Investor Presentation
Forward Looking Statements
February 26, 2019 © 2019 Watts Water Technologies, Inc. 2
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 2019 outlook
update, smart and connected strategy, capital expenditures, costs and savings associated
with realignment activities 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.
February 19, 2019 © 2019 Watts Water Technologies, Inc. 3
Who We Are
Global Leader / Expanding Geographically
Leader in Commercial / Residential Water Products
• $1.5B Global Company
o Domestic / international revenue split 60/40
o Exposure to replacement markets & new construction
o Strong presence in commercial / residential markets
o Regulations – plumbing codes drive ~ 65% of worldwide sales
• Leveraging Leading Brands and Key Market Drivers
o Safety & Regulation
o Energy Efficiency
o Water Conservation
• Driving Growth; introducing Smart & Connected
strategy
• Strong Cash Generator Drives Capital Deployment
R E V E N U E S O U R C E
EN
D M
AR
KE
TS
Where We Play: Strategic Themes
February 26, 2019 © 2019 Watts Water Technologies, Inc. 4
Addressing Global Secular Market Themes
SAFETY & REGULATION
Provide the highest levels of
performance in the
safeguarding of water systems
• Code & specification driven
• Extensive certification process
• Emerging need globally
ENERGY EFFICIENCY
Offer the most efficient
conversion of energy sources into
useful heat and hot water
• Large & fragmented market
• Economic & environmental value
proposition
• Application & engineering
competencies critical
WATER CONSERVATION
Deliver drainage and pre-treatment
systems that meet the design
challenges of a
water scarce world
• Environmental & emotional
drivers
• Code & specification driven
• Emerging global demand
• Best in class service
Specialty products and systems that conserve and safeguard the flow of fluid and energy
KEY MEGA
TRENDS
MARKET
CHARACTERISTICS
WATTS
VALUE
PROPOSITION
Attractive End Markets
February 26, 2019 © 2019 Watts Water Technologies, Inc. 5
Balanced Portfolio Providing Tailwind For Growth
Institutional / Educational
Multi Family / Commercial
Sports Complexes
Residential
Hospitality – Food Service
Light / General Industrial
Hospitality – Hotel
Healthcare
Specialty products and
systems that conserve and
safeguard the flow of fluid
and energy
Commercial Offerings
February 26, 2019 © 2019 Watts Water Technologies, Inc. 6
~60% of Sales; More Complexity / Systems
Driveway / Sidewalk
Drainage / Rain Water Harvesting Fire Protection Systems
Boiler / Mechanical Room
Irrigation
Commercial Kitchens
► Hot Water Heaters / Boilers
► Digital Thermostatic Mixing Stations
► Boiler & Pump Controls
► Gas Connectors
► Point of Use Filtration Systems
► Stainless Steel Drains
► Backflow Preventers
► Backflow Preventers
► Pressure Regulating Valves
► Isolation Valves
► Cross Connection Systems
► Automatic Control Valves
► Isolation Valves
► Cast Iron and Stainless Steel Drains & Pipe
► Rain Water Harvesting
► Roofs, Parking Garages, Bathrooms, Kitchens
Guestroom
► Anti-Scald Shower & Lavatory Valves
► Stainless Steel Shower Drains
► Underfloor Heating Systems
Public Restroom Safety
► Thermostatic Mixing Valves
► Floor Drains
► Closet & Lavatory Carriers
Point of Entry – Potable Water
► Electronic Temperature Controls
► Snow Melt Hydronic Systems
► Manifolds
Point of Entry –
Water Safety
► Backflow Preventers
► Automatic Control Valves
► Pressure Reducing Valves
► Ball, Gate, & Butterfly Valves
► OneFlow Anti-Scale Systems
► Water Softeners
► SmartStream UV System
Residential Offerings
February 26, 2019 © 2019 Watts Water Technologies, Inc. 7
~40% of Sales; Product Range Unmatched
Kitchen
► Undersink Thermostatic Mixing Valves
► Reverse Osmosis Water Filtration Systems
► Electric Tile Warming
► SmartSense Excess Flow Valve & Thermal Shutoff
Bathroom
► Tempering Valves
► Electric Tile Warming
► Stainless Steel Shower Drains
► Hot Water on Demand Recirculation
Driveway / Sidewalk
► Snow Melt Hydronic Systems
► Electronic Temperature Controls
► Manifolds
► Quick Connect Fittings
► Hydrocontrol Panels
► PEX Tubing
Laundry Room
► Anti-Scale Systems
► Gas Ball Valves & Connectors
► SmartSense Excess Flow Valve &
Thermal Shutoff
► IntelliFlow Automatic Washing
Machine Shutoff Valves
► Whole House Filtration
Systems
► Anti-Scale Systems
► Water Softeners
► SmartStream UV
Disinfection Systems
Boiler / Furnace Room
► T&P Relief Valves
► Tempering Valves
► Pressure Reducing Valves
► Expansion Tanks
► Temperature & Pressure Gauges
► Air Separators
► Backflow Preventers
► Pressure Reducing Valves
► Backflow Preventers
► Pressure Reducing Valves
► Flow Control Valves
Point of Entry –
Potable Water Point of Entry –
Water Safety
Irrigation
Living Room
► Control Panel / Thermostat
► Radiant Underfloor Heating
Watts Strategic Framework
8
Continue to Grow
Organically
Drive Operational
Efficiencies &
Improvement
across All Key
Processes
Employ
Disciplined &
Balanced Capital
Allocation
Strategy
February 26, 2019 © 2019 Watts Water Technologies, Inc.
