AOS - Earnings call transcript Q1 2024 | A. O. Smith Corporation

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Operator

Good day, and thank you for standing by. Welcome to the A. O. Smith First Quarter 2024 Earnings Call. [Operator Instructions] Please be advised today's conference is being recorded.

to Gurholt. conference Please like speaker to now Helen today, go would hand over the your I ahead.

Helen Gurholt

Investor Helen Good A. morning, Vice I'm O. the Financial President, Gurholt, Smith First and and Quarter Conference welcome Analysis. Relations and to Planning Call.

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

corporate earnings and non-GAAP exclude segment the of website. impairment from of expenses. provided expenditures, order and provide are improved from flow adjusted of earnings, provided we appendix to business, expenses measures Free per to presentation the transparency cash results the share, capital end our In non-GAAP defined this is impact GAAP operations adjusted earnings at in cash as Reconciliations our adjusted into the less measures. adjusted on measures operating

include queue, matters A courtesy some friendly risks are the follow-up in cause in turn. this release, press to different. be others to as and conference statement answers to materially morning's question others. will per comments this actual Also, limit risks question during our that among and a yourself be that could forward-looking to one one subject reminder that call of please we results that described Those

If rejoin you have the multiple questions, please queue.

we We can will as website be using call, move you today's our through investor.aosmith.com. slides access them at on

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

Kevin Wheeler

an global Chief we experience strategic manufacturing operational focus and A. to innovation Officer. continue will to I'd as and value. off acumen accomplished experience is Shafer, prove Smith global and warm everyone. innovative leading Thank extending deep morning, as has shareholder in to like start businesses. enhance with who O. performance you, on driving to invaluable His and business leadership extensive leader Operating joined Helen, good our Steve Steve welcome by recently a

turn on to Slide quarter now Let's the X.

$X, a in material $XXX basis increased mix, steel. adjusted XXXX XX X% principally increased A. EPS. of points and delivered increase sales sales lower margins North positive XXXX Smith to EPS team Our segment of and costs America over volumes due O. million global and X% commercial higher a

Our Rest sales contributed of In in currency XX% quarter of in products the recently China growth. to X%, the in sales India, the introduced majority of segment, grew XXXX. World grew our local first

influenced mix increase Please turn the pumps. X% sales high-efficiency first heat heater effective commercial North price due gas including favorably and higher X. water X. to positive our America in March to towards Slide products, quarter by volumes and grew commercial were Volumes a

by However, were quarter year-over-year muted comps somewhat XXXX. a strong first

Our North were XXXX. first compared America of flat order quarter the to sales

we effects until do destocking begin of year. the to XXXX channel last a not As second the inventory see of quarter reminder, the

softness residential levels our CREST and XX% with in in grew commercial orders sales North over high-efficiency pleased X% the the Sales and specialty by quarter quarter. and the We XXXX. were channels of of Organic in channels. XXXX, treatment boilers wholesale by to e-commerce pricing. the in Hellcat growth increased see sales acquisition-related sales America water growth normalized offset more are first to returned driven of direct-to-consumer retail in our technology

sales third-party increased in local X% quarter first China, currency. In

generally received launched pump the Sales growth. in and opportunities Kitchen with boiler HVAC heat a sales continue be increased of heater currency XX% the local recently quarter to products bundling as combine that overall well water Our which drive the provide well. combi in market systems

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

Charles Lauber

Thank X. you, Kevin, on I'm and everyone. Slide morning, good

heat XXXX X% of driven the compared commercial mix towards including water segment with $XXX America a increase were First high-efficiency benefits shift volumes heaters, quarter sales in higher the by North million, and pumps.

compared X% were with mix America increase North increased driven segment lower primarily segment and XX of margin and higher points by XXXX. $XXX was in expenses support and costs, The earnings sales. XX.X%, of higher material margin year-over-year. an Segment offset selling of by advertising positive basis earnings million partially

X. of The $XXX the sales on of constant of China. million currency kitchen including to World products increased higher primarily primarily Segment million sales $X HVAC year-over-year, Moving was driven currency to million increased sales in and of Slide $XXX China. third-party segment of related Rest unfavorable X% by a translation basis. X% increase

in local and treatment growth by XX% both India end driven sales markets. and quarter, with commercial in water water the our strength e-commerce currency heating increased particular in in

