LII - Earnings call transcript Q1 2022 | Lennox International Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Lennox International's First Quarter Earnings 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. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the conference over to Steve Harrison, Vice President of Investor Relations. ahead. go Please

Steve Harrison

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

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

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

Now, turn Todd Teske. to me let over the call

Todd Teske

the Alok already start on on us. Luxfer. to months the It's earnings International's career the from until CEO for Pentair Lennox of quarter review reconnect coming here across X. McKinsey In as weeks Many great during morning with CEO and to Maskara's Alok be to to thank have to joining the date you period Joe with as call and May Good then an new the today interim opportunity make and of you GE, or you'll him introductions. to his know short

rose search to that history. the experience Along to driving successfully been background at great profitability performance during We focus to the lead we challenges we was top as and and candidates. company are chapter slate the XX impressive an culture the leading Lennox, through candidate Alok years, his the think to us will with fit company's process the I outstanding With and the excited Alok various see with and Alok company, years Bluedorn track we growth his the proven was record foundation have of built over value. that's Todd next XX and of Lennox. recognizes a economic look of forward in shareholder maximize Alok on experience, join firm continue businesses of to as the to operating

quarter digits points. XXXX, for was segment share. Company near-term, $XXX quarter million Replacement $X.XX highs XX.X%, first revenue million. up quarter GAAP first construction digits down highlights European the Adjusted and of as income Residential up to margin double digits. set per at as up in earnings up revenue up both XXX and up our to record first $XXX reported were reported constant X%. record up was profit with In an $XXX refrigeration the double XX.X%. billion. by new basis for up low up record quarter Residential me million. Europe on Refrigeration and our first profit. first driven Segment Lennox was quarter points digits Residential XX% revenue GAAP to and currency. was was Segment first of our and segment to let quarter basis XX segment start And quarter adjusted for down XX% businesses, Turning and In quarter by than in X% to historical Refrigeration, the of was some quarter a was first down record International was revenue $XX America. historical basis North quarter mid and currency total was first rose first quarter revenue led first first Total points million, as EPS $X.XX a divestitures. profit single operating of currency. XX% low X%. X.X%. segment record a record X% profit a of grew The quarter for first constant HVAC for quarter was was $XXX $X.XX, $XXX adjusted X%. was a segment expanded the for to was Revenue margin to revenue up million, EPS down XX% new XXX both single more XX% margin record Refrigeration XX% at record at which high revenue record growth million, divestitures. teens constant reported

X.X%. Within global XX%. revenue more to a planned down was strong, XX% Replacement in but constraints was by our XXXX continued down More about emergency and with low be to contracted our up profit double up disruptions. moment, than points more further breaking but basis digits single production revenue. was than Replacement X%. chain commercial Commercial XX% Replacement down impacted Commercial and segment business. revenue in remained out to Segment was digits. margin equipment Commercial Turning low supply this and labor this Demand down operations revenue

mid out down XX% account was was Breaking and digits. way, than another National New more construction single business the in was regional revenue mid local revenue quarter. teens. down equipment revenue down

on our Commercial Account revenue Services A points National was Lennox the up to digits. of side single service the performance high business. On make few

obligations, to business the run the to to of we through work in account a price. price up up increase ahead We our constrained in national took of price environment, customers business X given was in for mix inflation and mix layer to continue year. Commercial announced causing longer increases as contractual will was But currently. to X% business commercial another additional the May benefit effective this price Given price

continue in along We and additional constraints. factory continue global pressures and freight, inefficiencies components to inflationary disruptions with create chain lingering supply see labor the to commodities,

commercial and adversely just controls where even to business. in our other these businesses other that a than distinguish more to primarily Our continues be Commercial it impacted delays for challenged There supply equipment, few business electronics have production experienced name abnormal chain unique our components has times. the disruptions that by we from are

of in the our lead continue all businesses supply to chain For lengthen. times

a However, configuration do they required the from We not the have for order been environment. all especially disruptive commercials production you configure know the of get components in the all until customer. units to products of specifications

