Slides
Page 1
Full Year & Fourth Quarter 2025 Results January 29, 2026
Page 2
Fourth Quarter 2025 Earnings Presentation 2 Charles T. Lauber Executive Vice President and Chief Financial Officer Helen E. Gurholt Vice President - Investor Relations, Financial Planning & Analysis Stephen M. Shafer President and Chief Executive Officer
Page 3
Fourth Quarter 2025 Earnings Presentation 3 This presentation contains statements that we believe are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “b elieve,” “continue,” “ forecast,” “guidance” or words of similar meaning. Important factors that could cause actual results to differ materially from these e xpectations include, among other things, the following: further weakening in North American residential or commercial construction or instability in the Company’s replacement markets; failure to realize the expected benefits of acquisitions or expected synergies; difficulties in predicting results of operations of an acq uired business; 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 i n U.S. residential and commercial water heater demand; negative impacts to the Company, parti cularly the demand for its products, resulting from global inflationary p ressures or a potential recession in one or more of the markets in which the Company participates; the Company’s ability to continue to obtain commodities, compone nts, parts and accessories on a timely basis through its supply chain and at expected costs; inability of the Company to implement or maintain pricing actions; in consistent recovery of the Chinese economy or a further decline in the growth rate of consumer spending or housing sales in China; the availability, timing or effe cts of China stimulus programs; uncertain outcomes and costs and other potential impac ts of the Company’s assessment relating to the Company’s China business; potential weakening in the high-efficiency gas boiler segment in the U.S.; substantia l defaults in payment by, material red uction in purchases by or the loss, b ankruptcy or insolvency of a major customer; foreign currency fluctuations; failure to realize the expected benefits, timing and extent of regulatory changes; c ompetitive pressures on the Company’s businesses, including new technologies and new competitors; the impact of potential information technology or data secu rity breaches; negative impact of changes in government regulations or regulato ry requirements; the inability to respond to secular trends toward decar bonization and energy efficiency; and adverse developments in general economic, politic al and business conditions in key regions of the world. Forward-looking st atements included in this presentation are made only as of the date of this presentation, and the Company is under no obligation to update these statements to ref lect subsequent events or circumstances. All subsequent written and oral forward-looking statements attributed to the Company, or persons acting on its behalf, are qualified entirely by these cautionary statements. This presentation contains certain non-GAAP financial measures as that term is defined by the SE C. Non-GAAP financial measures are generally identified by “Adjusted” (Adj.) or “Non-GAAP.” Forward Looking Statements
Page 4
Fourth Quarter 2025 Earnings Presentation 4 Full Year Performance and Highlights Highlights • Net sales of $3.8 billion • Adjusted EPS increased 6 percent to $3.85 driven by profitability improvements North America • Sales increased slightly as pricing actions and higher commercial water heater and boiler volumes were largely offset by lower residential water heater volumes • Boiler sales grew 8 percent Rest of World • China sales decreased 12 percent in local currency due to weak consumer demand • India sales grew 13 percent in local currency • Pureit contributed $54 million to sales $3.8B $3.8B TY 2024 TY 2025 Flat YOY Segment SalesAdjusted EPS Segment EarningsSales $3.73 $3.85 TY 2024 TY 2025 $2,984M $880M North America Rest of World $728M $76M North America Rest of World 6% YOY
