WTS Investor Presentation

WATTS WATER

INVESTOR PRESENTATIONAUGUST 2021

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 the 2021 outlook of sales and adjusted operating margin, acquisition strategy, the impact of

the COVID-19 pandemic, 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 “Item 1A. Risk Factors” in Watts’ most recent Annual Report on Form 10-K and in

subsequent reports filed with the SEC.

FORWARD-LOOKING STATEMENTS

2WTS Investor Presentation |

TODAY’S KEY THEMES

1. $1.5B Global Company with Leading Market Positions

2. Leader in Commercial and Residential Water Products

3. Industry-leading Brands, Key Market Drivers; Plumbing Codes

4.Driving Profitable Growth through Innovation and Smart & Connected

Strategy

5. Strong Cash Generator; Disciplined Capital Deployment


Global Leader in Commercial and Residential Water Products; Driving a Performance Culture

WATTS WATER SNAPSHOT (NYSE: WTS)


$3.88Adj. EPS1

+55% Growth

2020 Key StatisticsGrowth Rates Since 2014

12.9%Adj. Operating Margin1

+280 bps Growth

6.9%Dividend CAGR

+21% Growth

11.7%ROIC (GAAP)

+105% Growth

115%5-yr Avg Reinvestment Ratio

+60% Growth

2.8%R&D as a % of Sales

+87% Growth

60%

40%

Revenue by End Market

Repair & Replace New Construction

68%

28%

4%

Revenue by Geography

Americas Europe APMEA

60%

40%

Revenue by End Market

Non-Residential Residential

1 See Appendix for reconciliations for non-GAAP measures to their corresponding GAAP measures.

Specialty Products and Systems that Conserve and Safeguard the Flow of Fluid and Energy

VALUE PROPOSITION ALIGNED WITH

LONG-TERM SECULAR GROWTH TRENDS


Provide the highest levels of

performance in the safeguarding of

water systems

• Code and specification driven

• Extensive certification process

• Emerging need globally

Offer the most efficient conversion of

energy sources into useful heat and

hot water

• Large and fragmented

• Economic and environmental value

proposition

• Application and engineering competencies

critical

Deliver drainage and pre-treatment

systems that meet the design

challenges of a water scarce world

• Code and specification driven

• Environmental drivers

• Emerging need globally

• Best-in-class service

Safety & Regulation Energy Efficiency Water Conservation

Market Characteristics

Balanced Portfolio Providing Tailwind For Growth

LARGE ADDRESSABLE MARKET WITH EXPOSURE TO

DIVERSE END MARKETS

RESIDENTIAL INSTITUTIONAL /

EDUCATIONAL

LIGHT / GENERAL

INDUSTRIAL

MULTI-FAMILY /

COMMERCIAL

HOSPITALITY –

HOTEL

HOSPITALITY –

FOOD SERVICE

HEALTHCARE

DATA CENTERS

END MARKETS

~$15B Total Available

Market Opportunity1

1 Based on Company estimates of global market. 6WTS Investor Presentation |

COMMERCIAL OFFERINGS~60% of Sales; More Complexity / Systems


Water Safety (Point of Entry)

Backflow Preventers • Automatic Control

Valves • Pressure Reducing Valves •

Ball, Gate, & Butterfly Valves

Boiler / Mechanical Room

Hot Water Heaters / Boilers • Digital Thermostatic Mixing Stations •

Boiler & Pump Controls

Driveway / Sidewalk

Electronic Temperature Controls • Snow Melt Hydronic Systems •

Manifolds

Commercial Kitchens

Gas Connectors • Point of Use Filtration Systems • Stainless Steel

Drains • Backflow Preventers

Fire Protection Systems

Cross Connection Systems • Automatic Control Valves • Isolation Valves

Public Restroom Safety

Thermostatic Mixing Valves • Floor Drains • Closet and Lavatory Carriers

Water Quality (Point of Entry)

