Lennox International (LII) 23 Apr 182018 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Lennox International First Quarter 2018 Earnings Conference Call. At the request of your host, all lines are in a listen-only mode. There will be a question-and-answer session at the end of the presentation.

As a reminder, this call is being recorded. to of conference Investor like Harrison, to now President Vice Relations. would turn over the Steve I Please go ahead.

give the and the XXXX. questions Good Joe comparisons will quarter a necessary morning. the and Todd the morning, ask discussed Lennox the be for today additional re-queue limit will couple of through for this CEO, will of Q&A, this measures. included that quarter outlook. Thank you CFO, financial the everyone points company's against are In during please for take for reconciliation International's joining unless to GAAP yourself Todd Bluedorn; of review time financial you Joe questions prior-year earnings with questions. key here to mentioned and today and I'm issued us To period and review have first to release performance the Chairman we or of Reitmeier. All otherwise non-GAAP performance follow-ups we the measures any noted. for financial

can materially would that of to that of for on and this that I conference call we archived better remind to www.lennoxinternational.com. forward-looking the website risks course will site link find results at call, a subject today's could to certain our understanding give on cause The replay. webcast you in operations, webcast You the everyone such be uncertainties differ will like are direct to numerous be a from to making of our statements. statements actual statements. These

obligation information, or company a statements, filings risks disclaims see result revise any as with The forward-looking SEC. otherwise. publicly to of these International's or uncertainties, available For concerning new events, and update information any future intention or whether the Lennox

Todd Bluedorn Now, to let and turn over the CEO, Chairman call me

segment basis morning, million, a highs up revenue International America currency in record They that non-core margin XXXX Thanks, total basis up and In was first excluding divesting for previously of first Total a At XX% first quarter X.X%, a the operations transaction. continuing profit adjusted basis quarter to EPS write-down On million Australia segment was of everyone, $XXX set new quarter quarter up $XX assets costs and GAAP first strong quarter in operations. joining was the announced, in businesses us. X% divestiture with including associated posted from operating Revenue first $X.XX On adjusted from cases and for was Australia growth. Asia and EPS from quarter a and Asia rose Lennox a first and revenue, Good $XXX assets are continuing record XX and total adjusted million. transaction. continuing the to $X.XX. in record thanks revenue expanded GAAP points Asia of and first income revenue and costs quarter profit rose Steve. in of including $X.XX record basis to for in operations profit X% process and as write-down Australia, with $XX charges was on basis of margin South million we for refrigeration charges the both X%. million. EPS XX% segment an constant on record associated the for a adjusted $XX divestiture pretax GAAP

expanded XX% and and to segment than performance profit richer a Residential basis profit. with had X% quarter mix business first segment construction. margin highs year and points points for Revenue Residential to up segments with was strong price a the ago replacement up business XXX single-digits revenue, a and for segment faster key new quarter XX.X%. business Turning than established residential digits. replacement margin growing mid-single new the up new our rose high on construction first

quarter Revenue highs. revenue points from quarter; first first basis X.X% profit quarter at constant XX replacement and down up was up was revenues construction In digits up up commercial ago. the in single commercial first of mid segment and was mid-single a to up quarter, was the X%, profit was record new North new margin level X% year single revenue America, equipment digits Turning the segment currency was digits. for and revenues low hit

Looking mid business digits. at the revenue and another equipment single regional was local account in quarter national way, was flat and up

in down In In of HVAC North mid case XX% at relatively currency. down revenues regional the our rate. of To strength high non-core on update on On revenue account and was sale X.X%. both refrigeration at of flat and system strong down Asia currency side, mid-teens to revenue agreement America, margin core account revenues sale was a points commercial businesses, we our from and commercial revenue Australia for mid-teens teens was to server-side up rate, you strong up down was business in March profit down ago. a in segment digits our flat. business, revenue service In segment revenue Europe, Ref. on and announced year national constant the out Europe at nonfood as refrigeration refrigeration XXX display binding XX% refrigeration the the up Refrigerated business, in local signed refrigeration food Beijer service was constant national revenue was was X% a mid-XX% In Europe currency. constant was quarter

