Earnings call transcript: Watts Water Technologies beats Q3 2025 expectations

Watts Water Technologies reported its third-quarter earnings for 2025, surpassing market expectations with an EPS of $2.50, compared to the forecast of $2.27. Revenue also exceeded estimates, reaching $612 million against a predicted $576.23 million. Despite these strong results, the company's stock experienced a 3.67% decline in regular trading, closing at $282.24. However, it rebounded by 1.16% in premarket trading.

Key Takeaways

• Earnings per share beat expectations by 10.13%.
• Revenue exceeded forecasts with a 6.21% surprise.
• Stock experienced a mixed reaction, initially falling but recovering in premarket.
• Strong performance in the data center market and successful acquisitions.
• Raised full-year organic sales growth and EBITDA margin outlook.

Company Performance

Watts Water Technologies delivered a robust performance in the third quarter, with record sales and improved margins. The company achieved a 13% increase in reported sales and a 9% rise in organic sales. The adjusted EBITDA grew by 21%, reflecting strategic operational improvements. The company's focus on the data center market and successful integration of acquisitions like HAWS Corporation contributed to its strong performance.

Financial Highlights

• Revenue: $612 million, up 13% year-over-year.
• Earnings per share (EPS): $2.50, up 23% year-over-year.
• Adjusted EBITDA: $128 million, with a margin of 20.9%, up 140 basis points.
• Year-to-date free cash flow: $216 million, compared to $204 million last year.

Earnings vs. Forecast

Watts Water Technologies exceeded expectations with an EPS surprise of 10.13% and a revenue surprise of 6.21%. This marks a continuation of the company's trend of outperforming market forecasts, highlighting its operational efficiency and strategic growth initiatives.

Market Reaction

The company's stock experienced a 3.67% decline in regular trading, closing at $282.24. However, it showed resilience in premarket trading, rising by 1.16% to $285.50. This mixed reaction reflects investor concerns over potential tariff impacts and broader market conditions, despite strong earnings.

Outlook & Guidance

Looking forward, Watts Water Technologies raised its full-year organic sales growth outlook to 4-5% and adjusted EBITDA margin expansion to 140-150 basis points. The company anticipates strong free cash flow in the fourth quarter and remains cautiously optimistic about 2026 market conditions.

Executive Commentary

"We're pleased with our strong third quarter results, which exceeded expectations," said Bob Pagano, CEO. He emphasized the company's strategic focus on North America and the potential for the HAWS acquisition to align with overall margin goals.

Risks and Challenges

• Tariff impacts, estimated at $40 million for 2025, pose a challenge.
• Restructuring costs in Europe and supply chain optimization efforts.
• Market conditions in residential and multifamily sectors remain uncertain.
• Potential volatility in stock price due to broader market trends.

Q&A

During the earnings call, analysts inquired about the impact of a tariff-related Supreme Court case and the strategic rationale behind the HAWS acquisition. Executives addressed these concerns, highlighting potential synergies and market conditions in key segments.

Full transcript - Watts Water Technologies Inc (WTS) Q3 2025:

Conference Operator: Thank you for standing by. At this time, I would like to welcome everyone to today's third quarter 2025 Watts Water Technologies earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. Once again, star one. If you'd like to withdraw your question, simply press star one again. Thank you. I'd now like to turn the call over to Diane McClintock, Senior Vice President of Investor Relations. Diane?

Diane McClintock, Senior Vice President of Investor Relations, Watts Water Technologies: Thank you and good morning, everyone. Welcome to our third quarter earnings conference call. Joining me today are Bob Pagano, President and CEO, and Ryan Lada, our CFO. During today's call, Bob will provide an overview of the third quarter, a business update, and an update on our outlook for 2025. Ryan will discuss the details of our third quarter performance and provide our outlook for the fourth quarter 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. I'd 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 Watts publicly available filings with the SEC. The company undertakes no 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.

Bob Pagano, President and CEO, Watts Water Technologies: Thank you, Diane, and good morning, everyone. Please turn to slide three, and I'll provide an overview of the quarter. We're pleased with our strong third quarter results, which exceeded expectations. Watts' multi-year track record of success would not be possible without the dedication, collaboration, and support of our team members and business partners, and I'd like to express my sincere gratitude. Organic sales increased 9% in the quarter with favorable pricing in the Americas, volume, and pull-forward demand more than offsetting a decline in Europe. We also benefited from incremental sales from our ICON and EZwater acquisitions and favorable foreign exchange movements. Adjusted operating margin of 18.5% was better than anticipated due to favorable price, volume leverage, productivity, and mix. Year-to-date free cash flow continues to be solid, and we expect to generate seasonally strong free cash flow through year-end.