$XX to sales of and segment adjusted new XXXX, Rest associated product with to segment compared earnings China. product earnings of in in the mix promotions million decreased slightly due World primarily introductions

operating margin segment adjusted basis of points segment XXXX. to decrease was in margins compared XX X.X%, Third-party a

and result by turn profits associated million XXXX, year We inventory primarily of than payable decrease months of the to Please free X. generated offset sales lower projects. Slide a earnings flow $XX higher the of cash increased expansion a more year-over-year, payments X with last first million $XX that record same driven period incentive expenditures higher higher year, and accounts during last and as levels balances. Capital from

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

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

Let's to X. Slide now turn

in lines to development we product capital new opportunities for In innovation of all geographies. continue investment and see across growth, and our addition organic to shareholders, to returning product

Products Smith metrics first of A. growth supports accretive cost earnings business. treatment Impact target the expanding year strategic the meet our years. Coast return and as family. O. of that in our to Water water by our In our strategy the West we to quarter, first presence in financial X Impact the capital We acquisitions welcomed

expected Slide Please XX our $X.XX EPS. adjusted XXXX per range of of We EPS compared The with increase represents outlook. turn $X.XX guidance and midpoint EPS to XXXX range our share. in an our earnings outlook of X% XXXX an reaffirm to of

second the will be quarter. compared in number key steel of headwind quarter that steel slight a assumptions, over the on full including costs assumes XXXX based of guidance to an XXXX. is outlook approximately in increase first XX% year our input the a We project Our in costs our

Our price includes decline index steel full half the projection second of steel input in the a slight year in cost year. the

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

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

our internally facility in is introduced products We this capacity These tankless earlier China XXXX. in America our will manufactured be our completed designed and manufactured North gas products until year.

customer expect shipments the second in to later We quarter. begin

tariffs by other launch and we basis margins points impact America XX North import approximately Associated begin when will costs ship product. negatively to

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

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

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

year. shares million to million to our estimated of to diluted Our $XXX in effective is XX% tax approximately continue $XXX repurchase be XX.X% expect our shares outstanding the end stock, resulting of and we at the of rate of to between

XXXX, top call XX. who markets segment over turn line expectations more outlook for on to now Kevin? and staying on back will the growth provide Kevin, will I Slide and color key

Kevin Wheeler

to reaffirm that grow flat industry which We will sales We and approximately you, includes projection volumes be our will after a Thank growth outlook compared the XXXX. residential that X% assumptions. Chuck. our XXXX seeing to unit last X% X% XXXX in between following XXXX, maintain U.S. year

and home year. remain levels new that to similar Our assumption at proactive projects construction replacement last

Our is projection low single increase water commercial will that volumes heater U.S. in digits XXXX unchanged. industry

America heating our price water products of X% the in products. increases X%. includes outlook heater increase of on for water is heat North Our announced Price pumps most

of as resilient and orders. orders of markets economy April our believe demand estate and challenged. remains China, and real confidence management are In weak. are strong prebuy The Our the housing in year-over-year that result we consumer a

have in We Through and signs have we seen improvement. not April, headwinds consumer of seen demand. March

to the we our seeing, softness and are in sales lowering economy currency. flat are third-party up local growth weak continued be we X% the guidance China to Given XXXX in

currency We X% XX% reaffirm backlog that our between quarter the X% we assumes ended year. and second business to expect last boiler with and strong forecast approximately translation in year. negative of impact the over a boiler grow for a Our sales

This revising reduction of for sales average to is are in We North XX%. channel, reflection from water of to our XX% retail our treatment products our growth business, America of a guidance are an water price to direct-to-consumer X% order in particularly an experiencing softeners. we softness increase for XX% increase

margin margin to approximately we Based expect on our Rest and be to XX% segment assumptions, segment of approximately XX%. World our America third-party XXXX North be

Please turn to Slide XX.

growth in the XXXX. heaters, this pleased in quarter mix year-over-year with performance our we order along in month. are water are in commercial residential early We rates had pleased strong with and are seeing a We with we our and first

