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Edited Transcript of WTS earnings conference call or presentation 3-May-19 1:00pm GMT

Q1 2019 Watts Water Technologies Inc Earnings Call

NORTH ANDOVER May 7, 2019 (Thomson StreetEvents) -- Edited Transcript of Watts Water Technologies Inc earnings conference call or presentation Friday, May 3, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Robert J. Pagano

Watts Water Technologies, Inc. - CEO, President & Director

* Shashank Patel

Watts Water Technologies, Inc. - CFO

* Timothy M. MacPhee

Watts Water Technologies, Inc. - VP of IR & Treasurer

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Conference Call Participants

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* Bradley James Vanino

KeyBanc Capital Markets Inc., Research Division - Associate

* Nathan Hardie Jones

Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst

* Robert G. Jamieson

Cowen and Company, LLC, Research Division - Research Associate

* Ryan Michael Connors

Boenning and Scattergood, Inc., Research Division - MD & Senior Analyst of Water and Environment

* Walter Scott Liptak

Seaport Global Securities LLC, Research Division - MD & Senior Industrials Analyst

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Presentation

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Operator [1]

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Good morning. My name is Mariyamma, and I will be your conference operator today. At this time, I would like to welcome everyone to the Watts Water Technologies, Inc. Q1 Earnings Conference Call. (Operator Instructions) Thank you.

I would now like to turn the call over to Tim MacPhee, Treasurer and Vice President of Investor Relations. You may begin your conference.

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Timothy M. MacPhee, Watts Water Technologies, Inc. - VP of IR & Treasurer [2]

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Thank you, and good morning, everyone. Welcome to our first quarter earnings conference call. With me today are Bob Pagano, CEO and President; Shashank Patel, our CFO. During today's call, Bob will provide an overview of the quarter and offer his opinion on the current state of the markets. Shashank will provide details on our first quarter performance and revisit our full year outlook.

Following our prepared remarks, we will address questions related to 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 like to remind everyone that during the course of this call, we will 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 and uncertainties, see Watts' 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.

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

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Robert J. Pagano, Watts Water Technologies, Inc. - CEO, President & Director [3]

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Thank you, Tim, and good morning, everyone. Please turn to Slide 3 and let me briefly provide an overview of the first quarter. 2019 began on a solid note with the team delivering record Q1 sales, operating margin and EPS. Organic sales growth was favorable in the Americas and Europe with some softness in APMEA. We expanded adjusted operating margin by 80 basis points and adjusted earnings per share increased by 15% in the quarter. We continue executing on our strategy of delivering profitable top line growth and driving productivity and cost discipline in the organization while continuing to invest for the future.

Regionally, sales growth was largely in line with our internal expectations. The Americas had broad growth in a number of product lines, including connected products, and a favorable pricing dynamic. Europe delivered a solid top line that was driven by the Drains platform and an extra shipping day in the quarter over prior year. APMEA's softness was hindered by a weak China residential heating market and softness in Korea. Shashank will review the quarter results in more details in a few minutes.

The end markets performed in line with our expectations during the quarter. In the Americas, recent macro data like the ABI and Dodge Momentum Index have softened, which may be signaling slower growth later this year. Residential new construction data remains lumpy, and residential repair and replacement indicators see decelerating growth as the year progresses.

Europe macro data continues to signal softness. This together with the continued geopolitical concerns provides a backdrop for sluggish growth as the year progresses just as we had anticipated. APMEA markets are growing at moderate levels, but we are finding that growth spotty by region.

We continue to monitor the U.S. trade and tariff situation. For enacted tariffs, we instituted price increases in the second half of 2018. Recall, this issue mainly affects U.S. purchases as much of our intercompany activity into China is through Europe, which is not affected by the tariff regulations.

Turning to our outlook. We are reaffirming our original full year outlook for top line growth and reaffirming margin expansion in line with the assumptions we provided in February.

With that, let me turn the call over to Shashank to talk more about our first quarter results and our outlook. Shashank?

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Shashank Patel, Watts Water Technologies, Inc. - CFO [4]

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Thanks, Bob. Please turn to Slide 4, which shows the first quarter's comparative results. Sales of $389 million were up 3% on a reported basis. Organically, sales were up 6% with growth in the Americas and Europe. Foreign exchange, primarily driven by a weaker euro, decreased year-over-year sales by roughly $11 million or 3%.

