Watts Water Technologies, Inc. · NYSE:WTS
Watts Water Technologies — Q1 2023 Earnings Presentation
18 slides from Watts Water Technologies's earnings presentation, May 4, 2023
Slide 1: Watts Water Technologies Q1 2023 Earnings Conference Call
Watts Water Technologies Q1 2023 Earnings Conference Call May 4, 2023 May 3, 2023 © 2023 Watts Water Technologies, Inc. 1
Slide 2: Forward Looking Statements
Forward Looking Statements Certain statements in this presentation constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are related to forecasts of sales, margins, earnings, earnings per share, effective tax rate, capital
Slide 3: Q1 Overview
Q1 Overview Q1 Performance Operations Market Expectations Outlook • Results better than expected; • Completed acquisition of Enware • Global GDP lower than prior • Challenging comps in Q2 (16% positive price, mix and in Q2; integration going well year, but revised upward; R&R organic growth in Q2 20
Slide 4: Q1 2023 Financial Summary
Q1 2023 Financial Summary Sales ($M) Adj Operating Margin %* Adj EPS* YTD FCF ($M)* +4% Organic* +220 bps +18% Up $36M $1.92 $28 $472 17.9% $463 $1.63 15.7% Q1 2022 Q1 2023 -$8 Q1 2022 Q1 2023 Q1 2022 Q1 2023 Q1 2022 Q1 2023 • +2% reported • Adjusted operating income $84M, +16% • Operations +$0.30 •
Slide 5: Q1 2023 Regional Results
Q1 2023 Regional Results Sales ($M) Adj Operating Margin %* Sales and Business Adj Operating Profit* and Margin • +3% reported and organic • Adjusted operating profit ~$73M, +25% AMERICAS • Solid price realization • Margin drivers: • Mix shift: non-residential increase, residential ▲ Price, mix $323
Slide 6: Q2 and Full Year 2023 Outlook
Q2 and Full Year 2023 Outlook* Q2 2023 Full Year 2023 Other Key Full Year Inputs Organic -4% to Flat Total: -5% to +2% Corporate Growth Acquired sales ~$7M [Prior Same] Costs ~$52M Acquired sales ~$20M Adj Op Total 15.7% to 16.3% Interest 17.2% to 17.8% ~$8M Margin [Prior 15.4% to 16.0%] Expense Adj
Slide 7: Summary
Summary Solid start to 2023 with Q1 results better than expected Increasing full year operating margin outlook; maintaining full year organic sales growth Closed on Enware Australia acquisition in Q2 Managing the price / cost dynamic Investing for the future; increasing dividend 20% Increasing FY Op
Slide 8: Appendix
Appendix May 3, 2023 © 2022 2023 Watts Water Technologies, Inc. 8
Slide 9: Watts Water Snapshot
Watts Water Snapshot Company Highlights WTS 1874 North Andover, MA ~4,600 NYSE Year Founded Headquarters Employees 24 >75 >$15B One Watts Total Brands Countries Served Addressable Market Operating System Revenue Breakdown FY 2022 5% 20% 25% Americas 40% Single Family Repair & Replace Residential Geo
Slide 10: Invest With Us
Invest With Us RECOGNIZED LEADER • Global reach with leading market positions in commercial and residential water space ALIGNED TO LONG-TERM SECULAR TRENDS AND DIVERSE MARKETS • Addressing global secular macro themes • Large installed base; strong repair and replacement footprint FOCUS ON INNOVATION
Slide 11: Consolidated Statements of Operations
Consolidated Statements of Operations (M) (Unaudited) First Quarter 2023 2022 B/(W) % Net sales $471.7 $463.2 $8.5 2% Cost of goods sold 253.6 264.6 (11.0) (4%) Gross profit 218.1 198.6 19.5 10% 46.2% 42.9% +330 bps Selling, general & administrative expenses 133.7 126.1 (7.6) (6%) 28.3% 27.2% -110 b
Slide 12: Reconciliation of Reported Sales to Organic Sales
Reconciliation of Reported Sales to Organic Sales (M) (Unaudited) First Quarter Americas Europe APMEA Total Reported net sales 2023 $323.2 $128.3 $20.2 $471.7 Reported net sales 2022 $313.9 $129.9 $19.4 $463.2 Dollar change $9.3 ($1.6) $1.2 $8.5 Net sales % increase (decrease) 3% (1%) 4% 2% Decrease
Slide 13: Reconciliation of GAAP to Non-GAAP Measures
Reconciliation of GAAP to Non-GAAP Measures (M) (Unaudited) First Quarter 2023 2022 Net Sales $471.7 $463.2 Operating income - as reported $84.7 $71.5 Operating margin % 18.0% 15.4% Adjustments for special items: Restructuring ($0.3) $1.0 Operating income - as adjusted $84.4 $72.5 Adjusted operating
Slide 14: Adjusted Operating Income by Segment
Adjusted Operating Income by Segment (M) (Unaudited) First Quarter 2023 First Quarter 2022 Americas Europe APMEA Corp. Total Americas Europe APMEA Corp. Total Reported operating income (loss) $72.5 19.2 4.0 (11.0) $84.7 $57.9 21.1 3.0 (10.5) $71.5 Operating margin % 22.4% 15.0% 19.7% 18.0% 18.4% 16.
Slide 15: Reconciliation of Net Cash Provided by Operations to Free Cash Flow
Reconciliation of Net Cash Provided by Operations to Free Cash Flow (M) (Unaudited) First Quarter 2023 2022 Net cash provided by (used in) operations – as reported $33.4 ($2.0) Less: additions to property, plant, and equipment (5.1) (5.6) Free cash flow $28.3 ($7.6) Net income – as reported $64.7 $5
Slide 16: Reconciliation of Long-term Debt to Net Debt to Capitalization Ratio
Reconciliation of Long-term Debt (including current portion) to Net Debt to Capitalization Ratio (M) (Unaudited) March 26, 2023 December 31, 2022 Current portion of long-term debt $- $- Plus: Long-term debt, net of current portion 147.8 147.6 Less: Cash and cash equivalents (311.8) (310.8) Net debt
Slide 17: Calculations of Gross and Net Leverage
Calculations of Gross and Net Leverage (M) (Unaudited) Trailing Twelve Months through March 26, 2023 Net income – as reported $261.7 Plus: Interest expense, net 6.2 Plus: Income taxes 59.4 Plus: Depreciation 27.5 Plus: Amortization 12.0 Earnings before interest, taxes, depreciation and amortization
Slide 18: Reconciliation between GAAP and Non-GAAP Measures Included in 2023 Outlook
Reconciliation between GAAP and Non-GAAP Measures Included in 2023 Outlook* Second Quarter Full Year 2023 2023 Net Sales Reported net sales growth -3% to 1% -4% to +3% Forecasted impact of acquisition / FX (1)% (1)% Organic net sales growth -4% to Flat -5% to +2% Operating Margin Operating margin ra
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