A. O. Smith (AOS) investor relations material

Executive summary

• Q1 2026 net sales declined 2% year-over-year to $946 million, with North America up 1% and Rest of World down 11%, mainly due to weak China demand and weather-related disruptions.

• EPS fell 11% to $0.85, impacted by lower volumes and $0.03/share in transaction expenses from the Leonard Valve acquisition.

• Free cash flow was strong at $119 million, driven by working capital management.

• Strategic restructuring in North America water treatment and ongoing China business assessment were announced.

• Leonard Valve acquisition closed in January 2026, contributing $16 million in Q1 sales and expected to add $70 million for the year.

Financial highlights

• North America segment sales rose 1% to $753.4 million; segment earnings fell to $175.4 million, margin down 140 bps to 23.3%.

• Rest of World sales fell 11% to $200.7 million; segment earnings dropped to $12.4 million, margin down 250 bps to 6.2%.

• Free cash flow for Q1 2026 was $119 million, up significantly year-over-year.

• Gross profit margin was 38.7% in Q1 2026.

• Interest expense increased due to Leonard Valve acquisition debt.

Outlook and guidance

• 2026 adjusted EPS guidance revised to $3.70–$4.00, excluding a $20 million restructuring charge in Q2; GAAP EPS guidance is $3.60–$3.90.

• Full-year sales growth expected at 2%–4%.

• North America segment margin projected at ~24%; Rest of World at 6%–7%.

• Free cash flow guidance: $525–$575 million; CapEx: $70–$80 million.

• China sales outlook revised downward to a low double-digit decrease for 2026.