A.o. Smith Corporation · NYSE:AOS
A.o. Smith — Smith A O — Investor Day (November 2023)
132 slides from A.o. Smith's investor day presentation, Nov 6, 2023
Slide 1: 2023 Investor Day
12023 Investor Day Presentation | 2023 Investor Day November 6, 2023 Exhibit 99.1
Slide 2: Welcome & Opening Remarks
22023 Investor Day Presentation | Helen Gurholt VP, Investor Relations and FP&A Welcome & Opening Remarks
Slide 3: 32023 This presentation contains statements that we believe are “forward-looking statements” within the meaning
32023 Investor Day Presentation | 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,” “exp
Slide 4: Today's Agenda
42023 Investor Day Presentation | Today’s Agenda 12:30 pm Welcome & Opening Remarks Helen Gurholt | VP, Investor Relations and FP&A Innovating for the Long Term Kevin Wheeler | Chairman and Chief Executive Officer Building on a Strong Foundation Dave Warren | SVP and President, North America Water H
Slide 5: Innovating for the Long-Term
52023 Investor Day Presentation | Kevin J. Wheeler Chairman and Chief Executive Officer Innovating for the Long-Term
Slide 6: Our Company Vision
62023 Investor Day Presentation | Our Company Vision Vision To be the leading provider of innovative, highly efficient and differentiated solutions used to heat and treat water, creating exceptional long-term value for our global customers and stakeholders in a socially responsible manner. Strategy
Slide 7: Key Messages
72023 Investor Day Presentation | Key Messages Building on a Strong Foundation with Significant Growth Opportunities in Emerging Markets Leading North American water heater and boiler producer with stable and consistent replacement demand 3 Compelling brand awareness in emerging markets with attract
Slide 8: A. O. Smith At-a-Glance
82023 Investor Day Presentation | ~$3.8B A. O. Smith At-a-Glance 1 2023 Forecast 2 2018 – 2023 Forecast 1 Residential sales Water Heaters & Boilers Leading Brands Water Treatment Headquarters Milwaukee, WI Global Employees ~12,000 Mfg. Facilities 26 Countries Served ~80 Sales CAGR2 4% EPS CAGR2 8% G
Slide 9: A. O. Smith Geographic View
92023 Investor Day Presentation | China All Other India Water Heating Water Treatment Boilers North America A. O. Smith Geographic View Rest of World 8.6% Revenue CAGR 84% 8% 8% 77% 23% $2,084 $2,118 $2,530 $2,819 $2,900 23.5% 23.9% 22.9% 21.7% 25.0% 20.0% 22.0% 24.0% 26.0% 28.0% 30.0% $1,000 $1,200
Slide 10: Sustainable Competitive Advantages
102023 Investor Day Presentation | Sustainable Competitive Advantages WellPositioned to Address Global Megatrends Climate Change Drives regulatory changes to accelerate transition to higher-efficiency products Change in Demographics Global urbanization, U.S. housing shortages as well as changes to c
Slide 11: Executing a Clear Strategy
112023 Investor Day Presentation | Innovate and Expand Research & Development • New technologies • Product development Industry Leadership • Decarbonization • Water stewardship Regulatory Environment • 2026 / 2029 Executing a Clear Strategy Profitable Growth • Stable & profitable core business • Glo
Slide 12: Leading With Innovation
122023 Investor Day Presentation | DEVELOP the R&D and corporate development teams and their resources to drive the next era of innovation • People • Lab infrastructure • Through acquisition Leading With Innovation Develop and Seek New and Innovative Products • Water Heating • Water Treatment • Heat
Slide 13: Our Innovation Hub
132023 Investor Day Presentation | Our Innovation Hub • Dedicated to enterprise-wide development of new energy efficient products and processes • Teams of engineers develop concepts, test and finalize core technologies Innovation Hub: Lloyd R. Smith Corporate Technology Center Core Competencies • Wa
Slide 14: R&D Resources to Meet Current and Future Market Requirements
142023 Investor Day Presentation | Netherlands (12) Water Heating Nanjing, China (361) Water Heating (12) Water Treating (17) Bangalore, India (29) Standard Commercial Water Heating* McBee, SC (55)* Boilers and Comm. Water Heating Lebanon, TN (102)* Corporate Technology Center Milwaukee, WI (47) Wat
Slide 15: Industry Leadership: Committed to a Culture of Innovation
152023 Investor Day Presentation | Energy Efficiency • Driving innovation within control systems, distributed energy, and renewable energy • Product portfolio offers water and hydronic heating products, including high efficiency gas and electric water heaters and boilers, including electric heat pum
Slide 16: Our Core Business: North America Water Heaters & Boilers
162023 Investor Day Presentation | Our Core Business: North America Water Heaters & Boilers • Largest manufacturer and marketer of water heaters and boilers with leading share in both residential and commercial markets • Significant reoccurring replacement cycle: 80% - 85% of water heater and boiler
Slide 17: Operational Excellence
172023 Investor Day Presentation | Operational Excellence Opportunities Across the Organization Drives Margin Improvement Supply Chain Leverage systems providing value, reliability, and efficiency Operations / Manufacturing Maximize output and minimize cost Quality Continuous Improvement A. O. Smith
Slide 18: 2022 ESG Scorecard