India is double-digit growth. on another for of track projected sales year

capital categories initiated North expansion key will that for America. add During in projects three we the quarter, product capacity

facility. to our our is residential ground heater which currently broke Production XXXX. tankless as our we targeted in will First, eliminate same as tariff Production well in manufacturing China campus water the in the Juarez products logistics on current is improve facility. manufactured on as on Juarez, facility in begin

Carolina. our our This commercial product. for heater will water high-efficiency launched In products, South expansion addition, increase our our gas high-efficiency capacity McBee, expansion including in market-leading Cyclone production we

the Energy impacting commercial will eliminate from products heater reminder, late efficiency market changes lower As Department of XXXX. efficiency beginning in a levels largely water Regulatory gas

R&D facility with facility. commercial roof engineering product water engineering under the we combine our expansion our boiler heating in Lebanon, cross-functional initiated allow The heat and our test support technologies heater commercial innovation pump. our and markets, expertise one lab Tennessee commercial Finally, have particularly and collaboration, mutual and of state-of-the-art of will for like within water

the but to three in are off we're early start. a all good stages projects, very of We

our we priorities heating always, customers executing our the focused a the water to well meeting in position remain As as as leader as needs our around world. treating advance strategic on key and of

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

Operator

[Operator Instructions] Our comes first Jefferies. Boroditsky question with Saree from

Unknown Analyst

on James Saree. for is This

wanted to ask I water So quarter first heater demand. about the

your So in came expectation. than year higher January and full February shipments

about into kind talk from can you the and what in quarter first demand potentially April? water of saw heater So you the

Kevin Wheeler

February price up really saw was was and increase. a January prebuy a you based that on and if due Certainly, and that to AHRI portion Yes. of data, our

starting We in our residential business. of forecast and to the normalized XXXX flat see a get back more a the coming at on side and expect level March to of

the are We a be down backlog, entered strong in we'll second that quarter. really working -- with and we April

orders we're And X% like the We prebuy did. a would It ties thought. our got it working and thought fair have feel And that. was not into share we from on We we second down through the but again, kind the our of we did, our we it that of expect where much probably as and behaved of end. customers. as it right work our year really -- forecast track, backlog in and to remain we'll quarter,

Unknown Analyst

wanted Got it. the And I to on here. touch margin

you're steel cost expectation. North margin of come think at segment end I America like the for range higher to now the So a while looking in maintaining

more So you provide of for margin color on expectation can increasing North your America? kind

Charles Lauber

Yes. to XX%. had previously $XX.X guided we to I mean

coming plants America Now quarter, situations we're some performed by in bit in the saying that. came margin well We're North January, and a our very with had first helped the very weather performance XX%. We in mix. nicely, through approximately pleased

So the the it's in kind just of it at and some look of up, as are kind moved slightly we confidence way range operations top running. the end that of

the going coming pricing up. have in, We April costs time with steel in frame

pressure know coming the be tankless, feel the we there's later So year that of back in at of we we the comfortable with costs XX%. looking way and out considering in and launch But the some the us to bit started through pretty part of a the closer kind with full half. year of will moving

Operator

with Mike from Halloran comes question Baird. next Our

Michael Halloran

not sequentially pressure to talking When pressure Chuck. Just you front to you're half, right back said year-over-year? the half, you clarify in versus what mean want there,

Charles Lauber

lowest we that costs the sequentially. America about Correct. in is margins, for We're our year QX. steel thinking North project

to excited quite So launch first actually. see year pressure pressure as just the we're steel then in production our tankless the some get Mexico, product. bit on we the bit margins going up points. of relative until a to of X we'll being, headwind for it's back a be a in running And little But XX basis quarter, to time America to quarters the of of North about

Michael Halloran

margins XQ a is front they're XQ all touch right? high watermark? you're regardless. just So what might down decent still suggesting essentially And then be decent. then half half, from Well, the is back

Charles Lauber

XX% QX for Right. we're then about saying the year. XX.X% and in

Michael Halloran

how the the seasonal earnings margin then your bit? is earnings year in shift does a you through, to you're and seasonality from context of normal flow these a So that Or could around some put relatively nuances this expecting perspective?

