AOS - Earnings call 4 2023 | A. O. Smith Corporation

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Operator

Good day, and thank you for standing by. Welcome to the A. O. Smith's Fourth Quarter 2023 Earning's Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Helen Gurholt. ahead. go Please

Helen Gurholt

and Good Smith Abigail. I'm and to Financial welcome Gurholt, Thank Year morning, and A.O. Planning and Relations Full President, Call. Fourth the Vice you, Investor everyone, Analysis. Quarter Helen Conference

less appendix answers provided presentation comments that cause are and measures that and non-GAAP that forward-looking could conference Joining adjusted earnings are exclude subject earnings impact cash our expenses, adjusted statements improved Officer; expenditures, legal and in Financial some Chuck website. A and on this to Executive to the acquisition-related reminder adjusted and and risks Free during of impairment and judgment will call friendly the end segment be capital of our this of provided the at results morning's actual share, others. adjusted one release, different. be as into flow terminated are queue, from income expenses. earnings, question as per operating and me as defined pension matters to corporate risks yourself the in our for one please follow-up Lauber, cash Also, nonoperating others courtesy the press a to provide among non-GAAP business, churn. Reconciliations well in income Kevin we described measures today expenses limit order Chairman from Chief Wheeler, expenses Officer. In to noncash restructuring operations transparency that Chief we and GAAP include as to materially this results is Those of measures. question

rejoin the If queue. you please have multiple questions,

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

to to our call at slide. on the over prepared investor.aosmith.com. I remarks. You to will now our turn them turn website can next Please the begin Kevin access

Kevin Wheeler

price excellent and relationship. increased segment increased record-setting higher North and and due Slide XXX good everyone. water Thank by a and to year year full improved and X adjusted volumes our margin results. X% you, water points heater America earnings driven demand sales sales XXXX execution resilient team. cost heater was on by our I'm and basis Helen, morning,

of World our currency products products, Rest from of flow Free market. In China by grew XXXX sales which sales X. primarily local new XX% and represented $XXX in million, of profit. sales. capital to and X% kitchen to by turn received were $XXX introduced our share the benefited currency well to We as with cash Our sales grew in XX% record in of India, shareholders our segment million local grew driven repurchases. Please returned dividend our Slide recently

delivered sales for demand adjusted XXXX compared pre-XXXX and over approximately billion approximately water as XX% Our America X% industry electric sales A. closer $X.XX, demand aligned gallons The our commercial O. as North replacement to water and heater greater industry a and residential XXXX than remain resilient. $X.X Commercial new proactive X% year-over-year heaters increased XX volume commercial rebounded construction levels. residential products. unit grew demand XXXX, team record in of to units water increased of and due to in increase Smith global EPS heater of XXXX. XX% strong

both commercial We are and strength water pleased share with in our market residential heaters.

were and boiler our led Our down after backlog and inventories XX% comp residential worked channel and XXXX. our treatment from commercial order sales chain in year America over sales increased resulting with offset Hellcat our Sales shipments Sales partially supply XXXX. In into in down The boilers and full growth which constraints channel in channel XXXX. North destocking increased America of X% benefited North XXXX. We and sales small China, significant improved, making decreased local sales. and commercial strong going elevated CREST in a of to boiler inventory we in water XX% against inventories grew e-commerce in XX% elevated which currency. impacted sales production early worked our XXXX wholesale lower in X% chain the prior in as difficult resulted in year backlog, XXXX higher the sales channels. supply improvements, channels retail as technology the by direct-to-consumer

We our performance continued weak are pleased with in economy. a

saw addition categories. to our the water products, kitchen launch In of successful our commercial treatment sales HVAC product we of growth double-digit and

remain and water sales replacement as performed Our fourth residential and more core sales, heater residential provide particularly treating well turn water heating call water performance. who will the over quarter water details XX% our full to of consumables, and year also resilient. I'll approaches now treatment Chuck, products on

Charles Lauber

and X. rose segment of segment Kevin, a sales water pricing. America boilers higher $XXX segment in volumes with good Higher of X% water earnings heaters lower XX% XXXX. increase billion, Slide and margin the lower higher Thank offset partially driven primarily XX.X%, an I'm points morning, compared compared material XXX The with Full margin of to sales earnings was and Adjusted $X.X adjusted heater of America costs. year adjusted segment by were million on by North everyone. increased were you, North XXXX. segment year-over-year. volumes and basis increase

