certainty on interest rates and then there's certainty on the tariff climate.
I guess what I'm talking about is your investments, whether it's you as a CEO looking at your investments, your hiring, et cetera. Like when do you, when do you dust off that like cost-cutting recession playbook, or are you willing to give this like a few months of?
I think we're a quarter or two away from that.
Okay. Okay. You want to.
I want to, I think it's a good question that Steve asked, and I think everybody's going to be in a different position. I mean, just as a reminder, I said our particular North American housing cycles, they're at historical lows. When you think about 60,000 pools, we weren't at that level. Last time we were at that level was 2008 and 2009. Also, the new housing starts in 2025 are expected to be what was 25% below what it was in 2019. Overall, you're looking at these housing starts and you're looking at these pools and saying, you know, this feels like a flat line, you know, bouncing along the bottom scenario, and most of our cost models reflect that.
Right. I don't see a lot of imbalances, you know, that are typical of a recession beginning. It's a lot of, you know, obviously non-fundamental stuff we're kind of dealing with. Just on the pool front, what are you seeing in terms of consumer behavior and how's your channel, you know, thinking about this upcoming season? What's the level of confidence there?
We're 10 weeks in-ish, I guess. Optimism was running relatively high in our dealer and in our network, primarily because, again, even if you're only going to do 60,000 pools in 2025 and you do 60,000 pools in 2024, it's not down, right? Which means that the aftermarket and the break and fix would continue to propel you forward. That's generally what our guide reflected, and that's generally what our industry sees. The good news scenario is most of the pools that are going in in 2025 are reflecting in permits, you know, 12 to 18 months ago, right? The pool usually gets the cement side of the pool, and the digging of the pool happens in the early stages of the home build. Ultimately, the pool equipment gets put in towards the tail end of the home build.
That cycle is generally how our business model reflects. Overall enthusiasm is what most people started out. I haven't seen anything, you know, this quarter that would change that, although I don't think we're going to get real indications until we head into Q2 and we see where all this settles out and then what the buying patterns are in Q2.
Right. And you're, so everything you're seeing now is pretty consistent, you know, week to week with what you expected. On the other segments, anything of note there to talk about?
No, we were optimistic about the food service industry as well. I mean, we have a couple anomalies in our Q1 relative to finishing a larger ice project in China in 2024 for a big local coffee player in China. That is creating a Q1 headwind for us. We have a couple areas in flow and water solutions where last year there was a build cycle anticipating a second half home recovery and irrigation recovery that never occurred. Our Q1 has a tough comp, and those comps get relatively easy in Q2, Q3, and Q4. Generally, when you look at our growth rates throughout the year, they are not representative of increasing, you know, growth in the industry. They are just easier comparisons against last year's comps.
Is there anything on the non-res side that you guys are seeing? I know you have a kind of a small exposure there.
No, I mean, just again, you know, we have commercial, we have infrastructure pumps. Those are generally reflecting the infrastructure investment. Those projects continue. We're growing low single digits. We expect that to be the environment, and we're continuing to, you know, add value by bringing other product lines to areas that we're good at, and that's been a great contributor to our growth and income.
Okay. Let's talk about transformation a little bit. You know, just remind us where we are in that process and what are the upsides, surprises, what have been some of the challenges, and where do we go from here?
Yeah, so we started on this transformation journey a few years ago. You know, having been the CFO for 11 years, which in retrospect would be like 44 quarters, right? I mean, I saw these acquisitions coming in, and I knew which ones were integrated and which ones were not. This journey has really been about how do we decide what the right platforms are to integrate into and how do we start getting the value in the business models from having a standard way of operating. The four big levers are pricing. You know, everybody says they do price well. I mean, we brought in outside help because we wanted a value-based price.
Think of internet scrubbing, think about comparing our pool pumps to competitor pool pumps, think about value analysis, and then going to the market with what we really know our values are. That's been a pricing initiative. That's not captured in the transformation part of the savings. As you look at our P&L walks, it's called out on its own, and you should see that we're getting a little bit more pricing favorability. The second one is sourcing, and we brought in an outside partner as well. The real reason is we needed to have a different Rolodex. You know, we needed somebody who's done this for the automotive industry, somebody who's done this with industries like ours, and can point us to other suppliers that had the capability and access to the goods we needed. It's been a tremendous success.
