Watts Water Technologies, Inc.

Thank you, and good morning, everyone.

Welcome to our second quarter 2020 earnings conference call. With me today are Bob Pagano, President and CEO, and Shashank Patel, our CFO. Bob will provide an overview concerning various aspects of our business before turning the call over to Shashank, who will address the financial results in more detail and offer our outlook for the third quarter. Following the prepared remarks, we will address questions related to the information covered during the call. Today's webcast is accompanied by a slide presentation, which can be found in the Investors section of our website. We will reference these slides throughout our prepared remarks. Any reference to non-GAAP financial information is reconciled to the relevant GAAP measure in the appendix to the presentation. Before we begin, I'd like to remind everyone that during the course of 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 WAAT'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. Now, I will turn the call over to Bob.

Thanks, Tim, and good morning, everyone. Please turn to slide three in the presentation, and I'll provide an overview of the quarter. I'd like to start with a COVID-19 update. Our highest priority continues to be the health and safety of our employees. Fortunately, confirmed COVID-19 cases within our workforce has been very low. Since early April, all our manufacturing locations have remained open. The safety protocols we established during the first quarter have continued, and we've actually enhanced measures as government requirements have started easing. We have recently implemented new travel and back to the office policies as we move into the next phase of the pandemic recovery. We will remain diligent in ensuring workplace safety is a top priority. I again want to acknowledge the efforts of our employees who continue to maintain a customer focus as we transition into the new normal, ensuring our essential products are manufactured and delivered in a timely fashion. Thanks to our dedicated team, We delivered results in the second quarter that exceeded our internal expectations. The second quarter sales reduction was less than we had anticipated, and decrements in operating profits came in lower than expected as well. Overall, we maintained our focus on productivity and cost management, preserving cash, and controlling what we can. Dushank will provide more financial details in a few minutes. Orders trended positively during the second quarter and into July. Monthly orders were down as compared to the prior year from April through June, but sequentially order rate declines improved as the quarter progressed. Order rates on average for the quarter declined more in Europe as compared to the Americas, with Europe substantially softer in April and May, but recovering in June. Now let me provide a view on the markets. During the second quarter, the end markets performed as we had anticipated for the most part. with gradual sequential improvements as lockdowns in the U.S. and Europe began to ease. We continue to see delays across most verticals. Restrictions on social distancing at job sites is also causing a slowdown as construction companies adapt to the new normal. There does appear to be a push to get jobs already in process completed. The U.S. repair and replacement market performed better than other markets, especially in retail as DIY demand was strong. The marine market is slow and expected to remain tempered, at least in the near term, due to softness from the COVID-19 impact. Destocking by channel partners in the Americas has mostly subsided, while channels in Europe, which are taking a little longer to return, will likely see destocking into the third quarter. Some of the important indices we follow, such as the ABI and Dodge Momentum Index, have stabilized, albeit at much lower levels than before the pandemic. June PMI indices in both the U.S. and Europe improved as restrictions eased. The July AIA consensus construction outlook is predicting total non-residential new construction spending will decrease in the high single digits for 2020 and mid-single digits in 2021. In apnea, China's markets have made steady progress with Middle East continuing to languish. Operationally, we have instituted a majority of the cost-out programs we discussed last quarter. During the second quarter, we estimate total savings approximated $21 million. In the second quarter, we recorded a special charge of $6.7 million, primarily for costs related to the cost-out and restructuring initiatives, most of the total being severance. We expect to book additional costs for asset relocation, asset write-ups, and other exit costs in the third and fourth quarters, that also relate to these programs. They will be classified as special items when occurred. Further, we continue to review additional cost actions to support operational efficiency. Next, let me comment on some changes in our operating portfolio in APNIA. First, I'm happy to announce the acquisition of Australian VAL Group, or ABG, in an all-cash transaction that was consummated in early July. ABG is a $10 million sales company that designs and distributes heating control valves for the Australian marketplace that are sold into both residential and commercial end markets. This acquisition broadens our product offering in channel access in a region with well-established and tightly enforced plumbing codes. We welcome our new ABG colleagues to Watts. Secondly, we have changed how we go to market in Korea. Moving from a direct sales organization to a distribution model. We effected this change by selling our interest in our Watts Korea subsidiary to a local management in July. The future addressable market is limited and government regulations and certifications favor locally owned enterprises, which is why we made the change. The new entity will have exclusive distribution rights to sell our heating and hot water products, as well as some complementary products in the Korean marketplace. We expect a better margin on product sales due to reduced SG&A costs. The proceeds and loss on sale were minimal and will be recorded in the second half of 2020. A few words now on our third quarter outlook. We expect both sales and operating margins to improve relative to the second quarter, in line with the order trends we saw through July. Obviously, we continue to be concerned about the spread of COVID-19, especially in the U.S. Our results may be impacted depending on its ultimate course. Now, I'd like to update you on our smart and connected product offerings. Please turn to slide four. Our Techmar control systems business has been a market leader in hydronic and snow melting control systems. The Techmar team recognized that many homeowners were having difficulty upgrading their HVAC systems because they were wired for older two-wire control systems. The InVita thermostat system enables homeowners to upgrade their system without having to rewire their home. The InVita system is also Wi-Fi connected and includes connections to monitor water leaks from your hot water heater. The value of the InVita system was recently highlighted in an episode of Ask This Old House. Our HF Scientific business has been a key technology supplier into the ballast water treatment market. One of the most common ways to treat ballast water is through filtration and then injection of oxidants to kill any remaining invasive organisms. HF scientific instruments help monitor the level of these oxidants during treatment to ensure proper system performance. Once the ships return to port and begin to de-ballast, our instruments again monitor the oxidant levels to ensure that the treated ballast water will not harm the local environment. The HF Scientific team recently launched the SSR-EX system, which makes it easier to connect into local control systems, service more easily, and increase the safety levels of this instrument, which is essential to the performance of ballast water treatment systems. Finally, on slide five, I'd like to discuss a number of our accomplishments in 2019 around sustainability. Sustainability is very important to us. Our sustainability report was issued at the end of June of this year, and the quality and content has been significantly improved. During 2019, we continued to reduce our consumption of natural resources, including a 13% reduction in water usage by taking measures to conserve water and manage its flow and discharge responsibly. Our product portfolio shift to eco-friendly products and solutions continues. This past year, Sales of our condensing, boilers, and water heaters reduced more than 110,000 tons of CO2 for our customers, more than three times what Watts generated as a company. We have maintained our partnership with Planet Water, providing funding and resources to install water purification systems for disadvantaged areas of the world. Today, we have positively impacted over 15,000 people in eight different countries providing safe drinking water and education on the importance of proper hand sanitation. And we were recognized by Newsweek as one of America's most responsible companies with regards to our ESG efforts. Now, let me turn the call over to Shashank, who will discuss our second quarter operating performance and provide more details on our third quarter outlook. Shashank?