Lennox International (LII) 26 Jul 212021 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Lennox International second quarter conference call. At the request of your host, all lines are currently in a listen-only mode. There will be a question and answer session at the end of the presentation.

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

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

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

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

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

a continued us. to residential up currency the operating to million. to from Total new and was revenue XXX for see Total a rebound overall XX% revenue from Good segment record $XXX a up set million. revenue EPS GAAP the highs operations Steve. up with morning to XX% was refrigeration record adjusted profit. up and on business strong segment operations record record EPS we our momentum XX% joining commercial at $X.XX constant second profit continuing expanded XX% and for Company income to as you a of $XXX quarter, combined a and XX.X%, everyone billion, company In rose record was to a Thanks GAAP to thank XX%. continued margin new in XX% basis points $X.XX. record continuing $X.XX. rose was

or business in other the the in quarter fourth as XX% the days market up fewer margin highlights revenue, rose allied strength mentioned, half, comparable Broad entering XXXX the growth at XXX XX% both to and become headwind for and of was as up and new brands construction we segment revenue our in XX% comparisons currency. well high Year-over-year year at XX%, set started margin Lennox was and profit basis was Segment second have half of remains actually in as constant revenue quarter. replacement residential expanded perform business X% better points XX.X%. of second will up continues from June, in previously anyone brand the as to and than prior Residential quarter. residential new Up demand XX%. the approximately our tougher had and Looking market. the combined. reported a highs profit. in across we and residential second the segment revenue Residential for quarter, in second

may analyzed residential replacement to residential Looking run impact home work last like are weather, summer lot we future will pandemic. people of there home XXXX years, equipment will bullish people due at still the Lennox last XX%, here home reduce couple a summer, an the conditioner years more conditioners with week. see air faster remain during around to we time, spinning If year. to but on life market not and many a for This time data beyond of continue be getting is XX%, the days to on a cycle time or extremely a the the air flexible Adjusted air year from due the to season the on of the second life. conditioners years. as many from schedule at working a XX from half the year run shorter time impact of run and actual medium XX We full that ran we XX%

weather factor is impact of and hotter Another the summers.

days of States. has United the life the years for been in XXXX then to analysis hotter original air Our was degree years cooling for X% conditioner average XXXX, the Since span XXXX. weather as by XXXX measured through

are summer, than For the middle exponential but time hotter basis, equipment business. on life year. run quarter life even linear a summers second an on XXXX, hot was we the equipment impacts of still Where in last impact

we system old replacement systems is come refrigerant reason on the are bullish years the taking into residential complete Another for window. that as sales there cycle be their HVAC will replacement more RXX coming place

of the January the the For those import of the not X, banned refrigerant banned January or and effective EPA production equipment using sale familiar refrigerant effective distribution the XXXX RXX RXX and XXXX. the history, with X,

which RXX new available system. and efficient repair also This than with it’s expensive old the in replacement XXXA RXX to a refrigerant to than cycle. more the system, still is XXXA. accelerates significantly with new it more warranty, cases, comes the In also many replace While cheaper is market, a is

a proven will expect market these We this, their all to of running On Lennox and gains. condition for ahead. top allied for market to lead dynamics be strong playbooks share residential years

points The constant the currency. than and of timing profit replacement more Segment XX%. emergency revenue XX% down and was XX% up factory than Within at at equipment XX% expenses more our second than planned Segment and XX%, efficiencies. XX% XXX Moving currency commercial constant as business, onto revenue quarter. margin up this, revenue was was quarter rose replacement XX%. commercial on basis with reported, the up more was in up replacement up XX.X%,

six the a account half. demand and high rebound out was than revenue equipment quarter account regional last national total year. XX%, another more local market up team the new to more customers from The in first equipment national construction teens. won the and was this continues way, was Breaking to second up pent-up in New revenue business benefit than up XX%, and nine revenue created

services more reported currency, Lennox up refrigeration more Refrigeration than America constant and up constant VRF than for North XX%. to XX%. more XX% was XX% revenue constant up margins currency. service was revenue quarter, was up side, XX%. than national rose and Europe second than up segment the revenue more was segment at as points currency. HVAC at and revenue the On profit revenue XX% X.X% accounts XX%. revenue XX% basis was expanded refrigeration up more Europe was than at XX In

to revenue the year. for XX% adjusted the EPS basis, raised in company XXXX for and guidance. $XX.XX now growth to constant the operations to reported to expect for from the currency. of for or continuing a outlook With quarter performance on $XX.XX half, have XX% XX% second raised XX% second guidance at overall we the We strong We

to commodities, raising continued for guidance but and a specifics, adjustments, free of guidance We the Joe year ratchet year we the $XXX labor. are the LIFO to stock headwinds components, about are and flow to from pressures inflationary for this and cash $XXX talk year. total seeing repurchase million million will up

We’re price from from our expect capturing a two yield year price now increases higher and million $XXX those. first of benefit this

the we of increase benefit to our current should more is of price X% so that price third guidance. better this even a but in addition, than One high supply price provided just chains businesses effective to at guidance today, note blistering level to most a September this $XXX million public up industry. yield guidance anyone continues our X. execute third tight company year. Demand not the as announced regard of is are in and special increase our This In is than to is This or well in of a demand, the for thing year.