182023 Investor Day Presentation | 2022 ESG Scorecard ESG Performance and Metrics 1U.S. Bureau of Labor and Statistics (1/25/23). Manufacturing Industry, Household Data, Annual Averages, Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. *First reporting year was 202
Slide 19: Experienced Leadership Team Focused on Execution
192023 Investor Day Presentation | Experienced Leadership Team Focused on Execution Driven Team with 250+ Years of Industry Experience Today’s presenters Mark Petrarca SVP, Human Resources and Public Affairs 1999 Samuel M. Carver SVP, Global Operations 2006 Parag Kulkarni SVP and President, India 20
Slide 20: Experienced and Diversified Board of Directors
202023 Investor Day Presentation | Experienced and Diversified Board of Directors ~63 Years - Average Age 36% Gender / Racial / Ethnic Diversity ~9 Years - Average Board Tenure Kevin Wheeler Chairman and Chief Executive Officer, A. O. Smith Elected: 2017 Idelle Wolf Former President, Barnes Distribu
Slide 21: Clear Strategy for Long-Term Value Creation
212023 Investor Day Presentation | 5% - 6% Annual growth Plus fire power to accelerate growth through strategic acquisitions Revenue 7% - 9% Adjusted EPS CAGR • North America margin growth ~150 bps1 • Rest of World margin growth ~400 bps2 • Share repurchase to contribute 1% - 2%3 Earnings per Share
Slide 22: Building On A Strong Foundation
222023 Investor Day Presentation | Building On A Strong Foundation David Warren SVP and President, North America Water Heating
Slide 23: Key Messages – North America Water Heating
232023 Investor Day Presentation | Key Messages – North America Water Heating Innovative Products and Service Deliver 4% to 5% CAGR though 2028; Regulatory Changes Accelerates Growth in 2029 Clear strategy for demand creation and profitable growth 3 Industry-leading solutions portfolio, service, and
Slide 24: North America Water Heating At-a-Glance
242023 Investor Day Presentation | 80% 20% Residential Commercial North America Water Heating At-a-Glance • Market leader in residential and commercial market • Balanced distribution channel • Robust portfolio of products focused on innovation in energy efficiency • New product investments support g
Slide 25: Robust Line of Existing Products
252023 Investor Day Presentation | Robust Line of Existing Products Comprehensive Portfolio with Premier Customer Relationships Residential Commercial Retail 2,791 locations Wholesale 2,396 locations ProLine® Gas Hybrid Electric Heat Pump Gas Tankless ProLine® Electric Cyclone® Condensing Specialty
Slide 26: North America Residential Market Leader
262023 Investor Day Presentation | North America Residential Market Leader 1 AHRI: Air Conditioning, Heating & Refrigeration Institute; data includes gas tankless water heaters 2 Market share estimated using AHRI data and company estimates U.S. Housing Shortage Presents Incremental Growth Opportunit
Slide 27: North America Commercial Market Leader
272023 Investor Day Presentation | U.S. Commercial Market 2 2022 market share data (AHRI) 53% 26% 16% 5% Other North America Commercial Market Leader 1 AHRI: Air Conditioning, Heating & Refrigeration Institute; data includes gas tankless water heaters 2 Market share estimated using AHRI data and com
Slide 28: Executing a Clear Strategy
282023 Investor Day Presentation | Innovate and Expand Technology – Customer Service • Website / mobile platforms • QR code platform • Virtual assistance • Interactive training Execute on Key Drivers • 2026 and 2029 regulatory changes • A. O. Smith Operating System • Manufacturing flexibility and pr
Slide 29: Regulatory Requirements: Bringing Change to the Market
292023 Investor Day Presentation | 2029 Residential – Proposed NAECA IV1 Rule • Elimination of low efficiency residential gas product • Higher efficiency power vest and non-power damper products • Condensing gas tankless water heaters • 35+ gallon capacity heat pump water heater Industry impact: As
Slide 30: Residential: Introducing Gas Tankless Product Line
302023 Investor Day Presentation | Key Features • Controls on-going product development and marketing – A. O. Smith designed and manufactured line of gas tankless products • Improved design and product performance – Fast activation at low flow rates (0.4 gpm) and high incoming water temperature – Wi
Slide 31: Residential: New Technology for Hybrid Heat Pump
312023 Investor Day Presentation | Residential: New Technology for Hybrid Heat Pump New VOLTEX® MAX Hybrid Heat Pump Water Heater Ultra High Efficiency Hybrid, Efficiency or Electric Advance Controls ICOMM Smart Connectivity with Utility Rate Plan Integration 2023-Q4 Voltex MAX Key Features • 4 Size
Slide 32: Commercial: Upgrading the Cyclone Product Line
322023 Investor Day Presentation | Catalyst Technology Allows customers to purchase A. O. Smith-provided key to configure 3 core models… 20 possible combinations. Other features: • Over the air updates • Leak detection • Performance balancing for connected products Commercial: Upgrading the Market L
Slide 33: Innovation Improves Customer Experience and Reduces Costs
332023 Investor Day Presentation | A. O. Smith has sold 33M+ residential water heaters with QR codes since 2011 • QR mobile platform launched in 2023 • Provides customer/contractor information on the exact model installed – Warranty registration – Installation manual • Provides a platform for future
