Watts Water Technologies, Inc. · NYSE:WTS

Watts Water Technologies — Q3 2020 Earnings Presentation

15 slides from Watts Water Technologies's earnings presentation, Nov 5, 2020

  1. Slide 1: Watts Water Technologies 3Q 2020 Earnings Conference Call

    Watts Water Technologies 3Q 2020 Earnings Conference Call November 5, 2020 © 2020 Watts Water Technologies, Inc.

  2. 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, capital expenditures, water

  3. Slide 3: 3Q Overview

    3Q Overview • Employee Safety and Engagement ‒ Expanding protocols; promoting engagement ‒ Broad and deep customer focus • 3Q Performance ‒ Solid results; above expectations ‒ Controlling what we can; driving smart and connected strategy • Operations ‒ Cost mitigation actions – YTD savings $42M ‒ Re

  4. Slide 4: 3Q 2020 Financial Summary

    3Q 2020 Financial Summary Sales ($M) Adj. Operating Margin %* Adj. EPS* YTD FCF* ($M) Down 5% Up 50 bps Up 1% Up 25% Organic* $95 $395 $384 13.8% $1.04 $1.05 13.3% $76 2019 2020 2019 2020 2019 2020 2019 2020 • -3% reported; -5% organic • Adjusted OP $53M, +1% • Operations flat • AR improvement more

  5. Slide 5: 3Q 2020 Regional Results

    3Q 2020 Regional Results Adj. Operating Sales / Business Adj. Operating Profit / Sales ($M) Margin %* Highlights Margin Commentary Change (bps) • -3% reported • Adj. operating profit* $48.2M, -1% ‒ -4% organic ‒ 8% adj. operating profit decrement AMERICAS ‒ +1% acquisition • Margin drivers $262 18.4

  6. Slide 6: 4Q Assumptions

    4Q Assumptions Revenue 4% to 8% organic reduction YoY; COVID uncertainty Adjusted Operating Margin 12.5% to 13.0% Corporate Costs $9M - $10M Adjusted Effective Tax Rate ~27.5% FX Impact Positive at current levels Cash Flow Seasonally strong; capital spend ~$45M FY 4Q Margin Expansion Despite Volume

  7. Slide 7: Summary

    Summary • Employee safety and customer service remain top priorities • 3Q results better than anticipated with improved activity • Continued focus on productivity and cost efficiency • Flexible balance sheet; strong cash generation • Investing for the future with a focus on smart and connected solut

  8. Slide 8: Appendix

    Appendix © 2020 Watts Water Technologies, Inc.

  9. Slide 9: Consolidated Statement of Operations

    Consolidated Statement of Operations (M) (Unaudited) Third Quarter 2020 2019 B/(W) % Net sales 383.9 $394.7 ($10.8) (3%) Cost of goods sold 225.4 226.1 0.7 -% Gross profit 158.5 168.6 (10.1) (6%) 41.3% 42.7% - 1.4p Selling, general & administrative expenses 106.6 119.8 13.2 11% 27.8% 30.4% +2.6p Res

  10. Slide 10: Reconciliation of Reported Sales to Organic Sales

    Reconciliation of Reported Sales to Organic Sales (M) (Unaudited) (in millions except per share information) Third Quarter Americas Europe APMEA Total Reported net sales 3Q‘20 $261.5 $106.7 $15.7 $383.9 Reported net sales 3Q'19 $270.3 $107.9 $16.5 $394.7 Dollar change ($8.8) ($1.2) ($0.8) ($10.8) Ne

  11. Slide 11: Reconciliation of GAAP As Reported to Adjusted Non-GAAP

    Reconciliation of GAAP “As Reported” to “Adjusted” Non-GAAP Excluding Effect of Adjustments for Special Items (M) (Unaudited) Third Quarter Nine Months 2020 2019 2020 2019 Net sales $383.9 $394.7 $1,105.2 $1,200.2 Operating income - as reported $47.9 $48.8 $126.7 $ 149.8 Operating margin % 12.5% 12.

  12. Slide 12: Adjusted Operating Income by Segment

    Adjusted Operating Income by Segment (M) (Unaudited) (in millions) Third Quarter 2020 Third Quarter 2019 Americas Europe APMEA Corp. Total Americas Europe APMEA Corp. Total Reported operating income (loss) $47.3 $10.4 $- ($9.8) $47.9 $48.5 $12.1 $1.4 ($13.2) $48.8 Operating margin % 18.1% 9.7% (0.6%

  13. Slide 13: 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 2020 2019 Net cash provided by operations - as reported $127.4 $94.9 Less: additions to property, plant, and equipment, net (32.3) (19.0) Free cash flow $95.1 $75.9 Net income - as reported $85.1 $99.7 Ca

  14. Slide 14: 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 27, 2020 December 31, 2019 Current portion of long-term debt $ - $105.0 Plus: Long-term debt, net of current portion 247.9 204.2 Less: Cash and cash equivalents (188.3) (219.7)

  15. Slide 15: Calculations of Gross and Net Leverage

    Calculations of Gross and Net Leverage (M) (Unaudited) Trailing Twelve Months through September 27, 2020 Net income – as reported $116.6 Plus: Interest expense, net 13.0 Plus: Income taxes 43.4 Plus: Depreciation 31.6 Plus: Amortization 15.3 Earnings before interest, taxes depreciation and amortizat

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