The balance sheet remains healthy, and we have ample flexibility to support our disciplined capital allocation strategy. On that note, we're excited to have acquired HAWS Corporation, a leading global brand providing emergency safety and hydration solutions for use in industrial, institutional, and non-residential end markets for more than 120 years. The addition of HAWS' innovative specified product portfolio enhances our value proposition and broadens our capabilities. HAWS has annual sales of approximately $60 million and is expected to be modestly diluted to margins for the first year while we integrate and realize the benefits of synergies leveraging the OneWatts performance system. I'm also pleased with the integrations of Bradley, Josam, ICON, and EasyWater, which are progressing well, and synergy realization is tracking ahead of our original estimates. We continue to proactively manage tariff-related challenges through strategic pricing and supply chain optimization.

The tariff environment remains uncertain, but based on tariffs in effect as of today, our global direct tariff impact in 2025 is estimated to be $40 million, consistent with our guidance at the last earnings call. We have successfully handled the cost impact so far in 2025 and plan to continue doing so. Now, an update on our outlook for the remainder of the year. Due to our strong third quarter performance and our expectations for the fourth quarter, we are increasing our full-year sales and margin outlook. Tariff-related price increases, foreign exchange movements, strong data center sales, and the acquisition of HAWS are all favorable relative to the sales outlook we provided in August. However, there's ongoing uncertainty around the impact of supply chain disruptions and tariffs, including the effect on new construction and global GDP, as well as around the impact of the U.S. government shutdown.

As a reminder, GDP is a proxy for our repair and replacement business, which represents approximately 60% of total revenue. With that, let me turn the call over to Ryan, who will address our third quarter results and our fourth quarter and full-year outlook in more detail. Ryan?

Ryan Lada, CFO, Watts Water Technologies: Thank you, Bob, and good morning, everyone. Please turn to slide four, which highlights our third quarter results. Sales reached $612 million, setting a third quarter record for Watts. This reflects growth of 13% on a reported basis and 9% on an organic basis. Strong organic growth in the Americas more than offset a decline in Europe and a flat quarter in Asia-Pacific. In the Americas, reported sales were up 16%, and organic sales were up 13%, exceeding expectations. Growth was driven by favorable price, volume, and approximately $11 million of pull-forward demand. Sales from the I-CON and EasyWater acquisitions added another $11 million, or 3%, to Americas reported growth. Europe reported sales were up 4%, while organic sales were down 2%, as market weakness more than offset price. Reported sales in Europe benefited from favorable foreign exchange.

APMEA sales decreased 1% on a reported basis and were flat on an organic basis. Growth in Australia and the Middle East was offset by declines in China and New Zealand. Compared to prior year, adjusted EBITDA of $128 million increased 21%. Adjusted EBITDA margin of 20.9% increased 140 basis points. Adjusted operating income of $113 million increased 22%, and adjusted operating margin of 18.5% was up 140 basis points. Adjusted EBITDA and operating income were supported by favorable price, leverage in the Americas, and productivity. These benefits more than offset inflation, volume deleverage in Europe, tariffs, and investments. Our Americas segment margin increased 180 basis points to 23.7%. Europe segment margin increased 160 basis points to 12.2%, and APMEA segment margin increased 90 basis points to 19.4%.

Adjusted earnings per share of $2.50 were up 23% compared to the prior year, with contributions from operations, acquisitions, foreign exchange, and reduced interest expense. The adjusted effective tax rate in the quarter was 25.8%, an increase of 60 basis points relative to the third quarter of 2024. This increase was primarily due to the recent changes in U.S. tax regulations related to the One Big Beautiful Bill Act. For GAAP purposes, we incurred $1.9 million of pre-tax restructuring charges related to the exit of a facility in France and other actions within Europe. Our free cash flow year-to-date through the third quarter was $216 million, compared to $204 million last year. The cash flow increase was driven by higher net income and lower tax payments resulting from the change in U.S. tax regulations, which more than offset inventory investment and increased CapEx.

