AOS - Earnings call transcript Q2 2024 | A. O. Smith Corporation

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Operator

Good day. Thank you for standing by. Welcome to the 2024 Second Quarter A. O. Smith Earnings Call. advised to conference to hand speaker Helen be would being your Please today, like now the Gurholt. Instructions] that is today's recorded. I first [Operator conference over ahead. go Please

Helen Gurholt

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

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

queue. rejoin If you the have multiple please questions,

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

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

Kevin Wheeler

tracking water and week, year. Please I'm for record the team morning, Thank are everyone. and And increased water Slide due a EPS. quarterly billion tenth quarter, to due increase results. leading the and sales Smith the acquire achieved action. gas and second developed higher a Asia. currency that in welcoming India in sales America X. quarter, internally A.O. XXXX and and to We $X our second and you, boiler good signed very third-party currency. team began local actions. Smith year. our Pureit with are and delivered sales of business O. EPS $X.XX, pricing our we X% XX% South market consecutive global North over grew to the residential pleased our growth to turn how the in local quarter. acceptance. shipping an heater XX% with to in announced last second pleased second agreement quarter we China performance for tankless products the and commercial manufactured we we heater and Slide to volumes look A. later X% In this quarter purification forward grew adjusted I'm of higher the water family We very quarter X Helen, American Pureit, pricing on North in sales double-digit volumes

to see to sales levels am I as channel a Our return compared commercial growth higher grew inventory boiler North the by volumes. of America driven quarter year, pleased XX% to last second normalize.

acquisition-related products commercial of HVAC lower weakness by local water sales retail on continue Hellcat for boilers, treatment. XX% boiler sales water outperform of are offset partially with the well X% volumes by channel. In third-party quarter China, were of as partially that increased residential a year. Sales as in North America offset increases the technology as our kitchen X% were our the We as XXXX dealer currency sales to to boilers in track increased products treatment of second in forecast result to sales CREST sales achieve market. X% particularly our of

While premium heater of market the share markets are in categories. we with challenged, our water products core and the remain water portion pleased our for treatment product

achieving living is the we sector our the to are Slide values year, It's also a on reflect in good celebrating recognized for emphasizing to now name, our mid-price and pricing our of XXXth citizen. of good However, promotion continuation X. on profitable XXX those This and years the innovation, market. I'm time growth, values. a gratifying It pressures, being work have particularly anniversary. those of a to we be place preserving being of seen good

core O. and employees' far advancing world's So Earlier by our team was ethical our ethical leader the A. to practices. most this one honors our values. reflect global defining that the of companies named standards Ethisphere, dedication Smith business in XXXX, in year, several a has received of

In Environment efforts. and Nanjing XXXX addition, China energy management reduction resulted and Nanjing in our as model our has Protection one to in innovation selected waste being recognition of plant our emission of the commitment enterprises,

the a Excellence our energy through Award from EPA of received year products. for to also sixth row, our ENERGY Year the a STAR Sustained commitment in XXXX Partner We for management long-term the

named U.S. In were we XXXX addition,

U.S. News to for Best Work Companies in Manufacturing by

News Report. & World

who for our satisfaction reward the now on receives turn owners more our call performance. for employees doing quarter the over the These second values. our provide right our details as validate living our will to values team a the and While thing Chuck, is and differentiator stakeholders. I'll

Charles Lauber

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

earnings, support segment our which to XXXX were America increased earnings as volumes volumes lower compared a primarily the reasons were boiler driven compared Segment higher basis with was Second driven growth higher costs that pricing points water revenues. higher expenses year-over-year. America decrease including launch our XXXX, quarter. quarter higher XX.X%, and and increased segment XXX more products. higher $XXX margin by steel a The offset adjusted selling earnings to reviewed heater of partially tankless increase pricing with of due and segment margin actions. well was $XXX segment segment initiatives, offset segment than by were sales the as by in North the X% of volumes I year-over-year X% The gas in million, regard to the with North million,