Moving on segment to related basis. sales unfavorable China. increased sales million, X% Slide constant including $XX X. Segment translation currency Rest million a to decreased year-over-year, primarily X% of of $XXX of the World currency

compared sales Slide $XX compared in segment margin turn Adjusted XXXX, to basis increase to XXXX, increased primarily grew higher water of segment India XXXX. Please currency Rest sales market. higher driven of treatment XX% increase operating local earnings World was approximately kitchen of XX.X%, is by an sales due and was products X. segment sales million in X% Xx in Our which in of to in the China. China. points the products primarily earnings to XX

turn of earnings to lower water were delivered Fourth million, X. of X% by X% to fourth of and America of fourth compared America's a the share Adjusted sales The an in a quarter led with $XXX XXXX. of segment of million that product sales. compared increase and sales $XXX million adjusted XXXX. Please year. in the China fourth to primarily quarter the heater North per higher sales by margin higher with lower segment were increased due more result offset segment to adjusted to higher operating earnings Turning fourth partially XXXX, performance, $XXX volumes. adjusted boiler of increased of XX.X% in America earnings and margin volumes quarter year-over-year, compared $X.XX XXXX, boiler as North in quarter heating points water per offset heater increase basis segment North Slide last XX $X.XX X% in water fourth higher adjusted we volumes in compared sales Adjusted sales kitchen the the pricing. were than earnings quarter of quarter share higher in

grew Moving local working driven segment our sales were on Rest the turn and World last XXXX. in compared products, Rest to sales XXXX, earnings increased advertising segment the supporting million launch XXXX, Slide Slide year-over-year by free conversion Dish Steam primarily points China. China. Please XX% of of earnings XX% compared of of quarter QX by XX.X% XXXX, and Washer decreases primarily generated to of flow in The lower year. period needs. offset segment cash free partially in unfavorable XX. new in was earnings. translation of to segment products X% World segment cash X% margin by higher $XXX An capital due of promotions currency in million Fourth decreased the flow $X India of and XX. Oven to currency $XXX $XX during primarily driven XXX margin to million an million adjusted We XXXX over XXXX XXX%. decreased to sales adjusted same the compared increase of basis of

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

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

XX. Now to Slide turn I'll

all detailed and of in ourselves we Investor in and quarterly We us acquisitions capital through and our target to $X.XX of Board growth, pursuing The accretive X while see in approved new capital to per our product addition and year month, meet research allows to continue share. and dividend our of of strength our financial development opportunities capital we acquisitions. Earlier development for cost at invest Day, return first this to our product in balance lines strategic As of the sheet our our expansion metrics strategic returning earnings years. innovation continue geographies. that to organic to shareholders, across next

We of common shares have X.X increased in our stock dividend for approximately over XX total for million consecutive We of years. a XXXX repurchased million. $XXX

delivering We continue of strong record return our to track shareholders.

repurchases. Please and $X dividends turn to outlook. Over to the XX earnings guidance we our last share and have and returned X Slide through years, shareholders over billion XXXX our

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

a prices, number Relative the steel of a in assumes second on a to headwind slight prices our XXXX. price compared includes our will projection Our XXXX year. steel assumptions, outlook based half steel current guidance of the is index in in be decline key that including to

outlook non-steel in Our are XXXX. material as they in assumes similar costs XXXX, were

relatively throughout assumes also guidance what stable environment, chain XXXX. a supply Our to experienced similar we

Red Panama Investor gas completed we facility our our impacts. and be manufactured not the is America until We our negative experienced our will internally We these monitoring capacity are launched any designed as and Sea XXXX. in situation mentioned tankless in month, earlier manufactured this and products the products Canal in Day, have currently at China North

will impact margins costs North basis by approximately America import points. and Associated other tariffs launch XX

investing in in are would future. Juarez, eliminate that the manufacturing We tariff the in Mexico

capacity $XXX tankless should heating expansion the Tennessee gas capacity increase CapEx due with engineering to capabilities last an Lebanon, million in to to our increase and expansion align several high-efficiency facility changes in in year, water to regulatory an XXXX. million. commercial in between projects related Juarez, years the the over coming our manufacturing be of manufacturing For $XXX

generate $XXX to approximately and expected $XX $XXX are to flow cash be million free expect We other and of million. between expenses million. strong Corporate

key effective XXXX. I'll estimated back at line of for call and $XXX segment be And we outstanding $XXX shares growth expect between on Kevin over diluted of the expectations to rate XX.X%. who to repurchase our to Our will outlook end XX% and now resulting XX. million shares top and staying the of Kevin? color tax on stock, XXXX, our in turn of more provide Slide million our markets is

