Watts Water Technologies, Inc. (WTS) 2026 Q1 法說會逐字稿

Welcome to Watts Water Technologies, Inc. first quarter 2026 earnings call. (Operator Instructions) I will now turn the call over to Diane McClintock, Chief Financial Officer. Please go ahead.

歡迎參加 Watts Water Technologies, Inc. 2026 年第一季財報電話會議。(接線員指示) 現在我將把電話交給財務長 Diane McClintock。請開始。

Thank you, and good morning, everyone. Welcome to our first quarter earnings conference call. Before we begin, 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.

謝謝，各位早安。歡迎參加我們第一季財報電話會議。在開始之前，我想提醒各位，本次電話會議中我們可能會發表某些構成前瞻性陳述的評論。這些陳述受到眾多風險與不確定性影響，可能導致實際結果出現重大差異。有關這些風險的資訊，請參閱 Watts 向美國證券交易委員會（SEC）提交且可公開取得的文件。本公司不承擔更新或修訂任何前瞻性陳述之義務，無論係因新資訊、未來事件或其他原因所致。

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.

今日的網路直播搭配一份簡報，可於我們網站的投資人關係（Investor Relations）專區取得。我們在預先準備的發言中將全程引用該簡報。任何對非 GAAP 財務資訊的引用，均已在簡報附錄中提供調節表。

With that, I will turn the call over to Bob.

接下來，我把電話交給 Bob。

Thank you, Diane, and good morning, everyone. Please turn to slide 3, and I'll provide an overview of the first quarter. We began 2026 with better-than-expected results, including record sales, operating income, operating margin and earnings per share. I'd like to thank the entire Watts team for their impactful contributions to our results.

謝謝你，Diane，各位早安。請翻到第 3 頁投影片，我將概述第一季表現。我們以優於預期的結果展開 2026 年，包括創新高的銷售額、營業利益、營業利益率與每股盈餘。我要感謝整個 Watts 團隊對我們成果所做出的重要貢獻。

Organic sales rose 12% in the quarter as we benefited from price and incremental volume. Adjusted operating margin of 20.1% increased 110 basis points due to better-than-expected price, volume and productivity, which more than offset tariff costs, inflation and acquisition dilution of 80 basis points. Our balance sheet remains strong and provides ample capacity to support our disciplined capital allocation strategy. This includes evaluating strategic M&A opportunities while continuing to invest in product innovation and advancing our digital strategy.

本季有機銷售成長 12%，受惠於價格與新增出貨量。調整後營業利益率為 20.1%，提升 110 個基點，主要因價格、出貨量與生產力優於預期，足以抵銷關稅成本、通膨以及併購稀釋 80 個基點的影響。我們的資產負債表仍然強健，並提供充足的能力以支持我們嚴謹的資本配置策略。這包括評估策略性併購（M&A）機會，同時持續投資產品創新並推進我們的數位策略。

As a result of our solid start to 2026 and expected cash flows for the remainder of the year, we announced a 21% increase to our dividend beginning in June. We continue to see strong momentum in data center cooling applications with sales more than doubling in the quarter as we deepen customer relationships and leverage our broad portfolio. To support this growth and meet our customers' needs, we are investing in our team and accelerating innovation across our product portfolio.

基於 2026 年良好的開局以及對今年剩餘期間現金流的預期，我們宣布自 6 月起股利提高 21%。我們持續看到資料中心冷卻應用的強勁動能，本季銷售額在深化客戶關係並運用我們廣泛產品組合的帶動下，成長逾一倍。為支持此成長並滿足客戶需求，我們正投資於團隊並加速整體產品組合的創新。

Additionally, we're expanding capacity, including adding inventory to meet shorter lead time expectations. We're also gaining traction with our digital solutions, including the Nexa platform, our intelligent water management solution. Together, these strategic initiatives are driving growth and helping to offset softer end markets.

此外，我們正在擴充產能，包括增加庫存以符合更短交期的期待。我們的數位解決方案也正取得進展，包括 Nexa 平台——我們的智慧水管理解決方案。這些策略性舉措共同推動成長，並有助於抵銷較疲弱的終端市場。

In 2025, we completed five acquisitions, enhancing our technology capabilities and expanding our product range, geographic reach and exposure to high-growth nonresidential end markets. These businesses are performing well, and we are successfully integrating them through our One Watts performance system. We're on track to achieve or exceed the targeted synergies.

在 2025 年，我們完成了五項併購，強化我們的技術能力，並擴大產品範圍、地理覆蓋以及對高成長非住宅終端市場的曝險。這些業務表現良好，我們也正透過 One Watts 績效系統成功進行整合。我們正按計畫達成或超越預期的協同效益目標。

We are proactively working to mitigate the impact of the Middle East conflict. Our direct sales exposure to the Middle East is limited to approximately 2% of global sales with the majority being in our APMEA region. We are implementing targeted pricing strategies as well as sourcing and productivity initiatives to mitigate both the direct and indirect impacts, including freight and energy cost increases.

我們正主動採取措施以降低中東衝突的影響。我們對中東的直接銷售曝險有限，約占全球銷售的 2%，其中多數位於我們的 APMEA 區域。我們正在推行具針對性的定價策略，以及採購與生產力提升措施，以降低直接與間接影響，包括運費與能源成本上升。

Our direct Middle East exposure includes our recent acquisition, Saudi Cast, and I wanted to highlight that the Saudi Cast business is largely an in-country for-country business model, which should help insulate it from the full impact of the conflict. The tariff environment also remains fluid with IEEPA tariffs being eliminated, but generally being offset by new tariffs under Section 122 and changes in the Section 232 rules. Additionally, the administration is considering new tariffs under Section 301.