unfavorable tankless kitchen Segment segment Slide with intersegment launched increased categories included products of in sales primarily our third-party in well in driven Rest recently World water growth currency of treatment were water particular X% e-commerce, sales currency to products, China in lower million markets. China. India essentially sales slightly flat by constant HVAC quarter, increase residential both with retail sales driven partially strength the mix promotions grew the by segment heater end compared X. of year heaters. in World related segment and XXXX, The due $XX as of was Rest earnings of associated treatment $XXX and million, on the China. in earnings local unfavorable to $X sales commercial water Moving offset basis. partially to the to million higher approximately primarily a translation XX% as to sales and sales and currency by of last water product and decreased in of

higher first Third-party as XXXX, the of to during lower generated margin $XXX than payments same by with segment increased XX.X%, as balance $XX balances. Capital higher of of decrease a slightly earnings was sales flow year, higher well year-over-year turn margin incentive driven operating and year period projects. the from our higher record expenditures million segment and payable inventory Slide primarily as cash and We associated million in accounts last half free than last which profits expansion receivable a result trade offset X. XXXX. Please more

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

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

Now let's Slide XX. turn to

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

outlook of Pureit XX supplier million last a will Kevin an approximately position treatment our range As Pureit solutions double penetration premium strengthens from of offers Asia. $XXX market product our and as support The by sales of footprint. Please XXXX guidance a in to EPS The water of we primarily acquisition of to We global strategy and acquire our EPS. has XXXX our mentioned XX distribution has turn compared Slide South range premium earnings for of India. and million. leadership increase Pureit to in portfolio represents X% Unilever earlier, adjusted outlook. not changed residential and and to share. an EPS per our products USD of midpoint agreement water corporate annual XXXX $X.XX purification range with also signed The week narrowed our and $X.XX will an broad enhancing addition expected our

products that key XXXX manufactured in China products to of roughly in what including; based similar assumptions, internally stable assumes full a guidance the as steel quarter. XXXX, guidance our will XXXX. We non-steel the also in is XXXX, supply similar material shipping These capacity were be year second XXXX. and on in our until costs costs experienced our assumes environment America tankless assumes our manufactured our being designed our began chain are outlook XXXX North flat in is relatively a completed to outlook in we our throughout they gas facility Our number are

will moves and margins tariff America points XX North Mexico. when import to eliminated will tariffs Associated costs Juarez, other impact basis approximately in production launch The by be XXXX.

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

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

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

Kevin Wheeler

outlook compared We grow reaffirm following sales will assumptions. Thank you, X% to that to XXXX which our XXXX, the includes X% Chuck.

America increases Our of price residential heaters. price quarter. We a in and in pre-buy commercial We announced the both increases is most of water pump outlook to our North of the see on began for water water half realization [indiscernible] price of demand X%. heating some ahead heater that for first the year Price heat X% includes previously the of products increases in the forward products. second pulled believe

in year. the unit U.S. We orders industry to have in last in volumes our that projection seen pre-buy, softness July. normal flat to our Due we be to maintain some residential XXXX seasonality

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

new weak. economy that and construction and consumer year. In last at home will believe remain to residential we assumes China, product similar outlook remain Our levels the replacement confidence

demand. in see consumer continue headwinds to We

X% between and half are XXXX in our the While of third-party about local maintain we currency. sales X% we be cautious year, guidance growth second the to

assumes forecast X% impact currency approximately Our the a year. for of negative translation

We last reaffirm to expect our XX% over to year. that we sales boiler grow X%

X% of margin And segment XX%. Please Our World approximately be guidance America water our also third-party of our the sales turn on North to segment growth XX%. Based treatment to an of Slide for is unchanged. XX% to XXXX America assumptions, North XX. we expect be Rest increase approximately margin to