close in We the the to second sale quarter. expect

of As a costs the held $X.XX of I we in Brazilian for America In mentioned had to write-down agreement April, EPS million quarter our we the earlier, with to Elgin, the divestiture a pretax South company. privately or and GAAP a transaction. the signed assets associated for business charge $XX sale first binding

expect the close with the to to operations to guidance. in estate area in approximately of to of we we that that real approval concluded take non-cash Sydney year. related second EPS in later and the $XX sale before GAAP the factored charges Brazilian to the the also antitrust formerly Subject quarter, year. $X.XX expect in process We're expect the this selling metro is be to was Australia which end We million transaction approximately in associated

we Given the the on low expect book estate sizable property real would market, a Sydney the sale. gain value of and the strong

previously broadly are proceeds to sales the expect total estimating over the closed. we these US$XXX course approximately years As receive which as million, net are of of we the from transactions announced,

stock in We the repurchase XXX invest of million market our year. about for businesses, XXXX for the the full We continue for plans directed to Company our regions. in and are strong announced of America our Overall stock market grow total streamlining have in excited refrigeration Europe, North portfolio the in repurchases dividend stock. and these will quarter of the position we the a to focus first and XXX core repurchases on and million opportunities

our we year as expect The first record quarter another in start continue to to largest our the year, we growth period seasonal was a XXXX. to and record profitability strong and enter way on

it Joe. over turn I'll to Now,

Segment X%, XX%. in good and margin X% $XX first was and million, morning first higher I'll residential included investments. X%. Todd and neutral profit mix and a foreign the up reductions, XX.X%, additional comments and for from and the you, positively up factory record million, first was SG&A and was quarter costs, cost up productivity, engineering first on revenue. up quarter volume distribution exchange was by Residential cooling. higher to quarter Thank was quarter Segment profit basis X%, price lead partial favorable record up starting cooling commodity quarter everyone. heating mix Volume some revenue In was with financial up price record details segments offsets and higher impacted residential sourcing was points. provide freight a was $XXX XXX and and the business heating

was a Australia, costs commercial our include product Due prior offsets up price and European up off volume, in $X.X price, lower $XX from on the points half other first positive on down volume used a quarter the SG&A. $XX.X and and $XX and compared was for absorption litigation higher nature lower was a and and quarter. first in Asia distribution revenue revenue. the XX business the first associated Now was low turning asset quarter million the reductions high Segment based profit down first businesses up million As up $XX rate, reductions, was partial compared higher SG&A was quarter company excludes of cost volume was commercial low was quarter, profit $X.X and actual level the digits. offsets million $XXX single of a South benefit Overall quarter. are other record engineering non-core and up was or down positively single higher Net X%, $X.X profit engineering that foreign margin the XX%. mix, million segment foreign asbestos-related and commodity of and partial in adjusted had charges compared Corporate prior equipment basis of were cash million, HVAC XX%, Australia price, we services cash prior use up million down was after-tax down Segment was quarter. on X%. $XX had reported revenue profit This revenue, by partial North and XXX segment X%, for Overall segment Segment sourcing sourcing down net higher a at the transaction, refrigeration free impacted prior America cooling revenue. costs margin share the had million basis, of from million the positive revenue million heating currency year our costs, and cash Asia was compensation a had and a mid for first the mix we second non-core and cost uses used in the for lower charge quarter business. spending now was By national total lower unfavorable $XX down half in various cash refrigeration benefits quarter operations first included up of results. for company excess Commercial included X% Commercial for X% to tax and quarter. of million revenue America ago. X%, to volume a and $XXX generates to in write-down $XXX record X%, offsets freight was exchange $X.X profit approximately flat, the net commercial $X.X product first and in million. points, divestiture basis, ago. $X.X With lead and digits impact the of digits, account single seasonal million, a X.X%, for to X% and price first XX.X% was the lower the million, of factory the higher items, million of the was expenses X%, a business Europe impacted revenue quarter HVAC costs was million X.X%, in other with million we $XXX basis up our year X% million million, from record mix down by flow, the quarter segment XX% XX.X% which first lead first million the was divesting, America $XXX $XXX profit in was was year a region was in impact North flat the SG&A, Capital investments. quarter was $XX in our in with exchange to to costs commodity In respect an year.

in with million We $X.XX of overall. the the XXXX of paid EBITDA first target $XXX Cash to $XX of share billion at the equivalents X.X. at for to approximately we of cash ratio the $XX quarter. quarter, continue in and and March million free debt dividends for purchases end the ended first and company flow was end million cash million $XXX were debt March Total and

review I over turn it I'll Before outlook for our Q&A, XXXX.

