Watts Water Technologies (WTS) investor relations material

Executive summary

• Q3 sales reached $728.0M, up 19.0% reported and 12.2% organically; data-center volume, favorable pricing and execution drove record results.

• Adjusted operating margin expanded 240 bps to 20.9%; FY2026 sales and adjusted margin guidance increased.

• Strong data-center demand and productivity offset persistent inflation and weakness in residential and other new-construction markets.

Financial highlights

• Q3 adjusted operating income rose to $151.8M from $113.3M; adjusted diluted EPS was $3.40 versus $2.50.

• Reported operating income rose 71.3% to $190.8M, including $39.3M in tariff refunds; net income was $145.4M versus $82.2M and diluted EPS was $4.34 versus $2.45.

• Gross profit was $401.0M and gross margin expanded to 55.1% from 48.8%, supported by refunds, pricing, volume leverage and productivity, partly offset by inflation and mix.

• Nine-month sales rose 19.6% to $2,168.4M; diluted EPS was $10.84 versus $7.67, including the tariff-refund benefit.

Outlook and guidance

• FY2026 sales growth is guided at 17%-18% reported and 11%-12% organic; adjusted operating margin at 20.3%-20.4% and adjusted EBITDA margin at 22.6%-22.7%.

• FY adjusted EBITDA and operating margin increases are each guided at 70-80 bps; outlook includes 50 bps of acquisition dilution and excludes tariff refunds from adjusted earnings.

• Q4 sales growth is guided at 11%-14% reported and 9%-12% organic; adjusted operating margin at 19.1%-19.7%.

• FY free cash flow conversion is expected to be at least 90% of net income; guidance assumes no change in Middle East conflict impacts and includes tariffs in place or announced by Nov. 3.