Slide 34: New Web Platform Drives Demand Creation
342023 Investor Day Presentation | New Web Platform Drives Demand Creation Product Information Management Tool Mobile-responsive website attracts broader audience Automated data updates to websites drives operational efficiencies and ensures accuracy Lead generation drives contractor loyalty Over 40
Slide 35: Multi-media Approach to Training
352023 Investor Day Presentation | • 1,455 training videos across 3 University sites and 7 branded sites • Contractors gain education at their own pace • Provide contractor certification upon completion of several modules • Live training options available to contractors in their local market • 245k
Slide 36: A. O. Smith Operating System
362023 Investor Day Presentation | Strategy Deployment A3 Problem SolvingPhilosophy • Customer first • People are most valuable resource • Drive continuous improvement • Front line focused Management • Motivate and develop people to surface and solve problems Tools • Use tools and methods correctly
Slide 37: Manufacturing Footprint
372023 Investor Day Presentation | Execute Residential Plants Component Plants Stand-Alone Distribution Centers Water Well Pressure Tank Plants Commercial Plant 4 3 2 2 1 Residential Water Heater Plants Commercial Water Heater Plant Component Plants Distribution Centers Water Well Plants Manufacturi
Slide 38: Long-Term Growth Profile
382023 Investor Day Presentation | Long-Term Growth Profile Targeting Growth of 4% - 5% through 2028 5 Year Revenue Growth Profile: 4% – 5% Key Drivers • Industry unit growth + inflation • Improved residential mix toward higher efficiency products • Expansion of tankless market share with A. O. Smit
Slide 39: Key Takeaways
392023 Investor Day Presentation | Key Takeaways Innovative Products and Service Deliver 4% to 5% CAGR though 2028; Regulatory Changes Accelerates Growth in 2029 Clear strategy for demand creation and profitable growth Industry- leading solutions portfolio, service, and support Regulatory environmen
Slide 40: Continuing to Build Brand Equity
402023 Investor Day Presentation | Steve O’Brien SVP and President, Lochinvar Continuing to Build Brand Equity
Slide 41: Key Messages – Lochinvar
412023 Investor Day Presentation | Key Messages – Lochinvar Innovative Products and Best-in-class Customer Support to Drive 5% - 7% CAGR through 2028 Maintain and grow strong channel relationships as provider-of- choice 3 Provide highest standard of support and service Add value through customized s
Slide 42: Lochinvar-Branded Boilers At-a-Glance
422023 Investor Day Presentation | 27% 73% 55% 43% 2% Residential Commercial Lochinvar-Branded Boilers At-a-Glance • Market leader in high efficiency boilers • Broad set of product offerings that address consumer needs • Innovative products to navigate and capitalize on industry trend toward higher
Slide 43: Lochinvar-Branded Full Portfolio
432023 Investor Day Presentation | Lochinvar-Branded Full Portfolio Pool Heaters • Package Systems • Heat Pump Water Heaters • Parts & Accessories Boilers Water Heaters and Storage Tanks Boilers Commercial Water Heaters Tanks Other Revenue by Product Type Other 55% 17% 8% 20% Boilers, Commercial Wat
Slide 44: Industry Continues Shift to Condensing Boiler Technology
442023 Investor Day Presentation | 2000 20301990 2010 2020 Industry Continues Shift to Condensing Boiler Technology with Lochinvar as a Market Leader 1 Measured in units Focus on condensing boilers & water heaters with >90% energy efficiency Dept. of Energy Minimum Efficiency Standards Res Blrs 80%
Slide 45: Lochinvar Condensing Boiler Value Proposition
452023 Investor Day Presentation | Commercial Boiler Example: • Typical mid-size apartment complex or office building • 2.8 year payback with $2 million in energy savings over 15-year life Crest with Hellcat Combustion Technology • RealTime O2 Trim TM with continuous adjustment for optimal gas/air r
Slide 46: Executing a Clear Strategy
462023 Investor Day Presentation | Innovate and Expand Commercial Heat Pump Offering • Air source • Water source • Cold climate Packaged Systems/Solutions • Custom storage tanks • System controls Training and Industry Engagement • On-site • In-field Channel Excellence Commercial Boilers • High effic
Slide 47: High Efficiency Premium Commercial and Residential Products
472023 Investor Day Presentation | High Efficiency Premium Commercial and Residential Products 400mbh–999mbh 400mbh– 1,000mbh 750mbh–6,000mbh Fire Tube Heat ExchangerWater Tube Heat Exchanger Heat Exchanger: Stainless Steel FIRE TUBE 55mbh–399mbhBOILER ONLY 80mbh–199mbh COMBINATION 110mbh–199mbh • U
Slide 48: New Heat Pump Products Capitalize on Decarbonization Trends
482023 Investor Day Presentation | • Air source heat pump • Industry leading 460% efficiency • Modular design • Low global warming potential refrigerant • Designed and manufactured in Lebanon, TN • Alternative to Air Source with even greater energy efficiency • Consistent heating regardless of outdo
Slide 49: Enhancing Packaged Systems Offering
492023 Investor Day Presentation | Custom Engineering Solutions • Hydronic space heating • Commercial water heating • Hybrid solutions – Gas and electric – Space heating and domestic water heating – Pool heating Enhancing Packaged Systems Offering Engineered to Order • Boilers • Tanks • Pumps • Cont
