2023 Investor Day. A big welcome to everyone who is joining us in person, as well as those joining via the webcast. The A. O. Smith senior leadership team and I are really excited to share with all of you today an in-depth review of our company strategy, long-term objectives, growth drivers, and financial outlook. For those of you that don't know me, I'm Helen Gurholt, Vice President of Investor Relations and Financial Planning Analysis. I've been with A. O. Smith for 21 years in various roles in corporate accounting and finance, all based in Milwaukee. My most recent role prior to going into investor relations was corporate controller. So moving on to the forward-looking statements, don't worry, I won't read that whole paragraph to you, but just wanted to offer up a friendly reminder that some of our comments and answers during the event today will be forward-looking statements that are subject to risks and uncertainties that could cause actual results to be materially different from those anticipated in our presentation today. So we'll take a look at today's agenda. As you can see, we'll kick off the afternoon with Kevin Wheeler, our Chairman and Chief Executive Officer. Kevin will share how A. O. Smith is innovating for the long term. Next up will be Dave Warren, President of the largest piece of our company, North America Water Heating. Dave will be followed by one of our newer leaders, Steve O'Brien, President of our Lochinvar business. And then rounding out the North America segment is Sam Karge, President of North America Water Treatment. After the break, we'll introduce you to our Rest of World leaders, Jack Xu, President of A. O. Smith China, and Parag Kulkarni, President of A. O. Smith India. And then Chuck Lauber, our Chief Financial Officer, will share more details on our financial priorities and targets. We also have two additional team members joining us in the room today: Bob Heideman, Chief Technology Officer, and Holly Hause, Director of Corporate Communications. As you can see from the agenda, we've got two question and answer sessions. We ask that you hold all of your questions until those two allotted times. The slides that you see here today, as well as a copy of the webcast, will be on our website at the conclusion of the event. You can access them at investor.aosmith.com. With that, I'll turn the mic over to Kevin to begin our presentation. Well, thank you, Helen. Welcome, everybody, and thanks for joining us today. For those of you who don't know me, I'm gonna give you a very brief background on me. I've been with A. O. Smith for 29 years in various roles and duties, both domestic and internationally, and I've been very fortunate to be the CEO for the past 5 years. Our team here, our executive team and our business leaders, are excited to spend time with you this afternoon, and we'll share our strategic plan, company goals, and business initiatives. I'm gonna provide you a very high level, and then our business leaders are gonna come up here and give you all of the details. So for us, hey, it starts with our vision and strategy. A. O. Smith is a pure play water technology company that we primarily heat and treat water. Our goal always is to raise the industries that we participate in to higher levels through innovation, superior quality, and market-leading services. We always start out our strategy with delivering profitable growth, and then we execute on those seven strategic pillars that you see underneath that to make that happen. But one thing in our businesses, we'll demonstrate all those seven, but the one thing that I do want to spend a little bit of time with you is what does living our values mean to A. O. Smith? And what it means to us, it's doing business with honesty and integrity. It's having mutual respect for the people that we work with. It's doing the right thing, always. So our reputation matters, whether we're dealing with our employees, we're dealing with our customers, suppliers, you name it, investing, community, and so forth. What we do and say, and how we do it, is at core with A. O. Smith. Key messages today that you will get from our team is, firstly, I will tell you that innovation's in our company's DNA. It's been a constant since our company was founded in 1874, and I will tell you it's been our primary growth driver, and it is today. Some of the things we're gonna share with you, I'm going to share with you, is our innovation infrastructure. Why are we good at what we do on the innovation side? We'll review our resources and capabilities, and then throughout the presentation, we're gonna talk about some of our new products. I'm gonna share a little bit, just to give you a little taste of what you're gonna hear about. Today, we're gonna talk about the launch of our new, designed by ourselves, North America gas tankless product range. We're gonna show you how we're expanding our residential heat pump line to serve more solutions out in the market. And we're also gonna talk about the launch of our first commercial air-to-water heat pump by Lochinvar. Along with some other products, we're gonna talk about how leveraging technology in our products, what does that mean?... You're gonna hear about the Catalyst Cyclone program. What this does, Cyclone is our largest high efficient market share product we have today, and the Catalyst is gonna allow our distributors to have a limited product line in their inventory, and be able to configure it in about a very few minutes using an iPad. Dave will talk about that. We're also gonna talk quite a bit about China AI -Link. What that does is, it's very simple, we're building an ecosystem of connected products to make consumers' lives better and easier. When you look at mega trends in our business, there's three that I think are gonna benefit A. O. Smith. One is decarbonization. It fits right in our sweet spot of high efficiency. The other is just the focus on quality water. Everyone in this room needs clean water, and that's across the world. The ongoing urbanization that we'll see in our emerging markets. Each one of those mega trends is gonna raise significantly the total available market of our products in the businesses where in the markets that we do business in. North America replacement. A lot of you have been following us, we talk about that on a pretty regular basis. The resiliency of our water heater and our boiler replacement demand has been tested many, many times. Been tested through the Great Recession, through economic disruptions, and recently through the pandemic. One thing is clear, that consumers and businesses will not go without hot water. And I would add onto this that it's still early, but it's becoming a meaningful part of our business. In the North America Water Treatment side, there's a consumable business that's growing in North America, China, and India every day. In emerging markets, that's primarily China and India for us. China, where we've spent 25 years building our brand, and in India, we spent a decade or more building our brand there. We are a premium brand known for innovation, quality, and service. We'll talk about leveraging our balance sheet, we're gonna continue. You'll see that throughout the presentations, how we're investing in ourself, and of course, M&A is always top of mind for us. A. O. Smith at a glance, I'm gonna let you read most of that, but the, when you step back, we're primarily a North America-based company with some really nice markets growing. What's important, that we have leading product lines there, but I would tell you, the takeaway is our product lines have scale, and they have depth to them. We provide solutions across a spectrum of applications. And you see the brands down there? All those brands are respected brands in the multi-channels that we participate in. And what they allow us to do, they allow us to extract value from every channel that we participate in. And on the right there, I just wanna point out our 26 manufacturing facilities. When you step back here, they provide us the capacity and the flexibility to serve our customers, regardless of the business environment that we may encounter. Geographic view. We have two operating segments, and I think, you know, when I look at the key takeaways here is every one of these business segments has a really broad and diverse customer channel. And we have a nice mix of residential and commercial, and for the most part, we're market leaders in every one of our product categories. So when I look at the upside for us, we have upside geographic, market, and product categories as we continue to take our business to the other parts of the world. I did spend a little time already on the global trends, and again, if I look at decarbonization and the quality of water, I think the key takeaway for us is we already have the products. We already have the solutions today. And so we'll continue to fine-tune those, but in reality, we're ready for any type of change in regulatory that comes our way. From a technology side, you're gonna hear quite a bit about how we're using digital tools to engage our customers on a very high level and to make us, as a company, to do business easier. In each one of our presentations from our businesses, you'll see this sprinkled in across it. And then we talked a little bit about global urbanization. It's been a catalyst for growth for us, it'll be a catalyst for growth into the future. You look down there, and we have sustainable competitive advantages. And you'll hear today, you already hear me about technology expertise, innovation, continuous improvement, leadership, the omni-channel, and so forth. But I would wanna spend a little bit of time on our customer base and our supply chain. In all of our businesses, we have some of the premier customers in every one of our industries, and we continue to grow with them, they're consolidators, and they tend to grow faster than the market. And our supply chain and our suppliers, long-term relationships there as well. That helped us through the pandemic and positioned us really well to come out of that with every one of our customers intact. The key, and you'll hear this from us, these are all long-term relationships. This took us decades to build, and we continue to have them in place today. The key part is our customers can count on us. We are not, A. O. Smith is not a transactional company. We don't look at anything about just getting an order. It's about building a relationship, providing value, and generating growth and profitability for not only us, but also for our customers. So our customers can count on us, and they saw that once again during the pandemic. The other one is, and you'll hear that today, our business strategy is in country, for country. We don't use any country as a low-cost producer, and we don't have a lot of expats. What we do is we believe in local management that get up every day in the market, know the culture, are experts in their industries, in their markets to drive growth and innovation for our company. We believe that's a competitive advantage. Having those people in the market helps us innovate, and they can identify what the consumer in their particular markets really want for a solution. This is a slide you'll see from every one of our presenters, and it's what it's gonna tell you is how we innovate, how we're gonna expand, and how we're gonna execute. One of the things you'll see is the alignment between all of our businesses that ties back to the strategy that I told you, the vision that you've seen, and how the businesses work together to grow A. O. Smith profitably. Talked quite a bit about leading through innovation. I'm gonna spend a little bit of time here. What is our R&D structure? And it really comes down to, we start out at the very top. We're always looking for new and disruptive technologies coming to market. Even if we don't know where they may fit or how they would impact us, we spend time working with them, having our teams look at them, working with our businesses to make sure that they understand the impact and how we would prioritize some of those so that we can be successful. We also then look at our processes. Our A. O. Smith new product development process is standard across all of our businesses. It's a systematic way that we use to bring a product from concept to market with the highest possibility of success. This leads to every one of our businesses to a three-year product plan, that we know where we're going and why we're going there, and that product plan is updated every year. Then again, the R&D, the people we put in the labs, the skill sets that we have, I'll talk a bit more about those. But for us, where it starts, it starts at our Corporate Technology Center. A. O. Smith has had a Corporate Technology Center, I think, back to the 1950s. This is a separate, supported by our corporation, not aligned with... not, it doesn't come out of our businesses', P&Ls. This is our newest facility that you see there, that we opened in 2018. The reason we did that is over the past 20 years, our company has transformed into a water technology company, and our old facility was built for the old A. O. Smith. Those of you who follow us, we made car frames, electric motors, grain silos, things that don't have a lot to do with water. And so what we did is we built this facility, made sure we designed it, had the right capabilities, equipment, and so forth, for today's A. O. Smith. And you can see the competencies on the right there. We have deep competencies in all of those, whether it be from the sensors and electronics that you see in our products today, some analytics that we're using to make sure that we can model things in an appropriate way, in different technologies, but core people with deep competencies in all eight of those, which apply to all of our businesses. When you look at CTC also, this team, they work on things that we don't know how to do. They're 3, 5, 7-year type outlooks to make sure that we understand these processes and how they're gonna impact as we go forward. They work on a lot of things, and they come through with a few, but those few are really meaningful for us, and it doesn't burden the business to have to do not what they have to do today, but also what we have to do tomorrow. So we're very happy to have that facility. I think some of you have been there. It's absolutely world-class. And to support all that, this is our infrastructure. We step back, and we have over 900+ engineers and technicians that get up every day, that they work on what's gonna keep us more competitive, how we're gonna move to the next level of our markets, and ensure that A. O. Smith continues to be competitive and outpace our competition on a regular basis. Each of the businesses that will come up here today have their own R&D centers, their own people, their own capabilities, their own resources. And they offer new products, no doubt, but we also work on adjacencies. And by the way, we work on cost reductions as well in those facilities to make sure that not only are we just having new products, but that we're looking at materials and ways of doing business that keep us cost competitive for the long term. And we're excited to announce investing in ourselves. We are. We've broken ground in Tennessee. We're building a new North America commercial water heater R&D center. It will be completed sometime in 2025. The whole idea behind that is, one, again, upgrading the capabilities, upgrading the equipment but also locating it with our Lochinvar group, our boiler group. So we'll have the ability to leverage all of our knowledge and experience in one facility that can work together to drive and communicate how we can make better products going forward, how we can stay ahead of the competition. Industry leadership. Talked about market leadership, talked about a number of things of innovation, but also what's really important to us, we spend a lot of time is in our industry. We are very active members and participants in all of our industry associations. We spend a lot of time with our government, whether it be EPA or DOE. Spend time with NGOs and other agencies, and increasingly more, we spend time at the state and local levels to make sure that we are understanding what's going on and that what we wanna be, we are, we wanna be a trusted resource for all of these agencies to come to and be an industry partner. And the idea behind that is so that when they make decisions that affect our lives, we've had a chance to make sure that we make the best decisions for our industry, but also for the countries that we do business in. These are our resilient business model. On the left there, there's a water heater business. We've talked about how we're a leader there, market share, a number of things on the left. But I do. What I wanna do is I wanna spend a little bit of time talking about the ones in the middle. When we look at expanding our organic growth in China, we're very, very committed. Despite the geopolitical side of the business, the tensions and the economics that are currently that we're having to work through, we're fully committed to our China market. And the reason we are, one, it's the second-largest economy in the world. Its GDP is gonna grow twice as fast as the global GDP. The urbanization that's been stalled a little bit will continue. We've benefited from that for the last 20 years, and the middle class is absolutely gonna continue to grow. So you put that all together, and we just feel it's a market that makes long-term sense for a company that's invested 25 years into it. As important as those factors are, if you've watched us over the last few years, we've demonstrated that we can navigate this market both in good and bad times. Jack, we will be up here, he'll talk about we've had to do some restructuring, how we go to market with our premium brand and new products, but they all look towards long-term growth. As for India, my opinion, India is just hitting its economic stride. We are. It's going to be, if not the or one of the fastest-growing economies for next decade or so plus. The trend of urbanization in the middle class is there, albeit it's at a very much a at its infancy today, and it's gonna continue to grow, but it's a great foundation for long-term growth. Parag and team have had, we've had a nice run there. We're starting to build some momentum. That 10 years of investment is starting to pay off, and we really look for that momentum to continue and for us to be able to scale that business quite a bit faster than we have in the past. And then, global water treatment. When I look at it, this is A. O. Smith's first technology that we can take anywhere in the globe that we want to. Our, our technology of RO, carbon, UV, applies everywhere in the world. So as I sit back here and look at it, we have a nice growth story. You'll hear about it from China, from India, and from our North America Water Treatment group. It's fertile ground for us for geographic expansion, and it's fertile ground for M&A. As I mentioned, we are a water technology company, but we, to remind you, we're also a world-class manufacturer, and we have one of the best operations teams that has a strong record of execution. You look across that bottom there and in the supply chain, yeah, we all work through the pandemic, but some of you may not know, we are vertically integrated in North America Water Heating, very deep. We're also taking that technology, and we're becoming more vertically integrated in our North America Water Treatment business as well. We work with some of the best suppliers. We are one of the companies that are open to new technologies, new materials, new ways of doing business. We continue to invest in automation, AI type of activities, to make sure that we can improve quality, reliability, but also drive productivity in our factories as we go forward. Talked about the 26 locations that we have. Quality, for us, quality is everything. Without quality, we don't. We're not successful. So an example that I give, what does quality mean to us? And I'll use water heaters as an example. Residential water heaters. We want to sell it to a consumer. We want them to use it for 14 or 15 years, very happily, hot water, and then we want to do it again. I wish it wasn't 14 or 15 years, but you know, we make a quality product. But at the end, that's our goal. The reason for that is installers don't have time. You wanna do it right the first time. You want consumers to be happy through the whole time, that process, and at the end, you wanna do that again. The way you get to do that again is by actually executing really well on your quality side... What we also do is, the A. O. Smith Operating System is what brings us all together. It drives continuous improvement in our organization. It's a systematic way of all our employees getting them engaged, and they're all problem solvers for our organization. We started on this journey about five years ago with Dave Warren in North America Water Heater, and Dave's gonna share some of those details with you when he gets up here. ESG is, it's embedded in our strategy. You can see the things that we track. These are only some of them, by the way, but certainly greenhouse gases are really important for us to make sure that we're paying attention to. Health and safety has always been a priority for us. Again, good place to work, having that diversity, that diversity of thought in our organization is really important. But I'll tell you, more importantly is ESG is also in our company's guiding principles. And what are those? Our guiding principles is a booklet. It's about a 30-something-page booklet that we give to every employee that tells them how A. O. Smith and its employees are gonna behave. And we hold ourself accountable to it every day. And this is a team that gets the job done. You look at that, there's a group of tenured and new people, but that are highly competent and work well together and complement each other very, very well. And as an organization, we have another 12,000 employees that support them as we go forward. We understand our industries. We have deep understanding of them, and it's what kind of separates us from the rest of the organization, or our competition. And if I had to describe this group right here, and you'll meet a few of them in just a few minutes, I'll tell you that they're highly competitive, and we like to win. Very simple. And our board's the same way. We have another nice mix of tenured and new board members. We've been exceptionally intentional about how we bring new board members on, what skill matrix that we look for to make sure that they complement today's A. O. Smith, and that they can provide that strategic counsel and oversight that we need as an organization. Then when it's all said, each business unit is gonna have a similar slide that they're gonna give to you and present their growth profile and their margin profile. Then we're gonna roll that up, and it's gonna come to the long-term value creation of A. O. Smith. Chuck will take you through that. He'll bring it all together, he'll summarize it for our financial priorities and goals. This team is excited with where A. O. Smith is today, but I think we're in a much better position for tomorrow. So with that, that gives you the overview of what where we're at, and now we're gonna get into some of those details. And to start those details, I'd like to... He's already been introduced, but I'd like to bring up Dave Warren, President of North America Water Heating. All right, Dave, take it away. All right. All right, can you hear me now? Everybody got me? Good. Thanks, Kevin, and good afternoon to everybody that's here today. It's really great to see you all. I think we had some conversation earlier that some of you started as following us during COVID, and finally, we get to be in person. So really, it's great to see you all, and it's great to have everybody online that's listening today also. Hey, before I get started, I thought it'd be a good idea to provide a little bit of background on myself. I started out 34 years ago with A. O. Smith as an inside sales coordinator. Back then, the water heater business was only about $300 million. A lot of growth has taken place since that time. Over the years, I've held various sales positions in the U.S., in both the wholesale and the retail side of our business. Spent four years living overseas, managing the A. O. Smith European operation, and then was given a great opportunity to manage and lead our international business, which at that time consisted of Europe, Turkey, our export business, and our greenfield operation in India. For the past six years, my job has been to work with a really great team to build on a strong foundation to ensure that we maintain our leadership position while improving profitable growth. I'm very, very proud of what the team has accomplished, and I'm excited to share some of those accomplishments with you here today. During the presentation, I'm gonna spend a little bit of time expanding on what you see on