Earnings call transcript Q1 2023

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Operator

Good day and thank you for standing by. Welcome to the A. O. Smith First Quarter 2023. At this time, all participants are in a listen-only mode. there a presentation, session. speakers’ the will question-and-answer be After [Operator Instructions]

today, that Please conference being speaker please today’s recorded. advised ahead. over Gurholt. go I your the is hand conference be Helen, to would to Helen like

Helen Gurholt

to and you, Smith A. Analysis. am Gurholt, first Thank Relations Investor I O. Vice call. the President, And conference and Good morning. Helen Eleanor. welcome quarter Financial Planning

Kevin and today are Wheeler, Chuck Chief me Chief Officer; Chairman Joining Executive Officer. Lauber, Financial and

results operations provide of measures. to transparency expenditures. improved provide is the operating business, order non-GAAP our In Free defined into we as less flow cash cash from capital

income earnings, exclude terminated adjusted the share, segment acquisition-related non-cash earnings impairment expenses of judgment corporate non-operating charges, adjusted well and Adjusted impact as adjusted pension expenses. earnings per expenses, and legal as

total earnings. non-GAAP the end GAAP measures provide provided the on also and presentation from segment our appendix to in Reconciliations website. of at are measures We this

some among forward-looking friendly are of risks be this different. press include will our that answers Those risks matters conference to call and comments that be actual could statements, we release, more in materially A -- our results reminder morning’s cause described during others. that that to subject this

the question one Also, as courtesy turn. please to others and limit yourself a to one queue, in question per follow-up

If you the please questions, queue. rejoin have multiple

We will be using slides through today’s as move call. we

at our investor.aosmith.com. You can them website on access

Please turn next the turn now the call over prepared to to will remarks. begin I to Kevin slide. our

Kevin Wheeler

slide and few of results. highlights Thank quarter you, morning, a review Helen, we our will am good I four and everyone. first on

higher and in North volumes. $X.XX, of adjusted residential X% performance water delivered America due strong record heater up team Our quarter by EPS first with commercial sales to driven

across our product boiler saw we to a water water treatment heating, relationship. more addition, price/cost favorable In margin categories due and expansion

first consistent local exchange World quarter quarter, of in the delivered XX% currency our China. Rest economy in currency In heating in segment strong and our demand and despite sales products. for in grew treatment in headwinds the water the due first to India, performance Our water

water the five. grew market slide commercial we of to demand in outperformed sales heater heater XXXX North X% resilient water turn residential experienced products. quarter our Please for and America and as we the believe first

commercial were demand as of returned the electric negatively pre-XXXX change commercial electric were in Last products strong by year, greater gallons. shipments Sales XX products our industry quarter than for levels. to impacted commercial regulatory

off fourth Our driven year-over-year, costs. North higher grew decreased America quarter driven order volumes Residential channel increases by sales by XXXX. announced to primarily previously of strong X%, a boiler particularly levels coming elevated price inventory offset

by Hellcat commercial We levels the boilers believe normalized boilers inventory have quarter. Demand CREST the particularly condensing efficiency sensing technology our remains our strong. OX end with of high for

treatment tough XXXX water our specialty dealer XXXX higher sales and America in sales offset e-commerce were the quarter direct-to-consumer were comp to and first wholesale of flat North a lower compared in by as sales in channels.

the first constraints the first in normal the wholesale XXXX our customers We majority quarter benefited chain of levels. our with down of dealers Sales exited backlog. order strong as and improve supply we shipments believe from work and inventory quarter

local quarter demand. consumer weakened the first XXXX, sales currency due XX% to of China, first In quarter decreased compared primarily to

April improvement and that We continue improvement expect the through through sequential to have seen year.

