Slide 1: Watts Water Technologies Q3 2023 Earnings Conference Call
Watts Water Technologies Q3 2023 Earnings Conference Call November 2, 2023 November 1, 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: Q3 Overview
Q3 Overview Q3 Performance Operations Market Outlook • Organic sales growth flat to • Closed acquisition of Bradley • Global GDP remains favorable • Challenging comps in Q4 (11% prior year despite challenging in October; integration • Europe indicators softening organic growth in Q4 2022) comp (12%
Slide 4: Bradley Acquisition Highly Strategic and Complementary
Bradley Acquisition Highly Strategic and Complementary Highlights Bradley Profile & Products Total consideration of $303M ($268M net of discounted tax HQ in Menomonee Falls, WI; 100+ year history benefits) funded through cash on hand and existing line-of-credit Manufacturing sites in the Midwest; ~5
Slide 5: Bradley Acquisition Aligns with Established M&A Strategy
Bradley Acquisition Aligns with Established M&A Strategy Strategic Criteria Financial Criteria Highlights ✓ Core or Related ✓ ROIC > Cost of Capital • Meaningful synergies (~$12M Complementary Markets run-rate) captured through One ✓ Accretive to EPS in Year 1 Watts Performance System ✓ Addresses Ma
Slide 6: Q3 2023 Financial Summary
Q3 2023 Financial Summary Sales ($M) Adj Operating Margin %* Adj EPS* YTD FCF ($M)* Flat Organic* +120 bps +14% Up $115M $504 18.0% $2.04 $182 16.8% $1.79 $488 $67 Q3 2022 Q3 2023 Q3 2022 Q3 2023 Q3 2022 Q3 2023 Q3 2022 Q3 2023 • +3% reported • Adj. operating income $91M, +10% • Operations +$0.17 •
Slide 7: Q3 2023 Regional Results
Q3 2023 Regional Results Sales ($M) Adj Operating Margin %* Sales and Business Adj Operating Profit* & Margin • Flat reported and +1% organic sales growth • Adjusted operating profit ~$86M, +12% • Tough PY compare; 13% organic growth in Q3 ‘22 • Margin drivers: AMERICAS • Solid price realization ▲ P
Slide 8: Q4 and Full Year 2023 Outlook
Q4 and Full Year 2023 Outlook* Q4 2023 Full Year 2023 Other Key Full Year Inputs Organic -6% to -1% Flat Corporate Growth Acquired sales ~$9M Enware; ~$30M Bradley [Prior -2% to +2%] Costs ~$54M Acquired sales ~$26M Enware; ~$30M Bradley Adj Op Total 17.6% to 17.7% Net Interest ~$2M Margin 15.0% to
Slide 9: Summary
Summary Closed Bradley acquisition in early Q4; integration underway with strong collaboration Q3 results ahead of expectation; benefiting from favorable mix and price Increasing full year operating margin outlook Monitoring weakening global macro’s Balance sheet remains strong post acquisition and
Slide 10: Appendix
Appendix November 1, 2023 © 2022 2023 Watts Water Technologies, Inc. 10
Slide 11: 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 Ge
Slide 12: Compelling Investment Thesis
Compelling Investment Thesis 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 Global reach with Diverse Markets Sheet Economic Cycles leading market Strong execut
Slide 13: Consolidated Statements of Operations
Consolidated Statements of Operations (M) (Unaudited) Third Quarter 2023 2022 B/(W) % Net sales $504.3 $487.8 $16.5 3% Cost of goods sold 269.9 269.9 - 0% Gross profit 234.4 217.9 16.5 8% 46.5% 44.7% +180 bps Selling, general & administrative expenses 146.9 135.8 (11.1) (8%) 29.1% 27.8% -130 bps Res
Slide 14: Reconciliation of Reported Sales to Organic Sales
Reconciliation of Reported Sales to Organic Sales (M) (Unaudited) Third Quarter Americas Europe APMEA Total Reported net sales 2023 $351.0 $120.2 $33.1 $504.3 Reported net sales 2022 $349.8 $113.1 $24.9 $487.8 Dollar change $1.2 $7.1 $8.2 $16.5 Net sales % increase 0% 6% 33% 3% (Increase) decrease d
Slide 15: Reconciliation of GAAP to Non-GAAP Measures
Reconciliation of GAAP to Non-GAAP Measures (M) (Unaudited) Third Quarter Nine Months 2023 2022 2023 2022 Net Sales $504.3 $487.8 $1,508.8 $1,477.6 Operating income - as reported $87.1 $80.4 $272.2 $247.8 Operating margin % 17.3% 16.5% 18.0% 16.8% Adjustments for special items: Restructuring $0.4 $1
Slide 16: Adjusted Operating Income by Segment
Adjusted Operating Income by Segment (M) (Unaudited) Third Quarter 2023 Third Quarter 2022 Americas Europe APMEA Corp. Total Americas Europe APMEA Corp. Total Reported operating income (loss) $85.7 12.5 5.4 (16.5) $87.1 $76.2 12.6 4.1 (12.5) $80.4 Operating margin % 24.4% 10.4% 16.2% 17.3% 21.8% 11.
Slide 17: Reconciliation of Net Cash Provided by Operations to Free Cash Flow
Reconciliation of Net Cash Provided by Operations to Free Cash Flow (M) (Unaudited) Nine Months 2023 2022 Net cash provided by operations – as reported $200.9 86.3 Less: additions to property, plant, and equipment (19.0) (20.2) Plus: proceeds from the sale of property, plant, and equipment - 0.9 Fre
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 (M) (Unaudited) September 24, 2023 December 31, 2022 Current portion of long-term debt $- $- Plus: Long-term debt, net of current portion 98.2 147.6 Less: Cash and cash equivalents (362.7) (310.8) Net de
Slide 19: Calculations of Gross and Net Leverage
Calculations of Gross and Net Leverage (M) (Unaudited) Trailing Twelve Months through September 24, 2023 Net income – as reported $274.9 Plus: Interest expense, net 2.2 Plus: Income taxes 61.9 Plus: Depreciation 28.0 Plus: Amortization 12.0 Earnings before interest, taxes, depreciation and amortizat
Slide 20: Reconciliation of Adjusted Non-GAAP Effective Tax Rate
Reconciliation of “Adjusted” Non-GAAP Effective Tax Rate (M) (Unaudited) Third Quarter Nine Months 2023 2022 2023 2022 Income before income taxes – as reported $88.1 $78.8 $272.2 $242.9 Provision for income taxes – as reported $22.3 20.1 $65.8 $60.0 Effective tax rate – as reported 25.3% 25.5% 24.2%
Slide 21: Reconciliation between GAAP and Non-GAAP Measures Included in 2023 Outlook
Reconciliation between GAAP and Non-GAAP Measures Included in 2023 Outlook* Fourth Quarter Full Year 2023 2023 Net Sales Reported net sales growth +3% to +8% +3% Forecasted impact of acquisition / FX (9)% (3)% Organic net sales growth -6% to -1% Flat Operating Margin Operating margin range 14.0% to