A.O. Smith Corporation

Good day and thank you for standing by. Welcome to the A.O. Smith Third Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question and answer session. To ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. I would now like to hand the conference over to your speaker today, Helen Gerholt.

Good morning and welcome to the AO Smith third quarter conference call. I'm Helen Gerholtz, Vice President, Investor Relations and Financial Planning and Analysis. Today I'm joined by Steve Schaefer, Chief Executive Officer, and Chuck Lauber, Chief Financial Officer. Within today's presentation, we have provided non-GAAP measures. Free cash flow is defined as cash from operations plus capital expenditures. 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'll now turn the call over to Steve to begin our prepared remarks.

Thank you, Helen, and good morning, everyone. I would like to start by briefly thanking the many dedicated A.O. Smith employees and broader set of partners and customers in our ecosystem for another quarter of helping to make clean, hot, and safe water available to millions of people. We appreciate all you do to make that happen. Please turn to slide four and I will now review our financial performance in the quarter. Our global A.O. Smith team delivered third quarter sales of $943 million a year-over-year increase of 4%, an EPS of $0.94, a 15% increase over 2024. North America sales grew 6%, primarily as a result of our pricing actions and strong commercial water heater and boiler volumes. We achieved North America segment margin expansion of 110 basis points and rest of world segment margin expansion of 90 basis points. Continued economic challenges and more limited availability of government stimulus programs led to a 12% decrease in local currency sales in China. Purit contributed $17 million of sales in the quarter, and our legacy India business continued its strong double-digit growth trajectory by delivering 13% growth in local currency. North America water heater sales increased 6% in the third quarter, driven by pricing actions taken in response to higher tariffs and other input costs, as well as higher commercial water heater volumes. Our market-leading, high-efficiency condensing gas and heat pump products continue to have a compelling payback story in commercial applications. Our residential water heater volumes were also positive, but we believe that Q3 industry volumes declined year over year. As we expected, we believe we outperformed the residential and commercial markets in the quarter, in part due to our production efficiency initiative that limited the pre-buy impact on our sales in the first half of the year. Our North America boiler sales increased by 10% compared to the third quarter of 2024, led by the benefits of pricing actions and higher volumes of our high-efficiency boilers. North America water treatment sales decreased 5% in the third quarter as continued growth in our priority channels was more than offset by an expected decrease from the retail channel. Our priority dealer, e-commerce, and direct-to-consumer channels grew 11% in the quarter. In China, third quarter sales decreased 12% in local currency as the ongoing economic challenges and reduced availability of government subsidy programs along with an increasingly competitive environment, led to lower volumes. Despite these challenges and the resulting volume pressure, we achieved 90 basis points of margin expansion compared to last year through the restructuring initiatives we undertook in 2024 and other cost-saving measures. Please turn to slide five. I would now like to take a moment and talk about our commitment to sustainability. For us, Sustainability is not just a goal, but a core part of who we are and what we do every day. We are committed to not only developing and bringing to market innovative, high efficiency products, but we are also dedicated to sustainability in our facilities and manufacturing processes. Later this week, we will publish our sustainability progress report, which will include our sustainability scorecard and an update on our water conservation greenhouse gas emissions, and waste reduction goals. What the report will show is that we are meeting or exceeding the goals that we set out for ourselves. The outcome of these efforts are providing both sustainability and bottom line results. Example initiatives we have undertaken to support these goals include the test water recirculation system, which recycles water used during our product testing processes, and our glass enamel reuse process, which captures waste glass enamel for reuse in our tank manufacturing process. These are examples of how we seamlessly integrate sustainability into two of our priority areas, operational excellence and innovation. We remain dedicated to finding better ways of doing things, including how to improve our business while protecting our planet. I'll now turn the call over to Chuck, who will provide more details on our third quarter performance.