Charles Lauber

and of Yes. When when Kevin a as look water heater we pull there's first whole in. at the our projection quarter. at kind is in noise And still bit quarter, think in balance volume, you year, about kind half the of typically XX-XX look still of it's But mentioned, the historically, boilers are it's half. -- back third stronger then from there's you

relative Mike, on hope So a is that us we it's way our that, have margin. prior bit But the mix we would help normal, pretty would to years, outlook.

Operator

Sachs. with Maklari Susan next comes Our from question Goldman

Susan Maklari

first that you characterize channel on the thought where on second residential the into that Any inventories quarter? the the side, coming first stands? given how forward in the mentioned My is, -- would pull of you quarter level on question

Kevin Wheeler

basically Yes. you, line. on have the forward, Inventories even slightly well they'll I be work that to feedback off to that will are quarter. second going up. There's in in to based but we from pretty distributors, pull some all our are tell distributors the doing one, our

So of don't positive are right pull our what I through certainly, our thought, in second our mode. sales a the they're overall we It off but the this forward, being And kind starting say this worked industry. gone wouldn't with see with we crazy things distributors. positive, year think a more in pretty whole positive times is that line quarter. unique many was not up in distributors. I thing in We've it

Charles Lauber

that the quarter. some was just within I'll forward the of add pull Yes.

You came February. through saw the strong data out that on AHRI

work saw increase. For of of March. a through bit we in that moderation price kind us, we as

Susan Maklari

to right. commercial. That's turning And helpful. Okay. All then maybe

the that spot as bright a You highlighted in quarter.

you're it Just color seeing into summer? and any the sustainability drove on the further and the what go spring of strength we that that as

Kevin Wheeler

I you're prebuy was last is year there bit with than a think increase commercial. market, the which kind a if and back making you a lot greater electric. nice there positive we in up there's look was the One, points a What of saw had gas commercial it the And of of couple in was to regards we was that as quarter, well. commercial different XX-gallon to digits, surprise. mid-single a

We going pretty buy, but in We the will of it's overall, think don't be gas. that of all our be the electric we that think that's And said optimistic also that part to industry, was in going still low that to category. the single-digit majority commercial come growth. we're

for favorable, the in year, single-digit we're right line -- in So really and that rate market. growth I and low with commercial the think

Operator

comes question Matt D.A. Davidson. next Our from with Summerville

Matt Summerville

of to growth you if treatment, your kind on touch to how with A to constant this. Can X% respect positioned, you newer will? those the couple just kitchen in X%, groupings main and of questions, currency products, relative product you apologize you the X% that to I touched of expected. categories, But China, X% product some see water and HVAC do heaters, if water on

Charles Lauber

Yes.

bit So lower we We X%. X% X%, And it to did at last saying X% grew guidance. Matt. our were year, to we a

as seen We've seen on the And X the come kind end some we've first core April. of demand through our in what through a year. the that months pressure of we've of of is of in bit products

the kitchen year. we've products, seen slowness this certainly, the of we launched with We've end products the the that of bit launched core products, market a last in at year-over-year newer

be It's process. that early to So in on well just they continue received.

on pressure rates seeing a little order the April. through of So bit

Kevin Wheeler

in And Yes, how saw to that are in tie targeted some time March very particularly we approach. heavy we took that QX, maybe into just the approach promotions, we frame. we on our market an went and selective

a and premium have We much. treated as there brand really

and of you big with about water to it. But water We're look a So the concerned in part some saw not there. softness of of heating product had there's forward, treatment we drivers that. couple that as do

estate overhang back coming the not there. the just and is is sentiment still from Consumer real market

that's moved So down -- we because we seeing we're just what what -- today. it

know that fair watch positive we're and in up in and feel categories, still spending balance our kind But of, flat our rapidly. China, comes I of how profitability sales think, when being business. very we we're we're that going and you that As selective continue to getting pretty share on to to we're it to for promotion, the money the China going we're product to change be expenses to things market, still can our of

Matt Summerville

what's a business of China versus in driven as still China? And remind us Got you feel then new? it. you your And replacement China, of inventories follow-up, then by is assessment channel much can with sticking your today how

