Spring 2020

Analyst Presentation
Forward Looking Statements

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,” “believe,” “continue,” “ forecast,“ “guidance” or words of similar meaning. All forward-
looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated as of
the date of this presentation. Important factors that could cause actual results to differ materially from these expectations include,
among other things, the following: negative impacts to our business, including demand for our products, operations and workforce
dislocation and disruption, supply chain disruption and liquidity as a result of the severity and duration of the COVID-19 pandemic; a
failure to recover or further weakening of the Chinese economy and/or a failure to recover or further decline in the growth rate of
consumer spending or housing sales in China; negative impact to our businesses from international tariffs and trade disputes; a failure
to recover or further weakening in the high efficiency boiler market segment in the U. S.; significant volatility in raw material availability
and prices; our inability to implement or maintain pricing actions; potential weakening in U. S. residential or commercial construction or
instability in our replacement markets; foreign currency fluctuations; inability to successfully integrate or achieve our strategic
objectives resulting from acquisitions; competitive pressures on our businesses; the impact of potential information technology or data
security breaches; changes in government regulations or regulatory requirements; and adverse developments in general economic,
political and business conditions in the key regions of the world. Forward-looking statements 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 reflect 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 SEC. Non-GAAP financial measures are generally identified by “Adjusted” (Adj.) or “Non-GAAP” .

2
 Who We Are

$3.0B Annual Sales

15,100 Employees
GLOBAL
MANUFACTURER
of residential and commercial
water heaters, boilers and 23 Manufacturing Facilities
water treatment products

3
Compelling Investment Thesis

Market share leader Stable/growing North Strength of premium 5 year adjusted EPS Strong balance sheet
in major product lines American brand, distribution, CAGR through 2019 and cash flow to
replacement market; manufacturing and = 12.7% support future
operating leverage innovation provide growth, dividends,
5 year dividend CAGR
from incremental new clear market share repurchase
through 2019 =
construction and advantage in China and acquisitions
24.5%
replacement
5 year cumulative
cash returned to
shareholders from
dividends and share
repurchased = $1.4
billion

4
We Have Organic Revenue Growth Drivers Across our Portfolio

Vision
Product Lines / Geographies
North America
North America Boilers Water China India/ To be a leading
Water Heaters Treatment International
• Innovative • Innovative • Best innovative • Product • Market
provider of innovative
energy efficient
products
energy efficient
products
products in
marketplace
Innovation expansion and
penetration
and energy-efficient
• Service • Best in class • Direct-to-
• Channel
expansion in Tier • E-commerce products used to
leadership education and
training
consumer &
E-commerce
3 and 4 cities
• Brand-building heat, treat and
• Best in class • Brand leveraging marketing
virtual training • Service
leadership
• E-commerce
efforts conserve water,
leadership • Leverage retail
• Customer-centric
and wholesale • New product
• Innovative,
green products
providing value to our
opportunities categories
product
development • Expand dealer
residential and
focus presence
commercial
Drive
•
commercial customers
specifications

5
Corporate Snapshot

Segment Revenue Products

• Water Heaters • Water Treatment
• Boilers

Brands
Full Year
2019
North America

69%
Rest of World

31%

North America ROW

6
Leading Market Share in the U.S. Water Heater Market Segment1

Residential Market Commercial Market2

2019 market share data (AHRI + tankless) 2019 market share data (AHRI)

40% 60%

50%

30%

40%

20% 30%

20%
10%

10%

0% 0%
A. O. Smith Rheem Bradford White Other A. O. Smith Rheem Bradford White Other
Other Other

1 AOS actual shipments and AOS estimates of competitors’ shipments

2 Commercial water heater segment as defined by AHRI, total 2019 commercial units as reported by AHRI = 239,000 units 7
Comprehensive Residential and Commercial
Water Heaters Product Offering
Residential

ProLine® 50-Gallon
Gas Tankless Water Electric Water
Heater with X3™ Heater
Hybrid Electric Heat Technology
Pump Water Heater
ProLine® Master
50-Gallon Gas
Water Heater

