A.O. Smith Corporation

Good day and thank you for standing by. Welcome to the second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To answer your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker today. Helen Gurholt, please go ahead.

Thank you, Lisa. Good morning, everyone, and welcome to the AO Smith Second Quarter Conference Call. I'm Helen Gurholt, Vice President, Investor Relations and Financial Planning and Analysis. Joining me today are Steve Shafer, Chief Executive Officer, Chuck Lauber, Executive Vice President, and Carrie Anderson, 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 plus capital expenditures. North America segment organic growth excludes the impact of Leonard valve. Adjusted earnings, adjusted earnings per share and adjusted segment earnings exclude the impact of restructuring and 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 Steve to begin our prepared remarks.

Thank you, Helen, and good morning, everyone. Before we get into our results, I want to start by recognizing Chuck Lauber and thanking him for as many years of service as our CFO. Chuck has had a long and meaningful career with AO Smith, and his leadership has had a significant impact on our company. On behalf of all of us, Chuck, thank you for your many contributions, and we wish you all the best in retirement. At the same time, I am very pleased to welcome Carrie Anderson to AO Smith as our new Chief Financial Officer. Carrie brings extensive financial leadership experience across multiple industries, including complex global manufacturing organizations. She also brings a collaborative leadership style and a disciplined approach to execution. Carrie has already become a valued partner to the team, and we look forward to her leadership in strengthening our execution rigor and advancing our strategic priorities. This is another planned and orderly leadership transition at AO Smith, and it reflects the strength of our broader leadership team. We have a highly experienced group of leaders with the right balance of fresh perspective and deep industry knowledge to continue executing our strategy and serving our customers well. Now, moving on to our second quarter 2026 financial performance, please turn to slide four. While the quarter reflected very different market conditions across our businesses, I am pleased with how the AO Smith team executed. We continued to gain traction in North America, delivered strong free cash flow performance, and took additional actions to create value for shareholders. At the company level, sales were approximately $1 billion and adjusted earnings per share were $1.03. While our results were impacted by the continued weakness in China, our teams remained focused on operational execution and cost management across the business. One of the highlights of the quarter was the North America sales increase of 5% to $821 million, which includes Leonard Val, our recent acquisition that expands our water management and digital control capabilities. Excluding Leonard Val, organic sales grew 3% supported by strong boiler growth, carryover pricing actions, and continued focus on serving our customers. Another highlight of the quarter was our cash flow performance. Free cash flow increased nearly 70% in the first half of the year, reflecting the strength and resilience of our operating model. Supported by that performance, we increased our 2026 share repurchase target by 50% to $300 million. reinforcing our commitment to disciplined capital deployment and returning cash to shareholders. As expected, China sales decreased 28% in local currency, largely due to broader market conditions. While the China appliance market remains challenging, particularly in the premium segment, we continue to manage the business thoughtfully while completing our strategic assessments. We expect to share our conclusion on that assessment by our next quarterly earnings call and remain focused on identifying the best path forward to support long-term value creation. With that overview, let's take a closer look at the performance of our North America businesses. North America water heater sales increased 2% in the quarter. Residential water heater industry demand remained pressured by softness in new construction as well as existing home sales, which can weigh on replacement demand. While the residential market remains competitive, we continue to make progress in our market share performance. In an environment where demand remains muted, our leading brands, broad channel presence, and strong customer relationships continue to differentiate AO Smith and reinforce our confidence in the long-term fundamentals of the business. Our North America boiler business delivered a strong quarter, with sales increasing 21%, contributing to 12% growth in the first half of the year. Growth was driven by continued momentum in residential boilers and a return to growth in commercial boilers. We remain encouraged by the performance of this business and believe our investments in product innovation, customer service, and channel partnerships continue to position us well in an attractive market with significant long-term opportunities. North America water treatment sales decreased 2% as growth in our priority dealer channel was offset by softer demand in other channels. While consumers remain cautious in portions of the market, we continue to focus on the channels, products, and customer relationships where we see the greatest opportunities for growth. During the quarter, we advance actions to optimize our footprint and streamline our brand portfolio, which we believe position the business to operate more efficiently and accelerate profitable growth over time. We expect annual savings of approximately $6 to $8 million beginning in 2027. Leonard Valve contributed $16 million to sales in the second quarter of 2026, and we continue to target double-digit growth for the full year. I'll now turn the call over to Chuck, who will provide more specifics on our second quarter performance.