Page 5
Fourth Quarter 2025 Earnings Presentation 5 Full Year North America Segment • Sales increased slightly primarily due to pricing and higher boiler and commercial water heater sales offset by lower residential water heater volumes • Boiler sales increased 8 percent • Priority water treatment channel sales increased 10 percent • Income increased as pricing benefits were partially offset by higher input costs (primarily tariff cost increases) • SG&A expenses increased due to continued strategic investments • Adjusted segment margin up 20 bps year-over-year $2,950 $37 $(3) $2,984 TY 2024 Sales Organic Growth FX and Other TY 2025 Sales Adjusted Segment Operating Earnings ($M)Segment Sales ($M) $714 $68 $(36) $(18) $728 TY 2024 Adj Earnings Organic Growth Input Costs SG&A and Other TY 2025 Earnings 1% YOY 24.2% 24.4%
Page 6
Fourth Quarter 2025 Earnings Presentation 6 Full Year Rest of World Segment • China sales decreased 12% in local currency driven by weak consumer demand • India sales increased 13% in local currency, outpacing the market • Pureit contributed $54 million in sales • Lower China sales negatively impacted 2025 earnings • Lower SG&A costs offset lower volumes Adjusted Segment Operating Earnings ($M)Segment Sales ($M) $919 $(91) $54 $(2) $880 TY 2024 Sales Organic Growth Acquisition FX and Other TY 2025 Sales -4% YOY $76 $(27) $27 $76 TY 2024 Adj. Earnings Organic Growth SG&A Other TY 2025 Earnings 8.3% 8.7%
Page 7
Fourth Quarter 2025 Earnings Presentation 7 Fourth Quarter Performance and Highlights Highlights • Net sales flat at $913 million • EPS increased 6 percent to $0.90 North America • Sales up 3 percent primarily due to pricing actions • Segment margin increased 70 bps to 23.1 percent Rest of World • Sales down 13 percent due to lower China sales partially offset by Pureit acquisition sales and legacy India sales growth • Segment margin decreased 30 bps to 7.8 percent $912M $913M Q4 2025 Q4 2025 Flat YOY Segment SalesAdjusted EPS Segment EarningsSales $0.85 $0.90 Q4 2024 Q4 2025 $714M $206M North America Rest of World $165M $16M North America Rest of World 6% YOY
Page 8
Fourth Quarter 2025 Earnings Presentation 8 Fourth Quarter North America Segment • Sales increased primarily due to pricing actions • North America Water Treatment priority dealer, e-commerce and direct-to-consumer channels grew 3 percent • Higher earnings primarily due to pricing actions partially offset by higher steel, tariff and other input costs • Segment margin was 23.1 percent, an increase of 70 bps Adjusted Segment Operating Earnings ($M)Segment Sales ($M) 3% YOY $690 $24 $714 Q4 2024 Sales Organic Growth TY 2025 Sales 3% YOY $154 $32 $(17) $(4) $165 Q4 2024 Earnings Organic Growth Input Costs SG&A and FX Q4 2025 Earnings 22.4% 23.1%
Page 9
Fourth Quarter 2025 Earnings Presentation 9 Fourth Quarter Rest of World Segment • Sales decreased 13 percent primarily due to lower China volumes, • Legacy India business grew 18 percent and Pureit added $8 million to the quarter • Operating earnings decreased as lower volumes in China more than offset cost control efforts • Segment operating margin decreased 30 basis points due to lower China sales • Pureit integration on track Adjusted Segment Operating Earnings ($M)Segment Sales ($M) $237 $(41) $8 $2 $206 Q4 2024 Sales Organic Growth Acquisition FX Q4 2025 Sales -13% YOY $19 $(9) $6 $16 Q4 2024 Earnings Organic Growth SG&A Other Q4 2025 Earnings 8.1% 7.8%
Page 10
Fourth Quarter 2025 Earnings Presentation 10 $193M Cash balance2 7.7% Debt to capital ratio $38M Net cash position ~5.9M Shares repurchased YTD1 totaling ~$401M Cash Flow and Liquidity1 1As of December 31, 2025 2Includes cash, cash equivalents and marketable securities $582 $617 2024 2025 $474 $546 2024 2025 Free Cash Flow ($M) Cash Flow From Operations ($M)
Page 11