this slide, key messages that convey why A. O. Smith is a great investment. Market leader. For over 149 years, A. O. Smith has proven that one key element to success is the importance of having strong relationships with like-minded customers, customers that have the desire and the capability to invest in profitable growth. We believe that we have some of the best customers in the industry today. Strong and stable. We operate in a market that's very stable, as Kevin had indicated, supported by a large housing stock. The economic cycles and new construction only play a small role in our overall profitability. As Kevin indicated, we have proven that we can be successful regardless of the volatility in the new construction market. A clear strategy: We have a proven high-level strategy that has worked for many, many years. We continue to focus on the customer and our people. However, we always strive to improve to meet the needs of the ever-changing market. Industry-leading solutions. I'm really excited to be here today to share some of the new, innovative, compelling products and services that will provide a high level of confidence that our strategy is actually working. And finally, we will share some information on pending regulatory changes that will provide opportunities for significant profitable growth beyond 2028. On the next four slides, I want to spend some time grounding us all on the current state of the North America water heater business and on the industry, and then thereafter, we'll spend some time on strategy and industry-leading solutions. North America Water Heating has enjoyed phenomenal growth over the past three years, driven primarily by price inflation, but to some degree by an improved mix to more efficient products. While the business today is 80% residential, we clearly don't underestimate the importance of commercial leadership, which helps to improve our overall profitability, and it also differentiates the A. O. Smith value proposition from our competitors. The strength in both residential and commercial allows A. O. Smith to be a preferred choice for wholesale distributors across North America. You will also note on this slide that the business is very well balanced between wholesale and retail channels. This is a challenging balance to maintain and quite unique to A. O. Smith. It's a balance that offers stability and is beneficial as customers continue to expand beyond their traditional routes to market. A. O. Smith, as Kevin had mentioned, offers multiple market-leading brands, which provides our team the opportunity to better manage risk of oversaturation in any channel or market. On this slide, you see a small but important representation of the market-leading products we produce every day in our facilities across the U.S. and Canada. The products offered range from opening price point solutions to higher price point, feature-rich solutions, from standard efficiency products to very highly efficient solutions, which reduce carbon emissions. We are a full-line water heater solutions provider, providing north of 10,000 SKUs to our customers every year. Even though not all competitors offer a full range, A. O. Smith believes it's important to be able to provide the SKUs required by our customers. Our customers need products to meet various price points. Our customers need products to meet local codes that vary across the country. Our customers need products that fit into the available space, which varies from installation to installation across North America. On this slide, you'll also see a map. The stars on the map highlight the 5,000 distribution points of our premium customers in Canada and the U.S. End-user product availability in every market is key to our success. Taking a cold shower at home or in a hotel is not a pleasant experience. It's not one that you'd want to repeat. Having the end-to-end infrastructure in place to meet the end user's needs is extremely important, and our premium customers are a key contributor to our success. Let's now talk a little bit more about the industry. This chart shows the residential industry unit shipments over the past 15 years, an estimate between the units supplied to replace existing water heaters and units shipped to support new construction. Units for the new construction range year-over-year from 15%-20% of the total shipments, while the larger replacement market can be tied to the ever-expanding and aging housing stock in North America, which now stands at an estimated 161 million housing units. This slide also highlights the market leadership A. O. Smith enjoys in this category. While A. O. Smith was negatively impacted to a larger degree than our customers during 2022 due to destocking, I can tell you that our share is now improving as industry inventories have normalized now in 2023. Let's take a quick look at the North America commercial market. The commercial industry shipments have been relatively flat over the past 15 years. However, this slide also shows the trend towards higher price point condensing solutions, which greatly benefits A. O. Smith, as our share is much stronger in condensing than non-condensing commercial products. Through September of 2023, commercial gas industry shipments have been relatively flat, while A. O. Smith shipments are up mid-single digits. The share overview on this slide clearly highlights our market leadership position, leadership that has been maintained for many, many years, driven by a continuous flow of innovative products valued by engineering firms and contractors across the country, and driven by a highly skilled and technical sales organization and distributors that understand the importance of local inventory. Let's now move from kind of the current state, and let's talk a little bit more about strategy... executing a clear strategy. In the innovate and expand section of this slide, I have listed a few of the product categories and services that have been a focus for our business. The focus on product has been to develop innovative, compelling products in growth segments. When it comes to services, we have focused on customer-facing, innovative process improvement with the help of technology to reduce customer effort, to improve customer satisfaction, while reducing our cost to serve. In the area of execution, we have been engaged with industry associations, federal, state, and local governments as a trusted resource, as Kevin had mentioned, to work towards industry regulations aligned with carbon reduction goals. We have also spent a good amount of time and money on improving the A. O. Smith Operating System to drive more effective approach to strategy deployment and operational process improvement. In the coming slides, I'm gonna spend some more time, provide some more details on pending regulatory changes, new product development, service platforms, and an update on the A. O. Smith Operating Syste m, all which help to further differentiate A. O. Smith from others in the market today. As I mentioned, A. O. Smith is fully supportive and engaged with various regulatory bodies to ensure the industry takes pragmatic steps to implement change while ensuring end users have viable product choices, as collectively, we all try to reduce our carbon footprint. On this slide, we have provided a summary of two recent Department of Energy announcements. One, a commercial final rule that will require all manufacturers to produce only condensing products as of October 2026. The other, a residential Notice of Proposed Rulemaking, which if passed, will impact the types of residential water heaters manufacturers are able to produce in 2029. Highlighted on this slide are the innovative products we currently offer that meet the proposed regulatory requirements. I've also highlighted the industry impact, which suggests a major industry shift in mix in the coming years. The commercial rule is certain, and it'll all have a positive impact on top-line growth. However, growth will be somewhat muted as a lower price point electric product may be the product of choice due to venting challenges associated with moving from a standard efficient gas product to a condensing gas solution. On the other hand, the residential regulation is still being reviewed. It is likely that the proposed rule will change from input from manufacturers, energy advocates, and impacted industries. The final rule is scheduled to be published in April of 2024. Having said that, there is no question demand for more energy-efficient products will increase in the coming years. It's more a matter of the pace of the change than whether or not change will happen. Now, let's shift to review some really exciting A. O. Smith products that we'll be launching in the coming months. Today, I am extremely excited to announce that A. O. Smith will be launching a new line of gas tankless products developed by our U.S. and China engineering teams. The first product family, shown on the far left, which will be launched in Q1 of 2024, will consist of three premium condensing models. The product line will be easier to install, provide superior performance, and offer customers the option to add X3 Technology, a patent-protected technology that centers around an integrated scale prevention filter jointly developed by North America Water Heating and North America Water Treatment. Applying the filter will eliminate the risk of premature product failure and will eliminate the need for annual maintenance associated with standard tankless product installations, saving the customer hundreds of dollars per year. I think this is a pretty big deal. With two additional product families being released later in 2024, we are confident A. O. Smith will become a leading player in the growing gas tankless category. While we are pleased with the progress made to date, we are also extremely excited to announce that A. O. Smith will be opening a new North America manufacturing facility dedicated to the production of gas tankless products in 2025. A. O. Smith now is all in on developing, manufacturing, and selling gas tankless products in North America. Since 2010, the new residential heat pump industry demand has grown from a few thousand units per year to 141,000 units in 2022. North America Water Heating has taken, and will continue to take, a measured approach, investing in heat pump technology and adding production capacity as needed to meet demand. At the bottom of this slide, you see the expansion of our product offering. With the addition of the new Voltex MAX, which will be launched in the coming month, we will have a complete good, better, best product offering. The Voltex MAX offers all the features found on the Voltex AL listed on the slide. However, the new Voltex MAX will be capable to deliver up to 40% more hot water with the addition of an integrated smart valve. The valve allows the customer to heat water in the tank to a higher temperature. The high-temperature water then flows through the smart valve, which automatically adjusts the outlet temperature to the set point desired at the faucet or shower. While the category is relatively small today, it is growing at 25% per year, driven by new building codes and incentives. We are in front of the curve. We are preparing for significant growth between now and 2029. We are not only investing in residential, but we're also investing to further strengthen our commercial leadership position, as Kevin indicated earlier. The current A. O. Smith Cyclone product enjoys approximately 60% market share of the condensing tank type market. With the market shift towards condensing, A. O. Smith is raising the bar with the introduction of the Catalyst program. There are two customer benefits of the program. Incremental sales. A. O. Smith distributors will greatly increase their odds of having the right product to capture incremental sales. The new Cyclone Catalyst series will provide customers the opportunity to purchase three core models that they can convert to 10 BTU-specific models in either natural or LP gas. The customer can convert the core models using a tablet to program the unit via near-field communication technology. All in all, the process will take approximately five minutes. The second benefit is a reduction in inventory carrying cost. The Catalyst technology allows A. O. Smith to deploy a two-step pricing model. At the time of purchase, the distributor pays 30% below standard cost. We become whole when the distributor receives a second invoice for the purchase of a digital key that is required to finalize the conversion and make the unit operational. As I had said, customers having the right product at the right time is an important component to being successful in any local market. This program is the Catalyst to making this happen. I believe it's a game changer. Let's now move from these product announcements, which are sure to have a big impact in the market, to review some very exciting services now available through A. O. Smith. It's important to note that these services we'll discuss are new platforms, platforms that we'll be able to expand on, to provide further customer benefits. I think we can all agree that not much good came from the pandemic. I can think of only one benefit, and that's the adoption of the QR code by young and old alike. With more of the population aware of QR codes and the purpose of the code, we have been able to utilize a newly implemented product information management tool to connect with the unique QR code placed on our water heaters for more than 12 years. Now, the customers and contractors can receive information standing in front of a newly purchased water heater or on a unit purchased years ago by simply scanning the QR code to get information specific to the model in their home or place of business. Now, there's no longer a need to mail in warranty registrations, to call, to replace a lost product manual, to call A. O. Smith for a service part number, or call for troubleshooting assistance. Again, all of this can be accomplished by scanning the QR code. And while these benefits are extremely exciting, we'll be adding additional capabilities in the future to further strengthen the platform. The second initiative that you see on this slide was focused on improving first-time call resolution for those that still feel the need to contact A. O. Smith directly. With the virtual remote assistance, our technicians can push out a link to the customer, which allows the tech to use the customer's cell phone as a camera. Having the capability to see the installation and the ability to coach the contractor on troubleshooting has greatly improved first-time call resolution, all while capturing this information within Salesforce, if required at a later date. Both initiatives on this slide improve customer satisfaction while reducing our cost to serve. We also recently launched a new mobile-responsive website utilizing Salesforce Commerce Cloud as the platform. The platform receives information from the new product information management tool that I mentioned on the previous slide. The tool, excuse me, pushes information to the site, eliminating manual work, improving internal efficiencies, while delivering timely and accurate updates. The site has been designed to enhance self-service functionality, and it's been streamlined to better assist the customer in the product selection process. With the input of the customer's zip code and water requirements, the Xpert water heater selection tool can factor in local incoming water temperatures and local energy rates. It will also provide information on federal, state, and/or utility rebates available in the area, so the customer can now make the best choice to meet their specific needs. Once a product is selected, assistance is provided by the site to find a local, loyal contractor who is familiar with installing the type of product selected. This step not only elevates customer confidence, it provides leads to over 40,000 contractors that participate in the A. O. Smith Contractor Rewards program. A win-win both for our end customers and for our contractors. In 2024, we will expand these new capabilities to additional branded websites. As noted earlier in the presentation, regulatory change will likely move our sales organization and the customer base to selling and installing new technologies. We believe customers will gravitate to the manufacturer that can offer best-in-class training and support. On this slide, we have highlighted the investment made to expand capabilities to do just that. For those customers who recognize every minute out of the market reduces revenue, we have created the A. O. Smith University site, which offers multiple online training videos and certification modules that are available 24/7. For those that don't want to travel but would like to have live interaction with an instructor, we offer live training events from our state-of-the-art studio in Ashland City. And for those that require hands-on training, we have live-fire training schools in Ashland City throughout the year. All in all, the investment allows A. O. Smith to provide superior support to outside sales, distributors, and contractors, support that's going to be critical as the industry transitions to new technology. Let's now shift to a short but important overview of the A. O. Smith Operating System. The A. O. Smith Operating System. The deliverables that you have seen from A. O. Smith in the past, and the exciting deliverables that we have shared with you today, can be tied directly to the A. O. Smith Operating System. Yes, many companies have an operating system, and you may ask, "What makes the A. O. Smith Operating System different?" Our philosophy starts with customer needs and then shifts to the approach to meet those needs. It's the approach that we take that differentiates our operating system from other operating systems. Our system is based on lean principles that focuses on people-based development rather than a tools-only based or a Kaizen-only approach. These types of approaches typically involve just a few people in an organization tasked to make quick improvements to reach cost-cutting goals. Sustainability is an afterthought, if thought of at all. While the A. O. Smith people-based approach may take longer to deploy throughout the organization, it will provide ongoing benefits. It becomes part of our culture. The goal is to have employees throughout the business capable of following standard methodology to problem-solving. Training has been developed for various groups in the organization. We have been training leadership and middle-level managers on lean principles, Speed of Trust, catchball, A3 problem solving, and problem-solving coaching, using the training to improve various processes such as strategy deployment, the new product development process, and the sales inventory operation planning process. In our factories, we have partnered with Toyota System Support Center, a consulting arm of Toyota, to create model lines within our facilities, learning labs in our facilities that allow us to focus on developing a culture that surfaces problems and then uses standard tools like the eight-step problem-solving flowchart to solve the problem. It focuses on ensuring the right supervisory structure is in place to support problem-solving efforts and activities. We have been pleased with the progress to date, and we are confident the lean journey we are on will provide many additional benefits in the coming years. I thought it might also be important to highlight the strength of the A. O. Smith manufacturing footprint. Highlighted on this slide are the 13 manufacturing and distribution locations across North America. These facilities range from 54,000 to 1.2 million sq ft. Today, the three U.S. residential facilities produce products based on a standard product platform, enhancing our ability to use all available capacity. The footprint that we have today, the capacity and the capabilities, give our customers a sense of security when it comes to supply, which they all realized during the pandemic. It also allows the business the opportunity to better manage production costs by balancing demand across all three facilities. There is further opportunity to improve the utilization in the coming years, and this will be a priority as the sites prepare for the upcoming regulatory changes. We have a confidence in achieving the 4%-5% growth rate on average over the course of the next five years. As I presented, the residential industry has grown from approximately 1.5% over the past 15 years, and we would expect this growth rate to continue. A small add for inflation and a better mix towards higher price point products, incentivized by the federal, state, and local utilities across the country for both residential and commercial products, gets us even closer to the targeted growth rate. In addition to the improved mix and small inflation, we believe that we're in a great position to gain share with the launch of our gas tankless product, the Cyclone Catalyst program, and the new heat pump offering, alongside the digital investments to reduce customer effort. The team is excited about what they have accomplished in the past couple of years, and they're excited about the future, and they are confident in our ability to reach the 4%-5% growth target. In summary, we are a market leader because of our innovation. We're a market leader because of the long-term relationships that we have with our premium customers. We operate in a stable marketplace, really driven by the housing stock, the aging housing stock that we see in North America, and the fact that in North America, nobody will go without hot water. We do believe we have a clear strategy, a strategy that will provide us success in the future, focusing on improving the A. O. Smith Operating System, improving our processes, delivering new innovative products and solutions. Finally, with the regulatory environment that's expected to change in the coming years, we believe there's top-line and bottom-line opportunities for growth. Bringing it all together, we believe that North America Water Heating is on the right track to build on a strong foundation, to maintain our leadership and drive profitable growth. That's it for the North America Water Heater presentation. At this time, I'd like to bring up Steve O'Brien, President of Lochinvar, to give you an update on the Lochinvar business. Thank you. Thanks, Dave. Nice job. Good afternoon, everyone. My name is Steve O'Brien. I'm President of the Lochinvar business, and I've been in this role for just over two years. I started with A. O. Smith over 26 years ago, though, as a sales engineer in the electric motor business back when A. O. Smith had Electrical Products Company. And I grew through that organization. I was VP of Marketing and Product Management, and ultimately, when we divested the business in 2011, I was a Senior VP and General Manager, and I went along with the divestiture to Regal Rexnord. I stayed there for about three years and led the integration of the motor business into Regal, and then in 2015, had the opportunity to join Mitsubishi Electric to lead their heat pump, heating, and air conditioning business in the United States. I did that for a few years, up until about 2.5 years ago, when I was presented with the opportunity by Kevin and A. O. Smith to come back to the company I love and lead Lochinvar to the next generation of success. I'm really happy to be here with all of you today and happy to present to you how Lochinvar is going to continue to build brand equity in the U.S. and Canada. The first thing I want to share is that the Lochinvar brand is a premium brand within the A. O. Smith portfolio, built on a foundation of highly efficient products, complemented by channel excellence and offering superior service to all of our customers. The business has long been focused on high-efficiency boilers and water heaters, with a superb value proposition to lead and capitalize on the secular shift toward more efficient water heating systems. These products are driven through the industry by cultivating strong relationships throughout the channel and backed up with high standards of service and support before, during, and after installation. To provide optimal solutions to a variety of applications, Lochinvar has also developed customized package capabilities, combining boilers, water heaters, pumps, tanks, and controls into engineered systems shipped directly to our customers' job sites. This combination of energy efficiency with best-in-class channel presence and service will put Lochinvar in a position to drive consistent 5%-7% growth over the next several years. The core product line in the Lochinvar brand are boilers. Boilers are the key piece of equipment in a hydronic heating system for commercial and residential buildings. Boilers heat water, and then that water is transferred into the occupied space, where the heat is either released radiantly or through the use of fan coil systems. Lochinvar pioneered the adoption of high-efficiency