Our market assumptions aren't for changed. XXXX

mid-single North HVAC up digits. to American the residential shipments overall For be we industry expect

Lennox of American refrigeration share We unitary from shipments X% expect digits market International we foreign our to single be X% is expect gains and for a low this environment of on shipments underlying commercial positive adjusted single to benefit North be exchange. X% growth guidance including digits. Based revenue North targets to low a and America from market

business. divestiture $X.XX X% growth was X% EPS loose to foreign $X.XX first expected continuing American operations with South minimal of XXXX a new after from incorporating the GAAP quarter second exchange. guidance to from the prior the a from $X.XX results for of charges with range and guidance of impact quarter range to a associated Our $XX.XX to

expect into we the is GAAP mentioned a guidance of Todd Sydney year. our estate real sizable our gain factored As this for on sale the not and

reiterating of operations $X.XX adjusted guidance XXXX, from to our are for we $XX.XX. For EPS continuing range

in and run some the guidance let Now our takes and through me XXXX. key for points assumptions of other the puts

We aluminum and of commodities from continue that million expect which are and in on $XX includes in million steel the offsetting XXX with increases $XX tariff of headwind price Section to year. XXXX impact for confident

savings $XX cost We in our programs. engineering productivity million automation from our other still we continue factories as to see lead in on expect reduction We million sourcing initiatives. our $X and on savings from residential focus U.S. plants and

$XX distributions headwind to million continue $X million a this investments from foreign full a and growth and expect headwind. still $XX exchange year, SG&A benefit the another year will million and We for be will be

net still targeted $XX million $XX year, guidance $XX expense XX% up an now is full million. full year. prior for from adjusted million year, expected the Now, Tax more to XX% are remains this guidance at just a the basis for be expenses corporate guidance approximately for rate interest to points, of few on

XXXX million still which expected includes year average Q&A. We expenditures XX full for stock $XXX for cash million still $XXX are be flow planning XX and for diluted is free the the and of is repurchase to that $XXX year count to share year. full let's million our plans with of million expected million approximately go the for And capital shares, in to targeted this to

KeyBanc the Jeff line Capital Hammond First Please Markets. ahead. go with is on Instructions] [Operator

good morning, Hey, guys.

Jeff. Hey,

So, you're there? that chatter be it you something We a color moves as up heard like Maybe you're just about – little covering contemplating, channel it additive? on sounds are June price price, the it. more Is guys just in would that increase.

just me quarter, X% the may it. overall. fact $XX mean, in of We Jeff script revenue reiterate said price first of earliest, price it Yes, first priced residential that, I'll X.X just reiterate I LII and let million the where get you of got in we but in the for

a that's QX. as commodity since had in million strong here. X seen think I We I've I've been headwind

million given full XX XX For that to offset we're we're of the to of confident, price better in million quarter. maybe traction the going we get the first commodity, year got even

announced. yield both get As it's but you of it's you know on announcing the the price increases, much

price official but we marketplace. move to an message our terms competitors is do If commodity to clear we're so, marketplace, in offset additional As in price what announcing we to watch were that. increase, of next up get getting the would going the we're price get the continue to price again costs in

see that on whole? better refrigeration confidence in then did you given to start update you trends us just saying still that maybe the gate started single-digit, here display gives seems like the refrigeration, Thanks. and year out the expectations you then, you’re there just side. for have you margin What but the I it market’s on of more and think come And low the weak

are what The business, we're The to we – Kysor/Warren which of case market, is business single than we little what side low the little the think some softness of of be and refrigeration impact we and both be expect is that. part conservative a bit absorption expect I a there impact. the and you ahead said, it in large lumpiness bit a to North on a do factory up, than display just up grocery more America on the they our industry better the expect volume reflection lumpiness digits

think XXX down at XXX be apples-to-apples, expecting that basis within couple a to it’s of terms hundred couple to basis in margins improvement are to about were there in is year basis we adjusted XX an the Last points of year and to basis to our up first margins, while and full still in they be were up segment. points. sort margins refrigeration more quarter XXXX we’ve margin and disposing going our last years were we Again of were points XXXX points. up nice refrigeration come up In XX XX for driven the we businesses