我們在中東的直接曝險包含近期併購的 Saudi Cast。我想特別指出，Saudi Cast 的業務主要採「在地供在地」的商業模式，這應有助於使其免於承受衝突的全部影響。關稅環境仍然多變：IEEPA 關稅已被取消，但整體上大致被第 122 條下的新關稅以及第 232 條規則的變更所抵銷。此外，政府也正在考慮依第 301 條實施新的關稅。

Based on the tariff structure in place as of today, we believe we are well positioned from a price/cost perspective. Our strong first quarter performance and outlook for the second quarter give us a solid start towards achieving our outlook for the full year. We continue to face an uncertain macroeconomic and geopolitical environment, including the Middle East conflict, downward revisions of global GDP forecasts and elevated interest rates. In light of these factors, we believe it's prudent to maintain our full year outlook and we'll revisit in our next earnings call.

基於截至今日的關稅結構，我們認為從價格/成本角度來看，我們處於有利位置。我們第一季的強勁表現以及對第二季的展望，讓我們在達成全年展望方面有了穩健的起步。我們仍面臨不確定的總體經濟與地緣政治環境，包括中東衝突、全球 GDP 預測下修以及偏高的利率。鑑於這些因素，我們認為維持全年展望是審慎之舉，並將在下一次財報電話會議中再行檢視。

With that, let me turn the call over to Diane, who will address our first quarter results and our second quarter and full year outlook. Diane?

接下來，我把電話交給 Diane，由她說明第一季結果，以及第二季與全年展望。Diane？

Thank you, Bob, and good morning, everyone. Please turn to slide 4, which highlights our first quarter results. Sales reached $677 million, reflecting a 21% increase on a reported basis and a 12% increase organically. This performance was supported by favorable price and volume, including the benefit of growth in data center sales.

謝謝你，Bob，各位早安。請翻到第 4 頁投影片，該頁重點呈現我們第一季的結果。銷售額達 6.77 億美元，按報告基礎年增 21%，有機成長 12%。此表現受惠於有利的價格與出貨量，其中包括資料中心銷售成長帶來的助益。

The Americas region delivered strong organic growth of 16% and reported growth of 23%, exceeding our expectations. Acquisitions accounted for an additional $31 million in sales, contributing 7 points to the Americas reported growth. In Europe, organic sales rose 1%, while reported sales increased 12%. Organic growth stemmed from favorable pricing, while reported sales also benefited from positive foreign exchange.

美洲區有機成長強勁，達 16%，按報告基礎成長 23%，超出我們預期。併購額外貢獻 3,100 萬美元銷售額，為美洲區按報告基礎的成長貢獻 7 個百分點。在歐洲，有機銷售成長 1%，而按報告基礎銷售成長 12%。有機成長來自有利的定價，而按報告基礎銷售亦受惠於正向的外匯影響。

In APMEA, organic sales grew 3%, with acquisitions adding 19% and favorable foreign exchange contributing 7% for a total reported sales growth of 29%. Adjusted EBITDA totaled $151 million, an increase of 27% with an adjusted EBITDA margin of 22.3%, up 90 basis points year-over-year. Adjusted operating income of $136 million increased 28% and adjusted operating margin improved 110 basis points to 20.1%.

在 APMEA，有機銷售成長 3%，併購增加 19%，有利的外匯貢獻 7%，使按報告基礎銷售總成長達 29%。調整後 EBITDA 為 1.51 億美元，成長 27%；調整後 EBITDA 利潤率為 22.3%，年增 90 個基點。調整後營業利益為 1.36 億美元，成長 28%；調整後營業利益率提升 110 個基點至 20.1%。

These improvements were primarily driven by favorable pricing, volume leverage and productivity gains, more than offsetting inflationary pressure, tariffs and acquisition dilution of 80 basis points. Segment margins were as follows: Americas increased 80 basis points to 24.2% and APMEA increased 120 basis points to 18.7%, while Europe decreased 20 basis points to 13.7%.

這些改善主要由有利的定價、出貨量槓桿效應與生產力提升所帶動，足以抵銷通膨壓力、關稅以及併購稀釋 80 個基點的影響。各事業部門利潤率如下：美洲區提升 80 個基點至 24.2%，APMEA 提升 120 個基點至 18.7%，而歐洲區下降 20 個基點至 13.7%。

Adjusted earnings per share equaled $3.04, representing a 28% year-over-year increase with operational performance, acquisitions, tax and foreign exchange gains outweighing higher net interest expense. The adjusted effective tax rate in the quarter was 24.2%, down 30 basis points compared to the first quarter of 2025, primarily due to a higher tax benefit from the vesting of stock compensation awards that occur in the first quarter of each year.

調整後每股盈餘為 3.04 美元，年增 28%；營運表現、併購、稅務與外匯收益抵銷了較高的淨利息費用。本季調整後有效稅率為 24.2%，較 2025 年第一季下降 30 個基點，主要因每年第一季發生之股票酬勞獎勵歸屬所帶來的稅務利益增加。

Our free cash flow for the quarter was $7 million compared to $46 million in the first quarter of last year. The cash flow decrease was primarily due to the increase in accounts receivable due to higher sales volume, increases in and timing of our annual customer rebate payments and an increase in inventory related to incremental tariffs and our strategic investment in inventory.