Charles Lauber

I of pretty We're that range. is estimating normalized now channel on Yes. in XX% XX% in side we is mean normal kind range. heating replacement to is inventory -- right about water believe the business they're that

help business does of buffer drive resiliency to replacement portion to have volume. a China our in our of that of So that kind continue

Operator

question with comes Jeff KeyBanc. Hammond from next Our

Jeffrey Hammond

plant is do opens of So impact? just XQ And forward quantify then full Juarez? Did some in or that open you think headwind a just the from the year you And here. was plant you clarifications pulled much this to what you can think get kind headwind and to that prebuy? point product, XQ that basis shipping when XX happens how from quantify the once you

Charles Lauber

as of pleased of the updates is start mean, the We'll roughly. an the annualized ground. a progress. mid-XXXX production we we're construction go, broken We've And facility kind basis. made Yes. It's on full is basis Juarez. with of in We've scheduled points that good give I but XX impact. year

QX, data of It rates price in of that. estimate We as do March. in pull little always the saw a The are volume. Order to in through felt the volume it's still that some quarter. bit have February. difficult a a We did drive wasn't we quantification bit through that we of X%, increase, the a forward backlog, April. huge exit relief strong though, Clearly,

outlook, So was but don't it We believe some. quarter, doesn't impact in our there significant a not full year the amount.

Kevin Wheeler

make to Maybe just this. on a comment

going than price pretty We how much been first a market. has business is was go I going all. residential our we are industry the that where prebuy, really or to with think flat was through How the people it's we've We again, to to because our be at. it's of pull try into But less so. going out prebuy good realized at our as We going just the and have forward And the month that limit And for amount the also it's need we much prebuy increases. difficult to XX quarter. to next why wash days. bit. volumes And that's don't think going they're U.S. outlook kept itself the change

Jeffrey Hammond

And how sustainable how by of IRA on then much from shift, Okay. being you then kind is product driven this that do the and or support is? clarification mix kind of mix of just shift high think

Kevin Wheeler

replace of -- in efficiency. shift, efficiency the as their would replace a mix that I higher gas lower continues the existing to side from business, those I'll always we've leader tell the been you continues that products with to efficient Yes. people and that separate high

to East. the matter. Coast number And they regionalized this in rebates programs And going where pup, the -- heat side And out with of very of matter. on certainly regulatory we're do but and the there's XXXX. parts they're more of the there, On West

been on onetime, XX% the this XX%, years. we heat a on not for as the So last year X see we've XX%, pumps increasing

This years. that onetime. to XX%, as of expect few going an We get and a growth closer continue kind next to XX% expect to going we over It's is that's be ongoing growth, to not XXXX. we the

Operator

Our next with Graham Research question Partners. Seaport comes from Scott

Scott Graham

a April February maybe was said strong. Are going AHRI the numbers looking little bit quite that I of not March, We're to differently. less XX wanted works being February all sure was Because at that prebuy then that. followed down if days, you to up, the March question that numbers down? than data, understand and obviously, and then see suggesting you I into ask I'm we're

Kevin Wheeler

everybody what Well, XX in pulls we prebuys I mean to is XX It doesn't that days. said days. limit

I've prebuy March as look to level. as of And we so in we out is our and normalized. a mentioned going see March at forth, on. -- The to which what everybody become as more percentage remarks will March, be increase more scripted be focused starting in down back an February, normalized will year-over-year a so

into already still a prebuy necessarily QX. is doesn't orders at a some been looking just we forward. shipped there's a as again, be and Chuck we're And additional always mentioned, mean So as get out bit this how there. of It pull quarter to is out shipped that in it's the maybe

negative we of it's going go of based quarter But quarter going year. we're that to the that is read is flat a kind today. go perspective a on at know it -- where a more into to to of to X.X volumes rest and units what That's It's staying from million the year. normalized we back see be be that the to second X% -- we nothing going to we're stick, there. There's as going nor

Charles Lauber

we've on relative a I'll orders add seen just Yes. pretty And basis. in strong April

drop Scott. So we haven't that, seen in a

rate. of times out decent also and order Kevin So along managing, with through manage said, some seen the and extending We've pushing to bit order our then the a rates kind orders April. lead as of

into about quarter. So pretty we feel going good the second

Scott Graham

like? really business. question what guess one was quarter you Could a us boiler tell very looks my other simple did that how that and The in I backlog housekeeper. the it. Got