Commercial

Cyclone® Mxi
Commercial Heat
Pump Water Heater

Commercial Tankless
Rack System

8
Industry Leading Partners in both the U.S.
Residential Water Heater Channels
INDUSTRY

Wholesale Channel Retail Channel

Large Regional
Distributors
WHOLESALE CHANNEL

A. O. Smith Customers 54% of the market

RETAIL CHANNEL
~46% of the market

9
Stable Replacement Volumes to Temper Downcycles with
Upside New Construction Optionality
U. S. Residential Water Heaters1
Thousands of units

PEAK HOUSING
10,000 2.1M

8,000

New
6,000 Construction

4,000 Replacement

2,000

0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

1 Includes tankless 10
Industry-Leading Energy Efficient
Cyclone Condensing Commercial Water Heater

Up to 96% thermal Connectivity Represents

efficiency built in 67% of AOS
dramatically lowers commercial gas
operating costs water heater
offering short revenues
payback

11
 U.S. Commercial Gas Market: Energy Efficient Units more than
Doubled in Nine Years to 47% of Units Sold in 2019
Commercial Gas Industry Units
100,000

80,000

60,000

<90% Efficiency
40,000

2019 >90% Efficiency

20,000 41,472 units
2009 (47% of total)
19,000 units (29% of total)
-
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: AHRI Industry Data

12
 Industry trending to Higher Efficiency Condensing Boilers
Drives Past and Future Growth

NA Boiler Volumes A. O. Smith Boiler Sales

100,000
90,000
80,000 10%
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 90%
Condensing Commercial Boilers Non-Condensing Commercial Boilers

Source: 2006 to 2017: BRG Solutions; 2018-2019: AOS estimates

Condensing Non-Condensing

13
 Comprehensive Boiler Product Offering
Commercial & Residential
Residential Condensing Boilers Residential Combi-boilers

(55mbh – 399mbh)
(Indoor Rated)
(110mbh – 199mbh)
(Indoor Rated)

Commercial Condensing Boilers Commercial Non-Condensing Boilers Commercial Cogeneration

(500mbh – 5000mbh)
(Indoor & Outdoor Rated)
XRGI 25
Micro
Combined Heat & Power
• 163,000 BTU/hr
• 24 kW of electricity
• 49 DB(A)
(400mbh – 850mbh) (750mbh – 6000mbh)
(Indoor Rated) (Indoor & Outdoor Models available)

14
Our Focused Technology is Reverse Osmosis, a Leading Technology
to Provide Safe Drinking Water
Activated Carbon
Taste & Odor improves taste (removes chlorine), removes organic pollutants including PFAS

Pore Size 5000 nm

Sediment Micro-Filtration
& Colloids removes sediment, particulates, and colloids

Pore Size 1000 nm

Bacterium Ultra-Filtration
& Organics removes bacterium, large organics and other pollutants resulting from water transport

Pore Size 50 nm

Heavy Metals & Reverse Osmosis

Salts the ultimate filtration technology; removes nearly all substances,
particularly most heavy metals prevalent in China and India water supplies
Pore Size 0.2 nm

H2O Safe Water

15
Evolution of AOS’ Global Water Treatment Business

Revenue
$ in millions
Inorganic Revenue
Organic Revenue 35% CAGR over the last 10 years
$458

$397

$322

$250

$134
$97
$69
$35 $38
$20 $20

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Acquired Launched Purchased MIM, Launched Purchased Purchased Launched AOS Purchased
Chanitex AOS branded WT company in AOS branded Aquasana& Hague branded WT at Water-Right
WT in China Turkey WT in India launched Lowe's
AOS branded
WT in Vietnam

16
Large Addressable Market in U.S.
Water Treatment
Addressable A. O. Smith Market: $2.3 B

Water Treatment (Softeners)

