Mitch Moran

Mitch Moran, on behalf of Jeff Hammond, asked for more details on Leonard Valve's go-to-market strategy, target end markets, and the growth rate reflected in the projected $70 million sales for 2026. He also inquired about the expected trend of price-cost through the year, considering tariffs and lapping price increases.

Answer

CEO Steve Shafer stated that Leonard Valve is strong in commercial markets, with its Heat-Timer controls business being spec-in-driven, similar to Lochinvar, and overlapping channels with A. O. Smith's existing representatives and distribution. He noted the products interact in the same mechanical room ecosystem. Shafer mentioned the business has been growing double digits, around 10%, largely driven by the digital portion of the market. Shafer and CFO Chuck Lauber affirmed commitment to protecting the price-cost relationship, acknowledging carryover pricing and historical fade, while ensuring customer competitiveness.

Mitch Moran from KeyBanc Capital Markets requested additional details on the Leonard Valve acquisition, specifically its go-to-market strategy, target end markets, and the growth rate reflected in the projected $70 million sales for 2026. He also asked for insights into the expected trend of price-cost dynamics throughout the year, considering tariffs and lapping prior price increases.

Answer

CEO Steve Shafer explained that Leonard Valve is strong in commercial markets, with a spec-in driven model similar to Lochinvar, leveraging overlapping distribution and contractor channels. He noted the business has grown double digits, primarily driven by the digital transition of mixing valves. CFO Chuck Lauber stated that while the company historically protects its price-cost relationship, some fade is expected, and they remain committed to maintaining customer competitiveness amidst competitive pressures and carryover pricing.