Watts Water Technologies, Inc. · NYSE:WTS
Watts Water Technologies — Q4 2023 Earnings Presentation
21 slides from Watts Water Technologies's earnings presentation, Feb 13, 2024
Slide 1: Q4 2023 Earnings Conference Call
WATTS WATER TECHNOLOGIES Q4 2023 EARNINGS CONFERENCE CALL February 13, 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: 2023 Recap and 2024 Outlook
2023 Recap and 2024 Outlook Q4 and FY 2023 Performance 2023 Operations Market Expectations 2024 Outlook Q4 organic sales decline of 1% vs. Closed acquisition of Josam Global GDP lower; still positive ▲ Price ▼ Multi-family & non prior year; challenging comp of 11% January 1, 2024; integration instit
Slide 4: Q4 2023 Financial Summary
Q4 2023 Financial Summary Sales ($M) Adj Operating Margin %* Adj EPS* $548 $1.97 15.8% $502 14.3% $1.60 +9% Reported -1% +150 bps +23% Organic* Q4 2022 Q4 2023 Q4 2022 Q4 2023 Q4 2022 Q4 2023 • +9% reported growth • Adj. operating income $86M, +21% • Operations +$0.29 • -1% organic decline • Margin
Slide 5: Q4 2023 Regional Results
Q4 2023 Regional Results Sales ($M) Adj Operating Margin %* Sales and Business Adj Operating Profit* and Margin • Adjusted operating profit ~$78M, +19% • +10% reported sales growth; +1% organic • Margin drivers AMERICAS • Tough PY compare; 11% organic growth in Q4 2022 $387 20.2% • Acquired Bradley
Slide 6: Full Year 2023 Financial Summary
Full Year 2023 Financial Summary Sales ($M) Adj Operating Margin %* Adj EPS* FY FCF ($M)* $2,056 17.8% $8.27 $1,980 $281 16.4% $7.13 $201 +4% Reported +1% +140 bps +16% Up $80M Organic* 2022 2023 2022 2023 2022 2023 2022 2023 • +4% reported • Adj. operating income $365M, +13% • Operations +$0.91 • F
Slide 7: 2024 Macro Environment and Planning Framework
2024 Macro Environment and Planning Framework Monitoring Unfavorable Favorable • Elevated interest rates • Geopolitical uncertainty • Recent acquisitions • Europe declining • Price / cost dynamic • Institutional and light industrial new construction • Multi-family new construction • Slower, but posi
Slide 8: Q1 and Full Year 2024 Outlook
Q1 and Full Year 2024 Outlook* Q1 2024 Full Year 2024 Reported +15% to +19% Reported +6% to +12% Sales Growth Organic +1% to +5% Organic -5% to +1% Other Key Full Year Inputs Four extra shipping days Americas:-3% to +2% Acquired: Americas ~$55M Europe: -9% to -4% Corporate Net Interest APMEA ~$9M AP
Slide 9: Summary
Summary Strong Execution Drove Record Margins in 2023 Focusing on Integration of Bradley and Josam 2024 Outlook Reflects Challenging Global Macros; Focusing on Growing Sub-verticals Maintaining Long Term Strategy and Investing for the Future Balance Sheet Remains Strong Post Acquisition and Provides
Slide 10: Appendix
Appendix 10 © 2024 Watts Water Technologies, Inc.
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 Aligned with Strong execution Targeting >100% Large
Slide 13: Consolidated Statements of Operations
Consolidated Statements of Operations Fourth Quarter 2023 2022 B/(W) % Net sales $547.5 $501.9 $45.6 9% Cost of goods sold 291.8 283.3 (8.5) (3%) Gross profit 255.7 218.6 37.1 17% 46.7% 43.6% +310 bps Selling, general & administrative expenses 173.1 147.0 (26.1) (18%) 31.6% 29.3% -230 bps Restructur
Slide 14: Reconciliation of Reported Sales to Organic Sales
Reconciliation of Reported Sales to Organic Sales Fourth Quarter Americas Europe APMEA Total Reported net sales 2023 $387.0 $128.0 $32.5 $547.5 Reported net sales 2022 $350.4 $128.3 $23.2 $501.9 Dollar change $36.6 ($0.3) $9.3 $45.6 Net sales % increase (decrease) 10% - 40% 9% (Decrease) increase du
Slide 15: Reconciliation of GAAP to Non-GAAP Measures
Reconciliation of GAAP to Non-GAAP Measures Fourth Quarter Year 2023 2022 2023 2022 Net Sales $547.5 $501.9 $2,056.3 $1,979.5 Operating income - as reported $78.8 $67.2 $350.9 $315.0 Operating margin % 14.4% 13.4% 17.1% 15.9% Adjustments for special items: Restructuring, net of gain on sale of asset
Slide 16: Adjusted Operating Income by Segment
Adjusted Operating Income by Segment Fourth Quarter 2023 Fourth Quarter 2022 Americas Europe APMEA Corp. Total Americas Europe APMEA Corp. Total Reported operating income (loss) $75.4 17.3 4.2 (18.1) $78.8 $64.3 13.4 3.3 (13.8) $67.2 Operating margin % 19.5% 13.5% 12.8% 14.4% 18.3% 10.5% 14.4% 13.4%
Slide 17: Reconciliation of Net Cash Provided by Operations to Free Cash Flow
Reconciliation of Net Cash Provided by Operations to Free Cash Flow Year 2023 2022 Net cash provided by operations – as reported $310.8 $224.0 Less: additions to property, plant, and equipment (29.7) (28.1) Plus: proceeds from the sale of property, plant, and equipment - 5.2 Free cash flow $281.1 $2
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 December 31, 2023 December 31, 2022 Current portion of long-term debt $- $- Plus: Long-term debt, net of current portion 298.3 147.6 Less: Cash and cash equivalents (350.1) (310.8) Net debt ($51.8) ($163
Slide 19: Calculations of EBITDA & Gross and Net Leverage
Calculations of EBITDA & Gross and Net Leverage Year Ended December 31, 2023 Net income – as reported $262.1 Plus: Interest expense, net 1.0 Plus: Income taxes 87.4 Plus: Depreciation 30.1 Plus: Amortization 13.2 EBITDA - Earnings before interest, taxes, depreciation and amortization $393.8 EBITDA M
Slide 20: Reconciliation of Adjusted Non-GAAP Effective Tax Rate
Reconciliation of “Adjusted” Non-GAAP Effective Tax Rate Fourth Quarter Year 2023 2022 2023 2022 Income before income taxes – as reported $77.4 $64.7 $349.5 $307.6 Provision (benefit) for income taxes – as reported $21.6 ($3.9) $87.4 $56.1 Effective tax rate – as reported 27.9% -6.0% 25.0% 18.2% Inc
Slide 21: Reconciliation of GAAP and Non-GAAP Measures in 2024 Outlook
Reconciliation between GAAP and Non-GAAP Measures Included in 2024 Outlook* First Quarter Full Year 2024 2024 Net Sales Reported net sales growth +16% to +20% +6% to +12% Forecasted impact of acquisition / FX -11% to -19% -5% to -17% Organic net sales growth +1% to +5% -5% to +1% Operating Margin Op
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