Adjusted operating profit increased roughly 10% to $48 million. Adjusted operating margin of 12.4% was up 80 basis points. Price, volume and productivity more than offset normal cost inflation, tariff increases and incremental investment spend of $3 million. Foreign exchange was a year-over-year headwind of $1.4 million to operating profit.

Adjusted earnings per share of $0.94 increased 15% over the last year. The increase was driven mainly by operational improvements. Favorable below-the-line items mostly offset unfavorable foreign exchange, which is driven primarily by a weaker euro. The impact of the weaker euro was $0.03 a share. The adjusted effective tax rate of 27.5% is 70 basis points lower than the first quarter of 2018 and relates primarily to an increase in foreign tax reserves in the first quarter of last year.

Now turning to cash. As you know, historically, the first quarter is a slower period for cash flow, and that played out as expected. Our free cash outflow for the quarter was $31 million as compared to a $33 million outflow in the first quarter of last year. The cash flow improvement was due to higher operating income generated this year. We expect our cash generation to improve as the year progresses and expect to achieve at least 100% cash conversion for the year.

During the quarter, we repatriated approximately $11 million in cash, which was used to pay down our line of credit. In addition, we purchased approximately 74,000 shares of our common stock at a cost of $5.6 million. In total, we returned approximately $13 million in the first quarter to shareholders in the form of dividends and share repurchases as part of our balanced capital deployment strategy.

Overall, a good start to 2019. We delivered record sales, adjusted operating margin and adjusted earnings per share, and we continue to see organic growth trend positively.

Turning to the regions. On Slide 5, let's review the Americas results for the quarter. Sales were $259 million, up 7% on a reported basis and 8% organically. We saw strong performance from our core plumbing valves, Drains and water quality. Heating and Hot Water solution sales were up double digits driven by both boiler and hot water heating products.

Adjusted operating profit was $43.1 million, up 18% over the first quarter of last year. Adjusted operating margin was 16.6%, 150 basis points increase over the last year driven by price, volume, and productivity. Margin expansion was partially tempered by the impact of tariff costs, inflation, continued growth investments and unfavorable product mix. So a strong start for the Americas with growth in a number of key products and platforms.

Now on to Slide 6. Let's review Europe's results. Sales of $116 million were down 5% on a reported basis and up about 3% organically. Foreign exchange negatively impacted sales by about $10 million or 8%.

From a platform perspective, we saw growth in both Drains and Fluid Solutions. Europe benefited from one more shipping day during the quarter, which will be offset in the second quarter. In addition, Drains benefited from strong project sales into the hospital and industrial end markets as well as stronger marine-based business sold into shipyards.

Within Fluid Solutions, the sales increase was driven by valve products, including backflows and check valves, offset partially by softer electronic sales.

Regionally, we saw solid growth in some of our key regions such as France, Germany, Italy and Scandinavia. France growth was driven by expansion in the wholesale market with increases in valves and drain products. Germany was up due to OEM growth and Drains project timing. Italy grew from an expansion in the sale, including Drains and electronic products. This growth was partially offset by continued softness in the U.K., which was down double digits due to weaker end markets resulting from ongoing uncertainties there.

Adjusted operating profit for the quarter was $14.6 million, a decrease of 2%, which included a foreign exchange headwind of 8% year-over-year. Adjusted operating margin of 12.6% increased 50 basis points as compared to the first quarter of last year. Margin expansion was driven by higher volume, price and productivity, including restructuring savings, and was partially offset by unfavorable product mix, inflation and incremental investments. For Europe, excluding the foreign exchange noise, a decent start to the year, aided by the extra shipping day in the quarter.

Moving to Slide 7. Let's review APMEA's results. Sales were $13.5 million in the quarter, down 6% on a reported basis and down 3% organically. Sales outside of China, which represented over 70% of APMEA's sales in the quarter, decreased organically by 4%. Strength in the Middle East and Australia were more than offset by a slowdown in Korea due to reduction in demand for products sold into the hospitality market. China's organic sales were down 2% as continued demand for commercial valves sold into data center and semiconductor markets was more than offset by continued softness in underfloor heating products.