We've generated a ton of savings on the sourcing side and continue to see the value carrying over into 2025 and into 2026. The third element where we've struggled a little bit on, candidly, was operational excellence, which was our factories. While we've gotten a lot of productivity in that space and we've achieved at least what we promised, we didn't get the volume leverage yet because our markets didn't recover. We were counting on a lot of productivity going over the existing labor and overhead of our factories. This is where we've caused a little confusion externally. We brought in 80/20. 80/20 is filling that gap. As we have implemented 80/20 across our portfolio, we're getting the savings associated with repositioning the portfolio, and it's making up for a little bit of that volume leverage.
I want to throw that out there because that builds confidence in us that once we get these business models established and performing well, when we get the growth back, which we do believe we will, we're just going to leverage at a very high value going forward. The fourth one is organizational excellence. You know, how do you bring G&A and non-revenue generating functions in line? You know, we're getting about, you know, 50- 100 basis points overall from that contribution. All of this is funding growth, and all of this is, you know, in that simple walk that we provide every quarter. Our margins have expanded quite nicely, and we're confident that they'll continue to expand.
There is an element of growth, though, that I think you guys did tweak down your, you know, your forward growth rate. Just talk about what that change was, and is that, you know, part of this 80/20, you know, dynamic?
It's not tied to 80/20 as much. It's the realistic view that we didn't get the compounded average growth rate on the residential piece that we expected last year in 2024, and we're not getting it in 2025. While we expect to recover back to the mid-single digit growth rate, it's pushed to the right. Inherent in those long-term targets was the commitment to $100 million EBITDA every year, right? The mathematical formula is we still believe we're going to contribute and get to that level that we had promised in 2026. It's just going to be on a lower revenue number. If you took the 26% ROS and you divided it by the EBITDA of $1.2 billion, you're going to come back to the revenue number that we now have as an expectation there.
Got it.
If we grow on top of that, which I do believe is likely, we should expect to leverage and drive further margin enhancements, as I mentioned, because of that manufacturing effort that we've taken on.
As far as next year, anything moving around in the segments getting to that 26%? Any of the segments represent more of a bridge than others?
No. You know, I think we would expect water solutions to start contributing at a higher rate than they have in the past because they've got a high-performing business that should be growing faster. And then when you've got a pool business that has, you know, 35% EBITDA margins, when it grows, it really helps the mix.
Right. Just on the margin side, also on the bridge, outside of tariffs, your core inflation number seems to be a little bit higher than others. Some guys are talking about something that's lower. What's in there and what's driving that from just a core inflation perspective outside of tariffs?
Yeah, I want to be, you know, as least confusing as possible here. Heading into 2025 from 2024, we were seeing prior to all the tariffs a moderating inflationary environment, right? I think we would have thought that we would have seen input costs rise at a lower rate and get to what I'd call more normalized, meaning, you know, a point to point and a half would cover that inflationary environment, Steve. I think we had a little bit of hedge in ours, you know, and I think some of that is, you know, playing out more in the tariff line or more in the global commodity line now and the way that tariffs will affect steel, aluminum, copper. You know, there should be a favorability in the original forecast inflation that we had.
Right. So obviously with tariffs.
Yeah, it's all netted in.
At that stage of the game. Anything else on investments that you have to do?
No, I mean, we want to invest in our best businesses. Our food service businesses are really high quality. This is our ice business and our Everpure filtration business. We are investing in sales, marketing, and demand generation on that side. You know, we want to get pool owners and pool builders excited about automation again. Automation was designed to actually ease the dealer's life, right? Not having to go to a non-revenue generating service call in a pool. Because of price points and because of COVID and supply chain challenges, we have lost a little bit of the enthusiasm in the entire channel regarding those aspects. We want to invest differentially in there. I think if we can get that platform moving in pool, it is good for the entire industry.
How much of a revenue uplift would that be if you just went back to the trend that was happening before COVID?
The overall industry is only about 25-28% penetrated today, you know, on what you'd call an automated pool. High-end, it's almost close to 100%, but, you know, an average, you know, just basically one-body pool doesn't automate itself. The automation has two factors. One, it can make water chemistry a lot simpler. The second one it can do is a remote call to give a pre-service warning to come out and do something before it breaks. I think when you get that type of, you know, if we can get penetration 50%, which is what we always thought it would be, you start getting a dealer community being excited, almost like what mirrors the HVAC, to have that annualized service contract or to have a preemptive call that you can make that you can actually charge revenue for. That is what we're working on. The whole industry is working on it, and I just think it's a focus area.
If you think about like the average, you know, spend on my pool pad, like how much would the automation, you know, add to that?