OneFlow Anti-Scale Systems • Water Softeners • SmartStream UV

System

Guestroom

Irrigation

Backflow Preventers • Pressure

Regulating Valves • Isolation Valves

Drainage / Rainwater

Harvesting

Cast Iron and Stainless Drains & Pipe •

Rainwater Harvesting • Roofs, Parking

Garages, Bathrooms, Kitchens

Leak Detection

Smart & Connected Backflow Preventers

• Wireless Leak Detection & Notification

Systems

RESIDENTIAL OFFERINGS~40% of Sales; Product Range Unmatched


Water Safety (Point of Entry)


Reducing Valves

Boiler / Furnace Room

T&P Relief Valves • Tempering Valves • Pressure Reducing Valves •

Expansion Tanks • Temperature & Pressure Gauges • Air Separators

Laundry Room

Anti-Scale Systems • Gas Ball Valves & Connectors • SmartSense

Excess Flow Valve & Thermal Shutoff • IntelliFlow Automatic Washing

Machine Shutoff Valves

Bathroom

Tempering Valves • Electric Tile Warming • Stainless Steel Shower

Drains • Hot Water on Demand Recirculation

Living Room

Control Panel / Thermostat • Radiant Underfloor Heating

Kitchen

Undersink Thermostatic Mixing Valves • Reverse Osmosis Water •

Filtration Systems • Electric Tile Warming • SmartSense Excess Flow

Valve & Thermal Shutoff

Water Quality (Point of Entry)

Whole House Filtration Systems • Anti-Scale Systems • Water Softeners • SmartStream

UV Disinfection Systems

Irrigation


Reducing Valves • Flow Control Valves

Driveway / Sidewalk

Snow Melt Hydronic Systems • Electronic Temperature Controls •

Manifolds • Quick Connect Fittings • Hydrocontrol Panels • PEX Tubing

ESG / DE&I Are Key Priorities • Continuous Journey to Improve


OUR COMMITMENT TO SUSTAINABILITY

ENVIRONMENTAL SOCIAL GOVERNANCE

• Reduced consumption of natural resources

• Continue to shift product portfolio to

eco-friendly solutions

• Committed to providing clean water to

disadvantaged communities

• Assessing Climate related risks and

opportunities

• Launched first Global Diversity, Equity and

Inclusion (DE&I) survey

• Enhanced recruitment process with new

diversity standards

• Deployed company-wide DE&I training and

development

• Forged partnerships with several leading

Black colleges and universities

• Formed multiple diverse employee resource

groups

• Conducting business with integrity and

according to the highest ethical standards

• Continuous deployment of Code of

Conduct - our guide to applying our core

values in our everyday actions

Among Newsweek’s Top 400 of “America’s

Most Responsible Companies” for

sustainability performance, two years running

Director Skillsets and Attributes Support Our Long-term Strategy

ENGAGED AND ACCOUNTABLE BOARD OF DIRECTORS


Louise GoeserRetired President and CEO,

Grupo Siemens S.A. de C.V.2018

Jes Munk HansenPresident and CEO,

Terma A/S

2017

Joseph NoonaneCommerce Entrepreneur;

Horne Family Member

2013

Bob PaganoCEO and President,

Watts Water

2014

Joseph ReitmeierEVP and CFO,

Lennox International Inc.

2016

Craig KisselChairperson of the Board

Retired President of Trane

Commercial Systems,

American Standard

Joined: 2011

Christopher ConwayRetired President, CEO and

Chairman of the Board,

CLARCOR Inc

2015

Michael DubosePresident, Fisher

Healthcare Division,

Thermo Fisher Scientific Inc.

2020

David DunbarPresident and CEO,

Standex International Corp.

2017

Merilee RainesRetired CFO, IDEXX

Laboratories, Inc.

2011

Board Skillsets

and Attributes

✓ Operational and C-Suite Experience

✓ International Markets Exposure

✓ Public Company Board Experience

✓ Global Manufacturing

✓ Relevant End Market Exposure

✓ Business Ethics

✓ eCommerce / Digital

✓ Finance / M&A

60 YEARS

Avg. Age

5 YEARS

Avg. Tenure

WATTS STRATEGIC FRAMEWORK


Employ Disciplined & Balanced Capital Allocation Strategy

Drive Operational Efficiencies &

Improvement across All Key Processes

Continue to Grow

Organically

Multifaceted Approach to Drive Innovation; Future Growth Supported by Solution Selling

