A.o. Smith Corporation · NYSE:AOS
A.o. Smith — Q3 2023 Earnings Presentation
17 slides from A.o. Smith's earnings presentation, Oct 26, 2023
Slide 1: Third Quarter 2023 Results
(<eSmith. Innovation has a name. Third Quarter 2023 Results
Slide 2: Participants
Participants Kevin J. Wheeler Charles T. Lauber Helen E. Gurholt Chairman and Executive Vice President Vice President - Investor Relations, Chief Executive Officer and Chief Financial Officer Financial Planning & Analysis 2
Slide 3: Forward Looking Statements
Forward Looking Statements 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,” “i
Slide 4: Third Quarter Messages
Third Quarter Messages Sales of $938M Higher North Strong North Sales in China and EPS of $0.90 America America margins grew 9% in local residential water driven by lower currency driven by heater volumes material costs and new product were partially higher water introductions offset by lower heater
Slide 5: Third Quarter Performance and Highlights
Third Quarter Performance and Highlights Sales Adjusted EPS Segment Sales Adjusted Segment Earnings $874M $938M $0.90 200 $710M $170M $0.69 150 7% 30% YOY YOY 9% 100 YOY $233M 50 1% $23M YOY 0 Q3 2022 Q3 2023 Q3 2022 Q3 2023 North America Rest of World North America Rest of World Highlights North Am
Slide 6: New High Efficiency SmartFlow Reverse Osmosis Water Filtration System
New High Efficiency SmartFlow® Reverse Osmosis Water Filtration System REDUCES UP TO 99% OF 90 CONTAMINANTS Fluoride Lead Chlorine Arsenic Mercury Cysts Pesticides Pharmaceuticals Microplastics PFOA/PFOS 6
Slide 7: Third Quarter North America Segment
Third Quarter North America Segment Segment Sales ($M) Adjusted Segment Operating Earnings ($M) 9% 23.9% YOY 20.4% • Higher residential water heater volumes partially offset by lower boiler • Earnings increased primarily due to higher water heater volumes and volumes lower material costs • Water Tec
Slide 8: Third Quarter Rest of World Segment
Third Quarter Rest of World Segment Segment Sales ($M) Segment Operating Earnings ($M) 11% YOY 1% YOY 9.9% 9.5% • China sales increased 9% primarily due to new product introductions • Income higher due to YOY volume growth and favorable mix in China • India sales increase ~13% in local currency • Op
Slide 9: Cash Flow and Liquidity
Cash Flow and Liquidity1 Free Cash Flow ($M) $396 $342M 6.4% Cash balance2 Debt to capital ratio $164 $212M ~2.4M Net cash Shares repurchased 2022 2023 position in YTD 2023 totaling ~$161M Cash Flow from Operations ($M) $439 $215 1. As of September 30, 2023 2022 2023 9 2. Includes cash, cash equival
Slide 10: Capital Allocation Priorities
Capital Allocation Priorities Priority Comments Organic Growth • Opportunities for organic growth in all our businesses and geographies Acquisitions • Disciplined focus on transactions that enable geographic growth, expand/grow the core, establish adjacencies • Recent transactions include Water Tec
Slide 11: 2023 Outlook and Assumptions
2023 Outlook and Assumptions* • North American segment margin expected to be approximately 25%, excluding ($M, except per share data) pension settlement income Revenue Increase ~ 2% • Rest of World segment margin expected to be approximately 10%, excluding impairment expense U.S. Residential Water H
Slide 12: Compelling Investment Thesis
Compelling Investment Thesis Market Leader Stable/growing U.S. Strength of premium brand, Strong balance sheet and replacement market; distribution, manufacturing cash flow to support future operating leverage from and innovation provide growth, share repurchase incremental new construction signific
Slide 13: Innovation has a name.
(X6 Smith. Innovation has a name.
Slide 14: Adjusted Earnings and Adjusted EPS
Adjusted Earnings and Adjusted EPS ($ in Millions, except per share data) The following is a reconciliation of net earnings and diluted EPS to adjusted earnings (non-GAAP) and adjusted EPS Three Months Ended (non-GAAP): September 30, 2023 2022 Net Earnings (GAAP) $ 135.4 $ 109.8 Pension expense, bef
Slide 15: Adjusted Segment Earnings
Adjusted Segment Earnings ($ in Millions) The following is a reconciliation of earnings before provision for income taxes to total segment earnings (non-GAAP) and adjusted segment Three Months Ended September 30, earnings (non-GAAP): 2023 2022 Earnings Before Provision for Income Taxes (GAAP) $ 176.
Slide 16: Free Cash Flow
Free Cash Flow ($ in Millions) The following is a reconciliation of reported cash flow from operating activities to free cash flow (non-GAAP):): Nine Months Ended September 30, 2023 2022 Cash provided by operating activities (GAAP) $439.0 $ 214.7 Less: Capital expenditures (42.7) (50.9) Free cash fl
Slide 17: 2023 Adjusted EPS Guidance and 2022 Adjusted EPS
2023 Adjusted EPS Guidance and 2022 Adjusted EPS ($ in Millions, except per share data) The following is a reconciliation of diluted EPS to adjusted EPS (non-GAAP) (all items are net of tax): 2023 2022 Guidance Diluted EPS (GAAP) $ 3.63 – 3.73 $ 1.51 Impairment expense 0.10 (1) - Pension settlement