WATTS WATER TECHNOLOGIES, INC. WATTS WATER TECHNOLOGIES
Q1 2024 EARNINGS CONFERENCE CALL
May 9, 2024
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 expenditures, cash flow, water market growth, acquisition strategy and integration, construction outlook, inflation and management goals and objectives.
Watts cautions investors that any such forward-looking statements made by Watts are not guarantees of future performance. All forward-looking statements are subject to known and unknown risks, uncertainties, and contingencies, many of which are beyond the control of Watts, which may cause actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by the forward-looking statements.
Factors that might affect forward-looking statements include overall economic and business conditions, competitive factors, changes in laws affecting Watts, future acquisitions of material assets or businesses by Watts, the demand for Watts' products and services and other factors identified in "Item 1A. Risk Factors" in our most recent Annual Report on Form 10-K and in subsequent reports filed with the SEC.
2
© 2024 Watts Water Technologies, Inc.
Q1 Overview and 2024 Outlook
Q1 Performance
Q1 performance ahead of
expectations
Reported and organic sales growth of 21% and 6%, respectively, supported by extra shipping days and price
Adjusted operating margin of 18.2%,
expanded 30 bps
Announced 19% dividend increase
Balance sheet remains strong post Bradley and Josam acquisitions
Operations
Bradley, Josam and Enware integrations progressing well
Productivity savings mitigating inflation
Continuing investment in
digital strategy
Publishing 2023 sustainability report in Q2; Establishing absolute carbon emissions reduction goal
Hosting Watts 150th
anniversary events and
training for customers and
employees
Market Expectations
Global GDP remains positive
Weak Europe indicators
Americas single-family new
construction flat; multi-family new
construction weakening
Americas institutional and light industrial positive; other non- residential indicators weakening
Growth in Middle East, New Zealand
and Australia; China moderating
Outlook
Raising full year sales and operating margin outlook
- Q1 performance
- Price
- Acquisition performance ▼ Europe weakening
- Commodity inflation
- Interest rates higher for longer
Maintaining full year incremental
investments of $20M
Strong Start to 2024; Raising Full Year Outlook
See Appendix for reconciliation of non-GAAP measures to their corresponding GAAP measures
3
© 2024 Watts Water Technologies, Inc.
Q1 2024 Financial Summary
Sales ($M)
$571
$472 +21%
Reported
+6%
Organic*
20232024
- +21% reported
- +6% organic (~+7% from extra days)
- +15% acquired / FX
-
Extra shipping days added +HSD for Americas and +MSD for Europe &
APMEA - Acquisitions added $68M vs. PY
Adj Operating and EBITDA
Margin %*
+60 bps | ||
20.6% | ||
EBITDA % | 20.0% | |
+30 bps | ||
OM % | 17.9% | 18.2% |
2023 | 2024 |
- Adj. EBITDA $118M, +25%
- Adj. operating income $104M, +23%
- Margin drivers
- Price
- Volume from extra shipping days
- Productivity
- Inflation
- Acquisition dilution (~60 bps to OM%)
- Investments ($6M, ~100 bps)
Adj EPS*
$2.33
$1.92
+21%
20232024
- Operations +$0.26, including benefit of extra days
- FX / acquisitions +$0.12
- Net interest / tax / other inc. +$0.03
- Adjusted ETR 23.8%, 130 bps unfavorable YOY
FY FCF ($M)*
$37
$28 | Up $9M |
20232024
- Solid start; Q1 seasonally slower
- Good working capital management
- Balance sheet remains healthy
- Net leverage: 0.1x
- Net debt to cap ratio: 2.9%
Record Sales, Adjusted Operating Margin and EPS
* See Appendix for reconciliation of non-GAAP measures to their corresponding GAAP measures
4
© 2024 Watts Water Technologies, Inc.