Adjusted operating profit was $1.3 million in the first quarter, which translates to an adjusted operating margin of 9.7% or 30 basis points better than last year. The drivers of the margin expansion were higher affiliate volume and a positive impact from foreign exchange favorability from affiliate activity partially offset by lower trade sales and incremental investments.

We expected APMEA to start the year slowly, given the China heating market's continued volatility. Our expectation is for a gradual pickup in APMEA's growth as the year continues.

Now just a quick update on our full year outlook. Slide 8 provides the details, and I will highlight a few key points. Our current assumptions are mostly in line with original outlook we provided in February. One change is corporate cost, which for the year have increased to $41 million and now incorporates the additional expense incurred in the first quarter.

We expect operating margin should grow between 50 and 70 basis points, which includes incremental investments to support future growth initiatives. We are currently maintaining our full year effective tax rate at approximately 28%. And as I've just mentioned, we anticipate free cash flow for the year converting at or above 100% of net income.

Before I turn the call back over to Bob, a few items to keep in mind regarding the second quarter. We are expecting consolidated organic growth in the second quarter to be at the higher end of our full year expectations. And sequentially, we expect overall growth should be lower than the first quarter.

A couple of items about organic growth to keep in mind from a regional perspective. First, we expect a tougher comp in the Americas in the second quarter. If you recall, about $4 million or approximately 2 percentage points of pre-buy sales were shipped in the second quarter of 2018 in anticipation of the price increase that went into effect in July 2018.

Second, the one extra day of shipping tailwind we experienced in Europe in the first quarter will reverse and be a headwind in the second quarter. We expect incremental investments of $4 million in the second quarter, approximately $3 million in the Americas and approximately $0.5 million each in Europe and APMEA. The investments will be partially offset by approximately $1 million in incremental restructuring savings all in Europe.

Quarter-over-quarter consolidated operating margin in the second quarter should grow in line with our full year growth expectations. Foreign exchange would be a headwind when compared to the second quarter last year given the current euro/dollar exchange rate. As a reminder, the average Q2 2018 euro exchange rate was $1.19, and the current euro exchange rate is around $1.12.

And finally, in the appendix, we've provided a slide on the impact to Watts of the new lease accounting pronouncement, which took effect on January 1, 2019. For us, it's a balance sheet impact only, no effect on our P&L or earnings per share going forward.

And with that, let me turn the call over to Bob before we begin Q&A. Bob?

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Robert J. Pagano, Watts Water Technologies, Inc. - CEO, President & Director [5]

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Thanks, Shashank. I'd like to summarize before we address your questions. The year started out on a positive note. We delivered Q1 record results in sales, adjusted operating margin and adjusted EPS. And we continue to invest for the future. Overall, we expect to make sustained progress and look forward to another solid year of profitable growth.

So with that, operator, please open the lines for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from Nathan Jones with Stifel.

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Nathan Hardie Jones, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [2]

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Bob, some comments on the call about forward-looking indicators suggesting maybe slower growth in the back half of the year. Are you starting to see any of this slowdown in your order book? Or is this just prudent caution given some of the macro data out there and some of the uncertainties in the overall economy?

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Robert J. Pagano, Watts Water Technologies, Inc. - CEO, President & Director [3]

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Yes, I think it's just prudent caution right now. We look at all the same indicators that I'm sure everybody did. I referenced some earlier. But again, all of them are portraying -- portending slower growth in the future. So we watch those very closely and are monitoring accordingly.

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Nathan Hardie Jones, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [4]

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Okay. A follow-up question then on America's margins, really strong 150 basis points year-over-year expansion there. I know you've been doing a lot of work on the operations over the last few years. Can you talk about maybe how much of that improvement is coming out of that operational improvement, maybe where you are on the price-cost equation there? And are you seeing any pressure from customers to give back a bit on the pricing side as input costs have moderated?

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Robert J. Pagano, Watts Water Technologies, Inc. - CEO, President & Director [5]

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Yes. So when you look at that, I would say half the growth in related bottom line was related to price, I mean. So that was part of the story. Although we have been in front of the inflationary costs, so we have seen inflation increase, but our price-to-cost ratio I think is positive.