condensing boilers for hydronic applications many years ago and now has one of the broadest commercial and residential boiler lines in the industry. There's been a multi-year shift to higher efficient systems, and being an early adopter has led to above-market growth rates for many years, with about 5% CAGR over the last five years. About three-quarters of the boiler business is for commercial applications, such as apartment buildings, government and military buildings, hospitals, schools, and airports, where high volumes of hydronic heat can provide superior comfort and efficiency. Lochinvar has developed a premium network of independent manufacturers' representatives, who typically focus on designing and supplying all components needed for hydronic heating systems and sell direct to installers or through wholesalers for bundling of products throughout the channel. There continues to be a strong demand as well in the replacement channel due to the desire to replace less efficient boilers with premium condensing systems. The full portfolio of product includes condensing and non-condensing boilers, water heaters, storage tanks, pool heaters, and package systems, mostly as extensions of the boiler technology to complement hydronic heating systems with hot water consumptions in commercial buildings and homes, and also in swimming pools.... This diverse product line is focused on boilers, commercial water heaters, and tanks that are utilized in hydronic and water heating systems, and these categories combined make up about 80% of the overall business. From the early 2000s, the shift to condensing technology has been steady, now representing about two-thirds of the commercial boiler market. Condensing boilers are more efficient because they reuse the exhaust vapor and extract and convert additional heat energy to be used in the system. Lochinvar has led this shift, and as of 2023, over 90% of Lochinvar boiler and commercial water heater sales are now focused in this high-efficient category. Condensing boilers and water heaters typically provide efficiencies of greater than 90%, which is well above the Department of Energy minimum standards. These systems have been adopted due to the payback and the desire to operate more efficiently. The DOE, as Dave mentioned, is set to raise the minimum efficiency of commercial combustion water heaters to 94% and 95% in 2026, likely to raise the minimum for residential boilers to 95% in 2027, and commercial boiler standards are expected to follow later in the decade. Lochinvar is extremely well-positioned to capitalize on this shift, as the brand is known throughout the industry as a leader in this technology. The value proposition of condensing boilers typically includes significantly reduced operating costs compared to a current or an alternate system, often with a payback that makes the premium attractive. In this example, which would be a typical installation for a medium-sized apartment complex or office building, the installation cost for four commercial condensing boilers would be about $400,000 installed. When compared to a much less efficient existing boiler system, the annual energy savings could be up to $144,000 per year, achieving a payback on this investment of less than three years. The savings can be even greater when upgrading even older systems or in areas where natural gas is even more expensive. Also, this payback could be very similar in a residential condensing boiler system. Lochinvar has been winning in the commercial hydronic market by continually increasing the condensing boiler value proposition to owners, specifying engineers and building managers. Lochinvar launched the commercial condensing 1 million-6 million BTU Crest boiler system about a decade ago, and it is now the highest volume product platform in the portfolio. To stay ahead of the competition, Lochinvar is continually adding high-value features like the one shown here, the Crest Hellcat combustion technology, which continually monitors operating conditions such as barometric pressure and outdoor temperature, and adjusts the fuel to air ratio for optimal performance and best efficiency. This feature also provides the opportunity to not have to go back to the boiler system to make adjustments during seasonal changes. Our strategy for the brand is clear: We'll continue to add innovative features for high-efficiency residential and commercial condensing boilers and combi boilers, while also developing all electric heat pumps as supplements or alternatives to boilers and water heaters to expand the business into areas where electric solutions are either desired or required. We'll continue to execute this strategy by providing superior training and industry engagement in our factory and our training facility, as well as in the field, while ensuring we have optimal channels to market in every region of the United States and Canada. Expanding on the product breadth of our high-efficiency boiler product lines, the commercial boiler line is comprised of three main product categories: the water tube technology, cost-effective technology Knight, the premium fire tube FTXL, and Crest product lines. All three of these product platforms have stainless steel heat exchangers for longer life, with sustainable benefits that reduce lifecycle costs, operate up to 98% efficient, which is 23% over the DOE minimum, and they have industry-leading controls, such as the proprietary Smart Touch user interface and CON·X·US wireless control. The residential line is comprised of Noble boilers and Noble combination water heater boiler systems, commonly referred to as combis, and the Knight product line, which has a broader output range in floor standing and wall mount options. The residential boilers also operate at efficiency levels well above DOE minimums and have stainless steel heat exchangers, as well as easy-to-use system controls. Lochinvar's combustion boilers and water heaters provide high efficiency with lower carbon emissions, enhancing the overall value proposition. In order to capitalize on the trend to fully decarbonize with all-electric solutions, Lochinvar has recently developed an all-electric, zero-emission commercial heat pump water heater product line called Veritas to capitalize on this decarbonization trend. This air source heat pump transfers heat energy from outdoors into the stored water and has a coefficient of performance of 4.6, which means it operates at 460% efficiency in transferring that heat energy from outdoors into the water. The system uses R454B refrigerant, which is a low global warming potential refrigerant, and it's modular, meaning individual units can be paired together to address a variety of performance needs.... We're also expanding this product line in 2024 with the launch of Water Source, which uses outdoor bodies of water to heat, to transfer heat energy from the outdoors into the water. And we're also developing a cold climate version, which can operate as an air source product in nearly any climate. These air source heat pumps will utilize cutting-edge variable speed compressors with electronic controls to accomplish this performance. One of the fastest-growing parts of the Lochinvar business is the engineered prefab package systems that utilize Lochinvar's boilers, water heaters, tanks, and controls, pre-assembled, plumbed, and mounted on skids in our Lebanon, Tennessee, factory and shipped directly to job sites. We make these engineered solutions for space heating as well as water heating, and these systems can be tailored to a variety of needs, even combining combustion equipment and electric equipment for reduced carbon emissions with optimal performance. These package systems are popular in healthcare facilities, car washes, aquatic centers, and amusement parks because these types of facilities typically require large amounts of hot water, and they desire fast and easy installation with minimal on-site labor. Lochinvar utilizes our extensive application expertise to tailor these engineered solutions, offering expedited and effective construction completions from a single source. The growth rate in this category over the last few years has been 10%-12%, and we expect this trend to continue or even accelerate with the adoption of heat pump systems. As a matter of fact, here is a recent package system designed and sold by the Lochinvar team. This property is a 53-acre theme park that holds over 3 million gallons of water, and 1.7 million guests per year are expected. In the first phase of construction, there were four 6 million BTU Crest boilers with a heating output of 24 million BTU, with a central control panel and 10-inch stainless steel piping for a high output and long-lasting performance. This system was pre-assembled in our factory, including all the stainless steel piping, the control panel, and the wiring, and shipped directly to the theme park. This plug-and-play system allowed the park to get up and running with hot water on time with no delays. In order to ensure the Lochinvar value proposition is effectively communicated and the systems we manufacture are designed and installed with a very high level of confidence, Lochinvar has invested in innovative channel training and education. These programs include factory training on all of our product lines in our Lebanon, Tennessee, factory, where we utilize our state-of-the-art, university-style lecture hall and our hands-on lab behind the scenes. It also includes online and in-person specifying engineer classes and field programs with tailored content for all of our channel partners. We typically conduct over 85 classes per year, reaching about 1,500 new and existing customers. Much of the training we do is targeted at providing specifying engineers the ability to confidently design systems that have above-average value for building owners, making Lochinvar the provider of choice. The key to success with commercial projects is to have your brand as the basis of design from the engineering firm that creates the specification. When your brand and your product are specified as the basis of design by a specifying engineer, and you have market-leading performance and advanced features, it is highly likely you'll win the project with less competition. This chart shows Lochinvar's basis of design rate, along with four of our commercial condensing boiler competitors. As you can see, our specification share is over 30% and growing in the last few years. This is a focused area for all of our well-trained field reps and results in higher win rates at higher margin in the channel. Lochinvar's commercial boilers and water heaters are typically supplied by independent manufacturers' representatives, who focus on hydronic heating and water heating applications. In most cases throughout the country, these reps have Lochinvar as their number 1 or number 2 brand on their line card, typically complemented by a major pump product line. Our partner agreements typically require dedicated business development personnel, trained application and technical support teams in the field, and inventory available in the territory for fast turnaround of replacement demand. The country is well-covered with this strategy, and the reps shown here are known as industry experts in these territories. As a matter of fact, these reps together generate about 80% of commercial specifications for Lochinvar product throughout the U.S. and Canada. We intend to continue to grow the business at 5%-7% for the next several years by capitalizing on the accelerated trend toward energy efficiency, leading the innovation of all-electric heat pumps, and continuing to expand the package system business with a wide variety of capabilities. We will preserve and expand margins due to industry-leading innovation, supported by premium services and the adoption of the A. O. Smith Operating System that Dave just outlined for improved operating efficiencies. So in conclusion, the key takeaways for the Lochinvar brand are that we have built a foundation of success around premium energy-efficient products. We will grow by capturing share as this trend accelerates throughout the industry. We cultivate meaningful rep, engineer, and contractor relationships, so the brand is a provider of choice. We provide industry-leading support and service, and we can bring it all together with customized package systems for maximum value. We believe this product, support, and service strategy will lead to mid-single-digit growth for the next several years. Thank you. That concludes the Lochinvar presentation. Now we'll turn it over to Sam Karge, President of North America Water Treatment. Thanks. Microphone working here? All right. Good afternoon, everybody. As Steve said, my name is Sam Karge. I'm the president of the North America Water Treatment Group here at A. O. Smith. Like my colleagues across A. O. Smith, I've been in the water treatment industry for nearly 28 years and in a number of different companies within the water treatment space. In 2018, when Kevin invited me to come join A. O. Smith to start putting together the up-and-coming North America Water Treatment Group, it was a real honor and a real pleasure to be able to join the company here. So I'm really excited to take you through exactly what we're doing here in water treatment. So I'm gonna go through in depth our product and strategy, but in a nutshell, A. O. Smith Water Treatment in North America is only really about a seven-year-old business. We weren't in water treatment here in the U.S. and in North America before 2016. So really building out a strategy from the ground up. What I like about it is we've based it in two fundamental areas with a lot of room to scale. Number one, we're really building it on our innovative product and technology spectrum. Then you go and you build that together with a very strong market opportunity, a highly fragmented market, and going to that market through a really interesting set of channels, which I'm gonna talk about in a couple of pages here as well. Then, you know, going through and vertically integrating the business and then scaling that business up with a number of acquisitions that we've made to date, but really integrating those businesses and then building a foundation for a number of acquisitions going forward. So our business has been growing over the last handful of years, about 13% a year, so double digits, you know. Our business is really made up of two primary product categories, as you can see: water softening and water filtration. Water filtration provides us a great baseline business for a recurring revenue stream, which I'll talk about in a few minutes. But also the baseline water softener business is really an appliance business that has a nice capital sale, but then also keeps us connected to the channel. As you can see, there's a number of different ways that we go to market, which I'll go into depth, but fundamentally, we've been able to capitalize on the business and become a significant part of this industry just in a very short period of time. Our entire growth philosophy is based on one really good foundation: the water treatment industry in North America is barely penetrated. Unlike water heating, where just about everybody's got a water heater in their home, less than half of the United States homes have any sort of water treatment equipment, and if you take out refrigerator filters, which is the 29% blue bar, it's barely one quarter of homes. So less than right about one in four homes has any sort of what I'm gonna call deliberate water treatment system in there. So we think there's a lot of opportunity for baseline growth. If you look at our overall industry at a very high level, we've been growing about 4 or 5% CAGR over the last decade. That accelerated nicely during the pandemic with all the health awareness, you know, but overall, we think that the market will continue to grow at least that 4%-5%. And the main driver for that is really all around consumer awareness. The more the consumers realize the need for water treatment in the home, the more likely they are to buy it. And what's driving that consumer awareness is a number of different things, things like the aging U.S. infrastructure, you know, the PFAS and lead, which you've all heard about. All of these things are really gonna drive consumer awareness, all of which hopefully will drive that, that adoption rate on the far left up at a much higher level. I could see over the next decade where that goes from 25% to 30%, 40%, and eventually 50% penetration as an industry. So I'm very excited about the opportunity for what the industry has. So building our strategy on top of that baseline market opportunity is really important here. So first of all, our strategy is really built on three primary pillars. Number one is product leadership through innovation and technology. I'll go into what I mean about that in a couple of minutes, but on top of that, building out a very strong and concise channel strategy to get to the consumers. Since there is such low penetration, it's hard sometimes to get to the consumer, and we've got a pretty good program for how we're getting to it. And then once we've built that channel opportunity, we're really focused on: how do we execute, and how do we make sure that we make profitable growth for A. O. Smith to become a good growth engine for this, this company going forward? So if you look, I said technology and innovation was an important part of our, our differentiation to the industry. There's a lot of great companies in water treatment that make good products. We've taken a stand, however, at A. O. Smith. We're gonna lead with technology and innovation first. So I'm gonna start on the right-hand side of the, the page to start with. So there are a dozen different technologies that water treatment uses, but we believe there are four or five core technologies that are gonna represent the future of what, where the industry is going. Things like PFAS and lead and microplastics, those items, those contaminants in the water, these are the technologies that are really gonna go and differentiate that. And ultimately, reverse osmosis. You heard Kevin mention it earlier. You're gonna hear both Jack and Parag talk about it when they talk about China and India. We believe at A. O. Smith that reverse osmosis is that kinda be-all, end-all product that's going to be really influential in driving the technology forward. I like to kinda call it a final barrier technology, something that consumers can put in their home that takes just about everything out of the water. Just gonna get a drink. I'm talking fast here. So if you take a look, our product category is built into kind of three product categories. The first is what we call point of entry. These are devices that are at the entry of the home, where nearly every drop of water that enters that home gets either filtered or conditioned as it goes into it. Whole home filtration is really where we think, as A. O. Smith, a lot of the technologies are going. Whole home carbon filtration, reverse osmosis, things like that, is really the future of that. That represents about 60% of our revenue today. Then you get to point of use technology, which is water treatment equipment that only really touches that little bit of water that you actually consume. For every 100 gallons of water that is produced in the United States by the municipalities, less than 1%, or about 1 gallon out of 100, is actually consumed by people. Most of it gets irrigated or flushed down the toilet or whatever. We actually have technology that treats just that 1% to a very, very high level. And then the last category, a real small one for us, is what we call the non-installed category. This is things like the water bottle that I carry around with me everywhere. You know, we've got a lot of consumers out there who love the water treatment equipment in their home, but they can't take it with them everywhere they go, when they go on trips and things like that. Having technology that allows them to bring great water filtration products with them is very important as well. As we said earlier, technology is important, but innovation is really what differentiates us. You heard Kevin mention earlier, we've got hundreds of engineers and technicians in China, India, and here in the United States, working on the next generation of innovative products for the industry. When we talk about innovation, we're really focused on what I like to call differentiated products that are the best in category. So all of our products here in the United States are certified by what we call the National Sanitation Foundation, or NSF. That is the body that goes and certifies our products and says that the product does what it's going to do. They also list the number of contaminants that are reduced or removed by the different filtration, and in nearly every category, our product is, is the top of the line in terms of removing the most contaminants possible. In addition to that, a lot of the innovation we talk about is about how do we do it as efficiently as possible. So start up in the top left there, our side stream reverse osmosis technology. I said earlier that RO is the be-all, end-all technology. One of the dirty little secrets about it is it actually wastes a lot of water. Most RO systems in the market today dump actually 4 or 5 gallons of water down the drain to produce 1 gallon of drinking water. It's not a really good efficiency factor. We've actually developed, through our team over in China, in A. O. Smith China, a technology that flips it upside down, meaning we actually produce 4 gallons of water, of good water, for 1 gallon of wastewater. So almost flip that completely on there. We are one of the few technologies in the world that can provide this and have that super high efficiency. That's a great example of existing technology in a very innovative and efficient way. We also have our Claryum water filter. This is a carbon water filter that is really a baseline technology. We came out with this product with part of our Aquasana line back in 2014, and we continue to add new capabilities to that carbon every single year. And in our corporate technology center, recently came up with a variation on that that takes microplastics and PFAS out of the water. We were the first company to get certified by NSF for both reduction of PFAS as well as microplastic. Actually, microplastics very recently. If you go down to the bottom left there, a couple of technologies that we've had for a long time, but we continue to innovate on top of that technology, we are very good at A. O. Smith in problem water solutions. Water that's really stinky or has a lot of gook in it, we're able to use different technologies and innovation that takes multiple technologies and is able to provide great quality water. And then when it comes to water softening, water softening's been around for almost 100 years, but there is still innovation possible, particularly in terms of the efficiency of it. Our water softeners today, particularly with our WaterMax, use less salt to regenerate and less water to regenerate than anyone else on the market, and we're certified by NSF to those very, very high standard levels. We're really focused on great technology and innovation. As I said, our technology and innovation is the first step, but getting to the consumer is a very important part. We are an under-penetrated industry, so getting to the consumer is kinda tricky at times. We did some research back in 2019 and again in 2021, where we talked to actually thousands of consumers out in the water treatment market. One of the things that we learned is consumers don't know a lot about water. The chemistry of it kind of scares them a little bit, but they know that the water they have isn't good. So how do we get that message to consumers, and, and how do we get them to, to buy our products? There are what we consider, based on that research, five core channels that consumers want to get products through, and this is what our research told us. Going through this kind of top to bottom, the very first one is our first entry back in 2016, our direct-to-consumer channel. So the Aquasana brand that we market is a consumer-direct business that sells directly online and on the phone to consumers. It allows us to get directly to them, and actually, on a daily basis, we're talking to thousands of consumers about water treatment and the product out there. That's given us a lot of feedback to, to drive our overall strategy. The next one is kind of its sister channel, Marketplaces Online, AKA Amazon. Basically, this is the fastest-growing channel in water treatment right now. It's the smallest channel, but the fastest-growing, and we believe that this is a big opportunity, not only for A. O. Smith, but the industry going forward. The largest channel is the water quality dealer channel. This is one that's been around for the longest as well. It's nearly half the market in terms of dollars sold, and, as you can see in the top right there, it's about 