We expect seasonally strong free cash flow in the fourth quarter and are on track to achieve our full-year goal of free cash flow conversion greater than or equal to 100% of net income. The balance sheet remains strong. Our quarter-end net debt-to-capitalization ratio was negative 15%, and our net leverage is negative 0.5x. Our solid cash flow and healthy balance sheet continue to give us capital allocation optionality. Now, on slide five, let's review our assumptions about our fourth quarter and full-year outlook. As Bob mentioned, we are raising our full-year sales and margin outlook. This is driven by a strong third quarter, incremental price, favorable foreign exchange, and strong sales in data centers. We are also benefiting from incremental sales of approximately $10 million related to the acquisition of HAWS Corporation, which will be included in our Americas segment.

We now anticipate organic sales growth of 4% to 5%. A three-point increase to the midpoint from our previous outlook. Our reported sales growth is expected to be up 7% to 8%, a four-point increase from our previous outlook. This reflects incremental revenue from the HAWS acquisition and favorable foreign exchange impacts detailed by region in the appendix. Regionally, we anticipate stronger sales growth in the Americas and Europe, while Asia-Pacific is projected to be slightly below our previous outlook. We are raising our full-year adjusted EBITDA margin outlook to a range of up 140 to 150 basis points, an increase of 55 basis points from the midpoint of our previous outlook. We are also raising our full-year adjusted operating margin expansion to a range of up 140 to 150 basis points, an increase of 65 basis points from the midpoint of our previous outlook.

Our updated outlook includes 10 basis points of dilution from the HAWS acquisition. It also assumes $40 million in estimated direct tariff costs, consistent with our previous guidance. This is based on tariffs in effect as of today. Our free cash flow expectation remains in line with our previous outlook. We expect to deliver free cash flow conversion of greater than or equal to 100% of net income in 2025. Next, a few items to consider for the fourth quarter. On an organic basis, we expect sales growth of 4%-8%. Regionally, we expect high single-digit growth in the Americas, low single-digit growth in Asia-Pacific, and slight declines in Europe. The sequential slowdown in the Americas reflects the pull-forward demand discussed earlier. We expect approximately $20 million in incremental sales in the Americas from the ICON, EZwater, and HAWS acquisitions.

Additionally, we estimate a foreign exchange tailwind of approximately $10 million in the quarter. Regional assumptions are detailed in the appendix. Fourth quarter adjusted EBITDA margin is expected to be in the range of 19.6%-20.1%, an increase of 30-80 basis points. Adjusted operating margin is projected to be between 17%-17.5%, or up 20-70 basis points. Price and volume leverage in the Americas should more than offset volume deleverage in Europe and dilution from the HAWS acquisition. The sequential margin decline reflects normal seasonality and the impact of the HAWS acquisition. Other key inputs for the fourth quarter and full year can be found in the appendix. With that, I'll turn the call back over to Bob before we move to Q&A. Bob?

Bob Pagano, President and CEO, Watts Water Technologies: Thanks, Ryan. On slide six, I'd like to summarize our comments before we address your questions. Our third quarter performance was better than anticipated, with record third quarter sales, operating income, and earnings per share driven by strong performance in our Americas region and better than expected results in Europe. We continue to execute well amid an uncertain trade environment, and we expect that price and our global supply chain strategy will enable us to continue navigating effectively. As a result of our strong third quarter performance and fourth quarter expectations, we are increasing our full-year sales and margin outlook. We successfully closed on the acquisition of HAWS Corporation earlier this week and look forward to welcoming them to the Watts family of brands. Our balance sheet remains strong and provides ample flexibility to support our capital allocation priorities.

I'm confident in the resilience of our business and our team's ability to execute despite the uncertain environment as we continue to create durable, long-term value for our shareholders. With that, operator, please open the line for questions.

Ryan Lada, CFO, Watts Water Technologies: Thanks, Bob. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Once again, star one. In the interest of time, we ask that you please limit your questions to one primary and one follow-up question. If you have additional questions, you can rejoin the queue. Thanks in advance. We'll pause just a moment to compile the Q&A roster. All right. Looks like our first question today comes from the line of Nathan Jones with Stifel. Nathan, please go ahead.

Nathan Jones, Analyst, Stifel: Good morning, everyone.

Bob Pagano, President and CEO, Watts Water Technologies: Good morning.

Nathan Jones, Analyst, Stifel: Maybe just starting on the $11 million of demand portfolio for the third quarter, I assume that's probably ahead of price increases related to the increase in copper tariffs. That would then lead me to the question of, can you talk about what the price contribution was in 3Q? I assume the price contribution in Americas in 4Q will be somewhat higher due to those tariffs.