We first are the in XXXX. strong the pleased We half we saw heaters which with our growth in the was by first the year, of half partially driven prebuy. of performance believe in water

pleased we higher business benefit as inventory transition energy North normalize the from particularly see in boiler to growth efficiency to We a to and levels boilers, America are commercial return to our in applications. continue channel

will product that will and we're will for categories will track strength remains our treatment double-digit sales projects growth, add complete in the India. well capacity growth. us the projected Pureit expansion acquisition South of capital in brand e-commerce excited Asia strong complement for and residential which our India brand key the long-term North the us will water region, on to in #X year. and channel another America double for premium track sales on Pureit's year later X position this make are company Our in

our to we Even the treating our for innovation questions. advance key employees, now prepared around in on partners, executing strategic and your customers position the as remarks, leadership with a available meeting and we celebrate our our heating remain anniversary rich of priorities customers of focused and needs globe. That and we concludes history water XXXth our and are

Operator

[Operator first Summerville comes from Davidson. line Matt the D.A. question Instructions] of of Our

Matt Summerville

and we maybe moment, both spend about I Rest the questions. about hoping Chuck, America margin of and of could year the the couple how half kind thinking cadence World you in the talking A a back of should minuses be in given of you some describing? of were North pluses was

Charles Lauber

happy Yes, to.

a back North clearly, price first mentioned the increase. our strong we of the a we for half the believe had be of If prebuy cadence to in you American market the look a bit year, X at with months. We what

kind that at bit probably you volumes then So very of a North in because prebuy as as at look challenged of QX, and QX. similar being to America, we QX look looking some of

So bit third on little where in to margin product. will what a follow. cadence the with headwind and economy, of quarter I first mentioned. the the third in as solid headwind tankless half QX China, we're coming return momentum in continued the weakness fourth a little the Margins volumes The the tankless QX be Kevin a back of on see bit the still quarter gas in by year, will challenged in the would off, volume in we -- say, quarter. In of were

as into half is fourth our strongest we this always, As of go year. the to back be the expected quarter

also believe. We've within China side, and China, the a sorry, of -- be both quarter America. I'm July challenged Third bit bit in orders, we a North volume both within seen weakness will on on -- and

So volume on and headwinds, the a quarter, little it a margins. a will to and third bit the of an start little translate of that probably slow impact will into leave bit

Matt Summerville

comment Got your And remarks, mid-price on China? was on a little you it. bit? then think maybe competition in price in a follow-up, category. I And mention as bit a in looks picture elaborate the the inventory point prepared you about channel that could like seeing maybe Can more a what there

Kevin Wheeler

Inventories on. is that Kevin. be base expect to in touch much range. pretty we where X-week I'll to are them Maybe This X-

weaker nothing meaningful. competitive ups What it's very forward. There's downs than we So go that and is been. it's is, Consumer mentioned as a we demand market.

consumers cautious. bit the are so And a

carried saw we're kind So well. and bit of activities, QX as in over QX, more, seeing would a into I promotional it say, we that's

you our done remind also I every really growing that Again, don't also overall, think local we areas market. And it currency think China it go in X% very a we managing headwinds, competitive I have our look consumer We're we team of team competitive to well. has selective want if job some I how is very those chase to order. in a in at nice growing some people has balancing in that dynamics. are well. really market,

well, HVAC well, You products commercial the treatment look and is business. our of so at doing was water kitchen doing our are part

the So side this other water being treatment adjacencies made also diversified and having as has we water are it on difference -- heating helped and a in difficult market.

it pleased So managing right we'll in that overall, I'm we're half very China, and of the back in year. the keep

Operator

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

Jeffrey Hammond

start the to acquisition. just Maybe on

or for kind Just and X sense of rate give from the of the what the a opportunity in of business a kind been business has profitability profitability standpoint the of growth us years? last

