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Watts Water Investor Presentation
- 2. Forward Looking Statements 2/27/2017 2© 2017 Watts Water Technologies, Inc. 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, market dynamics and 2017 outlook update, capital expenditures, costs and savings associated with realignment activities, lead free developments 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 that 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 Watts’ most recent Annual Report on Form 10-K and subsequent reports filed with the SEC.
- 3. Who We Are Asia Pacific 4% Canada 5% EMEA 32% US 59% 2/27/2017 © 2017 Watts Water Technologies, Inc. 3 Global Leader / Driving Margin Expansion REVENUE SOURCES Leader in Commercial / Residential Water Products • $1.4B Global Company − Domestic / international revenue split fairly balanced − Strong presence in commercial / residential markets − Exposure to replacement markets & new construction • Leveraging Leading Brands and Key Market Drivers − Safety & Regulation − Energy Efficiency − Water Conservation • Multi-Year Transformation Underway − Delivering enhanced margin expansion • Strong Cash Generator Drives Capital Deployment • Codes drive ~ 65% of worldwide sales Residential 40% Non-Residential 60% Repair/Retrofit 65% New Construction 35% Geographic End Markets
- 4. Commercial Applications 2/27/2017 © 2017 Watts Water Technologies, Inc. 4 One of the Broadest Product Offerings… WASTEWATER (DRAINAGE) SYSTEM • Roof Drains • Floor Drains • Trench Drains • Fixture Carriers • Hydrants • Acid Waste Systems • Double Containment Piping Systems • Rainwater Harvesting Systems • Interceptors • Cleanouts ALTERNATIVE ENERGY • Solar Control Packages HVAC SYSTEM • Commercial Boilers • Water Heaters • Expansion Tanks • Gauges & Thermometers • Balancing Valves • Safety Relief Valves • Anti-Scale Systems • Electronic Temperature Controls • Tempering Valves • Backflow Preventers • Radiant Snow Melting Systems • Hydro-control Panels • Steam Traps • Strainers • Feed Water Regulators • Manifolds FOOD SERVICE APPLICATIONS • Movable Gas Connectors • Water Filtration Systems • Anti-Scale Systems • Gas and Water Shutoff Valves • Commercial Faucets • Gas Regulators • Thermostatic Mixing Valves • Grease Interceptors • Stainless Steel Piping and Drains • Anti-Scale Systems • T&P Relief Valves • Tempering Valves • Monitoring and Turbidity Monitors • Strainers • Butterfly Valves • Water Hammer Arrestors • UL / FM Fire Service Strainers • Automatic Control Valves • Pre-Engineered Valve Stations • Gate Valves FIRE PROTECTION SYSTEM • Backflow Preventers • Transition Risers • Relief Valves • Check Valves IRRIGATION SYSTEM • Backflow Preventers • Backflow Enclosures • Automatic Control Valves • Shutoff Valves • Butterfly Valves • Relief Valves • Water Pressure Reducing Valves POTABLE WATER SYSTEM • Water Heaters • Gas Connectors • Reverse Osmosis Water Filtration System • Water Softeners • Backflow Preventers • Water Pressure Reducing Valves
- 5. Residential Applications 2/27/2017 © 2017 Watts Water Technologies, Inc. 5 …Unmatched in the Industry BATHROOM • Tempering Valves for Tubs, Showers and Sinks • Electric Tile Warming • Hot Water On Demand Recirculation Systems KITCHEN • Undersink Guardian Thermostatic Mixing Valves • Reverse Osmosis Water Filtration Systems • Ice Maker Filtration Systems • Electric Tile Warming LAUNDRY ROOM • Automatic Washing Machine Shutoff Valves • Water Hammer Arrestors • Anti-Scale Systems • Gas Ball Valves • Gas Connectors BOILER • Temperature & Pressure Gauges • Tempering Valves • Safety Relief Valves • Fill Valves • Backflow Preventers • Boiler Drains • Air Separators • Flow Control Valves • Float Vents • Anti-Scale Systems • Water Softeners • UV Disinfection Systems • Whole House Filtration Systems WATER QUALITY RADIANT HEAT PRODUCTS • Radiant Underfloor Heating Systems • Snowmelting • Electronic Temperature Controls • Quick Connect Fittings • Hydrocontrol Panels • PEX Tubing • Manifolds • Backflow Preventers • Ball Valves • Drain Tubes • Floor Drains • Gas Connectors • T&P Relief Valves • Tempering Valves • Pressure Reducing Valves • Expansion Tanks • Anti-Scale Systems • Water Detector Shutoffs ALTERNATIVE ENERGY • Geothermal Control Packages WATER HEATER
