Watts Water Technologies, Inc. (WTS) Q1 2026 Earnings Call

Investor webinar replay

Replay transcript excerpt

tariffs, and acquisition dilution of 80 basis points. Segment margins were as follows. Americas increased 80 basis points to 24.2%, and apnea increased 120 basis points to 18.7%, while Europe decreased 20 basis points to 13.7%. Adjusted earnings per share equaled $3.04, representing a 28% year-over-year increase with operational performance acquisitions, tax, and foreign exchange gains outweighing higher net interest expense. The adjusted effective tax rate in the quarter was 24.2%, down 30 basis points compared to the first quarter of 2025, primarily due to a higher tax benefit from the vesting of stock compensation awards that occur in the first quarter of each year. Our free cash flow for the quarter was $7 million compared to $46 million in the first quarter of last year. The cash flow decrease was primarily due to the increase in accounts receivable due to higher sales volume, increases in and timing of our annual customer rebate payments, and an increase in inventory related to incremental tariffs and our strategic investment in inventory. We expect sequential improvement in our free cash flow and are on track to achieve our full year goal of free cash flow conversion greater than or equal to 90% of net income as previously communicated. We have a strong balance sheet and solid cash flow, giving us flexibility in executing our capital allocation strategy, including the announced 21% increase in our dividends that will begin in June. On slide five, we will review our outlook for the second quarter and full year 2026. We are reaffirming the full year 2026 outlook we presented in February, which reflects the market factors Bob discussed. It assumes the Middle East conflict is short-term in nature, The current tariff structure remains in place for the remainder of ...