As we look -- as you remember, we put in price increases in the second half of last year, and we knew some of the first half comps this year would be positive as it related to price. So as we see some of the tariffs and what's happening with inflation, we're hearing some noise on pricing, but we're trying to be disciplined. And we'll go as long as we can and drive pricing as long as we can.

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Nathan Hardie Jones, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [6]

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And I'll just slip one more in on the balance sheet. Despite the seasonal use of cash, you still only got 0.8x net leverage. How actionable is the M&A pipeline? If you can't find appropriate deals, what would be the alternative for capital? Would you just let it build on the balance sheet until you can find an appropriate avenue for it?

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Robert J. Pagano, Watts Water Technologies, Inc. - CEO, President & Director [7]

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Well, we believe in a balanced and disciplined capital allocation. So our first priority is to invest in the business and to do disciplined M&A work where it makes sense and then return to shareholders. So we're in the middle of our strategic planning process. Our pipeline is very active. And it's a good problem to have, but we'll continue to monitor it. And we'll do the right thing for our shareholders.

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Operator [8]

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Your next question comes from Walter Liptak from Seaport Global.

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Walter Scott Liptak, Seaport Global Securities LLC, Research Division - MD & Senior Industrials Analyst [9]

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Congratulations on a strong first quarter. I want to just stick with the first question about organic growth and some of the macro data points slowing down. And I wonder if you could just maybe dig into a couple of ideas, like residential versus commercial? Are you seeing the same kind of potential slowing on the commercial side?

And then weather seems to have been an issue for some companies. I wonder if weather has impacted you guys or your channel partners in the first quarter.

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Robert J. Pagano, Watts Water Technologies, Inc. - CEO, President & Director [10]

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Yes. So let's talk about the markets in general. If you recall, 60% of our business is commercial, 40% is residential. And of that residential, as you know, 2/3 of that is really in multi housing, which tends to act like a commercial building. When we look at the housing starts and some of that for residential, that doesn't concern us as much as commercial because we're more into the commercial side of that business.

So when we look at the commercial indicators, as I said earlier, the good news is, I believe, they're still looking for growth, just not as fast as growth as what we saw last year. So I think that's positive. And just always remember, we had many discussions with all of you on this, 65% of our business is repair and replace and that tends to follow GDP. So that's a nice solid backdrop on our overall business.

So when we look at that, I think that's how we're looking at the markets. They look okay. Our discussions with our channel partners are positive. So overall, we're just being cautiously optimistic. And exactly what we originally started the year with in our assumptions I think are coming out. So we're aligned, and our teams are driving for whatever share we can get in the marketplace and drive them for growth.

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Shashank Patel, Watts Water Technologies, Inc. - CFO [11]

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Just one thing to add on the second half slower growth that we have talked about beyond the macro indicators. In addition to that, we've also got lapping of price. So as you all know, we had price increases in Q3 and Q4 last year, and we lapped those in the second half. So the comparison becomes tougher in the second half versus the first half. So we factored -- and we factored that into our expectations when we did the plan for the year.

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Walter Scott Liptak, Seaport Global Securities LLC, Research Division - MD & Senior Industrials Analyst [12]

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Okay. Great. Kind of along the same lines with price. With the price increases having gone up, how are inventories in the channel with the pre-buys on some of the products that are going to impact second quarter? Where do you think the channel inventory is?

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Robert J. Pagano, Watts Water Technologies, Inc. - CEO, President & Director [13]

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I didn't answer your question on weather earlier. I apologize for that. The weather, we didn't believe it had a material impact to us in the quarter.

From a channel point of view, I think the inventories are okay. And if we look at last year, though, in the second quarter, we had pre-buys related to our price increase from the prior year of about $4 million, we estimated. So that'll be a headwind to us in the second quarter, as Shashank previously talked about. But channels look okay.

So weather, it's very difficult -- that's very difficult to figure out for us at this point in time. So I'm not going to call any weather issues in the first quarter.

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Walter Scott Liptak, Seaport Global Securities LLC, Research Division - MD & Senior Industrials Analyst [14]

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Yes. When you didn't answer that, I thought that was probably your way of saying no, but thanks for pointing that out. But that wasn't -- okay. I'll get back in queue.

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Operator [15]

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Your next question comes from Jeff Hammond with KeyBanc Capital Markets.