本季自由現金流為 700 萬美元，較去年第一季的 4,600 萬美元下降。現金流下降主要由於銷售量增加帶動應收帳款上升、年度客戶回饋款支付金額增加及其時點影響，以及因新增關稅與我們的策略性庫存投資而使存貨增加。

We expect sequential improvement in our free cash flow and are on track to achieve our full year goal of free cash flow conversion greater than or equal to 90% of net income as previously communicated. We have a strong balance sheet and solid cash flow, giving us flexibility in executing our capital allocation strategy, including the announced 21% increase in our dividends that will begin in June.

我們預期自由現金流將逐季改善，並如先前所溝通，正按計畫達成全年目標：自由現金流轉換率大於或等於淨利的 90%。我們擁有強健的資產負債表與穩健的現金流，使我們在執行資本配置策略上具備彈性，包括已宣布自 6 月起股利提高 21%。

On slide 5, we will review our outlook for the second quarter and full year 2026. We are reaffirming the full year 2026 outlook we presented in February, which reflects the market factors Bob discussed. It assumes the Middle East conflict is short term in nature, the current tariff structure remains in place for the remainder of the year, and there are no IEEPA tariff refunds.

在第 5 張投影片，我們將檢視 2026 年第二季與全年展望。我們重申 2 月提出的 2026 全年展望，該展望反映 Bob 所討論的市場因素。其假設中東衝突屬短期性質、目前的關稅結構在今年剩餘期間維持不變，且不會有 IEEPA 關稅退還。

For the full year 2026, we are maintaining both our consolidated and regional sales outlooks. Consolidated organic sales growth is expected to be between plus 2% and plus 6%, and our reported sales growth is expected to be between plus 8% and plus 12%. We are also maintaining our full year adjusted EBITDA and adjusted operating margin outlook.

就 2026 全年而言，我們維持合併與各區域的銷售展望不變。合併有機銷售成長預期介於 +2% 至 +6%，而報告銷售成長預期介於 +8% 至 +12%。我們也維持全年調整後 EBITDA 與調整後營業利益率展望不變。

Next, a few items to consider for the second quarter. Reported sales are expected to increase by 10% to 14% with organic sales up 4% to 8%. We anticipate mid- to high single-digit growth in the Americas despite the tough compare to the second quarter last year, which included an estimated $20 million of pull-forward sales into the second quarter from the third quarter due to the timing of price increases. We expect a low single-digit decline in Europe and low to mid-single-digit growth in APMEA with our expected data center sales offsetting the direct impact of the Middle East conflict.

接著，提供幾點第二季的考量事項。報告銷售預期成長 10% 至 14%，其中有機銷售成長 4% 至 8%。儘管去年第二季比較基期偏高（因漲價時點因素，估計約 2,000 萬美元的銷售由第三季提前至第二季），我們仍預期美洲地區將有中至高個位數成長。我們預期歐洲將呈現低個位數下滑，APMEA 則為低至中個位數成長，且預期資料中心銷售可抵銷中東衝突的直接影響。

These estimates incorporate the negative impact from product rationalization under our 80/20 initiative of approximately $2 million in Europe and $6 million in the Americas. Incremental sales from acquisitions are projected at $25 million to $30 million for the Americas and around $5 million for APMEA. We also estimate a foreign exchange benefit of approximately $5 million.

上述估計已納入我們 80/20 計畫下產品精簡所帶來的負面影響：歐洲約 200 萬美元、美洲約 600 萬美元。併購帶來的增量銷售預估為美洲 2,500 萬至 3,000 萬美元，APMEA 約 500 萬美元。我們亦估計外匯帶來約 500 萬美元的利益。

Second quarter EBITDA margin is expected to be between 22.3% and 22.9%. Operating margin is expected to be between 20% and 20.6%. Price and volume leverage in the Americas and APMEA are anticipated to be offset by acquisition dilution of approximately 70 basis points.

第二季 EBITDA 利潤率預期介於 22.3% 至 22.9%。營業利益率預期介於 20% 至 20.6%。美洲與 APMEA 的價格與銷量槓桿效益，預期將被併購稀釋約 70 個基點所抵銷。

In addition, last year, we had a nonrecurring price/cost benefit of approximately $6 million in the second quarter, in addition to the volume leverage on the estimated $20 million of sales pull forward that together are a 120 basis point headwind to margins in the second quarter. Additional key assumptions for the second quarter and full year are available in the appendix of the earnings presentation.

此外，去年第二季我們有約 600 萬美元的一次性價格/成本利益，加上估計 2,000 萬美元提前銷售所帶來的銷量槓桿，合計使第二季利潤率面臨 120 個基點的不利因素。第二季與全年其他關鍵假設，請參閱財報簡報的附錄。

With that, I'll turn the call back over to Bob before moving to Q&A. Bob?

接下來，在進入問答之前，我把電話交回給 Bob。Bob？

Thanks, Diane. To wrap up, we had a strong start to the year with record first quarter sales and earnings. Our portfolio spans diverse end markets, and we are actively reallocating resources towards areas of strong demand, including institutional and data centers.

