A. O. Smith (AOS) 22 Oct 242024 Q3 Earnings call transcript

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

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

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

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

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

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

have you multiple If questions, please rejoin queue. the

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

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

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

Thank on third you, X Helen. morning, quarter Good everyone. I'm results. our Slide and

I and heater than currency. XX% we our third-party demand years. North X% in local quarter our businesses X%, were North volumes. In dividend declined with earnings in and year pricing sales actions have October, increased consumer decreased had the decreased we in heater and compared America annually by in double-digit pleased increased America for North India. treatment we in China as last As XX the weaker sales quarter than offset well last in announced, water as our expected. the our dividend to growth lower demand sales boiler am America more water was China third previously by the water

end addition, to In year. by the track on the close of Pureit we are

to In decreased sales turn XX% quarter, Slide We currency the of of demand. third a the China, our result market consumer Please stable. X. position weaker-than-expected third-party remains premium as local believe portion in

However, increased saw particularly the and sector we pricing pressure, of promotional in mid-price market.

may demand XXXX. of announced consumer expect we softness recently a the trade-in year, government-sponsored government While stimulus through provide the programs appliance other positive persist, a impact remainder program and beyond to

led In for patterns related quarter end softening our demand their a price order our North times and residential reduce America increase water expected U.S. the than heater and softer a both market order and the both customers pre-buy adjust Canada heaters. water during in We business, inventories commercial and orders and to were believe reduction in lead a in our quarter. the in

feed product has quarter, resistant launched As our currently manufactured Early on which scale China our the innovative O. discussed, in design is in design. been tankless we and manufactured we have second facility. Smith positive our A.

have additional lagged X sales models launch in outlook, XXXX. While track on about the to remain and we we long-term are our early expectations, positive

our market. continue condensing commercial are in Our to the as to We growing sales boilers to XX% year-over-year with commercial portion treatment due America our we year sales share our of channels. the acquisition-related America boiler boiler CREST condensing and ] market well HealthCap and XX% believe led organic growth increased wholesale our sales dealer the perform in North grew quarter compared North the technology. in by dealer water [ last in

I'm now X. Slide on

opening growth strategy. North heaters manufacture of we gas XXXX our America. in to the As facility grand water our will support new year, projects expansion recently several for we this long-term commenced tankless on we have discussed our Juarez, in celebrated campus earlier where We

work start-up production to ramp-up still completed, is there a to the is early be While through expected year. XXXX, begin with in

added site also our capacity in pump heat increased additional water demand for the of same on support pump heaters. have residential We heat

we sharing together our state-of-the-art is facility, completed which on water Also, facility. commercial center, and our testing development our same and is product in on and heater to development product have Bayer located our enhance engineering This made progress commercial be will by expanded the Tennessee bringing as capabilities mid-XXXX site knowledge which new Livingston teams. projected

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

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

Third North X% sales lower sales segment boiler decreased and million basis to million, driven in pricing. and pricing decrease primarily XXXX year-over-year offset and water compared commercial by more higher treatment were segment of residential compared decline with by benefit sales volumes. was and X% heater water that earnings and year-over-year. a points the The volumes treatment $XXX were by and tire of $XXX earnings were quarter America margin lower segment the offset were heating actions than North XX.X%, segment XX America of water lower boiler XXXX. partially margins Segment as a

compared treatment our margin Slide to prior segment and segment lower decline material Rest water of and was in market. India heater million XXXX sales lower Rest our The lower by of partially sales, in China. core driven year. be by increased margins in offset resulted new XX% earnings in in China. as the local well that cost-saving quarter segment the segment the segment the sales million the products of of from water earnings to and sales continue World of lower earnings received margin, $XXX to X.X% X.X% last of currency to year. by in Moving were products driven million segment costs segment projects in primarily XX% X. decreased $XX World of and $XX.X compared The

balances. from flow cash months generated partially the by offset a lower result year of higher sales reviewed. period the free as There's We expansion accounts just the record higher of same increased $XXX been primarily X. last profits year, were associated decrease Slide million million incentive XXXX, receivable to first Kevin Capital inventory payments $XX to and balances. with X due that year-over-year a projects during growth-focused turn Please expenditures that of last