Slide 50: Case Study: Major Theme Park
502023 Investor Day Presentation | Case Study: Major Theme Park The Lochinvar customized packaged system provides hot water for large water theme park, including several water rides, a beach and a lagoon – all with temperature-controlled water Park Capacity: 3.6Million Gallons Park Size: 53Acres Yea
Slide 51: Innovative Channel Training and Education
512023 Investor Day Presentation | University Factory Training • Product specific consultative programs – installation, start-up, maintenance • Customer specific –tailored content • ~40 per year / 800 people Innovative Channel Training and Education Help Our Customers Win Specifying Engineer Based P
Slide 52: Continue to Build on Channel Excellence
522023 Investor Day Presentation | Continue to Build on Channel Excellence, Strong Relationships and Provider-of-Choice Source: Construct Connect • Basis of Design - enables higher win rates • Specifications are typically determined by mechanical and plumbing engineering firms • Market leading perfo
Slide 53: Manufacturers' Representatives Create Specified Product Demand
532023 Investor Day Presentation | #1 or #2 position in revenue or income in 80% of Manufacturers’ Representatives that carry the Lochinvar product lines Core Tenants of our Partnerships • Business development at engineer / contractor/ facility manager level - Packaging strength / product lines • Ap
Slide 54: Long-Term Growth Profile
542023 Investor Day Presentation | Long-Term Growth Profile Targeting Growth of 5% - 7% through 2028 5 Year Revenue Growth Profile: 5% – 7% Key Drivers • Continued market trend toward energy efficient products • Innovation driven market leading products including newly introduced heat pump products
Slide 55: Key Takeaways
552023 Investor Day Presentation | Key Takeaways Innovative Products and Best-in-class Customer Support to Drive 5% - 7% CAGR through 2028 Maintain and grow strong channel relationships as provider-of- choice Provide highest standard of support and service Add value through customized solutions and
Slide 56: Driving North America Water Treatment Growth
562023 Investor Day Presentation | Driving North America Water Treatment Growth for Scale and Margin Expansion Sam Karge SVP and President, North America Water Treatment
Slide 57: Key Messages – North America Water Treatment
572023 Investor Day Presentation | Key Messages – North America Water Treatment Brand awareness through innovative marketing programs and consumer tools 3 Targeted vertical integration and improved supply chain drives margin improvement Geographic expansion through acquisition and organic growth dri
Slide 58: North America Water Treatment At-a-Glance
582023 Investor Day Presentation | 19% 16% 21% 24% 9% 12% 52%48% $141 $177 $202 $222 $230 2019 2020 2021 2022 2023F Organic Sales Inorganic Sales Water Filtration Water Softening North America Water Treatment At-a-Glance • A market leader in water treatment with strong industry leadership and influe
Slide 59: Market Opportunity
592023 Investor Day Presentation | Market Opportunity1, 2 • $2.6B current addressable market • Represents only ~25% of U.S. households having a water treatment device North America Water Treatment Market Environment ~4% - 5% Industry CAGR Over Last Decade2 Market Growth Drivers • Consumer awareness
Slide 60: Executing a Clear Strategy
602023 Investor Day Presentation | Innovate and Expand Products • Portfolio addresses broad set of customer needs • Innovative technology Executing a Clear Strategy Multi-Channel Approach Marketing Programs and Customer Tools M&A Strategy • Proven integration playbook Operational Excellence • Scale
Slide 61: Water Treatment for All Needs
612023 Investor Day Presentation | Water Treatment for All Needs Complete Technology Portfolio to Provide Clean & Safe Drinking Water Full Spectrum of Water Treatment & Filtration Product Taste & Odor Sediments & Colloids Bacterium & Organics Heavy Metals & Salts H2O PS: 5,000 nm PS: 1,000 nm Ultra-
Slide 62: Innovative Technologies Drive Growth
622023 Investor Day Presentation | Innovative Technologies Drive Growth A. O. Smith Technology Group • 275 global water treatment technology professionals • New Corporate Technology Center - Milwaukee • Global engineering center - China • Industry-leading R&D facilities Certification Differentiator
Slide 63: Multi-Channel Approach Improves Penetration
632023 Investor Day Presentation | Multi-Channel Approach Improves Penetration 1 Estimated Channel Penetration North America Channels & Brands Our brands participate in all channels; most competitors operate in 1-2 of these channels CONSUMER Retail Wholesale Wholesaler, Contractor / Plumber Direct t
Slide 64: Marketing Programs and Consumer Service Tools
642023 Investor Day Presentation | Direct To Consumer Innovation • Constantly evolving marketing programs to be part of consumers’ decision-making process • Omni-channel marketing - television, radio and online coordinated messaging • Online influencers – market differentiation Professional Dealer S
Slide 65: Building Scale through M&A Strategy