謝謝，Diane。總結來說，我們今年開局強勁，第一季銷售與獲利皆創新高。我們的產品組合涵蓋多元終端市場，並正積極將資源重新配置至需求強勁的領域，包括機構市場與資料中心。

Importantly, approximately 60% of our sales are driven by repair and replacement activity, which provides a consistent foundation for revenue and cash flow generation over time. We remain nimble and are confident in our ability to execute through dynamic market conditions. We're maintaining our full year outlook despite the macro and geopolitical uncertainty.

重要的是，我們約 60% 的銷售來自維修與汰換活動，這為長期的營收與現金流創造提供穩定基礎。我們保持靈活，並對在多變的市場環境中執行的能力充滿信心。儘管總體與地緣政治不確定性存在，我們仍維持全年展望不變。

Our balance sheet remains strong and provides ample flexibility to support our capital allocation priorities. We believe we are well positioned to deliver on our financial commitments, create value and drive profitable growth over the long term.

我們的資產負債表依然強健，並提供充足彈性以支持我們的資本配置優先事項。我們相信自身具備良好定位，可履行財務承諾、創造價值，並在長期推動獲利性成長。

With that, operator, please open the lines for questions.

那麼，接線生，請開放提問。

(Operator Instructions)

(接線生指示)

Nathan Jones, Stifel.

Nathan Jones，Stifel。

Good morning, everyone. I guess I'll ask a dumb question about the full year guidance. I know you said, Bob, it's only one quarter in. There's a lot going on, but you did beat the first quarter by a long way, and the second quarter guidance is a fair way ahead of consensus as well.

各位早安。我想我會問一個關於全年指引的笨問題。我知道你說過，Bob，現在才第一季。事情很多，但你們第一季大幅超出預期，而第二季指引也明顯高於市場共識。

Is there any kind of assumption in here that you're making? I guess, maybe the MRO business slows down a little bit with global GDP. You've always said it's pretty well correlated with that? Or is there any reason to think that the second half is likely to be any weaker than you thought it was going to be three months ago? Or this is just purely being conservative given the macro environment that we're in?

這裡面是否有任何你們正在採用的假設？我猜也許 MRO 業務會隨全球 GDP 稍微放緩。你們一直說它與 GDP 的相關性相當高？或者，有沒有任何理由認為下半年可能會比你們三個月前所想的更弱？還是說，這純粹是在目前的總體環境下採取較保守的作法？

Thanks, Nathan, for the question. Look, I think it's being prudent right now. I think we've dialed in and we feel really confident about that. And it just depends on how long the war goes on at this point in time and does it impact future demand in the future. But if it's over with quickly and everything else, I think we have opportunities in the second half. But let's talk about that in three months, and we'll have a better answer for you at that point in time.

謝謝你，Nathan，提問。我認為目前採取審慎態度是對的。我想我們已經把各項因素調整到位，並對此非常有信心。而這取決於戰事會持續多久，以及是否會影響未來的需求。但如果很快結束以及其他因素配合，我認為下半年仍有機會。不過我們三個月後再談，到時候我們會給你更好的答案。

Fair enough. My second question is on the topic du jour of data centers and Watts' exposure there. I think you said it doubled in the first quarter. Can you maybe talk about any details you can give us on how big this is, what the contribution to the overall Watts growth is, how big the addressable market is, how much you think you can grow it over the next few years? Any more details you can give us around that kind of thing?

了解。我的第二個問題是關於當紅話題：資料中心，以及 Watts 在這方面的曝險。我想你說第一季翻倍了。你能否談談你能提供的任何細節：這塊規模有多大、對 Watts 整體成長的貢獻有多少、可服務市場（TAM）有多大、以及你認為未來幾年能成長到什麼程度？關於這類問題，你能再多分享一些細節嗎？

Yeah. Regarding data centers, look, it's an over $1 billion addressable market that we have in front of us. We ramped up last year. So the first half of this year is going to have better, easier comps than the first -- last year, we ramped up and the second half was stronger than the first half of last year.

是的。關於資料中心，你看，擺在我們面前的是一個可觸及市場規模超過10億美元的機會。我們去年加速擴張。因此今年上半年相較於去年上半年會有更好、更容易的比較基期——去年我們在加速擴張，而去年下半年比去年上半年更強。

So our goal is to do high double-digit increases in data center for the year, and we believe we're well on our way to do that at this point in time. Teams are doing a great job. We're innovating new products and the customers are happy with our performance. So we're excited about this opportunity, and we're doubling down on it.

所以我們的目標是今年資料中心業務要達到高雙位數的成長，我們相信目前進展非常順利。團隊做得非常出色。我們正在創新推出新產品，客戶也對我們的表現感到滿意。因此我們對這個機會感到興奮，並且會加碼投入。

Is it accretive to the company margins?

這對公司的利潤率有增益嗎？

It is. Overall operating income, very much so. Some movements on the gross profit margin with lesser SG&A costs, but overall accretive for overall Watts.

有。對整體營業利益而言，確實如此。毛利率會因SG&A費用較低而有一些變動，但整體而言對Watts的整體獲利是有增益的。

Thanks for taking the questions.

謝謝讓我提問。

Mike Halloran, Baird.

Mike Halloran，Baird。

Good morning, everyone. So certainly acknowledged the answer to the first question Nate asked there on the conservatism in the back half of the year. So just keeping that as a backdrop, maybe just help understand how you're talking about margin cadencing, price cost, et cetera. Guidance in the back half of the year implies lower margins front half, but it feels like if this trajectory continues, there's room there.

