Watts Water Technologies, Inc. · NYSE:WTS
Watts Water Technologies — Q2 2024 Earnings Presentation
21 slides from Watts Water Technologies's earnings presentation, Aug 8, 2024
Slide 1: Q2 2024 Earnings Conference Call
WATTS WATER TECHNOLOGIES Q2 2024 EARNINGS CONFERENCE CALL August 8, 2024 © 2024 Watts Water Technologies, Inc.
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: Q2 Overview and 2024 Outlook
Q2 Overview and 2024 Outlook Q2 Performance Operations Market Expectations Outlook Q2 results exceeded expectations Bradley, Josam and Enware Global GDP remains positive Maintaining full year outlook integrations progressing well Organic sales growth was flat, with Weak Europe macroenvironment ▲ H1
Slide 4: Sustainability Progress
Sustainability Progress Sustainability Report Our sustainability efforts are foundational to our mission of improving comfort, safety and 2024 quality of life for people around the world through our expertise in water technologies Selected as one of America’s Climate Leaders by USA Today Named to Ne
Slide 5: Q2 2024 Financial Summary
Q2 2024 Financial Summary Sales ($M) Adj Operating and Adj EPS* FY FCF ($M)* $597 Adj EBITDA Margin %* $120 $2.46 $533 $89 EBITDA % $2.34 21.5% -50 bps +12% 21.0% Reported Flat +5% +35% Organic* -70 bps OM % 19.5% 18.8% 2023 2024 2023 2024 2023 2024 2023 2024 • +12% reported • Adj. EBITDA $126M, +10
Slide 6: Q2 2024 Regional Results
Q2 2024 Regional Results Sales ($M) Adj Operating Margin %* Sales and Business Adj Operating Profit* and Margin • +22% reported • Adjusted operating income ~$109M, +19% AMERICAS +5% organic • Margin drivers $448 24.3% +17% acquired ▲ Price / mix ▼ Inflation Up 22% • Strong growth in core valves, boi
Slide 7: Q3 and Full Year 2024 Outlook
Q3 and Full Year 2024 Outlook* Maintaining FY Outlook Q3 Outlook Reported +7% to +12% Reported +5% to +8% Sales Growth Organic -4% to +1% Organic -7% to -4% Acquired: Americas ~$210M to $215M Acquired: Americas ~$60M to $62M 19.6% to 20.2% 18.7% to 19.3% Adj EBITDA Margin -30 bps to +30 bps -130 bps
Slide 8: Summary
Summary Better-than-expected Q2 results in the Americas offset weaker European demand Maintaining full year outlook while increasing investments Integration of Bradley, Josam and Enware progressing well Balance sheet remains robust and affords capital allocation flexibility 8 © 2024 Watts Water Tech
Slide 9: Appendix
Appendix 9 © 2024 Watts Water Technologies, Inc.