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

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

to turn I'll XX. Now Slide

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

of on water and treatment acquire enhancing and region, of acquisition in particularly in distribution by scale the premium product XXXX. This $XXX As for South close Pureit India. Unilever previously aligns end our footprint to agreement signed portfolio Pureit announced, million. track from to the our an acquisition of strategy is with Asia The adding

shares $X.XX Earlier dividend $XXX repurchased total million this Board X% month, in months approximately share. common our the approved to X.X per to X a million. first our for We stock XXXX a of quarterly of increase of

XX to Please updated recently revised outlook. our guidance turn $X.XX Slide an share. XXXX outlook range per and earnings XXXX of We expected to $X.XX and to EPS reaffirm our

the on our full guidance XXXX. Our a including number in that assumptions, key costs to material assumes outlook flat be of roughly year based XXXX will is

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

the projects our $XXX year-over-year and expanded between CapEx and year, several be an engineering expansion $XXX capacity past increase million million, from due the For years to capabilities. and should

are inventories expect increased to due and approximately approximately and lower cash of outlook million, generate Corporate the expected earnings lower from cash our free of guidance operating deposits be million a China. We $XX flow million. to to flow customer in expenses $XXX other reduction $XXX and previous

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

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

the Chuck. the you, In be for will outlook in we of flat our the revised which through quarter reaffirm we the includes experienced in to approximately the XXXX, market Thank following We that the sales third XXXX believe remainder year. assumptions. weakness China, recently persist to

by in from the impact we recently government announced minimal programs, programs expect encouraged we While the XXXX. are stimulus

China As to X% guidance of currency. our XXXX and we third-party a between X% be sales a decrease local lowered result,

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

have of their our current customers for than expected Our weaker will provided North we our orders heater With the the that been inventories the we inventories year. and levels lead July at and some remainder market, we water our of times, reduced reduced improved residential believe softness in have America remain since prior guidance. and backlog signals

our would outperform the we and assumed year-over-year. outlook July share slightly Our improved market

that the will flat U.S. year. our to unit project On last We similar industry year. maintain last projection will share be weaker remain our we volumes residential relatively to orders, XXXX

a last have increase single-digit the flat have mix been and our shipments water gas U.S. compared low to commercial for also industry-wide from shipments commercial the unit year. categories There approximately shift reduced where an in has We projection within unit electric have XXXX. increased industry heater volumes decreased to

in pleased are We both with our categories. share

included gas in the is X% most our that change increases as our up a and heater of announced in outlook. benefits The water approximately water the heating of products commercial price However, Xx X% in heat mix the average our America a are of pumps North heater heater. headwind price previously electric of on creates commercial a across water

Our levels outlook assumes proactive remain at similar to year. will replacement last

of watching However, data our closely. we'll on be market softening, signals end demand

range. our sales the lower previous our be boiler We end on X% of to revised approximately growth guidance

are We sales. our boiler pleased with commercial

residential order However, we rates. our see in weakness

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

the America our sales North quarter. with boiler pleased America heater third are and North water growth experienced businesses our in the We in China treatment challenges quarter. water

Although even outlook in quarter we though end we projects of expect in continue to water have sales the shopping are caution due market fourth China as quarter-over-quarter sales end improvements weak China seasonally some and holidays. America we volumes demand, year, quarter-over-quarter improvement stronger in through to expect heater demand our the the North typically around

sales with We North year-to-date in our products. growth for commercial high-efficiency particularly order are our business, the pleased America

Market continues. optimism

quoting activity. slowdown a seen have in we modest However,

the America, adjusted at current volume lead improved growth current in are the efficiently and business we with lower to the assessing North volumes future. to our and optimize to As rates times. our our profitable in more in manufacturing maintaining past, reviewing to leverage foundation a in while China, create operations solid lower still operate the have facilities In the align environment we we have

of XX% U.S. and of Smith estimate heater well volumes. through We XXX-year A. as navigating replacement a continue in strong and cycles. allows O. boiler demand water economic establishment our long to term to for has acquisitions. as all balance approximately investing represents ourselves That sheet history us through the XX%

our customers water. are on in and We continue our focused to treating servicing and leadership heating grow position

your concludes now That remarks, we our are available questions. prepared and for

