Watts Water Technologies, Inc. · NYSE:WTS
Watts Water Technologies — Q3 2024 Earnings Presentation
22 slides from Watts Water Technologies's earnings presentation, Oct 31, 2024
Slide 1: Q3 2024 Earnings Conference Call
WATTS WATER TECHNOLOGIES Q3 2024 EARNINGS CONFERENCE CALL October 31, 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: Q3 Overview and 2024 Outlook
Q3 Overview and 2024 Outlook Q3 Performance Operations Market Expectations Outlook Q3 results ahead of expectations Bradley, Josam and Enware Global GDP positive Q4 down organically partly due to integrations ahead of schedule fewer shipping days Organic sales down LSD; strong Weak Europe macroenvir
Slide 4: Progressing Our Smart & Connected Journey: Nexa, the Intelligent Water Management Solution
Progressing Our Smart & Connected Journey: Nexa, the Intelligent Water Management Solution Our Smart & Long-term Value-creation Opportunity Connected Journey Watts’ easy-to-deploy, modular intelligent water management solution seamlessly integrates hardware, software and decades-long systems experti
Slide 5: Ecosystem of Digital Innovation and Opportunity
Ecosystem of Digital Innovation and Opportunity Nexa’s Comprehensive Scope Customer Case Study Water usage ▪ Background: high-end hotel was facing water measurement temperature and flow issues ▪ Resulted in loss of revenue and poor guest experience Leak risk ▪ Traditional solutions were unable to so
Slide 6: Q3 2024 Financial Summary
Q3 2024 Financial Summary Sales ($M) Adj. Operating and Adj EPS* YTD FCF ($M)* $544 Adj. EBITDA Margin %* $204 $504 $2.04 $2.03 Adj. 20.0% $182 EBITDA % -50 bps +8% 19.5% Reported Slightly -4% +12% Organic* Down Adj. 18.0% -90 bps OM % 17.1% 2023 2024 2023 2024 2023 2024 2023 2024 • +8% reported • A
Slide 7: Q3 2024 Regional Results
Q3 2024 Regional Results Sales ($M) Adj. Operating Margin %* Sales and Business Adj. Operating Profit* and Margin • +14% reported • Adjusted operating income ~$88M, +2% -3% organic • Margin drivers AMERICAS +17% acquired $400 21.9% ▲ Price ▼ Volume Up 14% • Project timing and wholesale channel safet
Slide 8: Q4 and Full Year 2024 Outlook
Q4 and Full Year 2024 Outlook* Previous FY Outlook Updated FY Outlook Q4 Outlook Reported +7% to +12% Reported +9% to +10% Reported -4% to Flat Sales Growth Organic -4% to +1% Organic -2% to -1% Organic -9% to -5% Fewer shipping days ~-5% Acquired: Americas ~$210M to $215M Acquired: Americas ~$205M
Slide 9: Summary
Summary Better-than-expected Q3 results in the Americas and APMEA Advancing Smart & Connected initiative with Nexa, our Intelligent Water Management Solution Raising midpoint of full year operating and EBITDA margin outlook Positioning cost structure for long-term profitability Strong cash flow and
Slide 10: Appendix
Appendix 10 © 2024 Watts Water Technologies, Inc.
Slide 11: Other Outlook Inputs
Other Outlook* Inputs Other FY Inputs Other Q4 Inputs Corporate Costs ~$56M ~$14M Net Interest Expense ~$7M to $8M ~$1M to $2M Stock-Based compensation ~$21M ~$5M Adj Effective Tax Rate ~25% ~25% Share Count ~33.5M ~33.5M Capex ~$35M ~$12M Dep’n & Amort ~$55M ~$11M * As of October 30, 2024. See Appe
Slide 12: 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 13: 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 Solutions aligned Strong execution Targeting >100%
Slide 14: Consolidated Statements of Operations
Consolidated Statements of Operations Third Quarter 2024 2023 B/(W) % Net sales $543.6 $504.3 $39.3 8% Cost of goods sold 286.5 269.9 (16.6) (6%) Gross profit 257.1 234.4 22.7 10% 47.3% 46.5% +80 bps Selling, general & administrative expenses 159.0 146.9 (12.1) (8%) 29.2% 29.1% -10 bps Restructuring
Slide 15: Reconciliation of Reported Sales to Organic Sales
Reconciliation of Reported Sales to Organic Sales Third Quarter Americas Europe APMEA Total Reported net sales 2024 $400.0 $107.3 $36.3 $543.6 Reported net sales 2023 $351.0 $120.2 $33.1 $504.3 Dollar change $49.0 ($12.9) $3.2 $39.3 Net sales % increase (decrease) 14% (11%) 10% 8% Foreign exchange i
Slide 16: Reconciliation of GAAP to Non-GAAP Measures
Reconciliation of GAAP to Non-GAAP Measures Third Quarter Nine Months 2024 2023 2024 2023 Net Sales $543.6 $504.3 $1,711.8 $1,508.8 Reported operating income $93.2 $87.1 $301.4 $272.2 Reported operating margin % 17.1% 17.3% 17.6% 18.0% Adjustments for special items: Restructuring $4.9 $0.4 $6.4 $1.7
Slide 17: Adjusted Operating Income by Segment
Adjusted Operating Income by Segment Third Quarter 2024 Third Quarter 2023 Americas Europe APMEA Corp. Total Americas Europe APMEA Corp. Total Reported operating income (loss) $90.6 8.7 6.7 (12.8) $93.2 $85.7 12.5 5.4 (16.5) $87.1 Operating margin % 22.7% 8.2% 18.5% 17.1% 24.4% 10.4% 16.2% 17.3% Adj
Slide 18: Reconciliation of Net Cash Provided by Operations to Free Cash Flow
Reconciliation of Net Cash Provided by Operations to Free Cash Flow Nine Months 2024 2023 Net cash provided by operations – as reported $221.6 $200.9 Less: additions to property, plant, and equipment (23.3) (19.0) Plus: proceeds from the sale of property, plant, and equipment 5.9 - Free cash flow $2
Slide 19: 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 September 29, 2024 December 31, 2023 Current portion of long-term debt $- $- Plus: Long-term debt, net of current portion 211.8 298.3 Less: Cash and cash equivalents (303.9) (350.1) Net debt ($92.1) ($51
Slide 20: Calculations of EBITDA & Gross and Net Leverage
Calculations of EBITDA & Gross and Net Leverage Trailing Twelve Months Third Quarter Third Quarter Through September 29, September 24, 2023 September 29, 2024 2024 Sales $504.3 $543.6 $2,259.3 Net income – as reported $65.8 $69.1 $279.4 Plus: Interest expense, net (1.1) 1.5 6.3 Plus: Income taxes 22
Slide 21: Reconciliation of Adjusted Non-GAAP Effective Tax Rate
Reconciliation of “Adjusted” Non-GAAP Effective Tax Rate Third Quarter Nine Months 2024 2023 2024 2023 Income before income taxes – as reported $92.3 $88.1 $297.0 $272.2 Provision (benefit) for income taxes – as reported $23.2 $22.3 $73.4 $65.8 Effective tax rate – as reported 25.1% 25.3% 24.7% 24.2
Slide 22: Reconciliation between GAAP and Non-GAAP Measures Included in 2024 Outlook
Reconciliation between GAAP and Non-GAAP Measures Included in 2024 Outlook* Fourth Quarter Full Year 2024 2024 Net Sales Reported net sales growth -4% to Flat +9% to +10% Forecasted impact of acquisition / FX -5% -11% Organic net sales growth -9% to -5% -2% to -1% Operating Margin Operating margin r
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