Kevin Wheeler

in of the it to acquisition Well, I'll general. about part take the first and talk just

want well. to really I business First, performing go to is our back Indian

looking plays for brand stronger quarter solid nice been team that's dovetails a We that a a e-commerce, complements our both general with business, Pureit our after have business. to trade in India inorganically. market. business presence executing It organically quarter. that we that It's in that they're and in also have and terrific retail And management have scale a role nice And presence. retail the today, our we're

not We're overlap. next -- right not business other. is premium have each We're products exactly positioned doing we the well. a brand. overall, It's So do to

the We're on ground going So a to the our going you it and positioning, manufacturing, difference. the the doubling be whether and infrastructure at to we're the business overall, logistics, to is make excited if big about bringing in that team It's leverage scale. be look difference you it, have brand, to going product able name there, we our make also it. a our on,

doing doubling the like with our nicely sets is a Pureit brand premium forward business So close. -- we in really premium after excited we're company up as a and go

Charles Lauber

India looks Srilanka, also similar wise, -- I very profitability. to the but years, they've $XX of good financial of a business business business shipments some also in Pureit growth low India, I mentioned has from same business Profitability in the growth to growth. a as And of very Vietnam, brand, in India similar last mid-single-digit Growth-wise, to in very what in region. quarters Kevin a in they've premium very the million. couple experienced meaning but consecutive seen majority around our our is total, rates. of seen XX-plus their size outside roughly is Bangladesh it percent believe in Yes. and the profile, XX mean, similar today. it's And

up. way larger And continue growth leverage forward. hope to the coming with profile Kevin momentum as we financial opportunities together, the that for we're as base would a we matches look to pleased on go the line So said, bottom and

Jeffrey Hammond

like on lot half capital, the capital Is the just back a we second working then just of couple had expect that much And first it Okay. timing? years. to much you working seems last versus Do the in bigger a that of get build maybe half? in

Charles Lauber

Yes, back timing. it's large It's a being the little bit half. for it water tankless we get heater timing. up, of built in expect second part, but the to It's inventory

Operator

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

Susan Maklari

is, and the that back reverted you some how to growth half in [indiscernible] My about or path the from here? on mentioned driving the quarter. in thinking the that comps any you're the face comments growth talk first of and question saw sustainability you Can about it? that you what's Just back

Kevin Wheeler

transition from our side off Susan. we but it's we to And active. continues came kind has our it, models last That year, of at about mainly be. standard where look you overall, high we quarter thought difficult we're would If still pretty efficiency commercial the a business, on been of quoting

always well mean, are is but hellcat doing that's Order you Backlog to well, good. They I being continue products has done strong. really in the technology have of rates been top boiler received Our the that. And market. CREST add on well. the just good. be new

So than of up, positive. the industry. is The slightly overall, I is And a on segment the overall business, just doing also the well. better industry think we're that's the doing side even commercial residential

but from some it macro some our XX good, we're that well environment had off years, really plays Lochinvar and into seeing So the comps, focus the high-efficiency to real we've X benefits is and easier again, and coming over that. overall

Charles Lauber

And just the quarter. X% the easier comps when but fourth the mean comps. quarter, third to comment get get and cadence quarter-over-quarter on I up this we're on we to

So we XX% feel very comfortable X% growth. to with the

Susan Maklari

That's about helpful. think bit to impact there quarters America Okay. then How steel. trend turning And come a perhaps the that North seen to overall, recently. We've down the coming flow-through of that pricing? to and just for the business you the over do any quite

Charles Lauber

XX%, Yes. I By the come mean said little I the steel a bit. way, X%. boilers at has grew down

It's just I'll So growth correct a quarter. second that. for the XX%

flat we're at has As we outlook look our steel, thinking still year-over-year. roughly

we compared about first QX As went year. to last quarter steel It about by second was quarter up higher than XX% the XX%. mentioned, in

a So up. We've a some bit ramp there seen was of steel. softening in

As XXX you recall, to our is XX lag days.

as the because of issued. as they all half quarter, of of the all back in into been look to kind fourth that a little then we baked look our indexes haven't bit we So QX year, see haven't relief. quarter-over-quarter, of QX, we with at lag, And we the

XXX monthly that you As you know, pricing index days to the look, sets XX out. a it's as

of was a of the the outlook And of index expect relief [indiscernible] month what do bit we in fourth similar our to the June. little So for very issued kind quarter.

