Lennox International Inc. Deutsche Bank’s Chicago Industrials Summit

Sure. Great question. It is always a good time to reflect back when you come to an anniversary, and also when your stock price takes an unforeseen decline. I did that recently. Look at the things I am most proud of, and we will start with that. The first is our growth journey. I looked at it compared to 4 years ago. We have still grown. We have grown 13% over 4 years despite some divestitures in Europe, some acquisitions, and almost all the growth is driven by building commercials division for us. We have obviously faced a really tough residential market. To be able to deliver growth, and that growth is driven by we have gained share in five of our six business units. One place, like in residential, we have gained share at replacement and lost in new construction. Kind of a mixed bag.

That is the one thing we are very proud of, is the growth and the momentum that is still continuing. Second is margin. I asked AI to do this for me, and then had a finance team confirm it. Q2 2022 versus Q2 2026, we are up about 500 basis points in margins. As we talk about margin improvement and our entitlement to get both manufacturer's margin and distribution margin, we are making solid progress. We met that we got investor day target for 2022. We already came up with new set of targets. Very proud of both the growth journey and the margin journey. What is most proud moment for me is the momentum that behind all the future improvements that is going to come through.

The investments we have made, whether it's emergency replacement and commercial distribution improvements in residential, relooking at our product portfolio with greater emphasis on heat pumps, parts, the JVs we have done with Samsung and Ariston. We believe all of those momentum is going to carry us forward for the next four years. We are early innings in almost all of those initiatives to get some meaningful changes. It's a super exciting time. I think I'm more excited about the next four years because of the potential we have, and given where we are, it's on the trough of the market versus when I started four years ago.

Listen, it was tough. We obviously felt terrible about missing our consensus and guidance, and lowering guidance is not something any company should take lightly. We did not. When you lower guidance, you only want to do it once. You never want to do it multiple times.

Yeah. Yes, we put forward a fair guidance.

We went with a bigger range than we normally do. At this point, we would have gone with a $0.50 range, but we kept a $1 range because there is still uncertainty in the market. The changes in oil price, the inflation, consumer sentiment, repair versus replace dynamics. There are just a bunch of uncertainties. We kept a dollar range to make sure that we do not fall out of the range.

We have good conviction in the range. I think from that perspective, what we learned out of the whole Q2 thing was, A, is sometimes we are too transparent. I went back and looked at the feedback around share, and then we went back and what other companies said about their residential growth in Q2 last year. What happens is, when you are a sell-through business, you appear to be losing share when restocking is going on.

You gain share when destocking is going on. Last year, almost all our larger competition did not give the equivalent for us to look like. Last year, Q2, if we had analyzed the numbers same way, it would have looked like we are gaining share.

This year, it does look like we are losing share. In addition to the residential new home construction business that we walked away from. I think we could have done a better job explaining that. We should have seen that coming, and we did not. From a market perspective, as we said in Q2, the overall reason for where we are is the residential recovery in HVAC is delayed. We said it is going to be the second half when we announced full year guidance in January.