32% Water Filtration

68%

This Photo by Unknown Author is licensed under CC BY-NC-ND

Sources: A. O. Smith Primary Quantitative, Market Segmentation Research, April 2017

17
Positioned to Grow Across all Water Treatment Channels

Channel Brand Industry Water Treatment Channels

Our brands participate in all channels; most competitors operate in 1-2 of these channels

DIRECT TO
Aquasana 5%
CONSUMER
website or direct 9%
mail or telesales

E-COMMERCE other e-commerce 14%

market places
CONSUMER 48%

WATER
Dealer
QUALITY
DEALERS
24%

RETAIL

Water Quality Dealers Retail

WHOLESALE Wholesaler or Wholesale DTC
Contractor / Plumber
E-com

$2.3 Billion Addressable Market

Sources: A. O. Smith Primary Quantitative, Market Segmentation Research, April 2017; Water Quality Association 2017 Consumer Opinion Study
18
Comprehensive Water Treatment Product Offering for the Entire Home

Point of Entry Products Point of Use Products Non-Installed Products

Whole Home Clean Water

Filtration Machine

Whole Kitchen Tankless RO

Filtration Systems

Whole Home On-the-Go Filter

Softeners Bottles
Traditional RO Under Sink
Systems Filtration

19
AOS China Built On

Premium Brand

Extensive Distribution and Service Network

Innovative New Products and World

Class Manufacturing

Local Management Team and Organizational

Development

20
Growing Product Portfolio Developed in China for China

Electric & Gas Water Heaters Water Treatment Other Categories

Electric
Water Air Purifier
Heaters

Water
Purifiers

Range Hood
Gas Water
Heater

21
China: Broad Distribution Channel

Percentage of Sales

21% 20% 17% 17%

23%
36% 33% 35% 35% 36%

32% 30%
29% 30% 33%
10%
22%
26% 25% 25% +9,000
22% retail counters in China
23%
26% 24%
30%
54%
45%
38% 37% 31%

28% 31%
31%
23% 23% of outlets in Tier 1 cities
18%
1% 3% 8%
2007 2010 2012 2013 2014 2015 2016 2017 2018 2019

E-Commerce Suning/Guomei AOS Specialty Stores Regional Stores

69%
of outlets in Tier 2/3 cities

22
China: Mega Trends Driving Growth

TRENDS A. O. SMITH

We are positioned to reach consumers using the internet

On-line shopping is growing
in China

Middle and affluent classes Our Market Leading Premium Consumer brand is positioned for
are growing the middle and affluent classes

Urbanization in China projected to

A. O. Smith has manufacturing capacity and channel footprint
drive 28%1 of all global growth! to capitalize on continued household formation

1 Source: IMF 2019 to 2024, October 2019

23
China: Market Leader in Water Heating and Water Treatment

Water Heater Market Share Water Treatment Market Share

A.O.Smith Haier Midea Macro Wanhe A. O. Smith Midea Qinyuan

Rinnai Noritz Ariston Sakura Siemens Angel 3M Haier

30% 50%

25% 40%

20%
30%
15%
20%
10%

10%
5%

0% 0%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2011 2012 2013 2014 2015 2016 2017 2018 2019

Leading residential brands measured in currency; Tier One Market: 2009 - 2018 CMM; 2019 FEB – CMM data sampling several thousand largest retail stores, December 2018
Data Source: 2012 - 2018 CMM; 2019 FEB retail

24
Thesis in India Similar to China

Attractive Growth Demographics We are committed

for the long-term
Leveraging Global Capabilities with Products Designed for the opportunity
Indian Market

Building Brand & Expanding Our Distribution

Introducing New Product Categories with Water Treatment

Local Management

25
 India: Geographic Presence Build out from 2008 through 2019

A Class Cities
(pop >1.5 Mn) Headquarter & Manufacturing
(Bengaluru) National Retailers
Distribution in
25 out of 25 cities High Distribution Location