各位早安。所以我確實理解你們對Nate第一個問題的回答，也就是對今年下半年採取較保守的看法。以此作為背景，能否協助我們理解你們如何談利潤率的節奏安排、售價與成本（price-cost）等？你們對下半年的指引暗示利潤率會低於上半年，但感覺如果這個趨勢延續，似乎仍有上行空間。

But maybe just talk to how you're thinking about price cost, particularly in the context of recent inflation and then what you're doing on the pricing side?

不過能否談談你們如何看待售價與成本，特別是在近期通膨的背景下，以及你們在定價方面正在做什麼？

Yeah. So we've been -- as you know, we always stay in front of the price cost. And we believe with all the movements in tariffs and everything else, we're still ahead of that. Regarding, let's call it, the cost of inflation as an impact of the war, our international units have put in additional price increases because they're more impacted than we are in the US. And right now, we're evaluating in the US, we're watching very closely how long this war will continue and fuel costs, et cetera, going up. And we're prepared to put an additional price increase if that -- if required.

是的。所以我們一直——如你所知，我們一向會讓售價走在成本之前。我們相信即便關稅等各項變動，我們仍然領先於成本。至於我們稱之為戰爭帶來的通膨成本影響，我們的國際事業單位已經進一步調漲價格，因為他們受到的影響比我們在美國更大。而目前在美國，我們正在評估並密切觀察這場戰爭會持續多久，以及燃料成本等上升情況。如果有需要，我們也準備再進一步調漲價格。

Now regarding your discussion regarding margins, certainly, with the second half volume assumptions, which is flattish in the second half, if there's opportunities there, that we certainly should have opportunities from a margin point of view if we increase our outlook in the second half. Again, it all depends on the war and the longer-term impacts of it. As we said earlier on the call, about 2% of overall Watts sales is in the Middle East. We have addressed that in the second quarter, about an $8 million headwind in Q2. We're just watching to see the bigger impact in the second half if this war continues.

至於你提到的利潤率討論，當然，以我們對下半年出貨量的假設（下半年大致持平）來看，如果有上行機會，那麼若我們上調下半年展望，從利潤率角度也應該會有機會。同樣地，一切取決於戰爭及其長期影響。如同我們先前在電話會議中提到，Watts整體銷售約有2%在中東。我們已在第二季納入這點，Q2約有800萬美元的不利因素。我們正在觀察若戰爭持續，下半年是否會有更大的影響。

And then maybe just an update on the 80/20 side of things, both in terms of the progress with the initiatives, expectations for drag on the sales side and how that plays out for the year and then where you're starting to see the benefit so far?

另外，能否更新一下80/20方面的進展，包括推動措施的進度、對銷售端的拖累預期以及今年的呈現方式，還有目前你們開始看到哪些效益？

Yeah. From an 80/20 perspective, we'll expect to see that ramp up in the back half of the year. So that's another piece of our decline in the second half. I think we had about $15 million of that total in the first half, and you'll see that significantly increase in the back half.

好的。從80/20的角度來看，我們預期會在今年下半年開始加速。所以這也是我們下半年下滑的另一個因素。我想上半年合計大約是1,500萬美元，而你會看到下半年顯著增加。

Things are going well. I think we've started, in terms of price increases, that's always the first piece of it, getting a good response around that. But we do expect that to ramp up in the second half and then clearly wrap into the front half of 2027.

進展很順利。我認為我們已經開始了——就調價而言，那通常是第一步——並且獲得了不錯的回應。但我們確實預期下半年會加速，並且明顯延續到2027年上半年。

Thank you. Appreciate it.

謝謝。感謝。

Jeff Hammond, KeyBanc Capital Markets.

Jeff Hammond，KeyBanc Capital Markets。

Hi. Good morning, guys. Can you give us price mix versus volume in North America in the quarter and just how you think that's going to pace through? And then I think you said on price, you're pushing some internationally. What do you need to see on North America to kind of move forward with any incremental pricing, whether it be moving pieces in tariffs or copper inflation or some of this fuel transportation inflation?

嗨。各位早安。你們能否提供本季北美地區的價格/組合（price mix）相對於出貨量（volume）的貢獻，並談談你們認為接下來會如何演變？另外我想你們提到在國際市場正在推動一些調價。那在北美方面，你們需要看到什麼條件才會推進任何額外的調價——不論是關稅變動、銅價通膨，或是燃料與運輸通膨？

Well, you hit all the categories we're looking at, Jeff. I mean we're watching that very closely. Certainly, our international units have impacted more. They're seeing higher charges. So we immediately went out with that. Likely, the impact of that won't be seen probably until the third quarter by the time that all the way goes through.

Jeff，你提到的類別正是我們在看的。我們確實非常密切地在觀察。當然，我們的國際事業單位受到的影響更大。他們面臨更高的費用。所以我們立刻就採取行動調價。這個影響可能要到第三季才會反映出來，因為需要時間完全傳導。

But overall, price cost, approximately just a little shy of 8% of price was in the first quarter, which was strong overall to cover our costs in that, during the quarter and stuff. So we're on top of this. As you know, we watch it. We stay in front of it. And certainly, we're preparing if need be over the next few weeks to be ready to put in additional price increases if this continues.

但整體而言，售價與成本方面，第一季價格因素約略接近8%但稍低一些，整體表現強勁，足以在該季涵蓋我們的成本等。所以我們掌握得很好。如你所知，我們會持續監控。我們會讓售價走在成本之前。而且如果接下來幾週情勢持續，我們也在準備，必要時可再進一步調漲價格。

And Jeff, on your question of sequentials, we'll see that price realization come down sequentially across the year as we start to lap over the 2025 price increases.