Instructions]. [Operator

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

meaningfully Thank of think considering the we've your expect residential you. driving the North I your that My that first in I'm business, know based focusing right? the we around if the second you it first be year, the business. the heater been math what's will trailed that all, what in through industry of the If in just price in the on so, guide Good water going significantly would talk part on fairly the fourth pretty that terms is quarter. months? volumes morning, of guess, then I doing question can is big And the you industry of segment flat those you America seeing that commentary all, for to and everyone. several quarter, of third last to that right, moves reverse suggest and

Yes.

and think happens, get our some systems The orders. particularly our a generated to lead step and increase anticipated, even we an reduce let we me X% then out that that some line really -- working to And when little had that the our increased about normal saw bringing we it's we orders would on our cause price our and down a that and we that as quarter, again then I we And was, we lead backlogs call we our softness. kind get in of lead orders also mentioned, generate. and back And change customers would ] than in talked And then they to bit. inventories increase time. their distributors back times have ERP the just John a times second us, and as and more ERP systems our that behind. on had X% quarter [ generate pushed into start second

So but up moving there's of timing. market, inventory and been lot that takes is the some a puts just down and and imbalance the in deficit

you So a market. the share our shape, during volatile of times. experienced during look that share or just some pretty at when from happens good some fair some perspective, but it's customers just it We're their getting increases just lumpiness that price in we

have that So here nothing that we I maybe that the we still in work to work just is concern And through. about. something we're the our have from market we customers. saw softness through had tell It's only side would that concerned you we with our to that some

And in a couple comments maybe just of addition.

haven't really that But as we changed a full were industry, being were to flat thinking of we'd that floor flat up lot to as down. a the the flat as the I at in probably say goes being would And July, on probably in year of look flat full we flat, said, So with and ceiling and flat that. now say outlook. we is the it our there's year Kevin timing

gauge So just of that. to kind

the quarter, see we quarter, increased about feel September. good starting very orders going what fourth in really the we through have rate least trend fourth the at For August into from of at

for moment question. One next our

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

that's of making seen the push And to deflation of price America. Just if in just price March a I'm North harder wondering wondering stickiness increase. about it steel. in your lot We've

we talk you to are be know thought expect business And how back pricing step we And we I would always question. here. we pricing, competitive. to plan and as about Well, indicated. at a good would we're we our look where we what you, much of we But But the build it, our like how volume and was markets as and it's exactly according tell as increase the out plan. I executed

about. So a concerned it's but market, nothing from a we're competitive that perspective

back quarter. position fourth to in head feel is the And I Our our a always, always goal to as always come customers we're we goal our into competitive. keep is good

business then business. are has And significantly the Okay. on China. just and lower North uneven America the down I returns the been time some much mean, for than than

we sense as strategically over portfolio Just does you're that it of about months. XX, long get questions thinking business number increasing how wondering the last about term, the that XX make in an analyst,

U.S. the Smith Yes, long-term sit X at me Smith we mean that's be a is class where still long-term is O. markets, a a to A. third behind in the is right fair largest when urbanization has question. basis. there's have market I X economy the the second is together, It's forward be of the We'll China that a we in you should would a let you put and strong think And and in part strong countries and on look step footprint back. brands, of in middle organization. I those the going One from those And A. markets, upside back O. tell that. the obviously potentially economy. I company. lot participate markets #X India.

through we the in to the A. and Smith. albeit your some China. sense term, and some we make answer a we're in and the feel markets we're demographics markets in, more one go so long an patches So and we're standpoint, forth have that them O. through for economics upside, question still comfortable going very the see holistic But on tough

moment question. our next for One

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

Obviously, to business the together about kind the longer of you in growth And Jeff's of duration of I fair feel back mentioned? that XXXX we been I how context do late comment, was down you not a any beginning should that business cycle China. of sustain, on the in XXXX. period have just the thinking this on able follow-up a since thought early in China? be a bring has I multiyear to one. mean just is a getting you which like stimulus read Maybe this

Yes.