- 6. Investment Thesis 2/27/2017 © 2017 Watts Water Technologies, Inc. 6 Winning With Commercial, Operational and Innovation Excellence Strengthening the Foundation Multi-year transformation underway Enhanced portfolio and more efficient organization; ongoing tailwind Aligned to Favorable Macros and Markets Leading market positions in residential and commercial water, addressing global secular macro themes Focus On Innovation and Profitable Growth Leveraging components to broaden application solutions offering Investment continues, fueling growth Accretive Capital Deployment Strong cash flow and efficient capital structure enables more deployment upside; disciplined acquirer
- 7. Multi-Year Transition Underway 2/27/2017 © 2017 Watts Water Technologies, Inc. 7 Multi-Year Restructuring Tailwind Helping to Offset Macro Challenges Continue to Drive Productivity; Reinvest for Growth Americas / Asia Transformation • One Watts • Innovation / Application Solutions European Restructuring • Exited Non-core Products • Footprint Optimization • Sourcing Excellence • Realigned Cost Structure to Demand • Footprint Optimization • Sourcing Excellence 2013 – 2014 2015 – 2016 2017 & Beyond
- 8. Attractive End Markets 2/27/2017 © 2017 Watts Water Technologies, Inc. 8 Balanced Portfolio Providing Tailwind For Growth Specialty Products and Systems that Conserve and Safeguard the Flow of Fluid and Energy Verticals End Markets Residential Multi Family / Commercial Light / General Industrial Healthcare Hospitality Institutional / Educational
- 9. Aligned to Favorable Macro Trends 2/27/2017 © 2017 Watts Water Technologies, Inc. 9 Addressing Global Secular Macro Themes • Code & specification driven • Extensive certification process • Emerging need globally SAFETY & REGULATION ENERGY EFFICIENCY WATER CONSERVATION • Environmental & emotional drivers • Code & specification driven • Emerging global demand • Economic & environmental value proposition • Application & engineering competencies critical
- 10. “Self Help” Story Drives Earnings Growth 2/27/2017 © 2017 Watts Water Technologies, Inc. 10 Significant Margin Improvement Operating Margin Opportunity Next 5 Years
- 11. Disciplined Capital Deployment 2/27/2017 © 2017 Watts Water Technologies, Inc. 11 Strong Cash Generation Drives Deployment Upside Strong Cash Generation Deployment Priorities • Investing in high ROI CAPEX - Reinvestment ratio 80-100% • Strategic M&A - Selective acquirer; disciplined valuation and screening process • Pay a competitive dividend - Consistent double-digit increases • Stable share buyback - Offset option dilution at minimum 2015E 2019T >100% FCF Conversion
- 12. Summary 2/27/2017 © 2017 Watts Water Technologies, Inc. 12 Stronger Foundation Delivering Long-term Value Creation Who We Are • $1.4B enhanced water portfolio • Global leading brands in highly fragmented industry • Broad solutions across balanced geographies & end markets • Strong presence in repair/replace & new construction • Strong financial position & cash flow generation • Disciplined capital allocation Our Commitments • Expand operating margins – mid teens • Earnings growth through commercial and operational excellence • Re-investment in innovation to drive growth and margin upside • >100% free cash flow generation • Accelerate growth through disciplined acquisitions • Return excess cash to shareholders
Editor's Notes
- In summary: We are a large player in a fragmented industry, with worldwide breadth and leading brands in many markets we serve. We have a strong annuity business driven by repair/replace, codes and a large installed base which helps drive solid cash flows. Our strong cash flows, in turn, provide flexibility when determining our capital allocation priorities, which we believe are balanced. And our goals include: Driving operating margin expansion and achieving mid-teens margins by 2020 A commitment to re-invigorate our growth engine through product innovation. Driving expanded operating margins through both commercial and operational excellence, while continuing to invest in the business. Maintaining cash conversion of > 100% of net income. Expanding our growth through strategic acquisitions. And… Continuing to return excess cash to shareholders through dividends and opportunistic share buybacks. We are excited about our progress over the last couple of years and we are excited about our future prospects. With that, Jim, I’d be happy to answer any questions.