Organic Growth Initiatives
February 26, 2019 © 2019 Watts Water Technologies, Inc. 9
Multifaceted Approach to Drive Solutions
New
Product
Development
Geographic
Expansion
Key Account
Management
• Streamlined multiple development processes to one
• Leveraging Voice of Customer to drive product innovation
• Opened state-of-the-art Watts Works Learning Centers
• Driving Smart & Connected strategy
• Introducing existing products to new territories
• Targeting countries with well-established plumbing codes
- Australia, Korea, Japan, Singapore, Chile, Mexico
• Expanding relationships with large customers
(e.g., lodging and restaurant chains)
• Leveraging integrated business model to
cross-sell solutions
Future Growth
Supported by
Solution Selling
February 26, 2019 © 2019 Watts Water Technologies, Inc. 10
11
Our Smart & Connected Strategy
© 2019 Watts Water Technologies, Inc.
Watts’ mobile application provides
access to technical details and enables
customers to manage their key assets
Watts recently launched Backflow
Prevention with SentryPlus® Alert and
Flood Protection Technology
Syncta provides backflow testers with an
integrated tool to speed and simplify their
testing and documentation submission
By partnering with industry leaders,
Watts provides one of the most
comprehensive spec resources in the
industry
Watts’ Website provides easy access to
full product portfolio with focus on solutions
and product lifecycle resources
With recent launches, AERCO’s onAER
remote monitoring system is an industry
leader in boiler remote monitoring
LATEST DEVELOPMENTS
• Invested over $10M during 2018 in the Smart & Connected initiative
• Partnered with industry leaders for IoT platform, security standards
• Launched new global watts.com and mobile application / QR codes
ACHIEVEMENTS
OBJECTIVES
• Derive 25% of global sales from connected products by 2023
• Strengthen digital experiences with engineers & contractors
• Broaden data analytics to drive performance improvements & new
products
February 26, 2019February 26, 2019
Margin Improvement Expectations
February 26, 2019 © 2019 Watts Water Technologies, Inc. 12
Pivoting to Growth
2015
BaselineTransformation 2018
Growth
Initiatives
Operational
Initiatives2020E
10.1%(1)
12.3%(1)
Goal ~14%
• LEAN
• Functional
Excellence • New Product
Development
• Geographic
Expansion
• Key Account
Management
• Portfolio
Rationalization
• Footprint
Optimization
• Global Sourcing
• Europe
Restructuring
Adjusted(1)
Operating Margin Opportunity Next 2 Years
(1) See slide 19 for reconciliation of GAAP to Non GAAP operating margin
Re-invested Incremental $31M through 2018
Strong Cash Flow Generation Provides Flexibility
Capital Deployment
February 26, 2019 © 2019 Watts Water Technologies, Inc. 13
Deployment Priorities Deployment History 2014-2018
• Investing in high ROI CAPEX
- Reinvestment ratio 80-100%
• Strategic M&A
- Disciplined valuation / screening
process
• Pay a competitive dividend
- Announced 11% increase in Q2‘18
- 6th consecutive yearly increase
- Yield in line with peers
• Stable share buyback
- Offset option dilution at minimum
$153M
$382M
$155M
$122M
M&A SHARE BUYBACK CAPEX DIVIDEND
~66% to growth
~34% returned to shareholders
M&A Strategy
February 26, 2019 © 2019 Watts Water Technologies, Inc. 14
Disciplined Acquisitions Generate Incremental Growth
✓ Core or Related Complementary Markets
✓
Addresses Macro Themes• Safety & Regulation
• Energy Efficiency
• Water Conservation
✓ Preferred Brand Name Products
✓
Financial criteria• ROIC > Cost of Capital
• EPS Accretive Year 1
• Operating Margin Accretive by Year 3
CRITERIA Additional Considerations
• Entry into new markets &
geographies
• Increase in shelf space
with existing customers
• Supports solution selling
• New or improved
technology
• Expansion of the breadth
of product offerings
Flexible Balance Sheet
February 26, 2019 © 2019 Watts Water Technologies, Inc. 15
Capacity to Execute on Strategic Growth
12/31/18 12/31/17 12/31/16
Cash $204 $280 $338
Other Current Assets 517 504 481
Non-Current Assets 933 953 944
Total Assets $1,654 $1,737 $1,763
Current Liabilities, excl. Short-term Debt $319 $305 $287
Non-Current Liabilities 91 106 90
Debt 353 497 650
Equity 891 829 736
Total Liabilities & Equity $1,654 $1,737 $1,763
Net Debt / Capitalization Ratio(1)
14% 21% 30%
$M
(1) See slide 20 for calculation of net debt / capitalization ratio
February 26, 2019
Growth Moderating; Margin Continues to Expand16
2019 Outlook
© 2019 Watts Water Technologies, Inc.