Bob Pagano, President and CEO, Watts Water Technologies: Yeah. Correct. It was $11 million, as you said, as we talked about. About 6% was our price.

Nathan Jones, Analyst, Stifel: That's in 3Q. Do you have an expectation for 4Q? I assume there's been more price put through to cover those tariffs.

Bob Pagano, President and CEO, Watts Water Technologies: Yeah, slightly higher than that.

Nathan Jones, Analyst, Stifel: Okay. Fair enough. I guess the second question I wanted to ask was on this HAWS acquisition. Obviously, the questions are going to be around the drinking water business. There's been pretty robust growth being seen by one of your competitors in that business, but they do have very high market share in that. And based on HAWS revenue, pretty low market share for them. How do you go about competing with the Elkay business, specifically in that drinking water business, and look to grow the market share for that business?

Bob Pagano, President and CEO, Watts Water Technologies: Nathan, as we talked about, HAWS is a $60 million sales company. About 20% of its business is in the hydration market. Look at it. It's a company that's been around a long time, 120 years, great brand known for their quality and customer service. So. They're niche in their hydration area, mainly on the West Coast. We'll be evaluating that. We primarily bought that business for their safety product, which complements our Bradley business.

Nathan Jones, Analyst, Stifel: Maybe then, just as a final question, you could talk about how it complements the Bradley business. I did notice that. Whether or not you can kind of marry those two together to generate revenue synergies out of those businesses. I'll leave it there. Thanks.

Bob Pagano, President and CEO, Watts Water Technologies: Yeah. Yeah. They make bigger sizes of safety showers and equipment and other products that we do not have. It is complementary with some of the gaps that we have and gives us the full portfolio to leverage in our portfolio. We believe it is a nice growing market and something we can leverage going forward.

Nathan Jones, Analyst, Stifel: Great. Thanks for taking the questions.

Bob Pagano, President and CEO, Watts Water Technologies: Thank you.

Ryan Lada, CFO, Watts Water Technologies: Thanks, Nathan. Our next question comes from the line of Mike Halloran with RW Baird. Mike, please go ahead.

Mike Halloran, Analyst, RW Baird: Hey. Morning, everyone.

Bob Pagano, President and CEO, Watts Water Technologies: Morning.

Mike Halloran, Analyst, RW Baird: Hey, Bob. Could you just dig into how you're looking at the end markets here today and how you're thinking about the trajectory in the next year? I think primary focus for the question would be on the non-RES, RES pieces. And how you see those playing out going into next year in North America, as well as maybe a generic comment on Europe as well.

Bob Pagano, President and CEO, Watts Water Technologies: Yeah. So let's look at Q3. We basically saw similar markets than we saw in Q2. We'll be watching, I think, in general. Multifamily, residential, which single-family, again, slow growth. We're seeing probably similar to that going into next year. It's too early to talk about next year at this point in time, but I think we're all looking at ABI, Dodge momentum, all the leading indicators. 2026 is probably going to be a slow growth market, similar to 2025 at this point in time. On the question on Europe, it was nice to see Europe finally getting close to bottom like we were projecting, minus 2% organically for us. Against easier compares, but it's nice to see we're finally getting to the bottom of this. I don't think you'll see new construction growth really grow significantly in Europe until the war in Ukraine subsides.

Each one of the governments understanding how much they have to fund that. Again, continued slow growth assumptions in Europe.

Mike Halloran, Analyst, RW Baird: Thanks for that, Bob. Then secondary questions, just maybe the % takes that drove the sequential margin improvement in Europe, but if you look at the guide for Europe margins, up substantially. I guess the primary question, though, is, is that the right run rate to think about for going into next year, the EBITDA margin implied for the European segment for the fourth quarter? In other words, are you back at the previous run rate now that you've gotten a chunk of that restructuring done and hopefully a little bit more normal mix?

Bob Pagano, President and CEO, Watts Water Technologies: Yeah. That's the goal, Mike. I mean, certainly, the team has been doing a great job of getting through the restructuring, closing of the site. We're now complete, adjusting their cost structure to the current market environments. The team is doubling down and relooking on an 80/20 basis. The markets because they've shifted so much over the last couple of years. Teams really looking at that will provide a little more guidance as we move into 2026.

Mike Halloran, Analyst, RW Baird: Thanks, Bob. Appreciate it.

Bob Pagano, President and CEO, Watts Water Technologies: Thank you.

Ryan Lada, CFO, Watts Water Technologies: Thanks, Mike. Our next question comes from the line of Jeff Hammond with KeyBank. Jeff, please go ahead.

