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- **Revenue resilience**: Q3 2025 revenue up 4% YoY, driven by North America (+6%) despite China challenges.
- **Margin expansion**: North America segment margin +110bps to 24.2%, offsetting 5% input cost increases.
- **China strategy**: 2025 sales outlook revised to -10% local currency, with restructuring initiatives mitigating margin impact.
- **Tariff mitigation**: 5% COGS impact from tariffs, with pricing actions covering margin and cost, but Q4 margin pressure expected.
- **Sustainability success**: Water recycling and glass reuse initiatives reduce waste by 100,000 gallons/year and 100 tons/year.

**【CEO Summary】**
- Q3 2025 revenue: $943 million (+4% YoY), driven by North America (+6%) and India (+13% local currency). China sales declined 12% due to economic challenges and reduced subsidies.
- North America: Commercial water heater and boiler volumes up, with pricing actions offsetting 5% YoY input cost increases. Segment margin expanded 110bps to 24.2%.
- China: Restructuring initiatives offset 12% sales decline, with margin improving 90bps. Strategic assessment underway to address market challenges.
- Sustainability: Water recycling and glass reuse initiatives reduce waste by 100,000 gallons/year and 100 tons/year respectively.
- New leadership: Chris Howe appointed Chief Digital Information Officer to drive AI and generative tech adoption.

**【CFO Financial Commentary】**
- Free cash flow: $381 million (9M 2025, +35% YoY). Net debt: $13 million. Dividend increased 6% to $0.36/share.
- Guidance update: 2025 EPS narrowed to $3.70-$3.85 (prev $3.70-$3.90) due to tariffs (+5% COGS impact) and steel costs (+15-20% H2 2025). Free cash flow target: $500 million.
- Tariff impact: Q4 North America margin expected to decline 20bps. Mitigation strategies include footprint optimization and pricing actions.
- Pureit integration: 2025 sales $55 million, no bottom-line contribution as integration continues.

**【Q&A Highlights】**
- **China Market**: Competitive promotional activity offset by strong brand equity. 2025 sales outlook revised to -10% local currency.
- **Commercial Water Heaters**: FLEX product launch and production efficiency program drove Q3 share gains. 2025 industry volume growth revised to low single digits.
- **Boiler Sales**: Q3 up 10%, with potential prebuy ahead of Q2 price increases. 2025 guidance unchanged at +4-6%.
- **Tariffs & Costs**: 2025 steel costs expected to rise 15-20% YoY. Pricing actions cover margin and cost, but 20bps margin pressure expected in Q4.
- **Capital Allocation**: $400 million buyback target (9M 2025: $335M). Focus on M&A for core business adjacencies and new growth platforms.

A. O. Smith Corporation (AOS) Q3 2025 Earnings Call Transcript

Revenue

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Operating Expenses

Selling, General and Administrative Expenses

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AOS

AOS fundamentals

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