our continue teams feasible. rapidly along expanding sourcing, to suppliers with and working collectively and disruptions substitution in-sourcing Our stock, where manufacturing Even their suppliers the by in new increasing chain address closely safety assisting we supply to and addressing delays, supply qualifying base the continue engineering unavoidable historical actions Arkansas them and with for with our to components. chain labor unemployment are areas the supply order extended With in X% or for Stuttgart, there and to configured respect for to where for less. is direct in lead times constraints products still we labor, certain from at take, surrounding commercial delays due draw lows

navigated the the Part turnover unprecedented experiencing many exposed our employee been early of to COVID-related the our and year COVID last factory. at as affecting not in have we commercial turnover employees year commercial work factory. elected disruptions to from late We stems return facility, this

of overtime ease In broader impacted labor area. raised attract of disruptions production employee and at a overcome to make to the tight utilization constraints Arkansas market To of factory, talent in also wages very we Lennox choice our a in employer that addition, our pool have retention.

In for ease on employees. our significant in the create will static demands factory and a that labor have better instituted factory scheduling wages, addition to balance work-life for raising overtime direct we

the and delays. along easing the in is resulting supply in with disruptions employee that of the wages We for stabilizing employees our the factory increasing actions we've improve work schedules manufacturing commercial labor constraint chain to retention absenteeism reduce expect taken factory and significantly

Our of our work care focus continues diligently customers. to with the team to taking commercial primary overcome these disruptions

million $XXX the of guidance, freight million, the quarter. company but material ahead that guidance commodity, headwind expect For pacing year, price in of a in of ahead and compared talk million continue price $XX to In $XX component a the of of was it year. and pressures. Joe capture we more pressures, the approximately on about to overall prior focus will million of for X% compared to inflationary price XXXX now staying captured and company plan we the first quarter, this with through yield to the $XXX freight

company are new the guidance EPS year. XXXX, X% $XX.XX overall to $XX.XX to growth of For guidance for the in a from are range reiterating revenue XX%, and raising full XX% of to we we X% to

We of and the year our drive led towards record repurchases strength million are XXXX by in another reiterating stock Refrigeration plans Residential for businesses. $XXX in we as

more our Now and to the I'll turn detail it for on Joe over quarter outlook. first

Joseph Reitmeier

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

material, first Foreign XX.X%, was higher margin joint exchange a supply price disruptions, basis higher million, chain and quarter and Partial up down factoring included was lower mix. XX freight efficiencies, profit impacted warranty and venture distribution $XXX neutral SG&A. investments profit Segment Segment points. favorable and by income offsets revenue. global was record primarily Residential to costs, XX%. was

Price was cooling Commercial the first was our commercial XX%. was $XXX Volume was up down to turning million, mix Now X%. quarter X% down heating X%. revenue business, and and up in

segment divestitures. offsets Volume basis mix. factory neutral In Refrigeration X.X%, material adjusted to for impacted down was revenue XX% other higher and inefficiencies by segment was margin was primarily Foreign Mix supply price and up and constraints X%. record due to Partial was labor disruptions, and X%. points. profit price chain favorable quarter historical global first Segment XXXX up exchange Commercial volume SG&A. and was $X freight profit million, was and a million, was was down higher XX% $XXX up distribution and included revenue. costs, lower XX% to down product

chain unfavorable include expanded to had profit by record and XX.X% was global than divestitures. in impact freight and on Segment points to Partial the expenses positively in adjusted higher the dollars historical $XX quarter, XX% first million million, price $XX the a or in revenue were for mix, Segment exchange prior the $XXX disruptions of in basis impacted Refrigeration segment higher quarter costs. supply margin Overall, a Foreign was million also profit favorable rose million ago. volume a material, to offsets first down revenue. prior Corporate XX.X% year quarter. negative revenue, XXX from first X% quarter X.X%. of compared SG&A and SG&A $XX quarter.