Operator

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

Saree Boroditsky

in rate? the all? some side. guided quantify stays with at orders And demand does line You just your that water heater July in Could assume softer you then softer on guidance the July this

Kevin Wheeler

a to Yes. believe months on an started a in we And talked do be the you But And going third the I we a But mention, there we to call. outlook bit May are to the pull heat and pre-buy, if also ahead. at forth. just because and there for of July into one quarter is -- weaker our the our in always see July. we're month was June, look about of the of so of really, softness and weaker one and summer think months, is

why do market we for year. why August to that's and balance we that's the through And going it's think rate get the So into we're the holding September. tank-type flat of as U.S. a return residential

back think entire lull what it's So us but a temporary year. the just our has to for it I been forecast gets

Saree Boroditsky

ship are a impact comp to sales next the And from then there? second the turning does what you do tankless from perspective this challenging the And ship seeing just to China you quarter. demand then modeling, to tankless, North a when some create to on is year? segment you started in America year? And this What production

Kevin Wheeler

coming you, a again, we're low a Well, of share. I -- market mid-single-digit would tell from kind

the go away our ahead and schedule, which track, year, is the we'll assembly have sort get touch of end on of ready make to a well received So launched XXXX would the the the Chuck perspective we've going want in first. And And that's by We're maybe us. difference XXXX. manufacturing -- from we easily been how high. having give as had high-end any this start QX then you we very will going number forward. Again, good going customers. I really is view tariff on towards this products of pleased a more in customers, model line big product adoption and sound forward. to coming we don't of and complete by it's our I'll a and have start margin they launch. to expectations again, to X very do launch we'll But that. numbers our a factory a And some by the for in hitting to condensing Juarez in at because bit are with they The and Maybe

Charles Lauber

and product the America bringing at positive take Right. to believe all long the tariff. costs some the of way time with comp it's all when XX% I from North a back lead mean, perspective, Saree, we China. the ourselves We at move associated away the We logistics from Juarez. to

Juarez very positive So to we're when category. up at a upside really start production viewing tankless we is our

Operator

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

Andrew Kaplowitz

You China. mentioned pressure promotion [indiscernible] pricing in

I XX%. think Rest guidance your for World there but talked about a bit, you of obviously margin you little kept margin

sort question guidance actions What my pressure? sort anything is, difficult doing to forward? So moving is of cost are or of margin how price that else it lingering maintain you to offset

Kevin Wheeler

Yes, it I'll not when and only the business. now went maybe in. a will back the price It's on then of tough even our Chuck also But cost cautious but as and balancing market. talked touch we they about of we're variable our first, than We guidance. jump pandemic, said, promotion, doing terrific And a are are job our through lot fixed. team we our way more a is costs

we're it. premium just we're so balancing a Again, brand. And

Again, a is level, mid- So upper the It's China management team in year. evaluating we're a they taking kind to still we're in we're that easy, most not be that of half of a on are in navigate can our we're clientele. But I the in level. pressures through the of confident of overall, market to different think our that tough And different higher mid the but it's way not second approach. it. going part targeted receiving And a the the environment.

Charles Lauber

and to variable store very position more of -- over like profitable business volumes Kevin costs few to be out in bit. take China. some cost a quite challenges footprints structure within less as change feel And flexible frame pretty time said, COVID us actions took a closed some of to the cost good our about We the our Yes.