Okay, guys. thanks

Thanks. Sure.

question is Our JPMorgan. go ahead. with Steve next from Tusa Please

morning. guys. Hey, Good

morning Good Steve.

bit, You guys out you but there? delve specifically on further would cost side into say be prices hysteria did there, what price know refrigeration cost the

notes looking quarter sure. and first including just the at in offset am We and commodities some I all make price three segments, to with in refrigeration.

Okay.

So course going of can are forward in channel? that get over the the you price here year optimistic you

answer. short Yeah. That’s a

everybody with of as the there are few a you of there have relatively side, are out Okay. seeing you gone there. well, And holdout everybody peers kind Resi guys couple of missing maybe any you said, seen letters been, on so seeing forward? I have Jeff is your kind move Have far. behave but know

think growth strong revenue answer I I would would way. I we had in say, the this quarter. it

outpaced we we market price. the got think I and

So price structure, the same others thing, got a we I as and hedge and structure the on industry an have commodities do our just the have that then same means that cost and we do, raising competitors always are gained share said, pass same they we doing like implies in do. we way they

being have city given there at pricing We talk like So, a structure but to to good if is guys any the I industry board somebody go across is rational all price. point, the a a where get know on we is one. sales

of commodity reflects what Okay, here know cost up that's I opposed aluminum when XXst? as your like of then March I to look estimates, as kind moved XXrd recently, assume fair. you thing, that of April is And know one kind at last you

number. our is Correct. pretty and mean again now, best bet I right round It’s a XX more

but of then high-level message the totally a down if is it, about think be I in feel to – material it I and goes we is sincere, are the and we but the there that minus is marketplace or deliver we or number I know amount plus this concern sort it’s up update confident. So XX

to offset are are very and it. demonstrate and at commodities least doing one for a we price with had we We going quarter quarter first good

Right.

resi? of are April volumes kind how in curious, our off Just here starting

and the sales. Mets are air-conditioning out. Anytime Cubs not sign snowed the for It’s being good a

April So May very plenty but of than the recall couple started XX% early first have we in quarters time weather answer, year, it’s last but early. in cooler been the year April hot got it to for and it’s in may And of the you up, to the warm the that's last the and weeks of [Indiscernible]. of June cold of quarter, and honest

So we off were the the of quarter. hot in then at cooled April and end

So, we little to a still come, start. time a have for heat bit slow soft but plenty of the of bit the

Yeah, out they your always say not head analysis. is sticking window fundamental the

weather what is So Thanks the guys. it is.

right. Exactly,

Next question go Wojs from Baird. ahead. Tim with is Please

Hey guys, good morning.

Tim. Hey

you you know or think the that of us, – anything you seeing sort but are maybe around, are you Maybe residential selling like any too, of how about guys of or perspective kind the expecting? business have price seen in thinking just that is context residential, ahead down trade seeing of that about the in just increases I and broadly the more next season are context of but some the any anything mix summer from

add-on it, part, Signature the part our but the leads to what of see positive doing I continue than more were strategy in I with and that’s comfort what quarter mean new was add-on all up No, around Series. Lennox even Dave construction replacement our we we within and in in we that resi was to replacement because and had mix mix-up in

cost get ago about is based and the half homeowners years something at half talked again we contractor, this pass So, going level dealer other price of accept sort the price so the it to the X% the you consumer end labor unnoticeable and the once on to where equipments increase. to be are installations to the take no, XX about to of

through some the cash this point of the proceeds about the of of sales 'XX? terms at would then offsetting great. we just on work you And your is guidance some think Okay, as just dilution or refrigeration of in of that into the incorporated how use kind

the will earnings are I not going sort a we’ve get or we of question disciplined, you business, share be the of the account the announced are incorporated consistent then to to are if to with core CapEx haven’t and left think we to in to share guidance GAAP are the into lower the a do what’s mantras explicitly invest is with. share it’s will get we said of incorporated not asking to buyback EPS guidance, but we is dividends anticipating have of, to of, buyback sort that’s what that sort going going be, we we grow to

on year. good Great. luck the the rest of Well,

Thanks.

go we go Mitchell Barclays, Julian Next, with will please to ahead.