An automation package in a high-end pool is going to be about $6,000. It is not an insignificant one. If you go to the lower-end pools, what we believe you can do is almost get it for free with our new IntelliFlo 3 pump. That is not a commercial. It really is the pump comes with embedded automation in it that can run itself and two other items on that pool pad. You can do the app and you can do a heater, you can do a lighting, you could do a pump configuration, and now you have got a low-end body of pool working off of that. It is free. It is embedded right into our pump itself.
When you get a higher-body pool, you have multiple pumps running, you have multiple lighting configurations, you have sometimes two filtrations, and that's when you need multi-faceted automation, which is what the automation platform itself does.
Before tariffs, any sign of price pressure in the channel from your competitors like, "Hey, we're in fluid?
Not price pressure, but we did see consumers, you know, choosing and defeaturing within the context of the lower-end to mid-end pools. I think the industry has talked about that pretty openly. You know, you've seen it everywhere. You know, do I need all those features and can I get away with a little less feature? Could I delay, you know, replacing my heater because, you know, it's the end of season and I'll buy it next season? We were seeing some of that for sure. That's, you know, continued. I think tariffs may add to that, and that's why we got to be thoughtful.
Right, around the volume side. Yep. And then the other two businesses you mentioned that are kind of the growthy ones, the, you know, the Manitowoc Ice side and what you're doing in food retail, maybe walk through that growth story a bit.
Yeah, so the food service industry, and I'll let you go check your own metrics on this, is a pretty resilient, you know, industry absent maybe the 2020 COVID experience. Other than that, it's, you know, plus 2%, down 1% in any given year. It's really about, you know, how do you continue to take advantage of volume share and price and how do you bring new features to bear? You know, I think overall, ice is really important to restaurants, as you know, and ice is really important to beverages, and beverages is where the profitability lies in any particular quick-serve restaurant. Ultimately, the Everpure filtration combined with our ice machines has been a really big synergy for us, but also the industry as a whole has changed and increased its penetration rate of filters.
To be honest, I think there was a competitor selling, and I think we took advantage of that a little bit in the sense that they might have lost the eye on their ball. Ultimately, the Everpure brand is highly valued, and the only little change we did in the selling model is we sell the initial install a little cheaper than we used to, and then we get the recurring revenue on the canisters on a regular basis. That was just a little insight that we got from the pricing analysis that we did under transformation.
Any other growth stories that you're, you know, excited about from a technology perspective longer term?
No, I think we have a couple, you know, early, but I do think we're on the cutting edge of a potential advanced water filtration for the whole home. Think of more like an HVAC-like unit that can go into a house and can give you high-quality water through your entire household without using salt. It's a technology and a practice that we use for commercial restaurants, and we've been able to package it into a box. We've got 22 beta tests underway right now, Steve. The technology is proving out. The one thing I want to be careful about, we want to bring it to market through a channel that values the pricing point that we want and values the recurring revenue stream that we would like to get from that particular unit.
We'll probably start it in high-end homes in the areas that have drastic needs and are constrained by the inability to buy salt. Then we might work it in more mainstream over time. You know, it's really sad when you look at building a new house and you've got large packages for countertops and cabinets and HVAC equipment, and you get down to water filtration, it's somewhere around $3,500 total when you're spending about $65,000 on HVAC. Right? I mean, there is a place in Arizona and Texas and Florida and California for high-end water solutions, but the industry has never sold it. That's what we're working on.
Got it.
I think we're a couple of years away, but I'm really excited by the technology and, you know, we're going to look to commercialize it in a high-value way for Pentair and share owners.
Portfolio, you guys have always generated a, you know, really good level of cash. Anything M&A-wise that's bubbling up that looks interesting? Maybe your stock is more interesting these days, but how do you think about capital allocation these days?
Yeah, so, you know, I think we're undervalued on cash flow. That's just my whining. You know, I think we, if you look at us on the EBITDA multiple, things are fair, you know, but I think when we get down to the PE side, and we do, we're not headquartered in the United States, so we do get an advantage tax rate, and I understand why people don't view that as permanent, but when you look at the cash flow, we have full access to global cash, and our cash flow is strong. I think our cash flow has been challenged by the transformation work that we've been doing, and we're not yet to optimize working capital levels. I see a lot more work, a lot more cash flow in our future.
We're not a capital-intensive company, you know, less than 2% of sales on capital in a year, and we have plenty of room even within that space. It really comes down to how do we want to utilize it. We've been paying down debt because debt's been higher cost, and I think it's going to skew to bolt-on M&A and buyback. ROIC matters. I think it's the only way you measure someone over a long period of time, and it's really hard to go buy big transformative deals at very high multiples and make the ROIC calculation work. While it might feel good on day one or it might feel good for the first four quarters, the fifth quarter rolls around pretty quickly, and you got to have a year-over-year comparison, and you got to go get the value to make that work.