Regarding EBITDA approximately product as used costs. use supply increase $XXX chain year the the flow cash working with quarter, the receivable, Net along had primarily compared and to quarter. year million in the charges growth, of second for use cash and of to Cash, generate in end million company half quarter. we was the the in the of the quarter we investments repurchased first quarter, cash special dollars to first million quarter compared $XX of in combat billion to to a cash the $XX prior Capital capital the well in $XX end net $XX Total in tend the due debt $X.XX quarter. company stock accounts first cash inventory million of of million to on of million And seasonally, half. tax use $XX The quarter. Free were effects increasing first after mitigation inflationary quarter, as $X.X million sales a at in quarter. increasing were the in disruptions, and items, ratio to with $XX the quarter expenditures to short-term a ended dividends equivalents $XX the strategies year-over-year company as of prior in approximately was million, million million and compared the at paid operations was due in X.X. prior the the debt in first $XXX

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

Our the assumptions underlying the market for same. remain year

in growth and digit We America. in North Commercial shipment Refrigeration expect growth see low digit single unitary the and industry single markets shipment in to Residential mid

adjusted We with of we X% new foreign a exchange. X% reiterating GAAP and are $XX.XX to raising XXXX guidance revenue neutral guidance XX% for XX% $XX.XX. are our of And from to to to range EPS

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

items expect of price round $XXX the changing. of million. of yield up With and increases guidance to the now XXXX, a for price is $XXX we are from a announced First, that for benefit million second for prior this year and our be X%

$X to $XX a a factory to at the expected be slipping up million flat from headwinds we guidance Tariffs prior share be increased previously. $XX million Some million million which to freight shares, million a now neutral previously. we of to from now headwind be now $XXX which for productivity and of weighted that headwind $XX And incorporates expected year a stock our from are of And previously. for the our total net headwind million up a full the the headwind XXXX. to components, for $XX We headwind full up benefit guidance end $XXX of of repurchase to a for guidance, approximately this prior have headwind is low approximately from a average $X of million diluted net our count compared year. at from is expect from a expect now in year, $XXX commodities, guidance million expect approximately XX million million plans be is to

guiding remaining for the neutral mix to guidance are the we exchange. are that for will neutral items assume be Residential same, we and foreign Now

a $XX and to million investments this Lennox expected our R&D at new with year, normal be with year investments planned be IT. and this will run We more is rate distribution in XX including stores still up SG&A

expenditures still flow is be still for targeted $XXX We final still approximately plan guidance expected to this be cash to go finally, $XX million. expenses that, $XXX a capital Q&A. year. corporate And to are million few million. with And Now points, approximately at for free let's

Operator

of Deutsche [Operator Instructions] Nicole DeBlase line Bank. And we'll to the ahead. first to Please go with

Todd Teske

Nicole. Hi

Nicole DeBlase

you Can me now? hear

Todd Teske

We you. you hear can thank now,

Nicole DeBlase

cool. Okay,

provided done just take Commercial you've how with quarter, start can levels, in XQ the that I rapid do like we to maybe in guess faced starting some challenges the margins. you've factoring fix around quickly the you in to But color So what it year? execute with snapback in to performance margin margin that time of a return you come like throughout through think very, and or starting the will to kind prior see

Todd Teske

to going time, it's going couple, it's a a think battling more One I supply be you Yes, you fronts. chain, know, on the two but is bit probably we're things Nicole, steps little that take factory. we industry the what which, appropriate you the challenged to across we'll obviously, taking we're need everyone's and do to know, to do make sure continue know, the in and there disruptions minimizing

we production. the quarter, was can And quite limitation control out commercial our the where level was in headcount more first commercial labor a and our to that is product that's continue the a in which necessary frankly, second recruiting on of direct business, The to to get getting the factories. increase

floor. the of coming folks we it a factory products more be to would probably to second see will end productive the have little those be What factory factory, able and improvement in to out fix take the because by get quarter, it. we of while the on We will would expect the trained

back on long-term itself year, So trajectory of what margins. on improved expecting the achieving the the it in their once will half we're three-year of that, profitability target lend second the is of hopefully, we're to other side and

Nicole DeBlase

strength obviously the a I getting questions about of saw guys investors this then That's of is in it. got from really quarter, guess, helpful. that that, lot can the anything you order pull Okay, with there sustainability into restock? to in the that And give isn't inventory some to you share respect just XQ later quarter and a of channel forward activity, the confidence

Todd Teske

make about even were comment overarching the shortages. business, I that challenged Early is think Residential strength. I with on we our continued quarter, the Nicole, would Yes in Residential component

We a quarter we in for backlog exceptionally to and our expect March as to we rates got quarter, continue. What an that our was us. and were the a off improved ordered that strong And order where do XX% backlog is Now coming in that in also tough extent year, see the that through momentum demand, of very you up can comp last very Residential we're have strong. we business.

