Watts Water Technologies Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 3, 2023

There are 10 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Watts Water Technologies Second Quarter 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

Followed by the number 1 on your telephone keypad. Thank you. I will now turn today's call over to Diane McClintock, Senior Vice President, Financial Planning Analysis and Investor Relations. Please go ahead.

Speaker 1

Thank you, and good morning, everyone. Welcome to our Q2 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 Q2 and discuss the current state of the markets and our operations. He will also update you on our Smart and Connected product initiatives and our sustainability efforts.

Speaker 1

Shashank will discuss the details of our 2nd quarter performance and provide our outlook for the Q3 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 reference this presentation throughout our prepared remarks. Any reference to non GAAP financial information is reconciled in the appendix to the presentation.

Speaker 1

Before we begin, and like to remind everyone that during this call, we may be making certain comments that constitute forward looking statements. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially. For information concerning these risks, see Watt's publicly available filings with the SEC. The company disclaims any intention or obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise. With that, I will turn the call over to Bob.

Speaker 2

Thank you, Diane, and good morning, everyone. Please turn to Slide 3 and I'll provide an overview of the quarter. First, I'd like to thank the entire Watts team for their hard work in dedication to diligently serving our customers worldwide. Together, we delivered another better than expected quarter despite tough comparisons to a very strong Q2 in 2022. We finished the quarter with record sales, operating margin and earnings per share leading to the decision to raise our full year 2023 outlook.

Speaker 2

The Europe and APMEA regions were resilient as organic sales grew at a mid single digit pace, primarily due to price. Sales in the Americas region were down low single digits as we expected, due to a tough comparison to a very strong Q2 in 2022, where organic sales were up 22%. Strong growth in our non residential core valve products was more than offset by double digit declines in our gas connectors, radiant heating applications in Commercial Marine Instrumentation. Adjusted operating margin exceeded expectations supported by solid price realization, to favorable mix and productivity, which more than offset inflation, lower volume and incremental investments. Year to date free cash flow has been strong and has added to the strength of our balance sheet.

Speaker 2

We expect to generate strong free cash flow into the second half of twenty twenty three, which will afford us ongoing flexibility in our balanced capital allocation strategy. To that end, our Board approved a new $150,000,000 share repurchase program. This program will follow on our existing plan as stock repurchases remain an important part of our capital allocation strategy. As a reminder, stock buybacks along with high ROI CapEx investments, competitive dividends and strategic M and A such as our recent nware acquisition remain our top capital allocation priorities. Moving to operations, the integration of our nWARE acquisition is going well and cost actions are ahead of schedule.

Speaker 2

By leveraging our 1 Watts performance system and collaborating with the NWARE team, we have been able to seamlessly integrate and align the organization and efficiently streamline operations. We're excited about the future of nware as we continue to scale our operations in Australia. While inflation is moderating, it is still above normal historical levels. We continue to assess our price cost relationship and we'll address price increases as needed. Automation is a big focus for our capital spending and is necessary to offset labor shortages and drive productivity.

Speaker 2

We expect to continue these investments to enhance productivity in our factories. Next, I'd like to provide an update on our end markets. While GDP is down compared to 2022, it remains positive in our key markets and is contributing to continued repair and replacement activity. Europe remained solid in the quarter as growth continued in Germany, France and Benelux. However, we do expect softening marketing additions in the second half of the year, driven by a slower residential market, declining Eurozone PMI and the potential impact of changes to the energy incentive program in Italy.

Speaker 2

In the Americas, new residential single family construction appears to have bottomed out and multifamily new construction is holding up. Non residential new construction indicators are mixed, but have shown recent resilience. After multiple readings below 50 dating back to the fall of last The May June ABI index readings bounced back above 50 indicating expansion. The Dodge Momentum Index to still suggesting that growth in non residential projects will continue. The institutional industrial verticals that remains solid year to date and we expect this to continue through 2023.

Speaker 2

In the Asia Pacific region, Growth in China has decelerated in recent months. We are seeing strengthening markets in the Middle East due to continued higher oil prices. Australian markets remain resilient despite continued interest rate increases and our recent nWARE acquisition gives us confidence that we'll continue to grow in Australia. Now an update on our outlook for the Q3 and the remainder of the year. Due to challenging comps as a result of a strong Q3 2022, we expect our Q3 organic sales growth to be lower versus prior year.