Charles Lauber

the for flat was quarter. it Yes,

we a comp inventories recall headwind our bit channel quarter down. worked decent We quite in we you then a down got pretty on a a boilers last first really if and had backlog had in So year, bit coming of XXXX.

last boilers year. we challenges saw some in So

go we've comps got easier So forward. we as

to X% We XX% rate. growth good about feel the

it boilers. strong. feel in it's commercial stronger both is we backlog to And year. other than And years, quarter It's into highest in last was relatively a going is second Our relative residential. the strong bit typically quarter strong, third and

Operator

with comes Citi. next Andrew Kaplowitz Our question from

Andrew Kaplowitz

you us what you weak slightly usually, Can Did in you're Margin you margins? think, like World just in in thought. than something your year more Rest Rest I And the for lower of I keep give then seeing World that? have sales QX, color of higher despite maybe margin into advertising China. did expense or is slightly seasonally same the growth weaker the

you So still good you're about that. up feel it stay looks margins Anything like doing at to make that sure levels? those

Charles Lauber

Yes. mean, margin always the a largely quarter lowest challenge is Sure, margins. on as It's for our Rest you China World And us China. Andrew. first I usually in is know, quarter. of

with expected what it line quarter. first So out wasn't of for the we

We haven't our full outlook. year changed

that You're the top a a to with going line. those confidence great the a variable we little look China at job team right. But bottom SG&A guide is continue did has bit. of have lower on team, line manage and We even lower more to taking a our costs flexible, in volume done being more the

So yes, little a top the on line. bit headwind of a

always we about the still good is range feel First but year. full challenge, quarter for a that

Andrew Kaplowitz

little Great. did your lower there. American forecast And on you treatment, just water North then a

side that end into tend it be helpful. elaboration Maybe to the fragmented, our inventories said visibility think just a bit of more would that bit direct-to-consumer side channel and it sort just little about was I on around talk does visibility more the market, on be you weakness. how

Kevin Wheeler

Yes.

five market. different in channels. certainly a fragmented think is I We're it

little would the in average is you was visibility our was and more to just softeners the the our it, bit thought more of a price like. as as just bit highlighted for from back we things side business, demand two being of consumer the So rebounded look be. not clear it But on cautious. going at highlighted we the that where And also pricing consumer people water we orders it a if then lower crystal just and side hasn't

delay there's more sometimes a can people I that's discretionary just think of item it. --

really spends we're being with seeing. things more just these two So of wrong fundamentally We There's about. a I It's we're a those going We really channels. some bit still mean, feel XX%. didn't are up about acquisition it's make discretionary that that puts us to are which nothing cautious. of matter in the X% consumers again, business. good the excited be to California, an

each challenges, there's of within a little So America has but North got and treatment the a going channel on also side. it's own lot business its water positive good things

Operator

comes Damian question UBS. from next with Our Karas

Damian Karas

I that appreciate and proactive all us replacement. this around where Or around XXXX? choppiness the on I of changes color on some there any give you you data inventories. the you distributor an maybe versus perception exiting your just AHRI hoping update monthly was still could XX%? of have seen Is we're

Kevin Wheeler

still We we holding it's percentage. kind in that every and really check No. coming quarter, and It's watch level. out, that right closely it's been because interesting, up XX% elevated, it's of normalized now it that at

no we change. consistent. particularly housing. And with replacement single-family And in the new always also our merchant seeing on course, remains like of So construction we're that, side, what

components up been the that and think consumer made several, are for volumes for I and overall, pretty have now several months. our the So of of and units are consistent kind way how

Damian Karas

then American And North tankless. a quarter. second hear. exciting, to Obviously, I to Good for you have Interesting. on product question start you're follow-up in shipping going that the

sense sales this I year. year Any orders about on you think potential soliciting for And impact us thinking a you've the you orders on been that chance able of can the since product? level how product? to already maybe up late give that for new you've are that been line last