Hi, good morning thank you.

Julian! Hey,

a far. Just commodity just I question maybe, lot costs. the on talked thus wanted a Hey! freight you have about costs

in that guidance? You called costs balance and sizing are quarter the the subsequent the Maybe of headwinds kind thinking as residential in freight of was any in headwind from the impact over businesses. those of the how the you commercial out about year big how and

I it full-year again other For and couple transportation have broadly able the think X was offset distribution areas, well we it of sort times we through of get broadly the cost X.X other and on on and of the or [ph] to sort take offsetting as business X and say, cost impact would and are million again managing that elements that million it, quarter the P&L. it – productivity of been the as but multiply I a and of

up kind thank quarter saw you then particular much project helpful, delays to of outs from in that push of move activity in thing? would you first till kind on be should in think whether half? that’s also the commercial we second have impact follow year, of up Very any to terms wait we the margins year the quickly see And And second quarter you! the segment weather my around in how whether start or

of quarter. is of There outs at much. sort No, the there end always wasn’t push

in what is profitable national So, business our and for more of account revenue and revenue just commercial business to mix first is there the faster our anything business we for accounts, saw our than grew than quarter national and driven, national local that regional and caused us account lumpiness down. local wasn’t weather regional

focused are grow fourth we were had we margin and margins first on in quarter, to had the committed in commercial We them balance for of we having but the driving strong decreased expansion quarter, year.

you. thank Great,

Thanks.

Our ahead. next question Cowen Please from is Gautam & Khanna Company. go with

Yeah. Thanks good guys. morning

Hey Gautam!

couple So, questions. of

are First, now space to exits portfolio you to here? assets announced, with to sort you to a the of any that like add you you refrigeration that’s shore would help M&A do there it the in the not or have remaining need what refrigeration focus business from and up of really

be trigger may we’ve now us for there in and some more near-term. both opportunities, and our opportunities, of the the think I in refrigeration more but and I our in expect broadly on refrigeration business but business, we business not Europe, North pull traditional refrigeration sort the back America core case in be parsed display in could to and talked is both opportunities, wouldn’t HVAC that there

margins target. still get three I both grow organic we think to to for our opportunities, to continue and year growth have

I So if be sometime later. for year would that we do to look or something next refrigeration

JCI, bit that up with significantly would business. of scares threat when look UTX, company battery out where combinations happened seems about the Are there who Lennox, at to just splitting knows landscape out or there that a you? be eventually auto a you you the the pose little what with think separation be the any Okay. you and like guys and post there combination pretty their Anything combinations that threat then sit? as from rational landscape industry And but because change everything, it may we have any do you a a are heard follow-up all

all short companies of also and and play markets and unitary I No, it in and early Where other if or is its underline three are were I said mass these but applied America an large sort our will I and parking times I America doesn’t I combine actually two bother about time office pass it and of and it snarky that at a going lot that. us UTC or rather worried spent bother combine and again so than have to haven’t when JCI’s have they sort being are still about these sort North VIP that or of conglomerates think me at and at no. end corner combination doesn’t a businesses answer North so afterthought to of without people too when critical gain residential almost in going mean three like residential customers, we they case say. share we of the it of a commercial of scale, in have still guess we lot

good Now, available is think and could of were combinations more we The value snarky can creative constructive there if create answer. pretty I we do something industry I the that’s combination. if comes I think here guess value and in are we the operators this is be answer I think part demonstrated we that

Thanks it. Appreciate a Todd. lot

is Next from ahead. Vertical Research. Jeff with Please Sprague question go

morning Thank Good you. everyone.