652023 Investor Day Presentation | Inorganic geographic expansion across North America in residential and commercial • Water treatment is “local”– regional expertise • Acquire geographically for regional assembly and distribution • Creating regional centers of excellence • Commercial water treatment
Slide 66: Targeted Vertical Integration and Streamlined Supply Chain
662023 Investor Day Presentation | Targeted Vertical Integration and Streamlined Supply Chain Improve Margin Profile Vertical Integration of Critical Components • Growth driven by innovative core filtration products • A. O. Smith innovative new filtration technologies: – Claryum™ carbon block – Side
Slide 67: Long-Term Growth Profile
672023 Investor Day Presentation | Long-Term Growth Profile Path to $500+ million and Mid-Teens Margins through 2028 1 Annual market growth assumption of 4% - 5% 5 Year Revenue Growth Profile: 15% – 17% Key Drivers • Grow faster than the market1 with organic annual growth of 10% – 12% by: – 2% – 3%
Slide 68: Key Takeaways
682023 Investor Day Presentation | Key Takeaways Brand awareness through innovative marketing programs and consumer tools Targeted vertical integration and improved supply chain drives margin improvement Geographic expansion through acquisition and organic growth drive 2028 sales target of $500 mill
Slide 69: Q&A
692023 Investor Day Presentation | Q&A
Slide 70: Break
702023 Investor Day Presentation | BREAK
Slide 71: Executing Growth in China
712023 Investor Day Presentation | Executing Growth in China Jack Qiu SVP and President, China
Slide 72: Key Messages - China
722023 Investor Day Presentation | Key Messages - China Focusing on customer experience using digital selling and service tools 3 Capturing growth through new adjacencies and expanding commercial markets Leveraging strong in-country market presence and brand recognition for sustainable, profitable g
Slide 73: China At-a-Glance
732023 Investor Day Presentation | 41% 35% 24% 47% 39% 14% China At-a-Glance • 25+ years operating in China with ability to scale - Strong in-country leadership - Operational improvements and organizational driving margin expansion • Premium brand recognition to reach middle / affluent classes • Mul
Slide 74: Balanced Go-To-Market Strategy with Key Partnerships
742023 Investor Day Presentation | Balanced Go-To-Market Strategy with Key Partnerships Balanced Channel Strategy • A. O. Smith exclusive specialty store are 100% dedicated to the success of the A. O. Smith product family • Leading partners in the national and regional offline retail • Leveraging e-
Slide 75: Investments in R&D and Manufacturing in place to Support Growth
752023 Investor Day Presentation | Investments in R&D and Manufacturing in place to Support Growth Industry-Leading Technology • Focus on quality excellence, safety and social responsibility • Invest in digitalization and automation for productivity and profitable growth ~$500M Invested in China’s 3
Slide 76: Executing a Clear Strategy
762023 Investor Day Presentation | Innovate and Expand Premium Residential Products • Water heating • Water treatment • Kitchen appliances Whole-home HVAC Packaged System Executing a Clear Strategy Technology • Connected services (AI-LiNK) Commercial Product Opportunities Premium Product Positioning
Slide 77: Innovative Core Product Offerings
772023 Investor Day Presentation | ~60% of Water Heaters are Replacements Innovative Core Product Offerings Differentiated Features Whole Home Softener Whole Home Filtration Large FlowPre-Filter Hot Water Purifier Dual Function Water Purifier Slim-Design Dual tank Electric Zero-cold Water Gas Conden
Slide 78: Expanding into Other Kitchen Appliance Categories
782023 Investor Day Presentation | Residential: Expanding into other Kitchen Appliance Categories as a Catalyst for Growth Range Hood • Super quiet, super clean • Top & side dual suction Cook Tops • High thermal output • Precise temperature control Steam Oven • Dual-generator steam system • 316 stai
Slide 79: AI-LiNK Smart Home: HVAC System as a Solution
792023 Investor Day Presentation | Maximum Comfort and Most Efficient • Customized, whole home packaged system that provides heating, cooling and fresh air • A. O. Smith is single solution provider that designs, installs and services system – transforming to a system solutions provider - Comfort and
Slide 80: AI-LiNK Smart Home, Good Water System
802023 Investor Day Presentation | AI-LiNK Smart Home • AI-LiNK Technology (Power Line +Wi-Fi Dual-mode Connection) • “Smart Home Box” creates a unique IOT system with enhanced safety and privacy protection • Expand bundled offerings to drive growth and increase value to consumers AI-LiNK Smart Home
Slide 81: Commercial Product Offerings are Catalysts for Growth
812023 Investor Day Presentation | Annual Growth of 10-12% Commercial Product Offerings are Catalysts for Growth Commercial Strategy • Develop channels and win landmark projects to enhance brand influence • Promote high efficiency condensing boiler and heat pump, with multi- energy management AI-LiN
Slide 82: Market Positioning
822023 Investor Day Presentation | • Mid price positioning • Good quality and mid-range features to attract younger generation / first-time buyers • Market-leading full range of products with differentiated features • Uniform pricing across online and offline channels • Elevate our premium name • Sm