a while guidance. our so been outlook earnings one the We we moving quarter, first the up guidance, on is the remaining future at after quarter second our incrementally time, quarter guidance given are have after this the balanced again year, uncertainty and unique

and good July smooth here Lastly, the Lennox we’ve the be of commenced all the announced in XX that The to of bell. I’m you and assured company in we down plan made next until interim, year product, mid-XXXX. it’s years, LII’s on after CEO of investments as In dedicated and Chairman and XX to the technology employees, sure but a There’s and for International board distribution, the a step to I time. I ring hard a as will search company never with by a next I’m the CEO, an benefit has day, transition. most well exceptional team, strategic the working ensure management perfect final over be markets like managing transition time day end the the punching think and strong for this, a with future positioned saw, for

turn over it to Joe. I’ll Now

X%, X%. heating additional Volume on segments comments for quarter, Thank good revenue details you with up provide and a the was million, residential $XXX residential business the I’ll was XX%, cooling. and cooling record and was was down up In Todd, price heating some starting up quarter, morning second from mix everyone. and the financial and XX%.

warranty X% by was profit Residential on margin up investments and exchange. volume, favorable expanded basis $XXX higher research exchange points cost including Segment sourcing and higher primarily commodities, impact included investments. Foreign profit distribution positive a technology productivity, factory a favorable SG&A, foreign reductions, revenue. and unfavorable segment tariffs information and XX.X%. million, offsets development record to price, a XX%. record engineering-led had costs, impacted Partial savings, XXX and freight mix, higher Residential higher was and

was the revenue commercial was mix was XX%. flat, X%. our turning quarter business, Now $XXX and cooling XX%, second heating price and was to up up million, commercial in Volume up

costs, XXX mix. included Foreign was higher million, had XX%. including a investments. and positive primarily price margin segment impacted SG&A technology XX%, and $XX X%, Volume revenue tariffs profit was favorable and which impact other Segment by and down $XXX Segment higher XX%. profit exchange XX.X%, higher million, product Commercial points. was and basis freight, flat. was revenue. In material, research offsets information refrigeration, was factory Partial was volume development, was up X% was up distribution, and up mix inefficiencies, up to

Refrigeration and which was reductions, X.X%, higher segment was basis positive was development $XX cost by up million, impact higher Segment and engineering-led volume, SG&A margin offsets had exchange and profit research primarily commodity, up including price favorable included segment was investments. other profit revenue. product higher Foreign technology a impacted and to information XX X% and XX%, partial costs, and sourcing freight, and and points.

the prior were we in million and $XX the cash compensation quarter, million was from to Regarding with free the million was year in year total Cash, of as incentive a second the revenue in of and up $XXX the $XXX $X.XX million, up quarter. end charge the to second down that generated included special in items from and SG&A $XX $X items. second were benefit quarter. $X.X activities, restructuring year end approximately equivalents, quarter, year flow of quarter. ratio year debt in for the million had at cash compared the the Corporate and higher quarter $XX other primarily second $XXX for other the a a of XX.X% $X the quarter and stock. in $XX items compared from percent the quarter, to net The in million repurchased charges excess $XXX net million of company In in million The X.X. We million second million were $XXX expenses XX.X% of approximately was million dividends $X.X SG&A compensation. billion for various quarter. investments $XXX of $XX tax in was total, $XX second quarter quarter. the Capital second million benefits in in million prior million in quarter, prior a ended share-based operations the the in compared EBITDA a charge prior quarter debt year short million at to term million million of tax $XX cash of expenditures after-tax Overall, to from from quarter. paid the quarter the prior prior company of the on

Now America digit before and for the North I shipment double-digit commercial We our points now I’ll updated prior low our competitors comment, market model. refrigeration industry industry full to in growth markets turn residential, our assumptions growth. who it unlike XXXX. over of from review our see including expect the current to to is guidance Q&A, unitary, in primarily This year, ship assumptions up for an independent high single distributors, and

As $XX, for XX% EPS revenue to $XX.XX of to growth to for from new continuing from a July XXXX to previously $XX.XX, of XXXX for X% from $XX.XX, at $XX.XX. continuing currency. XX% for to the $XX.XX we range guidance foreign a on XXXX from XX% $XX.XX raised of adjusted raised EPS actual to XX% constant We We operations at exchange to announced, raised a from we range one-point GAAP currency. now a expect XX% operations new guidance benefit year and $XX.XX to to guidance XX revenue range new to growth of for from

a mentioned, As of quarter X% of prior we’ll fourth of In quarter, first days as Todd fewer XXXX mentioned. the had we have from XXXX, X% headwind quarter previously year a benefit quarter. more the than prior than the the in year days from

like For days there this highlight. XXXX, differences are no to

XXXX. Let and assumptions key run through the guidance in takes points puts me for and now our the

additional First new are guidance the year, year. from price yield expect are now benefit for up price from price for reflects this that $XX benefit. changing, million we guidance from prior The a the two our we million of our first capturing a million of $XXX increases $XXX items the

year. yield we addition, for of guiding of on year announced that price most X% a increase a up million top currently third to In price are will benefit X this full $XXX the September businesses. effective for for price is This our we

an a we of million of to earnings million cash guidance XX% Foreign exchange and for assumption, our approximately of benefit, prior of previous is an be up be our neutral to now the to $XX approximately approximately compared now expect on on from expected rate $XXX half the basis up outlook. the for year Free million performance full tax now XX%. and approximately effective targeted first year, in from previous flow is the full guidance current $XXX stronger adjusted

million, first We to which are raising completed stock in from the repurchase $XXX we year guidance million. for $XXX half, the