the our introduced large for and mix in water products quarter, recently time we our treatment to favorable We take will well improve. by been in the price confidence saw market. it that believe flow have We Chinese the economy as received consumer particularly

award U.S. named their long-term made to has The energy Smith by services. slide STAR recently ENERGY to Department a have EPA I Partner the the is am through O. six. Energy. now ENERGY been A. of STAR management winner XXXX the Year companies Sustained commitment in on given Excellence products of that or and

award strategic has Water These Year to the recent of AL of Excellence our received time Partner result are evidenced named the high-efficiency awards STAR third and partner. Heater. Heat pumps, heat as portfolio Voltex direct of ENERGY consecutive the A.O. launch objective by being Sustained our a fifth and Smith expand the is including a product our This enhance Pump

We of water technology. are heating treaty and committed water to development continued sustainable

call will our Chuck, I quarter now more the first turn who over will performance. provide to details on

Chuck Lauber

compared heater slide everyone. I same by last volumes, The driven North period to and million, Kevin, segment you, X% rose with pricing. America sales Thank offset by first Record good is in partially year. a increase seven. residential morning, am primarily higher water the and on increase $XXX quarter the commercial

increased first of margin margin Operating operating commercial in the North America of residential lower and are higher quarter million $XXX.X of year. earnings first and with the steel due heaters XXXX. to XXX costs. XX.X% segment from and improved basis adjusted the segment of last volumes XX% compared higher earnings The margin primarily operating segment quarter of water points

X% World and year-over-year a currency sales by million Currency $XXX.X sales the million. $XX unfavorably segment segment Moving decreased to of basis. slide of eight. on impacted translation approximately constant Rest XX%

lower COVID-XX-related month-over-month primarily improvement consumer demand in sales demand We as was during the headwinds. Our consumer in negatively saw driven by China decrease quarter. sales was impacted by

new XX% have received by India sales market. in grew compared quarter the to currency been local XXXX our the first products in as well

XXXX. in million earnings a year, last X.X%, to decrease compared of the in as primarily result was XX% of volumes lower selling Segment quarter segment operating partially basis earnings by offset compared adjusted margin $XX.X of of XXX decreased a to adjusted the of China, costs. World points lower first segment Rest

months the in of inventory levels higher earnings the due same $XXX to slide related primarily turn lower period to lower in paid in a incentive first cash and capital than outlays XXXX to lower working Please nine. XXXX, free We higher generated XXXX. and payments three of XXXX, flow million

our totaled at balance $XXX position million cash Our end the March, $XXX was million. cash of net

ratio as to total by Our capital. XX% was leverage measured debt total

our to on focus and allocation Board $X.XX per enable our cash of of XXrd Our to strong which share. approved year consecutive dividend solid priorities next quarterly month, and flow capital us return annual free dividend our represents this Earlier cash sheet balance payments. shareholders.

for the million. stock quarter XXX,XXX a in approximately XXXX $XX of repurchased shares first of common of total We

to repurchase our million expect $XXX guidance. in We of shares increase XXXX, previous from $XXX million

to XX. turn now Let’s slide

uncertainty. returning for growth addition we In capital opportunities to sheet strategic development driven innovation to of to organic categories new geographies. acquisitions economic The by of product and balance see our pursue times and product even to shareholders, of continue allows us all our across in strength

of During The more cumulative the charge project-based of than foreign is currency quarter, our Turkey business of liquidation a Turkey in in fits recognized water model core selling impairment in and business our our no commercial to million, primarily current and committed we the the anticipation adjustment. business consumer strategy. and translation treatment non-cash $XX.X longer

revised and XX XXXX guidance and slide to outlook. turn Please our

an increased adjusted midpoint with an expected represents outlook EPS have range range of our $X.XX XXXX of EPS. We adjusted X% of share. EPS The share compared our XXXX adjusted $X.XX with per per increase and

Our outlook is including relatively of chain. based assumptions, assume supply on number key we stable a a

persist, remain they providers challenges contact in disruptions We resolve as are chain our arise. logistics While close limited. with supply issues and to suppliers manage and

the relationship, will XX% meaningful into translate have year half year. margin have our XX% We quarter, the North XX.X%. pressure the forecast We and cost cost in we the and a a American higher steel outlook of recently half and put input range full price of North back between on year margins the second to our first guidance on American first to of relative the from in XX% year. seen half pricing, steel will than approximately be costs the approximately of in a which that higher rise volumes Based on increased index

of offset costs guidance that of Our by favorable moderately higher transportation flat remain outside transportation. other assumes previous outlook steel with to costs guidance, relatively our cost in adjustments outside our

generate of and cash We $XXX between free to $XXX million expect flow million.