48% of the market. This is where a dedicated water treatment professional comes in, diagnoses the water for the consumer, but through a water test creates the right solution, then actually installs it, and then maintains it going forward. What we found out from a lot of consumers is they are scared of the chemistry that's out there, when it comes to water, so they like having a professional, help them get the right solution. The next one that we're all familiar with is big box retail. A. O. Smith has a strong partnership with a number of the retailers, but Lowe's especially, and this is a very important channel overall for getting to the market. And then the last one, not unlike our water heating group, is wholesale. As I said, there are a number of consumers that need the product installed, so buying it from that plumbing channel, through a wholesaler is a very important part and a very important way of getting to the market. So as we've got those number of channels, getting the right message and the right product line to the consumer is very important. So when it comes to the direct-to-consumer business, our Aquasana business, it, it's all about innovation. We are in charge of actually generating the consumer demand. We don't have wholesale distributors. We don't have channel partners. We're selling directly to the consumer, so this is a constantly evolving space. You may have heard Aquasana commercials out there on Sirius XM or on Fox News, or things like that. We spend a lot of time changing our message over the last couple of years, to make sure we're getting to the consumers. Since the pandemic, our way of getting consumers has evolved quite a bit. A big part of what we're trying to do is, when you are in all five of those channels, the concept of omni-channel marketing is very important. We generate a lot of sales leads from consumers through our Aquasana channel, but being able to take the ones that we can't close online and moving them to one of our dealers is an important part of our future overall. As you look into our dealer network, we have over 400 professional dealers selling our products under a number of different brands. The key thing we have found is that to help them grow, it's about training, not unlike our water heating and our boiler group, training them how to talk to consumers, but also how to install the right product at the right place at the right time. Then last but not least, our retail channel. When a consumer walks into a big box retail store, they see a number of different types of water softeners and water filters. It's hard for them to know what they need. We have spent a lot of time and effort building a very comprehensive packaging solution to help the consumer get to the right product. But much like in our water heater group, we use QR codes, where they can scan the QR code, and actually takes them to an app to help them find the right product. And we also use online virtual assistant tools, much like the water heater group, to help guide consumers to the right type of product. These differentiators really have been an important part of how do we differentiate from the rest of the market. So after having built the business for the last seven years, we've been able to build a good scale when it comes to our dealer network, our online consumer network. But as we've kind of discovered, water treatment is local. Water treatment in California is not the same as it is in Florida, is not the same as it is here in Illinois, and you need to have local water expertise through your dealers and your channel to market. So as we look at how do we build scale for our business, it's about building out geographically. So kind of focusing on the opportunity where we have good representation. So right now, we are very strong in the Midwest and in the Northeast, but we don't have a lot of dealers, and we don't have a lot of presence out West. So as we look at the opportunity for mergers and acquisitions, we're definitely looking West. The other area that's very important for us is commercial and industrial. You'll hear Jack Xu talk about China and the commercial water treatment business that they've built there. Likewise, in the United States, we believe through our research that the commercial water space is nearly 2X the size of the residential water space. So that is an area of focus for us going forward when we look at acquisitions and the opportunity to grow. So now that we've built a good channel, we've got innovative products. For the most part, our operating aspects of how we build our product is primarily that of an assembler. So we've started to, over the last couple of years, focus on vertical integration of our components and actually becoming a core, vertically integrated manufacturer of our products. So things like our carbon filters, we've brought in-house, our reverse osmosis membranes, we've brought in-house, and the assembly of that equipment, we're actually making in our own factories going forward. The other part of it is supply chain length. Believe it or not, water treatment products have a very long supply chain. Take a basic carbon filter. It starts out as a tree growing in Sri Lanka, making coconut. That actually has to travel across the ocean a couple of times to make a carbon filter. So we've been working on processes to shorten that, so it's not traveling as far and taking us from a 25-week supply chain down to maybe a 10- or 12-week supply chain. It takes a great amount of cost out of it. It also makes us be able to control our quality and everything else much more efficiently going forward. So as you look at our growth profile, you heard Kevin talk about earlier, A. O. Smith North America Water Treatment being one of the focus growth areas for this. We've put together a plan to grow to be over $500 million over the next five years. How are we gonna do that? Number one is the market. We feel it will continue to grow 3%-5% a year, and we will organically grow at least 2-3 times that over the next handful of years. Take on top of that, 5%, bolt-on acquisitions, whether it be geographic or commercial. So that will drive us to be, you know, mid-teens growth over the next 5 years. That takes us at a top-line level to nearly $500 million. So we will become a significant part of the overall A. O. Smith portfolio. In addition to that, using our vertical integration and our ability to get price and our ability to drive best-in-class service, we think that we can drive at least 100 basis points of margin improvement every single year, which will take us, again, our operating margins into the mid-teens as well. So really nice growth plan we've put together for top-line growth, but also a healthy bottom-line growth overall as we build the business. So as we wrap up, you know, we're very excited about the opportunity for this to be a great growth opportunity within A. O. Smith. Really built on top of a strong, differentiated, and innovative product portfolio, our unique five-channel strategy to the market, along with our brand awareness, being able to take brands like A. O. Smith and Aquasana all the way down to the consumer and talk to them. And then using our vertical integration program to make us much more growth on the profit side of things, and then geographic expansion, both as we move west as well as in the commercial space, really will drive us to be a $500 million business overall. So with that, I'm going to hand it over to Helen, I think, for our Q&A session. Okay. That's our North America business in a lot of detail, and so I'm going to ask the team to come back up here on stage. We're going to take about 20 minutes to answer a few questions for you. And so, Helen will be walking around with the mic. And why don't you guys sit in the middle, the business leaders, and Chuck and I will be here for support. Okay? Hello, everyone. Leah, turn that on. Yeah. All right. There we go. There you go. For all the information this afternoon, Sue Maklari from- Can you hear me? Yeah. Yeah, we can. Yes. The expansion into the gas industry. Can you talk a little bit about, you know, that, that whole process of operating up there, and any thoughts on eventually getting to the electric side, and maybe why starting with gas there, and some of the dynamics of that part of the industry? Okay. I'm going to give you the high level, and I'm going to get Dave to give you the details. Hey, listen, well, we've always looked at tankless as a product that's going to be part of our portfolio long term. And we've had a joint venture for quite a long time with a very good company. But what we saw several years ago is that, quite frankly, if we were going to be a leader and be meaningful, that we had to take steps beyond what we're doing today. And we valued our relationships with our joint venture, but we had to take that step. So about three years ago or so, we made that decision. This is a $50 million investment for us. But it was all centered around. Listen, A. O. Smith is a leader in everything we do. We just talked about innovation is everything that drives us. This was a gap, and through 15 years of making the product in China, quite frankly, we make the gas tankless there. And what we've learned over the last several years in North America, it was time for A. O. Smith to take that next step, and we put a specialized team to do that. And over the last 3 years, they've generated a great product line that's competitive with anybody in the world. And more importantly, Sam talked a little bit about the supply chain. We're going to have that supply chain come out of Juarez, Mexico. So it's going to be on the ground for us, not leaving that long supply chain to deal with. So we have the flexibility. We talked about capacity and flexibility. So we're excited about that. That's the long-term strategy, why we are where we are. It was the one gap in our product line that we needed to close, and we are, and we'll start that at start of this upcoming year. I'm going to let Dave give you just some particulars about it, and let her know we're already in the electric business, by the way. Yeah, yeah. Okay. Yeah. So, you know, when you take a look at the gas tankless industry, it has grown from a very small market to about 1 million units a year at this point in time. Prior to the pandemic, it was growing at about 12.5%, was the CAGR. Post the pandemic, I think the industry is down a little bit this year, maybe 10%. Some supply chain issues, inventory getting balanced out, but we do think it'll continue to grow on into the future. And, you know, so it's really about 10% of the total industry. If you look at an industry around 10 million units, and on the gas side, it's about 20. So it's really important for us to get into the space. As Kevin mentioned, we've got a lot of experience in China with gas tankless, but it was extremely important for us coming in on our own to have a differentiated product. And we're really excited about the product that's been developed, a very unique heat exchanger on our premium product, and having that X3 Technology. You know, when you look at scale formation in the heat exchanger, it's really the death of gas tankless products, and it's the biggest knock against gas tankless product. So again, the timing was right to come in with a very unique value proposition because we do have some players in this space that are fairly well entrenched, that we're going to have to push to the side. And we're confident we're going to be able to do that with the size of A. O. Smith. Smith on, on the wholesale channel, what we do with all of our partners, and then finally having a product that's really differentiated, we're quite excited. On the electric tankless side, we did get into electric tankless a while back through a small acquisition. We do bring to product whole home, tankless electric products. You can find those being sold through wholesale and also through our retail partners. We will be bringing to market a point-of-use product, this coming year, which we're really excited about. Tankless electric point-of-use is typically looked at as a kind of a throwaway product. It's installed, you get a little scale formation on the element, it fails, you take it out, you put a new one in. We're gonna come out with a point of use electric product that really holds up to our quality standards, and we think it's gonna change the market. Point of use is typically more sold in commercial, at airports, in the labs there, and the like, whereas whole home is typically more sold through the residential side. So we're in that space. We've got some exciting things coming there also. Okay? Microphone failure. Maybe you should have the electric, tankless one stay as a throwaway item, seeing as Kevin's complaining that they last too long. I guess a question on the guidance from 2024 to 2028. The 150 basis points of North America margin expansion's on the 24% exit rate rather than the 25% full year. So maybe just a little bit more color around that, to start with, and then I've got a follow-up on water treatment. Is my mic on? 'Cause I can't tell. No. It's not on. The light's on. Can you hear me now? Okay. Yeah, in North America margin expansion, so we're, we're looking to expand margins. As you know, we've made quite a step up in the last year, so we're kind of looking to exit the fourth quarter at about 24%. When you look out, you know, go out the five years, you've got a couple dynamics. You've got margin expansion in, you know, the North America Water Heating part of the business. We've got a little bit of margin expansion, a little smaller scale, but, on the North America Water Treatment business, and as the water treatment business grows, there's a little bit of headwind against the North America margin. So there's a bit of headwind against it in total. But through the operating program, through all the things that we typically do, the working down costs, you saw cost reductions across all the businesses, we would expect to add a little bit of margin. And then on water treatment- I can, there's one more thing. So through that period, I just wanna kind of highlight that, you know, when we come out with some of the more high efficient products, but particularly on the commercial side, you know, we're assuming right now, kind of, you know, where those end up and, and what the bar raises on energy efficiency, but the, you know, the percentage is going to be roughly the same on operating mar-- or on contribution margin, but the dollars themselves should be larger 'cause it's a higher efficiency, larger selling price on the, particularly on the commercial side. Maybe one on water treatment. You talked about 4%-5% market growth for that and 10%-12% market growth for you guys. Just talk about the specific initiatives that you think can drive, you know, double the market growth. It's water treatment? You want to take that- Water treatment. Yeah. So the biggest initiative is really driven around the filtration EPA standards. We believe with the PFAS standard and the lead standard, that's gonna make the penetration of filtration in homes grow at a very good market level, and we believe that our technology, it being higher than what else is out there, that we should be able to capitalize on that tailwind that's driving us forward. Yeah. We're at the back. Yeah. Fine. Yes, David MacGregor with Longbow Research. Thanks for all the detail in the presentation. A couple of questions. First of all, on the water heaters, the 4%-5% growth through 2028, what do you assume for market share gains? I know market shares in that particular category are historically been pretty steady. Are you assuming that you're able to pick something up there? And then, I guess, I don't know if you want to address this now or maybe in the presentation later in the day, but is there a China or India opportunity for commercial boilers for Lochinvar? And then finally, for water treatment, is an evolving distribution mix a headwind or a tailwind? Thank you. Look, I'm going to talk about China this afternoon, maybe. Yeah, yes. Certainly, China, you, you'll hear them going for... We're, we're selling heat pumps, we're selling commercials and, and so forth. Yeah. Go ahead. I'm gonna. Yeah. So on the water heater side of the business, as we had indicated, there's normal growth that we see, right? With the housing stock that's out there, the aging housing stock, CAGR is about 1.5%. We historically have seen a little bit of inflation as we move forward, but with some of the incentives and regulatory programs, we definitely think there's gonna be a mix shift. As Chuck alluded to, that mix shift is typically a higher price point solution. And then, you know, as we shared with you, some of the compelling products and services that we're bringing to market, we do feel that there is gonna be some share gain opportunity, and we gain share by bringing innovative solutions, right? Innovative products, innovative services to drive that share growth. The team is pretty confident they'll be able to pick up some share as we move forward. Particularly on gas tankless, where- Yeah, tankless, $100 million over the next few years on, on top-line growth, right? So, we'll, we'll definitely see some improvement in the gas tankless space. On the top-line growth on the commercial regulatory changes expected in 2026, you know, it could go a number of ways. They've mentioned that it could go away, it could go to a tankless product, but the way we estimate it now, we would expect top-line growth just for that regulatory change to move to higher selling price and be a top-line driver of about $150 million. So between tankless and that commercial regulation at the, you know, later part of 2026, two meaningful catalysts for growth now. Oh, water treatment. Yeah, I Missed that question. What was the question? It was, the evolving nature of the channel. I think for us, it's a strong tailwind. Participating in each of the five core channel is important for us because as the federal regulations come out, especially for PFAS, we don't know which channel that's gonna favor 'cause they haven't actually released that data yet. There's a good chance our professional channel, namely our dealer channel, is going to be very successful in being able to capitalize on that federal regulation coming out in the next year or so. So we're leaning heavily into our expansion around the professional dealer channel right now. Yeah, let me just comment and use water heaters as kind of a catalyst- Mm-hmm. To what you just said. Over the years, and we—Dave and I have been around a while, you know, big box was gonna take out the small retail, all these things were gonna happen, and there actually is a place in the market for all these channels. There's different customers for a big box. There's different customers for a professional plumber. There's different customers for an Ace Hardware store. And what I like about what we're doing in water treatment, there is truly different customer for every one of those channels, and that's not gonna change over time. Maybe longer term, it might, when it becomes part of everybody's everyday life. But right now, having that younger person who's just gonna start out with a bottle and then graduating up to somebody who's gonna have a whole house, that's gonna take time, it's gonna evolve, and being in that position, I think is a real asset for our company. Hi, Saree Boroditsky from Jefferies. So your outlook was out to 2028, but you did highlight a large regulatory change on the residential side in 2029. I think last time you had a big change in 2015, you increased prices by 20%, you had a step change in margins. So I know it's a long way out, but any kind of color on what you would expect from the, the 2029 regulatory change? Thanks. Yeah, let's we'll talk a little bit about the pricing, kind of the gap that we see. So on a standard residential electric product today, sold at retail is about $500-$600. And we jump to an equivalent heat pump, you're looking at about $1,900. Okay? So pretty significant jump that we see between the two technologies. I would say right now, what the DOE has put out there is a notice of proposed rulemaking. There's still a lot that needs to go in, a lot of sausage making that's gonna take place before we have that final rule. And until we have that final rule in April 2024, we really don't have a clear vision on the transition from the current technology to heat pump technology. We do think it's gonna be fairly significant, but we really need to see the final rule to really understand and project the growth that we'll see going forward. Directionally, we see it as positive, though. Yeah. Similar dynamics to the last one. Yeah. Okay, and related to that then, so you look at the presentation here, and it's a lot of investment on the water heater side and, you know, tankless, heat pump, improving the efficiency level on the tank side. So there's a twofold question I have. One, your previous comments there made it seem like you think the industry will be pushing more towards the heat pump side of things when the regulatory filing gets finalized. Is that how you see the mix going, or is there gonna be a little bit more balance depending on the product category, the needs of the customer, whatever? And the follow-up is, and maybe I'm stealing what you might say later, Chuck, how do you think about the CapEx needs for that over the next few years here? Yeah. Because it feels like that's a lot of capital dollars that are needed. High return, but a lot of capital dollars. Yes. Yeah, good, good, good questions. So you know, at the end of the day, we really don't have a lot of clarity as far as where that mix will shift towards. All right? What we do see is we see a lot of states out there that are pushing to ban natural gas in a variety of different ways. In California, there's a proposal that'll bring the NOx emissions on gas down to zero. If that happens, gas products will no longer be available, and that's talked about in 2027. It's gonna go heat pump. So in California, they're really pushing towards heat pump. Other areas of the country, they're still very supportive of gas technologies, and you'll see some of the higher efficient standard tank-type gas products and tankless gas products doing well in those markets. Okay? So it's really kind of a mixed bag at this point in time. And again, when we get further clarity in 2024, I think we'll be able to forecast a little bit better going forward. So it does vary across the country. Gas products have moved to higher efficiency. Right. Electric products will likely go to heat pump- Yeah A nd then there'll be some exchange for regulation before that time. Yeah. Can we- The CapEx? Yeah. Yeah. Let me make another comment here, because I think it's really important. Gas is gonna be around for a long time. Yeah. Okay? And so we talked a lot about residential, but Steve also and Lochinvar talked about the commercial, and it's going to impact us on a North American water heater side. There's just footprints that don't work. So having a combination, see, we can talk about it. When you start putting 4 million-6 million BTUs, man, that's some power there. You say, "Let's make that a heat pump. Sure. That's a whole different animal. So it's gonna be a combination of solutions, we think, going forward. Yeah, we do. I mean, there are parts of the country where they're adopting building performance standards as an alternative, and building performance standards typically require a lower carbon emission over a period of time, whether it's year by year, over the next five years or over the next 10 years. And we think very often the best way to reduce carbon emissions over time is going to be with hybrid systems. W ith ones that have heat pump capability or all electric combined with gas, for the optimal performance and carbon footprint reduction. And, you know, with the products that we're developing, including the Veritas heat pump I showed for the Lochinvar business, which will be branded A. O. Smith and State as well, so we'll be selling that across the portfolio. We think that's gonna be a really nice addition as a direct heat pump for water heating and as a boiler supplementary placement, and in a hybrid system. Yeah, you know, I think I'd like to add to that and just say, Kevin had indicated we've been around for a long time, 34 years. We haven't seen this much proposed change in the 34 years we've been in the industry. But I tell you what, there's no better place to be than A. O. Smith, as the industry is making this change because of the strength of the organization, and because of our resources, and because of our R&D and our capabilities to make that transition, so we feel pretty good about that. On water heating side, we've got the products. Yeah. So kind of leads me into the CapEx question is, we've got the products. Some of what Kevin quoted on, on tankless investment is behind us, 'cause it's R&D over the last handful of years, where we really plowed into some money and, and making sure we got that