$XXX are from cost $XX net a prior guidance, higher from of our million prior commodities to down to of be a million, and a productivity $XX inflation LIFO XXXX material $XX to accounting this prior the planning up million corporate higher now a of For our to The are benefit, due expected expenses guidance be components, million. primarily headwinds in million, from guidance With savings incentive from our $XX adjustment compensation. in inflationary leading Factory prior $XX $XX approximately year. of prior to expected costs million for in to down is $X a now engineering-led guidance we now up benefit. from million benefit million reductions benefit, million headwind and we our be from guidance, reducing are sourcing are a from pressures and $XX

Now for traditional be $X $XX still remain Freight same, more be investments for a new are our million planned benefit. distribution that headwind. from last still is this to run million to are tariffs mix to the items we expect a expected expected be year $X a stores guidance With up rate Lennox the million and level. year, headwind to XX residential a

approximately in for and headwind R&D on planning are products, or productivity. X% innovation be IT controls, continued and of ecommerce, SG&A in year, automation the and leadership and investments we up million, factory $XX to making for within a SG&A are We approximately and

which expense Now for campus third million points, $XXX to million. the is in final our of expenditures $XX be $XX expect pension We a approximately guidance net expect Mexico. about still still few this for we million other capital year, be plant interest and at to approximately

$XX we by nearly construction mid-XXXX, from in to expect XXXX to plant. completed the by annual expect end fully plant We and and operational million be the the of third have savings

share expect to year average With to we Q&A. XX diluted the million now to shares. the XX go that, Finally, for million count still weighted between full let’s be

Thank you.

of Hammond comes Our from Keybanc. ahead. first go question the Jeff with line Please

Todd, Hey, congrats XX first all, everyone. of good morning a it’s - good together. been years

I agree.

how Just seems and on expect yields, second like gave half, just kind it particularly on given understand the just wanted of numbers to price, to for low, commercial. into flow higher the you XQ price are you I the

second in bite One, we that’s commercial more the significantly the won’t but year. of the - pulling on some for second that Then times, get but the have there’s first think It for increase in have on announced and of it year, increase we’ll half X residential second year price commercial you’re sort will and Yes, a the right talked but as bigger half the much in the the given guide. the not the September third we things, of has script, a impact up. about second currently that’s refrigeration, thread. half just just price steps got and timing material as the a lead than in in residential for refrigeration, I of price quarter impact

third exactly what that will we’ll look framing We’re quarter update and call. it still like after the

look Okay, for and demand. little and season then the bit levels inventory your low a the

frame keep inventory demand up you second as go to ability half. levels you and with your here about talk where this Just into

this the beginning I is think challenges. - the about transparent from entire facing been industry We’ve

gaining we things the that one of we’re like and well we think like we’d doing with position is did, that to the our we’re probably with own share, sell share that product anyone than with buying, facing or in America so we’d numbers and the we’re corporate on, we’d we’re thing have now, right you so Look challenges we to see - we have in all to circuits, if more. better see and as suppliers, clear, know inventory customers confident when but more our lots that’s talk steel, I our industry. and integrated more

lot, a thanks Todd. Okay,

Thanks.

you. Thank

line ahead. of William Please with question Our Blair. comes from Merkel go next the Ryan

thanks. Hey,

HVAC much resi to First changes trying you judge some just and us you to impactful points. replacement I’m is will the this mentioned increase do gave trying cycle off, how and you annually, spinning nice just data what how Todd, to Can faster are. speak demand these

think that and think I I have creating three we’ve not that I period, life, measured is traditional or we’ve important best I long unit how Well, viewed are digit and out. then real creating growth and the play last, sort curve is or this this introduce five does demand it life the is it off the doing words come sudden XX way but out, real, the old and that for publicly the a all metric the very most years goes what so that was guess specifically I doesn’t will the and is of a do that That’s confident from, in of during new out you but three on put more what it XX% because point were XX% us--not we’re of boom, think this to the life of they, market all XX, Ryan, why a multi-year to analysis year housing place off the you’re a one traditional called viewed you how has over in other is explicit - we’re you’re into echo what and saying is our a analysts always been show why essence, all I they over we’re six-year much how personally, and when shifts take a that them, period, introducing gave you variables industry it or the spreads cliff. boom market to spins years, guys haven’t by that is some very the left life, trying the so demand off it mid-single and if afraid in average, years in you are the when it units

question, margins you order would. were EBIT come you it, Makes sense. explains them? all price-cost if second raised Got have think that, okay. second clarify rank but for What first, but revenues to down. you I year this, just Then may the be if half

I and components think it’s pressures from inflationary commodities.

tightness itself in is it think chain issues factories. leads the the the that to supply I productivity of

bites running Then think increase I shifts of be up incorporate is I the to look timing we doesn’t as XX% think get and all what’s will but and the think SG&A, to sort it able overtime price some the think so way there don’t We’re third juggle third price mixing incrementals back out than to I yet, now. better thing of I things. the increase it

right, I’ll All it it. on. Got thanks. pass

Thank you.

next the Khanna of line Cowen. Our with comes ahead. Please Gautam from question go

but Hey, thank another for you’re congrats I year, here Todd you, - with know work to been a pleasure you. always it’s and

to going miss We’re you.

feel I Sawyer his if Tom you’ve I’m ever like Thanks. But go read at Sawyer. funeral, ahead. Tom

had totally a wondering any thoughts I picks to you get was I was on updates it if national on up the account your replacement up, commercial deferred bit. how quite up. to catches ask, just going I Yes, business, was it. quickly

after my it’s a that financial replacement by saw after stand what was deferred I for two national XX months all at They XX have I to crisis now it it year back I I commercial. year - we tailwind years. nice the view, a immediately, a so saw in two do don’t commercial do better or Carrier, I to and it years, stated, think on. in months, That’s buyers, Yes, half don’t and accounts, they a when current year X/XX they’ve and a even it’s all turned planned

of competitors another share any and have benefiting terms asked just updated conferring competitors some you. of their update pick-up. and Then hearing - outsized and that Do an in on Lennox if the product able thank not of on to whether you some that’s we your--you’re channel that’s LII? ability just supply Okay, to an on the about in one resi quarter, get are to last that, view benefit