$XX $XX are and CapEx between year, $XX expected be and Corporate expenses million be the approximately to For million. should million. other

tax Our in XXXX. estimated shares earlier, be our resulting outstanding to of approximately shares rate XX%. I we is million of repurchase $XXX stock, noted $XXX at average And to of the of end as million approximately expect diluted effective

back staying turn slide more Kevin? on and who the outlook will will Kevin, The I key our to on topline now growth XX. segment XXXX, call for markets and color provide expectations

Kevin Wheeler

to to to plus raising sales Chuck. midpoint, Residential be X%, approximately you, heater demand water with revised was minus of flat quarter, XXXX heater the for following residential our Thank at flat or industry the a the XXXX in range we year. resilient be to approximately projection are first our volumes which therefore, assumptions. last XXXX We water includes the and projection

completions. We replacement proactive continue and to new monitor housing

commercial water was orders Demand than in remained strong strong April. in gallons first and XX the electric greater for quarter heaters

industry volumes digits our raised mid-single have XXXX. for guidance We compared to water heater to increase commercial

for to guidance our XXXX. China. the first in for expected local business improve the currency economy it China in to X% take that confidence in We performed grow and time our consumer reaffirm will in in Our as to will X% quarter. China believe strengthen sales We

volumes Our in year. assumes China throughout improved guidance the

compared forecast Our XXXX the in will devalue to approximately XXXX. currency X% assumes Chinese

believe adjusting our our guidance. XXXX our more assumed inventory boilers are boiler than We levels in outlook we for channel residential are We elevated prior what business. into of coming

with quarter outlook residential digits. to boiler residential annual our resulted growth previous and amount sales first market us While growth aligns in guides the mid-single sluggish commercial the the inventory guidance, in in boiler an of of

and commercial institutional job was key steady remains custom Demand for condensing quarter quoting energy-efficient active, particularly our vertical. the first in the in boilers

segment of and for on segment North we outlook America not and Our water treatment for be XX%. sales XX.X% between be margin expect Rest changed. approximately to XX% North XXXX X% these of to X% to World factors, has the margins America Based our growth

to turn XX. slide Please

with saw heaters in pleased water rebounded water heaters. early pre-XXXX Demand XXXX. to electric levels. for demand for very are We We performance residential commercial resilient our our

costs sales China, Our saw improvement significant monthly quarter XX.X% XXXX America we and April In continue will expect North year. the margin to sequential of drive margin steel through in as our full rise. improvement that through operating first even year we

pleased China across are a dedicated and through our focus the free flow our flow March rebound North America free operations. emerges COVID-XX-related from as expect full our inventory cash for We disruptions, in with we reduction on strong cash year

position on heating our to advance and water focus as of in customers, well leader Our meeting globally. needs our executing a treating the as strategic key remains our as objectives

our balance we market development enhance our to capitalize And innovation strong continue across with on our we leadership. to with as new portfolio, our in strategy. strong ability Our brands sheet, are opportunities product execute the confident technology-driven combined will and

remarks your and we prepared that, now our available for With we conclude are questions.

Operator

Halloran Thank you. of Baird. Michael of question first Our line comes from [Operator the Instructions]

Michael Halloran

Hey. everyone. morning, Good

Kevin Wheeler

morning, Good Mike.

Chuck Lauber

Good morning.