accomplished. I'm gonna talk in my presentation about $85 million of incremental investment. That's gonna cover, you know, that's gonna cover our R&D center in Lebanon, it's gonna cover tankless manufacturing that we've just begun to break ground in Juarez, and it's gonna cover investment in our McBee facility for commercial production. Because we know the product is gonna move into the Cyclone that David presented, and we need a little bit more capacity on the Cyclone product. So, in total, that's about $85 million incremental investment that we'd see over 2024 and 2025. So it there'll probably be a little bit taken out of our normal $75 million-$80 million, but that'll be a little bit more investment, and we feel good about the investments in all those categories. Good morning, good afternoon, gentlemen. Just back on tankless, if you could help us understand how big that market is on a dollar basis? And just as you think about share gain versus the entrenched guys, is it really distribution partners kind of clamoring for different product? Do you think the product differentiated enough, or do you think you got to compete on price? Just how do you guys close that gap? Yeah, very, very good question. Typically, we don't compete on price. We like to separate ourselves with innovation. And we do feel very confident that the product that we're bringing to market is differentiated enough that it'll entice some of our solid customers that, quite frankly, had moved away reluctantly to additional manufacturers because we weren't up to speed with the technology within that space. So with the differentiation that we have and with the customer base we have, we feel fairly confident we're gonna be able to take some share in the market. So the market, as I indicated, is about 1 million units per year. Average sell price is anywhere $850, when you look at a mix between condensing and non-condensing that's out there in the market today. So it's pretty sizable, and it's a space that we need to deploy in. Good afternoon. Thanks for a lot of the information and particularly some of the aspirational goals. I have questions about two of them. One of them is the 1.5-2 times net leverage. You know, as a company, you've been operating in a net cash position for over a decade. Your share repurchases guidance on that page does not look like a lot. Doesn't sound like the capital investment is going to be getting us to 2 times leverage. I understand that, you know, acquisitions is always the first course, but getting to that level, what is the commitment there? Or has there just been a significant improvement in visibility in the M&A market on water treatment assets? And then I have a follow-up. Yeah. We've sized kind of the capital allocation, and you saw it wasn't, it wasn't closing the gap on that 1.5-2 times. You know, we still feel good about acquisitions. We still feel we should reserve ourselves the ability to make a significant or multiple acquisitions, and we still are, are down that path and active. So you're right, it's, it's been a while since we've been under-levered. We're gonna continue to watch it. The market for acquisitions, I'd say, you know, the process side, where you see processes right now, it's probably slowed a little bit. That's not necessarily our target. Our target is private companies looking to sell, and has kind of demonstrated that in the, in the handful of transactions we've done recently. So, and I realize I'm... way and they're adjusting it. But we still feel, we still feel good about the acquisition. At what point would we, you know, pull a different lever on a buyback or something? We're, we're just not quite to that point yet, but, we, we certainly do understand we're under-levered. That's a sea change difference from where we've been, right? So I was- I don't know- J ust assuming. I don't know if it's a sea change difference. I think what we're trying to plan on the chart on leverage is, you know, and I'll comment about it in my section, but we are looking at large and small acquisitions. And for those of you who don't know us well and think we're just, you know, constantly gonna be at a net cash position, that's really not our intent. It is our intent to lever up, but I want to give some comfort level that we're not gonna go crazy, and we're not gonna look at over-levering and get ourselves into a position, and particularly in this environment, where we're over-levered. But trying to give some parameters on where we would go for leverage and how we're, you know, how we'd manage that. Okay, thanks. The only other one is on the Rest of World margin, so 400 basis points over essentially a 4-5-year period there. Why would it take so long? Is it the mix now with the more upper middle price point? What is stopping you from getting there faster? Yeah, and Jack will talk a bit about what's going on, and then kind of how we look at, look at the target for margin expansion. You get us kind of back to where we were at our peak, you know, $1.1 billion and maybe 14%-15% operating margins. You know, the economy in China today, you know, we're—it's a, it's a tough environment. And so part of that is, you know, we're, we're gonna need some help on the economy getting back to some housing starts and a little bit more consumer confidence before we see that trajectory take off. So some of that hesitation, Scott, is just kind of the, you know, when does the economy in China kind of get back to a little more robust growth on housing, a little more consumer confidence, where consumers are reaching up for a premium product and seeing some of those dynamics give us a little bit of help like we enjoyed prior to about 2018. Okay, hey, I think if you have any more questions, we're gonna have another question and answer period at the end. So sorry. 'Cause there's a candy cart and other things we have to eat. Okay, so, we're gonna maybe take 15 minutes. Let's get a drink, grab some snacks, and we'll come back in about quarter till the hour, if that's okay. Okay? All right, thank you! My mic working? Oh, 2 more minutes. Second half of our program today. As you can see on the agenda, Jack Xu, President of our A. O. Smith China business, is up next, and he'll talk about capturing growth opportunities in China. Thank you, Helen. Welcome. Yeah. So good afternoon, ladies and gentlemen. I'm Jack Qiu, the President of A. O. Smith China. First, I would like to provide you a little bit about my background. I've been with A. O. Smith for 20 years. I joined A. O. Smith in 2003, as a Deputy General Manager of Product Engineering, leading new product and engineering organization development. Then I'm promoted to run our gas water heating business unit for over 10 years. I have been in my current role since 2020, right after COVID outbreak. It's my pleasure today to share with you our strategies, as well as the great progress we have made through past few years. We not only improve our cost structure, resulting in a series quarters with a 10% operating profit, but also continue to invest in new products and technology to drive our performance. Under today's challenging economic environment, we are very pleased with the resilience of our business and the foundation that we built to drive growth for the future. To begin with, I would like to highlight some key messages... A. O. Smith is a leader and a premium brand with our core business with water heating and water treatment. Within that core, we continue to see growth in the replacement market and a solid recurring revenue from our water filter business. We have built and invested in a balanced go-to-market channel strategy through A. O. Smith's branded special stores, third-party retail stores, and e-commerce. The balanced go-to-market strategy, along with the growth in recurring revenue streams, has built resilience into our business model. In addition to product innovation, we have focused on providing a premium customer experience through the development of digital tools for selling and service. We are also expanding our business through adjacent kitchen appliance by leverage our brand and innovative connectivities. We see opportunity for growth in commercial market, in both water treatment and water heating. Moving forward, we will continue to leverage our established strong brand equity and balanced channel to drive profit growth. We're looking for a 5%-6% compound average growth rate through 2028. China at a glance. Well, on financial performance perspective, after a period of challenge years, we are positioned for growth. As the COVID outbreak in 2020, we challenged our cost base through organizational restructuring, inventory management, and productivity improvement. In 2023, we project growth of 3%-5% in local currency year -on -year, and the EBIT rate will be over 10%. Our water heating business and water treatment business accounted for 47% and 39% of our total sales, respectively. 6% of water heater sales are replacement, and 20%-25% of water treatment sales are replacement filters. As I noted earlier, our go-to-market strategy is channel-based, with 41% of sales going through A. O. Smith's exclusive special stores, 35% through third-party retail stores, and 24% through e-commerce. A. O. Smith's exclusive special store distribution network is a true differentiator by combining sales and service, and in fact, we're controlling the whole customer experience. The network is a foundation to provide a premium customer experience, inclusive of products sold through the third-party retail and e-commerce. In recent years, we have executed a dual-brand strategy in China. The A. O. Smith brand is aimed towards a middle affluent classes and sold through all channels with consistent pricing. The Chanitex brand is defined as a member of A. O. Smith family, targeting younger generation of first-time buyers, mainly for online at a competitive cost position. We also have introduced AI-LiNK, a unique IoT application, which meets the smart home scenario and is better for bundled sales. So in fact, AI-LiNK has become a brand of system integration, and now A. O. Smith is well positioned for the smart home. This slide provides you with some ideas for our balanced channel strategy. For offline retail sales, we have about 9,600 point of sales across the country, with 4,500 physical stores in tier one to three cities. 1,800 of them are A. O. Smith special stores, which contribute about 56% of our offline sales. The other 2,700, primarily consisting of key account stores like Suning and other regional top stores, contributing 35% of offline sales. We also have approximately 5,100 outlets in tier 4 to tier 6 cities, which account for 9% of our offline sales. A. O. Smith special store plays an important role in our offline sales. They are operated by our exclusive distributors and are able to integrate pre-sales and off-sales to leverage, to deliver a premium experience. We have a good partnership with the Suning and the top regional retail stores, which is important for the expansion of our new categories. Our major online platforms are JD.com and Tmall.com, those big players in China. Online exposure is crucial to our brand, and we leverage the e-commerce activity to attract attractive traffics and deliver in-store visits to upsell premium products. We also have a project sales about $35 billion revenue, mainly focused on the high-end luxury properties. You can see some good names over there, the Vanke and the Longhu. Investment in China. We have operate and grow in China for over a period of 25 years. We have 3 facilities which house our manufacturing and R&D capabilities, all based in the city of Nanjing. Our business model is in China for China. From day one, we have focused on quality excellence, uncompromised safety standards, and social responsibilities. We have over 470 engineers in China, very passionate and capable. Our success in China is founded on a deep understanding of Chinese customers' needs and an R&D capability to launch innovative products to lead the market. In recent years, in addition to the product innovation, we have also leveraged digital tools and automation to empower the team and improve operational efficiency. This page outlines areas within our strategy. We believe our growth and margin expansion will be driven by the execution of initiatives which are surrounded by innovation. Innovation within the products themselves, innovation connecting various product offerings, and innovation enabling exceptional service capability and provide premium customer experience. We remain focused on our residential core product of water heating and water treatment, and we have added the new kitchen appliance, which provided for growth in underpenetrated market categories, and also protect our core business through the bundle sales. Our dual brand strategy protect our premium positioning and allows a great engagement in e-commerce. We also see opportunities in the commercial water treatment and water heating market. So I will talk about in the commercial product sector. This page show our commitment. Our core products continue to receive the investment to lead the market with innovation that is key to maintaining our premium position in China. A. O. Smith has been leading the water heating market with many innovative products. Here you can see a lot of good stuff, right? On dual tank, slim design, super quiet, and zero cold water for tankless. In recent years, we introduced new electric water heaters with a slim design, good looking, and more hot water supply. And we launched soft water integrated gas water heaters, and upcoming boiler is better fit for the Chinese apartment for softer water application. Before, there were very limited space for installation. So when we integrate the softer water with our water heaters, that is a very unique solution for the market. In residential water treatment, we continue to promote large water flow rates and hot water purification. Recently, we add the IoT connectivity to most our water purifier models, which measure the water consumption and therefore provide accurate data to ensure water filters are changed based on the actual use of filtered water. In addition, consumers are also provided information like the TDS level. You know, TDS, the total dissolved solids, is a key parameter for water quality and is well known to many Chinese consumers through the media education. In Q3 this year, we launched a unique dual function water purifier. It has two outlets. One provides a treated water up to five liters per minute for washing dishes and vegetables, and another outlet provides pure water for drinking and cooking. So that, that's also make our water purifier essential device multifunctional to serve the whole house instead of one point. Let's talk about the new categories of kitchen product. I will spend a little bit more time on these slides, since I'm thinking most of you will be very interested in this new stuff. We entered into the range hoods and the cooktops market in 2019. It was tough to grow in a mature market along with the COVID impact. We are very proud of our range hoods products since we developed a very unique, super quiet, split, split fan design. The no-noise fan assembly is designed to be installed away from the cooking operation zone and concealed above the ceiling of the kitchen. Our range hood is able to run at a higher speed, get rid of the cooking fumes completely, while maintaining a pleasant, quiet environment. This year, we introduced two exciting kitchen appliance: a steam oven and a dishwasher. Both market are underpenetrated with a good potential for growth. I think both category should be lower than 5% penetration. We have always driven our premium brands through innovation and solve customer needs better than our competitors. Our dishwasher have a unique bowl rotation technology, which provides a clean effect which outperform traditional dishwasher ability, particularly in Chinese-style cooking. We even display our products with a super clean features in the stores, with a transparent front cover, so that people can see the actual operation, admiring how effectively the strong hot water flushing the deep bowls, with the bowls themselves automatically rotating. For steam oven, we have a better design for Chinese, China cuisine. In China, the consumers just love to cook with steam, but before there were a lot of complaints that steam amount is not enough for handling the thick cuts of meat or a larger fish. The machine run out of water quickly with a small tank to create steam. Our solution is adopt a dual generator system with abundant three-dimensional steam for better cooking and to supply endless purified water by connecting the steam oven with our water purifier. In fact, we design all our kitchen categories with the ability to connect to each other. For example, our dishwasher could be connected to the water purifier as A. O. Smith's bundle offering. In this way, consumers are able to achieve spotless clean effect with purified water into the dishwasher directly and be free of maintenance, no longer need to refill softening agent. In addition, the potential consumer can easily find the quality difference of our products versus others. We first applied a stainless steel, the food-class stainless steel material, for the tank, you also call the inner chamber of the steam oven and the dishwasher, providing strong corrosion resistance and better hygiene conditions. With the new kitchen products, we initiate a program to promote a bundle sales, providing all sorts of product combination. You can see from the bottom, including our core products. The bundle sales are key trend in China. It's very important for the offline stores' efficiency improvement, and it also help to reach the target consumers at early stages of a home decoration. One of our unique bundle sales is for safety. Our range hoods, cooktops, and gas tankless, all installed in the kitchen, can be linked together to create a safe kitchen concept, with sensors monitoring the gas leak, the CO, and the smoke in the kitchen on a real-time basis. It also monitor the cooktop fire status, and it can provide a warning if somebody forgets to turn it off. So our new kitchen category, bundled with our core products, are being well received in the market this year. So in China, like the smart electric cars, the IoT-driven, scenario-based smart home solutions become a clear trend. I am pleased that we have made early strategic and forward-looking investment around the smart home. We have launched the AI-LiNK HVAC system in 2021, heating, ventilation, and air conditioning, providing high-end customers with one-stop shopping and intelligent solution, covering space heating and air conditioning, and fresh air. We have adopted advanced power line carrier technology to reduce on-site wiring and enhance the reliability of connection of wireless equipment. By linking controls and mechanics, we're able to achieve operating convenience and deliver a highly integrated comfort and energy-saving solution. And this year, we upgrade our HVAC system with a better air quality controls in five aspects: temperature, humidity, air freshness, room cleanliness, and quietness. And the high style display of air quality is very attractive to the high-end customers. Like this room, you know, we don't know how exactly the air looks like. So if you do have a digital display, all the key parameters, it, it's make you feel better and cherish the air conditioning system. So we forecast an annual sales of $100 million for our HVAC business by 2028. So here I will give you an overview of our integrated system of good water for smarter homes and how A. O. Smith will own the kitchen. Our AI-LiNK technology is the foundation. Its unique design is to create a safe local network system, since consumers are getting more concerned about information security and their privacy. Our system is equipped with power line carrier plus Wi-Fi dual-mode networking, and the smart home box can store all necessary data inside the people's houses, so all the data don't need to go into the cloud. So people don't worry about those, the leakage of the information. And this way, creating a very unique system to ensure reliability and information security. So our strategy is to expand our core water business around the kitchen appliance under the AI-LiNK framework. We forecast our kitchen appliance category, range hoods, cooktops, steam oven, and the dishwashers, the total sales will grow to $100 million in five years. Now we are talking about the commercial products. We're seeing commercial product as a catalyst for growth, too, because we have a premium brand in China, so that's also applied to our commercial segment. Our commercial water treatment business contributes 7% of our total sales today, and we are leading this growing market, and our products are designed based on application scenarios. So we have a product for manufacture facilities, offices, hospitals, campuses, and public areas like airports and shopping malls. So if you went to China, you can see A. O. Smith's commercial water purifier everywhere. It's really enhanced our image greatly. And we also are offering diverse diversified solutions, such as not only the hot water, but also chilled water, sparkling water, and a variety of coffee. So that's new. We see commercial water treatment products through the local dealers in over 110 cities now. Developing high quality dealers and the landmark project have proved to be very important in expanding our commercial business. We expecting annual growth of 10%-12% for commercial treatment, water treatment. For commercial water heating, with China's transition from low-efficient gas boiler to heat pump, the gas boiler industry show a downward trend. Actually, it's like a 30% decrease last year and also 30% decrease this year. So our commercial water heating business contribute 4% of our total sales today, and our focus is on high-efficient products of heat pumps and condensing boilers. We have introduced a smart commercial IoT system, also called AI-LiNK, same name, which intelligently link a gas boiler and air source heat pump to provide a optimized, reliable, and energy-saving solution, which is well-received in the commercial renovation market. This slide shows a clear picture of our strategy of a dual brand and AI-LiNK. So you can see, and Chanitex mission is to go after a larger portion of the market online and possibly down to tier four to tier six city in the future, because, you know, we cannot open the stores over there with the, with efficiency concerns. That's why I think maybe we go along with online down to the tier four and tier six as the most efficient way. And this change has transition, and we have adopted uniform A. O. Smith brand pricing across online and offline to protect our business. This change of transition Chanitex brand to online really protect offline sales from conflict. Since the price of the Chanitex brand models are more flexible for competing. AI-LiNK has elevate our brand as a system solution provider and make us a key player in the smart home arena. With our unique dual module setting, wired, PLC, power line carrier, plus wireless, Wi-Fi, AI-LiNK has become an open platform to allow other brand devices to be connected. A. O. Smith service and customer experience has earned widespread recognition in China. In past couple years, we continuously improving by developing various digital tools. We help salespeople improve the efficiency of communication with customers. We also empower the service technicians with a timely guidance on installation and maintenance through backstage supporting system. We built regional material center and established a digital visibility to components in stock with three color coding. Today, we have over 7 million customer online, over 6,000 dedicated service technicians representing A. O. Smith. Besides regular customer care center, we also have a unique online system called President Hotline, which has been in place for 2 years, allowing the top management to receive feedback directly from the end users by openly promising timely and responsible feedback to each customer. In 2022, we received 4.2 million service calls online, 100,000 messages through the President Hotline, and we are very happy to see 98% of the messages from the end users are positive, that want to thank our excellent service. Another key project, A. O. Smith Industry College. It was established 2021 as a training space to support our AI-LiNK strategy. So far, we have cultivate 400 highly skilled technicians capable of mechanics, electric, and on-site networking. We also provide training courses for many salespeople to help them to better understanding the bundle offering and the system. Our unique service system pattern controlling the whole experience, plus extensive training, that's why we feel very comfortable entering the new product categories. Regarding the brand building, we continue to invest both A. O. Smith and the Chanitex brand through social media such as the Red and the