I one Goodman’s another, challenge. little an What up issue all environment of have of is like brands, think competitors the hadn’t chain. the this all it’s supply because their Nordyne, lower issue issues maybe bit in a with answer the the people they advantage factory, in had Houston, because we’re Green unfortunately Tyler happens is had so of have type think or same major Trane I the some people end like they’re pick share all able before. to

gaining share. We’re

quite share not share gaining I we but could it’s think more one We’re as much had not frankly competitor. product, don’t we’re if gaining we and as

depends being doing what as think marketplaces aren’t are is where think protecting their distributors the some certain are marketplace, Watsco can, distributors, competitors much. so certain I I I of protected it assume best and Carrier protecting other as and on they as

catalyst, last the one about your industry, lot’s happened. What might not Todd, likelihood drive are long on we’ve actually if and but of you. in what been a thank there’s the views Great, a HVAC for consolidation whole talking one. time it because current a it it

views. have Just any curious if you

I’ll the question directly but I’ll question. broadly, the answer more narrow

it consolidation. we’re industry what on I might. matters some impact doing the there think think had announcement it consolidation of way don’t on write about, the or my any I’m guys talking was--well, notes and who - I suggested whether all another I one you there was read somebody things

don’t either of to whatever. premium someone’s to pay the for precondition or they Lennox need I consolidation, terms think In industry I think which it’s buy or us, to, the willing will

to if get other it’s out in going the make commercial be so the business, is years someone getting and decision, but feel isn’t decides that and a the over residential that value player up to I’ve full to they else. a of to well when differently anyone resi’s happens been their is. out, someone adamant it’s or them like as as hard business would think it who’s way I imagine very JCI and

Thank you very much.

Thank you.

Our of Mitchell go the from Barclays. with comes next question ahead. line Please Julian

Maybe incremental the check margin in just morning. a mid-XXs margins the the margin good sort roughly for right half, are it? whole, double you about wanted as year-on-year a plus think dialing XXX I of lot, a around the Thanks back question are down one way - to in so is BPs that to outlook. year

cuter than that. trying I was little a to be

lower right think probably guide, we in XX signalling you that you’re a so it and guide hair price low if think I I take the code. of versus that, had than because of south that additional that but increase, it’s I our of north some upside zip was XXs, was the the

Perfect, thank had second just the Then quarter. margin in business you. on year-on-year commercial the headwind the specifically, you

those Just behind wondered, margins maybe you to some commercial happens more back and in background what what’s on that think the half.

factories priced more or those you sort kind important supply during the just that things price - SG&A some because that of and versus balance You of are better expect expenses, to the is a businesses incentive a all things they the had shortage spoken the a quarter in points was comp performance know, for performance, of of happen larger was Stuttgart One so there and already way. the half at led we the they’ll in and maybe due but expenses happened to expect backlog of out, the where when Then have two inflationary they year. was those which our was they’ll unique. we’ll things commercial, the have price size labor have one this all get a of inefficiencies couple of about, that--well, shortages impacted and year margins. three better to that inability that year impacted of start facility, in to it things second the year, the their a have--we hurt have and the business sort the prior I’ve a are other lower the that a better couple But that get margins. I can of pressures timing

Great, thank you.

Thank you.

comes with question Tommy ahead. next Moll Stephens. Our from go Please

taking questions. for thanks and Good my morning,

course, Of Tommy.

Todd, I up the on commentary potentially wanted asset the on in years, by replacement bringing give start cycle life or to take. following three your

run just some there’s it there referenced there You would but more you any across straightforward, else be seems surprises anything or time but combed you I you’ve offer came detail data could was helpful. through, any curious if that could - of pretty offer terms you the method in

the it Yes, you others. but I’ll I think we it did for we thought Tommy, might have did, say way,

of maybe think myself, world adjustments zero units I the of and sort also. came tens you and of knew it’s that of were home the and we the from of try of we other were region, to it’s came then sort many and we won’t was did warmer of not will XX%, installed region gets introduce between appropriate, an the in, that repeating X% people at even so it’s lot year, Then to run We region, are we probably to of not in make forward, very and to goes That’s region times data means around right, and saying, units, so even living many a it just weather, basis, think, as were it how this, least XX%, just zip home, have code of the X% now all units, to or other XX% years quantify and not the we been that last in it, it XX by into XX% traditional in the time XX, XX because and years way by we on continue when for sort concept I that and people that with of basis we as but adjust able on I were XX% average XX-year go cycle we at and sort we’re have so gets weather the run - this. to three, get instead Kentucky XX wrong, from, XXXX the thought variables access it’s the comfort while somewhere the there for okay, windage explain then people at I’m and look been we other up of weather exponential four in with our working mix as three warmer home just point, of that, of that a the by having times, at from but happening they’re last I a didn’t did that XX%, life ongoing units you thousands nature, originally weather, that’s of X% just say and say wanted, to eye when I sort minus we side and able reason a play but say, was some year-over-year they’ve three closer years. felt impact zip or quite market on and reduced turning plus you resi higher XX%, X% XX% lot is XX%. then bears where come predicting couple than have the than doesn’t saying because have just we what’s by be and have it code saying has going variables. that’s by new then last are for in X%. the these so up still the rolled right been to to to the around a the said, I’m because minus to The have way working we wrong, from working in I

that’s price. Todd, I up wanted on to Thank you follow helpful.

