Watts Water Technologies Reports Record Fourth Quarter and Full Year 2025 Results

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(NYSE: WTS) – through its subsidiaries, one of the world’s leading manufacturers and providers of plumbing, heating and water quality products and solutions – today announced results for the fourth quarter and full year 2025.Chief Executive Officer Robert J. Pagano Jr. said, “I would like to recognize the Watts team for their hard work and dedication, which resulted in record fourth quarter and full year 2025 performance, including record sales, operating income and earnings per share. In addition, we continued to meet our customers’ needs for innovative solutions that address their greatest water safety, water conservation and energy efficiency challenges. We also successfully executed on our goals to develop differentiated products and further enhance productivity through the One Watts Performance System.”“We are proud of the work done to complete the acquisitions of Haws Corporation, Superior Boiler and Saudi Cast during the quarter. These strategic and complementary acquisitions expand our product portfolio, channel access and geographic presence. They also increase our exposure to specified, code-driven products in non-residential, institutional and industrial end markets. The integration of all three acquisitions is underway and progressing well.”Mr. Pagano concluded, “We look ahead to the coming year with confidence in our strategic growth initiatives and execution capabilities while continuing to monitor ongoing geopolitical uncertainty and mixed global markets. Our business is resilient and diversified, underpinned by a strong balance sheet and robust cash flow that support disciplined capital deployment. We will continue to invest for the future, return capital to our shareholders, and execute our strategy to drive profitable, long-term growth.”A summary of fourth quarter and full year financial results is as follows:Fourth Quarter and Full Year Earnings SummaryFourth quarter ended December 31,Year ended December 31,(In millions, except per share information)20252024% Change20252024% ChangeNet sales$625.1$540.416%$2,438.5$2,252.28%Organic sales growth % (1)8%5%Operating income$113.7$89.028%$448.1$390.415%Operating margin %18.2%16.5%170bps18.4%17.3%110bpsAdjusted operating income (1)$118.7$90.931%$477.2$399.619%Adjusted operating margin % (1)19.0%16.8%220bps19.6%17.7%190bpsDiluted earnings per share$2.50$2.0224%$10.17$8.6917%Special items (1)0.120.030.410.17Adjusted diluted earnings per share (1)$2.62$2.0528%$10.58$8.8619%(1)Sales of $625 million increased 16% on a reported basis and 8% on an organic basis. Organic sales increased primarily due to favorable price and an additional shipping day in the quarter. Incremental acquisition sales within the Americas and APMEA were $29 million and contributed 6% to reported growth. Favorable foreign exchange movements increased sales by $10 million, or 2%.Operating margin increased 170 basis points on a reported basis and 220 basis points on an adjusted basis. Operating and adjusted operating margin increased primarily due to favorable price and productivity which more than offset inflation, investments and tariffs. Operating margin was unfavorably impacted by an increase in acquisition-related charges and restructuring charges.Sales of $467 million increased 17% on a reported basis and 10% on an organic basis, primarily due to favorable price and an additional shipping day. Acquisitions contributed $27 million of incremental sales, or 7%, to reported growth.Segment margin increased 150 basis points as benefits from price realization and productivity more than offset inflation, tariffs, and acquisition dilution.Sales of $120 million increased 10% on a reported basis and 1% on an organic basis. Sales growth was due to favorable foreign exchange movements, which increased reported sales by 9%. Organic sales increased as a result of favorable