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Bradley James Vanino, KeyBanc Capital Markets Inc., Research Division - Associate [16]

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This is Brad on for Jeff. Just digging into that 8% core growth in the Americas, and you've kind of touched on different moving pieces here. But I think you talked about 150 to 200 basis points pull-forward headwind in 1Q, so maybe that's even closer to 10% on a normalized basis. So I guess, just wondering if you can kind of split out how much of that was market-driven versus share gains. I think you said price is maybe about half, but just clarifying just some of the market dynamics there.

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Robert J. Pagano, Watts Water Technologies, Inc. - CEO, President & Director [17]

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Yes. So in the 8% growth in the Americas, about half of it was price, half is growth. We believe about 1% was related to our new product development, primarily driven by our connected products inside of that. So I think that's really the dynamics of that.

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Shashank Patel, Watts Water Technologies, Inc. - CFO [18]

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And your first statement on the 1.5% to 2% of headwind, that was for the second quarter, not the first quarter in the Americas.

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Bradley James Vanino, KeyBanc Capital Markets Inc., Research Division - Associate [19]

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Oh, okay. I thought you talked about last quarter, there was maybe some benefit in the fourth quarter of '18.

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Robert J. Pagano, Watts Water Technologies, Inc. - CEO, President & Director [20]

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A small amount.

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Shashank Patel, Watts Water Technologies, Inc. - CFO [21]

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Yes, it wasn't -- not significant. Yes.

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Bradley James Vanino, KeyBanc Capital Markets Inc., Research Division - Associate [22]

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All right. And then just in Europe, I understand the directional commentary but I guess, going into the year, you talked about some headwinds in Italy, France and Germany. So I guess a little bit surprised to see moderate growth in all those regions, maybe a little bit of project timing in Germany. But can you kind of level set how that market performed relative to your expectations on kind of a country-by-country basis in the first quarter?

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Robert J. Pagano, Watts Water Technologies, Inc. - CEO, President & Director [23]

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Well, yes. So each one of them, we had an extra day that we talked about. That's about 1.5% of the growth -- overall growth in the quarter. And that's, in essence, in every one of those countries. So it rippled all the way across to each one of those.

So when we look inside of it, our Drains business is performing very well in keys like the Nordics. We had some strong German OEM business in the quarter, which is our lower-margin type business. That was positive. In electronics, it was slightly down because we're seeing some product shifts on different platforms, and that's just a timing issue.

So generally, it performed basically in line with what we expected, and there was no surprises for us on that. We're going to see the negative impact of that day coming back inside of negatively hitting us in Q2.

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Shashank Patel, Watts Water Technologies, Inc. - CFO [24]

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And as we model the year, our full year outlook for Europe was 0 to 2% growth with the easier first half comparison versus second half comparison because, second half last year, we actually grew Europe and, clearly, Q1-Q2 dynamics with that extra -- the Easter timing. So it's playing out like we thought.

Now clearly, Europe 3 months ago versus Europe today, things have moved around, but it's small. It's 0.2%, 0.3% by each of those countries you mentioned. So it's not significant enough.

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Operator [25]

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Your next question comes from Ryan Connors with Boenning and Scatt.

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Ryan Michael Connors, Boenning and Scattergood, Inc., Research Division - MD & Senior Analyst of Water and Environment [26]

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So just you mentioned the somewhat softer outlook for really across the board in terms of the end markets and maybe some particular concern on nonresi commercial. Can you parse that for us in terms of how that impacts the mix outlook in terms of would that -- maybe that would have a negative effect on mix given commercial's a little softer. Can you just kind of give us your view there?

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Robert J. Pagano, Watts Water Technologies, Inc. - CEO, President & Director [27]

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Yes. Again, really no change from where we gave guidance for the year. I think we -- small leading indicators were telling us it would slow in the second half. And I think it's playing out as we expected. What's interesting to us is -- if we look at what happened in the fourth quarter and early in the first quarter, I mean, this business, in general, is based on sentiment in what's happening in the market. So people decide to invest in new construction based on how the economy is going, et cetera. So I think there could be a lumpiness inside of the economics related to, let's call that, 1 to 3 months negative period we had that kind of made people rethink.