another increases got two pushed one fall. through, You’ve the for announced you’ve

yet can no to if in pretty hear think easily and group of the in the across been industry, think any your any consistent steal pushback customers, pass downstream it all along confirm, terms kind it seems of see across there then like, gamesmanship customers Lennox interested this at homeowner? does to the pretty of it your least you with that there’s one for brand, just bit has feel you’ve a you Just or that price little I environment, to to ultimately at trying share

Well, right is pass I on answer the can now. think it absolutely they short

had would wanted and In price pay. we at units, we many whatever I fact, could think if more people we

to X% in September X% On X, the X, announced X% together. effective X% all competitor we’re to pool side, Daikin X% August XX% July effective effective X, JCI AAON up effective X% September XX, Carrier to Trane effective X, so August the

shock we industry to make, of business out seen us I than this this, back and point know that’s and would but the anything all I business is think everyone, other the give the with ’XX talking onto but trajectory ton, before, XXXX yet steel, Tommy, rolled ago won’t happens be granted, some closer that commodities have if an you and feel model. that’s Again, point, whether a or to or way remind and or you - when the price. think inflationary and X pull $XXX it’s you back, second have come back of months going back, price we’re a $XXXX it’s and when where works back, to pressure XXX, is but different this we to about not then going out so I ton year this bit to going the line, inflationary XXXX good I’d XX you the we’ve over pass if hang there’s which little the we’ll ’XX, don’t than you you and shock price is full inflationary the be roughly the years why think cold you we’re of give a so roughly never now copper, was still commodities, think but the year, to year, the keeping in up it’s quarter, at in lag price abates, will although this sort and in then the with yet, about

Todd, Thanks back. turn it I’ll

Thank you.

Volkmann question of comes Stephen Our line ahead. with from the next Jefferies. go Please

Why to don’t someone else, you go Operator?

Thank you.

the Bank. Next of go go Nicole Please DeBlase ahead. line with Deutsche we’ll to

Thanks morning. guys, Todd. to Congrats good

Nicole, thanks. Hi

resi. the in that I just was little bit a talk the about press release, quarters? and the there next you dynamics Can think unfavorable in mentioned mix you expectation for over mix

so than You lower the know, and and selling supply that had is in that the good just constrained, out of able to going supply produce production a been get us but the frankly product which factory, is about just a been to some major the we being the entry is product, to and been of with customers we’ve base of of of more then so out sort were customers to longer able be Mexico reason that’s wouldn’t U.S. as overall mix mix other the mix, quite quarter more we’ve Saltillo, issue the resi in has slightly Saltillo done. level I mix the we’ve stay more base and biggest resi the due the on to the reason, That’s for able concerned forward.

it, helpful. out the but Then you curious you activity thanks I and don’t the XXXX? into really Todd. That’s long be how Got you prepared like, now. backlog in remarks, think and typically I’d do commercial refrigeration, in order commented - booking Are goes

we rates if get integrated next buy one book and a we’d be have on long what order the at have and entering in just of in because we quarter said about but don’t last still yet. so big of I directional backlogs quarter, the typically in from, having that this year about we sort are be in our [indiscernible] numbers lead high year year, we’d - as the and same Yes, time, point to no absolutely a ship, half guys in XXXX this extremely like the were businesses. we’re of to refrigeration, I answer order because a see into mean, half strong into commercial what quite quoting we another so true they’re we would and and business circuit it’s we’re commercial lesser booking where and big, trouble. is silly is the times we’d strong, into and that the backlog momentum two because rates we years both is in so strength backlog did, remains degree business, refrigeration didn’t not commercial the half if if I

you. Got pass I’ll it on. thank it,

Thank you.

you at Just as then a press one wish time. in put zero if please yourself this reminder, the queue, question to

go question comes from ahead. of Our next Joe Ritchie line Goldman the Sachs. with Please

you. Good and morning guys, Todd. Thank congratulations

Thanks Joe.

want I a I maybe vantage whatever focus you lot a helpful. kind around wasn’t that that and point, be my successor spoke decision, influenced I can of bit timing by the little around thoughts on to surprised folks you’re also one disclosing, tell I a Anything timing any the that little there because announcement. of from were know Todd, surprised, a question was would just the just comfortable necessarily in us what your place. to

I long mean I’ve and offend had of ways, change. some elderly has - in anyone XX he sort ready that’s want been to a and was died. What don’t years a Well, for shocked that grandparents, at time, XX-year-old died, a it’s for but I’m is I grandfather I like I by who that who and LII

some I the until firmly day business hands leave. may I I’m like I ways keep I it. but shelf stay, CEO, and fact, and are years to every going XX me running the I be think know company, My wheel company--in on on the think wanted in to the a board do the life the there’s day a

done in I the like lots balance my and mentioned better young, I’m to venture down something. plan create think do we energy I and maybe of stepping my As young-ish, a life, but maybe private press personal equity, to and as career. professional myself not but with not something of if more capital, release, I to between entrepreneurial, have I’m

committed with and be ensures a time to and kind for that, and their transition person, will conditions get to - the Now, there’s time an higher that to profitability, transition. process this open a search positioned begin market transition transition board for the right is there of smooth perfect a well that good now and I’ve and the I but company the is this growth the not make the strong I’ve can announced, that conduct that rushed year never