price and an additional shipping day partially offset by lower volumes due to continued market weakness.Segment margin increased 490 basis points as price, productivity, and restructuring actions more than offset inflation.Sales of $39 million increased 15% on a reported basis and 9% on an organic basis, with growth across all major countries in the segment. The acquisition of Saudi Cast contributed $2 million of incremental sales, or 6%, to reported growth.Segment margin decreased 20 basis points as inflation and affiliate volume deleverage more than offset benefits from productivity and acquisition accretion.For full year 2025, operating cash flow was $402 million and net capital expenditures were $46 million, resulting in free cash flow of $356 million. For full year 2024, operating cash flow was $361 million and net capital expenditures were $29 million, resulting in free cash flow of $332 million. Operating and free cash flow increased due to higher net income and lower tax payments as a result of the One Big Beautiful Bill Act, partially offset by higher inventory driven by strategic investment and incremental tariffs. Free cash flow was also unfavorably impacted by an increase in net capital expenditures, partly due to proceeds from the sale of properties in the prior year.For the fourth quarter of 2025, the Company repurchased approximately 15,000 shares of Class A common stock at a cost of $4.2 million. For full year 2025, the Company repurchased approximately 67,000 shares at a cost of $16.0 million. Approximately $129 million remains available under the stock repurchase program authorized in 2023. There is no expiration date for this program.The Company anticipates full year 2026 sales growth to range from up 8% to up 12% on a reported basis and up 2% to up 6% on an organic basis. Full year operating margin is expected to be between 18.8% and 19.4%, or up 40 basis points to up 100 basis points, and adjusted operating margin is expected to be between 19.1% and 19.7%, or down 50 basis points to up 10 basis points.Further 2026 planning assumptions are included in the fourth quarter earnings materials posted in the Investor Relations section of our website at www.watts.com.For a reconciliation of GAAP to non-GAAP items and a statement regarding the usefulness of these measures to investors and management in evaluating our operating performance, please see the tables attached to this press release.Watts Water Technologies, Inc. will hold a live webcast of its conference call to discuss fourth quarter and full year 2025 results on Thursday, February 12, 2026 at 9:00 a.m. EST. This press release and the live webcast can be accessed by visiting the Investor Relations section of the Company’s website at www.watts.com. Following the webcast, the call recording will be available at the same address until February 11, 2027.Watts Water Technologies, Inc., through its subsidiaries, is a world leader in the manufacturing of innovative products to control the efficiency, safety, and quality of water within residential, commercial, and institutional applications. Watts’ expertise in a wide variety of water technologies enables us to be a comprehensive supplier to the water industry.This press release includes “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995, including statements relating to expected full year 2026 financial results, including sales and organic sales growth, operating margin and adjusted operating margin, our strategy, investments, the impact of tariffs, the benefits from and integration of recent acquisitions, our ability to manage uncertainty and current market conditions, including the fluid trade environment, our portfolio offerings, long-term growth and shareholder value creation and return of capital to stockholders. These forward-looking statements reflect our current views about future events. You should not rely on forward-looking statements because our actual results may differ materially from