Fourth 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 • Portfolio management • Continued focus within North America Water Treatment and Water Management • Quarterly dividend increased 6 percent • Five-year CAGR of 7 percent • Over 30 consecutive years of dividend increases • $401 million in 2025; $200 million projected for the full year 2026 Acquisitions Organic Growth Dividends Share Repurchases
Page 12
Fourth Quarter 2025 Earnings Presentation 12 2026 Outlook and Assumptions1 1As of January 29, 2026 ~2% to 5%Revenue Increase ~FlatU.S. Residential Water Heater Industry ~LSDCommercial Water Heater Industry ~-MSDChina Sales Decrease (Local Currency) ~6% to 8%North American Boiler Sales Growth ~10% to 12% North American Water Treatment Increase ~24% to 24.5%North America Segment Margin ~9% to 10%Rest of World Segment Margin ~$525M to $575MFree Cash Flow ~$70M to $80MCapital Expenditures ~$100MDepreciation & Amortization ~$30M to $40MInterest Expense ~$80M to $85MCorporate/Other Expense ~24% to 24.5%Effective Tax Rate ~$200MShare Repurchase ~138MShare Count – Diluted Diluted EPS (GAAP) $3.85 - $4.15 2026 Guidance $3.85 2025
Page 13
Fourth Quarter 2025 Earnings Presentation 13 Finding a Better Way: Key Strategic Priorities to Deliver Greater Value • Improving performance: China • Investing in the core: New products and capacity • Increasing scale and profitability: North America Water Treatment • Building out new platforms: Water Management Portfolio Management Innovation Operational Excellence
Page 14
Fourth Quarter 2025 Earnings Presentation 14 Leonard Valve At-a-Glance 1Net of expected tax benefit Leader in Water Temperature Mixing Valves and Heating Control Solutions • Leading manufacturer of best-in-class, highly engineered solutions under Leonard Valve and Heat-Timer brands for water temperature and flow control • Products include water temperature mixing valves and heating control for non-discretionary applications and IoT heating controls for commercial buildings • Deep specification presence across plumbing codes and design standards, driving replacement and project-based demand • Generates best-in-class margins and strong free cash flow • U.S. business headquartered in Cranston, RI with ~100 employees Proven Track Record 110+ years of Performance and Integrity Industry-Leading Innovation 10 Products Launched in the Last 7 Years High Growth Platform Double Digit 2022-2025 Revenue CAGR Leading Digital Capabilities ~30% Digital/Connected Revenue Predictable Demand ~80% Repair and Replace Exposure Large Installed Base ‘Spec’d’-in, Critical Products ~12x 2026E EBITDA1 Deal closed in January 2026 Projected 2026 revenue: $70M Acquisition Details Acquired Leonard Valve for $470M ($412M, after adjusting for estimated tax benefits)
Page 15
Fourth Quarter 2025 Earnings Presentation 15 Growth platforms of boilers, water treatment and India positioned for growth in 2026 Continued focus on Portfolio Management, Innovation and Operational Excellence for future value creation Leonard Valve acquisition expands reach into Water Management market Margin expansion in both the North America and Rest of the World segments Total Company sales were $3.8B and EPS was a record $3.85 Full Year 2025 Messages 3 4 5 2 1
Page 16
Fourth Quarter 2025 Earnings Presentation 16 Appendix
Page 17
Fourth Quarter 2025 Earnings Presentation 17 Powerful Investment Thesis Leading with innovative products that drive technology and meet sustainability needs Capitalizing on global megatrends in a large and growing market supported by regulatory changes Leading North American water heater and boiler producer with stable and consistent replacement demand Leveraging strong balance sheet for organic and inorganic growth while returning capital to shareholders Compelling brand awareness in emerging markets with attractive growth and margin expansion opportunities 1 2 3 4 5
Page 18
Fourth Quarter 2025 Earnings Presentation 18 Adjusted Earnings and Adjusted EPS ($ in Millions, except per share data)
Page 19
Fourth Quarter 2025 Earnings Presentation 19 Adjusted Segment Earnings ($ in Millions)
Page 20
Fourth Quarter 2025 Earnings Presentation 20 Free Cash Flow ($ in Millions)