stimulus look little I need a impact. at to to But they a do government the are of think realizes it's have that early on again, canceled that's information ] more about. still need outcome credit positive that I China going mortgage it, think of announced We a do They've put something. the we you a of positive think rates I number litany stimulus construction the [ list, increase a side. to projects. down. They've think, programs restrictions, to They lower stall purchasing on as

part and the of stimulus, we it. that's important don't the However, still an of know size

But are market, our you still our it's look COVID. again, think distributors years, We when We proposition last the brand about brand, still out tougher particularly at a been the haul again, at Again, stimulus and there. But at value the talking programs, upside. forth. the our our you few of over coming business. look look about, there's people positioning, feel good so

going story. it indication it next that and prepare think the of we're how few a but Now business to start then looks But to of different do business some business don't we'll going over talked that? forward. overall, the business weeks, we out I our what come the means environment, when do in that, that get today. that, to we'll like for back good stimulus whole into our is what assessing and tie That's about we've forecast We

trend. what more like North bit America going little you pivot more of me Help to just business capacitized away there? gas. you as from about may it your understand be market on to then commercial what's electric appropriately Are mentioned And address sustained sounds in follow-up, a a a that today kind of

electric now year, the of it's be the gas in QX, and the in commercial. electric in year, -- QX bit of if we'll heavier being that a bit bit and an comfortable business, half And both side capacity and you but a And little helped back earlier in what facing comfortable of very us and a with recall position, we the about we're unwind We're of really Matt. from our we're our gas. and Yes, our seeing headwind, that. were talking both gas is on share a very with which the

moment our for One question. next

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

you heater on Just as can of think should benefit. the and switch because tankless just to of headwind factory us I world water America both it Rest the towards World the of XXXX, impact we a look through margin rest a sales but walk be, North maybe segments,

through it walk be helpful impacts So just next as of to kind we year. look those to

points Yes. We'll that far a of talking kind it actually for we've lot about as to the we're reserve in year, the framing talking full XX been means detail basis as tankless. launch to XXXX. But about headwind of year what it this and

As a mentioned, behind. little we're Kevin

less the be of it will the that little of most behind, because way, hit So most it weight, but fourth quarter. we're the a a will than little

would next of to expect as over manufacturing talked transitioning in course into be headwind. volume about, that XXXX. to we've benefits China our the the Juarez product the we facility some There's still World the a from But year, Going from perspective. of Rest we'll

and get will there fourth XXXX, quarter a January a of into frame end closer So headwind little as on our but we bit continued call. we'll be into the that

little a that does quarter? North us volume maybe how differ And the was up there a if heater you bit the more. case? How in industry. seems like why from the understand perspective you a difference, residential is water It Can shipments from And performed third America residential this are the help heaters the market? quarter-to-date in in just just water for into digging volume

is behind. you data the a Again, always month X Yes. or see

quarter, So at XX% down based the shift will. and the how September a that you range, on good we pretty in our industry that finished we look if having back

And it we going X% it's XXXX. the in the maybe as in that believe going that to it's year. to the been just we're we that's And flat why being mentioned, going we we've stick. we softening come exit slightly pretty it's rest of time to be the talked -- for consistent. don't about line number. They're flat thought where to down you're We've Chuck about, to further talking think So by

to comfortable. the So just I and to in is think orders going we're in flat. how be are out that very XXXX. play relatively the it's think timing going But We things industry actually

One moment our question. for next

Bryan next question Blair Our comes of from Oppenheimer. line the from

you. can if us, you hear can't hear Bryan, we

Bryan Blair proceed. from Oppenheimer. Please

moment One question. next our for

Mike question Our from from of next Baird. comes line Halloran the

the question there. just what an Maybe following sell-out just like on of kind from talk So about perspective. dynamics last up industry look

through that then more channel? guess, your kind you share it of your your look perspective? And specific sellout perspective? stable things So I of twofold. stable from what side I a the up sellout Is when kind backs of secondarily, at mean, data is from

would we And Yes. have sell you, down. we low that with post but basis. we regular we the that to up say information, by low digits tell I varies perfect don't of customers single -- have don't on are some distributors but are pretty Mike, a perfect market, single our it do out have communicate

think some bit kind are to of of I leaning more even. a them

and the up we that have but don't feedback for it's customer flattish kind but slowed commercial going we're feedback business change go forward. see is holding a And zone our market overall, But in the business. little there bit, now as still that our on both have. of that getting be based is residential we in we right the goes anything And things to