those predicted as a result of a number of potential risks and uncertainties. These potential risks and uncertainties include, but are not limited to: the imposition of or changes to tariff rates and related impacts to our business and the broader market; the effectiveness, timing and expected savings associated with our cost-cutting actions, restructuring and initiatives; integration of acquired businesses in a timely and cost-effective manner, retention of supplier and customer relationships and key employees, and the ability to achieve synergies and cost savings in the amounts and within the time frames currently anticipated; current economic and financial conditions, which can affect the housing and construction markets where our products are sold, manufactured and marketed; shortages in and pricing of raw materials and supplies; our ability to compete effectively; changes in variable interest rates on our borrowings; inflation; failure to expand our markets through acquisitions; failure to successfully develop and introduce new product offerings or enhancements to existing products; failure to manufacture products that meet required performance and safety standards; foreign exchange rate fluctuations; cyclicality of industries where we market our products, such as plumbing and heating wholesalers and home improvement retailers; environmental compliance costs; product liability risks and costs; changes in the status of current litigation; the war in Ukraine and other global crises; supply chain and logistical disruptions or labor shortages and workforce disruptions that could negatively affect our supply chain, manufacturing, distribution, or other business processes; and other risks and uncertainties discussed under the heading “Item 1A. Risk Factors” and in Note 16 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (“SEC”), as will be updated by our Annual Report on Form 10-K for the year ended December 31, 2025, as well as risk factors disclosed in our other subsequent filings with the SEC. We undertake no duty to update the information contained in this press release, except as required by law.WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(Amounts in millions, except per share information)(Unaudited)Fourth Quarter EndedYear EndedDecember 31,December 31,December 31,December 31,2025202420252024Net sales$625.1$540.4$2,438.5$2,252.2Cost of goods sold315.9287.71,232.51,190.2GROSS PROFIT309.2252.71,206.01,062.0Selling, general and administrative expenses194.4162.9734.2664.4Restructuring1.10.823.77.2OPERATING INCOME113.789.0448.1390.4Other (income) expense:Interest income(2.7)(2.8)(9.8)(8.9)Interest expense2.72.810.814.7Other expense (income), net0.5—1.3(1.4)Total other expense0.5—2.34.4INCOME BEFORE INCOME TAXES113.289.0445.8386.0Provision for income taxes29.521.5105.094.8NET INCOME$83.7$67.5$340.8$291.2BASIC EPSNET INCOME PER SHARE$2.50$2.02$10.17$8.70Weighted average number of shares33.433.433.533.5DILUTED EPSNET INCOME PER SHARE$2.50$2.02$10.17$8.69Weighted average number of shares33.533.533.533.5Dividends declared per share$0.52$0.43$1.99$1.65WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Amounts in millions, except share information)(Unaudited)December 31,December 31,20252024ASSETSCURRENT ASSETS:Cash and cash equivalents$405.5$386.9Trade accounts receivable, less reserve allowances of $12.5 million at December 31, 2025 and $11.9 million at December 31, 2024294.0253.2Inventories, net:Raw materials190.8141.9Work in process28.516.9Finished goods305.0233.3Total Inventories524.3392.1Prepaid expenses and other current assets62.351.3Total Current Assets1,286.11,083.5PROPERTY, PLANT AND EQUIPMENT:Property, plant and equipment, at cost777.1691.6Accumulated depreciation(480.0)(436.8)Property, plant and equipment, net297.1254.8OTHER ASSETS:Goodwill859.0715.0Intangible assets, net294.6235.0Deferred income taxes17.936.4Other, net126.572.3TOTAL ASSETS$2,881.2$2,397.0LIABILITIES AND STOCKHOLDERS’ EQUITYCURRENT