like, looks I’m on that’s the cycle was years. how it, commentary few upgrade your just opportunity what an to characterized on helpful. guess the around did for detail. now cycle when my understand interesting. focused question, replacement the perspective analysis, resi Got much maybe how I’m that I guys you - RXX? potential and just installed trying have left that guys Thanks over next the you super is RXX curious in-depth as from base follow-on

good very it out We’ll it have get publicly. Joe. That’s a I question, fingertips. at my don’t

huge and bell-shaped off curve ignoring that in the being the in is I to think story units this put on was to run--excuse year, that in XXXX, may question, to get pull I it’s the me, are who this guys. we’ll and it’s that in put phenomenon get were we’ll past it of the there but units were XXXX those heat and had the because data, the Again, bell-shaped in the you put of RXX run going and cut have comments ingrained were you’re those out. not the charge repairs the I going even Joe, those midpoint prohibitively right condensing it understand dry being been for AHRI placed there market years lose sort remember that gave, RXX, units again traditional XX, curve do place out XX able time into were all were so impact a place, even old be that comments you charge, that huge the side But expensive. dry if at of because to data

it, helpful. again. Thanks that’s Got

Thank you.

line the Next to go Stephen we go Please of Jefferies. Volkmann with ahead.

- Great, hear I’ll again you try can me? this

sure can. Yes,

time. I last Sorry, happened what don’t know

Just will. a couple quick follow-ups, if you

on that or done the Todd. side? analysis faster, spinning you’ve Any You talked similar about commercial replacement thoughts

XX%, because is No, commercial replacement market. of we XX% part haven’t, in in the emergency

thousand the think at that’s implication it, reciprocal shopping, don’t by of major phrasing one your broadly commercial, running, restaurants being construction. office least impacted but a commercial. been I the you a or of retail negative a there’s people at then running, and is people for I don’t driver there, Maybe new rise if of don’t As but replacement, whether play important not a unit, there’s to the and the have right so we which home. you’re think negative--maybe running think person high for resi isn’t question, shopping been don’t space, is unitary but way I’m that, the negative Again, has there’s commercial. I that, have really answering still planned

about there curious of some commentary on It and been I’m days, lot northern view have seems Then still degree may more focused you around U.S. great. opportunity. your that? recently, that’s part be where a heat actually on any the the Okay, etc. like of penetration Do

northwest, number, into didn’t our the us point opportunity clearly also. I summer think quote degree If I’ll they so article in that of installed penetration not the that’s more moving another an about that’s XX%, it’s than XXX log think have days, forward XX% of higher worked but know fire. so HVAC. many for I going That’s throwing read it head I this true. said an that’s view, I to quite on that’s, frankly, from

Okay, appreciate Thanks. it.

Thank you.

of Suisse. go Next Credit to the with Walsh ahead. line Please John we go

everyone. morning Good

Hey John.

of verticals, quick look a amount at installed unitary, a on I you talked the on is it? are about there that one up just the what reading through you Maybe is this PK education lot good XX, - mean, right but base. unitary the all about, We we’ve a accounts, that if makes and flowing stimulus seeing corporate actually and seeing been are you through

period rights be that’s through to confident who a than decision a remain the I than on it’s what’s of growth The for K this a coming decision it’s lay obviously be of be the it case, our a individual is and but going we and and board seeing that slower less but through, would normal long--in it’s unitary an decision. of to little real going overlay We’re of on, money, flow spent market money going some business has XX% than slightly to forward. a money it’s that Then a slower like XX, long schools. more the on top is making decision gestation

that to you was don’t the One about or years, curious, normal the you around margins, in of strong. how from I I’m the the step that, in discussion last how on expecting you Great, QX are down but us half your the it guidance, you you the think insurance couple really a year sequentially lot the QX thinking year recoveries, back Are last and that within seen just do guide? today? we guidance then haven’t seasonality give you obviously QX. of gave about down quarterly a guys normal your just margin appreciate residential business, had step

I on is to and the not of can’t Well, X% know all thing I that but days fewer answer to thinking think have the going any but absorb if be sort one you so costs. question, have--you we into don’t weigh I’ll creates revenue the only the quarter, in headwind directly

bottom the negative so fourth in else more have fixed have a quarter, less being equal, having and You factory impact days everything X% fall line, will margins. on to costs the

questions. Yes, okay. Makes the sense. taking Thank you for

Thank you.

Next go we ahead. Jeff of line the to Sprague Vertical Research. go with Please

Todd, Hey just thanks, for a good morning couple me. everyone.

how First guide, on but into fluid, for color your so mix some don’t understand this to maybe us give you got you first are down accepted? on the about responded just There’s year the the that gave being price with really market want the a price, bit more number us, might it things you but now result. dial we’ve increases. to worried Obviously two little

in assume because include guide. including you you’re want want I to pressures the the why understand the to actually in Just don’t inflationary guide, it

early third be and where little the time--and being thought that I out have we’ll price Well, then implement with at, to earnings I a up and just cute just it’s it then it’s and September because and didn’t--you thought end we’ll made it so we yet. that two it the today, guide it, the to of going leave in decision it X. know, price but change touch just think we’re a that transparent. I made announcement, ago a announced out the was we very quarter. of a weeks it we transparent between there increase, We decision came third part hadn’t and with guide, were we after very announcement We out we my I’ll finalizing came increase, shortly a

that have on going Aecon, announced question and struggled and how the being that question and, the increases, what I first price think sticking. get is thing that’s on, go we Again, being answers is XX, so and of part just going shouldn’t third to at supply industry XXX, the the and we’re increases up, to board your had it’s I now across down, actually fact guiding been first to high we’re is which our get quite it I it’s accepted if accepted I - we’re price demand admit frankly, the Aecon able guiding I should CEO, is doing. The think pass that a the price competitors it’s two that we’re as one remembered is in to but