ORGANIC GROWTH INITIATIVES


Geographic

Expansion

Key Account

Management

New

Product Development

▪ Utilizing single streamlined

product development

process

▪ Leveraging Voice of

Customer to drive product

innovation

▪ Driving Smart & Connected

strategy

▪ Advancing solutions that

address market needs

▪ Cross-sharing existing

products into new regions

▪ Targeting countries with

well-established plumbing

codes

▪ Opened 9 state-of-the-art

Watts Works Learning

Centers since 2015

▪ Influencing plumbing code

improvements in developing

countries

▪ Expanding relationships

with large customers

▪ Leveraging integrated

business model to cross sell

− Use Case: Large hospitality

customer turned to Watts to

standardize on a solution for

their water heating, water

quality, and space heating

needs

Strategic Account Teams Help Customers Achieve Desired Outcomes

CLIENT CASE STUDIESExceeding Client Needs with Innovative Solutions


BACKGROUND: CLIENT NEED OUR INNOVATIVE SOLUTION BENEFITS

Prestigious hospital

in Boston, MA

needed a compact footprint solution

to increase efficiency of its centralized

steam system without diminishing

steam sterilization requirements

Combined a Benchmark 3000 high

efficiency boiler for space heating and

Innovation 600 & 800 water

heating units for hot water to meet all

engineering requirements (small enough to

fit through a standard doorway)

Easily meeting

facility’s domestic

hot water, heating

and sterilization

needs

30-40%reduction in

fuel operating

costs

Meat production facility, Midwest

U.S.A. required a drainage solution

that could handle significant volumes

of high temperature wastewater; a

challenging application due to the

potential for stress cracking and

bacterial growth

100 feet of HygienicPro®

drains and 200 feet of BLÜCHER

push fit stainless-steel

piping were installed in 7 days to

handle over 10,000 gallons per day at

temperatures exceeding 200°F.

Bacterial counts

BELOW

DETECTABLE levels

Downtime due

to stress

fractures

ELIMINATED

Workplace

SAFETY

improved by

reduction of

steam and

biofilm

Steady Progress Despite Pandemic; Driving to 2023 Goal


25%Smart & Connected

Revenues by 2023

Mid-teens: Smart & Connected 2020 Revenues

PAST: 2015Launched digital journey

Limited use of internal digital

resources

No pipeline of projects

PRESENTDedicated organizational

structure deployed to support IoT

Strategic alignment with all

business units

85+ Dedicated digital / IoT engineers

70k Connected devices shipped

87% Connected revenues

from non-residential

FUTURE

Improve use of data to

enhance customer experience

Continue to focus on

key customer issues

System Safety | Water Hygiene

Energy Efficiency | Leak Detection

Expand subscription-based

services

SMART AND CONNECTED STRATEGY PROGRESS

OWPS Focus Areas

✓ Gross productivity project funnel growth

✓ Business process efficiencies

✓ Locating production close to customers

✓ Ensuring a “safety first” culture

✓ Providing world class quality

✓ Committed to great customer service –

“On time in full”

✓ Improving working capital

Customer Focused Productivity Initiatives

DRIVING ONE WATTS PERFORMANCE SYSTEM (OWPS)


OWPS is a collection of tools, processes and

behaviors that help us grow and develop

STRATEGYHow We Win

CULTUREHow We Act

PROCESSHow We Work

CUSTOMER

BACKGROUND

Issues and Drivers

▪ Complexity of fabrication processes

‒ Required highly skilled associates to

complete rigorous training – extended

time to reach expected productivity levels

▪ Both increased product demand across

the factory and labor shortages related to

COVID restricted available skilled talent in

the Intellistation fabrication department

▪ Intellistation’s 2021 growth projections

dictated requirements to increase capacity

and reduce lead times

▪ Extended lead times from suppliers

requiring adjustments to safety stocks and

supplier lead times to further reduce

Watts’ lead times to customer on mostly

Make-to-Order (MTO) products

OWPS CASE STUDY: INTELLISTATION LEAD TIME STATUS

WTS Investor Presentation | 16

▪ Process flow improvements

– Review of component sub assembly vs full assembly

▪ Elimination of fabrication (womb to tomb)