Yes. just is we proactive one would replacement insights of get that do I we add And survey. the that

And and relatively the same so did again we that quarter, it's maintained in this position.

strong. fairly been has replacement proactive So

proactive concern quarter. of right. this down a as see don't on replacement we movement So

from lose front at just of into as year? then And steel you're the cost price/cost of part the look curve thinking here and quarter we about trend of fourth the about maybe talk how kind secondarily, next on then thoughts kind and steel

bit the of to on little help a Yes. fourth will quarter steel. be mean, we've I gone

slowed But QX kind prepared XX% favorable, as a -- to to took timing maybe down think we've material I mean, that. remarks, got our in of costs steel price a we're So about lag and said experience also that from volumes, QX. flat. a bit other we the costs, we little of overall I our were movement is going tick relatively

to year still quarter fourth little and relatively -- are bit quarter favorable costs so a fourth the is other So the year, unfavorable, little material it flat. a

So price fourth we into stable cost, pretty feel the going quarter.

moment our for One next question.

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

And you respect replacement talked in what water earnings I that is you're impact guess to forward and guess just they about just conditions, half. your can identified to had talk your as expected extent prepared or America destock Are it upon these in demand North I just second multifamily having the proactive starting maybe to that builder it You've think, where softer what 'XX remarks in and slowing I about slower carry North the stable down? factors that? 'XX is Is activity, you with as largely slightly American as negative quoting to sense headwinds you've -- influence particularly this issues? is looking you a indicated the heater, on said. these

had proactive replacement I as we've guess take be that been it continues higher the X is mentioned, Chuck years I obviously just to would mean I stable. replacement at level. that it's Yes. And

almost now. trend So a that calling I'm

our believe one, we their their for times, a really also driven people toward rebalancing lead by just toys rates, but And quarter at the for so order slower was when primarily maybe counter. that bit over demand we and lower look entry the and

part seems that's times and I pretty that's bit, Multifamily the down little So think, inventory key by close don't as of was to I big the stable. driver coming going to down rest QX. it a think but is lead of we a correction really, the business be an driven be

get on we add I'll of overall trends rates. residential in see comfort kind what order do We that.

September a up our call in saw in on but in order In took rates. July down, also down last residential, order tick bit. rates a up is said rates in to also then bit October, August we were months we So date a order

So into the confidence largely positive the go trend fourth that the to is and gives related quarter. as very us it's that we just prebuy

moment One for next our question.

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

talked organic I and you China turnaround the from you thought, pretty than about pricing it upper middle wanted half third And quarter was again of a talk that's, I be the about -- to positive those had point, guess, that. I because first in would in just the half but I significant price less know sales.

us sales in quarter one could significant half? that the a think China the the in So you little you what bit do versus caused flip third bundle first for

that QX, Yes. I'm you comes significantly property development It tell -- what's the happens in X going look been it back got items. us some worse you it. possible market, a GDP whole property and lot. and is there's reasons But one confidence. always are area that if for to happened constantly give at what we feel consumer look The addressed. what hasn't we to And at doesn't

the you you Chinese it, want property, in And of wealth at is property. a so if look if about XX% consumers'

to And that's continuing so decline.

by consumer And driven think I really spending. the in So poor accelerated confidence real it their holding QX. back I that's think some

And if And you there. they consumers of weren't look a lot a absolutely think, it and consumer back is just it's level challenge spend the at to confidence of employment been happened going necessary. just lack that, on decided also, accelerated in and step I where QX,

the first months, think well but you there there, So got it consumers' the going the for about the particularly mean was attention. X that's I how in as because that pretty was feel talked change quarter. along I a we property sector

the other to the one impact And of Kevin's for the majority add-on that. Just covered comments quarter.

