Watts Water Technologies, Inc. · NYSE:WTS

Watts Water Technologies — Q2 2020 Earnings Presentation

17 slides from Watts Water Technologies's earnings presentation, Aug 4, 2020

  1. Slide 1: Watts Water Technologies 2Q 2020 Earnings Conference Call

    Watts Water Technologies 2Q 2020 Earnings Conference Call August 4, 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: 2Q Performance Better than Anticipated; Continued Focus on Cost and Cash

    2Q Overview 2Q Performance / Markets • COVID-19 update • Orders trend improved May – July Operations • GAAP charge of $6.7M in 2Q for restructuring / impairment − Expect incremental charges in 2H20 • Cost mitigation actions related to COVID-19 total $21M Notable Developments in APMEA Portfolio • Acq

  4. Slide 4: Smart and Connected Solutions Continued Progress and Momentum

    Smart and Connected Solutions SIMPLE RETROFIT HVAC CONTROL BALLAST WATER MONITORING SYSTEM tekmar INVITA® Wi-Fi Thermostat HF Scientific SSR-EX • Simplifies temperature control upgrades • Instrument measures oxidants in sea water • Connects to HVAC interface in home mechanical • Helps ballast water

  5. Slide 5: ESG a Priority; Continuous Journey to Improve

    Sustainability 2019 HIGHLIGHTS • Reduced consumption of natural resources • Continue to shift product portfolio to eco-friendly solutions • Committed to providing clean water to disadvantaged communities • Newsweek: Among Top 300 of “America’s Most Responsible Companies” for sustainability performan

  6. Slide 6: Volumes Impacted By COVID-19; Maintained Cost / Cash Focus

    2Q 2020 Financial Summary Sales ($M) Adj. Operating Margin %* Adj. EPS* YTD FCF* ($M) Down 19% Down 220 Down Organic* bps 32% $417 13.3% $1.09 $25 11.1% $339 $0.74 $5 2019 2020 2019 2020 2019 2020 2019 2020 • -19% reported and organic • Adjusted OP $38M, -32% • Operations -$0.37 • AR improvement mor

  7. Slide 7: 2Q 2020 Regional Results

    2Q 2020 Regional Results Adj. Operating Sales / Business Adj. Operating Profit / Sales ($M) Margin %* Highlights Margin Commentary Change (bps) • -17% reported • Adj. operating profit* $36M, -30% AMERICAS ‒ -18% organic • 30% adj. operating profit decrement $237 15.0% ‒ +1% acquisition • Margin driv

  8. Slide 8: Sequential Improvement Expected in 3Q

    3Q Assumptions Revenue – expect 8% to 12% organic reduction from prior year Expect adjusted operating margin of 11% to 13% Markets • Decrements in total similar to 2Q 2020 • Includes cost reduction actions Interest expense to decrease sequentially ~$500k vs 2Q 2020 Adjusted effective tax rate ~28.5%

  9. Slide 9: Markets Returning Slowly; Controlling What We Can

    Summary Expanded safety protocols as restrictions ease 2Q trended better than anticipated as quarter progressed • Markets opening up Continued cost focus Investing for the long-term Strong balance sheet; flexibility to weather storm Expect 3Q sequential improvement • COVID-19 remains a concern Marke

  10. Slide 10: Appendix

    Appendix © 2020 Watts Water Technologies, Inc.

  11. Slide 11: Consolidated Statement of Operations

    Consolidated Statement of Operations (M) (Unaudited) Second Quarter 2020 2019 B/(W) % Net sales $338.7 $416.8 ($78.1) (19%) Cost of goods sold 203.8 242.2 38.4 16% Gross profit 134.9 174.6 (39.7) (23%) 39.8% 41.9% -2.1 p Selling, general & administrative expenses 97.6 119.0 21.4 18% 28.8% 28.6% -0.2

  12. Slide 12: Reconciliation of Reported Sales to Organic Sales

    Reconciliation of Reported Sales to Organic Sales (M) (Unaudited) (in millions except per share information) Second Quarter Americas Europe APMEA Total Reported net sales 2Q‘20 $237.4 $88.1 $13.2 $338.7 Reported net sales 2Q'19 $287.0 $113.2 $16.6 $416.8 Dollar change ($49.6) ($25.1) ($3.4) ($78.1)

  13. Slide 13: 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) Second Quarter Six Months 2020 2019 2020 2019 Net sales $338.7 $416.8 $ 721.3 $805.5 Operating income - as reported $31.0 $54.3 $78.8 $ 101.0 Operating margin % 9.2% 13.0% 10

  14. Slide 14: Adjusted Operating Income by Segment

    Adjusted Operating Income by Segment (M) (Unaudited) (in millions) Second Quarter 2020 Second Quarter 2019 Americas Europe APMEA Corp. Total Americas Europe APMEA Corp. Total Reported operating income (loss) $ 29.5 $ 9.2 $ 0.8 ($8.5) $31.0 $50.7 $12.8 $1.2 ($10.4) $54.3 Operating margin % 12.4% 10.4

  15. Slide 15: Reconciliation of Net Cash Provided By Operations to Free Cash Flow

    Reconciliation of Net Cash Provided By Operations to Free Cash Flow (M) (Unaudited) Six Months 2020 2019 Net cash provided by operations - as reported $47.3 $19.7 Less: additions to property, plant, and equipment, net (22.3) (14.3) Free cash flow $25.0 $5.4 Net income - as reported $52.2 $67.4 Cash

  16. Slide 16: 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) June 28, 2020 December 31, 2019 Current portion of long-term debt $ - $105.0 Plus: Long-term debt, net of current portion 262.5 204.2 Less: Cash and cash equivalents (148.7) (219.7) Net d

  17. Slide 17: Calculations of Gross and Net Leverage

    Calculations of Gross and Net Leverage (M) (Unaudited) Trailing Twelve Months through June 28, 2020 Net income – as reported $116.3 Plus: Interest expense, net 13.3 Plus: Income taxes 46.3 Plus: Depreciation 31.3 Plus: Amortization 15.3 Earnings before interest, taxes depreciation and amortization (

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