– Multiple Kaizens

▪ Modularized assembly for sub assembly cells

▪ Separation of wiring process from component assembly

– Allowed specialization of wiring process/skills

– Reduced learning curve training new employees

▪ Growth in multiple-unit installations

– Reviewed processes/equipment

– Identified safety and productivity issues addressed with

installation of additional taller, increased-capacity hoist

– Added additional cells

▪ Component demand review resulted in upgraded safety

stock and adjusted supplier lead times to further

reduce production lead times on MTO products

KEY ACTIONS

7.5

4.584.99

3.96

3.1

2017 2018 2019 2020 2021

Intellistation Weeks Lead Time

OUTCOME

Strong Cash Flow Generation Provides Flexibility

Priorities

Strategic M&A

▪ Disciplined valuation / screening process

Investing in high ROI Capex

▪ 70% of Capex invested in growth and productivity initiatives

▪ Reinvestment ratio 80-100%

Competitive Dividend

▪ 6.9% 5-year CAGR through 2020

▪ $1.04 annual dividend, 0.63% yield1

Stable Share Buyback

▪ Offset option dilution at minimum

BALANCED CAPITAL DEPLOYMENT


$148

$171

$142

$119

Deployment History2016-2020

M&A Capex Dividend Share Buyback

~55% Growth

~45% Returned to

Shareholders

55%

Growth

1 Yield as of 8/16/21.

Disciplined Acquisitions Generate Incremental Growth

M&A STRATEGY


Core or Related

Complementary Markets

Addresses Macro Themes

▪ Safety and Regulation

▪ Energy Efficiency

▪ Water Conservation

Brand Name Products,

Market Leadership

STRATEGIC CRITERIA FINANCIAL CRITERIA

✓

✓

✓

Entry into New Markets

and Geographies

Increase in Shelf Space

with Existing Customers

Product Offering

Expansion, Including New /

Improved Technology

✓

✓

✓

ROIC > Cost of

Capital

Accretive to EPS

in Year 1

Accretive to EBITDA

Margin within 3 – 5 Years

✓

✓

✓

Capacity to Execute on Strategic Growth

FLEXIBLE BALANCE SHEET

$M6/27/21

Cash $240

Other Current Assets 604

Non-Current Assets 1,011

TOTAL ASSETS $1,855

Current Liabilities, excl. Short-term Debt $396

Non-Current Liabilities 150

Debt 191

Equity 1,118

TOTAL LIABILITIES & EQUITY 1,855

Net Debt / Capitalization Ratio*

(4.5%)


$191M

2021 2026

Revolving

Credit

Facility

Debt Maturity Schedule

No Debt Due Until 2026

Unused and available credit capacity ~ $600M on June 27, 2021

Revised for Continued Strong Expectations

2021 OUTLOOK – AS OF AUGUST 5, 2021

20WTS Investor Presentation |1 See Appendix for reconciliations of non-GAAP measures to their corresponding GAAP measures; 2 Includes $17M incremental investments.

OTHER KEY INPUTS

Item Expectation

Corporate Costs ~$48M

Interest Expense ~$7M

Adjusted Effective Tax Rate ~27.5%

CAPEX / D&A ~$35M / ~$46M

Free Cash Flow Conversion ≥100%

Share Count ~34M shares

Organic Revenue Growth1 Adjusted Margin Growth1

Americas 9% to 13%[Prior 2% to 7%]

Up[Prior Up]

Europe10% to 14%[Prior 1% to 5%]

Up[Prior Up]

APMEA23% to 27%

[Prior 10% to 15%]

Up[Prior Flat to Up]

Total Watts10% to 14%[Prior 2% to 7%] Up 100 to 150 bps1,2

[Prior up 30 to 70 bps]

Build a High Performance “Connected Water and Heating Solutions” Company

OUR LONG-TERM ASPIRATIONS

21WTS Investor Presentation |1 Post 2021 – after pandemic subsides.