Slide 83: Premium Service Technology Drives Best-in-Class Customer Service
832023 Investor Day Presentation | Premium Service Technology Drives Best-in-Class Customer Service +7M Consumers Online 6,000+ Service Technicians 4.2m Service Orders (2022) 100K+ President Hotline Messages Design / Installation / After Service A. O. Smith Industry CollegeRegional Materials Center
Slide 84: Social Media Platform Merge Online & Offline Brand Building
842023 Investor Day Presentation | Social Media Platform Merge Online & Offline Brand Building to Complete the Sale Online & Offline Brand Building • Cooperating with influencers for live- streaming and creating high-quality content • Leveraging Tmall.com and JD online platforms to showcase A. O. Sm
Slide 85: Long-Term Growth Profile
852023 Investor Day Presentation | Long-Term Growth Profile Path to $1.1+ Billion Revenue and 15% Operating Margin in 2028 5 Year Revenue Growth Profile: 5% – 6% Key Drivers • Core business (residential water heating and water treatment) growth driven by new product introductions and project sales •
Slide 86: Key Takeaways
862023 Investor Day Presentation | Key Takeaways Focusing on customer experience using digital selling and service tools Capturing growth through new adjacencies and expanding commercial markets Leveraging strong in-country market presence and brand recognition for sustainable, profitable growth Mai
Slide 87: Expanding Presence in India
872023 Investor Day Presentation | Expanding Presence in India Parag Kulkarni SVP and President, India
Slide 88: Key Messages - India
882023 Investor Day Presentation | Key Messages - India Deep industry knowledge and local market expertise 3 Strong channel relationships and broad distribution network drive market share Near-term investments in innovative new products drive sustainable and profitable growth Positive market demogra
Slide 89: India At-a-Glance
892023 Investor Day Presentation | Water Heating Water Treatment India At-a-Glance $39 $31 $41 $49 $53 $- $10 $20 $30 $40 $50 $60 2019 2020 2021 2022 2023F 70% 30% 68% 20% 12% Residential - Offline Residential - Online Commercial 5% A. O. Smith India 20% Y/Y 2022 Sales A. O. Smith India Grew 4X Indu
Slide 90: Strong Brand and Broad Distribution
902023 Investor Day Presentation | Strong Brand and Broad Distribution A. O. Smith India Channels 1 Residential sales National Retailers Regional Retailers 300 Distributors ~13,000 Retailers Large Retailers 20 Chains 800 Stores 50 Commercial Dealers E-commerce Flipkart Amazon Water Heating Water Tre
Slide 91: Executing a Clear Strategy
912023 Investor Day Presentation | Innovate and Expand New Premium Products and Technology • Residential water heating • Residential water treatment Demand Creation Executing a Clear Strategy Build Brand • 360 engagement • Accreditation / certification / service Channel Expansion • Unique customer r
Slide 92: Residential Water Heaters – Innovation Raises the Bar
922023 Investor Day Presentation | Residential Water Heaters – Innovation Raises the Bar in the Market RRID: Rust Resistance Inlet Diffuser Value-added features including a longer life, energy savings & faster heating Build on technologically & aesthetically superior product launches of last few yea
Slide 93: Residential Water Treatment - Product Introductions
932023 Investor Day Presentation | 2015 2017 2020 2023 Residential Water Treatment - Product Introductions Create New Trends in the Industry ~30% of Sales from New Products Hot - UVHot - RO Intuitive Hot - RO Highest Recovery Hot - RO Hot – UV+UF Innovate & Expand Create New Segments Based on consum
Slide 94: Creating Premium, Niche Segments within Water Treatment
942023 Investor Day Presentation | Hot is The New Healthy • Hot as a unique consumer benefit • Young, upwardly mobile, urban consumer family • 7 offerings in 8 years • Hot is the new healthy • Health-conscious urban buyer Demand Creation: Creating New Trends in the Market Under the Counter, Over the
Slide 95: Building Brand Awareness through 360º Consumer Engagement
952023 Investor Day Presentation | Public Space Booths • Brand building Digital Outreach • Social media • Google platforms • Precision targeting E-Commerce Ads • Conversion • Speed of decision In Shop Branding • Point of sale influencing Building Brand Awareness through 360º Consumer Engagement Prin
Slide 96: Building Brand Through Accreditation, Certification & Service
962023 Investor Day Presentation | India’s Most Trusted Water Heater Brand 5th Time In A Row India’s 1st Major Water Treatment Brand to get BIS Certification Building Brand Through Accreditation, Certification & Service One of the Highest Rated Brands on E-commerce Platform Top Rated Product in Wate
Slide 97: Channel Expansion through Strong Channel Relationships
972023 Investor Day Presentation | A. O. Smith Top Customer Engagement Platform Channel Expansion through Strong Channel Relationships to Fuel Growth Store Focus Channel expansion supports strong foundation for sustainable growth • Annual event to award achievement, set future goals and aspirations
Slide 98: Growing Commercial Presence through Heat Pumps