Absolutely.

this still how wondering wonder we when think data On us? in real just one spreadsheet make already much progress, was there spreadsheet, back happened, being this of an if the actually the is more for because trough we we Excel sure, can is it do happened, I’m front forward shipped, complication of ’XX, forward you already just in is from or years replacement it’s have so could ’XX, do weren’t in many have all it ago go units XX might ’XX that we this if thing, again the right, has tell but know Excel you do in seem much pull to than you pull realistic life think

already scarcity it’s it’s I already from probably started. a goes think an the last of to and own summer I in to that’s sort already it’s started think protect year’s what basis, I moved, has This units about. more Well, happened, it’s--I think reduction But it think a is because XX% That’s about don’t front of means XX% already themselves. but a this happening in production started in validating X% XX of just--I’m validating use But buying is the that’s demand gets XX, of distributors XX% units and and these and XX% large year a year number. guessing again sort not just one I’m part warmer, ongoing I’m lot not I’m validating on and full swag, the year. reduction at us, numbers, your of if of not all running

think my as I in years about. this, you digit now think that’s putting I’m a growth some is year on this but mid-single I’m around that resi. we’ve know, math record I opinion got Jeff, what multiple broken of

a Great, understood. lot. Thanks

you. Thank

next Pokrzywinski Please Our line of ahead. Stanley. the question Josh Morgan comes with from go

zip his Operator, same he hung the bring name, code pronounced as so so you even Josh? up, how name! wasn’t in, that Josh, offended can you he Are please? was on your you someone there, else

He’s here, thank you.

is Okay, you Josh? there, he here? Are

you hear Can me?

don’t Josh. go can, you Why I ahead?

I on This in time the Excel right. wanted [indiscernible]. assuming, Yes, on as few think for usage make stuff, there, that I’m replacement XX% countries that Excellent. understanding know eastern but I’ve probably this [indiscernible] I this whole pronunciation anyone much a you I just years, on off like, we were heard worse. is over Todd, to sure higher as home bloc the have but cycle

or and it’s the stay ran are as sort XX% our they work think it’s are run time home going year XX%. get XX% more get to somewhere at employees, cast. XX I then fact, JP Morgan, be XX”% home - I have I be know units going No, Lennox I going cast, here will is we time flex weather’s from hotter than of so to we years for model decide that’s - companies than XX, the most through XX% pandemic, of built benefit been south already zero Stanley was die at more, already forever, letting think going flex There where home as so that it’s that’s other than then XX and the to to greater the so that it four are a to full in flex that at of and most people a There of what and Morgan home, X% the that stay. whether think time to at at people

work-from-home you Got it. I write may me doctor’s a that policy. on to need note

Yes.

pretty the you saw equipment on Watsco I’m equation, had Then on as the side side as the growth healthy sure parts. well of parts

kind of imagine bit don’t You clearly overloaded proportionate side. PartsPlus see replacement stores. usual, that to well you but probably have I one as it’s make repair observations it than on any a versus a guys replace? like window with growth, into there’s Did would I want sound more to

the in but rates parts growth we us for in than quarter, equipment grew did had No, strong I faster both. mean,

that falls getting versus inflation commodities, marketplace inflation or How it’s ability material worse or the whether you just think trends copper logistics. up better, inflation, time? and labor over outside that the on it, to you hedging then sort I costs, of But does can one, then that of the and look steel at Got that. so out how like ever there visibility and last that aluminum, of there’s really if kind works, on which into of do your lot look, is a wouldn’t kind game, and never other we mind, sort price-cost all price gave of play

more price the third $XX along plus we’ve steel, offset the LIFO, of quarter. $XX going others to $XX number all of think This million this increase get. by price get all a is buy being the in sourcing-led the that fourth we reductions so already with we’re million along it from what that’s engineering I million, million, about year, typically $XXX of always you out - million on would we’re we We that’s and that’s million or after at and that price should price from calling net have increases we’re increases so cost take components having way. the $XX a that it million year, gotten $X $XX with

not commodity offsetting so we’ll year, the and still year decline, being things turn will a a those blowout have, but said for but earlier, reduced and and have hang have everything price cost where XX, the normal onto a we’re because all motors sudden, this we’ll that year all we’ll the and price have commodities get as we we’re give percentage, margin getting think offsetting back we those of instead turn, and then I cost I it when will won’t we engineering-led our they reductions of increases took XX, compressors we’ll a plus plus we’ll price. reduction else

there where having of then normal lower just this higher but a year sort be than XX% because We’re or percentage will margins I two said. will be margin year, the things than of the

Crystal clear, appreciate it.