hill, of also mountain overall and but the strength So, in balance the in quarter, Residential but to seasonally record we start of frankly, We're over still latest a front Refrigeration year. quite the to expect quarter. is us, we for have it the our see

Nicole DeBlase

on. it pass I'll you. Thank

Operator

next Please go with Barclays. ahead. to And we'll Julian Mitchell go

Julian Mitchell

morning, the update. interim for and Todd, good thanks, Hi,

terms a year of for the bps earnings around were a kind as of, through the the question year, guided operating year. I quarter slightly, In in year to on they of suppose are think whole grow just XXX the first the I margins cadence and down

So to down you assume and second get plus when in the then operating of for to year again seasonality thinking first earnings sort seasonality, up year thinking do half half year EPS QX, revenues or sort leverage a just you're are of And they're margins, type get half second about kind we split? understand on XX/XX overall. trying operating we the of or of XX% the

Joseph Reitmeier

since today. Yes, pandemic and the right are tornado as know, we've year, then, going had to you Julian, a here into know, while been you it's and a back the normal we

think it. you I nailed So

year earnings think at to seasonality, closer is I what XX/XX. this look our expect we when be you going

Margins half. instance. in continued year things had the challenging the more start half up business our became second we XX% then than were strong last and to extremely You more an first for know, where we Residential in in grow

But be we half the year year. margins bit. second should ease for the up expect in would the to comps full a of So

Julian Mitchell

in And resi more very follow in you necessarily at, Thanks Lennox's is channels, broadly much, just up, you look some market, and perhaps the the on know, a inventory on depending macro assessment which marketplace, out point the market around of in a further kind not just kind because suggests are the volume I in broader anticipation inventory sort dynamics quite overall, own Joe. aggregate then about inventory, but but your in but out there, look data channels maybe a suppose, through their there QX, it flow wondered guess, the lean, of had there? I worried sell demand of you the lot cash that big of of statement the own of of selling your that, outflow good of pressures QX, may

Joseph Reitmeier

Residential for when our talk they much and that eventually more hoarding quite fear let demand product be to typically market able not inventory, inventory they're to dealers what at point. this little to And Yes, regardless. will meet able I frankly, the that levels. aren't as end we in And we think bit then, is folks be supplied are of hoarding distributors distributions than hearing inventory are business, the a that that sell adequately

lean. still remain inventories Our

enter As quality year we strong as high well. because pretty demand, addressing of goods we this business, our that you were as know, problem. inventory entered Residential We're of in well depleted finished so

inventory in, again, characterize on what inventory more with which channel, think for inventory, they two-step a, I need. level a in dealers and I of at forward you would take are looking depending know, additional as continue what on So, to once you distribution, distributors normal channel the look

Julian Mitchell

you, Joe. thank Great,

Joseph Reitmeier

are welcome. You

Operator

go And Jeff KeyBanc. of Please we'll Hammond to go the with line ahead.

Jeff Hammond

guys. good Hey, morning,

Todd Teske

Good morning, Jeff.

Joseph Reitmeier

morning. Good

Jeff Hammond

about to that issues I'm It labor you anything Commercial flowed back I So, and just kind like, the, or for beyond business? different the how long-term? ebbed just seems years don't on of and thinking sense have for to this now if differently make Stuttgart multiple just about diversify, guess, wondering the just doing on you're structurally business, business yes think

Joseph Reitmeier

Yes, great question, Jeff.

we you quite and location. be beneficial one manufacturing believe costs in going You manufacturing provide Commercial profitability could our support capacity physical as business frankly, with to to forward. manufacturing have a that mentioned, know, we strategy footprint, We strategies, and to flexibility, business multi-location manufacturing routinely evaluate our our that add where line, add in includes growth, specifically

definitely our So in the the of the manufacturing and current table. facility, given challenges our expected strategy Commercial Stuttgart land growth on commercial is markets,

just front. So you encourage tuned would I on stay that to

Jeff Hammond

low of market pause store of Okay, the resi single single great. guys you underperform, I always perform on issues you think taken us around has and new the year, in growth you Commercial line set kind on kind and been, you've just and of digits but the a market are maybe then, Commercial, the but in how outperformers, maybe of been digit I know give some And just growth mid in to trend those units color, level until you guys this or kind think relative metrics?