Hey, good morning, guys.

Bob Pagano, President and CEO, Watts Water Technologies: Morning, Jeff.

You've talked about kind of pricing 3Q, 4Q. I'm just wondering, as we look forward into 2026, what you think carryover price is, at least into the first half. And then as you contemplate your normal course pricing for 2026, is that a more normal kind of view, or is it continuing to be elevated with inflation, tariffs, etc.?

Jeff, I mean, most of the price increases happened in the, starting in April, etc. There will be some carryover because we've had multiple price increases during the year with the adjustments of tariffs. Tariffs are a fluid thing, as we all know. We will be adjusting and looking at tariffs as we go forward into next year right now. Again, we're watching it very closely. We should have some favorable price, certainly, in the first quarter as we continue to roll off some of those. As you know, we had both pre-buy in Q2 and Q3 now of this year. Again, we will be providing more information in 2026, but there will be some carryover into next year.

Okay. We talk more and more about data center, obviously booming. Just wondering if you can, I guess, size that business for 2025 year, what you think for this year, what you think it can be in a few years. I think most of your exposure historically was Asia. A lot of the demand's happening in the U.S. I'm just wondering about your success bringing that over to the North American market.

Yeah, Jeff, I would say our North America team is going to surpass Asia-Pacific this year. We've been growing very quickly in North America. We'll size it at the end of this year, but I can say that it's growing high double digits. It's one of our fastest growing markets in North America and in Asia-Pacific. We'll continue to double down on that. It's offsetting some of the softness in the residential side of our markets. It's nice complementary to what we're doing. You're seeing it come through our results in Q3.

Okay. And then just last one. Multifamily, just to update there, it seems like maybe some bottoming and things getting better. I guess it depends on where you are in the build process, but just an update there.

Yeah. On the multifamily, again, it's been a soft market. Like you said, there's various regions of the country that are still booming. Certainly, when you look at the single housing crisis, where there's not enough homes and unaffordability, we're seeing projects in the multifamily. It's not—and there's shovel-ready projects ready to go. People are finishing what they've started. I think they're waiting for some certainty on the tariff front and making sure that calms down, as well as waiting for some lower interest rates. We think it's close to bottoming out. We'll watch carefully through there. It's not been a robust market. We're hopeful that it'll begin getting better as interest rates start coming down next year.

Mike Halloran, Analyst, RW Baird: Great. Thanks for the color, guys.

Bob Pagano, President and CEO, Watts Water Technologies: Thanks, Jeff.

Ryan Lada, CFO, Watts Water Technologies: Thank you, Jeff. Again, a reminder, folks, if you'd like to ask a question, it is star one on your telephone keypad. Once again, star one. Our next question comes from the line of Ryan Connors with North Coast Research. Ryan, please go ahead.

Good morning. Thank you.

Bob Pagano, President and CEO, Watts Water Technologies: Good morning.

Most of my questions have been answered. You've been pretty comprehensive here. I did pick up there, Bob, through the phone on your tone around tariffs and the increased uncertainty there. I think you're kind of alluding to the SCOTUS case, which I don't follow these things too closely, but apparently, it didn't go all that well. There's a chance that maybe the whole thing could be just disallowed. That would be a very disruptive outcome given all the price you've taken related to tariffs. Without getting too detailed, I mean, just conceptually, if we were to hypothetically assume tariffs just go away and SCOTUS says, "No go," what does that conceptually look like? Do you keep the price that you've gotten? Do you give that back? Just curious how conceptually how you would look at that kind of a scenario.

Yeah, Ryan, that's a great question. Fundamentally, I have a hard time believing that the government's going to give anything back to any of us. Even if they lose the case, it'll be interesting to see the appeals and the potential adjustments. We're watching it carefully. It would be very complicated, as you can imagine, because our pricing has not just been because of tariffs. Copper prices have been up double digits. General inflation's been high, labor, etc. It's a very complicated item. We're watching this very closely. We'll adjust based on what the market does at this point in time. It's very complicated, as you said. I think a lot of people are trying to figure this out. We'll just have to wait and see how it plays out.

Yeah. I mean, just as a follow-up to that, would it be crazy to think that, okay, the price you've put in the market's been accepted in the market. It's been kind of there. And you can sort of keep that. And even if you don't get any retroactive credits, that maybe that scenario could actually be a margin positive going forward? I mean, is that my way off base there?