Speaker 2

We also anticipate declining operating margins due to normal seasonality, incremental investments and volume deleverage. While we expect difficult comps in Q3, we are increasing our full year outlook due to a strong first half performance as well as better than expected price and favorable mix. We expect America's nonresidential business to remain solid, but be offset by weak single family residential and continued softness in certain specialty channel products. We also anticipate the second half to be softer in Europe due to weakening macros. Inflated interest rates and lending tightening may also have an impact on new construction.

Speaker 2

In addition, we are accelerating $3,000,000 of investments into 2023 and increasing our full year investments to $23,000,000 from the $20,000,000 previously communicated to fund new product development, including Smart and Connected enabled products. On Slide 4, I'd like to update you on our Smart and Connected offerings. Year to date, the percentage of Smart and Connected enabled product sales to total sales reached 23%. Our goal has been to achieve 25% of sales from smart and connected enabled products by the end of 2023 and we expect to meet that goal. I would also like to share with you one of the new smart and connected products that was developed by the team at The SmartFlow Meter Risk Management System incorporates a smart thermostatic mixing valve, Tapware and other hardware to provide monitoring and flow management capability.

Speaker 2

The SmartFlow platform serves the healthcare vertical and provides visibility to water system delivery that will enhance asset performance and longevity, reduce operating costs and help proactively manage bacterial and scalding to risk while ensuring a more comfortable patient experience. We are excited about the SmartFlow and other new products as we continue to grow our smart and connected product offering. On Slide 5, I'd like to comment on our most recent sustainability report. In May, we published our 2022 Sustainability Report, which highlights the accomplishments and the progress we've made within our 4 ESG pillars: Footprint, Amprint, Social Responsibility and Corporate Governance. Our focus on our sustainability triple play, Safety and regulation, energy efficiency and water conservation has allowed us to deliver tremendous value to our customers as we continue to enhance efficiency and transform traditional products into our smart and connected solutions.

Speaker 2

Our focus on social responsibility reflects our people first approach and commitment to making people and communities safer, healthier and stronger. Sustainability is a core commitment at Watts that extends into all aspects of our business. I'm proud of the progress our global team has made and invite you to read more about it in our sustainability report, which can be downloaded from our Investor Relations website. With that, let me turn the call over to Shashank, who will address our Q2 results and our Q3 and revised full year outlook. Shashank?

Speaker 3

Thanks, Bob, and good morning, everyone. Please turn to Slide 6, and I will review the 2nd quarter's consolidated results. Sales of $533,000,000 were up 1% on a reported basis and flat organically. Mid single digit organic growth in Europe and APMEA were offset by a low single digit organic decline in the Americas. Sales from our Endor acquisition totaled approximately $8,000,000 and are reported within the APMEA region.

Speaker 3

Unfavorable foreign exchange movements had an immaterial impact in the quarter. Adjusted operating profit was $104,000,000 up 7% compared to last year and adjusted EPS was up 11% to $2.34 Adjusted operating margin of 19.5 percent was up 100 basis points as price mix and productivity more than offset inflation, to lower volume and incremental investments. We were able to deliver 100 basis points of margin expansion despite a tough comparison to the Q2 of 2022, which benefited from approximately $7,000,000 of one time price cost favorability and the dilution of the Enworth acquisition in the quarter. The adjusted effective tax rate was 24.7%, 130 basis points favorable to the Q2 of 2022. The decrease relates primarily to the reduction of foreign taxes associated with the repatriation of funds.

Speaker 3

Our free cash flow year to date was $89,000,000 as compared to $33,000,000 in the 1st 6 months of last year. The cash flow increase was primarily due to higher net income and a lower amount of working capital investment. To expect sequential improvement in our free cash flow and our full year goal is to achieve free cash flow conversion of 100% or more of net income as previously communicated. During the quarter, we repurchased approximately 24,000 shares of our Class A common stock for $4,000,000 and year to date we have repurchased approximately 47,000 shares of our Class A common stock for $8,000,000 There is approximately $20,000,000 remaining under the current stock repurchase program that was authorized in 2019. As Bob mentioned, we just announced a new $150,000,000 stock repurchase program that will provide us with to Aptiality as part of our balanced capital allocation strategy.

Speaker 3

Furthermore, the 20% dividend increase that we announced in early May demonstrates our continued focus on returning capital to shareholders. Please turn to Slide 7 and let me provide a few comments on the regional results. Americas organic sales were down 2% as we expected due to a tough prior year comparison. As a reminder, Americas grew 22% in the Q2 of 2022. Strong growth in our non residential core valve products was more than offset by declines in gas connectors, radiant heating applications and commercial marine instrumentation.

