A.O. Smith Corporation

Good day and thank you for standing by. Welcome to the A.O. Smith first quarter 2024 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 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 today's conference is being recorded. I would like to hand the conference over to your speaker today, Helen Gerholt. Please go ahead.

Good morning and welcome to the A.L. Smith First 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 impairment expenses. 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 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.

Thank you, Helen, and good morning, everyone. I'd like to start off by extending a warm welcome to Steve Schaefer, who has recently joined A.O. Smith as our Chief Operating Officer. Steve is an accomplished business leader with deep global experience in manufacturing and leading innovative businesses. His strategic acumen and extensive global leadership experience will prove invaluable as we continue to focus on innovation and driving operational performance to enhance shareholder value. Let's now turn to the quarter on slide four. Our global A.O. Smith team delivered sales of $979 million in 2024 and EPS of $1, a 6% increase over 2023 adjusted EPS. North America sales increased 2% and segment margins increased 80 basis points due to a positive mix, higher commercial volumes, and lower material costs principally steel. A restable segment, sales grew 4%. Recently introduced products in China contributed to the majority of the growth. In India, our sales grew 16% local currency in the first quarter of 2024. Please turn to slide five. North America water heater sales grew 2% in the first quarter due to higher commercial volumes and a positive mix towards commercial gas and high-efficiency products, including heat pumps. Volumes were favorably influenced by our price increase, effective March 1st. However, year-over-year comps were somewhat muted by a strong first quarter of 2023. Our North America weather sales were flat compared to the first quarter of 2023. As a reminder, we do not begin to see the effects of the 2023 channel inventory to stocking until the second quarter of last year. We were pleased to see sales of our high-efficiency residential boilers return to more normalized levels in the first quarter of 2024. Sales of our Crest commercial boilers with Hellcat technology increased over 30% in the quarter. North America water treatment sales grew 4% in 2024, driven by acquisition-related sales growth and pricing. Organic growth in the e-commerce and especially wholesale channels were offset by softness in the direct-to-consumer and retail channels. In China, first quarter third-party sales increased 6% in local currency. Our recently launched kitchen products continue to be well-received in the market and provide bundling opportunities that drive overall sales growth. Sales on HVAC systems, which generally combine a combi boiler with a heat pump water heater, increased 14% local currency in the quarter as well. I will now turn the call over to Chuck, who will provide more details on our first quarter performance.