• Net sales of $763 million, up 19% on a reported basis and 12% organically
• Operating margin of 20.2%, down 80 bps; adjusted operating margin of 21.0%, down 60 bps
• Diluted EPS of $3.53, up 17%; adjusted diluted EPS of $3.66, up 18%
• Increasing full year 2026 sales and margin outlook

Note changes in performance are relative to second quarter 2025

NORTH ANDOVER, Mass.--(BUSINESS WIRE)--Watts Water Technologies, Inc. (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 second quarter of 2026.

Chief Executive Officer Robert J. Pagano Jr. said, “We delivered another strong quarter, achieving record sales, operating income and EPS, with double-digit organic growth. These results reflect the strength of our diversified portfolio, disciplined execution, and our ability to capture long-term growth opportunities. Building on our first half performance, we are increasing our full year 2026 sales and margin outlook. While the trade and geopolitical environments remain dynamic, our teams continue to execute well and remain focused on serving our customers. Through continued investments in innovation, digital capabilities and the One Watts Performance System, we are enhancing our competitive position and expanding opportunities for profitable growth across our portfolio. This includes attractive markets such as data centers, where our differentiated capabilities continue to drive strong customer demand and where we see significant opportunity ahead. Supported by our healthy balance sheet, consistent cash generation and disciplined capital allocation, we believe we are well positioned to continue delivering value for our customers and shareholders. I would like to thank the Watts team for their commitment and dedication, which continue to drive our success.”

A summary of second quarter financial results is as follows:

Second Quarter Financial Highlights
Second quarter 2026 performance compared to second quarter 2025

Sales of $763 million increased 19% on a reported basis and 12% on an organic basis, primarily due to favorable price realization and higher volume driven by data center growth. Acquisition sales within the Americas and APMEA contributed $34 million, or 5%, to reported sales growth. Favorable foreign exchange contributed $7 million, or 1%, to reported sales growth.

Operating margin decreased 80 basis points on a reported basis, and 60 basis points on an adjusted basis. Operating and adjusted operating margin decreased primarily due to acquisition dilution, inflation and tariffs, and the difficult comparison against the one-time tariff-related price/cost benefit in the prior year, partly offset by favorable price realization, sales volume leverage, and productivity. Operating margin was also unfavorably impacted by an increase in restructuring charges.

Regional Performance

Americas
Sales of $585 million increased 17% on a reported basis and 12% on an organic basis, primarily due to favorable price realization and higher volume driven by data center growth. Acquisition sales contributed $28 million, or 6%, to reported sales growth.

Segment margin decreased 150 basis points primarily due to acquisition dilution, inflation and tariffs, and the difficult comparison against the one-time tariff-related price/cost benefit in the prior year, partly offset by favorable price realization, sales volume leverage, and productivity.

Europe
Sales of $125 million increased 12% on a reported basis and 9% on an organic basis, primarily due to higher volumes and favorable price realization. Favorable foreign exchange contributed 3% to reported sales growth.

Segment margin increased 160 basis points primarily due to favorable price realization, sales volume leverage, and productivity, which more than offset higher inflation.

APMEA
Sales of $54 million increased 57% on a reported basis and 31% on an organic basis. Organic growth was primarily due to higher volume driven by data center growth in China partly offset by a decline in the Middle East. Acquisition sales contributed $6 million, or 17%, and favorable foreign exchange contributed 9% to reported sales growth.

Segment margin increased 100 basis points primarily due to favorable price realization and acquisition accretion, which more than offset inflation and cost headwinds from the Middle East conflict.

Cash Flow and Capital Allocation

For the first six months of 2026, operating cash flow was $121 million and net capital expenditure was $23 million, resulting in free cash flow of $98 million. In the comparable period last year, operating cash flow was $125 million and net capital expenditure was $20 million, resulting in free cash flow of $105 million. Free cash flow declined due to higher working capital levels and increased capital expenditures, which more than offset higher net income. Working capital increases were due to higher accounts receivable attributable to higher net sales, higher inventory due to incremental tariffs and strategic inventory investments to support expected end-market demand. Sequential increases in free cash flow are expected in the second half of 2026 as we monetize working capital with the seasonality of the business.

The Company repurchased approximately 13,000 shares of Class A common stock at a cost of $4.1 million during the second quarter of 2026. Approximately $121 million remains available under the stock repurchase program authorized in 2023. There is no expiration date for this program.

Full Year 2026 Outlook

The Company is increasing its full year sales and organic sales growth outlook as well as its operating margin and adjusted operating margin outlook. Sales growth is expected to range from up 14% to up 17% on a reported basis and up 8% to up 11% on an organic basis. Full year operating margin is expected to be between 19.4% and 20.0%, or up 100 basis points to up 160 basis points, and adjusted operating margin is expected to be between 19.8% and 20.4%, or up 20 basis points to up 80 basis points. The full year outlook assumes no change in the level of impact resulting from the Middle East conflict and incorporates the estimated impact of tariffs in place or announced as of August 4, 2026. The full year outlook does not include the impact of tariff refunds, and any tariff refunds received in future periods will be treated as non-recurring special items and therefore will not be included in our adjusted results.

Further 2026 planning assumptions are included in the second 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 second quarter 2026 results on Thursday, August 6, 2026 at 9:00 a.m. EDT. 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 August 5, 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, improvements in free cash flow in the second half of 2026, our strategy, investments, our ability to target and capitalize on growing markets, including our data center initiative, the impact of tariffs and any tariff refunds received as a result of the invalidation of tariffs imposed under the International Emergency Economic Powers Act, the benefits from and integration of acquisitions, our ability to manage uncertainty and current market conditions, including the fluid trade environment, future dividends, long-term growth and shareholder value creation. 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 continued growth of our customers’ markets; 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 timeframes 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 impacts and duration of the Middle East conflict, 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 17 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission (“SEC”). We undertake no duty to update the information contained in this press release, except as required by law.

Segment Earnings and Non-GAAP Financial Measures

In 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 and acquisition-related costs. 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 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 balance sheet leverage relative 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20260805319284/en/

Ray Nash
VP FP&A and Investor Relations
email: investorrelations@wattswater.com

Source: Watts Water Technologies, Inc