A O Smith : Report (bd7613c0 c50c 4bb1 9e76 2dadca3b41a9)

Published: 2026-04-30 09:49:11 ET AOS

Published on 04/30/2026 at 09:49 am EDT

‌First Quarter 2026 Results

April 30, 2026

Stephen M. Shafer

President and Chief Executive Officer

Charles T. Lauber

Executive Vice President and Chief Financial Officer

Helen E. Gurholt

Vice President - Investor Relations, Financial Planning & Analysis

First Quarter 2026 Results 2

‌Forward Looking Statements

First Quarter 2026 Results

This presentation contains statements that we believe are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the use of words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "continue," " forecast," "guidance" or words of similar meaning. Important factors that could cause actual results to differ materially from these expectations include, among other things, the following: further weakening in North American residential or commercial construction or instability in the Company's replacement markets; failure to realize the expected benefits of acquisitions or expected synergies; difficulties in predicting results of operations of an acquired business; negative impact to the Company's businesses from international tariffs, including any new or increased tariffs that could also trigger retaliatory responses from other countries, as well as trade disputes and geopolitical differences, including the conflicts in Ukraine and the Middle East; further softening in U.S. residential and commercial water heater demand; negative impacts to the Company, particularly the demand for its products, resulting from global inflationary pressures or a potential recession in one or more of the markets in which the Company participates; the Company's ability to continue to obtain commodities, components, parts and accessories on a timely basis through its supply chain and at expected costs, including the recent volatility in fuel and other material prices; inability of the Company to implement or maintain pricing actions; inconsistent recovery of the Chinese economy or a further decline in the growth rate of consumer spending or housing sales in China; the availability, timing or effects of China stimulus programs; uncertain outcomes and costs and other potential impacts of the Company's assessment relating to the Company's China business; the failure to realize the expected benefits of restructuring actions; further weakening in the high-efficiency gas boiler segment in the U.S.; substantial defaults in payment by, material reduction in purchases by or the loss, bankruptcy or insolvency of a major customer; foreign currency fluctuations; failure to realize the expected benefits, timing and extent of regulatory changes; competitive pressures on the Company's businesses, including new technologies and new competitors; the impact of potential information technology or data security breaches; negative impact of changes in government regulations or regulatory requirements; the inability to respond to secular trends toward decarbonization and energy efficiency; and adverse developments in general economic, political and business conditions in key regions of the world. Forward-looking statements included in this presentation are made only as of the date of this presentation, and the Company is under no obligation to update these statements to reflect subsequent events or circumstances. All subsequent written and oral forward-looking statements attributed to the Company, or persons acting on its behalf, are qualified entirely by these cautionary statements. This presentation contains certain non-GAAP financial measures as that term is defined by the SEC. Non-GAAP financial measures are generally identified by "Adjusted" (Adj.) or "Non-GAAP."

‌First Quarter Performance and Highlights

$964M

Sales ($M)

-2% YOY

$946M

EPS

Segment Sales ($M)

$201M

$753M

Segment Earnings ($M)

$175M

$12M

$0.95

$0.85

-11% YOY

Q1 2025 Q1 2026

North America Rest of World

Highlights

Net sales decreased 2 percent to $946 million

EPS decreased 11 percent to $0.85

North America

Sales increased 1 percent

Pricing actions partially offset lower residential water heater volumes

Leonard Valve contributed $16 million

Rest of World

Sales decreased 11 percent primarily due to continued challenges in China consumer appliance market

Segment margin decreased 250 bps to

6.2 percent

First Quarter 2026 Results 4

‌First Quarter North America Segment

Segment Sales ($M)

Segment Operating Earnings ($M)

1% YOY

$(12)

$749

$16 $753

24.7%

$185 $7 $6

$(23)

23.3%

$175

Q1 2025 Sales Organic Growth 1

Acquisition Q1 2026 Sales

Q1 2025 Earnings Organic Growth 1

Acquisition Input and Other Costs

Q1 2026 Earnings

Sales increased against a tough comp as carryover pricing actions partially offset lower residential volumes

Leonard Valve contributed $16 million to sales

Weather-related production and shipping constraints negatively impacted the quarter

Earnings decrease primarily due to lower residential water heater volumes that more than offset the Leonard Valve earnings contribution