Speaker 3

In addition to the tough comps, weakness in single family residential new construction was a contributing factor. Adjusted operating profit increased by 7% and adjusted operating margins increased by 2 10 basis points. The margin expansion was driven by price, mix and productivity, which more than offset volume declines, inflation and incremental investments. Europe demonstrated resiliency with organic sales up approximately 5%. Reported sales were positively impacted by 1% from favorable foreign exchange movements.

Speaker 3

Growth was primarily due to price with growth in Germany, driven by our OEM business and in France and Benelux, by solid wholesale activity. The growth was partly offset by declines in Scandinavia and Italy with the reduction of government subsidies had an unfavorable impact. Operating margin declined by 10 basis points as price and productivity were unable to offset to inflation Investments and Volume De Leverage. APMEA also had a solid quarter delivering 6% organic growth. Reported sales growth of 33% was negatively impacted by 6% from unfavorable foreign exchange movements and favorably impacted by 33 percent or $8,000,000 of acquired nware sales.

Speaker 3

China's organic Sales grew low single digits, while organic sales outside China were up by double digits with growth in Australia and in the Middle East, partially offset by a decline in New Zealand due to the after effects of the historic flooding. Adjusted operating margins increased 2.50 basis points due to higher third party sales volume, affiliated volume, price and productivity, which more than offset inflation investments and the dilutive to the effect of the Inware acquisition. Slide 8 provides our assumptions about our Q3 and full year operating outlook. First, let's cover the Q3 outlook. As Bob mentioned, we'll have a very tough comparison to a strong Q3 in 2022.

Speaker 3

We estimate consolidated organic sales may be up by 1% to down by 3% with Americas and Europe being flat to a low single digit decline, offset partly by low single digit growth in APMEA. This moderation in growth rates is due to the anticipated softening underlying market conditions in Europe. As previously mentioned in the Americas, we expect continued weakness in gas connectors, to Radiant Heating Applications and Commercial Marine Instrumentation. We also anticipate continued weakness in single family residential new construction. In APMEA, the acquisition of NWARE is expected to contribute $8,000,000 of sales.

Speaker 3

We estimate our adjusted Operating margin could range from 16% to 16.5% for the 3rd quarter, down 30 basis points to 80 basis points versus prior year. The decline versus prior year is due to the reduced volume incremental investments of approximately $7,000,000 and the one time price cost benefit of $6,000,000 we spoke about in the Q3 of 2022. The sequential decline in operating margin from Q2 is driven primarily by the impact of volume deleverage, incremental investments and typical seasonality. In addition, we expect the Enron acquisition to be dilutive to operating margin as we continue to adjust the cost structure. Corporate costs should be approximately $14,000,000 and interest expense net of interest income should to approximately $500,000 in the 3rd quarter.

Speaker 3

The adjusted effective tax rate should be approximately 25%. We are assuming a 1.10 average euro U. S. Dollar FX rate for Q3 versus the average rate of 1.01 in the Q3 of 2022. This implies a Q3 increase of 8% year over year, which equates to an increase of to approximately $8,000,000 in sales and $0.02 a share in EPS versus the prior year.

Speaker 3

Now let's cover the updated full year outlook. For the full year 2023, we are increasing our organic sales growth outlook to a range from minus 2% to plus 2%. Our previous guide was from a range of minus 5% to plus 2%. In effect, this raises the bottom of our range by 3% and the midpoint by 2% based on our stronger than expected start in the first half of the year and our expected third quarter outlook. We now expect approximately $24,000,000 of sales from the acquisition of nWARE.

Speaker 3

We are also increasing our full year to operating margin expansion to a range of +30basispoints to plus 90basispoints compared to our previous outlook of minus 10 basis points to minus 70 basis points. This represents an increase of 100 basis points to our previous guidance. We now expect our 2023 operating margins to be between 16.7% 17.3%. We expect our solid first half will partially mitigate the lower margins in the second half due to seasonality, volume deleverage, incremental investments and the dilutive impact of the Enron acquisition. As a reminder, we are also increasing our full year investments from $20,000,000 to $23,000,000 Our free cash flow expectations are anticipated to be in line with our previous outlook and should meet or exceed 100 percent of net income.