Michael Halloran

above side, obviously, period destock had January, tracking relative a rate point million at through are are Those like. Hey. a to little you the last on previously annualized volume what North Can you what at seems you $X talking the hot here? this about December, at lot are been the seeing You have maybe volumes water year, variability least through with look HRI says. units looked walk run America, heater February of we

So some variability there expect maybe of year? on what about going underneath understand think on do those working and you think is some how restocking, through you the element hood, trends that you the are do help demand

Kevin Wheeler

Hi. Listen, Yeah, for going buckets four It’s I Kevin. you. in Mike. am to it put

First, is our always going The rule always one replacement that coal be will to and continue. applies demand there. shallow emergency

What is above just recently. just We be on we levels. continues some though got replacement to normal updated proactive seen have that the our

additional So some providing that’s volume. above so average,

strong QX. New construction were completions in

So that a also us gave bump.

customers, believe some, too may of little on we about all, there replenishment not And few was be going cut some and customers, a bit our their some a with customers. you low inventories mentioned

those year. you last flat of together, to four then that to QX our and back be our We So guidance kind forward-looking getting do QX expect to of drives put down.

category. We double low probably to to in be single-digit -- digits. low be it probably down going to It’s single expect that

strong a that remember It strongest and Just month. quarter strongest the had was that very the particularly quarter. was QX we was March

a the XXXX. volume, overall, So, look the with but pleased for pleased flat of with industry kind and

Michael Halloran

XH decent weighted year, the Is that the help to XQ on the and for half is through profile? or that comparable offsets North margins envisioning, year. that to And something XX.X% modeling back also are to incremental think XQ that you as implies how for about pricing work we drawdown there the maybe else remainder and are Thanks decline all that you think and might XX%, more XH whether that. to of American then as

Chuck Lauber

kind to the my first year. half Yeah. in I The mean the sides. half we costs, the steel lowest of see year of be XX% they and of higher are two about in the back going

quarter first weight of steel year, pleased with half the are started price itself we which a is while to very relationship, kind the America of going margins the on North year. cost be our our So back we and by

we for XX.X% in then lower the So margins. half year and will the operating XX%, margins see the back

of -- back the cadence typical half, first of kind year in the in and We half splitting is we stronger typical front the the in kind XX% XX% the weaker see a half it’s and maybe back. and the volumes in little

outlook stronger We our strong on here are a QX. little on based the

probably XX%, the more XX%. are in We

costs, you we destocking As little bit quarter the quarter are kind relatively on see last of a aware, flat. we got and in easier year. have third the Material comps second based

kind up give the bit on back in half, a takes half XX% strong XX.X%. the of first So margins that to and puts end be and would in second

Michael Halloran

it. appreciate Thanks, good It’s Yeah. Really Chuck. still Kevin. range. Thanks,

Operator

question. our for standby Please next

Saree Please Boroditsky Jefferies. Our of next of the comes line question standby? from

Saree Boroditsky

this The your so you higher guidance, talked automatic margin about driven half. for additional in steel But you baking within that. are offset retail costs this, would by back that being commentary, pricing in the

Chuck Lauber

haven’t Saree, We -- is any good changed Chuck. This morning.

We changed policy. our any haven’t of pricing

some costs go on same the So leg that’s we as and before down. formula and steel out that do talked will have up kind there about flow as have of we pricing

along So follow, formulas historically. down it that that moves some changed we and pricing will steel as it either or haven’t natural going up any through of price the of kind as with of has up,

Kevin Wheeler

process the record always within say our continue about adjusting and fall to, to Yeah. of that mentioned, our look And I at to good changed will when haven’t our necessary. track we just pretty it’s would we and expected back monitor I works way company. have go it, pricing, we where a as it we Chuck back you do we

Saree Boroditsky

levels? current price within at any in you But your increases do or current guidance, you do additional stay bake

Chuck Lauber

Yeah.

future increases. are We comment on to not price going

XXXX. just total the remind this commentary Just increase and remind maybe pricing everybody price in was to our November announced on that, its -- last

comp we is So pricing have got in XXXX kind a full year place. where of

out fall. And to full price increase. have it’s there and for of our wanted anniversaried increase that so announced just that price That kind that final been everybody was -- the last year we remind it’s year last

Saree Boroditsky

Okay.

not So just to price are commenting clear, be going on additional I know we forward. increases

So baked fair? increases assume point, that we guidance is that additional can not are into price at this

Kevin Wheeler

don’t just comment on looking. pricing We forward

Saree Boroditsky

through then you. sequentially mentioned are did And try. how last in thinking to the one April question, the How trend growth have I cadence you about you and improving just this China through the month. of Thank year?