Kevin Wheeler

the U.S. XXXX Chuck. will it includes Thank be between will assumptions. X% in new X% remains deficit, home We in following project sales believe grow XXXX, project compared XXXX. we to construction which flat and a the We you,

flat assume to industry approximate replacement Therefore, we XXXX. an electric commercial project trend greater demand our industry at XXXX industry We compared similar than increase single low remain pre-XXXX commercial will a for gallons that XXXX, that residential after the We level proactive to X% in XXXX increase also XXXX unit volumes in levels. approximately to last U.S. its as be to project will XX water positive volumes heater year. to continues digits

estate In backdrop projected XXXX, our products. the continued is currency heat X% demand economy consumer signs water These real driven for and outlook weak to in recently challenged the the demand, North America believe and products for increase and includes announced have take In resilient in heating pump addition, project in water improvement. heater we price approve released in to yet of X%. the growth will a we seen of treatment local our quarter. increases products. replacement products not are X% with and our increases will sales again economy, our market, it of we in significant grow most for amid up effective first China time confidence water a China, our by housing to X%, kitchen be Even late in on weakened Price

Our the will currency forecast translation in XXXX. minimal that impact be assumes

boiler increase sales expect business to with to in to a X% return North XX% of projected growth XXXX. America in We between our

World expect our sales to us to at predict in benefit I'd gas late footprint. treatment like of available of cover the from to businesses. commercial carbon recording America the increase segment and XX. segment assumptions, on we year, the of our expect see are we XX.X% webcast grow exciting the be all We Slide our last A the for and higher improve to at Slide or launch market. of of look approximately horizon efficient XX%, margin to key particularly we that our their is I to that tankless products. between as boilers, on water summary North Based on margins sharing XXXX continue I America updates webcast. our on XX. to turn via North look either Rest to A on XX% website. everyone who our pace XX%. Please the energy be products buildings growth joined Day The Xx team expect and to the to to opportunities as sharing periodic overall of transition including we initiatives to Investor our of topics enjoyed XX% approximately We person thank forward the

to XXXX, on heating, treatment leader pursue pipeline a our heat strategic water as and product look by pumps are: global in water position we geographic and Those to water shareholders. in and expansion acquisition we As and focused effectively active our technologies, our high-efficiency treating our portfolio, key capital expand and around the priorities world. remain returning in advance investing to our capital deploy priorities enhance including space for investing by people capabilities ourselves, heating and expand

market our in water exited to channel end many be XXXX. of return to We believe we as inventories. as product treatment XXXX for with reasons expect normalized boilers we for strong and see categories, North growth customers enter to optimism have America North America our all have and we XXXX, demand We

as we We in North resilient for in In growth and expansion have in to an the conclude proud our double-digit received by that, finally, employees, Smith, growth grown we capacity we innovative XXXth an Wisconsin China, in company A. to machine our milestone innovative, products. expect and rich term. our remarks, across begun it and are employees. continue globe. With service a and well America as with of more driven important global anniversary. for shareholders, we into shop we products products premium marks second prepared available O. Milwaukee, history, several industry-leading are will celebrate are a has market. And India year a year this in long questions. are excited new as celebrate O. XXXX technology began your projecting in XX,XXX growth and than projects with demand water Smith our and And core that the we now customers What A. for partners the has our small customer support

Operator

Michael with Halloran [Operator Baird. Instructions] Our from question comes first

Michael Halloran

last I through, figured pause a on I'd time pregnant give getting after there. my where figured had I issues end, I

guys hear me. So make sure you could

Charles Lauber

hear also. We they hope can. can I us

Michael Halloran

Great.

on North both here, questions two So America.

how the could you're and residential moving discretionary you nondiscretionary replacement to First, give some the thinking the pieces between replacement, about heater water then context business within build new pieces?

