Watts Water Technologies, Inc. · NYSE:WTS
Watts Water Technologies — Q1 2024 Earnings Presentation
20 slides from Watts Water Technologies's earnings presentation, May 9, 2024
Slide 1: Watts Water Technologies Q1 2024 Earnings Conference Call
WATTS WATER TECHNOLOGIES Q1 2024 EARNINGS CONFERENCE CALL May 9, 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: Q1 Overview and 2024 Outlook
Q1 Overview and 2024 Outlook Q1 Performance Operations Market Expectations Outlook Q1 performance ahead of Bradley, Josam and Enware Global GDP remains positive Raising full year sales and expectations integrations progressing well operating margin outlook Weak Europe indicators Reported and organic
Slide 4: Q1 2024 Financial Summary
Q1 2024 Financial Summary Sales ($M) Adj Operating and EBITDA Adj EPS* FY FCF ($M)* $571 Margin %* $2.33 $1.92 +60 bps $37 $472 +21% 20.6% Reported EBITDA % 20.0% +6% +21% $28 Up $9M Organic* +30 bps OM % 17.9% 18.2% 2023 2024 2023 2024 2023 2024 2023 2024 • +21% reported • Adj. EBITDA $118M, +25% •
Slide 5: Q1 2024 Regional Results
Q1 2024 Regional Results Sales ($M) Adj Operating Margin %* Sales and Business Adj. Operating Profit* and Margin • +30% reported • Adjusted operating profit ~$93M, +28% • Margin drivers AMERICAS +11% organic $419 +19% acquired ▲ Price ▼ Inflation Up 30% 22.1% • +HSD from extra shipping days ▲ Produc
Slide 6: Q2 and Full Year 2024 Outlook
Q2 and Full Year 2024 Outlook* Previous FY Outlook Updated FY Outlook Q2 Outlook Reported +6% to +12% Reported +7% to +12% Reported +7% to +11% Sales Growth Organic -5% to +1% Organic -4% to +1% Organic -5% to -1% Acquired: Americas ~$210M Acquired: Americas ~$210M to $215M Acquired: Americas ~$64M
Slide 7: Summary
Summary Better-than-expected Q1 results in the Americas driven by price and acquisition performance Increasing full year sales, operating margin and EBITDA margin outlook 2024 outlook reflects challenging macros and uncertainty; maintaining investment in digital strategy Integrations of Bradley, Jos
Slide 8: Appendix
Appendix 8 © 2024 Watts Water Technologies, Inc.
Slide 9: Other Full Year 2024 Outlook Inputs
Other Full Year 2024 Outlook* Inputs Other FY Inputs Corporate Costs ~$55M Net Interest Expense ~$12M Adj Effective Tax Rate ~25% Share Count ~33.5M Capex ~$50M Dep’n & Amort ~$55M • * As of May 8, 2024. See Appendix for reconciliation of non-GAAP measures to their corresponding GAAP measures 9 © 20
Slide 10: 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 11: 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 12: Consolidated Statements of Operations
Consolidated Statements of Operations First Quarter 2024 2023 B/(W) % Net sales $570.9 $471.7 $99.2 21% Cost of goods sold 303.4 253.6 (49.8) (19.6%) Gross profit 267.5 218.1 49.4 23% 46.9% 46.2% +70 bps Selling, general & administrative expenses 169.6 133.7 (35.9) (27%) 29.7% 28.3% -140 bps Restruc
Slide 13: Reconciliation of Reported Sales to Organic Sales
Reconciliation of Reported Sales to Organic Sales First Quarter Americas Europe APMEA Total Reported net sales 2024 $418.8 $123.3 $28.8 $570.9 Reported net sales 2023 $323.2 $128.3 $20.2 $471.7 Dollar change $95.6 ($5.0) $8.6 $99.2 Net sales % increase (decrease) 30% (4%) 43% 21% (Decrease) increase
Slide 14: Reconciliation of GAAP to Non-GAAP Measures
Reconciliation of GAAP to Non-GAAP Measures First Quarter 2024 2023 Net Sales $570.9 $471.7 Operating income - as reported $96.7 $84.7 Operating margin % 16.9% 18.0% Adjustments for special items: Restructuring $1.2 ($0.3) Acquisition-related costs 7.0 Gain on sale of asset ($1.1) Operating income -
Slide 15: Adjusted Operating Income by Segment
Adjusted Operating Income by Segment First Quarter 2024 First Quarter 2023 Americas Europe APMEA Corp. Total Americas Europe APMEA Corp. Total Reported operating income (loss) $85.4 20.5 5.0 (14.2) $96.7 $72.5 19.2 4.0 (11.0) $84.7 Operating margin % 20.4% 16.6% 17.2% 16.9% 22.4% 15.0% 19.7% 18.0% A
Slide 16: Reconciliation of Net Cash Provided by Operations to Free Cash Flow
Reconciliation of Net Cash Provided by Operations to Free Cash Flow Year 2024 2023 Net cash provided by operations – as reported $45.6 $33.4 Less: additions to property, plant, and equipment (10.1) (5.1) Plus: proceeds from the sale of property, plant, and equipment 1.1 - Free cash flow $36.6 $28.3
Slide 17: 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 March 31, 2024 December 31, 2023 Current portion of long-term debt $- $- Plus: Long-term debt, net of current portion 283.5 298.3 Less: Cash and cash equivalents (237.1) (350.1) Net debt $46.4 ($51.8) Ne
Slide 18: Calculations of EBITDA & Gross and Net Leverage
Calculations of EBITDA & Gross and Net Leverage Trailing Twelve First Quarter Ended First Quarter Ended Months Through March 31, 2023 March 31, 2024 March 31, 2024 Sales $471.7 $570.9 $2,155.5 Net income – as reported $64.7 $72.6 $270.0 Plus: Interest expense, net 1.1 2.1 2.0 Plus: Income taxes 18.8
Slide 19: Reconciliation of Adjusted Non-GAAP Effective Tax Rate
Reconciliation of “Adjusted” Non-GAAP Effective Tax Rate First Quarter 2024 2023 Income before income taxes – as reported $95.2 $83.5 Provision (benefit) for income taxes – as reported $22.6 $18.8 Effective tax rate – as reported 23.7% 22.5% Income before income taxes – as reported $95.2 $83.5 Total
Slide 20: Reconciliation between GAAP and Non-GAAP Measures Included in 2024 Outlook
Reconciliation between GAAP and Non-GAAP Measures Included in 2024 Outlook* Second Quarter Full Year 2024 2024 Net Sales Reported net sales growth +7% to +11% +7% to +12% Forecasted impact of acquisition / FX -12% -11% Organic net sales growth -5% to -1% -4% to +1% Operating Margin Operating margin
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