LIABILITIES:Accounts payable$182.2$148.0Accrued expenses and other liabilities234.7190.8Accrued compensation and benefits95.579.1Total Current Liabilities512.4417.9LONG-TERM DEBT197.7197.0DEFERRED INCOME TAXES36.510.9OTHER NONCURRENT LIABILITIES106.963.3STOCKHOLDERS’ EQUITY:Preferred Stock, $0.10 par value; 5,000,000 shares authorized; no shares issued or outstanding——Class A common stock, $0.10 par value; 120,000,000 shares authorized; 1 vote per share; issued and outstanding, 27,426,533 shares at December 31, 2025 and 27,366,685 shares at December 31, 20242.72.7Class B common stock, $0.10 par value; 25,000,000 shares authorized; 10 votes per share; issued and outstanding, 5,916,290 shares at December 31, 2025 and 5,953,290 shares at December 31, 20240.60.6Additional paid-in capital720.6696.2Retained earnings1,431.31,184.8Accumulated other comprehensive loss(127.5)(176.4)Total Stockholders’ Equity2,027.71,707.9TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$2,881.2$2,397.0WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in millions)(Unaudited)Year EndedDecember 31,December 31,20252024OPERATING ACTIVITIESNet income$340.8$291.2Adjustments to reconcile net income to net cash provided by operating activities:Depreciation36.234.6Amortization of intangibles20.619.8Amortization of cloud computing arrangements1.6—Loss on disposal, (gain) on sale of assets0.3(5.2)Stock-based compensation21.219.5Deferred income tax38.5(14.7)Changes in operating assets and liabilities, net of effects from business acquisitions:Accounts receivable(9.5)3.3Inventories(75.4)13.6Prepaid expenses and other assets(18.1)(9.0)Accounts payable, accrued expenses and other liabilities45.88.0Net cash provided by operating activities402.0361.1INVESTING ACTIVITIESAdditions to property, plant and equipment(45.7)(35.3)Proceeds from the sale of property, plant and equipment—5.9Business acquisitions, net of cash acquired(257.1)(96.3)Other investing activity—1.0Net cash used in investing activities(302.8)(124.7)FINANCING ACTIVITIESPayments of long-term debt—(100.0)Payments for withholding taxes on vested awards(11.4)(13.0)Payments for debt issuance costs—(2.3)Payments for finance leases and other(2.6)(2.7)Payments to repurchase common stock(16.0)(17.0)Dividends(66.9)(55.5)Net cash used in financing activities(96.9)(190.5)Effect of exchange rate changes on cash and cash equivalents16.3(9.1)INCREASE IN CASH AND CASH EQUIVALENTS18.636.8Cash and cash equivalents at beginning of year386.9350.1CASH AND CASH EQUIVALENTS AT END OF YEAR$405.5$386.9In this press release, segment earnings is our GAAP performance measure used by our chief operating decision-maker (“CODM”) to assess and evaluate segment results. Segment earnings exclude the impact of non-recurring and unusual items, such as restructuring costs, acquisition-related costs, gain or loss on sale of assets and pension settlements. The CODM uses segment earnings for insight into underlying trends comparing past financial performance with current performance by reporting segment on a consistent basis. Segment margin is defined as segment earnings divided by segment revenue.We refer to non-GAAP financial measures (including adjusted operating income, adjusted operating margin, adjusted net income, adjusted diluted earnings per share, organic sales, organic sales growth, free cash flow, cash conversion rate of free cash flow to net income and net debt to capitalization ratio) and provide a reconciliation of those non-GAAP financial measures to the corresponding financial measures contained in our consolidated financial statements prepared in accordance with GAAP. We believe these financial measures enhance the overall understanding of our historical financial performance and give insight into our future prospects. Adjusted operating income, adjusted operating margin, adjusted net income and adjusted diluted earnings per share eliminate certain expenses incurred and benefits recognized in the periods presented that