Kevin Wheeler

see difference don't in We that. on touch I'll Yes. much XXXX.

see single-family new to resilient. it down our X or million, it in course, and just received And to progress, replacement forecasted now. we path. the flat. we And $X.X to As guidance X We it from emergency quarters at continue. and move that replacement nondiscretionary a multifamily continues to construction, stayed whether expect proactive that we and it's has recently, very is continues It's of data the been

as having So we a outlook XXXX. look XXXX very really similar at

Charles Lauber

this a And going up for COVID maybe the in step at that industry to kind Mike, lumpy maybe had think that XXXX what a rate think correction will year look and been back of last just X%. mentioned. I'll XXXX, But just year. those X.X% we've comment, mean, we couple be right? Kevin end at been assumptions it's bit of we just a of I to X.X%, that up growth a We to years, we along outlook our if is with be of

into go 'XX. stable So as residential us fairly for it we a feels market like

Michael Halloran

right? it. Got X% clear, And be reference just was XXXX the point, a to

Charles Lauber

over next It 'XX. go was into 'XX we the as here. year Trip up

Michael Halloran

page, same No, too. me,

or remaining? inflation saw the then how down you're basis about a from limited America talk of And the more steel there, in what the the putting for and in quarter but of in levels maybe the guide? context. America I lot you that will fourth that ramp why Could costs, XX making. the margins confidence certainly point headwind just question second lower North around context inflation color a through little margin then year. the the So I looking bit know in investments North just is get you

Charles Lauber

Yes.

as of the now. $X,XXX, end in rolled year. cold go costs steel bandwidth headwind bandwidth it's of slight the right that So to that have a $XXX costs that in as we I we at mean bandwidth been $XX.XX. a into been and higher see kind Steel of

half we bit the first help the out the going and quarter, calling as then we're slight to a in on So come out of of quarter, steel a in in back see we're little likely, fourth X steel to year. see again the of up going we're the back ramp although relief quarters,

the have we coming comes Fortunately, quarter. in pricing steel of when in kind in, second

the or feels bit bandwidth in America kind pressure out kind at margin North in helped product product. say on range launching we some at at deal. most of as get with in pricing pretty mentioned, XX% of that again first and and we maybe a I'd QX the transportation come import cost of then you a are So point the bandwidth. that and better our we're look higher it then slightly XXXX, about more of then, do bit China is just to has If promote continue the headwind of quarter little XX.X% little to least quarters for headwinds close looking a profile a have year, tankless cadence XX a we as because little course, down through within as coming out of in basis we

Operator

One question. our moment next for

question Our Hammond with Jeff comes Markets. Capital next from KeyBanc

Jeffrey Hammond

everyone. morning, good Hey,

channel the Just sense get pricing. on March of to from a feedback the trying

through put You quite guys a bit.

price that increase? I see but reacting just surprised of follow-on what's it think channel is we maybe speak a the how to to supporting here, little a to kind were and

Kevin Wheeler

that pricing customers we has Yes. before that been do. the just feel cost would our on I philosophy our always tell you

down, and chemicals there's other parts up as of forth. other and much components so so and as still And steel bounces

And on have always so suppliers. we our our to increase forward address is what going based with

cadence, March. So pretty that's off it -- but and to a rare, it pushed And the bit. We out on occasion. it's little happens

has and goal increase will goal price along to really always been the timing reaches with that customers keep be for and our Our continue competitive to the us.

Jeffrey Hammond

And then boiler easy growth Okay. in just the off of demand? on seeing just Or of kind this you any is boiler, comps? are inflection

Kevin Wheeler

coming comps. It's some off certainly some

the has destocking coming quarter back didn't to a a You for can quarter comps, was And the But coming remember, starting year a quarter. until last in strong with cadence. or regular for year get side. getting see of much pretty our us on first boiler inventories good we we up down, of sell tripped to off it sell in. [indiscernible] little some out do And always second on

in our we our our felt in was sell and down, the remember, You sellout market. we held but -- own

the how or overall, a continues of market combination the technology overall, CREST a of has market is XXXX. around our Residential that grow. been But We boiler Hellcat our for comps of is that much headwind turning most some last year. the in quoting. with on year growing new is this look year So to and some slightly at products, we us down outlined

of getting some X% to to back to product the combination a get how a So offerings normal we is cadence and new XX%.