Q1 2024 Regional Results
Sales ($M) | Adj Operating Margin %* | Sales and Business | Adj. Operating Profit* and Margin | |||
• +30% reported | • Adjusted operating profit ~$93M, +28% | |||||
AMERICAS | +11% organic | • Margin drivers | acquisition dilution | |||
• Solid growth in core valve products | shipping days | |||||
$419 | 22.1% | +19% acquired | ▲ Price | ▼ Inflation | ||
Up 30% | Down 40 bps | • +HSD from extra shipping days | ▲ Productivity | ▼ Investments | ||
Up 11% Organic* | • Higher than expected price realization | ▲ Volume, extra | ▼ Bradley | |||
• Bradley & Josam contributed ~$60M of sales | ||||||
• -4% reported | • Adjusted operating profit ~$19M, +3% | |||||
EUROPE | -5% organic | • Margin drivers | ||||
$123 | 15.7% | +1% FX | ▲ Price | ▼ Volume | ||
Down 4% | • +MSD from extra shipping days | ▲ Favorable mix | ▼ Inflation | |||
Up 110 bps | ||||||
Down 5% Organic* | • Declines in Germany, Italy, Benelux and France; | ▲ Productivity | ▼ Investments | |||
OEM volume impacted by reduced energy | ▲ Extra shipping | |||||
incentives and heat pump destocking | days | |||||
• +43% reported | • Adjusted operating profit ~$5M, +32% | |||||
+6% organic | • Margin drivers | |||||
APMEA | $29 | 18.2% | +40% acquired / -3% FX | ▲ Price | ▼ Inflation | |
• +MSD from extra shipping days | ▲ Volume; extra | ▼ Investments | ||||
Up 43% | ||||||
Down 150 bps | • Growth in Australia & Middle East; New Zealand & | shipping days | ▼ Enware | |||
Up 6% Organic* | ||||||
China flat | ▲ Productivity | acquisition dilution | ||||
• Enware integration going well; contributed | ||||||
~$8M revenue | ||||||
* See Appendix for reconciliation of non-GAAP measures to their corresponding GAAP measures
5
© 2024 Watts Water Technologies, Inc.
Q2 and Full Year 2024 Outlook*
Previous FY Outlook | Updated FY Outlook | Q2 Outlook | |
Sales Growth | Reported +6% to +12% | Reported +7% to +12% | Reported +7% to +11% |
Organic -5% to +1% | Organic -4% to +1% | Organic -5% to -1% | |
Acquired: Americas ~$210M | Acquired: Americas ~$210M to $215M | Acquired: Americas ~$64M | |
Adj EBITDA Margin | 19.4% to 20.0% | 19.6% to 20.2% | 20.0% to 20.6% |
-50 bps to +10 bps | -30 bps to +30 bps | -160 bps to -100 bps | |
Adj Operating Margin | 16.9% to 17.5% | 17.1% to 17.7% | 17.6% to 18.2% |
-90 bps to -30 bps | -70 bps to -10 bps | -190 bps to -130 bp | |
Acquisition dilution ~80 bps | Acquisition dilution ~70 bps | Acquisition dilution ~110 bps | |
Free Cash Flow | ≥ 90% of Net Income | ≥ 90% of Net Income | Seasonally Slower |
FX Euro / $ | 1.09 | 1.08 | 1.08 |
Sales (~+$5M); EPS (~+$0.02) | Sales (Flat); EPS (Flat) | Sales (~-$1M); EPS (<$0.01/share) |
See Appendix for Other FY Outlook assumptions
Raising Midpoint of Full Year Sales by 50 bps and EBITDA Margin 20 bps
* As of May 8, 2024. See Appendix for reconciliation of non-GAAP measures to their corresponding GAAP measures
6
© 2024 Watts Water Technologies, Inc.
Summary
Better-than-expected Q1 results in the Americas driven by price and acquisition performance
Increasing full year sales, operating margin and EBITDA margin outlook
2024 outlook reflects challenging macros and uncertainty; maintaining investment in digital strategy
Integrations of Bradley, Josam and Enware progressing well
Balance sheet remains strong post acquisitions; increasing dividend 19%; maintaining our balanced capital allocation strategy
7
© 2024 Watts Water Technologies, Inc.
Appendix
8
Other Full Year 2024 Outlook* Inputs
Other FY Inputs | |
Corporate Costs | ~$55M |
Net Interest Expense | ~$12M |
Adj Effective Tax Rate | ~25% |
Share Count | ~33.5M |
Capex | ~$50M |
Dep'n & Amort | ~$55M |
- * As of May 8, 2024. See Appendix for reconciliation of non-GAAP measures to their corresponding GAAP measures
9
© 2024 Watts Water Technologies, Inc.
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 bps Expansion | |||||||
Revenue by Geography* | Revenue by End Market* | Revenue by End Market* |
5%
22%
40% | 65% | 50% Single family |
35% | 50% Multi family |
73%
60%
Americas Europe APMEA | Repair & Replace New Construction | Non-Residential Residential |
Global Leader in Commercial, Residential and Industrial Water Solutions
See Appendix for reconciliation of non-GAAP measures to their corresponding GAAP measures *Proforma includes recent acquisitions of Bradley and Josam
10
© 2024 Watts Water Technologies, Inc.
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
Watts Water Technologies Inc. published this content on 08 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 May 2024 21:06:21 UTC.