Kevin Wheeler

out And $XX market. do of we And Well, new an orders tankers $XX really we've forth. to the look throughout about of one, will so the and we're incremental to product prebuy bring And as already we have yes, in-house million phases. excited kind and only our forth. tankless, and we that and modeled technology so it launch year kind that of in growth this come additional as million on

phased The product two high-end the the in But will month. also launching to premium is of next our what be we're product. going premix other lines we That's convincing half year. have really back be that

it, So own we believe for able being competitive we another excited and product which and had excited with that a go-to-market haven't year. the is technology about line, and very to to compelling

where and year. look the the of forward we're rest more as kind that's So get we at into of to sharing of that

Operator

Our next question.

comes Jones question Nathan next Our of Stifel. from

Adam Farley

Farley I around This kitchen wanted in a China. Adam commentary on follow-up Nathan. on products for is the

detail go to any products Just wondering expect China percentage and for if over could where you these you products of time? revenue kitchen provide account the maybe on in

Charles Lauber

Yes.

Chuck. our China. Kitchen in products is of business So this part still are very small a very,

kind of at it's cook steam tops dishwashers, look I in If oven. X%. year, that and the And around hoods, you full range include

those altogether, though and revenue products our an or of link of through China. around that it's bundle, more kitchen kind It's value-oriented very a and our having lump consumers. distributors a we you package the strategy small that sell our to in to part are still in can part AI So of give together important Link,

part So a very business well of our small fits our but into strategy.

Adam Farley

products are Rest And segment margins? to World these of accretive

Charles Lauber

growth that of margins average go and and to appreciate We're pressure they a cost of segment prepared and way. for bundle for we've margins. We've stability launching behind remarks that that launching mentioned that headwind in a them World promotions little the them. top a opportunities We bit are some them. the fact do and we line into our little us the provide There market Rest being of to as some on products got

Operator

David with from Longbow MacGregor Our next Research. comes question

David S. MacGregor

And acceptance about yet? impact you the you just out I and talk on commercial And by business? that model if pricing seeing can to X-step business. asking initial so, level rolled of about the have you're the want off start the the

Kevin Wheeler

during we Investor you talked Day? that our assuming I'm catalysts talked about two about step,

David S. MacGregor

Yes, exactly.

Kevin Wheeler

Again, a pilots. of been We've done out. number it's rolled

We various out customers. continue to to it roll

The early able right in models the We're different think I turn XX stages now, we're few So it still proposition to it of is of be into products able have it. value outstanding. immediately. a and to

you are up more much, you going up better. -- much but not importantly, served your that are you're capital, So to that tying don't and get your goes capturing inventory availability when customers

This is us a a everyone, on to stocking going proposition. but roll real the larger real continues that of and It's the program benefit our market So out. a be accounts. for to in commercial value not separation

be pleased leverage seem very that and customer. with appropriate very Customers with the we'll So it as to well, with continue pleased it. to

David S. MacGregor

still It's Right. early.

that. gave variability general year being in pricing. little exposure. on commentary how that of about about up residual then a uncertainty selling Got I your just much the portion remaining the outlook? But thinking this of remains then XQ is risk You you variability still about steel this follow steel indexed second and And there and ask wondering half. you the up steel you're appreciate price that much want risk for. product But Okay. How exposure, just I a XQ kind more the versus I'm what And to to XX% some is talked in or forecast?

Charles Lauber

mean the I talked see. lag kind we've Yes. of about that we

So we've a XXX-day visibility looking in frame. got a we to -- XX- of have time forward kind

time. kind of April, you So amount forward of that through look from see can we

for we opportunity changes kind the is look the biggest quarter of the of forward fourth or in risk as in steel rest year. really index to So

we've the covered amount visibility. a of from So decent year got

Operator

like further for remarks. at I'd any time. questions over call the closing showing not to this turn to Helen back I'm And any

Helen Gurholt

Thank us you, for today. everyone, joining

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

Wells KeyBanc June Thank and calendars Fargo William Oppenheimer on mark our enjoy please presentations addition, your join on In four of June XX, XX. rest quarter: at May the Blair day. you, this your on on May and X conferences to X,

David S. MacGregor

this gentlemen, does today's presentation. and conclude Ladies

You and wonderful day. a disconnect, have may now

A. O. Smith (AOS) 25 Apr 242024 Q1 Earnings call transcript