Operator

for next question. moment our One

from next Sachs. Susan Maklari Goldman with question Our comes

Susan Maklari

on residential back everyone. water to is My heaters. Thank first Good you. going morning, the discretionary that question demand

You've the that obviously last seen years. several in

additional other just weaker, such you about this where flat we're hold that of over And the time? as will relative What we thoughts that seeing has talked some trend XXXX. sort gives been that holding our where When year? may to that, appliances, building across products You've demand that categories think to any on for discretionary that confidence coverage. fairly

Kevin Wheeler

now, it, are their we're proactive still even Certainly, and be flat, and continue little and it a we monitor We to confident held is replacement get trying as see But generational renovation, for long at Yes. housing talked And Again, forward. right long go we're think about seen. people where we still go the homes, renovation it, big as issues steady, it's goes that our things a overall, XXXX, around will some in still pretty to a in we to we'll we housing arms bit are relatively we've though term, part years. going stay to steady look of been be we the we've that forward continue time. it how watching going it. staying or over

Susan Maklari

we there Okay. inventories anything into channel come And on we right. or through that? where would this thoughts All That's any highlight year, that helpful. year the then you are, move expectations as as on

Charles Lauber

America North on into water feel think with pretty like little coming channel a 'XX, the entered January. water had North we start this I'll bit normalized We shape, strong inventories heating. but lower we heating. we And we're America year maybe great in very Well, year

I feel feel through a of the headwind the think and the exit treatment bit end we going side, water boiler a like are year On go continue In we very XXXX, in we're still as of a while of to good pretty normal kind much position zone. inventories. China, in kind the that all a and normalized normalized inventories for event channel of but of

Operator

with Jefferies. comes next Boroditsky Saree Our from question

Saree Boroditsky

a Could talk what shipments demand market you from from back in January quarter shipment November, pretty heater any versus fourth quarter then through as October saw third color saw share strong you you the results? perspective? the about just in go what in or And on seem and water

Kevin Wheeler

than and got our residential side. fair our And little stronger expected share QX own we bit a on came in we and of the that. mostly we held

positive that nice so And a plus. was

to track side on it's a heater strong residential close -- month, we of our water out would I the side remain think actually And towards how I strong. of guidance. being you, particularly about mean, mean, was see comes talked But the specifically. we've I business. the I January, the X% early. tell being January will to it's orders up in business. continue X%. that I And pretty

year, off a year. pretty good across to good I Again, start. orders where X-month strong doesn't just And about make X but are we're month tell we fairly a in would at. view, we're So starting of businesses the a feel all you, our

Saree Boroditsky

year flat at World despite of Rest or the XX% for higher this The expectations from sales. margins

that you to talk offsets maybe just about So there? expect see some

Charles Lauber

Offsets for next year?

Saree Boroditsky

on of on Yes, side margin. the Rest World the the

Charles Lauber

I'll China. speak to mean I Yes.

first, China China, So X%. to we're in expecting X% growth

very our have line of top that looks and that XX%. going growth in new investing right products, products, outlook Next around similar margins year new in and looking to promoting to in maintaining kind we're be China

China operating the So roughly margin is margins same. year-over-year in --

I really growth continue think of India. look maybe we're leaning at in on to growth. our for we And in rest world the overall outlook you invest at is India, you and look when

to to in So and put we're India year. pleased would XX% India. we're be going continue kind invest of of in We our -- position to to outlooks to have profitable like in continue in certainly, next growth a growth

Operator

from question Longbow David with MacGregor next Our Research. comes

David S. MacGregor

by asking I start tankless business. North the want American gas to about

You you fill? talked could how context of the top its channel terms impact contribution the of of initial that in impact, margin about timing the what within of you are should pressure. to we talk basis And revenue terms XX the expect But of your thinking in the size about line points of that and guide?

