Watts Water Technologies, Inc. (NYSE:WTS) Q4 2022 Earnings Conference Call February 9, 2023 9:00 AM ET
Company Participants
Diane McClintock - SVP, FP&A and IR
Robert Pagano - Chairman & President, CEO
Shashank Patel - CFO
Conference Call Participants
Michael Halloran - Baird
David Tarantino - KeyBanc Capital Markets
Operator
Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Watts Water Technologies, Inc. Fourth Quarter 2022 Earnings Call. [Operator Instructions]
It is now my pleasure to turn today's call over to Diane McClintock, Senior Vice President of Investor Relations.
Diane McClintock
Thank you, and good morning, everyone. Welcome to our fourth quarter and full year 2022 earnings conference call. Joining me today are Bob Pagano, President and CEO; and Shashank Patel, our CFO. During today's call, Bob will provide an overview of 2022 as well as an update on our expectations for the markets in 2023. Shashank will discuss the details of our fourth quarter and full year financial results and provide our outlook for
Q1 and the full year 2023. 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 this 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 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 turn the call over to Bob.
Robert Pagano
Thank you, Diane, and good morning, everyone. Please turn to slide 3 in the earnings presentation, and I'll provide a recap of 2022 and some initial thoughts regarding 2023. I'd like to start by thanking the entire Watts Water team. We've continued to execute and provide outstanding service to our customers despite escalating inflation, supply chain challenges and labor shortages. The team's collective efforts delivered another strong quarter and record full year sales, operating margin, earnings per share and free cash flow. Organically, full year 2022 sales increased by 13%. Adjusted operating margin increased by 210 basis points and adjusted EPS increased by 29%. We delivered record operating margin while still investing in an incremental $23 million for the future, including spending on our smart and connected initiatives. We generated record free cash flow in the fourth quarter to end the year at $201 million, which represents an 80% conversion rate. Our balance sheet remains strong and provides us with the flexibility to continue to invest for the future through our strategic investments in R&D, smart and connected projects, factory automation and M&A.