Jeff! Hey

morning a if news you on about aluminum have I mind. but good is relief, Hey, China a that is the X% little Russia this question got down don’t a

with Todd motors a knows China a you weeks there You made a can outsourcing these that shift and anything are do just how fall? there cards might or wait to the on historically deal little highlighted is you doing to you and Can Is that Investor and you back came Day, significantly you had that? need give about you see us list as out point preliminary a that how couple the U.S? to compressors lot ago, color that of on

learnt. We the had have the the to think wait question latter first. fall. cards part I see I and of will I answer how

have We all learnt.

how You’ve got to out. plays see sort it of

tweets how answer The is it see is You and out. paper, sort options. of obviously and we put early or it a can’t discus plays more the than pronouncements tweet react to they have we but on this

We to move have both Asia. to North options it places move other back it in America, to

and see and the multiple it will we the have almost So, on wait how all and but we motors flexibility it how plays react. components, we will out suppliers plays see out, and just including

still motors Can us of of how on sourcing much U.S. your you in is sense a the compressors? give and

the We in over our half do compressors U.S.

of do, decades the we base a the of in but there. some source U.S. our even have for Emerson them still make a in we suppliers joint U.S. that our ago motors have compressors us We and premium we then there Asia with from venture from come and motors, lot source load from of of those

than than U.S., more U.S. compressors XX So, motors XX outside the more in the

kind but way help XX%, of to some of wanted actually It the right getting works conversion erodes it thinking dollar right? you the dollar against for just works, speak. as I cost arithmetic so And you targeting the so of that about are margin, price rate to know incremental spending obviously if the

still a on you and little drive a color path incrementals to maybe there? see how get You XX%

think closer that’s A attempting our I we what do to bit in are year longer-term. partial and little just XX guide with say, it’s this to than XX,

it’s productivity SG&A we I I for see model. commodities, on that the we're can are but quarter is XX% it. more So, for Yeah, get pretty do should think productivity and price we we’ll what we the the got we year. offsetting -- still mean, the drop-through are confident SG&A

North have distribution still we America. the of and We and are million freight productivity in offsetting getting factory we productivity are $X then

the So, incrementals that we get as XX% we still pretty good feel talk we about. as the long on volume

of conclusive. addition in the three the to nine of point you is to And Alright! just clarification that two freight or the commodities of one quarter in felt

Yes.

lot a thanks Appreciate it. guys. Great,

Okay.

Robert Please Barry is go ahead. Our with next question Susquehanna. from

Hey, guys good morning.

are you? How Hey Robert!

I I growth that for Good, price would actually question metrics. as thanks. of more you color X% kind appreciate a but did of pricing Thanks the That those this a year couple resi a rate, on in track the mix have on how of versus quarter breakout. the to as the detailed expressed that, expect progresses?

in a relatively think I we consistent it refrigeration it on will resi commercial and see will I little the bit. be think uptick

going sort year year. there half because spiked took the of the some will lapping second Now, actions maybe up be in I fourth this of think commodity we quarter some into as preliminary

answering I I real-time. So, think maybe am questions

account the of little our down a starts are and it for some pricing. or get as I bit think able refrigeration year we commercial half national to a with larger tales maybe X% customers to for resi of climb, second tales

are maybe there front? does but rounding some look that mean I like to a pretty start you Yeah. it there off on is solid

obvious do that state and what be model your we but X.X do we've to that the a sales said, or on are happen a half or mean Yeah. of the we one we year good. sort better I of you math would of than do going whatever if if billion

the five is just Yes. components And resi? that that guide mixed of that

gives specifically mean; resi, the I that yes resi. guy primarily

mean mean in as question Yes, we or similar this go? just some is quarter. offsets see in X% is I the do five, that quarter almost I there conservatism just you

add-on it’s me have in, sort RNC just of digits We'll quite what A the probably in more four kicks it’s the That mean, add-on and I to let RNC growing frankly back we mixed but that we had part that other mix not, quarter conservatism. New Construction. guided. was a It’s better single on of the give replacements basis. outgrowing on answer. for than like thoughtfully a offset. we happens more high do quarter; then replacement year negative mix double way in digits If Residential

math of sort that’s the of think it. I

it. Got enough. Fair

a In residential will new our think grow faster. we models full-year basis construction still on

resi kind think? you Got quarter? bottom it. weather line the What how Do was growth impacted net in the of on

[ph] up it The a year-over-year, degree were so first was quarter colder I heating mean was year than it ago. days in

on sort it in helped third that quarter. second and when near and it helped. think first is and we warm as quarter the supplies, first quarter, I parts in is in net-net weather been before impactful as said So, as helped spare early it’s but It of

percent a revenue. of two or be may So,

it. Got

XXX, one number? Just flow me. you for guide material kind do cash In one capital, of quick working your last that in headwind or tailwind any of contemplate