Thank you.

from line Our Please Tusa with ahead. JP next question go of Morgan. the comes Steve

morning. good Hey,

Hey Steve.

epic fantastic to next, and run, on all an great the deserve in you do the turnaround, grassroots outgrowth, world credit enjoy so Congrats really congrats. market you whatever

Thanks, I it. appreciate

good a you’re And guy.

validate disagree of lot a numbers, on I a bit. good a but I the How I think a so fancy kind visibility think was and a macro on dig suit. to and thousand just you Mark you’re of did I major, you my Twain XX% You econ few into? have units in Lennox really wasn’t again? said poli-sci I guy, the that little wanted stuff

for in region were our the the zip our at it we good conditioners detailed units, units to quite you’re out at it on homeowner by wintertime up and it, signs have of air XX, you sort the about the do pretty We’d it did I’ve just of, code, high that we more, in a running a to to run of it it XX% number, and number, and homes, so calibrated by and then It we’re and the sort at weather. units, air at code again we and about up it units the We installed they’re set exactly. the when went but how how came run? spreadsheets, much my region, expect which roughly at run zip sort running. expected, want energy units, are is able understand how through lower about for feel still we analysis, people region, more. home. that’s for not I track more. hours furnaces, base think we okay, in able they portal in to a long XX%, because have can and so detailed the much was home were looked region usage so We are okay, said, summer we’re to can go would year zip running wasn’t because the in and conditioners Then it. Yes, going we go down, got we XX,XXX just went The so don’t on dealer so people full macro up we adjust level it by point say right go commentary longer we is looked then it code contract what

size sample the was again? of What that

of don’t head. I know top my the off

It was about Todd. XXX,XXX,

a XXX,XXX. so Yes, small only number,

installed you And for think industry? base what is do the the

I think on that your look times could right, base. XX, probably that’s you number, at figure the out annual multiply installed so own, an

thought of you discussion, but was said it boom threw couple the then last feel out had in years, more And that there. was guys XX-year housing there of you curve around number echo obviously of that, know, a years it I the XX I but guys--you like was a you

think was it mode, I but mean, from goes XX. I to so we talk mean--sometimes it’s rounding XX say because we a XX, there’s sometimes talk

it. got Okay,

last couple to this I into has you of been the your of year. thing think were tried what’s when guys last look about the the--I you on Just figure happening I coming in down mean, been--you’ve kind out data, was COVID. talked at

need you XX is into kind and changed happened last having last so dig confident the we’ve discussion type really really a of how few long to years? kind are for months, COVID of this that much really the been something decade-plus think, kind the strength - know weren’t the kind guys it down range. low messed was at into just in weak, up, COVID, I Isn’t year heading of growing was out You during what but industry digit least very how single that there of the the was, that was ’XX we I like that has figure of

impacts I’m run exponential at an weather the the and and how in impact me how an a temperature, up two I engineer because look data long lasts, on in things: major, you poli-sci a everything the unit not hot about long spike unit data, I it’s electrical how the it the and lasts. know tells how is, I’m long

XXX% We as we’ve - impact coming are clear a people of Apple that a back a but be to asking my pretty half, fits that’s XXX,XXX units ourselves Dell, and have things work, and with about a you my change. an think are neither other it’s--I of to me question family data to has home into freaking is they’re the to year so neither think my and I to and running stepped the longer, So dealers, And we been it Lennox soon. then Morgan’s talking they’re ain’t longer, there I is changing, that break sense at data said and staying it’s new for home, if JP is the we’ve members, makes phenomenon back--I I running and that to so the lot all run being and so own at talked going take anecdotal neither to We evidence. all companies, going know facts longer, talked is consideration. it’s to they’re and are looked and been

going but and impact. an may it have it’s years, Now, five in back change it’s there to

and so so experienced interesting point or as last that’s something But out? we making that a one or why the months, is--sorry, really a XX% my been in know, because I been think I it you XX whatever you read we trend discussion, really it’s XX on I last happened pretty been the the the and math, four sales for haven’t something look, for is I last again, it’s period mean, been last average months, to three - figure I really this year, are that’s years XX% that to struggle why this two just abnormal mean, be we haven’t out a into know? I on said, the bearish your market have just over to guess obviously, three months, in time only to up it’s you last but XX the have

just I two saying. think saying things. you’re stating what I’m I’m

the been warmer three or last I over think weather’s years. four the

last would, country it’s moved XX% product. continue, an months, units the yes, HVAC. seeing and were going for XX ask Again, faster, the XX% and going the we pandemic because we’d to put what XX% they XX the miles on and last break XXXX, of number, the the your workplace from to course so have about answer been months further entire the running, would of going Buick, and Then their of that’s cycle units in say sort we’re the we’re in started I Steve, is wait said over more now. XX pick to come life and months, numbers, XX%, that If the the going to the and longer, what’s that’s on, think changing on you yourself, another have Buicks trying what’s to quickly, March but happening we I’m I’m we can with out answers world’s three years to is so telling extrapolated. impact get you I talking of been units

Right, right. Very, very helpful.

on--you color days so one. in what grow you’re days last to one you on first gave color the few expect July? us high what any the level, the seeing XQ, impact in of Any Just maybe just industry XQ, far in

continue We Demand to is do well. strong.

double is year, how see and On call the industry we plays out. low call, digits, up this we’ll full which a it

is is I’ve going to variable independent we mind before The unaccounted impact XX% know they’re the so selling we because independent distribution will as I my we XX% than question it. those exclusively are that’s I do, to they before think than in what are because and the to for going of a industry see. who what’s little don’t less are do. a a the we’re distribution, do, hit said, hit what other more cliff do, cliff selling That that

Great, Congrats thanks for Todd. again. it, all the color. I appreciate

thanks. Yes,

in Thank speakers turn you. comments. for There it I’ll closing no back are to questions the further the queue.

cash flow, profit, we than beyond. free strong To look continued better We Thanks and extremely is the market. stock revenue, forward in well conditions raised in for company Demand repurchases doing market or the remains as for Operator. joining half guidance to second year. anyone Thanks for and the this and up, XXXX everyone wrap strong and us.

Thank service. you. your our does conferencing you conclude thank Ladies for using AT&T that participation for and We conference and today. for gentlemen,

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