Watts Water Technologies (WTS) Investor presentation summary

Strategic positioning and market overview

• Global leader in water solutions for commercial, residential, and industrial markets, with a broad product portfolio and strong repair/replacement footprint.

• Operates in over 35 principal locations across 5 continents, serving diverse end markets including institutional, healthcare, hospitality, and residential sectors.

• Addressable market estimated at ~$20B, with balanced exposure to new construction and repair/replace segments.

• Focused on aligning business with secular trends such as safety, regulation, energy efficiency, and water conservation.

• Industry-leading brands and vertical integration support operational efficiency and customer proximity.

Financial performance and outlook

• Achieved $2.1B in net sales in 2023, with a 6% CAGR over five years and 17.8% adjusted operating margin.

• Free cash flow conversion averaged 115% over five years, with a 20.3% ROIC and 11% dividend CAGR.

• Q3 2024 outlook: reported sales growth +5% to +8%, adjusted operating margin 16.2% to 16.8%, free cash flow ≥90% of net income.

• Full year 2024 outlook: reported sales growth +7% to +12%, adjusted operating margin 17.1% to 17.7%.

• Maintains a flexible balance sheet with net debt to capitalization ratio of -1.3% and no debt due until 2029.

Innovation, smart & connected strategy

• Investing over 3% of sales in R&D, with 100+ digital engineers and 12 new smart & connected products launched in 2023.

• Smart & connected revenues grew from a low base to 25% of total as of Q4 2023.

• Future focus on expanding digital/SaaS capabilities, real-time monitoring, and subscription-based services.

• Continuous improvement driven by the One Watts Performance System, emphasizing customer focus, operational excellence, and safety.