Watts Water Technologies, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Watts Water Technologies third quarter 2021 earnings conference call. All lines are in a listen-only mode to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw yourself from the queue, simply press star 1 again. Thank you. I would now like to turn the call over to Tim McPhee, Treasurer and Vice President, Investor Relations of Watts Water Technologies, Incorporated. Please go ahead, sir.

Thank you, and good morning, everyone. Welcome to our third quarter earnings conference call. Joining me today are Bob Pagano, CEO and President, and Shashank Patel, our CFO. During today's call, Bob will provide an overview of the third quarter results and discuss the current state of our operations and markets. Shashank will discuss the details of our third quarter performance, provide our initial outlook for the fourth quarter, and offer a revised outlook for the full year 2021. 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. Before we begin, I'd like to remind everyone that during the call, we will be making certain comments that constitute forward-looking statements. These statements are subject to numerous risks and uncertainties that could cause the 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 because of new information, future events, or otherwise. I request that questions be limited to one, plus a follow-up, to ensure everyone has an opportunity to participate. If you have additional questions, please rejoin the queue. Let me now turn the call over to Bob.

Thanks, Tim, and good morning, everyone. First, I must recognize the efforts of all our employees for their sustained commitment while dealing with continued supply chain and logistics challenges and the Delta variant. Our team has maintained a customer focus and have worked diligently to deliver on our promises to them. My sincere thanks to the entire team for their hard work. Now, please turn to slide three in the presentation, and I'll provide an overview of the quarter. The team produced another strong quarter despite supply chain and logistics challenges. We delivered record third quarter sales, adjusted operating margin, and adjusted earnings per share. All regions' sales grew organically by double digits. Our results benefited from the continued economic recovery as well as price and volume tailwinds. Cash generation remains a focal point. Year-to-date, we have increased our free cash flow by 26% as compared to last year. Shashank will review the financial results in more detail momentarily. In late September, we purchased Sentinel Hydro Solutions in an all-cash transaction. Sentinel, a $6 million sales business, provides leak detection solutions mostly to the high-end residential market. Sentinel's systems are designed to detect leaks in water pipes, plumbing fixtures, and appliances, and will automatically shut off water when a leak is detected. This acquisition further expands our developing focus in leak detection technology. I'd like to welcome our Sentinel colleagues to Watts. Like many companies, we're dealing with supply chain and logistics challenges. We previously mentioned concerns involving components used in our electronics products. Since then, supply chain and logistics issues have gotten more dynamic. We are seeing disruptions across the board in all regions, impacting many of our core raw materials and components. Lead times, on average, have more than doubled, and suppliers are dealing with labor constraints. We're addressing these and other problems daily to maximize customer order fulfillment. Our expectation is that supply chain and logistics disruptions will continue into 2022. We are monitoring this issue closely. Now let me talk about the markets. In general, markets have continued to be positive. GDP expectations in most regions pretend a solid finish to 2021 for repair and replacement in both commercial and residential end markets. In the Americas, single-family residential new construction remains strong, and we've seen some pickup in multifamily starts as well. Repair and replacement business in both non-residential and residential end markets remains strong. We still see pent-up demand in older projects while new project starts are still lagging. Contractors are also dealing with materials and skilled labor shortages at job sites, in addition to substantial inflation on project costs. In Europe, German and Italian OEMs continue to benefit from government energy efficiency subsidies. Repair and replacement was again strong in France. We are beginning to hear customer feedback that there is more uncertainty heading into Q4 as projects are being delayed due to material and labor shortages, as well as an across-the-board inflationary impact on project costs. The team is watching this trend closely. In APMIA, underlying market demand is improved but is being impacted by the pandemic. New Zealand and Australia have both had recent lockdowns affect their economies. China market demand has been steady, but is being impacted by a potential correction in the housing market and COVID outbreaks that caused lockdowns, which impacts both suppliers and customers. China is also experiencing power outages, which is further exasperating the supply chain. Finally, given our performance in the third quarter and our expectations for Q4, we are raising our full year sales outlook. Let me turn the call over to Shashank. We'll discuss the third quarter operating performance and provide more detail on our fourth quarter expectations and revised full year outlook. Shashank.