XXXX – is guide we reason of performance we tailwind. had that to there of incorporated capital normal other cash tailwind end the sort that. about working to degree of end would And working flow last the added the The then, cash the and was a receivables payables flow and flow recall expected said disappointing XX we initial into it of other than is our than so nothing we reflect million capital sort on pointed until we at that year year lesser year and

right, And modest it! just normal yeah some it. that Got lead given got would be incremental just –

Yeah.

or metrics for spend good is working revenue. capital working will capital cost this core capital, the for when bad drive of slow to So

thanks. you. Great, Thank

Merkel go will with Ryan to ahead. we Next, William Please Blair. go

thanks. morning thanks and Good Hey, for fitting in.

Yeah.

year, you So, strong think going it'll be did for in Why still residential quarter you the and but the to it sounds just you do think construction. up? new slower pick what first questions just and hear its on back why like was it

and flip houses don't side of mainly started I trades the believe they property don't when to they're year continue are than I be think think the being jobsites have to and remain it's a more they going projects of the talked builders, far or I and as when it of think I finished, builders get our making talk by colder confident, don't we year the the intimidated rather sure to just we weather. up it's and and weather-driven. this our last interest sort reverse is not so they builders year? big – still in so by don't The think get rates, we constrained

little but to then more And think as well? follow-up on, improve secondary gain sense. makes is a costs improve think should is goes forward little of sounds That drive I as national margins, to to it should the price commercial just helpful. also year-over-year, starting big the mix bit we margins the improve you actually be that you that, price the said year see you a start so to why it the on going like that's account going going and That's

Yes, exactly.

Very good. Thank you.

thanks. Okay,

Stifel. ahead. from McCarthy Please is question Next Robert with go

Good morning, everyone.

are how Robert, you?

point, questions with in But try Good. that because because in snide know keep on event, Three I'll me to me. a quick any it go slippery it's and I so snarky slope to particular. from don't with you

the address So you impact what of making of here? quarter we're of us then part is turn level we maybe terms our just anecdotal number set models talk and maybe And activity? just of we as the the as second in disruption the the concern the just kind in one, compare rebuild in for hurricane about that could event, any question could see terms in third

in are we there's how to summer that's hot to so team quarter. saw what the places it it's each is, them selling question see we the of out replace Florida on when variable I issue have into if the they'll saw think right those season the another plays And they Houston the a team had And to or a that tell is unit. talk it they unaccounted just you we we spike is When units. year-round, those in for to then events. their after for you in parts that repair And will the spare get

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I think times. on the round it's both

– strong in retail of the there national how around of you of Armageddon, was kind definitely playing of compare account benefit national this talk think maybe shoulder out bit year? any trends it about bit overall, or about a we the terms obviously growth for you're as quarter, accounts, be a a but growth, Moving should could little weathering kind may

compete continues know, then a retail And way to as us. Best we look explicit our we're to two of to is the is a And them and as you won good our at point from retail. are I heard our whether so it's for you be working some business of to or think And are against and over efforts higher we've retail, made diversify it's accounts around. story we've in last how other of when three percentage business again new mix non-retail a customers increasingly its works Lowe's model whether talk Depot, – it less Robert, Buy Amazon. that than Home away years, continue the and have me and you've compete whether figuring about to

on of those model which which roof two-thirds be are retail decade brick-and-mortar construction that to thirds rather place housing new a big Those put a lot so, our those than And and of aging model ago. continue construction units last have not replaced model to and now our going tops a to be is new replacement the business we used two and to construction business. have of during be bubble mirrored

of Final update and in negative store deployment or positive any trends trajectory PartsPlus, of question the is terms there, just ads and any traction?

last nice, drive supplies. mix outgrew rather nice helped supplies revenue cold, parts high it overall. as supplies in we opened need increasingly five but not Yes. sales the We total I to be to parts exact forget a a opened more years stores the have We and or and in a the our to to digits and resi, in had than and you've because parts the again, but XXXX you grew the open XX -- was weather quarter, growth same about the focus first of know one talking us our in few was we single as like digits double XX we're that had number. We six, growth we

to quarter. One focus and appears had our but parts parts to make good forward supplies. doesn't nice year in sort So of a off quarter look trend, increased we get supplies a and bang and

Perfect. Thanks.

with Please Belfiore ahead. Next, go to UBS. we'll Chris go

Good morning.