FY 2019 Outlook by Region
Org Rev Growth *Adjusted Margin
Growth*
AMERICAS 4-5%▲
Positive
EUROPE 0-2%▲
Positive
APMEA5-7%
▼
Down
WATTS 3-4%
50 to 70 bps
Includes $12M
Investments
Other Key Inputs
Item Expectation
Corporate Costs ~$39M
Interest
Expense~$15M
Adjusted Effective
Tax Rate*~28%
CAPEX / D&A ~$37M / ~$48M
Free Cash Flow
Conversion ≥100%
Share Count ~34.3M shares
* Organic revenue growth and Adjusted Margin Growth are non GAAP measures, see slide 21 for reconciliations. Adjusted Effective Tax Rate is a non GAAP measure and approximates the GAAP measure.
Summary
February 26, 2019 © 2019 Watts Water Technologies, Inc. 17
Commercial, Operational, and Innovation Excellence
Multi-year transformation completed → Enhanced portfolio and more
efficient organization; ongoing tailwind
Strengthened the
Foundation
Aligned to
Favorable Macros
and Markets
Focus On
Innovation and
Profitable Growth
Accretive Capital
Deployment
Achieving 2020
Targets
Leading market positions in residential and commercial water,
addressing global secular macro themes
Leveraging components to broaden application solutions offering,
Investment continues, fueling growth
Strong cash flow and efficient capital structure enables more
deployment upside; disciplined acquirer
• Operating margin ~14%
• Free cash flow > 100% conversion
Appendix
February 26, 2019 © 2019 Watts Water Technologies, Inc.
Reconciliation of GAAP “As Reported” to “Adjusted” Non-GAAP
Excluding Effect of Adjustments for Special Items
19
(in millions except per share information)
Year Ended2018 2015
Net Sales $1,564.9 $1,467.7
Operating income (loss) - as reported $188.4 $(90.1)
Operating margin % 12.0% -6.1%
Adjustments for special items:
Goodwill impairment — 130.5
Acquisitions / divesture related costs — 1.6
Restructuring 3.4 21.4
Transformation — 14.3
Pension / other costs — 70.7
Total adjustments for special items $3.4 $238.5
Operating income - as adjusted $191.8 $148.4
Adjusted operating margin % 12.3% 10.1%
(M)
(Unaudited)
February 26, 2019 © 2019 Watts Water Technologies, Inc.
Reconciliation of Long-term Debt
(including current portion) to Net Debt to Capitalization Ratio
© 2019 Watts Water Technologies, Inc. 20
(M)
(Unaudited)
December 31,
2017
December 31,
2016
December 31,
2016
Current portion of long-term debt $30.0 $22.5 $139.1
Plus: Long-term debt, net of current portion 323.4 474.6 511.3
Less: Cash and cash equivalents (204.1) (280.2) (338.4)
Net debt $149.3 $216.9 $312.0
Net debt $149.3 $216.9 $312.0
Plus: Total stockholders' equity 891.3 829.0 736.3
Capitalization $1,040.6 1,045.9 $1,048.3
Net debt to capitalization ratio 14% 21% 30%
February 26, 2019
February 26, 2019 21
Reconciliation between GAAP and Non GAAP
Measures Included in 2019 Outlook
© 2019 Watts Water Technologies, Inc.
Watts Americas Europe APMEA
Full Year
2019
Full Year
2019
Full Year
2019
Full Year
2019
Approximately Approximately Approximately Approximately
Sales Growth
2% to 3% 4% to 5% (3%) to (1%) 3% to 5%GAAP sales growth
Forecasted impact of foreign exchange ~1% - ~3% ~2%
Non GAAP sales growth - Organic 3% to 4% 4% to 5% 0% to 2% 5% to 7%
Operating Margin Expansion
40 to 60 bpsGAAP operating margin growth
Forecasted restructuring / other ~10 bps
Non GAAP – adjusted operating margin
growth50 to 70 bps