另外Jeff，關於你問到的逐季變化（sequential），隨著我們開始與2025年的調價形成比較基期，全年價格實現（price realization）會逐季下降。

Okay. Great. And then just back on kind of the uncertainty. If you look at kind of your order book through the quarter and into April, May, like are you seeing any pockets of slowing? Or is this just, hey, we're going to assume this thing continues and it's going to start to get more disruptive?

好的。了解。再回到不確定性這點。如果看你們本季以及進入4月、5月的訂單簿，你們有看到任何放緩的區塊嗎？還是這只是說，你們假設這件事會持續，並且會開始變得更具干擾性？

Right now, we're not seeing it. At this point in time, we've seen some drain business that's been lumpy that was waiting for some BABA funding, not material. I mean we're off some very difficult compares on an order rate in Q2 of last year because of the pull-in with the price increases.

目前我們還沒有看到。就目前而言，我們看到有些排水（drain）業務較為波動，因為在等待一些BABA資金到位，但並不重大。我的意思是，因為去年第二季在調價帶動提前拉貨（pull-in），所以我們今年第二季的訂單率比較基期非常艱難。

But overall, the order book is in line with our Q2 forecast at this point in time, with certainly data centers offsetting a lot of the softness, in particular, in the resi market.

但整體而言，截至目前，訂單簿與我們對第二季的預測一致；其中資料中心確實抵消了相當多的疲弱，尤其是住宅（resi）市場的疲弱。

Okay. And then just last one. This inventory investment, can you kind of quantify what it was and kind of how you think working capital use is going to look like for the year? It doesn't seem like you're really changing your free cash flow guidance, but it seems like a change in tone a little bit on inventory.

好的。然後最後一個問題。這項存貨投資，你能否大致量化一下金額，以及你認為今年營運資金的使用情況會是什麼樣子？看起來你並沒有真正調整自由現金流指引，但在存貨方面的語氣似乎有些變化。

Yes. It's really around the strategic investment from the data center point of view, right? Our customers are asking for quicker lead times and adjustments, and we want to make sure the inventory is on hand to support that. But overall, net-net, by the end of the year, we believe it worked its way through.

是的。這主要是從資料中心角度的策略性投資，對吧？我們的客戶要求更快的交期與調整，我們希望確保存貨在手以支援這些需求。但整體來看，淨額而言，到年底我們相信這些會逐步消化完畢。

Okay, thank you.

好的，謝謝。

Andrew Krill, Deutsche Bank.

Andrew Krill，德意志銀行。

Hi, thanks. Good morning, everyone. I wanted to see if there was any meaningful impact from weather this quarter. I think one of your main public peers called this out as a point benefit for the first quarter, and I think that continues into 2Q. Just historically, I think losses even over-indexed on this versus then. So anything you can provide there?

嗨，謝謝。各位早安。我想了解本季天氣是否帶來任何顯著影響。我記得你們的一家主要同業（上市同業）提到這是第一季的一個正面因素，我想這也延續到第二季。從歷史來看，我認為損失甚至在這方面的比重更高。所以你們能提供任何相關資訊嗎？

Yes. It was not a huge impact, a little under 1% in the first quarter. We're not expecting it to be meaningful in the second quarter, but the freeze that happened in the first quarter created some incremental demand, but we don't expect that to carry over into the second quarter.

是的。影響不大，第一季略低於1%。我們預期第二季不會有顯著影響，但第一季發生的寒凍確實帶來一些額外需求，不過我們不預期會延續到第二季。

Okay. Makes sense. And then following back up on the 2Q margin guide, again, it implies just a little bit of sequential expansion, and you went through some of the year-over-year headwinds. But -- any reason we're not seeing a bigger sequential expansion? I think you said $8 million of Middle East costs. Was that a cost number or sales there? Any help why that's not a bigger jump into 2Q?

好的。合理。接著回到第二季毛利率指引，它暗示僅有些微的季增擴張，你也提到了一些年對年逆風。但——為什麼我們沒有看到更大的季增擴張？我想你提到中東有800萬美元的成本。那是成本數字還是那邊的銷售額？能否協助說明為何第二季沒有更大的跳升？

Yeah. Sequentially, first quarter to second quarter on the margin side, we're going to have that decline in price. So that's going to be a little bit of a margin headwind. And then if you remember, we had a pull forward last year in Q4. So that's a margin headwind for us as well. And the Middle East conflict, that will be about $5 million to $6 million on the margin side. So that's also going to be a headwind. It's a challenging compare as well.

是的。就毛利率而言，從第一季到第二季，價格會下滑。因此這會帶來一些毛利率逆風。另外如果你還記得，去年第四季我們有提前拉貨。這對我們來說也是毛利率逆風。而中東衝突在毛利率端大約會影響500萬到600萬美元。所以這也會是逆風。同比基期也很具挑戰。

Yeah. The $8 million I referred to was the $8 million of sales we're negatively impacting in the Middle East. And certainly, we're keeping our team fully aligned inside the Middle East. So it's -- we'll have some net negative absorption costs as a result of this. We believe it's timing, and we're going to ride it out with the team because we've got a great team and a growing opportunity in the Middle East.