relate primarily to our global restructuring programs, acquisition-related costs, gain or loss on sale of assets, pension settlements, other investment gains and the related income tax impacts on these items and tax adjustment items (with respect to adjusted net income and adjusted diluted earnings per share only). Management then utilizes these adjusted financial measures to assess the run rate of the Company’s operations against those of comparable periods. Organic sales and organic sales growth are non-GAAP measures of net sales and net sales growth excluding the impacts of foreign exchange, acquisitions and divestitures from period-over-period comparisons. Management believes reporting organic sales and organic sales growth provides useful information to investors, potential investors and others, and allows for a more complete understanding of underlying sales trends by providing sales and sales growth on a consistent basis. Free cash flow, cash conversion rate of free cash flow to net income, and the net debt to capitalization ratio, which are adjusted to exclude certain cash inflows and outlays, and include only certain balance sheet accounts from the comparable GAAP measures, are an indication of our performance in cash flow generation and also provide an indication of the Company’s relative balance sheet leverage to other industrial manufacturing companies. These non-GAAP financial measures are among the primary indicators management uses as a basis for evaluating our cash flow generation and our capitalization structure. In addition, free cash flow is used as a criterion to measure and pay certain compensation-based incentives. For these reasons, management believes these non-GAAP financial measures can be useful to investors, potential investors and others. The Company’s non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial measures prepared in accordance with GAAP.TABLE 1RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURESEXCLUDING THE EFFECT OF ADJUSTMENTS FOR SPECIAL ITEMS(Amounts in millions, except per share information)(Unaudited)CONSOLIDATED RESULTSFourth Quarter EndedYear EndedDecember 31,December 31,December 31,December 31,2025202420252024Net sales$625.1$540.4$2,438.5$2,252.2Operating income$113.7$89.0$448.1$390.4Operating margin %18.2%16.5%18.4%17.3%Adjustments for special items:Restructuring$1.1$0.8$23.7$7.2Acquisition-related costs3.91.15.414.2Gain on sale of assets———(4.4)Pension settlement———(7.8)Total adjustments for special items$5.0$1.9$29.1$9.2Adjusted operating income$118.7$90.9$477.2$399.6Adjusted operating margin %19.0%16.8%19.6%17.7%Net income$83.7$67.5$340.8$291.2Adjustments for special items – tax effected:Restructuring$0.8$0.6$17.8$5.4Acquisition-related costs3.40.84.510.7Gain on sale of assets———(3.5)Pension settlement———(5.8)Other investment gain———(1.0)Tax adjustment items—(0.4)(8.3)—Total adjustments for special items – tax effected$4.2$1.0$14.0$5.8Adjusted net income$87.9$68.5$354.8$297.0Diluted earnings per share$2.50$2.02$10.17$8.69Restructuring0.020.020.530.16Acquisition-related costs0.100.020.130.32Gain on sale of assets———(0.11)Pension settlement———(0.17)Other investment gain———(0.03)Tax adjustment items—(0.01)(0.25)—Adjusted diluted earnings per share$2.62$2.05$10.58$8.86TABLE 2SEGMENT INFORMATION – RECONCILIATION OF SEGMENT EARNINGS TO CONSOLIDATED OPERATING INCOME – GAAP(Amounts in millions)(Unaudited)Fourth Quarter EndedDecember 31, 2025December 31, 2024AmericasEuropeAPMEATotalAmericasEuropeAPMEATotalTotal segment net sales$468.6128.155.4$652.1$400.2113.654.8$568.6Elimination of intersegment sales(2.0)(8.4)(16.6)(27.0)(2.2)(5.0)(21.0)(28.2)Net sales from external customers$466.6119.738.8$625.1$398.0108.633.8$540.4Segment earnings$108.718.06.7$133.4$86.911.05.9$103.8Segment margin %23.3%15.1%17.3%21.3%21.8%10.2%17.5%19.2%Corporate operating loss – excluding special items$(14.7)$(12.9)Corporate special items(1.6)(1.1)Corporate operating loss$(16.3)$(14.0)Adjustments