Charles Lauber

expecting China treatment I about a and so X%. of pump on growing of XX% within are tankless, are meaningful top of that In in we're within amount year. but so the them in overall India, top We've if heat XX%. We've on the growth got it's to kind I at in X% pricing. mentioned tie boilers line America back kind to roughly. to at ones growing just X of got over not to the XX% that the Yes. in very look we're of to of on all and $XXX number Kevin talked then to growth growth, it back just North the you And next part X% way all growth North million X% a drivers growth got same that America kind similarly the overall there's contributes years. revenue pleased sized that guide this line. a largest we've And it water of type -- growth, mean I'll

looking expect in we be XXXX, we but when a to So It'd get year would little there. we incrementally contributions X. start we're lumpy be to out, probably as for

Kevin Wheeler

Yes.

add of to it. tankless on Just the side

a speak taking technology building manufacturing. we we'll own ground, on are already orders the the frankly, been market, with late importantly, as more little which bit And line. and we're we're in first features But for we're quite excited is about We're that premix it our March. a We the all condensing that product inventory we the product bringing that, in hamstrung the launch has one, we've it.

band, connection, rates. So two inch flow half-inch better

So our in is excited about team compete. to getting able and all being -- market the

the So indications and customers product. the about to over as years. from about lot pretty gain that we'll will product. a are of excited Early mentioned, start start excited be the March. in ramp will a But year momentum couple We're Chuck next this continue of this

David S. MacGregor

demand I and what new. seeing is you're there? about But good, in across if I better, still seeing Analyst Got of just Meeting, of terms segments it. X-segment thinking you segmentation share model. you're wanted right wonder what best X pretty realize talk And AI as the you now. At market outlined kind a follow-up, I dynamics a just link to ask could could what those China. if about you you're

Kevin Wheeler

that, of But it's the much market. not Chuck down seen held not sector change market pandemic growing, good. mean price it. good our on our I'll on jump I will Yes. We've touch on I premium not that maybe in would we're And mix. in we're even tell And is you the how year but products, we're and our It's the that up. of and into premium has end throughout last the into looking holding. premium going XXXX, low -- even

same grows it confidence considering that over not being needs as good about as the pretty last the several it as our and as that bit. looks a has to we mix be, look we years. at consumer consumer And that as feel so relatively is And the the upside engaged

Charles Lauber

to Yes. just some that. numbers put I'll

we kind core gas in that are X,XXX and mean, we treatment market X,XXX sell, now. I it's treatment, right above And been water of while So code the range, on XX% around and in China. heating for XX% for for it's water of a the water market heating products sector RMB premium sector water define which above to a our RMB of lower the the XX%. But the premium on a ZIP quite little electric been

So of for probably last years. couple the

a So certainly steady. pretty but seen it's decreased, change, haven't hasn't been

Operator

comes question Stifel. with Next Nathan from Jones

Adam Farley

for My significantly in with sheet is Farley very relates strong is Adam on to balance a Nathan. a position, question cash the position. good This underlevered

are I'll could balance on sheet? optimize pipeline? update plans maybe leave And an your provide what M&A So to it your the you there.

Charles Lauber

in the into we'll we're Sure. position M&A, We which opportunity that Yes, we talk underlevered. an for going like are about.

continue kind investing manufacturing the about little to of with building going approach. talked capabilities in investing projects which on Tennessee. for in capacity that invest in in have continue some are bit Lebanon, commercial facilities have then gas earlier high-efficiency and balanced our for tankless expansion We major I ourselves, to a X of R&D we a

we We've ourselves of to on major sure doing got share buyback on. We're in our and million doing the So bit for projects have $XXX in make buyback. a XXXX. continue invest right the also things share to we're outlook three going

some We feel We of It's to reserving as of continue we high. into though, go that look Certainly, look tell. that's those we're feel kind investors' always opportunities as to expectations in to we're a position, capital for this remain we're to forward We XXXX. always opportunities maybe then opportunities difficult continue great an like component year. for the underlevered. to within firepower M&A. allocation And appropriate

Kevin Wheeler

industries. our maybe that even only we I our in pipeline geographic mean I would active. to but on continue is and levering look within at various that. just have water potentially not And treatment spaces our and customers footprint expansions we certainly core, to add

different on spots a pretty of the a engaged companies. on So regular board. number basis a with of lot We're

stay not that company to timing find return Smith. in that, And again, -- we are that but shareholders. sure yet of matter at A. the sure us again, within going we about. culture exceptionally to important of we we O. for On and just acquisitions, a disciplined top our can we fits that the But making at right making return is the when look comes look when

good in the some those really we'll about all XXXX. pipeline, that home see of in and we putting feel So if we can context, bring