Yeah. It's such a difficult question, Ryan. There are so many different variables from that point of view. I think we're all going to have to wait and see and have many different scenarios to understand what market pricing and what's happening on this. Again, stay tuned. I think we're all watching carefully.

Got it. Thanks again for your time.

Thank you.

Ryan Lada, CFO, Watts Water Technologies: Thanks, Ryan. Our next question comes from the line of Joe Giordano. Sorry, Giordano with TD Cowen. Sorry about that, Joe. Please go ahead.

Hi, good morning. This is Chris on for Joe.

Bob Pagano, President and CEO, Watts Water Technologies: Good morning.

You'd mentioned the uncertainty surrounding the government shutdown. Just wondering if you could elaborate on what parts of the business that you are seeing or expect to potentially see impact from that shutdown.

It's primarily on the residential side, right? Anytime there's uncertainty, people withhold and slow down things. I think it's just one of those things, just an added variable we're watching very carefully. Nothing big to report on at this point in time, but something that's certainly out there. It's just normal process. People pull back when they're not certain. We'll see how that goes through. Hopefully, they'll get that resolved very soon.

Great. Thank you very much. With HAWS, is there any difference in how they go to market versus your predominant channels, and any opportunity to sell through your existing channels?

It's very similar to our current process, through wholesalers and distributions. Yeah, no, it's very similar. We can leverage our channels. The nice thing about HAWS is they have more international exposure than we have, so that's an opportunity for us to leverage.

Great. Thank you very much.

Thank you.

Ryan Lada, CFO, Watts Water Technologies: All right. Thanks, Joe. Excuse me, Chris. Hey, one final prompt, ladies and gentlemen. Again, star one on your telephone keypad if you'd like to ask a question. Once again, star one. Our next question is from the line of Andrew Jon Krill with Deutsche Bank. Andrew, please go ahead.

Andrew Jon Krill, Analyst, Deutsche Bank: Hi, thanks. Good morning, everyone. I want to ask another one on HAWS. Just can you provide any sense of the historical growth rates there, what you expect looking forward? And then on margins for the business, I think if we do the math on the dilution, is it correct it's around 10% even margins initially as you integrate the business? And then over time, any reason this can't be a WATT average or better margin business? Thanks.

Bob Pagano, President and CEO, Watts Water Technologies: Yeah. In general, I would say they are similar to the institutional growth, which is above, let's call it, our growth of our traditional portfolio that includes residential. I would say their EBITDA is in the mid to high single digits right now. We certainly believe over the next several years, we'll be able to get them to the Watts overall margin. Teams are on it really early at this point. We are mapping it out. Great brand, great quality, and great people. We are excited to leverage that going forward.

Andrew Jon Krill, Analyst, Deutsche Bank: Great. And then switching back to Europe, I know the margin improvement is encouraging, a pretty nice inflection. Just more medium term, I think the prior high watermark was about 16% even margin. Just, can you get there, do you think, if volumes remain sluggish around where they are, just with the new initiatives you have in place? I think we're getting back to that. One, is it possible? And do you need volume leverage to get there? Thanks.

Bob Pagano, President and CEO, Watts Water Technologies: Certainly, volume leverage would help. Certainly, we're taking cost structure. I think the team is relooking, as I said earlier, at the 80/20 because the markets have changed significantly since we did a very detailed 80/20 on that. We're reshuffling that. We will provide more guidance. That should help our margins going forward. It takes a while to unravel some of the contracts we have with customers. The team's on it. We're looking at it. I would say our aspirations are to get back up to those levels. As you know, I'm always cautious on Europe at this point in time, given the market dynamics and given the uncertainty with the conflict in Ukraine that's having an impact on local incentives, etc. Watching it very closely, the team's on it. It's nice to see.

I think we're starting to hit that bottoming out at this point in time.

Andrew Jon Krill, Analyst, Deutsche Bank: Great. Thank you.

Bob Pagano, President and CEO, Watts Water Technologies: Thank you.

Ryan Lada, CFO, Watts Water Technologies: Great. Thank you, Andrew. There are no further questions at this time. I will now turn the call back over to Bob Pagano for closing remarks. Bob.

Bob Pagano, President and CEO, Watts Water Technologies: Thank you for taking the time to join us today. We appreciate your continued interest in Watts and look forward to speaking with you again during our fourth quarter earnings call in early February. Have a good day and stay safe.

Ryan Lada, CFO, Watts Water Technologies: Thank you. This concludes today's conference call. You may now disconnect. Have a great day, everyone.

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