for segment special items:$(1.8)(1.2)(0.4)$(3.4)$1.2(1.9)(0.1)$(0.8)Operating income$113.7$89.0Operating margin %18.2%16.5%Year EndedDecember 31, 2025December 31, 2024AmericasEuropeAPMEATotalAmericasEuropeAPMEATotalTotal segment net sales$1,855.8484.3235.3$2,575.4$1,673.8476.3218.7$2,368.8Elimination of intersegment sales(8.4)(33.6)(94.9)(136.9)(8.9)(23.0)(84.7)(116.6)Net sales from external customers$1,847.4450.7140.4$2,438.5$1,664.9453.3134.0$2,252.2Segment earnings$452.259.825.7$537.7$376.053.224.5$453.7Segment margin %24.5%13.3%18.3%22.1%22.6%11.7%18.3%20.1%Corporate operating loss – excluding special items$(60.5)$(54.1)Corporate special items(1.6)(1.7)Corporate operating loss$(62.1)$(55.8)Adjustments for segment special items:$(3.3)(23.7)(0.5)$(27.5)$(3.5)(3.4)(0.6)$(7.5)Operating income$448.1$390.4Operating margin %18.4%17.3%TABLE 3SEGMENT INFORMATION – RECONCILIATION OF NET SALES TO NON-GAAP ORGANIC SALES(Amounts in millions)(Unaudited)Fourth Quarter EndedAmericasEuropeAPMEATotalNet sales December 31, 2025$466.6$119.7$38.8$625.1Net sales December 31, 2024398.0108.633.8540.4Dollar change$68.6$11.1$5.0$84.7Net sales % increase17.2%10.2%14.8%15.7%Foreign exchange impact—%(8.8)%(0.3)%(1.9)%Acquisition impact(6.8)%—%(6.0)%(5.4)%Organic sales % increase10.4%1.4%8.5%8.4%Year EndedAmericasEuropeAPMEATotalNet sales December 31, 2025$1,847.4$450.7$140.4$2,438.5Net sales December 31, 20241,664.9453.3134.02,252.2Dollar change$182.5$(2.6)$6.4$186.3Net sales % increase (decrease)11.0%(0.6)%4.8%8.3%Foreign exchange impact—%(4.0)%1.5%(0.7)%Acquisition impact(3.0)%—%(1.5)%(2.3)%Organic sales % increase (decrease)8.0%(4.6)%4.8%5.3%Fourth Quarter EndedAmericasEuropeAPMEATotalNet sales December 31, 2024$398.0$108.6$33.8$540.4Net sales December 31, 2023387.0128.032.5547.5Dollar change$11.0$(19.4)$1.3$(7.1)Net sales % increase (decrease)2.8%(15.2)%4.0%(1.3)%Foreign exchange impact0.2%(0.1)%(0.6)%—%Acquisition impact(5.9)%—%—%(4.1)%Organic sales % (decrease) increase(2.9)%(15.3)%3.4%(5.4)%Year EndedAmericasEuropeAPMEATotalNet sales December 31, 2024$1,664.9$453.3$134.0$2,252.2Net sales December 31, 20231,428.1512.1116.12,056.3Dollar change$236.8$(58.8)$17.9$195.9Net sales % increase (decrease)16.6%(11.5)%15.4%9.5%Foreign exchange impact0.1%(0.3)%0.8%—%Acquisition impact(14.5)%—%(7.0)%(10.4)%Organic sales % increase (decrease)2.2%(11.8)%9.2%(0.9)%TABLE 4RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW(Amounts in millions)(Unaudited)Year EndedDecember 31,December 31,20252024Net cash provided by operating activities$402.0$361.1Less: additions to property, plant, and equipment(45.7)(35.3)Plus: proceeds from the sale of property, plant, and equipment—5.9Free cash flow$356.3$331.7Net income$340.8$291.2Cash conversion rate of free cash flow to net income104.5%113.9%TABLE 5RECONCILIATION OF LONG-TERM DEBT (INCLUDING CURRENT PORTION) TO NET DEBT AND NET DEBT TO CAPITALIZATION RATIO(Amounts in millions)(Unaudited)December 31,December 31,20252024Current portion of long-term debt$—$—Plus: long-term debt, net of current portion197.7197.0Less: cash and cash equivalents(405.5)(386.9)Net debt$(207.8)$(189.9)Net debt$(207.8)$(189.9)Total stockholders’ equity2,027.71,707.9Capitalization$1,819.9$1,518.0Net debt to capitalization ratio(11.4)%(12.5)%TABLE 62026 FULL YEAR OUTLOOK – RECONCILIATION OF NET SALES GROWTH TO ORGANIC SALES GROWTH AND OPERATING MARGIN TO ADJUSTED OPERATING MARGIN(Unaudited)Total WattsFull Year2026 OutlookApproximatelyNet SalesNet sales growth8% to 12%Forecasted impact of acquisition / FX(6)%Organic sales growth2% to 6%Operating MarginOperating margin18.8% to 19.4%Forecasted restructuring / other costs0.3%Adjusted operating margin19.1% to 19.7% https://www.businesswire.com/news/home/20260211277819/en/ContactsDiane McClintock Chief Financial Officer email: investorrelations@wattswater.com#distroPostmedia is committed to maintaining a lively but civil forum for discussion. 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