B Class Cities Ludhiana

(pop .5 to 1.5 Mn) New Delhi
Distribution in Agra
63 out of 68 cities Jaipur
Guwahati
Kanpur Lucknow
C Class Cities Bhopal Patna
(pop .1 to.5 Mn)
Ahmedabad Indore
Distribution in Surat Kolkata
316 out of 400 cities
Mumbai
Regional Retailers
Pune Hyderabad
Visakhapatnam

Bengaluru
Chennai

Coimbatore

26
Driving Financial Performance and Delivering Significant Growth

Sales Growth Adjusted EBITDA1 Adjusted Earnings Per Share2

Sales in billions

$3.5
8% CAGR 15% CAGR 21% CAGR
$700

Adjusted EBITDA $2.5

$3.0
$600 2010 10.6 % of Sales
2019 18.7 % of Sales
$2.5 $2.0
$500

$2.0
$400
$1.5

$1.5 $300
$1.0
$1.0 $200

$0.5
$0.5 $100

$0.0 $0 $0.0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

1 2010 through 2014 adjusted for non-operating pension costs and certain non-recurring items
2 2010 27
through 2014 adjusted for non-operating pension costs and certain non-recurring items; 2017 adjusted for U.S. Tax Reform expense; 2018 adjusted for restructuring & impairment expenses
Cash Returned to Shareholders:
~$1.4B last Five Years
$ in millions
$500

$450 $436.9

$400

$350 $332.7

$300

$250 $236
$219.4
$195.9
$200

$150

$100

$50

$0
2015 2016 2017 2018 2019

Dividends Share Repurchase

1 Subject to price, alternative investments and working capital requirements

28
M&A Criteria and Focus

Accretive to ROIC in excess of Meet risk adjusted Margin accretion

earnings in the cost of capital by IRR hurdle rates with growth rates
first year third year higher than U.S.
GDP

Geographic Growth Expand / Grow the Core Adjacencies

▪ High Growth Markets New Products & ▪ Water-themed
New Technologies platforms for growth
▪ Water Heating ▪ Leverage channels
and brands
▪ Water Treatment

29
Compelling Investment Thesis

Market share leader Stable/growing U.S. Strength of premium 5 year adjusted EPS Strong balance sheet
in major product lines replacement market; brand, distribution, CAGR through 2019 and cash flow to
operating leverage manufacturing and = 12.7% support future
from incremental new innovation provide growth, dividends,
5 year dividend CAGR
construction and clear market share repurchase
through 2019 =
replacement advantage in China and acquisitions
24.5%
5 year cumulative
cash returned to
shareholders from
dividends and share
repurchased = $1.4
billion

30
ESG Accomplishments

Products Conserve Operations Are Safe & We Are a Good Place

Resources Conserve Resources to Work

98% Thermal Efficient President's Safety

Award
Employee Engagement Score (Max 5)
Established 1955 5.0 100%
Cyclone Commercial Water Heater 87% 90%
1.6B cubic feet of natural gas saved 1
(predates OSHA) 4.5 80% 82% 83%

4.0 80%
100K tons of GHG avoided1 4.00 3.99 4.00
3.5 3.85 3.84
3.0 60%
2.5

99% Thermal Efficient

Chairman's Green
2.0
1.5
40%

Crest Commercial Boiler Star Award

Celebrating
1.0 20%
2.0B cubic feet of natural gas saved 1 2009
0.5
120K tons of GHG avoided1
146 years of
0.0 0%
2010 2012 2014 2016 2018

75% Water Conservation Ratio innovation

Participation Percentage (right axis)
ISO 14001 for
environment ▪ Ethics ▪ Supervisor
Effectiveness
R O Max Series Water Treatment System ISO 45001 for safety ▪ Integrity CRS Report
1.3 B gallons of water conserved in China 1 ▪ Innovation
▪ Value Recognition
▪ Customer Focus

1As reported in AOS 2018 CRS Report based on 2017 sales and data
31
•Q1 2020 Results