Organic Growth1% Above Market

Operating Margin

Expansion30-50 bps per Year1

Emphasis on GrowthSupported by M&A

Focus in Selected

Emerging Markets

RECOGNIZED LEADER • Global reach: leading market positions in commercial and residential water space

ALIGNED TO LONG-TERM SECULAR TRENDS AND DIVERSE MARKETS • Addressing global secular macro themes

• Challenging commercial new construction markets in various sub-verticals

• Opportunities in Americas single family residential market and repair & replacement in near-term

FOCUS ON INNOVATION AND PROFITABLE GROWTH• Leveraging components to broaden application solutions offering

• Investment continues, fueling growth with “connected” strategy

ACCRETIVE CAPITAL DEPLOYMENT• Strong cash flow and efficient capital structure enables more deployment upside

• Disciplined acquirer

• Returns to shareholders

Commercial Excellence and Innovation Drives Above Market Growth

INVEST WITH US


Appendix

WTS Investor Presentation |

RECONCILIATION OF GAAP TO NON-GAAP MEASURES


Year2020 2014

Net Sales $1,508.6 $1,513.7

Operating income - as reported $181.1 $105.4

Operating margin % 12.0% 7.0%

Adjustments for special items:

Footprint optimization / impairment charge 2.5 14.2

Restructuring / transformation costs 9.9 25.7

Prof. fees / acquisition / earnout adj. / disposal 0.4 7.7

$12.8 $47.6

Operating income - as adjusted $193.9 $153.0

Adjusted operating margin % 12.9% 10.1%

Net income - as reported $114.3 $50.3

Adjustments for special items - tax affected:

Footprint optimization / impairment charge 1.8 13.8

Restructuring / transformation costs 7.4 17.8

Prof. fees / acquisition / earnout adj. / disposal (1.2) 6.9

Tax adjustments 9.7 -

$17.7 $38.5

Net income - as adjusted $132.0 $88.8

Earnings per share

Diluted earnings per share - as reported $3.36 $1.42

Adjustments for special items 0.52 1.09

Diluted earnings per share - as adjusted $3.88 $2.51

(M)

(Unaudited)

RECONCILIATION OF LONG-TERM DEBT (INCLUDING CURRENT

PORTION) TO NET DEBT TO CAPITALIZATION RATIO


(M)

(Unaudited)

June 27,

2021

December 31,

2020

Current portion of long-term debt $ - $ -

Plus: Long-term debt, net of current portion 191.5 198.2

Less: Cash and cash equivalents (240.1) (218.9)

Net debt ($48.6) ($20.7)

Net debt ($48.6) ($20.7)

Plus: Total stockholders' equity 1,117.9 1,069.8

Capitalization $1,069.3 $1,049.1

Net debt to capitalization ratio (4.5%) (2.0%)

RECONCILIATION BETWEEN GAAP AND NON-GAAP MEASURES

INCLUDED IN 2021 OUTLOOK – AS OF AUGUST 5, 2021


Watts Americas Europe APMEA

Full Year

2021

Full Year

2021

Full Year

2021

Full Year

2021

Approximately Approximately Approximately Approximately

Sales

12.5% to 16.5% 10.1% to 14.1% 16.5% to 20.5% 38.0% to 42.0%Reported net sales growth

Forecasted impact of acquisition / FX (2.5%) (1.1%) (6.5%) (15.0%)

Organic sales growth 10.0% to 14.0% 9.0% to 13.0% 10.0% to 14.0% 23.0% to 27.0%

Operating Margin

(15) to 35 bpsOperating margin growth

Forecasted restructuring / other (115 bps)

Adjusted operating margin growth 100 to 150 bps

CALCULATIONS OF GROSS AND NET LEVERAGE


Trailing Twelve Months

through June 27, 2021

Net income – as reported $141.3

Plus: Interest expense, net 9.7

Plus: Income taxes 63.2

Plus: Depreciation 32.0

Plus: Amortization 14.9

Earnings before interest, taxes depreciation and amortization (EBITDA) $261.1

Debt on June 27, 2021 $191.5

Less: Cash & cash equivalents on June 27, 2021 240.1

Net debt ($48.6)

Gross debt to EBITDA ratio (Gross leverage) 0.7x

Net debt to EBITDA ratio (Net leverage) (0.2)x

(M)

(Unaudited)

Documents

WTS Investor Presentation