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1Second Quarter 2025 Earnings Presentation | Second Quarter 2025 ResultsJuly 24, 2025
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2Second Quarter 2025 Earnings Presentation | Charles T. LauberExecutive Vice Presidentand Chief Financial Officer Helen E. GurholtVice President - Investor Relations, Financial Planning & AnalysisStephen M. Shafer President and Chief Executive Officer
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3Second Quarter 2025 Earnings Presentation | Forward Looking StatementsThis presentation contains statements that we believe are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “continue,” “ forecast,”“guidance” or words of similar meaning. Important factors that could cause actual results to differ materially from these expectations include, among other things, the following:negative impact to the Company’s businesses from international tariffs, including any new or increased tariffs that could also trigger retaliatory responses from other countries,as well as, trade disputes and geopolitical differences, including the conflicts in Ukraine and the Middle East; further softening in U.S. residential and commercial water heaterdemand; negative impacts to the Company, particularly the demand for its products, resulting from global inflationary pressures or a potential recession in one or more of themarkets in which the Company participates; the Company’s ability to continue to obtain commodities, components, parts and accessories on a timely basis through its supplychain and at expected costs; negative impacts to demand for the Company’s products, particularly commercial products, as a result of changes in commercial property usagethat followed the COVID-19 pandemic; further weakening in North American residential or commercial construction or instability in the Company’s replacement markets; inabilityof the Company to implement or maintain pricing actions; inconsistent recovery of the Chinese economy or a further decline in the growth rate of consumer spending or housingsales in China; the availability, timing or effects of China stimulus programs; uncertain outcomes and costs and other potential impacts of the Company’s assessment relating tothe Company’s China business; potential weakening in the high-efficiency gas boiler segment in the U.S.; substantial defaults in payment by, material reduction in purchases byor the loss, bankruptcy or insolvency of a major customer; foreign currency fluctuations; the Company’s inability to successfully integrate or achieve its strategic objectivesresulting from acquisitions; failure to realize the expected benefits of acquisitions or expected synergies; failure to realize the expected benefits, timing and extent of regulatorychanges; competitive pressures on the Company’s businesses, including new technologies and new competitors; the impact of potential information technology or data securitybreaches; negative impact of changes in government regulations or regulatory requirements; the inability to respond to secular trends toward decarbonization and energyefficiency; and adverse developments in general economic, political and business conditions in key regions of the world. . Forward-looking statements included in thispresentation are made only as of the date of this presentation, and the Company is under no obligation to update these statements to reflect subsequent events orcircumstances. All subsequent written and oral forward-looking statements attributed to the Company, or persons acting on its behalf, are qualified entirely by these cautionarystatements. This presentation contains certain non-GAAP financial measures as that term is defined by the SEC. Non-GAAP financial measures are generally identified by“Adjusted” (Adj.) or “Non-GAAP.”
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Second Quarter 2025 Earnings Presentation | 4 Second Quarter Performance and HighlightsHighlights•Net sales decreased slightly to $1B•EPS increased to $1.07North America•Sales down 1 percent relative to challenging prior year comparable•Segment margin increased to 25.4 percentRest of World•Sales down 2 percent due to lower sales in China that were partially offset by Pureitacquisition sales•China operating margin flat on lower sales$1B$1BQ2 2024 Q2 2025$779M$240MNorth AmericaRest of World$198M$25MNorth AmericaRest of World-1%YOY$1.06 $1.07 Q2 2024 Q2 20251%YOYSegment SalesEPS Segment EarningsSales
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Second Quarter 2025 Earnings Presentation | 5 Innovative New Product IntroductionsAdapt SC Standard Condensing Tankless •Industry-First Integrated X3®Scale Prevention•ENERGY STAR®Certified, up to .95 UEF•No flushing maintenance required•Primary copper and secondary stainless steel heat exchanger HomeShield Whole House Water Filter•Certified to reduce PFAS1to less than 4 ng/L for 500,000 gallons•Space-saving design with no drain line required for greater installation flexibility•Reduces Chlorine for improved taste and water quality from every tap•No wastewater for economic and eco-friendly performance Cyclone®FLEX: Smarter, More Efficient and Flexible•Smarter: AiQ Adaptive Gas Technology, integrated leak detection for proactive protection•More Efficient: Cleaner ignition and optimized combustion for better performance and energy savings•More Flexible: Longer vent runs, more model sizes and dual-fuel compatibility