Chris. Hey,

price terms than you picked comp Are But do seeing ahead of year. being any last have up that replacement inventory tough with in? regard you fully baked from higher or they in year? levels? you normal think And last So, of seen to channel guys increased residential that are pre-buy pretty like again sequentially,

the year so we anything in of end it the at put quarter and we effective last were increases if year. fourth put will the price The No.

difference this had last versus year, because Chris, The against last year its or the last I year its mean round from but the five for the four significantly I of others. of to the in days more number year because where we point days know days the by and year-over-year one, first on I'll is up were mention other tough year. comp do hard we up know you so it quarter, prior was

look units hard comp. real probe But demand, tough what at we it's for the we I cool trying confidence foreshadows is, break percentages right and the being to those to in think that So think was homeowner underlying both up even to say when with a go contract. the our answer, weather you're year-over-year us and demand for and second now, on replace the they confidence as quarter

should how Was great. or kind [ph] them just only at you. then negatively Right, you kind out that factory of And quarter? just go point? absorption of continue that on profitability expect largely Thank this -- behind in the – is for the through refrigeration? called affecting And year the we

we're quarter. we Again and confident communicated that margins look year margins us. think quarter, refrigeration sort for to margins largely full while up the were XXX on we're to points XXX refrigeration down we going think we of XX and second to for grow can basis points to we basis we that it's behind still build, have Its the only

what Okay. mix, terms So color you the some side improving just on the of And quarter in of emergency guys potentially commercial of then about gain there? in think replacement trends any just one share there to I your there product or you're with and the trying terms any last on there? more mix kind talked side things, seeing last

we And a on our on and pretty I in we're I locals as our which not working focus only we regional growing accounts out about continue than good but and actually growing account grew local focus it. had business. our spoke our regional national and sort business of focused quarter quicker No. national accounts business on they so business, first mean, regional to national

you. Thank great. Okay,

Thanks.

Rich And we'll go ahead. with to go Kwas Securities. Please Wells Fargo

Hi, everyone.

account? local a ones regional margin piece, that on is that Just couple than better national

know better them. is we the it accounts. mix you actually of you pressure, part and this that faster not part why And product in premium think we again, sell also from growing down in the but is its than national audience margin, quarter Rich the believe had most but business to the counterintuitive we accounts national it's most who margin or our that National customers about expensive, or our felt when we product broader on accounts, for them are energy-efficient sell who so

then that first this you're to XXX quarters? of was we resi, And confident mix three expect mix year does a the on Okay. for last construction so my recollection of on quarter, continue face side, growth the in little next so bps, should replacement, couple so you say, point weaker, stronger going benefit against bit its

last popped asked the or on around – and Steve question that's years. know, someone mix add for up are earlier if short three and always and I said the is sort and You the I mixing all been way up of that two the the question so trend answer the replacement -- an or we asked

than We trend is offset expect couple the this variable add-on replacement The year. that constructions has last faster and market to be years sale. grown of that's a the residential it new as over our both

tailwind. construction is our to replacement nice impacted by market to first like in be new of weather looks quarter for have balance year cooler the that's outpace we're the models. grows than was the year mix business add-on We probably and going of don't rest construction the if replacement. the We add-on so think And residential quarter going residential faster and will the case internal new the which think in our

Okay.

upside once said all potential and that's So done? is

volume, less upside mix Correct. be of we them strong. potential mean, on to I its but maybe like up both

we think Right, sales half growth? of of course. SG&A, should And about then

Yes.

how off good yes, we're that's but start, we to a it. model Although

Thank cool. Okay, you.

Thanks.

comments. closing it back questions, further no for turn I'll to the company With

wrap everyone us joining Great. Thanks again for up. to

our seasonal record First year. largest to quarter entered a We was the start period.

record us. We in for another cash continue everyone to thanks XXXX. joining expect for strong growth, generation profitability Again, and year

your that conference Thank today. gentlemen, and participation. your you for for Ladies does conclude

disconnect. now may You