products We also did in year kitchen launch last QX. our

and that. So we're our up kind against that launch anniversarying of of

kitchen launching we quarter-over-quarter of as didn't have products we've of those any anniversary benefit come So products. across year-over-year that for kind

the guess That really, makes of sense. thing other is tankless. a lot on I

proactive seem new I of side, high worse, has that you on in area. that really on it for, case, stats side, weaker weakened right? market drawback hopes because this the would that little So it say, What think the a think, had the is bit just Is reception into here? let's obviously, has maybe the that in to do have you proactive tankless? gotten maybe the led and the sort housing products maybe

That don't lost our Remember, convention one product specific. product that line. I think premix category. premium No, it's was we

product upper again, some So up it. And there. there's XXXX. bit and launched other we'll at of we still launching the in It got might that market the end happened in have the little as that caught early QX a be X destocking lines of

is back, a I But step long-term approach. if this

You think control, be view North trucks America, going It's customers. it's the go having able to to share We'll is to have our take I be the on in to our with have we we to -- a have lines, their benefits going we're and as it product regular own basis my reduce put be terrific. times We forward. for going lead features water to think on heaters.

out, us in build Meeting just of we there's come give for in to are still that just new mentioned you but that But we XXXX. how start May. very stages. a early, to We it get as incremental we So we're and number there's But $XXX of launch as to sales in things we early some our want forward. things million along a color start comfortable the we feel we're the Analyst towards as products launched here, going

to should any see make while think it's full assumptions enter there, as too product up Scott, tick nice So a just in XXXX. we we the line I early just

question. next our for moment One

question of next the Stifel. Jones from comes from Our Nathan line

years couple times. your just My post-COVID like I ago. that a ask got of question to times a wanted normal on the lead lead back to shortened is recollection

maybe extend out lead talking So have you on a provide they on further? around in about can them they've bit little Or color details back that times. what you more just comment? the Do you're again? and what come reduced just Or

the about our when we they was was times they again. increase your did would And the maximum little think QX. is bit out increase did we that get QX really into a as memory have I -- perfect, extended talked That and but thought customers lead could. increase minimal impact, up that price but our a in out bought raised we

times times of are double put If heating, was what reason boiler in to America treatment anticipated good took us it. us in But was lead our for times the at it in we point almost normal that shape. bit little event, that increase work of time part It are a and our longer than water overall you did business, for our good look shape specific that down. the North lead out and this a lead

-- they would you're of all an I'd what lead increase back lead are and that But of need of really event kind change we're hearing our times providing to that's times say that. much most across pretty where there's our like forth. businesses, So be, some

not markets to you information the It deliberately from consumer But maybe angle. will market Okay. And a give stimulus to Any wanted to for on that have. the government historical can you sounds takes China a to before, spending. seeing previous stimulus from Chinese how just I around for put the typically don't flow just of provided kind but you ask of to consumer. on magnitude different you heater color the a little what kind like been question from have this us water through a through figure out that have cycles enough of you're China impacts is kind one impact where perspective? long of that some Can

lot has the bit the a of there, FDI tell the would country, different expanding this prior going stimulus there probably it I people you changed. is still into a environment were and is than and was

So different on the haven't issue property think deal there one past. environment. sector, have with, is more go The it's just now, historically market to they with a had I that mature, the they this deal much this is if back you in to

to I a be We you how will of brand doing China incremental things a standpoint. as couldn't fashion So adjustments really -- stimulus there. when the were a to economic an they're serious to manage seems move think it bit China know going I come We we'll then form economy good need they'll really again, when is it in And in the it. predict we stimulus better have strong make give our taking to a get come we're still package this. really thing, you going from more prediction come start though, we're but out business the and benefit out, down of in steps more I the road. largest they to to wouldn't cautious to make. or leaning we'll as out on where of a in come is do to do to about will think, starts some us it trying the and be current that of be and And on about what talking environment, it think position that that we in out

we have announced type much appliance that program. least the say a the recent stages trade-in Yes. to qualified that past, of program more in not would I early, of heard that little little traction. have I really at specific, more program to early add appliances specific gained most they've program appears would a at a But be

So as see appliance the have last been But that again, program. stages we'll that historically, it's as And this not where specific program. for programs early goes.