So similar last able work kind at very percentage. on for XX% cost through being focus at year, and to it to of we'll now, think We Right be China year. anticipate got about continue it. to watch continue to the we've I that and

Kevin Wheeler

we the quarter. side. in introduce few we're HVAC building our in of half water back mentioned, again, a some momentum momentum Yes. products And Chuck is our commercial And in We're year. new building treatment. QX the will strongest

we very together think it's combination the but doable. putting again, So challenging,

Andrew Kaplowitz

Got it. of like same just sure ask it. margin, like make to I America, want the North And question I maybe terms understand on in again, the to

So steel still slightly better.

incremental But And flattish also than like sort holding think, the of the launch you Is headwind, said. anything in that's or versus talked you modest headwind I basis maybe I costs, investment said a a about being you points. higher little expected? XX a back. You're is you you I margin lighter guess previously saying light volume. there else what is little QX know

So any would color be helpful.

Charles Lauber

I mean talked don't basis that tankless we margin nothing margins. on does about projection think mention full I launch just we've cause talked -- haven't We'll of spread I'll the sort That new. points XX%. year the pressure some -- XX that before. that is of to

it's into QX So clearly, QX, heavier as QX. we launch it, and weighted

back half the the into area only thinking probably the that's So of take bit to say account as year. a you're margins of other little about of headwinds on that I would

Operator

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

David S. MacGregor

when in we should selling America. I that And the how I the at rollout? American that guess modeling North gas guess Can how year-over-year half? focus expense through you talk the all expense tankless increased I also, about exclude you to on North selling second wanted be in compared

Charles Lauber

Yes. structure tracks on cost So expense it selling volumes, based right? I really mean our closely on is with basis. a largely commission

as So to higher sell we we're more expense. have going selling a product,

to from products time also level We with emphasize initiatives to different drive a time. commission different

mention somewhat launch way does expenses. think, do is to tankless it, look volumes it of and to flat out We products. at the than it just variable, of kind I So the tracks closer best

some higher. driving the So initiatives launch we've tankless of that's that got products little bit within number a just

Kevin Wheeler

And manufactured our offering, than with category mean, partnering be excited from designed. own the I from we're that just in rather It's going about to is tankless being own perspective going I'll Yes. somebody. our we're add, to North and internally America.

part and to this we're understand first All this promotional the we're expand and could benefits does, category. we going make of everybody activities. to they into long product benefit for product So them us forward get year, training, the the going how understand going some make that people sure -- in compete some product get market, important can we and is promote to for features to term what sure this the how really really can the

is but this it's make good we off a off a we're start. that and sure and kind product one that expense, the onetime to So of get going lean to into

David S. MacGregor

for And to in follow-up last you've guided up think what have as XX% What's then the it. X% right guidance? way about compares how year. Got business, boiler you profitability on and a with to may year the to the your

Charles Lauber

business, you commercial Well, volumes When being being XX%. product we're X% us. talking boiler the that at it's helps about look largely to up certainly increased a

in So growth when improvement than that further it's category. you've that product segment an got

Operator

comes Our Scott of question of the next Seaport Graham Partners. line from Research

Scott Graham

tougher? of months the fact, sales not hold your weakening volumes? thinking on of a change industry Is are you're [indiscernible] half from anything? maybe flat. now, a little in really flat you going you quarters to the we with about market of And want in a into second U.S. careful It's past with of comparisons more message no the water little the flat little to year-to-date. get point in -- because maybe course I half quarters given be unexpectedly, So there's that the first bit comps talked view. of know so couple number, maybe are that your this leaning resi thinking certainly even bit the last in Or kind the couple trying tougher, to up -- resi, is,

Kevin Wheeler

[indiscernible] that last we to we're it it's Interest single-family we to family, again, Yes. We've message. look a pretty was keep flat. same I you you year. really relatively going always off going And came multi stay trying to thought is the if think replacement, look, be or forward, going proactive probably new which our at strong year would construction, flat. rates felt always whether don't

So that year, tankless, But how well. you forward we and at in we're year now look we're back residential months. We're some of had and bit a next growth the even the to strong and going a and very down the give on good as saw growth little we of a X% see pre-buy, pump the gas flat to both then when surprised maybe back trending some comfortable kind step forward with you kind just we commercial more you look than thought. as a heat in pull maybe some started X

we coming and back where think that strong very is, flat residential So the we're market to with outlook just get very based track just trying comfortable year. on a really off

Scott Graham

Thank you, Kevin.