是的。我提到的800萬美元是指我們在中東受到負面影響的800萬美元銷售額。而且我們確實讓團隊在中東內部保持完全一致的步調。因此——我們會因此產生一些淨負面的吸收成本。我們相信這是時間點問題，我們會和團隊一起撐過去，因為我們有一支很棒的團隊，而且中東有成長中的機會。

Okay. Great. And just one last quick one. You said you said $5 million to $6 million cost, $8 million of sales. Was there anything meaningful in the first quarter on both of those metrics?

好的。很好。最後一個快問。你提到500萬到600萬美元的成本、800萬美元的銷售額。第一季在這兩個指標上有任何顯著影響嗎？

Not on the cost side. On the sales side, a small number, a few million dollars of sales at that point because most of the conflict didn't really happen until March. So we were able to get most of our shipments out that we were expecting.

成本端沒有。銷售端有一個小數字，當時大概是幾百萬美元的銷售額，因為大部分衝突其實直到3月才真正發生。所以我們仍能把原本預期的大部分出貨送出去。

Great. Thank you.

很好。謝謝。

James Ko, Jefferies.

James Ko，Jefferies。

Good morning. Thanks for taking questions here. I wanted to touch on the guidance here a little bit again. So are you assuming the Middle East conflict continues for the remainder of the year, and it potentially impact other regions like Europe? Or like are you assuming that it ends by like first half? Because most of the companies, I think, are guiding like that Middle East should be over by first half, but it sounds like it's going to be more elongated for you guys. So just wanted to get like clarification here.

早安。謝謝讓我提問。我想再談一下這裡的指引。所以你們是否假設中東衝突會持續到今年剩餘時間，並可能影響像歐洲等其他地區？還是你們假設它會在上半年左右結束？因為我認為多數公司給的指引是中東應該會在上半年結束，但聽起來你們這邊可能會拖得更久。所以想請你們釐清一下。

Yeah. So we really are not assuming a long impact in Q2 right now. We've not made a full assumption for the rest of this year at this point in time, given we don't know the duration, et cetera. As I said earlier, certainly, if this conflict gets over and the strait opens up and things get moving, I think there's opportunities in the second half at this point in time. But we didn't want to -- there's too many geopolitical uncertainties at this point in time. So raising at this time just didn't make sense. But we'll look at it in the next three months because I think we'll have greater clarity at that point in time.

是的。所以我們目前並沒有假設第二季會有長期影響。鑑於我們不知道持續時間等因素，截至目前我們也尚未對今年剩餘時間做出完整假設。如我先前所說，當然，如果衝突結束、海峽重新開放、物流恢復運作，我認為下半年會有一些機會。但我們不想——目前地緣政治不確定性太多。所以此時上調指引並不合理。不過我們會在接下來三個月再評估，因為到那時我們應該會更清楚。

Great. Thanks for the color. And I guess I wanted to touch on the Europe margin here. It was down a bit in the first quarter and -- but the last quarter, we had like nearly 500 basis point improvement. So can you kind of parse out kind of what changed sequentially, why aren't we seeing a strong margin expansion like we did like the last quarter?

很好。謝謝補充說明。另外我想談一下歐洲的毛利率。第一季有些下滑，而——但上一季我們有接近500個基點的改善。你能否拆解一下，序列上到底改變了什麼？為什麼我們沒有看到像上一季那樣強勁的毛利率擴張？

Are you looking at Q1 to Q2, James?

James，你是在看第一季到第二季嗎？

No, I'm comparing Q1, what is the margin performance versus last quarter, 4Q on a year-over-year basis.

不是，我是在比較第一季的毛利率表現相對於上一季，也就是第四季，在年對年的基礎上。

Yeah. There's typically a seasonality in Europe in Q4. It tends to be our higher margin quarter, in fact. So really some volume leverage there. Volume is down in the quarter. So that's a piece of it. 80/20, piece of it. And so those are all sort of contributing factors to that margin decline.

是的。歐洲在第四季通常有季節性因素。事實上，那往往是我們毛利率較高的一季。所以那裡確實有一些量的槓桿。本季出貨量下滑。所以這是其中一部分，約占80/20的一部分。因此這些都是造成毛利率下滑的因素。

There was also a small mix issue in the first quarter also. So again, nothing to really read into that. The team is doing a good job. We're relatively stabilized in Europe at this point in time. So two decent quarters in a row where it's more flat. We're not seeing the decrease. And it just depends on how long this war continues and the knock-on effects inside of Europe at this point in time.

第一季也有一個小的產品組合問題。所以再說一次，這沒有什麼需要過度解讀的。團隊做得很好。就目前而言，我們在歐洲相對已經穩定下來。因此連續兩個季度表現都還不錯，基本上更為持平。我們沒有看到下滑。而這就取決於這場戰爭還會持續多久，以及此時此刻在歐洲內部所產生的連鎖效應。

Got it. Thanks for taking questions.

了解。謝謝讓我提問。

Jeff Reive, RBC Capital Markets.

Jeff Reive，RBC Capital Markets。

Good morning. Thanks for all the details thus far. Last quarter, you characterized North American and European residential construction markets as remaining soft in 2026. As you sit here today, are you seeing any meaningful change in demand trends or customer behavior relative to those expectations?