TikTok, by cooperating with influencers on live streaming and creating high-quality content. In China today, the online and offline are really merged. We, we display A. O. Smith brand high-end models online. It may directly create online sales, but it also routes the traffic and generate sales leads to the offline stores. If the sale is fulfilled by the offline stores with a lead from online, the sales records and the positive comments can be also seen online to help to get more leads. So year to date, we have established the presence of over 800 A. O. Smith specialist stores online. The national building material and decor mall chains, Red Star Macalline and the Easyh ome, are also promoting the O2O approach with their brand digital reach and extensive offline footprint to improve the operational efficiency. We built a strong collaboration with those, channels and established stores on the online platform as well.... Today we will see the headwinds in China, in decline real estate, low consumer confidence, you know, put the money in the bank, don't want spending short time, and a very fragmented channels. Also, I think the competition is fierce. But we believe A. O. Smith is prepared and well-positioned for these challenges, and we are responding with clear strategies. We'll keep driving our core business, new kitchen categories, HVAC and commercial business, and we will continue to enhance premium brand through AI-LiNK and best-in-class service. We believe with all this initiative, we are on the path $1.1 billion revenue in 2028, with a 5%-6% revenue growth each year. We expect our margin to improve from 11%, maybe 10%, to 15% in five years. To sum up, I hope today I'll be able to provide you with a clear insight into where we have invested within our product, as investing including enhanced, customer experience through digital tools. We'll continue to keep our leadership in the core business, maintaining our market share with a balanced omni-channel strategy, and we'll expand our kitchen appliance and commercial business and HVAC by leveraging strong in-country market presence. A. O. Smith service capability is better than most appliance manufacturer in China since we have built a powerful ecosystem. We have over 20 million units sold in China, and we are monitoring every unit installed and controlling the whole customer's experience with our distributors and service agents. This, our real differentiator for competition, will ensure high quality of service and enable us to expand our service capability to new categories like the kitchen products and complex HVAC system. Those are all very challenged field. It is not easy for any home appliance manufacturer. Premium products plus premium service. I'm confident that executing on these clear strategies will further enhance the resilience of our business model and ensure our profit goals. In the past few years, we have faced various challenges, gone through intense market swings, but I'm very happy to witness the continuous pursuit of excellence with the team. Reshaped organization, greatly reduced inventory, expanded to a new category, and stepped into the HVAC and smart home business, and improved the bottom line every year, and now back to 10%. So in short, we have emerged even stronger and nimbler, and this is all based on deep understanding of the local market and be able to respond with speed. We all have a full confidence in the future of A. O. Smith China. It's also a good report that A. O. Smith has been named 2022 China Most Socially Responsible Employer top ten, and first time elected as a China Best Employer for female employees, top ten. So we have earned an outstanding reputation as a good place to work, one that treats its employee with dignity and respect, and does business with honest and integrity. Thank you very much. I think that's all for the China operation. So, next, I will invite Parag, our business leader of India, to show his passion. Thank you, Jack. Okay. And you all yours. Yeah. Yeah. Thank you. Very good afternoon, everyone, and welcome to India. And let me share with you how A. O. Smith is expanding its presence in India. By way of introduction, I'm Parag Kulkarni. I'm the Senior Vice President, International, and President of India Business. I joined A. O. Smith early 2015 as the Managing Director for India Business, and it has been a very, very enriching journey so far for me, working alongside a very highly capable, committed, and driven India team. In short, it's been a ride of a lifetime so far for me. Prior to A. O. Smith, I worked with Swedish multinational firms, SKF Bearings and Atlas Copco, and after that, for almost 22 years with one of India's most trusted, reputed, and admired companies, Wipro, running their lighting and office furniture business. Outside of work, I am a marathon runner, a wildlife photographer, and a blogger. So let me take you through India business and what is it for us to share about India. So A. O. Smith is a very premium brand and well-recognized in India, with a very strong product portfolio. And when I say premium brand, we are a very consumer-facing brand. So, in India, a water heating product is fitted in the bathrooms, and the consumer knows what he or she is buying for the house, and they are very much engaged with the brand in the decision-making process. Same is the case for water treatment, which is, of course, even more informed and involved category. So I must say that, a general A. O. Smith consumer remembers what they have used in the house, and the brand has a terrific connect. And I thought I must share with you that I just met Damian some time back, and he was saying that he had an India colleague who had just come back and was saying that he saw a lot of A. O. Smith all over whenever he traveled, and that's what I hear whenever I go into various forums, being a member of a lot of CXO forums or chambers of commerce and all. If I introduce myself, I am from A. O. Smith, a lot of people come up and say, "Hey, I'm using your product." So that's the difference. I mean, A. O. Smith appeals to the sensitivity of the urban, young, upper middle class and middle class, which is expanding terrifically, and that's the opportunity that India presents. Being one of the fastest growing economy in the world, apart from that great demographic dividend of about 1 billion population under 35 years of age, average age of India is 29. As India grows fast at about 6%, the per capita grows up and the middle class is expanding terrifically, all of which is fantastic for a brand like A. O. Smith. And what the projections are, is that India is going to be one of the youngest nations right up to 2070. So there's a lot of human capital over there. So we are in a great shape at this point of time to really ride this boom. India, also for A. O. Smith India, the team has a lot of local expertise and awareness and understanding of what the consumer wants, how and what the behavior is. All of that helps in terms of innovating continuously and launching new products and services to our consumers, which has led us to drive a very profitable and sustainable growth, and going ahead as well, that's what is going to help us. We have also tried to expand our footprint because the growth of India is very much bottom-up. So what I mean by that, it's no longer a top seven, eight city, metro city driven kind of a country in terms of GDP. India's growth is bottom-up, and it's expanding terrifically. So there are 52 cities in the country with a million-plus population, and there is an equal opportunity in all these places. So which means that A. O. Smith really has to be present closer to the customer, and that's what we have been doing in terms of driving our expansions. Which means that we are very comfortable and confident that going ahead, we will grow at industry-leading rates at 15%-20% CAGR right through 2028. So let me give you a snapshot of what we have achieved in the past few years and where is this confidence coming from? So 2022, very, very important year for A. O. Smith India. Coming on the back of 2021, which was a terrific year, we still grew at four times the industry growth rate in 2022, which is terrific in terms of performance. But look at the 5-year track record. We have been a CAGR of 13%, and this is despite two years or one and a half years getting lost on COVID. So, there is a lot of, I mean, positive energy within the A. O. Smith India team to drive the business ahead. I must share over here with you that we started off as a water heating company when we got into the country, and late 2015 to 2016, we expanded ourselves or diversified ourselves into water treatment category. So till then, 100% of our business was water heater. But today, despite getting into an industry which is a water treatment, which is, I must say, a very competitive field in India, with very, very good established competition, very tough to find a place for yourself, to create a niche for yourself. In that, we have been able to create a premium niche for ourselves, and today, 70% of our sales come through water heaters and 30% come from water treatment, which is a good balance. So we are no longer risked with only one business category or one product category. We have a good spread of water heaters and water treatment in our portfolio. I'd also like to share that our strength, of course, when we started, was distribution and offline, which has been very, very good, and today, 68% of our revenue comes from offline. But last 4, 5 years, we have invested and grown our presence on the e-commerce platform and online platform. So close to 20% + of our revenue comes from there, and we have created a very strong premium niche commercial business for ourselves. 12% of our revenue comes from there. So that's how A. O. Smith is in India. But let me talk you through what India is and what opportunity it presents. So India is a number 5 economy in the world today, at around $3.5 trillion, likely to be a $5 trillion economy by 2026. In fact, the recent S&P projections, which came in about 10 days back, project India to be a top three economy by 2030. At this point of time, we have just overtaken UK a few months back to be a top five economy. By 2030, we should be overtaking Germany and Japan to be among the top three economies in the world. So this is terrific. A lot of FDI investments are happening in the country. I must also share some statistics. Out of the $3.5 trillion, the first $1 trillion took 67 years. I mean, India had independence in 1947. The first $1 trillion took that much. The second $1 trillion came in 8 years. The third $1 trillion came in 5 years. So the speed is really up, and India is really in a great position at this point of time. In talking about FDI, since our independence of 1947, close to about $950 billion got invested in India, out of which $532 billion came in the last 90 months. So that's the speed at which India is growing at this point of time. Last 8 year, year after year, the FDI investment has been breaking the previous year's mark. So that's the speed at which the things are changing. So net of all, it's a great position. Today, even startups are really driving a lot of growth in India, and we have among the top 3 nations in the world in terms of unicorns. I mean, a lot of change is happening. Government of India is investing a lot into infrastructure, be it roads, ports, airports, et cetera, and driving a lot of urbanization. One, one more statistics over here that, I mean, 30 Indians are migrating from village to town every minute. So which means that urbanization is really happening all over. And I'm talking again, that India is growth is bottom-up, it is expanding in all the cities. 52 cities are a million-plus population, so there is tremendous opportunity which is happening. There is a saying that India will create a U.S., U.K. in a very short period of time. That much is the urbanization which is happening. So there's a lot of opportunities over there. So which means for a company like A. O. Smith, which is a premium product, innovation, expansion of market, being present in e-commerce platforms and broad distribution network, gets us in a great position to ride this wave of India becoming a fast-changing nation. So A. O. Smith is a very strong brand with terrific distribution strength, broad distribution strength. Just some statistics around it: we are now having over 300 distributors and really reaching out to 13,000 retailers. When I talk about retail, there's a lot of mom-and-pop stores in the country. So which is a lot of effort to get into and permeate and reach over there. So that's been our strength. But the biggest strength of A. O. Smith, because of a premium brand, is also in the big box, large format or modern retail, what we call it, where we have 20 chains, and we are represented in 800 outlets. So over there, the real premium customer steps in, and our brand really addresses and talks to them, and there's a great opportunity which happens. On the commercial front, we have really expanded our presence, and we have now 50 commercial dealers covering the large spectrum of the country, and we are well represented on e-commerce platforms of Amazon and Flipkart. Flipkart is a Walmart entity in India. So that's how we are well-positioned. Like everyone over here in this room, A. O. Smith has a very clear strategy in India, and it's a simple, well-understood strategy among all the people of A. O. Smith, India. And what is that? Innovate and expand. Innovation is our core. We are all the time looking at new products, new technologies to ride in and bring in for our water heater and water treatment business, and we are creating demand as we expand and generate new products. On the brand front, we are really addressing that, and I will touch upon it in the slides ahead. In terms of execution, we are really providing a best-in-class consumer experience. Again, some slides ahead will talk about it, and we have a process-based approach in the country and a platform-based model in terms of new product introductions. Water heater is the core of our business in India, residential water heaters, and we have innovated continuously to raise the bar in the market. In fact, I must share with you that Raise the Bar is the anthem of A. O. Smith India. In fact, I'm not a great singer, but I mean, most of the times in a factory, on people's ringtones, on their phones, or even when you walk in or in your car, people are playing that song, "Raise the Bar, A. O. Smith, Raise the Bar, A. O. Smith." That kind of a thing, yeah? It's very much part of our culture and DNA. We are a young team. I'm the oldest guy in the team. We are a very, very young team, less than 30 years in terms of average age. So this team is driven around innovating and really launching technologically advanced products, which deliver great value for the customers, be it on energy efficiency, longer life, or faster heating. Some of the things which we feel the consumer really values. So technologically, A. O. Smith provides great solutions, but what I am going to talk about, and that's something which is core to A. O. Smith. What differentiates us as a consumer brand and as a brand of A. O. Smith facing Indian customers, is that we pride ourselves on also providing design-based I mean, a modern, styled, aesthetically appealing, really minimalistic style products which the consumer loves to have and bring it to their house. So most of our products talk to the consumer, in the sense, when you go into a shop and you see a A. O. Smith designed product, the product is designed in a way, it appeals to a consumer's senses, and it tells the consumer: Hey, come and talk to me, feel me, touch me, take me home. That's the way we have designed and constructed the product in terms of aesthetic styling, appeal, et cetera, et cetera. I must share over here, how are we able to roll out such wonderful, beautiful products all the time? Because we have a India-focused, India-based R&D team of 30 engineers, which are working round the clock to roll out products for India. So, deep understanding of the Indian market, plus a team which is working continuously, and they, and a lot of our external design firms, roll out these products, leading us to get 30% of our revenues all the time because of new products. So, not just water heaters, but even on water treatment, which is even more advanced and highly sought-after product among the urban Indian middle class. So, we are creating new trends, and that's how we are generating demand. So, one of the such trends that we created is a hot water product. So, at different points of time, our teams, which is the marketing team, R&D team, or even independent research, talk to consumers, and some of their stated and unstated needs get communicated to us. So, we heard during our different interactions at different points of time with the customer... Some people said, "I have aging parents in home." Someone said, "I have a pregnant wife at home." Someone said, "I have young kids, and I have to take care of their throat." Some others said, "I and my husband are very health conscious. We want to start our day with a hot glass of water or a warm glass of water or a green tea." So all of them put together led to a creation of a hot RO water product purifier, and that got launched in 2015, leading further to launching that range in the UV category, further leading to launching a more sustainable. I think Sam talked about how A. O. Smith has innovated at all times, and RO products lead to water wastage, but we are one of the companies which pride ourselves on highest recovery. So we say that we are among the highest recovery water purifiers in the country. So A, B, C, D, E, a slew of product launches over a period of time, and a new trend created. So hot is the new healthy in India, and all of that leads to, again, 30% of our sales coming because of new products. So we are creating demand by understanding and creating new trends in the industry. So we talked about the hot water. Here is another trend. So as India is urbanizing, as per capita goes up, as it's getting up on the affluent chain, the Indian household wants to have a better life. Water purifiers in India are generally wall-hung units, so not a good sight if you walk into a kitchen that suddenly you have a modern kitchen and there is a water purifier, wall-hung. So there is a need to create modern, minimalistic design, which mergers go into the background, and in came under-the-counter water purifiers. So A. O. Smith innovated and launched a lot of new products in that platform, and today, three times of our sales have grown in that category. Same is the case with UV product purifiers. We—I mean, there are a lot of customers. So in India, the water quality among the, in the cities has improved significantly, unlike a lot of places where normally the water quality goes down. So there is a better water quality available, leading to a lot of people saying, "I will buy a UV product," but then in that, no premium product available. So A. O. Smith innovated and brought new modern styled UV product purifiers with lot of consumer interface kind of appliance, so it's electronically and digitally operated products, and that's what has led to creation of new trends. And we are continuously investing and nurturing in these trends and grow the business continuous. So that's what is there. Building a brand. So over here, I must say that wherever the consumer is, A. O. Smith is. What do I mean by that? At the normal and regular watering holes, be it Instagram, Facebook, WhatsApp, I mean, well, Google, Amazon platforms, et cetera. A. O. Smith digital outreach is over there. In terms of product, and not just product, we are just not advertising on products. We, as a company, and Kevin talked about it, and everyone talked about, we being sensitive to the global environment, sustainability drives us. So be it Earth Day, we are present in terms of sending a message across. No product advertisement, but connecting with the consumer, or be it a Mother's Day or be it a Father's Day. So there's a lot of emotion. Indians are generally very emotional people, so you have an emotional connect also with the brand. At the same time, we need to be there when the festival time is happening. Right now, it's a festival time in India. Next week, Monday is the biggest festival of India, which is Diwali, which is the Christmas of India. So in which case, we need to have offers for the consumers to get excited. So print, we are still a print-hungry nation. We still consume a lot of print, so we have—we are present over there, or at the same time on Amazon platform, where a consumer is about to make a decision, we influence that by being over there and likewise. I mean, oh, brand building is something which is continuous. A brand is also built through third-party accreditations and certifications. So your A. O. Smith consumer, I mean, oh, is very happy that A. O. Smith water heater for five years in a row has been rated as the most trusted brand, and which is terrific. So that's what the consumer feels good about, and that's how the brand appeal goes up. In the same time, as new certifications come up, A. O. Smith was leading among the largest players for getting that certification from Government of India. On an e-commerce platform like Amazon, we are possibly among the highest rated within our category in terms of ratings and reviews, leading the consumer to develop more trust, more appeal for our brand, and our net promoter score is continuously going up. That drives us to being present where the consumer is, and we have expanded our distribution footprint significantly over the last few years. We started with about 100 distributors in, say, 2016. Today, we are 300+ distributors, covering large footprint in terms of retail outlets. I must share over here that how have we been able to appeal? With the distributor, it's not a relationship which is just a commercial, transactional relationship. A distributor is an extended part of an A. O. Smith family. We are one family, one unit, and that's what the distributors firmly believes because of a program called Sankalp, which is one of its most unique kind of a distributor-oriented program. Every year, we conduct one annual event where the chairman, CEO, like last year, Kevin was over there, present, and we have something called as a Hall of Fame, which means for the full year running, not just on performance on sales, but on various parameters in terms of educating the customers, in terms of premiumization of product offerings, various things, and best payment, et cetera, et cetera. We reward the distributors. Today, the distributors want to be on the stage receiving this award from the chairman and CEO of the company, getting an acknowledgment in their public forum and peer group, and they--that drives a certain behavior, and they are very, very committed to working alongside. Although within the industry, they represent only us, but they also sell various other products. Our aim was that they treat A. O. Smith as their number one principle, and that's what this program has been able to drive, and that's what is helping A. O. Smith a lot. Coming to commercial, again, we were among the first to bring in heat pump offerings in the India market, and premium customers, aware corporates, were very much happy to have energy-efficient, sustainable products for their requirements, be it hotels, healthcare facilities, educational institutions, premium condominiums, et cetera, et cetera, or even high net worth individuals for their villas and all. So commercial business has been growing at a fast clip as we continue to invest in that business. One of the best things, which I am very, very proud of to share with you, is the brand is not built by just innovating and getting the best product at the highest and the most premium technology, but leaving the customer high and dry. A. O. Smith India has invested in possibly one of the best—I mean, service customer experience, not just for the industry. We do not really benchmark ourselves with the industry, but we want to be among the best wherever consumer experience is that. And our service is really raising the bar continuously. We have invested in technology for to enable the consumer to touch base with us any time in the day or night, and we provide 1,200 technicians plus over 14,000 zip codes, 365 days a year, all the time, and try to solve the consumer issue, if at all, within the same day. And that's what the service stands for, and that premiumization of service is building the brand of A. O. Smith in India in a very, very strong manner. What does that mean to the business? Water treatment provides us an opportunity to have annuity business or annual maintenance contract with the consumables and other things. So you can see in the graph below how our business in terms of AMCs is growing. It's a very profitable way of growing the business. What is there for the consumer? Peace of mind. So I think every consumer values