Pricing benefits more than offset cost inflation in the quarter

Weather-related production and shipping constraints negatively impacted margin by 70 bps

Segment margin was 23.3 percent, a decrease of 140 bps

1Includes volume, price and mix

First Quarter 2026 Results 5

‌First Quarter Rest of World Segment

Segment Sales ($M) Segment Operating Earnings ($M)

$227

$(34)

-11%

YOY

$8 $201

8.7%

$20

$7 $12

$(15)

6.2%

Q1 2025 Sales Organic Growth 1

FX Q1 2026 Sales

Q1 2026 Earnings Organic Growth1

SG&A

Other

Q1 2026 Earnings

Sales decreased 11 percent primarily due to lower China volumes

Currency translation benefit of $8 million

Operating earnings decreased as lower volumes in China more than offset cost control efforts

Segment operating margin decreased 250 basis points

1Includes volume, price and mix

First Quarter 2026 Results 6

‌Cash Flow and Liquidity1

Free Cash Flow ($M) Cash Flow From Operations ($M)

$119

Q1 2025 Q1 2026

$129

$39

$17

Q1 2025 Q1 2026

1As of March 31, 2026

2Includes cash, cash equivalents and marketable securities

First Quarter 2026 Results 7

$204M

Cash balance2

24.7%

Debt to capital ratio

$412M

Net debt position

~700K

Shares repurchased

YTD1 totaling ~$51M

‌Capital Allocation Priorities

Organic Growth

Acquisitions

Dividends

Driving organic growth: developing products aligned to upcoming regulatory changes,

investing in productivity and continuing to build the strength of the core

Disciplined focus on transactions that expand/grow the core, enable geographic growth, expand technology capabilities, and establish adjacencies

Continued focus within North America Water Treatment and Water Management

Five-year CAGR of 7 percent

Over 30 consecutive years of dividend increases

Share Repurchases

$51 million in Q1 2026 (~700K shares); Full year projection is $200 million

First Quarter 2026 Results

1As of April 30, 2026

2Excludes the impact of North America water treatment pre-tax restructuring and impairment expenses of approximately $20 million to be recognized in the second quarter

First Quarter 2026 Results 9

‌2026 Outlook and Assumptions1

Diluted EPS (GAAP)

Restructuring Expense

Adjusted EPS2 (non-GAAP)

2026 Outlook

$3.60 - $3.90

$0.10

$3.70 - $4.00

2025 Actual

$3.85

Revenue Increase

~2% to 4%

U.S. Residential Water Heater Industry

~Flat to down

Commercial Water Heater Industry

~Flat

China Sales Decrease (Local Currency)

~-LDD

North American Boiler Sales Growth

~6% to 8%

North American Water Treatment Sales

Growth

~5% to 6%

Leonard Valve Acquisition

~$70M

North America Segment Margin2

~24%

Rest of World Segment Margin

~6% to 7%

Free Cash Flow

~$525M to $575M

Capital Expenditures

~$70M to $80M

Depreciation & Amortization

~$100M

Interest Expense

~$30M to $40M

Corporate/Other Expense

~$80M to $85M

Effective Tax Rate

~24% to 24.5%

Share Repurchase

~$200M

Share Count - Diluted

~138M

‌Finding a Better Way:

Strategic Actions to Deliver Greater Value

Process Intelligence and AI Tool Sets

Focused on improving customer experience and productivity

Leveraging process forensics to identify opportunity

Developing AI agents to enable performance improvement

Optimizing North America Water Treatment Business Model

Operational Excellence

Focusing on strengths of the business

Consolidating footprint and brands for greater scale and efficiency

Restructuring charge of ~$20M in Q2 2026

Annual savings of ~$6M to $8M

First Quarter 2026 Results 10

Portfolio Management

Innovation

✓

Operational Excellence

First Quarter 2026 Results 11

‌First Quarter 2026 Messages

Total Company sales were

$946M and

EPS was $0.85

China appliance market remains challenged as strategic assessment continues

Strong free cash flow performance of

$119M

Restructuring actions announced for North America Water Treatment to enhance profitability

Confidence in underlying strength of North America business

‌Appendix

First Quarter 2026 Results 12

‌Free Cash Flow

First Quarter 2026 Results 13

($ in Millions)

‌

Disclaimer

A.O. Smith Corporation published this content on April 30, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on April 30, 2026 at 13:48 UTC.