早安。謝謝你們到目前為止提供的所有細節。上個季度，你們將北美與歐洲的住宅建築市場描述為在 2026 年仍將疲弱。以你們今天的觀察，相較於那些預期，你們是否看到需求趨勢或客戶行為有任何具意義的變化？

No, I would just say there's probably -- it's a little softer than we probably anticipated only because of the uncertainty in the fuel costs. I think just people are holding back on that, and you can see it in the starts, et cetera, on the resi side. So I would say resi is a little bit softer, but all the other markets are kind of in line with what we expected.

沒有。我只會說，可能——因為燃料成本的不確定性，情況比我們原先預期的還要再疲弱一些。我認為大家因此有所保留，你也可以從住宅端的開工等數據看得出來。所以我會說住宅市場稍微更疲弱一些，但其他所有市場大致都符合我們的預期。

Got it. And maybe within that resi, is it single-family, multifamily, repair/remodel? What's tracking worse?

了解。那也許在住宅市場內，是獨棟、多戶、維修/翻新？哪一塊走勢最差？

I think it's all of the above. I mean it's -- in general, I would say repair and replacement is holding up, in resi. Big remodeling is probably a little softer because people are deferring that. But the new construction markets are still soft, and we're carefully watching that, but we are more than offsetting that with our data center growth.

我想以上皆是。我的意思是——整體而言，我會說在住宅端，維修與更換仍然撐得住。大型翻修可能稍微更疲弱，因為大家在延後這類支出。但新建市場仍然疲弱，我們也在密切觀察；不過我們的資料中心成長已經足以大幅抵消這部分影響。

Got it. Thank you.

了解。謝謝。

Joseph Giordano, TD Cowen.

Joseph Giordano，TD Cowen。

Hi, good morning. This is Chris on for Joe. You had mentioned institutional alongside data center as showing growth. I'm just wondering if you could elaborate on which particular areas within that market that you're seeing? And if you could also discuss what you're seeing in terms of the Nexa attach rate broadly in both data center and institutional, if it's applicable.

嗨，早安。我是 Chris，代 Joe 提問。你提到機構市場與資料中心一樣呈現成長。我想請你更詳細說明，在該市場中你們看到成長的是哪些特定領域？另外也請談談你們在資料中心與機構市場中，Nexa 的搭載率（attach rate）整體表現如何（若適用）。

Yeah. So schools and hospitals are primarily inside of the institutional market that've been holding up on that as well as data centers are really strong at this point in time. Your second question was that on Nexa, did you say? You broke up a little bit.

好的。所以在機構市場裡，主要是學校與醫院表現仍然穩健；同時資料中心在目前這個時間點非常強勁。你的第二個問題是關於 Nexa，對嗎？你剛剛訊號有點斷斷續續。

Yes. If you could just elaborate on the -- what you're seeing in terms of Nexa uptake. You touched on it briefly. Just --

是的。如果你能再多談談——你們看到 Nexa 採用情況如何。你剛剛有簡單提到。只是--

Yeah. So Nexa continues to be a favorable story for us. We continue to grow that slow but surely. Team is making great progress. And I want to remind everybody, Nexa is going to be being put on all of our products, right? So all of our main products are going to be Nexa-enabled.

好的。所以 Nexa 對我們來說仍然是一個正向的故事。我們持續穩健、循序漸進地成長。團隊正在取得很大的進展。我也想提醒大家，Nexa 會被安裝在我們所有產品上，對吧？所以我們所有的主要產品都會具備 Nexa 功能（Nexa-enabled）。

So it's also something to protect our core business and allows people to hook that up on a proactive basis when they're ready to do so. So again, Nexa is also a play to protect our core business and help that to grow and command higher pricing based on the value it's doing to our customers.

因此，這同時也是用來保護我們核心業務的措施，並讓客戶在準備好時，能以更主動的方式把它連接起來。所以再說一次，Nexa 也是一個用來保護核心業務的布局，並協助其成長，且基於它為客戶帶來的價值，讓我們能夠取得更高的定價。

Great. And have you seen any evolution or change to the M&A environment incrementally over the last 90 days? Any change in terms of the attractiveness of the targets or what's taking place in M&A?

很好。那在過去 90 天裡，你們是否看到併購（M&A）環境有任何逐步的演變或變化？在標的吸引力或併購活動方面，有沒有任何變化？

Yeah. So M&A, the pipeline, there's still a strong pipeline out there. As you know, we're disciplined, and we always say we have to make -- it has to make strategic and financial sense based on our criteria, and we'll be watching that. As you know, you can never predict timing of acquisitions, but we'll continue to cultivate and we'll keep you posted as we make progress there.

有的。所以就併購而言，案源管線仍然很強。如你所知，我們很有紀律，我們也一直說必須——必須在我們的標準下同時符合策略與財務上的合理性，我們會持續觀察。如你所知，你永遠無法預測收購的時點，但我們會持續耕耘，也會在那方面有進展時向各位更新。

Thank you very much.

非常感謝。

(Operator Instructions) And that concludes our Q&A session. I will now turn the conference back over to Bob Pagano for closing remarks.

（接線員指示）問答環節到此結束。我現在把電話會議交回給 Bob Pagano 作結語。

Thank you for joining us today. We appreciate your continued interest in Watts and look forward to speaking with you again during our second quarter earnings call in early August. Have a great day and stay safe.

感謝各位今天加入我們。我們感謝各位持續關注 Watts，並期待在八月初的第二季財報電話會議上再次與各位交流。祝各位有美好的一天，並請注意安全。

And this concludes today's conference call. Thank you for your participation. You may now disconnect.

今天的電話會議到此結束。感謝各位的參與。您現在可以掛線。