A.O. Smith Corporation

and thank you for standing by. Welcome to the AO Smith fourth quarter 2023 earnings conference 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, you will need to press star 1 1 on your telephone. You will then hear an automated message advising 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 conference over to your speaker today, Helen Gerholt. Please go ahead.

Thank you, Abigail. Good morning, everyone, and welcome to the A.O. Smith Full Year and Fourth 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 the 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 restructuring and impairment expenses, non-operating non-cash pension income and expenses, as well as legal judgment income and terminated acquisition related expenses. Reconciliations from gap measures to non-gap 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 others 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 our full year results. 2023 was a record-setting sales and earnings year, driven by resilient water heater demand and excellent execution by our team. North America sales increased 4% and adjusted segment margin increased 310 basis points due to higher water heater volumes and improved price-cost relationship. Our rest of the world segment, sales grew 4% in local currency, as our recently introduced kitchen products in China were well-received by the market. In India, our sales grew 15% local currency in 2023 and benefited from sales of new products, which represented 30% of our sales. Free cash flow grew to $598 million, primarily driven by record profit. We returned $490 million of capital to shareholders with our dividend and share repurchases. Please turn to slide five. Our global AOSNet team delivered record sales of $3.9 billion in 2023 and adjusted EPS of $3.81, a 21% increase over 2022. North America water heater sales grew 6% in 2023 due to strong demand for our residential and commercial water heater products. The residential unit industry demand increased approximately 6% compared to 2022. as new construction and proactive replacement demand remain resilient. Commercial industry units increased approximately 15% year over year, as volume of commercial electric water heaters greater than 55 gallons rebounded and aligned closer to pre-2022 levels. We are pleased with our market share strength in both residential and commercial water heaters. Our North America boiler sales decreased 12% against a difficult comp of 28% growth in 2022. We worked down our backlog in 2022 after making significant production and supply chain improvements, which led to elevated channel inventories going into 2023. The resulting channel inventory destocking impacted our residential and small commercial boiler sales. Sales of our Crest commercial boilers with Hellcat technology increased over 50% in 2023. North America water treatment sales grew 2% in 2023 as higher sales in the e-commerce and direct-to-consumer channels were partially offset by lower sales in the wholesale and retail channels. Sales in the prior year benefited from strong shipments as supply chain constraints improved and we worked out our order backlog, which resulted in elevated channel inventories in early 2023. In China, full-year sales increased 4% in local currency. We are pleased with our performance in a continued weak economy. In addition to the successful launch of our kitchen products, we saw double-digit sales growth of our HVAC and commercial water treatment product categories. Our core water heating and water treating products also performed well as replacement approaches 60% of residential water heater sales. And residential water treatment sales particularly consumables, remain resilient. I'll now turn the call over to Chuck, who will provide more details on our full year and fourth quarter performance.