Watts Water Technologies (WTS) investor relations material

Executive summary

• Achieved record Q1 2026 results with net sales of $677.3 million, up 21% year-over-year and 12% organically, driven by strong price, volume, and data center demand.

• Operating margin rose to 19.6%, up 390 bps; adjusted operating margin at 20.1%, up 110 bps; adjusted EPS increased 28% to $3.04, and diluted EPS rose 34% to $2.97.

• Announced a 21% dividend increase to $0.63 per share, reflecting strong balance sheet and capital allocation flexibility.

• Five acquisitions in 2025 expanded technology, product range, and geographic reach, with successful integration and synergy realization.

• Maintained full-year 2026 outlook amid macroeconomic and geopolitical uncertainty, supported by robust Americas and APMEA performance.

Financial highlights

• Q1 net sales reached $677.3 million, up 21% reported and 12% organically year-over-year.

• Adjusted EBITDA was $151 million (+27%), with a margin of 22.3% (+90 bps YoY); adjusted operating income rose 28% to $136 million.

• Net income rose 34.6% to $99.6 million; diluted EPS up 34% to $2.97.

• Free cash flow declined to $6.6–$7 million from $45.6 million, due to higher receivables, rebates, and inventory investments.

• Gross profit increased to $326.1 million, though gross margin declined to 48.1% due to acquisition dilution.

Outlook and guidance

• Full-year 2026 outlook reaffirmed: organic sales growth of 2–6%, reported sales growth of 8–12%.

• Adjusted operating margin guidance: 19.1–19.7% for FY 2026; operating margin forecasted at 18.8–19.4%.

• Q2 reported sales expected to rise 10–14%, organic sales up 4–8%; Americas to see mid to high single-digit growth, Europe low single-digit decline, APMEA low to mid single-digit growth.

• Free cash flow conversion target ≥90% of net income for the year.

• Outlook assumes short-term Middle East conflict and incorporates current tariff impacts.