for question. moment next our One

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

on about A numbers China. follow-up it was help Good side seeing Could you heater like for When talking versus water you varying of X difference sounded couple portion of the the everybody. break the in there, questions morning, the market those what up the trends like business mid-tier premium the over of you're trends of kind were the just to price in part maybe understand business. pieces? us your year

we're say, is entire would I bit that market the a overall, down. feeling Well,

And fairly, like We down So position protected had. say I'd that currency. think local feel it's XX% we're feeling the I that, fairly we're we we've about premium even. in

from share, a on bit market our more a we But we is overall, earlier. of did based it, market mid-price little factors is So because the China, that we how feel just programs. bit premium projected we but not, down the and feel Probably we market, can the we to depressed of share the upper with Kevin on participate position, some our whole whole mentioned in all the down. always a bit a challenge in measure it's measure promotional

just water to one we a Again, that. consumer. we've been sell to time add very Remember, would a I heater selective. at

which going promotion, But to continue maybe this A. to long-term So up we our held brand think our environment. a value overall, brand. to a and O. about Smith competitive take don't of and our in premium brand lean we're to someone's has approach participate difficult towards is the really in promotions and the Think I position, targeted going strong, well

it. Got

volume that And how Okay. then just was negative mix much versus and purely kind maybe decline, core of XX% about thinking sales pressures of price impacts? that

substantially And Mostly pressure, volume. the all participate pressure. Damian? of all Yes, didn't a but volume. we is on majority all but that, it's pricing mix, again, that volume, pricing little decline of there's in There's pressure

One moment question. for next our

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

I guess where your a China, are or versus -- pre-COVID on on segment levels? today as just maybe water of again unit heaters volumes premium percentage

of portion of year-over-year, the In an you pre-XXXX, go third go you premium XXXX, quarter, premium. same the majority on if saw our the market define were measurement saw. back falling if the we increase premium our we quarter-over-quarter, into in back, actually that baseline and we keeping how Well, the category sales

on treatment We're side, the little in the over it's less. a category. side a premium. premium on the And I XX% kind heating to XX% water So XX% little hovering is water of the would say bit

compare Great. of get I were where to you a sense trying pre-COVID. I guess was versus just

at saw water bit our side downturn in we Pre-COVID on majority market, XX% heating before that a the a of were at particularly premium the time. we product the was -- premium above

moment question. One for next our

line of Bryan question the Our comes from next Blair from Oppenheimer.

issues. technical some Unfortunately,

I for there. I'm repeating the from a out any cut bit, questions I if apologize call So

You North demand cost time in are Or moves to optimizing America flight there savings? conditions. both so, these the China quantify and cost, that are for can Are in variable If right you now? structural being? response anticipated mentioned actions the more

from America, largest at made would We've and some North cover plants. our I'll headcount China mean, reduced balanced Well, realigning I say through moves between a attrition. few by separately facility. we've production production -- We've I in really aligning America. headcount North

volumes in America. So taking cause actions in out did in the to the QX quarter, decent margin position facility QX into be able some third which our but in QX, adjust manufacturing a headwind of like North feel to going to we're to a the in

the part at take of cost is to we're out, it's looking China, It's X in when pieces. In process, product of at process part process reduction, redesigning looking plant. looking at have right? we innovation, products through China, our really One and our cost improvement we're always

So process. that's an ongoing

our what that the at Along looking to store outlets. particularly ongoing process, with support and improve streamline of we is and for looking the efficiencies since COVID footprint, efficiencies retail

challenging is best And in as we to did the So the and have those this current things structurally, environment, we we're foundation. into evaluate continue. the going COVID, ourselves want foundation, to right

have kind talking at of at on We be be profitable in a a we'll kind course when stronger taking where cost we and looking we're our in the China back January. we're not of cost, may quarter look be to future. in that that China through the position a about but into or don't of So the at growth may quantification for of what get

a offer high and makes perhaps think smart on your And acquisition, Understood. period Yes. I lot pending strategically a of color level sense.

some leased the channel that business [ make simple Just do growth low- to mid-single now, QX than particular, as that else India in the detail asset you how much digit of stronger accelerate as your the presence, helps hoping Asia on will to ]. profitable margin right that and is scale kind profile upside offer how to have you South levers in

that just X markets, items the various didn't Pureit package to pretty and scale in with scale in may are we e-commerce has mentioned, that as the together some Yes, different And don't. those to combination bringing we having or so and if complementary and a access markets brands some one forth that at like together then bring a you markets functions be site putting along leveraging retailer. deal to the type of footprint, forward, look important certain you strengths go

