Watts Water Technologies, Inc. · NYSE:WTS
Watts Water Technologies — Q2 2023 Earnings Presentation
21 slides from Watts Water Technologies's earnings presentation, Aug 3, 2023
Slide 1: Watts Water Technologies Q2 2023 Earnings Conference Call
Watts Water Technologies Q2 2023 Earnings Conference Call August 3, 2023 August 2, 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: Q2 Overview
Q2 Overview Q2 Performance Operations Market Outlook • Record results exceeded our • Enware integration going well; • Global GDP remains positive; • Challenging comps in Q3 expectations cost actions ahead of schedule R&R holding (12% organic growth in Q3 • Staying ahead of price / cost • Europe soli
Slide 4: Smart & Connected Update
Smart & Connected Update Enware Smart Flow Water Risk Management System System Features and Benefits • Smart and connected enabled thermostatic mixing valves (TMV) and Temperature and Flow Delivery Performance tapware provide water temperature delivery and flow usage monitoring that assists in compl
Slide 5: Advancing Our ESG Strategy
Advancing Our ESG Strategy Our ESG strategy is built on four pillars and is focused on continuous improvement as we evolve to ensure sustainability is integrated at every level of our business FOOTPRINT HANDPRINT CORPORATE SOCIAL Reducing our Serving customers’ GOVERNANCE RESPONSIBILITY water, energ
Slide 6: Q2 2023 Financial Summary
Q2 2023 Financial Summary Sales ($M) Adj Operating Margin %* Adj EPS* YTD FCF ($M)* Flat Organic* +100 bps +11% Up $56M $533 19.5% $2.34 $527 $89 18.5% $2.11 $33 Q2 2022 Q2 2023 Q2 2022 Q2 2023 Q2 2022 Q2 2023 Q2 2022 Q2 2023 • +1% reported • Adjusted operating income $104M, +7% • Operations +$0.15
Slide 7: Q2 2023 Regional Results
Q2 2023 Regional Results Sales ($M) Adj Operating Margin %* Sales and Business Adj Operating Profit* & Margin • -2% reported and organic • Adjusted operating profit ~$92M, +7% • Tough PY compare; 22% organic growth • Margin drivers: AMERICAS • Solid price realization ▲ Price, mix $367 24.9% • Strong
Slide 8: Q3 and Full Year 2023 Outlook
Q3 and Full Year 2023 Outlook* Q3 2023 Full Year 2023 Other Key Full Year Inputs Organic -3% to +1% Total: -2% to +2% Corporate [Prior -5% to +2%] ~$54M Growth Acquired sales ~$8M Acquired sales ~$24M Costs Adj Op Total 16.7% to 17.3% Net Interest 16.0% to 16.5% ~$3M Margin [Prior 15.7% to 16.3%] Ex
Slide 9: Summary
Summary Solid performance continues with Q2 results better than expected Increasing full year sales and margin outlook Europe macros weakening Driving our smart & connected strategy and sustainability initiatives Strong balance sheet provides flexibility; Announced $150M stock repurchase plan Increa
Slide 10: Appendix
Appendix August 2, 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 Geo
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) Second Quarter 2023 2022 B/(W) % Net sales $532.8 $526.6 $6.2 1% Cost of goods sold 280.0 287.4 7.4 3% Gross profit 252.8 239.2 13.6 6% 47.4% 45.4% +200 bps Selling, general & administrative expenses 150.8 141.6 (9.2) (6%) 28.3% 26.9% -140 bps Re
Slide 14: Reconciliation of Reported Sales to Organic Sales
Reconciliation of Reported Sales to Organic Sales (M) (Unaudited) Second Quarter Americas Europe APMEA Total Reported net sales 2023 $366.9 $135.6 $30.3 $532.8 Reported net sales 2022 $375.9 $127.9 $22.8 $526.6 Dollar change ($9.0) $7.7 $7.5 $6.2 Net sales % (decrease) increase (2%) 6% 33% 1% (Incre
Slide 15: Reconciliation of GAAP to Non-GAAP Measures
Reconciliation of GAAP to Non-GAAP Measures (M) (Unaudited) Second Quarter Six Months 2023 2022 2023 2022 Net Sales $532.8 $526.6 $1,004.5 $989.8 Operating income - as reported $100.4 $95.9 $185.1 $167.4 Operating margin % 18.8% 18.2% 18.4% 16.9% Adjustments for special items: Restructuring $1.6 $1.
Slide 16: Adjusted Operating Income by Segment
Adjusted Operating Income by Segment (M) (Unaudited) Second Quarter 2023 Second Quarter 2022 Americas Europe APMEA Corp. Total Americas Europe APMEA Corp. Total Reported operating income (loss) $91.6 21.5 2.5 (15.2) $100.4 $85.5 19.6 3.6 (12.8) $95.9 Operating margin % 24.9% 15.8% 8.4% 18.8% 22.7% 1
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) Six Months 2023 2022 Net cash provided by operations – as reported $100.5 44.9 Less: additions to property, plant, and equipment (11.6) (13.1) Plus: proceeds from the sale of property, plant, and equipment - 0.8 Free
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) June 25, 2023 December 31, 2022 Current portion of long-term debt $- $- Plus: Long-term debt, net of current portion 98.0 147.6 Less: Cash and cash equivalents (291.9) (310.8) Net debt ($
Slide 19: Calculations of Gross and Net Leverage
Calculations of Gross and Net Leverage (M) (Unaudited) Trailing Twelve Months through June 25, 2023 Net income – as reported $267.9 Plus: Interest expense, net 5.1 Plus: Income taxes 59.6 Plus: Depreciation 27.7 Plus: Amortization 12.0 Earnings before interest, taxes, depreciation and amortization (
Slide 20: Reconciliation of Adjusted Non-GAAP Effective Tax Rate
Reconciliation of “Adjusted” Non-GAAP Effective Tax Rate (M) (Unaudited) Second Quarter Year 2023 2022 2023 2022 Income before income taxes – as reported $100.6 $94.2 $184.1 $164.1 Provision for income taxes – as reported $24.7 $24.5 $43.5 $39.9 Effective tax rate – as reported 24.6% 26.0% 23.6% 24.
Slide 21: Reconciliation between GAAP and Non-GAAP Measures Included in 2023 Outlook
Reconciliation between GAAP and Non-GAAP Measures Included in 2023 Outlook* Third Quarter Full Year 2023 2023 Net Sales Reported net sales growth -1% to +3% -1% to +3% Forecasted impact of acquisition / FX (2)% (1)% Organic net sales growth -3% to +1% -2% to +2% Operating Margin Operating margin ran
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