Speaker 3

We are assuming a 1.09 average euro U. S. Dollar FX rate for the full year versus the average rate of €1,050,000,000 in 2022. This would imply an increase of 4% in sales year over year and equates to an increase of $12,000,000 in sales and $0.04 a share in EPS for the full year versus the prior year. Regarding other key inputs for the full year.

Speaker 3

We expect corporate costs to be approximately $54,000,000 for the full year. Interest expense net of interest income should now be approximately $3,000,000 for the full year. Our Estimated adjusted effective tax rate for 2023 should be approximately 25%. Capital spending is expected to be approximately $35,000,000 depreciation and amortization should be approximately $42,000,000 for the year. We expect our share count to be approximately 33,500,000 for the year.

Speaker 3

Now let me turn the call back over to Bob before we begin Q and A.

Speaker 2

Bob? Thanks, Shashank. Please turn to Slide 9. I'd like to summarize our discussion before we address your questions. The Q2 was better than we anticipated with record sales, operating margin and earnings per share supported by price and favorable mix.

Speaker 2

Due to our strong first half performance, we are increasing our full year outlook. We continue to monitor the slowing economic indicators in Europe and are staying close to our customers. We are confident in our ability to execute in this uncertain environment. We are prioritizing investment in our smart and connected and sustainability initiatives and are increasing our full year investments from $20,000,000 to $23,000,000 We believe we are on track to hit 25% of total revenues coming from smart and connected enabled products by the end of 2023. Our strong free cash flow generation and balance sheet provides us flexibility to execute our balanced capital allocation strategy.

Speaker 2

We announced a new $150,000,000 stock repurchase program to ensure we maintain repurchase flexibility over the coming years. With that operator, please open the line for questions.

Operator

Your first question comes from the line of Ryan Connors with Northcoast Research. Your line is

Speaker 4

open. Good morning. Thanks for taking my question. So I want to start on the gross margin. Obviously, gross margins look really, really good.

Speaker 4

And I wanted to just kind of step back and look at the big picture on that. And can we kind of interpret that to these big debates about how well would price hold relative to raw materials and would we be able to hold price and lock in some of that margin longer term as input costs moderate. I mean, is that kind of what's happening here on the gross margin line? And is that something that's going to be sustainable going forward.

Speaker 2

Well, good morning, Ryan. The first part of that, first of all, it was Favorable mix, right? Residential is down, commercial is up and our OEM business is down, which are lower margin businesses. So that's good. That's good from a margin point of view.

Speaker 2

From a pricing point of view, we've been able to hold pricing so far. And in that backdrop, we've also seeing some reductions in our input costs. So that altogether, favorable mix as well as to favorable cost at this point and favorable price is holding up.

Speaker 4

And is there any sign that that's Any early evidence that that's changing or is the price environment, is there no real evidence of any major Cracking that pricing, it looks pretty solid going forward.

Speaker 2

Yes, we don't comment on forward looking price usually, but as of now, as I said, it's holding up in the quarter. It held up in the Q2.

Speaker 4

Got it. Okay. And then just one last one. If you could just I didn't hear much from you on kind of the channel inventory situation in your prepared remarks. So if you could just kind of give us an update on the channel inventory situation, that would be helpful as well.

Speaker 4

Thanks.

Speaker 2

Yes. I think the channel inventory is healthy, but we've seen some destocking with continued residential destocking with OEMs in North America. And I think there's a big focus on inventory in Europe right now from the wholesalers, which we've been seeing them starting to destock as well as the OEMs in Italy. So we're starting to see more destocking in Europe. We've seen it last year, but We're continuing to see it, especially with the order trends in Q2 in Europe.

Speaker 4

Got it. Okay. Thanks for your time.

Speaker 2

Thank you.

Operator

Your next question is from the line of Nathan Jones with Stifel. Your line is open.

Speaker 5

Good morning. This is Adam Farley on for Nathan Jones. Good morning, Adam. Hey, good morning. With global GDP still positive, should we expect repair and replace volume to be modestly positive?

Speaker 2

Yes, we expect that. Repair and replacement has been holding up. I think you've seen some we talked about in our prepared comments that the specialty market, which was really around gas connectors, radiant heating and then a niche of commercial instrumentation, which is really related to our ballast water. Those areas have been declining and we expect them to continue in the Q3 that way.

Speaker 5

Okay, that's helpful. And then Looking at your non residential businesses, can you provide a little more color on which end markets within non resi are still showing strength, Which ones are still showing weakness? And would you expect strength in institutional to continue into 2024?