We're really focused on bolt-on M&A and buyback shorter term and getting the debt to a realistic level, which we're starting to get to now.
And divestitures?
You know, same thing. I mean, they got to bring a value to the share owner to do them. You know, I think you got to continue to run businesses inside your portfolio the best you can, and the only reason you would actually have to sell them is if they're, you know, exhausting management time, attention, or capital, and they're not. We are going to continue to prove them, and if you can trade up, maybe, but I think you got to also look at the holes that you'd put in your portfolio if you sell assets without getting premium multiples for them.
Right. Are you seeing a bit more of a funnel, or at least in the beginning of the year, were you seeing a bit more of the opportunity funnel kind of coming your way? Just.
Yeah, you know, we.
More bankruptcies?
There's a couple, you know, larger deals out there that candidly we just chose not to participate in. While they're high-quality assets, I think, A, we don't have the money to do it, so that makes the clarity easy. B, I think it would be distracting to even participate. We just say no and we move on.
Okay. Any questions out there? We got about five minutes left.
Any tariff question? Yes.
Yeah, you know, you were.
You had a mic coming right there.
You were nicely transparent about the cost of different tariffs and how you respond to pricing standpoint. That third step of like supply chain to get to the point of manufacturing, how long does it take you to get to that? Or do you even bother giving?
No, I mean, listen, I think you guys know this. Ever since we knew who was going to be president, I think most companies have spent, at least we did, we spent an exhaustive amount of time thinking about the tariffs. I mean, he did run on a campaign saying, "I'm going to put tariffs in place." It is understanding all the different, you know, input sources and everything else you have. I feel like the best thing I can do is be as transparent as possible with you. You know, we all have to be a little bit more agile on what playbook we might actually have to go to. The one that's the hardest to get your head around is the reason we went to Mexico in the first place was the availability of labor. It was not just a cost trade.
It's hard to find manufacturing labor in the places that we're located in the United States. We're competing against Amazon and other companies who offer easier jobs at the same cost points. It's really hard to say if these were to become, you know, permanent, that we're going to pull back all of our manufacturing factories out of Mexico. By the time you're done with that, maybe a new administration comes in with a new particular view, right? Those are the ones that I would say are more longer term and we'd like some certainty. You'd like to know that you're going to make that investment and you're going to see a return from the investment if you're going to bring things back or re-maneuver. There's about a year right now to qualify a new supplier.
You know, and that's the reality. I mean, there's all laws and regulations as you sell things in and you've got to bring that part, you got to test that part. Those are the longer-term transitionary aspects that would be harder to just decide to move out on.
You believe maybe if you were in trade agreement, that will be the bottom line.
That's my hope, and it seems sensible that those of us that were honoring those global tariffs through our trade agreements, because that's what we were doing, right? We don't get to avoid a China-based tariff by being a U.S. company with a Mexican entity. We have to pay those tariffs to China. We bring that through a Mexican entity, and therefore we paid the tariffs when it crosses the Mexican border. That was the concept of that trade agreement, and I would hope that that's where we land.
Steve, you mentioned it takes a long time. You got to go through a few different products. Has there been, you know, that was also part of the, we're going to unwind regulation. Has there been any shifting to that?
Not yet. You know, we do, I'd say the majority of our product is bought through trade agreements, which means we probably have some, you know, lows, let's call it mid to high single digits. That's not part of that, like 5%-8% of the purchases. That might be a little more challenging to work through the qualification process to get it, but it's a rounding error in the whole scheme of where we are. Generally, those are agreements with companies where they're making a subcomponent. We're buying that subcomponent directly into U.S. manufacturing. That might be what they're referring to. As far as longer-term qualifications, it does take time. There's a lot of regulatory agencies, and it takes a long time to get something. Yes. It's true. Thank you.
Any exposure to any of these on that front, on like on the DOGE and IRA, you know, getting, you know, perhaps neutered a bit? Any exposure to any of these federal subsidies or government spending or anything like that?
No, we're, you know, we're a subcontractor to a subcontractor, and it's a real small rounding error as far as the total revenue that we would have exposed in that area. Chances are it might have been moving out of Quad 4 in our 80/20 analysis anyway.
Right. Okay. Any other questions?
Thank you.
All right. Thanks.
I know these are exciting times, so I appreciate your attention.
Exciting is one way to put it.