32
Focus on Cash and Liquidity

$125M $850M1 ~ $55M

2020 Share Capital spending Cash repatriated Liquidity China SG&A
Repurchase reprioritized and to U.S. savings ($30
suspended reduced million of which
mid-March was achieved in
2019)

1
As of April 30, 2020

33
Minimal Debt Maturities in Next Twelve Months
$ in millions
Revolving
Credit Facility
$250
$230M

$200

$150
LT Notes
$106M
$100

$50
LT Notes
$7M
$0M $0M $0M $0M $0M
$0
Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Dec 31, Thereafter
2021

March 31, 2020

34
First Quarter Results

$ in millions

2020 2019 Change % Change

Sales $636.9 $748.2 $(111.3) -15%

Net Earnings $ 51.7 $ 89.3 $ (37.6) -42%

EPS $ 0.32 $ 0.53 $ (0.21) -40%

35
First Quarter Sales
$ in millions

2020 2019 Change % Change

North America $ 532.9 $ 521.8 $ 11.1 2%

Rest of World 110.2 232.1 (121.9) -53%

Intersegment (6.2) (5.7) (0.5)

Total $ 636.9 $ 748.2 $(111.3) -15%

36
First Quarter Earnings (Loss)
$ in millions, except percentages

2020 2019 Change % Change

North America $127.1 $116.0 $ 11.1 10%
Rest of World (42.2) 12.3 (54.5)
Total Segment Earnings 84.9 128.3 (43.4) -34%
Corporate (15.0) (14.7) (0.3) -2%
Interest Expense (2.2) (2.0) (0.2) -10%
Pre-tax Earnings 67.7 111.6 (43.9) -39%
Tax Provision (16.0) (22.3)
Earnings $ 51.7 $ 89.3 $ (37.6) -42%
Segment Margin
North America 23.9 % 22.2 %
Rest of World (38.3)% 5.3 %

37
Strong Capital Position1

Cash Flow from Operations

$ in millions

$54M 17.5% $552M $70

$60
$54
Cash provided Debt to Cash balance2
by operations capital ratio $50

$40

$ 209M ~1.3M $30

$22
$20
Net cash position Stock repurchase;
shares totaling ~$57M $10

$0
2020 2019

1 as of March 31, 2020

2 includes 38
cash, cash equivalents and marketable securities
April 2020 Business Conditions

% Q1 YOY
Revenue1 sales April Commentary
NA Water April 2020 residential order rates off low single digits compared
70% -2%
Heaters with Q1 2020; commercial orders down 30 - 35%

China2 14% -56% Sequential sell-out improving

NA Boilers 7% -3% Commercial condensing backlog double YOY

NA Water
4% +17% Internet sales up; in-home install sales temporarily challenged
Treatment3

India/ROW 3% flat India manufacturing closed

Total3 98% -17%

1 Year to date March 31, 2020

2 Local currency 39
3 Excludes $16 million in revenues from April 2019 acquisition
North America Business Conditions

Manufacturing Supply Chain

Flexibility in NA Proactively Managed

Residential Replacement Water Heater Volumes NA Boiler Volumes

100,000
90,000
PEAK HOUSING
80,000
2.1M
10,000 Replacement New Construction 70,000
60,000
8,000 50,000
40,000
6,000 30,000
20,000
4,000
10,000

2,000 0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

0 Condensing Commercial Boilers Non-Condensing Commercial Boilers

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: 2006 to 2017: BRG Solutions; 2018-2019: AOS estimates

40
China Business Conditions

Weekly China Channel sell out - Units • Three plants operating

− Building to order
− Operating at lower than normal
levels
• Supply chain intact

• Demand skew to on-line

• Right sizing and product

cost reduction continue

• New product development

0 and R&D continue
1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th
2020 2019

41
2020 COVID-19 Commentary

After a hard closure of Great recession NA boiler sales will be India will not achieve
the economy, the impacted residential impacted as break-even in 2020
country is slowly volume by 18% construction slows
returning to business

42