Kevin Wheeler

China month-over-month Yeah. really off so talked about we out our a prepared of is played really see, of opening to very with we thought. I particularly remarks, and Chinese a we coming Year result but forth month was kind tough playing saw -- what New and January did improvement. up, it April out in COVID We and well.

seeing March. are over improve sellout We our

there. our view we that way strongest the we is remember So month quarter fourth month-over-month, see it, quarter-over-quarter, the should and

thought our probably So, more currency. consumers comfortable and things get X% growth but to guidance in a X% comfortable, at not and with are we local it’s the settle bit way as of we

Chuck Lauber

be Being we down expect first of in quarters each quarter, do the quarter-over-quarter up going we but forward. the would

Operator

standby for Please question. next our

Our comes Maklari line the next of question from Sachs. of Susan Goldman

is now line Your open.

Susan Maklari

Thank morning, Good everyone. you.

Kevin Wheeler

morning. Good

Susan Maklari

to you happening Do question of try pull higher today the come first some in think in your potential moving that some you about the perhaps themselves? forward for around think through. first pricing to My market any steel position quarter was and is or customers as -- as is there the

Kevin Wheeler

how with we guess businesses our buckets outlined don’t but out as in much that was the I can played we pull forward. talking the really expect bit, of quarter feel saw, there little I that I a recently

maybe care was customers. I think people, regards that I forward our any of light taking a their was their customers, with bit number was it one, two, out But, steel. from think there with don’t balance inventory pull to overall, some

Susan Maklari

Okay.

color digits about ground to seeing seeing more how been on there, your give you can color are you -- you expect up volumes think there side? bit obviously -- the you know I -- mentioned the are And market. on so, any a the currents you There’s underlying what that give? but as some industry, the be cross you Okay. you are for the can then mid-single there on That’s more commercial helpful. what you

Kevin Wheeler

Yeah. That did. we thought tell really electric commercial back not I would than frankly, bounce greater the you, by XX-gallon. -- was would overall that it it’s but really up, one, the and driven market commercial quite was it to and pre-XX levels, -- the

digits But side seeing low-single the gas So the see growth. that’s of driving of business. we in are much growth also the

held up to that comfort the So commercial to it that’s up gives mid-single-digit us move what and well rate. growth

Operator

our for question. moment next One

the & comes Matt Our next Co. D.A. Davidson of question line from of Summerville

Your open. line now is

Matt Summerville

the of M&A in you the therein say maybe questions. then M&A A.O. a actionability couple the specifically? or of Smith And pipeline A step-up talk Thanks. outlook doesn’t with your context Can about says repurchase for have I and to about maybe respect and activity follow-up. what

Kevin Wheeler

Yeah. M&A. of areas. on but continues M&A comment in repurchase. the to particularly up. side be, They are Chuck them treatment the on I’d the connected not business, Terrific. take with water other to we really say, why I active I let pipeline move will will the regards

contact with hasn’t we that our looking for to right in continue So and changed targets stay close the opportunities. and

be like the much capital moving it will and thought hope near-term. we some able be deploy that’s in would we we So to

Chuck Lauber

through moving cash talked also million. to year, our buyback $XXX we and that year. $XXX watch and outlook we $XXX ahead strong and Based gave we that repurchase kind went million about QX to when million, we in the $XXX by being we Board moved about Yeah. January, up operations our authorized of the million With the for talked and would in up outlook upon respect the our outlook

So very that. we felt comfortable with

Matt Summerville

then respect share you. both in Got you and are more China, heaters it. would market characterize how you with levels? inventory to water and about trends And seeing maybe you Thank perspective a recent mix treatment. then What from talk can water

Kevin Wheeler

pieces we the our look at to share market are of this, us of comfortable getting China, we are look very when are market overall, we business. have we store we leaders we at our Okay. business, When the a business, to one and overall, at But about great retail and we that we outlet put for have still -- fair talked our in not look there’s share specialty the together.