So similar question.

margin -- have that wiggle On in you making in for in is change yet didn't quarter, third here that fourth the I'm no actually there of weakness American no kind the segment -- you're margin? you some on wondering, things some kind why? and/or that quarter so, calling North room are because more maybe And pun just it either, you're if is there you of seeing the attended. change spot margin, that that bullish you

Charles Lauber

volumes. would say we're is We mean end about we still we'll to it in up. some No, I believe where were XX% on nice more bullish. QX really that I be going

that of to on line. little drop challenged bottom the assumption. be to the would A at lower steel a last our we that because volumes then and volumes least little more will some get will outlook than back back QX our in So

kind of think our up. end where a is look we little when feeling opportunity there we'll we midpoint side steel on we're of the quarter ago. a But XX% still is So guidance the at from bit of of kind

Operator

question next Our from Damian line of the comes of Instructions] Karas UBS. [Operator

Damian Karas

heaters. of may water seeing I you was wondering us if pump what a for an give on update you're bit little heat

some New of seen of up. and ramping lot allocation, states really finalize those IRA York we've think kind others I a like their

could into year? us product? of the expectations pump the next with been How of and kind the year through seeing heat you rest trending what it's you've So been tell

Kevin Wheeler

is you category, Yes. to one, very specific. just that, and start still X% -- want I I market, with would the always tell growing a but it is calibrate, of to it's

the over several You of I other XX% grow promoting we've parts years, but New a we That just York, growth of nicely. really that forecasted next to that continues it. California, QX. mentioned to in XX% mean, are pretty north were kind

So momentum. still it gets

We're more in distributors a line. having a great and stock have more We retailers broader product and it variety.

a everything. So availability good that's is . thing,

above But it growth albeit So that certain it's continues grow, in had, we great continuing. and category the again, product. to a our overall, we've It's see states. well

a one It nice just has have to in. product great planned payback line. It's We be a story. needs that

it up helping growing that quite markets in And it's and putting money and are purchase, so subsidizing with far, the front the well.

XX% several the years, again, we So and forward next that. going there was XX%, several had QX, nice a points above

Damian Karas

list. Great. rolled that on back if getting maybe on just American could Congrats That's product touch then And good out. the hear. to tank we North

distributors the about an of kind and your such us just tank Can or other of Or they color been wholesale of more is type your for relied have your talk of you're the bit a switch sort sampling manufacturers [indiscernible] your lot of you a [indiscernible], of the distributors? product? would for past. know on just have from all to Are have across give your in and little conversations in like. they hearing could make? that more Any you seeing receptivity I tankless products [indiscernible] none on what and country as what kind it Now

Kevin Wheeler

would I pretty market described Well, you, the tell well. you

but are. able tankless be hearing so some relationships is so have have at I we and think, I not distributors, and they and think really tank-type When forth, market we the us. our from what is we like have to only look competitive and that We we're distribution you and and on be there the and commercial, still with long-term buy there, the And meet sell important. to our from to optionality commitments also

do the we're in that And every competitive take overall, look compete move market. line years I a our very I us do let well. us lines? I is own then expect do their to one going now. to our answer very destiny forward to again, But distributors going gas think and drop to So adding current control of several It's no. to their tankless forward. product product we inventory But The to

great the tankless as gas happen line forward to with to our have I of what's develop. support We going distributors. our look from next few kind years

Operator

showing like this I'm to would turn back Gurholt now Helen at to time. closing further no for questions I remarks. it

Helen Gurholt

for us Thank you, today. everyone, joining

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

please addition, a XX, September XX. X Thank and presentations conferences Seaport mark Stifel Davidson day. August our on to on at have great your September In join this calendars quarter. X D.A. on you, and

Operator

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

may You disconnect. now

A. O. Smith (AOS) 23 Jul 242024 Q2 Earnings call transcript