that, and that's what is helping us terrifically. Now, let me share with you a simple one of the platform-based approaches that has been working for A. O. Smith in a very, very good way. Much like an automobile industry, where you create a heart and then you package a chassis differently for different products and roll out, so A. O. Smith also has a very platform-based approach. What does that mean is that based on various value propositions and customer touch points, and even India as a geographical nation, has a requirement which is little different in different geographies. We are able to do that through this platform-based approach and launch a product time after time, time after time. What does it mean to the retailers? To a retailer, whenever a consumer walks in, a retailer wants the consumer to buy and go. He doesn't want a solution to come from somewhere else. So a customer is always looking at the latest offering. He goes to the retailer and says, "What is the latest?" So the retailer is very happy that A. O. Smith is launching every time, time and again, new products. So they say, "Okay, this is the product that is the latest. Please buy it." What is there for A. O. Smith? I think we are able to launch new products with minimum tooling investments, at the same time, also use inventories and cut down on our operational cost. So net of it all, through a lot of these initiatives, through innovative products, launch of and expansion of these in the market, through commercial expansion, e-commerce expansion, and great customer experience, we feel and very confident about delivering industry-leading 15%-20% CAGR through 2028. We will maintain our margin profiles and invest into our business to grow our presence in India. So let me summarize over here. A. O. Smith stands for premium brand positioning, a great brand connect with the consumers. India is one of the most happening places. I gave you a lot of examples for that. A. O. Smith India understands and has local market expertise, and we are innovating fast, and we are expanding fast to reach out to all the consumers in the market, and we are very confident of delivering 15%-20%, I mean, market-leading growth right through 2028. Thanks a lot. I will hand over to Chuck now. Thanks, Parag. I'm not going to sing during my presentation, just assuring everybody. All right, so, good afternoon, everybody, Chuck Lauber. I've been with the company, 24 years going on, and prior to that, I was with E&Y, a number of leadership roles with A. O. Smith, and been in my current role as CFO for the past 4 years. Very pleased to review with you how each of the individual business presentations come together to form a compelling financial profile. When you look back at our performance over the past decade, we have a proven track record of delivering revenue growth, earnings growth, and creating value. We have an industry-leading free cash flow conversion rate of 100% over the past 5 years. In a moment, I'll review with you our capital allocation priorities. In addition, I'll review a few near-term, incremental growth-oriented investments we will be making to further enhance our leadership position, particularly in the North America Water Heating market. We have a strong balance sheet, and therefore, in a position to deploy capital into M&A. Acquisitions are our priority, and we remain active in seeking the right acquisition for A. O. Smith in a disciplined fashion... We believe we have a clear strategy for growth and value creation going forward. As you look at our financial performance over the past 10 years, we have a strong, proven track record of growth and earnings expansion. Our key performance drivers have been positioned into two categories. Those in the bottom left of the slide are historical drivers, and those in the bottom right are catalysts that position us for future financial performance. It's important I touch on the historical drivers, as I want to emphasize that those drivers all remain in place as a solid foundation to build from, including regulatory changes for water heating, as you heard from Dave Warren. We've grown our top line and margin profile in North America business. We've invested in and introduced innovative products across all of our geographies. We've invested in digital platforms, some of which are already improved our premium positioning, and others that are just recently deployed and have a long runway. And underlying these drivers, we have a strong replacement model in North America and growing replacement business in China. The replacement cycle provides a backstop against downward pressure in times of a challenging economy, as well as provides an upsell opportunity when the replacement cycle comes around. We are positioned for future performance. You just heard from the business leaders and their specific strategies to grow both top-line sales, as well as continue on a path of margin expansion. To highlight just a few, in North America, the launch of a premier gas tankless water heating offering, where we expect to gain share within the category. We expect to continue to capitalize on the tailwind momentum provided by a decarbonization megatrend that supports growth in high-efficiency gas water heating and boiler product, along with electric heat pump technology, each improving the financial profile of our mix. We see a clear path to continuing North America Water Treatment top-line growth and margin profile through executing the integration of the acquisitions we have made so far and enhance growth through the future acquisitions, acquisitions driving scale and margin improvement. Our initial acquisition was made in 2016, and today, through acquisition and organic growth, the business is around $230 million in 2023. We see a path over the next 5 years through organic growth and acquisition to $500 million with margin expansion. The 2026 regulatory change for commercial water heating is right around the corner, and we are well positioned with our leading Cyclone product platform that is now configurable into various models from 3 core models. Catalyst, the updated Cyclone, differentiates us in the market and positions our customers to win. With the most compelling value proposition in commercial high-efficiency water heating, the proposed 2029 regulatory changes on the residential side of water heating, while still in the proposal state, are expected to provide a top-line and margin growth opportunity. In China, we believe we are positioned for top-line and margin growth. We have restructured the business, rationalized our store footprint, and invested in developing and introducing new products, along with AI-LiNK connectivity. In addition, you just heard we have a very long positive outlook for India. Executing our business strategies along with capital allocation priorities, line us up to deliver on our key financial objectives. Our confidence in achieving our objectives is not only based on the strategy you heard today, but also the way we are structured and focused. Our businesses are intentionally structured to deliver in the markets they serve. As we talked about throughout the presentation, in serving our geographic markets, we're customer-focused and locally led. Our localized in-country leadership and management teams know the local markets they serve and can drive performance based on premium in-country go-to-market strategies supported by in-country manufacturing. We believe this structure is critically important to a premium positioning in each market and creates a superior customer experience. In addition, each country is supported by the global functional teams, driving common standards when possible, and building off the standard platforms. This support aligns with providing speed, quality, and flexibility to serve each market using global best practices. Operational excellence has long been embedded in our businesses. The A. O. Smith Operating System was introduced a number of years ago as a next step in A. O. Smith continuous improvement journey. Dave Warren spoke about how the North America Water Heating business has used the A. O. Smith Operating System to drive sustainable improvement. During the pandemic, our operational excellence foundation served us well through all aspects of a challenging COVID environment, and we look forward to a long runway of foundational continuous improvement programs surrounding our A. O. Smith operating system, creating a sustainable culture shift to provide process improvement over a period of time. Our free cash flow target is 100% of net earnings, and we've achieved that over the past five years. The recurring revenue portion of our business and the replacement side help build resiliency into that model. We have relatively low capital intensity, even with incremental investments over the next few years. We have a strong working capital position through active management, with some incremental improvement in inventory investment from where we are today. Our free cash flow supports our capital allocation priorities and funds the right investments for the long term. Turning to a discussion of our capital allocation philosophy, that focuses on strategic investments and returning capital to shareholders. We are currently in a net cash position, and while we have deployed capital in each of the four categories noted in this chart, we remain undersized in our acquisition deployment. We continue to believe that capital deployment for the right acquisition would create long-term value, and we have continued to reserve firepower to be in a position when that opportunity arises. We remain focused on acquisitions and have, over the past two years, looked at both large and smaller acquisitions. We do, however, remain a disciplined M&A acquirer, and while we would stretch our debt-to-EBITDA ratio above our target range of 1.5-2 times, we would do so when we see a clear path to working back into that zone. We have a strong balance sheet, along with a solid, predictable free cash flow. Together, we have the firepower in support of strategic investments, as well as return capital to shareholders. We're in a great financial position in today's environment to pursue strategic M&A. Our highest expected rate of return and opportunity to expand our market leadership in each of our businesses and geographies is to invest in ourselves. In planning our capital, our target is to dedicate approximately 60% to maintenance projects and 40% within the category of growth and operational excellence. Over the next two years, incremental to that target investment mix, we will invest in a number of key growth and innovation initiatives that total approximately $85 million. Earlier this year, we announced a $30 million investment in our commercial R&D facility in Lebanon, Tennessee, that Kevin talked about. The facility will be an expansion of our current Lebanon operations, adding offices, lab space, and testing facilities. This expansion allows for the consolidation of our commercial engineering teams, some of which are currently located in Lebanon, along with those located in McBee, South Carolina. The consolidation will leverage the team's capabilities, collaboration, and efficiencies, all in a state-of-the-art commercial engineering, water heating, and boiler R&D center. We have two expansion projects launched, beginning to be launched in Juarez, Mexico, both within the property we occupy today. The first project supports North America production of our newly launched gas tankless. A new building will be constructed on the property to manufacture our newly launched tankless product in North America. Our initial launch in China leverages our footprint and capabilities already in place, where we have manufactured, where we have manufactured gas tankless for the China market for over 15 years. While manufacturing in China provides the right footprint to launch production, it's not cost-effective longer term, with tariffs and transportation adding to that cost. 2024 will require an incremental investment in our bottom line and support the launch and import costs of tankless product. Initiating our production in Juarez is key to eliminating the 25% tariff and improving logistical efficiencies. Also in Juarez, we are expanding our residential heat pump capacity to meet the increasing demand of growth in residential electric heat pump in the near term, not inclusive of what we would see in a proposal in 2029. The fourth key incremental growth project expands our commercial water heating production capacity for our high-efficiency Cyclone product as a result of the pending and will be launched 2026 regulatory change for commercial water heaters. While eliminating certain less efficient commercial models we sell today, this change is expected to expand our Cyclone demand, already a leader in the commercial water heating space. We continue to invest around $90 million globally in R&D and product development. Finally, we continue to invest globally in our operational excellence and channel expansion. We consider to continue to pursue strategic acquisitions that fit within our strategy, as well as those that meet our financial criteria. We seek to remain within water and expand our core, as well as consider water-themed adjacent platforms. Potential acquisitions that expand our total addressable market, either through market synergies within our current footprint or as a platform for future bolt-on acquisitions, are of particular interest. Also, as a component of our forward view on emerging technologies and capabilities, in addition to our R&D investments previously mentioned, we consider acquisitions or joint ventures as a jumpstart to developing those capabilities and technologies internally. We also continue to remain disciplined in our financial criteria review. We keep our pre-acquisition financial profile with regard to growth rate and our highly attractive margin profile in front of us as we review acquisitions. And because we believe our return on invested capital is a differentiator, our financial investment criteria also focuses on projection of return on invested capital by year three of ownership in excess of the weighted average cost of capital. It's a priority for us to continue to pay a dividend. We have raised and continue to pay an attractive dividend. We have a 30-year-plus track record of an annual increase in our dividend, and we are committed to continuing that practice. We benchmark our dividend yield compared to our peer group and are committed to remain a leader within our peers. In addition, share repurchase has been a consistent ingredient within our capital allocation strategy. Since 2014, we have reduced our diluted share position by approximately 17%. Going forward, we expect that share repurchase will be an active component of our philosophy in returning capital to shareholders. We have a great foundation to build from and a strategy to deliver growth in the range of 5%-6% in the 2024 through 2028 timeframe. The North America Water Heating business has a number of catalysts, including two key growth drivers. Our newly launched gas tankless products are projected to add an incremental growth of $100 million by 2026. And the commercial water heating regulatory change in late 2026 is projected on a product shift assumption to provide top-line growth on a full year run rate of over $150 million. In addition, we've invested in innovative products, innovation beyond products, to deliver on a premium customer experience in each of our markets. Our free cash flow will continue to feed the investments we need to continue to grow. In addition, we have a base of replacement business, which provides resiliency when the economy may be weaker or challenged. As you look at this slide, it demonstrates that our strategy for growth is not based on one or even two actions. It's based on a number of strategies across each of our key markets. It's based on historical experience in these markets and investments we have made in ourselves and continue to make. In addition to the strategies we have in place and the investments we have made, we believe that the decarbonization megatrends, driving energy efficiency and water heating and space heating, and the aging infrastructure in water delivery provide long-term tailwinds in water heating, boilers, and water treatment. Our water treatment business, through organic growth and acquisition growth, is on a path to grow to $500 million, with a priority to improve operating margins to mid-teens over the next five years. Based on our 2023 outlook for China and the challenged economy and environment within the economy in China has been over the past couple of years, we believe we are poised to grow from the current position. Our assumption to achieve our objectives over the next five years assumes a return to a more healthy economy in China and a more confident consumer to trade up to premium product. Our balanced channel approach in China and the way we go to market, new product introductions, giving our portfolio more breadth from which enhances the effectiveness of the bundling programs that Jack talked about, and connectivity through AI-LiNK are all growth drivers. Those investments, along with the growing replacement business of water heating and water filter consumables, make China more resilient, even in a challenged economy. With regard to India, while small today in relation to our total business, we believe India has great potential for long-term growth within our with brand strength, new product introductions, and channel expansion. Beyond five-year profile, far to the right, we expect the proposed residential water heating regulatory changes, projected to begin in 2029, provide a positive financial catalyst to the growth of the water heating business in North America. Looking forward over the next five years, 2024-2028, our value creation objectives and goals, we would expect to grow top line in the range of 5%-6%. Our EPS grow EPS in the range of 7%-9%, with North America margin expansion of 150 basis points from our expected exit rate of 2023. The Rest of the World margin expansion of 400 basis points and a continued capital allocation program towards share repurchase, in line with the $300 million target we have for 2023. 100% free cash flow rate, and as we deploy capital through acquisitions, target a range of about 1.5-2 times debt-to-EBITDA ratio. ROIC is an important metric for us, and we believe that our high ROIC differentiates us from our other investment opportunities, and maintaining a high ROIC remains a focus for us. To wrap up, we have a track record of delivering top line in earnings growth, as a proven foundation with a number of key growth drivers over the next five years, driven by regulatory change and the launch of our tankless product, as well as product launches across all of our businesses. We have an industry-leading free cash flow, a rate of about 100%, a balanced capital allocation approach, and a strong balance sheet in support of investing in our capital allocation strategy as well as acquisitions. After hearing from the businesses and the investments we've made in both our products and innovation beyond products, we hope we've been able to communicate a clear strategy for growth and value creation. I'll turn it over to Kevin with some closing comments before some Q&A. All right. Thank you, Chuck. Well, let me just wrap things up first. We have the leadership team. I hope you've seen that today. You know, you can have a great strategy, even have, you know, all these execution plans, but if you don't have the right people in the right spots, you don't get them done. I hope you've seen that throughout. We have great leadership, and we have the ability to execute on everything that we've told you up here. Why A. O. Smith? This is my initial slide, but I'll be much more condensed. I hope you believe that innovation is alive and well in A. O. Smith. We have the products, we have the digital capabilities, we have the infrastructure, the R&D infrastructure to maintain this for the long term. Chuck did a nice job summarizing the megatrends. Each of those megatrends that we've talked about, decarbonization, water, and urbanization, are tailwinds. They're not a yearly tailwind, they are many years of tailwinds. I would argue anybody in this room here, can you find a more resilient replacement market than water heaters and boilers? It'd be difficult to find, and it continues to grow, as we talked about in China, with 60% there, and I'm sure in India, it's gonna happen to be the same way. When it comes to our emerging markets, outside of North America, where would you rather be? You have growth opportunities in China and in India that are gonna exceed the global GDP for the long term, and we are in great position to take care of that and execute there. Chuck just laid out a pretty good way of how we deploy our capital and cash flows, and so forth, in our business. We're strong financially. We'll continue to be strong financially, because you know why? We're a leader, and we're disciplined as an organization. So if you look at our business, I would argue that we have many competitive advantages, and we have staying power for the long term. Now, I would also tell you that A. O. Smith is not easily duplicated. It takes years to build the infrastructure that we have, the customer relationships, just the technology that we have in our organization. I will tell you, it takes years to build the culture that we have, not only how we do business, but how we go about to win in the market. So we're in great shape from a company standpoint, and I wanna end on a really fun note. We get to turn 150 years old next year. Not many people get to do that, and it's a tremendous milestone for our company. The legacy of people who have been there, of course, the ones here, they get to actually be able to celebrate, which is gonna be pretty, a lot of fun. But, but when you look at that, we're incredibly proud of that, and we'll continue. And we're gonna celebrate, by the way, everywhere in the world. We're gonna have a good time. But I, I want to step back a little bit, and this is just from my perspective. When you turn 150 years, what does that mean? What does that underline? I would tell you that what it means is, in those 150 years, A. O. Smith has been tested for decades. We've been successful for decades. We are a resilient company that can perform through all business cycles. We've demonstrated that. The last one I'll tell you is, we're a nimble company. We are willing to make bold, transformational changes when needed. That's why we're standing in front of you today as a water technology company and not making car frames and electric motors. But I'll tell you, most importantly, when it comes about it, there's one constant, and you've heard it today over and over, and you're gonna hear it one more time. One constant from our company is our unwavering commitment to innovation. Innovation has been the key driver for our success for the first 150 years, and I think it's in pretty darn good position to be a great growth driver for the next phase of our organization. So with that, I wanna thank you for putting up with 4 hours of A. O. Smith. But hopefully, meeting our team, getting an update of where we're at, looking where the business is going, look at the technology we have, look at the megatrends that are happening, you'll see why A. O. Smith is a compelling value and a compelling investment going into the future. So with that, thank you very much for your time, and then I'm gonna ask our business leaders to come back up on stage, and we'll open up for another Q&A for about 20 minutes or so. Thank you. I'm gonna leave that up there, so it reminds you, 150. Okay, and by the way, there is a song called Raise the Bar: A. O. Smith. And how do I know that? 