Chuck Lauber

it’s Yeah. channel -- of normal to weeks kind six inventory is The that in in a range weeks. four

Kevin Wheeler

And coming back, just holding about well. mix is pretty mix, the the

of bit categories to Our water of premium flow about high a and premium categories. is introduced all treatment a we still slightly new our mix We up be how in talked moving most in product, in continues the sector. the which our

the with So side been our year. continuing to continue watch through we it’s premium rest buy products our the the the to of of and interesting premium and mix that customers see

Operator

please. for moment our next question, One

question Our the from Karas of of Damian UBS. next comes line

Your line open. is now

Damian Karas

the everyone. on morning, Good quarter. Congrats Hey.

Kevin Wheeler

morning. Good

Chuck Lauber

Good morning.

Damian Karas

you I about the comments ask levels quarter. America exiting So your normal being to with pretty wanted on at much channel inventories North

is a You are heading water with out boiler on maybe flushed water that it confidence you XQ, like out? of and more you in the caught respect already hearing but what inventory recent levels to there. fact bit gives a you us heaters into little sounds there that or understand better for seeing some by just are Could you surprise, maybe bit destocking treatment help this

Kevin Wheeler

would surprise a We that to such in. and me can missed. bit what so a fourth with of surprise. a had and start sell of that quarter I strong a let jump had through. Well, kind was we say, a of Boilers, bit Chuck We

they we our would now, with where think, it The say some out. at the our wholesalers channels, be, of there inventory dealers channel, in itself right and really way I all the treatment, frankly. I right specialty knew that are inventories was our I quite works need water still now, look to But particularly and

in a commercial gap QX a And saw have where other boilers, But, the take of bit should side be we thought that of and the our our only they care little area we business. our on customers. than of inventories the will that I with would be may overall, think hopefully

Damian Karas

you I bit over subject will the the water not heat past, rebates topical I Okay. a heat I to you There’s some seen expecting pump still on which to there in about water Great. ask and pumps And IRA the are a matter say, related Kevin, heaters. cost pumps, you know, heat is soon. mentioned wanted and heater have take I incentives anytime But at market out of installation quite to challenges. moment,

maybe started as in seeing result? I curious in activity any or notable any you decisions customer So pickup am if changes buying a

Kevin Wheeler

it I any Certainly, would qualify of been major side now. been I this They have there’s have They am changes. there. been out the not sure as local. state. have Rebates federal

heater So as I a overall what it’s is base heat would X% each the growing small pump continues to tell very double than pretty water you that off coming But It’s less we at regularly quarter. digits grow. of sold. that, talked,

The to need to we in the place going you to quarter-over-quarter I a fast volume. it’s incentives, grow. continue at It’s but long grow expect has with future, good to modest green drive to grow it so product pace. are continue month-over-month, a regulatory to very future. -- and the probably high-efficiency foreseeable increase But can to going for going really Even a a that term think it’s

and high very the really the They with are provide the term long side business a a a consumer the commercial in bit value install. both expensive. are and from pumps, to side standpoint, on proposition or They But the of really good commercial residential a consumer, good from We little they owner. do payback take heat on business.

Operator

next for our Please standby question.

of line comes question the from of Our Citigroup. Kaplowitz Andrew next

line open. now Your is

Andrew Kaplowitz

everyone. morning, Good Hey.

Kevin Wheeler

morning. Good

Helen Gurholt

Good morning.

Chuck Lauber

Good morning.