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6Second Quarter 2025 Earnings Presentation | Second Quarter North America Segment•Sales decreased primarily due to lower water heater volumes•Boilers sales increased 6 percent•Flat earnings primarily due to lower water heater volumes offset by higher boiler sales and water treatment margin improvement•Favorable steel costs and productivity gains offset by tariff impacts•Segment margin was 25.4%, an increase of 30 bps, driven by mix toward more profitable channels in water treatment and growth in high efficiency water heatersSegment Operating Earnings ($M)Segment Sales ($M)($1)$791 $(11)$779 Q2 2024 SalesOrganic GrowthFXQ2 2025 Sales-1%YOY$198 $2 $1 $(3)$198 Q2 2024 EarningsOrganic GrowthInput CostsSG&A and FXQ2 2025 Earnings25.1% 25.4%
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Second Quarter 2025 Earnings Presentation | 7 Second Quarter Rest of World Segment•Sales decrease 2 percent primarily due to lower China volumes, partially offset by higher sales in India •China third-party sales declined 11 percent in local currency due to continued weak consumer demand•Pureit added $16 million to the quarter•Operating earnings decreased as lower volumes in China offset SG&A and other cost reductions •China operating margin flat even on lower sales•Pureit integration on track$26($8)$7$25Q2 2024 EarningsOrganic GrowthSG&A and OtherQ2 2025 Earnings10.6% 10.5%Segment Operating Earnings ($M)$16 $245 $(21)$240 Q2 2024 SalesOrganic GrowthAcquisitionQ2 2025 SalesSegment Sales ($M)-2%
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Second Quarter 2025 Earnings Presentation | 8 $178MCash balance214.1%Debt to capital ratio$126MNet debt position~3.8MShares repurchased YTD June 2025 totaling ~$251M Cash Flow and Liquidity1 1As of June 30, 20252Includes cash, cash equivalents and marketable securities $164 $178 YTD June 2024 YTD June 2025 $119 $140YTD June 2024 YTD June 2025Free Cash Flow ($M)Cash Flow From Operations ($M)
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9Second Quarter 2025 Earnings Presentation | Capital Allocation Priorities•Driving organic growth: developing products aligned to upcoming regulatory changes, investing in productivity and continuing to build the strength of the core•Disciplined focus on transactions that expand/grow the core, enable geographic growth, expand technology capabilities, and establish adjacencies•Continued focus within North America Water Treatment •Portfolio management •Five-year CAGR of 7 percent•Over 30 consecutive years of dividend increases•$251 million through June 2025; $400 million projected for the full yearAcquisitionsOrganic GrowthDividendsPhilosophy: growing, competitive sustainable dividendShare Repurchases
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10Second Quarter 2025 Earnings Presentation | 2025 Outlook and Assumptions1 1As of July 24, 2025 ~1% to 3%Revenue Increase~FlatU.S. Residential Water Heater Industry~FlatCommercial Water Heater Industry~-5% to -8% China Sales Decrease (Local Currency) ~4% to 6%North American Boiler Sales Growth~-5%North American Water Treatment Decrease~24% to 24.5%North America Segment Margin~8% to 9%Rest of World Segment Margin$500M to $525MFree Cash Flow~$90M to $100MCapital Expenditures~$80MDepreciation & Amortization~$15M to $20MInterest Expense~$75MCorporate/Other Expense~24% to 24.5%Effective Tax Rate~$400MShare Repurchase~142MShare Count – Diluted 20242025 Guidance$3.63$3.70 - $3.90Diluted EPS (GAAP)$0.101-Restructuring and impairment expense$3.73$3.70 - $3.90 Adjusted EPS (non-GAAP)1Includes pre-tax restructuring and impairment expenses of $6.3 million and $11.3 million, within the North America segment and the Rest of World segment, respectively.
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Second Quarter 2025 Earnings Presentation | 11 MY FOCUS AREAS…Operational Excellence InnovationPortfolio ManagementWHY I JOINED…Commitment to doing business the right wayStrong culture of innovationExcellent, market leading businessesExciting strategic opportunities ahead 1 2 3
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12Second Quarter 2025 Earnings Presentation | Second Quarter MessagesDisciplined operations and proactive tariff mitigation actions impacted North America performance 3Initiating an assessment of China business to ensure business is positioned well for the futureFocusing on Operational Excellence, Innovation and Portfolio Management for future value creationContinued sequential margin expansion enabled by 2024 restructuring actions Total Company sales of $1B and EPS grew 1% to $1.07 against a challenging comparable Q2 2024 4 5 2 1
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13Second Quarter 2025 Earnings Presentation | 13 Appendix
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14Second Quarter 2025 Earnings Presentation | Powerful Investment Thesis Leading with innovative products that drive technology and meet sustainability needs Capitalizing on global megatrends in a large and growing market supported by regulatory changes Leading North American water heater and boiler producer with stable and consistent replacement demand Leveraging strong balance sheet for organic and inorganic growth while returning capital to shareholders Compelling brand awareness in emerging markets with attractive growth and margin expansion opportunities12345
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15Second Quarter 2025 Earnings Presentation | Free Cash Flow($ in Millions)