Slide 10: Other Full Year 2024 Outlook Inputs
Other Full Year 2024 Outlook* Inputs Other FY Inputs Corporate Costs ~$56M Net Interest Expense ~$8M to $9M Stock-Based compensation ~$21M Adj Effective Tax Rate ~25% Share Count ~33.5M Capex ~$50M Dep’n & Amort ~$55M * As of August 7, 2024. See Appendix for reconciliation of non-GAAP measures to th
Slide 11: Watts Water Snapshot (NYSE: WTS)
Watts Water Snapshot (NYSE: WTS) 2023 Key Statistics With 5 Year Performance vs. 2018 $8.27 17.8% $1.44 $2.1B 115% 20.3% 105% Adj. EPS Adj. Operating Margin Dividends Net Sales 5-yr Avg Free Cash ROIC (GAAP) 5-yr Avg Reinvestment +17% CAGR +550 bps Expansion +11% CAGR 6% CAGR Flow Conversion +710 bp
Slide 12: Key Themes
Key Themes Recognized Aligned to Focus on Accretive Capital Resilient Leader Long-term Secular Innovation and Deployment and Business Model Trends and Profitable Growth Strong Balance Tested Across Diverse Markets Sheet Economic Cycles Global reach Solutions aligned Strong execution Targeting >100%
Slide 13: Consolidated Statements of Operations
Consolidated Statements of Operations Second Quarter 2024 2023 B/(W) % Net sales $597.3 $532.8 $64.5 12% Cost of goods sold 312.5 280.0 (32.5) (12%) Gross profit 284.8 252.8 32.0 13% 47.7% 47.4% +30 bps Selling, general & administrative expenses 173.1 150.8 (22.3) (15%) 29.0% 28.3% -70 bps Restructu
Slide 14: Reconciliation of Reported Sales to Organic Sales
Reconciliation of Reported Sales to Organic Sales Second Quarter Americas Europe APMEA Total Reported net sales 2024 $448.1 $114.1 $35.1 $597.3 Reported net sales 2023 $366.9 $135.6 $30.3 $532.8 Dollar change $81.2 ($21.5) $4.8 $64.5 Net sales % increase (decrease) 22% (16%) 16% 12% Increase due to
Slide 15: Reconciliation of GAAP to Non-GAAP Measures
Reconciliation of GAAP to Non-GAAP Measures Second Quarter Six Months 2024 2023 2024 2023 Net Sales $597.3 $532.8 $1,168.2 $1,004.5 Reported operating income $111.5 $100.4 $208.2 $185.1 Reported operating margin % 18.7% 18.8% 17.8% 18.4% Adjustments for special items: Restructuring $0.2 $1.6 $1.4 $1
Slide 16: Adjusted Operating Income by Segment
Adjusted Operating Income by Segment Second Quarter 2024 Second Quarter 2023 Americas Europe APMEA Corp. Total Americas Europe APMEA Corp. Total Reported operating income (loss) $108.4 11.3 6.5 (14.7) $111.5 $91.6 21.5 2.5 (15.2) $100.4 Operating margin % 24.2% 10.0% 18.5% 18.7% 24.9% 15.8% 8.4% 18.
Slide 17: Reconciliation of Net Cash Provided by Operations to Free Cash Flow
Reconciliation of Net Cash Provided by Operations to Free Cash Flow Six Months 2024 2023 Net cash provided by operations – as reported $130.9 $100.5 Less: additions to property, plant, and equipment (16.9) (11.6) Plus: proceeds from the sale of property, plant, and equipment 5.7 - Free cash flow $11
Slide 18: 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 June 30, 2024 December 31, 2023 Current portion of long-term debt $- $- Plus: Long-term debt, net of current portion 258.7 298.3 Less: Cash and cash equivalents (279.4) (350.1) Net debt ($20.7) ($51.8) N
Slide 19: Calculations of EBITDA & Gross and Net Leverage
Calculations of EBITDA & Gross and Net Leverage Second Quarter Second Quarter Trailing Twelve Months June 25, 2023 June 30, 2024 Through June 30, 2024 Sales $532.8 $597.3 $2,220.0 Net income – as reported $75.9 $82.0 $276.0 Plus: Interest expense, net 0.4 2.2 3.7 Plus: Income taxes 24.7 27.5 94.2 Pl
Slide 20: Reconciliation of Adjusted Non-GAAP Effective Tax Rate
Reconciliation of “Adjusted” Non-GAAP Effective Tax Rate Second Quarter Six Months 2024 2023 2024 2023 Income before income taxes – as reported $109.5 $100.6 $204.7 $184.1 Provision (benefit) for income taxes – as reported $27.5 $24.7 $50.2 $43.5 Effective tax rate – as reported 25.1% 24.6% 24.5% 23
Slide 21: Reconciliation of GAAP and Non-GAAP Measures in 2024 Outlook
Reconciliation between GAAP and Non-GAAP Measures Included in 2024 Outlook* Third Quarter Full Year 2024 2024 Net Sales Reported net sales growth +5% to +8% +7% to +12% Forecasted impact of acquisition / FX -13% -11% Organic net sales growth -7% to -4% -4% to +1% Operating Margin Operating margin ra
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