Q3 2024 Watts Water Technologies Inc Earnings Call Transcript
Key Points
- Watts Water Technologies Inc (WTS) exceeded expectations in the third quarter with an adjusted operating margin of 17.1%, driven by productivity and cost controls.
- The company reported strong free cash flow, with year-to-date free cash flow at $204 million, up from $182 million in the previous year.
- The integration of recent acquisitions, Bradley and Josam, is ahead of schedule, realizing solid synergy savings.
- The company's smart and connected product line, including the new Nexa water management solution, is gaining traction, with 25% of total sales now comprised of smart and connected products.
- Watts Water Technologies Inc (WTS) has a robust balance sheet, providing ample flexibility for capital allocation, including strategic M&A, high ROI capex, competitive dividends, and steady share buybacks.
- Organic sales were down 4% in the third quarter, with declines in the Americas and Europe offsetting growth in APMEA.
- The company anticipates a sequential decline in operating margins in the fourth quarter due to normal seasonality, incremental investments, volume deleverage, and acquisition dilution.
- Europe's market remains weak, particularly in the heat pump sector, with continued de-stocking impacting OEM volume.
- The Americas experienced a decline in organic sales due to project timing and inventory safety stock reductions within the wholesale channel.
- Watts Water Technologies Inc (WTS) is facing challenges in the multi-family and non-residential new construction markets in the Americas, which have been down double digits since the end of last year.
Welcome to the Watts Water Technologies Inc, third-quarter 2024 earnings call, hosted by Bob Pagano, President and CEO; Shashank Patel, CFO; and Diane McClintock, Senior Vice President, FP&A and Investor Relations. At the end of the presentation, we will open the line for questions.
I will now turn the call over to Diane McClintock.
Thank you and good morning, everyone. Welcome to our third quarter earnings conference call. Joining me today are Bob Pagano, President and CEO and Shashank Patel. Our CFO during today's call, Bob will provide an overview of the third quarter, our markets and our operations. Shashank will discuss the details of our third quarter performance and provide our outlook for the fourth quarter and for the full year following our remarks, we will address questions related to the information covered during the call. Today's webcast is accompanied by a presentation which can be found in the investor relations section of our website. We will
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