If you look at where GDP is going, it's slowing, but it popped up a little bit here in the first quarter. But in general, we feel good about the year in total, and it's not changed. All the indicators were coming down before, but it's -- they're still growing. So from a positive point of view, our teams feel good about what's happening in the channel. And the discussion is if there's a pickup in the second half and some of the indicators start indicating that, they may be a little bit more bullish. But we're a short lead time business. We have visibility really into the next 3 months. And that's really what we're gauging. So the longer term is just the same indicators that we all look at.

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Shashank Patel, Watts Water Technologies, Inc. - CFO [28]

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And I think, Ryan, on the mix side between commercial and residential in the Americas, from a margin standpoint, it's very similar. Where we get difference is obviously in the heating/hot water solutions business, the margin profile is different.

But where we get a mix shift is in APMEA when we're selling in different regions within the APMEA market. And that's just market dynamics there.

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Ryan Michael Connors, Boenning and Scattergood, Inc., Research Division - MD & Senior Analyst of Water and Environment [29]

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Okay. Now my other one was you touched on channel inventories earlier, and I just wanted to revisit that briefly. You talk about given some of the data and the -- also the fact that maybe raw materials moderating a bit, is there any -- what do you think is the likelihood that you do see some kind of -- a bit of a destocking in the next couple of quarters? Is that -- or is that not the right way to read that?

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Robert J. Pagano, Watts Water Technologies, Inc. - CEO, President & Director [30]

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When we look at it, we're close to our channel partners. We don't have exact numbers on every one of their channels. But our discussions with our channel partners are they're cautiously optimistic. We are not seeing any major trends in their inventory and their buying patterns. So right now, steady as they go, right now.

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Ryan Michael Connors, Boenning and Scattergood, Inc., Research Division - MD & Senior Analyst of Water and Environment [31]

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Got it. And then my last one just, I guess for you, Shashank. You're buying back some stocks. But if I'm reading it right in the proxy, you actually have a pretty sizable -- request for a pretty sizable increase in share authorization. Any color on what's driving that?

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Shashank Patel, Watts Water Technologies, Inc. - CFO [32]

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I mean, it's -- I guess it's just proactive move on our part. I mean, as Bob said, we actively pursue the M&A pipeline. And you never know the timing of that, but this is the proactive move to get ready for anything that could happen over the next several years.

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Operator [33]

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Your next question comes from Joe Giordano with Cowen and Company.

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Robert G. Jamieson, Cowen and Company, LLC, Research Division - Research Associate [34]

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This is Rob in for Joe this morning. Just had a quick question on your incremental investment spending this year. Just a little bit more detail on that and how much of that come through in the first quarter.

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Shashank Patel, Watts Water Technologies, Inc. - CFO [35]

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Yes. So as we had talked about 3 months ago, our incremental investment spend was approximately $12 million for the year. In Q1, we spent about $3 million, and our forecast for the second quarter is about $4 million. A good portion of that is basically on new product development, including our smart and connected strategies. So we continue to invest in that.

And then there's a piece of that which is obviously driving our productivity initiatives. And that's within the factory and outside the factory walls. And a small portion is capability building. But right now, we're on track for the $12 million that we talked about.

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Robert G. Jamieson, Cowen and Company, LLC, Research Division - Research Associate [36]

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Okay. That's great. And then is there anything that you can provide in terms of detail on the restructuring actions in Europe and the related savings to that?

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Shashank Patel, Watts Water Technologies, Inc. - CFO [37]

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Yes. So we had -- we took an action last July, and we had approximately about $5 million of costs with an incremental savings of about $3 million, $3.5 million in 2019. As we threw that -- as we looked at that and finalized the numbers, we had an incremental $1 million. So instead of $5 million, it's a $6 million cost. The savings is still in that same range, and the incremental savings in 2019 is in that same range. And in the second quarter, it will contribute about $1 million of incremental quarter-over-quarter savings versus Q2 of 2018.

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Operator [38]

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There are no further questions at this time. I will now turn the call back over to Robert Pagano for closing remarks.

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Robert J. Pagano, Watts Water Technologies, Inc. - CEO, President & Director [39]

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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 at our second quarter earnings call in early August. Thank you very much.

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Operator [40]

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This concludes today's conference call. You may now disconnect.