Andrew Kaplowitz

guide of the about the a start was of you a year in Could in Rest segment in the China to that margin in year. the just little already. talked the as QX, margin sort was change know about weaker you performance World? low talk I But for didn’t you

I advertising, think did do to that were had on you money you mentioned more marketing, QX? in going spend you that

Chuck Lauber

-- I in year a it our a would oversized QX. of was you -- bit look That’s aligns mean I It’s the QX little lower than last say kind our and QX with history last Yeah. expectations. year. at always China But our challenge. a that bit on year. cut to World of the of in in help this with Rest -- a last We really is in year back was it was margin. aligned expectations spending margin QX is the

We we will, expect year-over-year are drive roughly out to some China, operating to spend in growth. the though, and calling mean, margin for and of do think, I growth year quarters on XX% more the SG&A next be, to that I we we expect in

that’s a why pleased expanding out great growth of not mode kind a we get to are are that we but we So that once we really are back deal, QX. of

Andrew Kaplowitz

did seem the of and doesn’t anything And markets? when that as saw -- you see volatility the either you in or around talking core sort you your to have hiccups, helpful. up then, to residential but or Very Kevin in sort customers channel of partners, did continued you come March, REITs given banks worries and commercial you like there, any Chuck, are

Kevin Wheeler

going to and economy, I now particularly half. -- that the back that’s But always anecdotal, okay? for what with there’s moving is say rates the up concerns would mean this in it’s right

along residentially inventories watching seems commercially. So everybody has customer be still behavior. but moving to and demand they are closely, it are online, both They changing but not

as that the rates some the of we could interest backdrop hint this of back a there’s potential get half But the year. into cause issues

that on We today. will to conversation how plays That’s out. the than ground have what’s see happening more actually

Operator

our for question. standby Please next

Inc. Jeff the question Capital Markets, from of line of next comes Hammond Our KeyBanc

Your line is now open.

Jeff Hammond

Good Hey. morning.

Kevin Wheeler

Jeff. Hey,

Helen Gurholt

morning. Good

Chuck Lauber

Good morning.

Jeff Hammond

out you want kind or price is of in magnitude, understand more price think there broad? material something one, just formulas to is maybe quarter I lower called first all this I the and So the

Chuck Lauber

Yeah.

We the I around will growth that. are are going though, say, to details the quarter. for we really up I on not mean, organic carve out

price. residential -- commercial growth the the outweighed So growth

back kind with in to pleased that So we are our we in year. margin steel knowing pressure half the are expansion of see QX of the on some going

Kevin Wheeler

well tell it better. just a while little really played side, I and will Yeah. over out out make continue just would to a played we and have commercially. we just back. both But sure Jeff, as the that and and even customers so a over channels competitive. always I comment expected, in to our frankly, said and pricing it bit continue quite you evaluate are maybe that on

We we are pleased have the trend that pleased with we quarter with the and are today.

Jeff Hammond

an looks like then Okay. think Is the of to step And guidance? margins. earlier North XQ XQ get simply then there question of the about fall cadence within we America it and I a was down kind

Chuck Lauber

in on steel really quarter, and it least that. Yeah. at that we roughly those It’s the QX, when on the year, at side early of we XX% look back It’s QX go the real weighing some -- on evening see costs up in the today. half the of

Operator

our for next please. question, moment One

comes Research. MacGregor question the of Longbow next David from Our line of

Your line open. is now

David MacGregor

Yes. Good morning, everyone.

Kevin Wheeler

morning. Good

David MacGregor

point if us then help you volume which versus just happening back what about Yeah. to of that and and go China, then what’s also just this And trend-wise you XXXX? about represent we price to China. understand Good extent might for at to distribution expanding question. talk that I I just follow-up And you the a in guidance wonder if are there? on your and could have if you talk just could X% sort Can out XXXX. to China back I go wonder could I to just X% ask separate morning.