Speaker 2

Yes, I think, similar to the Q1, the commercial market has been holding in there, strength in institutional who's been there and I think the normal offices, hospitality, but hospitality is coming back a little bit, albeit off a really low comps from last year. So in general, it's holding up at this point in time. And as in my prepared remarks, we talked about The Dodge and ABI index is also supporting that. So, so far so good and it's holding in there. But As you can imagine, we're watching that very carefully.

Speaker 2

And again, we have some tough comps we're comparing against in the second half of this year.

Speaker 5

Okay. Thank you for taking my questions.

Speaker 2

Thank you.

Operator

Your next question comes from the line of Jeff Hammond with KeyBanc Capital Markets. Your line is open.

Speaker 6

Hey, good morning, guys.

Speaker 7

Good morning, Jeff.

Speaker 6

Hey, just want to unpack the decrementals, I guess, first half to second half. I mean, I understand there's some seasonality in there, but and Maybe you can quantify the incremental investments and if there's anything else around mix or otherwise that would be impacting that?

Speaker 3

Yes. So Jeff, part of it is seasonality, right? Typically, first half, second half, we see a decline of 100, 150 bps 1st half to second half. The other part this year, we got some volume deleverage, right? So the volume deleverage affects not only at the standard margin line, but you got some absorption impacts as well there.

Speaker 3

The third thing is the incremental investments. We have about $5,000,000 of incremental investments H2 versus H1. And lastly, nWARE is dilutive by about 20 bps. And then the other point Bob had talked about, which is Europe, We've got negative growth in Europe and with our high fixed cost base, we see some deleveraging there.

Speaker 6

Okay, great. Have you guys seen any destocking in boilers? I don't know if you mentioned that, but one of the competitors had called that out. And then can you just clarify what the specialty channel is? Is that DIY or something else?

Speaker 2

Yes. On the I think our HHW heating and hot water platform is holding up. I think there might have been some destocking in the commercial water heater side of that business, but overall that team is doing a nice job. The specialty channel is a combination of we call it in residential our gas connectors and radiant heating in So those are gas connectors in grills, generators, etcetera. So that's being impacted by that part of the market, which is residential, same with Radian Heating.

Speaker 2

And we had some tough comps last year in that area. So again, the specialty channel, we also have what we call our commercial marine instrumentation, which is our ballast water, where there's There was a movement over the last several years to have all of the ships, the large ships measure their ballast water. And there was that requirement, all the ships got pretty much done by the end of last year, probably a year earlier than we expected, and we're seeing that tail off. But again, all of that, our specialty product is less than 10% of our overall business. But some of this we expected obviously with the residential side of this decreasing and a big part of that gas also goes through OEMs.

Speaker 6

And then just finally on Europe, I guess the moving pieces are you're starting to see destocking that showing up in orders. I think you mentioned in Italy, regulatory change dynamic, but that's a business that I think you've been worried about for some time, but continues to kind of put up better growth.

Speaker 2

Yes, I mean, it surprised us both in the Q1 and Q2, it's held up. But as expected, given the leading economic indicators and some concerns, especially in the residential side of that market. We are starting to see that tip over a little bit, But we were expecting that. It just happened a little later than we expected. So the team's done a nice job of getting more than our fair share of the market there, and I expect them to continue to do that.

Speaker 6

Okay, thanks.

Speaker 2

Thank

Speaker 8

you. Thank you.

Operator

Your next question comes from the line of Mike Halloran with Baird. Your line is open.

Speaker 7

Hey, thanks. Good morning, everyone. Good morning. Good morning. So a couple of questions.

Speaker 7

First on the non res side of things, maybe Bob, could you talk to to the project funnel or the funnel of the backfill of some of the projects out there. I know in the past we've talked about working off of what was a backlog of activity and curious what you guys are seeing as far as replenishing that funnel and replenishing that opportunity out there and any level of variance as you look across some of the sub verticals within that non res space?

Speaker 2

As I've said in the prior quarter, institutional is still holding up as well as like data centers and some of that area who has been holding up strong. Our teams are out in the field. It depends on which country like or part of the country like anything. But in general, I would say it's still healthy backlog out there. And I think some of it continues to be a result of the shortage of labor inside of those markets and there was some backlog out there.

Speaker 2

So again, we're cautiously optimistic, but we're watching it closely.