'Cause Chuck and I sang it, okay? At the Sales Con. Not very good, by the way. So, I did not sing well. Are there any questions before we wrap up? And Helen, we'll take it from here, and don't forget our friend that we left behind, okay? Go ahead. Thank you very much, Damian Karas from UBS. Chuck- I'm gonna. Maybe you could just elaborate on how much capacity we're talking on the expansion for heat pumps and tankless in North America. And just thinking about demand, you know, to the point Kevin just made, you know- This market's largely replacement-driven, I think to the tune of, like, eight or nine out of every ten units sold. So, you know, are you expecting tankless heat pump, right, all this long-term growth opportunity to still mostly be, you know, new construction for now? Or, you know, has that decision framework changed much in the, you know, the contractor replacement, side of things? I'll let Dave take the second part of that. I'll say for capacity-wise, and correct me if I'm wrong here, so we're starting in China on building the tankless product. What we're building in Juarez should take us through 2026 or so. We'll be looking at whether we need to expand. We always have the China as a backup manufacturing facility if it grows faster than that, but it's for the first phase, and it should take us through the first handful of years. Heat pump's been growing at twen- 25, 30%- Yeah A year. So when we- Yeah, that heat- Is it working? Yeah, it's working. It's working, yeah. 25%-30% per year. So, you know, initially, there's a lot of incentive programs out there, building codes that are changing to drive heat pump into new construction, but there's also a lot of incentives for the replacement, side of the business. One of the heat pumps that we had up there in our good, better, best portfolio was a 120-volt heat pump. The reason we came out with that is so people that have gas product, that may not have, the ability to connect, can just plug that into the wall, so it's, it's nice for a conversion, right, of an existing product. So I think we'll start seeing more and more, replacement going towards heat pump in certain markets where it's, being highly incentivized. Okay. Great, thanks. Yeah. And then just a question on China. So given all the inflation that we've had in recent years globally, what is the price differential at this point between, you know, the kind of the three brand categories that you laid out? Is there much margin difference amongst them? And then just more broadly, thinking about the 400 basis points of expansion that you're targeting for Rest of the World, is that largely a matter of just scaling the business? Yeah, I would say a large part of the expansion, I'll let Jack talk a little bit about price points, it is scaling the business. You know, we were at one point RMB 1 billion, kind of dropped below that, but scaling the business and then having a larger portion of the market move into the premium sector. You know, today, you know, we kinda measure the premium sector as RMB 3,000 for electric product, and then RMB 5,000 for water treatment and for gas tankless. So, above that is what we classify as premium. That's kind of been in the range of 50%-60% of our sales now. Prior to when the premium market was a little higher, it had been higher than that. So some of that also would be getting back into the premium sector of the market. Price differentials, Jack, any commentary around kind of your Chanitex brand strategy and protecting premium brand? I know, you know, certainly premium brand is what I just defined, and Chanitex kind of falls at the high end of the mid part of the market, protecting that premium brand. You know, in the past few years, the booming online sales really give us some headache, because normally, in order to compete online, you see a similar feature models at the online price versus offline, is like 20% lower as easily, because people believe that it's a more efficient channel. So that create a lot of conflicts between A. O. Smith online, offline. That's the reason why we need a second brand competing online and protect our A. O. Smith premium name, for the. Actually, we provide a consistent online, offline price for A. O. Smith, which able- enable us to play in the, in the premium category. Yeah. Yeah, it, it's really, this is Jack's team, it really changed the dynamic of the channel conflict. When you, when you had A. O. Smith on both, both, and they were kind of the same, it, it was problematic. But, you know, if we're on, if we're online or we're offline, no matter where we're at, we're in the premium side of the market. So even on, on the online, which is a very tiny channel, we're still in the, the mid to upper range of that product category, and, and it, it's an important one that will grow. But to take away that channel conflict and be able to have brands positioned specifically for certain customers, and we still tie A. O. Smith back to it as a sub-brand, has made a huge difference in how we can go to market and how we can take now go to the AI-LiNK and still get that premium price position that we've really treasured now for 25 years. Jack, I was just gonna add that Jack really described well why we wanna be online with the A. O. Smith brand, so that it can be driven on an omni-channel to a store, and have somebody upsell. You know, when you get a promoter at the store, they can actually walk through the features and benefits. Andrew Kaplowitz with Citigroup. Thank you for the presentation. I wanted to ask Jack or Kevin just a follow-up question on China. Like, when I look at the presentation today, one thing that stands out a little bit is the CAGR over the last five years in China, it's a little lower than everywhere else. So I mean, obviously, 2020 was a headwind, but, you know, you've talked today about compelling strategy of coming out with new products, but I feel like you've kinda talked about new products for a while in China. So how is this new product suite different and gonna really raise the sort of growth profile of China versus the past, would you say? I think we are having very good innovation, and we have very strong brand in China. So actually, if we extend other category, people will come. They think A. O. Smith should be good at this particular category. But the challenge for us is, we are focused on the water heating and the water purification, and within this difficult time, and it is difficult for every brand to improve the efficiency and get a meaningful growth. That's why we start to think about some adjacent category. But we're not just simply introduce some new categories, we introduce a very innovative products with also with this AI-LiNK, that really enhance our premium brand, you know, because it's we talk about scenario-based, smart home concept. So with those new categories, with a premium brand, with innovation, with all of our people over there, I'm pretty confident to achieving those target, even with this very tough situation. But like, Chuck just mentioned, maybe we still need help from the economy, you know? Yeah, that's what I was gonna mention. The economy wasn't that great in 2019, by the way. We just came off an inventory adjustment there. You know, we took the right steps to stabilize our inventory, get the right positioning and so forth. Then 2020 comes, and we're back in a pandemic. If you remember back in that pandemic, we had a really bad quarter. We lost $ millions, and that's what caused us to restructure and become a bit more variable in our costs. Then we just haven't any help from the economy. And so, I look at the way what Jack's done and his team is to be growing the business, even if it's 3%-5% local currency, and still posting double-digit returns in an economy that not, not many companies are doing that. And so, I would say that the products has helped us, you know, make sure that we can still grow a bit. I would tell you that once we get a little help from the economy, some of these mature with our range hoods and the other types of kitchen appliances, and combine that when that property development market kind of moves up a little bit. It may take a couple of years, but to have the infrastructure we have now and the cost structure gives me great comfort when that moves in the right direction, because we've been able to do pretty well in a very challenging economy. Thanks for that. And I want to follow up actually, on your earlier presentation, Dave. Like, you, we've asked questions on the earnings call about sort of proactive water heater replacement. Like, how long do you think it is before we declare it as a definitive trend, in a sense? And, you know- That's a great question. Yeah, that's a great question. That's a great question. What do you think, Tom? Right now, no. So, but if we do, is that in your guidance, or is that not in your guidance when you're talking about sort of the 4%-5% growth? Yeah, I don't necessarily think that's in the guidance at this point in time. You know, I think we get there with just standard industry growth, inflation in the mix, and the market share gains going forward. It's really pretty tough. I know that on the call, the earnings call, Kevin talked about maybe a shift taking place. I think it's too early to tell at this point in time. You know, there's various factors that go into that. The housing stock is getting older out there, and so there's more water heaters maybe being proactively replaced that are 14 years old. So there's a lot of variables. I think it's gonna take a little bit more time for us to figure out if this is actually the new normal for us, whereas proactive historically has been around 25% of the total replacement market. So a little too early to tell yet. Okay. It is moving in the right direction. Yeah, yeah. We're pleased. Thanks, guys, and, thanks all for-- Thank you for all coming out and talking to us. It makes a good picture. Just, and sorry if this question comes a bit blunt, but just on the kitchen appliances business in China, I just want to delve into the rationale behind that. Because, Kevin, you talked earlier about refocusing the business from years gone by into just water-related products, and this feels like a bit of a departure from that. If I'm just trying to work out how it sort of centers in on innovation in water-related products you've developed over time, and really the rationale behind it. So I don't know if it's because we feel that the water business is slowing in China, and this will offset it, or if it's sort of trying to bring more product into that AI-LiNK suite of products to try and drive that, or really what the rationale is, because it feels like a departure of sort of innovation and process that A. O. Smith has really developed. Yeah, if I can leave it at that. Thanks. Yeah. Okay. I don't think it, it's a departure, and certainly, I, I would tell you that we've actually been looking at dishwashers for eight years. That will tell you that we don't move that quickly. Our core business is still very strong. One of the things, and this is true for A. O. Smith, and I think it's for A. O. Smith India, and it's also going to be true for A. O. Smith, excuse me, A. O. Smith China, and A. O. Smith India. We do have a consumer brand there, and so that changes to some degree, how we can lever and look at the businesses and so forth, because our brand does translate to consumers. We're a trusted brand. We're known for premium and high quality. So, you know, over the years, we've dabbled in it, and we were in water heaters and then we bought a water treatment company. Yeah. And in a very short time, that business went from zero to $300 million, and part of it was the product, but also was part of the brand. And so we've always looked at the kitchen and the bathroom as opportunities at the right time. And for us, it wasn't a "Hey, we're not selling enough, let's go to another category." It was one that we looked at and planned to move there in the right way. And by the way, we're not manufacturing. Okay, so you know that. We own the design and the IP behind it, but we can tap into these markets and use our brand and our distribution. I'll let Jack talk about this, but having high productivity and efficiencies in our store and having our exclusive dealers the ability to sell is important, and our products do translate well when it's in the kitchen or when it's in the bathroom. Yeah, the trend in China embrace the smart home. So it's not only us, everybody's trying to expand the category. But that's why you have a whole lot of cheap product. That's why I want A. O. Smith to get into this new category. We've got to be very careful. We have to release a very innovative product, meet our names. That's critical. And we're talking about this key scenario, our tankless, our water purifier, or in the kitchen. We are talking about the dishwashers, steam oven. So it, it's a nice bundle. Actually, you know, it also help a lot in the efficiency improvement, talking about our through stores. So I said that's with AI-LiNK, that's very unique because before people sell bundle sales, you just go for more discount, right? You got more, you get a lower price. But for A. O. Smith, we're able to maintain our price with AI-LiNK because we're not talking about, they just bundle for lower price. We bundle because we've got a one interface connecting all these good products, creating new values to the end users. So it's really we can stick to our traditional core business, but we've got to adapt to the environment. We see the trend and respond with the strategy, and so far, so well. Thank you. Yeah, and I, I would just add one more step. You, you might see some of that, departure, well, that you call, we don't consider it a departure, but certainly we might see that in India because the channels and, and how they line up are very similar. And, we're not ready to do that, but it's something that we'll continue to look at and, and leveraging that brand and bringing more people, consumers into our, kind of bucket of the market, I, I, I think is, is a good thing for A. O. Smith if it's done in the right way. Hi. Scott Graham, Seaport Research. Two questions, one on Lochinvar, one on water treatment. What do you see happening as the year comes to a close on Lochinvar that kind of jumps that into growth next year, off of what's been a weak this year? And then on water treatment, it looks like, you know, obviously you're very well diversified by channel on North America, and dealer is half of the market. Is that where your acquisitions are gonna be focused to get you in there? Do you want to go to Lochinvar first? Sure. So, you know, the Lochinvar boiler business this year has faced a little bit of de-stocking, so we've been going through that throughout the course of the year. We expect a rebound next year. We think inventories are about normal, and so we expect volumes to rebound next year. And then our growth catalysts for the future are what we talked about. You know, that shift to condensing is gonna continue, and that's a growth catalyst for us, and then the shift to all electric with heat pumps is gonna be another step up. I'll jump in on the water treatment side. You got it right on the number. Our last three acquisitions have been exactly in that dealer space. We hope that our channel looks like the rest of the market, when all is said and done, that dealers make up a good, you know, approaching half of our overall business. Yeah, I would tell you, if you look at, and Sam pointed out, you know, we have the water treatment side, and then we have the water softening side, okay? And water softeners look a lot like water heaters. They're really big, and they're hard to transport. And, but they don't have the same scale of 10 million water heaters. It's much less than that. So being strategically located closer to the market is one of our tenets as far as growth in that dealer segment. We want to be able to not take an order and go out of Wisconsin all the way to California, by the time it shows up there, it may not be in one piece. However, if we have strategic locations where we can not only ship it very quickly, but within a 2-day timeframe, your lead times are down, which increases your sales, and your freight costs are down, which increases your margins. So we're not gonna be in every state, but we're gonna be strategically located throughout the country to be able to get that 1, 2, 3-day service that I'm talking about. I wanted to follow up on the new product introductions in China. Can you talk a bit about who your competition is in those new product categories, and how concentrated are some of those players in there? How hard is it for you to kind of break into that and gain some real ground? I believe we have some strong competitors in China, a local brand, very strong and have many product offerings, also have a very strong stores and channels. So I think A. O. Smith is a bit different because we play in the premium segment. So actually, this new category give us more strengths for competing. But I still think the smart home concept is still new for China. So we're talking about a single product, water heaters, water purifications. Definitely, we're talking about reliability, we're talking about the features, but right now, I want to go into this smart home scenario, how we link these products to create new values.... For example, I'm talking about this today, that water purifier connect to our dishwashers, will actually we also have some that we call air cleaner connect to our range hoods. So actually, there's a newer competing, in not only for A. O. Smith, but also our competitors. But so is, it all go back to innovation. And so before you, you like play a violin or a piano, but right now, you're, you're orchestra. So you got it. So our engineers is so inspired, uses their technology and strengths to think about how to, develop a better system solutions for the, for China. That is. I think China has been, very, aggressive in this direction, and I'm, I'm very happy our engineers embrace these challenges. Yeah, I would just add on to that. Our competitors are Chinese, okay? And we, we've been competing against them for 25 years, and we'll continue to compete against them through all the things that, that, that Jack was talking about. So, and what I really like about the two new categories, and, and they're new, and we'll see where they go, they're emerging categories, okay? They're not, ones that if we're trying to come in, where there's 85%-90% penetration, we're gonna have to take market share. That's a very difficult way to do business, and, and that's why we like being a leading market share, 'cause it's hard to come in there and do that. Right. But those couple categories, and Jack mentioned in his presentation, the penetration may be 5%. So it's an open category. If you have some good technology and can combine it with A. O. Smith and the bundling side of it, we're not gonna try to be the biggest in any of those categories, but we're gonna try to be the biggest in the premium side of those categories. I just wanted to ask Parag a question, and just in the context of you're gonna be, like, the fastest growing business at AOS. Like, and your margins are a little bit lower. Like, how do you get? You know, you talked about 3%-5%. Like, what's the potential longer term of that end market? Can you get the margins up? And then, like, can India start to look like China, you know, long term? You know, I don't want to get too excited. You know, we're only talking about five years here. What do you think, Parag? Well, I think I will share it outside of AOS. Every Indian aspires and feels they're China, but I think the China opportunity and India opportunity are different. Let's understand that, India is growing, and there's a lot of steam in India to grow and drive high GDP growth rates, and for various factors I just mentioned. As affluence increases and as middle class increases, a premium brand like A. O. Smith is well positioned to really grow the business. Fifteen to twenty percent is where we aspire. I'm sure GDP growth rate will crack 6% and grow 8% and beyond going ahead, as the investments in infrastructure and all that comes through, enables us to potentially also do even better. Coming to your margin part, I'm sure we will do better, but what I showed on the slide is that we are going to keep our margin profiles the same and invest that to grow our business. So we'll do a self-funding of our business, to put behind marketing programs and grow the business more aggressively in the next few years. Because being a consumer-facing brand, there's a lot of investment required to create brand awareness. We are well positioned, but we have 50+ towns providing opportunities, so the brand has to invest to grow. Post that, post which, of course, we will be able to grow our margins even better ahead. I hope that... Yeah, yeah, you answered it perfectly. The bottom line is, I like to see us scale India more and self-fund it. It doesn't mean we go backwards and so forth, but being able to increase that top line, you know, move it to $100 million over time and build that scale will make a big difference long term. And again, I look at India as a long-term play. It's not gonna grow like China, but it's going to grow like China eventually, as we go forward. And it may take a few more years, and so, you know, Parag and I have talked about this with Chuck and team, and we want to scale the business and invest back into it. I think it's more important over the next 3-5 years to do that and get that top line to the right area and so you can support the infrastructure we have for that long-term growth in India. Just one follow-up for Sam. Like, a lot of the companies I cover talk about sort of moving aggressively into commercial water treatment. So are there targets out- water treatment? Yeah, no, good question. We have a-- We actually have a substantial, not huge, but a substantial commercial business already through our Water-Right and our Master Water, businesses like that. There are a pipeline of dozens of potential regional and national commercial players out there that we, we, we're looking at currently, and, it's definitely an opportunity to grow, through acquisitions over the next couple of years. We just have to find the right person who's ready to sell. And one of the things we're good at, and Chuck mentioned this, A. O. Smith, we'll go through processes and things of that nature, but we spend a lot of time... We talked about that we're more of a relationship company and so forth. We spend a lot of time. Most of our acquisitions have been private, where we've spent years cultivating that, making sure they, if they're looking for a home, we're the right home for them. And we're doing a lot of that and have been doing a lot of that the last several years with many of the targets that we feel would fit good with A. O. Smith, both on the residential and commercial side. And it'll just be a matter of time before... You know, those, maybe come to fruition. Thanks. I guess I just wanted to explore that $90 million R&D number with you a little bit further. And how do you come up with that number, and why is that the right number? Do you sum up your available opportunities, and it comes to $90 million, or you're budgeting $90 million, you go down to a marginal efficiency of investment kind of analysis? And if we see you flex that up, do you just run into organizational and market constraints that sort of limit your incremental returns, or? I'm just trying to get a sense of, you know, why, why that's the right number. Yeah. Hey, I would tell you, no, we never give anybody a budget. Okay? It. But we do, we do make, organizations, present a, a viable plan. I mean, that's our, that's our shareholders' money. So that $90 million, it may be $85 million, may be a little bit more, but, you know, in, in my, tell you, 29 years today at A. O. Smith, I've never seen us pass on a, the right investment. And so the, $90 million is, is a number that fits us today. It, it, it could go higher or lower, you know, in, in the future. It's to support all the programs that you've seen up here, and, and it supports all our businesses. We, we make sure that each of our business, none of them are starved for investment, okay? Because if that, then the biggest one, they would win all the investment. Okay? But in reality, we make sure that we are investing in good projects, and this team up here makes the pitches for them, and if they make sense, we invest in them. We may not always take every one of them, but it seems to be a right number for us today. Yeah, and I- Anything you- Yeah, I was just gonna say, a large base of that is what Kevin talked about before, is kind of that corporate base of R&D center looking five years out. Businesses don't spend, well, they fund that eventually, but they don't contribute to that in a meaningful way on an annual basis. It's just a funding that is always looking to invest in technology, processes, new innovation. What's the next, you know, disruptive technology? And that's a decent size of that $90 million. 90's kinda rounded. Probably were a little heavier than that when we were developing tankless products. You know, got a lot of projects on the table. Again, you heard a little bit about heat pumps on Steve O'Brien's side of the world, so we continue to invest in heat pump, too. So it's, you know, it's around that number. It could go higher if we see the need. Hey, is this gonna fit our $90 million? But it's going to, it's gonna come in, and it's a good project, and we wanna do it, so we're not worried about whether it's $90 million or $92 million. It's a good project that we need to fund. Okay. Well, again, thank you very much for your time and for your interest in our company. We're excited where we're at. Hopefully, you leave here with a positive... a couple takeaways that you didn't know, I hope, and ones that maybe cleared up some of the questions you had about our long-term future. We're gonna be around for a long time. We're gonna be a market leader, and we're gonna continue to grow at this pace, and the items we showed you, we have a clear path to executing them. So thanks again, and have a great evening, and be safe out there, okay? Thank you.