Chuck Lauber

in our businesses. It’s price, mostly not volume nearly parts what of Yeah. bit There’s seen a but other of China. we in have

based will COVID to China is the and in X% X% the believe opening see So what that up. a on we that step with we policies

kind the in comfortable with April. that about that. are good of We rates feel order came We

volume. largely it’s So

XXXX, relatively are XXXX reduced Not stable. have. period comfortable in of on we with the during change Distribution lot points, a distribution distribution points through wise China, are COVID but some the we really we outlets stores but the

David MacGregor

just question. but it second. could build Okay. that price further median in China on if your point product. I China to for have the to expand do recovery, on for opposed just a as just you look question, mostly And follow-up volume higher point as is your I little then a price a

earlier well. doing premium mentioned You was

I So just some on wanted to that. clarity get

Kevin Wheeler

that No. of introduce I leaning it come coming out, pattern year. a do see new some to normal the would going have premium we we we through towards that will out say the are even a and products bit, maybe products additional because kind have

of seen to our we or side the the have up So on of behavior in new as these and A.O. say consumer bit what a purchasing the I enter very step products similar a premium maybe the market. purchasing hopefully be products that would past Smith will

Chuck Lauber

Yeah.

have seen call it, premium products positive to mix our last, move introduced XX We months. on the in the based

mix helping that a new products growth. bit the So on on is

Operator

of Research. Our Instructions] MacGregor line comes the moment next [Operator of from question David Longbow One please.

David MacGregor

again. there, Hi,

Operator

is David, live. line your

Chuck Lauber

David. Hey,

Kevin Wheeler

David. Hey,

tough are [Inaudible], on You so. the pretty

Chuck Lauber

Welcome back.

Kevin Wheeler

Thanks back. Welcome Thanks. queue. back the again in

David MacGregor

Yes. Thank all you again.

behind ask we over about just water and this about profitability kind get to around in a the that? of this margin to the and wanted few having years wanted a about treatment treatment your last year you kind factors outlook long of just how I sense there’s what within conversation the and might is just been be So water treatment are just water thinking have of thinking --

Chuck Lauber

Yeah.

working to year. XX% expand up for is is the goal and treatment as and a water basis mean, points So, you still quarter, know, we margins operating those and way margin XXX our XX% were our I at around

a catch-up little a operating trying that are little a on margin. cost relationships little because the which and play of to curve there, behind on the price some of bit of pressure put We

For at XX% operating of the are kind margin. year, we looking

little bit better have do to be little But, through as catch-up to on are increases. some we the year. So looking a yeah, a go we we cost

David MacGregor

Is it that mix drive the are progress drivers gradual getting that and new you just little productivity improvement, just what around are products that behind and a more improvement?

Kevin Wheeler

Yeah.

to mentioned. what new some will some be combination particularly a it’s in because There think introduce mix, some we productivity. our I will going There be segment. retail you products, of just are

basis productivity, increase. a combination be will mix other that it XXX a things So few of in point and

David MacGregor

treatment, opportunity water a the your looks in mentioned little you perhaps imminent? then that comment more And M&A

Kevin Wheeler

make market. imminent, roll-up is treatment, you water Yeah. didn’t so I I very more just when look it’s maybe and on part we the clear are okay? fragmented at going that. I a smaller to that of some lot a always our But be acquisitions, that of think say area at treatment, again, sure we look want bit than to of active are and products. A we water core

always there. there’s But opportunity

focus will others, out Not going to not most water that for a probably We the But us. find next also fit, treatment. but kind to want years the that’s opportunity the for to primary few over say it of water have us. treatment singled and people have the to for why be but to sell think I us, there’s not is would only right

Operator

would to I At to this any back time, turn for like it Helen remarks. closing Gurholt

Helen Gurholt

everyone you us Thank for joining today.

on you look global to forward our Let quarter Smith me strong that delivered team you conclude to We our quarters first come. performance record EPS. in updating reminding by quarter and first progress A.O.

and addition, join three In rest day. presentation this on the calendars Xth, XXst, on Blair Thank enjoy of conferences June mark to KeyBanc Oppenheimer William your quarter, your on Xth. May May you our and please at

Operator

you your the in program. This Thank conference. conclude today’s participation does for

disconnect. now may You

A. O. Smith (AOS) 27 Apr 232023 Q1 Earnings call transcript