982023 Investor Day Presentation | Growing Commercial Presence through Premium Value Proposition for Heat Pumps Applications • Top education institutes • Villas, weekend retreats • Healthcare facilities • Green buildings • Premium condominiums • Corporate campuses • Luxury hotels & resorts Heat Pump
Slide 99: Leveraging Technology to Create Best-in-Class Consumer Experience
992023 Investor Day Presentation | Leveraging Technology to Create Best-in-Class Consumer Experience Raising The Bar on Customer Service with Superior Service Provider Training and Technology Execute Human Touch --- Delighting Customers • 1200+ third party team members • ~14K zip code coverage • 365
Slide 100: Platform Approach
1002023 Investor Day Presentation | Platform Approach Process and Platform Approach Supports Product Introductions, Quality and Cost Position Channel and Consumer Benefits: • Speed to market of new products • Improved technical support & user interface A. O. Smith Benefits: • Common platform • Impro
Slide 101: Long-Term Growth Profile
1012023 Investor Day Presentation | Long-Term Growth Profile Targeting Growth of 15% - 20% through 2028 5 Year Revenue Growth Profile: 15% – 20% Key Drivers • New product introductions • Best-in-Class Service • Expand commercial presence • Expand channel footprint with unique custom relationship pla
Slide 102: Key Takeaways – India
1022023 Investor Day Presentation | Key Takeaways – India Deep industry knowledge and local market expertise Strong channel relationships and broad distribution network drive market share Near-term investments in innovative new products drive sustainable and profitable growth Positive market demogra
Slide 103: Executing Clear Financial Priorities
1032023 Investor Day Presentation | Executing Clear Financial Priorities Chuck Lauber EVP and Chief Financial Officer
Slide 104: Key Messages
1042023 Investor Day Presentation | Key Messages Balance and disciplined capital allocation approach for optimal returns 3 Strong balance sheet supports growth through strategic M&A Clear strategy for long-term growth and value creation Industry-leading free cash flow conversion of 100%+ Track recor
Slide 105: Strong Track Record of Delivering Financial Results
1052023 Investor Day Presentation | Strong Track Record of Delivering Financial Results 1 Non-GAAP measure. See reconciliation to GAAP measures in Appendix. 2 ROIC defined as ANOPAT divided by average invested capital net of cash $353 $638 $815 2014 2018 2023F 15.0% 20.0% 21.3% $1.22 $2.61 $3.75 201
Slide 106: Key Financial Objectives
1062023 Investor Day Presentation | Key Financial Objectives • Positive market dynamics • Organic outgrowth driven by new products and regulatory change over time • Strategic acquisitions will enhance growth Volume • Operational excellence improves margins over time • Share repurchases continue to c
Slide 107: Cumulative Free Cash Flow 2019–2023F
1072023 Investor Day Presentation | 2019 – 2023F Cumulative Free Cash Flow ($ in Millions) Sales $17,006 Net earnings (excl 2022 pension settlement) 2,254 D&A 383 Working Capital 71 Other (8) Cash Flow from Operations 2,700 Capital Expenditures (331) Free Cash Flow 2,369 FCF Conversion % 105% Resili
Slide 108: Capital Allocation Philosophy
1082023 Investor Day Presentation | Capital Allocation Philosophy Strategic Investments Organic Growth Mix of Capex, R&D and new product development M&A Strategic M&A to drive shareholder value Returning Capital to Shareholders Dividend Annual dividend paid for last 82 years; annual dividend i
Slide 109: Investing in Core Remains Top Priority
1092023 Investor Day Presentation | 40% 60% Capital Expenditures – target 2% - 3% of sales over the cycle • Includes maintenance (~1% of sales) • 2024-2025 Capital investments for growth (~$85 million) - Commercial R&D engineering facility with testing capability– Lebanon, TN - Tankless manufacturin
Slide 110: Strong Financial Position Supports Growth through Strategic M&A
1102023 Investor Day Presentation | Strong Financial Position Supports Growth through Strategic M&A Strategic Fit • Grow TAM • Capitalize on megatrends • Expand geographically • New water themed platforms • Grow / leverage existing capabilities and technology • New or complimentary technology or inn
Slide 111: Returning Capital to Shareholders
1112023 Investor Day Presentation |1 Subject to ongoing Board approval 2 Net of shares issued for stock-based compensation 1994 2023 Returning Capital to Shareholders Dividend Priorities • Pay attractive dividend that grows with earnings • Conduct peer analysis and assess yield / payout ratio • Cont
Slide 112: Delivering Sustainable Growth
1122023 Investor Day Presentation | 5% - 6% Revenue Target FY’24 – FY’28 CAGR North America Rest of World 2023F Water Heating Boilers Water Treatment China India 2028 2029 CAGR 4% – 5% 5% – 7% 15% – 17% 4% – 6% 15% – 20% Incremental % of Sales 65% ~5% – 10% ~5% – 10% ~20% – 25% ~1% Drivers • Industr
Slide 113: Clear Strategy for Long-Term Value Creation
1132023 Investor Day Presentation | 5% - 6% Annual growth Plus fire power to accelerate growth through strategic acquisitions Revenue 7% - 9% Adjusted EPS CAGR • North America margin growth ~150 bps1 • Rest of World margin growth ~400 bps2 • Share repurchase to contribute 1% - 2%3 Earnings per Share
Slide 114: Key Takeaways