Speaker 7

And how should I think about the North America margins from here? I mean, it feels like every quarter there's a new high that you're reaching. Certainly understand a lot Shakes commentary on mix and other headwinds as you look through things sequentially in the back half. But when we're thinking on a little longer horizon, What's that right base to build off of for that segment? I mean, it feels like you just established a new high here.

Speaker 3

Yes, I would say, so beyond the mix, which was very favorable in the Q2, and obviously the mix adjusts over time. But our goal, as we've talked about before, is long term to continue expanding that in the 30 to 50 basis point range going forward, including in the Americas, because that's 70% of our business.

Speaker 2

Mike, do you have any other questions?

Speaker 7

Oh, I'm good. I said thanks. I might have been on mute. I apologize for that.

Speaker 2

Okay. Thank you.

Operator

Your next question comes from the line of Joe Giordano with Cowen and Company. Your line is

Speaker 9

open. Good morning. This is Michael on for Joe.

Speaker 3

Good morning.

Speaker 9

Apologies if I joined the call late, so apologies if this has already been asked. But previously you mentioned OEM related sales or roughly a third of your European business. So I was just curious on how this has trended in the first half, and what are your thoughts sequentially for OEMs on a global basis? And then if you have any margin color there, it would be very helpful. Thank you.

Speaker 2

Yes. I mean OEM business, which is usually is really tied to the residential markets, Both in North America and Europe has continued to be soft and we've continued to see destocking in that area given the residential nature of that business. So We're expecting that to continue through the rest of this year. And as you can imagine, OEM business is our lowest margin business. So with that being down, that obviously helps our margins in total, just from a mix point of view.

Speaker 2

So again, our guidance assumes that that will continue in the Q3.

Speaker 8

Great. Thank you.

Speaker 3

Thank you.

Operator

Your next question comes from the line of Walt Liptak with Seaport Global. Your line is open.

Speaker 8

Thank you. Good morning, guys.

Speaker 7

Good morning, Will.

Speaker 8

I wanted to ask about the incremental spend on the new products. And I want to make sure that we're not like under appreciating what you're doing with smart products. And so I wonder if you could help us maybe with some data points about how many products you've developed, what the categories might be a product that might be a best seller, to the kind of incremental growth that you might be getting from these investments.

Speaker 2

Yes. So we talked in 2022 that we developed 20 new product developments in Smart and Connected, and we're continuing on that journey to get that 25% of our products Smart and Connected. So that's a key initiative for us. We continue to highlight those products. It's nice to see nware also is in that overall Quest to be smart and connected.

Speaker 2

So we'll continue to invest in there. We believe that's the future of all of our products into the future and we'll continue to to invest in those differentiated products for the marketplace.

Speaker 8

Okay, great. Are these going through do they require more training or are they going through the same Channels as you're doing now, like how's the commercialization of Homecoming?

Speaker 2

Yes, they definitely require both training from a customer point of view as well as our rep network and our channels. So we continue that training. Our WAPs Works training Initiative, as you know, is very strong. We continue to grow that, and we'll continue to do that. What we always say is we have to make sure that it's we're easy to do business with in regards to Smart and Connected, how it's connected, the data it produces, etcetera.

Speaker 2

So those are key areas. Training is a key part of that, but it's a shift and I think everybody's realizing The shift is here and I think during the COVID outbreak, everybody realizes that it's an important part of the future of plumbing.

Speaker 8

Okay. Yes, it seems very excited. It seems like an obvious progression for your products. Are you able to measure yet how much I guess I'm sure you do. You measure the incremental sales, but At what point do you think it's going to or maybe it's showing up already, at what point do you think it's quantifiable what it's adding to your revenue?

Speaker 2

So we are taking our existing products and cannibalizing them, right, and making them smart and connected. So it's I would just say in general, I think we're growing faster than the market. And I think having new products that are smart and connected gives us a continued differentiation that we're still capitalizing on. So, yes, that's how we see it.

Speaker 8

Okay, great. Thank you.

Speaker 7

Thank you.

Operator

There are no to further questions at this time. I will now turn the call back over to Bob Picano.

Speaker 2

Thank you for taking the time to join us today. We appreciate your continued interest in WAPs and look forward to speaking with you again at our Q3 earnings call in early November. Have a good day and stay safe.

Operator

Ladies and gentlemen, thank you for participating. This concludes today's conference call. You may now disconnect.

Powered by Quartr
Earnings Conference Call
Watts Water Technologies Q2 2023
00:00 / 00:00