And us business we quite doing get in goal which a for. deal. foundation to year it's strong to enough acquisitions that companies election for the where big strategic able going our X having I to business between to going it's we to a next make X move going double scale to difference over to market India, We're leverage synergies and where brands water coming the we a or Pureit scale share off which, India again, looking the We're is the to position, a two. And believe are #X the big be. But up. time India well. market, that organically, want going been grow treatment the the we're we matters. think that being is go like really perfect us. gives as can't in So fast is

we're put I certainly in all together, you and early margins, So think when going drive stages. still incremental it's the that to

into haven't growth forward first but look and We top growth, but we get profitable the to enhancement closed, couple not only as we of line margin years.

question. next our for moment One

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

gas. and risk it gets give could given still what's a that residential little lag you the But little the move electric down worse forecast little mentioned a toward before American get to us they that revised heaters? Could tend you're color what industry better, about happens you've versus U.S. a commercial more the in North you water Obviously, heaters. into commercial water how thinking bit,

at inventory But with a lag we quoting, again, bit. we we our start at distributors' look does as replacement -- It our look market.

seems I hot be use a Quoting pretty really down. still remember, replacement. boilers see think water well. we is holding XX%, XX%, XX% don't shift up significant to Again,

a shift is But there on. going

product space a the gas line. commercial we pump have well. the in is have premier commercial We of And product nice condensing course, that line heat as

going there gas heat to efficient from pump forward. I What we're can to going a provide like are have full solutions about is through. portfolio technology we electric we work just to going product condensing different be solution just So think that position our gas to we to high have that

the So being as further downside business don't XXXX. a we but see flat, exit again, it to we relatively see

That's strong. is boiler obviously, And still helpful.

concerned market the boilers gently in mentioned in you I quoting residential saw weaker activity boiler regarding and at think outlook or said slower sort a on good there? you you still Are the overall despite slowdown you markets. modest all that strong growth

out Well, we we're what's happening of point would at, kind where just here.

this technology. Our some I products, year. share good market boilers benefits outperformed of about particularly the of commercial the condition like some gained health feel We've care type have our -- have commercial that really the we

this of good is just go back there's out time a to But We I cold So into season, saw for still us. We're there. business always lot activity said we softness of a XX%, there. XX% heading which still again, some is replacement. the

is well. just on table. So overall, business the wanted to maybe But going just get

is backlog we Our expect where be. to it

one But So I significantly, QX -- going really rate do to where into easy you go well. cautious, comp. for the overall, a want make for as look But boilers. performing if was back normalized our that commercial we we run about quarter. of we to kind were up as a pretty talked

for moment question. our next One

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

flow, but quick a walk moving Just earnings, Free cash cut through just the pretty clearly, pieces. you follow-up. significantly lower the

X It's inventory. Yes. pieces there. One is really moving

bit of about a out still you are little inventory plans. us slowing a to slower the Our gate. be on going it's little our We but is heard positive bit forecast and very tankless, tankless up a about

the probably end about the that, we than would up so gone last tankless And at of to meaningful due inventory of year. -- is a have of inventory increase more that's carrying we of our piece XX%

Some planned. of that is

in July. of Some heavier expected than have is we that little would what just a

piece other China deposits on as just deposits advance in customer receive customer shipments. in And China, of our is, slow seen year-end we projection we've come down. The

really pieces. major are X those the So

time, Gurholt this for now to the I turn like At over back remarks. conference to would closing Helen

you us joining Thank for today.

quarter. O. on A. We you come. progress by to to forward challenges conclude updating navigating solid you the execution in in that many reminding look me third while Smith Let global our our quarters team delivered the

the at on Sachs X UBS on on Thank enjoy your rest on mark XX, X. please and addition, XX, North December Goldman day. In conferences our quarter. November join to you, Coast November and your this presentation Baird calendars December of X

for today's concludes call. Thank you conference This participating.

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