1142023 Investor Day Presentation | Key Takeaways Balance and disciplined capital allocation approach for optimal returns Strong balance sheet supports growth through strategic M&A Clear strategy for long-term growth and value creation Industry-leading free cash flow conversion of 100%+ Track record
Slide 115: Closing Remarks
1152023 Investor Day Presentation | Kevin J. Wheeler Chairman and Chief Executive Officer Closing Remarks
Slide 116: Powerful Investment Thesis
1162023 Investor Day Presentation | Powerful Investment Thesis Leading with innovative products that drive technology and meet sustainability needs Capitalizing on global megatrends in a large and growing market supported by regulatory changes Leading North American water heater and boiler producer
Slide 117: Where water flows – our legacy grows
1172023 Investor Day Presentation | Where water flows – our legacy grows The 150th anniversary of A. O. Smith will acknowledge our rich history and celebrate our future among global employees, Smith family members, elected officials, our community and customers around the world. Our year-long celebr
Slide 118: Q&A
1182023 Investor Day Presentation | Q&A
Slide 119: Speaker Bios
1192023 Investor Day Presentation | Speaker Bios
Slide 120: Kevin Wheeler bio
1202023 Investor Day Presentation | Kevin Wheeler was named chairman of the A. O. Smith Corporation board of directors on May 1, 2020. He was named president and chief executive officer on September 1, 2018 – the 10th chief executive officer in the company’s history. He has responsibility for the co
Slide 121: Chuck Lauber bio
1212023 Investor Day Presentation | Chuck Lauber was named executive vice president and chief financial officer of the company in May 2019. He is responsible for all financial functions of the company including treasury, controllership, cash management, and investor relations. Chuck joined A. O. Smi
Slide 122: Dave Warren bio
1222023 Investor Day Presentation | Dave Warren was named president and general manager of the North America Water Heating business unit in July 2017. In this role, Dave has profit and loss responsibility for the 10 brands that make up the operation. He oversees the unit’s 4,860 employees at facilit
Slide 123: Stephen O'Brien bio
1232023 Investor Day Presentation | Stephen O’Brien was named senior vice president of A. O. Smith Corporation and president of Lochinvar, LLC in April 2022. He joined Lochinvar as chief operating officer in August 2021, overseeing the engineering, manufacturing, quality, sales, marketing and busine
Slide 124: Sam Karge bio
1242023 Investor Day Presentation | Sam Karge was named senior vice president of A. O. Smith Corporation & president – North America Water Treatment on September 1, 2018. He joined A. O. Smith in March 2018 as president of the newly created North America Water Treatment business unit. In this positi
Slide 125: Jack Qiu bio
1252023 Investor Day Presentation | Jack Qiu was named senior vice president of A. O. Smith corporations and president – A. O. Smith China in October 2020. He has profit and loss responsibility for A. O. Smith’s water heating and water treatment business in China, based in Nanjing and Lishui, and he
Slide 126: Parag Kulkarni bio
1262023 Investor Day Presentation | Parag Kulkarni was named senior vice president-international and president of A. O. Smith India Water Products Private Limited, in September 2022, with profit & loss responsibility for the Company’s operations in India, Vietnam, Europe, the Middle East and Africa.
Slide 127: Helen Gurholt bio
1272023 Investor Day Presentation | Helen Gurholt, vice president – investor relations and financial planning and analysis, is responsible for investor relations, financial planning and analysis for the company. She also oversees the treasury and insurance functions. Helen joined A. O. Smith as acco
Slide 128: Financial Appendix
1282023 Investor Day Presentation | Financial Appendix
Slide 129: Reconciliation to Total Segment Earnings
1292023 Investor Day Presentation |Investor Presenta ion Reconciliation of reported earnings before provision for income taxes to total segment earnings (non-GAAP) and adjusted segment earnings (non-GAAP): ($millions) 2019 2020 2021 2022 2023F Earnings Before Provision for Income Taxes (GAAP) $ 472.
Slide 130: Reconciliation of Cash Flow to FCF
1302023 Investor Day Presentation |Investor Presenta ion Reconciliation of Reported Cash Flow from Operating Activities to FCF (Non-GAAP) ($millions) 2019 2020 2021 2022 2023F Cash provided by operating activities (GAAP) $ 456 $ 562 $ 641 $ 391 $ 650 Less: Capital Expenditures (64) (57) (75) (70) (6
Slide 131: Reconciliation to Adjusted EBITDA
1312023 Investor Day Presentation |Investor Presenta ion Reconciliation of Earnings Before Provision for Income Taxes to Adjusted EBITDA (Non-GAAP) ($millions) 2014 2018 2023F Earnings before provision for income taxes (GAAP) $ 287 $ 558 $ 735 Add: Depreciation and amortization expense 60 72 70 Add:
Slide 132: Reconciliation of EPS to Adjusted EPS
1322023 Investor Day Presentation |Investor Presenta ion Reconciliation of EPS to Adjusted EPS (Non-GAAP) 2014 2018 2023F Diluted EPS (GAAP) $ 1.14 $ 2.58 $ 3.68 Impairment Expense - - 0.10 Pension Settlement Costs (Income) 0.08 - (0.03) Restructuring and impairment expenses - 0.03 - Adjusted EPS (n