A.O. Smith Corporation

Good day and thank you for standing by. Welcome to the A.O. Smith third quarter 2023 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the call over to our first speaker for today, Helen Gerholt. Your line is now open.

Good morning and thank you everyone for your patience while we dealt with our technical difficulties. Welcome to our A.L. Smith third quarter conference call. I'm Helen Gerholt, Vice President, Investor Relations and Financial Planning and Analysis. Joining me today are Kevin Wheeler, Chairman and Chief Executive Officer, and Chuck Lauber, Chief Financial Officer. In order to provide improved transparency into our operating results of our business, we provided non-GAAP measures. Free cash flow is defined as cash from operations, less capital expenditures. Adjusted earnings, adjusted earnings per share, adjusted segment earnings, and adjusted corporate expenses exclude the impact of impairment charges, non-operating non-cash pension income and expenses, as well as legal judgment income and terminated acquisition-related expenses. We also provide total segment earnings. Reconciliations from GAAP measures to non-GAAP measures are provided in the appendix at the end of this presentation and on our website. A friendly reminder that some of our comments and answers during this conference call will be forward-looking statements that are subject to risks that could cause actual results to be materially different. Those risks include matters that we described in this morning's press release, among others. Also, as a courtesy to those in the question queue, please limit yourself to one question and one follow-up per turn. If you have multiple questions, please rejoin the queue. We will be using slides as we move through today's call. You can access them on our website at investor.aosmith.com. I will now turn the call over to Kevin to begin our prepared remarks. Please turn to the next slide.

Thank you, Helen, and good morning, everyone. I'm on slide four, and we'll review a few of our third quarter highlights. I'm very pleased with the execution of our team across all of our businesses to deliver a strong third quarter EPS of 90 cents. The performance of our North America segment was particularly strong. We saw resilient demand for our residential water heaters, as well as year-over-year improvement in our operating margin. China's new products drove year-over-year improvement as newly introduced kitchen appliance products were well received by the market. Innovative new products combined with our strong brand drove growth despite a continued challenging economic backdrop. India entered the year introducing a number of new products in both the water heating and water treatment categories, and has delivered year-to-date sales growth of 17% in local currency. We also acquired WaterTech, a high-quality Arizona-based water treatment company. This acquisition aligns with our strategic growth aspirations to expand water treatment across the U.S. We welcome the WaterTech team to the A.O. Smith family. Please turn to slide five. North America water heater sales increased 13% in the third quarter as a result of continued strength in residential water heater demand. As you may recall, sales in the third quarter of last year were negatively impacted by channel inventory destocking of residential water heaters, primarily in the wholesale channel. Our North America boiler sales declined 18% in the third quarter against a difficult comp in 2022. In the third quarter last year, we worked down our backlog after making significant production and supply chain improvements. We believe channel inventories are approaching normal levels. Demand for our commercial high-efficiency condensing boilers, particularly our Hellcat Crest boilers, remained steady in the quarter. North America water treatment sales increased 5% in the third quarter of 2023, primarily driven by pricing and e-commerce sales. The quarter also benefited from pricing-related margin improvement. In China, third quarter sales increased 9% local currency compared to the third quarter of 2022. primarily due to our newly introduced dishwasher and steam oven products. The quarter also benefited from higher commercial water treatment sales and positive mix. I'm now on slide six. We continue to introduce new innovative products in water filtration. I'm pleased to highlight the launch of our new SmartFlow reverse osmosis filtration system under both our A.O. Smith and Aquasana brands. The product takes up less space and features an easy filter replacement process. Our smart flow technology features a multi-stage filtration process that removes up to 99.9% of non-contaminants, including PFAS, arsenic, microplastics, and lead. It also features our innovative and exclusive side-stream reverse osmosis technology, making this one of the most water-efficient systems in the market. This is one example of our commitment to bringing innovative water heating and water treatment products to the global market. On November 6th, at our investor day, each of our businesses will highlight new products that are driving results in the marketplace. I'll now turn the call over to Chuck, who will provide more details on our third quarter performance.