Operator

moment for question. next One our

Kaplowitz Andrew from comes question with Citigroup. next Our

Andrew Kaplowitz

up want China. margin, XX% just on World I the Rest XX% of follow to in

margin spoke dial Investor need in? that better of products and Chinese the over work? years. for you advertising next you that How at basis does on the and soon Day, kitchen about points to economy will help. obviously expansion do XXX new the a promotions Or start your improvement to kick Do that You several down

Charles Lauber

cost that. in leverage we going in out We better now backdrop to level so at get growing a I is feel we about but We feel to are can reignited the taken situation a good need economic at. mean achieve we where we've we're forward, growth like we we've larger the that really economy got formation that need market kind of to We the a the house get housing formation. portion need back. of Yes.

pleased We're it's their the As most water of on a heaters new construction. even moves an into you go the heating when XX% know, if side. replacement we've water got home in individual

in will with So resiliency we're economic expansion. need business very the we're kind that the help but at, meantime, we the levels of to happy of some at achieve the

Andrew Kaplowitz

good in And color. had industry then heater gears, helpful water commercial North year American That's 'XX. a just shifting

the So but maybe you've in growth. comparison a 'XX, single-digit low dialed difficult in

So 'XX? the have can up you end you holding talk in that about to visibility market

Kevin Wheeler

low electrics needs particular to you of business a gets it had But exited in It industry its versus to get of almost normalized majority did, up But went of and overall, that category place we had and out if growth greater from to get single at be. back than look growth growth. start down to -- it's a small digits, that to came that. electrics where and primarily category the which small we'll it we've is level almost mentioned more XX% Gas back of to benefit in XXXX. But that it the some the business that to we had held a change, underneath go back held -- to We to regulatory be going commercial saw had of large, XX-gallon kind and large that as break electrics. times a it and couple showed well. We to up it growth. Yes.

come restaurants, exercised continue particular And the that XX% get big just in to else's. -- still market is share we market growing, everybody and part about for that category you should as nice still know, continue really very foreseeable for future. going category. each So still have been, business like we us. residential hotels our we And like expect replacement that that they a back online There's of to is have continue. discretionary versus units replacement And to talked are a replacement

Operator

comes question with next from Our Vinjamuri UBS. Srikar

Srikar Vinjamuri

this on I'm for morning. Damian

America question North pricing. quick So a on

March. X% November happening the So What's to price you and I what you pushed the increase announced some Did reason increase? got for to was pushing wanted there? get pushback? understand it in a

Kevin Wheeler

The market. Yes. that as make cost bring evaluate bottom We is discussed, before are today pricing costs. keep addressing our to And say sure really all what's each of pricing our early the to really within make we -- customers on, on a increase side going time our that's we where the on always customers to strategy this. we're details we're that the we going line we sure fill We we're is. here. always competitive price And at and

Srikar Vinjamuri

China. a quick follow-up as Okay. And on

of You seem and growth treatment. is from to appliances water see coming most kitchen the

water going So color I seeing your XXXX. just get into China to on what wanted you're for demand in heater

Kevin Wheeler

we maybe about a newly stabilization Overall, business I our premium of little products see we've on products side. bit to treatment, commercial earlier being the we are in of the water seen kind of do Most sold into introduced. some treatment Yes. that relatively the the then core year-over-year. consumables kitchen what's flat particularly see XXXX growth and relates overall, mentioned water in that growth were

the in for we economy core good or but our relatively So we're at for spot flat when products. think a does come we're looking back, year-over-year

Operator

the to remarks. for does At would conclude I session. closing to time, the back turn call Gurholt Helen like this question-and-answer That

Helen Gurholt

everyone, today. us for you, Thank joining

quarters global our that reminding on XXXX. come. delivered the you O. team We by you A. progress conclude our Smith me forward Let in record in to sales to updating look earnings and

three X. Thank your February February and In XX, day. to on you, on presentations of and addition, on the calendars join your XX Coast please rest conferences March enjoy quarter. our Citi Barclays mark this North at

Operator

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

You disconnect. may now

A. O. Smith (AOS) 30 Jan 242023 Q4 Earnings call transcript