Joseph Reitmeier

again folks our like the Yes, share. Residential it on at I to when we're date, look data once business industry we the relatively talked to in looks have that and flat

read the I get the than able into to first much we're So, that price. other wouldn't fact quarter dynamics too

of of equipment our or of end equipment might like that was market commercial the revenue combat direct continuing Lennox in outpaced wise, market if the I business, as more in and levels but continue to Residential seeing again, frankly, up, the our continue with end ready for our But of were that made up low getting our up, as business strong you to see differences business. the was teens, any two-step channels. mentioned, the order you business in look in allied as the chain business, growth. We business effective high I when steady but market supplies see mixed out the that it We're inventory challenges mentioned once meaning those the I both previously, teens, side growth, of rates was as to about to to turn, remains dealer comments to supply a demand. each product at far see, along not quite challenges, indications both back in we're overall, our we we're And that

again, the about record remain our lies all the Residential start, excited in our and in Residential year of us continued what ahead once intact. quarter setting indicators first And the of for in So balance we're strength business.

Jeff Hammond

it, appreciate guys. I Okay,

Joseph Reitmeier

You bet.

Operator

with Cowen. go go we'll ahead. Please to Gautam And Khanna

Gautam Khanna

Hey, Good morning, thank you. guys.

Todd Teske

morning, Gautam. Good

Gautam Khanna

Joe, a morning, Good you guys. made comment.

made much. But Commercial about? I'd the you wondering could okay plan love guys But CEO to could join, be Alok whether thinking much, potential changes hasn't broadly, your It's comment maybe along? there whether it's I an more opinion overlap. to run on a there that. a we not to that you're strategy, expecting manufacturing talk under investors, there say anything on You in changes with the expect Because that, I new And over that gotten you any been isn’t was risks question it's leadership? then footprint. left mean, And respect transition that's the the else? just before time from a if was but that And Todd was company. second all should thing, of just where the it's well we've any portfolio, is

that? how So, about should we think just wondering

Todd Teske

So let I me appreciate sure. take, question. that

of second question back the Let first, and first. to me question, take second the go half we'll the your then

have essentially, So did did some to overlap. we not we plan --

out the me However, weeks timing several some that's ago. may lot all what had another Alok. a having have with now, the got that not ultimately with seen and situation the Todd, think then with worked of Interim drove the you and I he being opportunity way search, overlap really with of And announced

his though any made he give coming now with the number number, transition he is of clear that else, I'll is, in. phone his that questions can, happy take the even abundantly it to Todd phone or have Alok you I tell and in somewhere However, and is way help any Alok to is he I would fact

personal that So, hadn't timing way, ultimately out. and it commitments, ultimately that's the it planned but given shook we way

of well. at strong. here team think end is The working everything the is I the it's exceptionally day, out

culture question, know and of rolling any solid And part so make performing should we a you as as and that team through whole went high at that performing, first we things. we is process, the culture. you want to a a culture over has really time. sure, situation, executed and the sure one is The Alok the want search to to With thing into is of all. out, couple well point very high a really not is expect your regards of, lose One did I we changes, I think made here

that us And as so will with relates important of the culture. And they that. to candidates, was we Alok candidates interviewed how top to one to rose things the as clearly really interview fit it was the

scale. at Pentair We make to experience $X wanted is also know you certainly was billion experience there sure company, but a experience Alok's over that at provided Luxfer smaller at And running business scale.

the got and first And team those alleviate challenges on in so challenges. This May here the days operating do aware is, him we've we've is with X XXX asked gets things those challenges those to Commercial, and but to well along now, Obviously, take two some is what when he on learn. executing is company well. very

losing And so that might the we're opportunities that the what ultimately, we've we a be want to various taking out without sure fresh look built. make at of foundation there

in, a back do chapter figure ultimately review the be. for to come ultimately, to give come and to and going it be Board of business, the what his And up Lennox recommendations, Alok out so then the will is next observations, to

already. he his a done the to homework business recommendations. anything we're because and to better of come imminent, learn come forward has and lot course company, ultimately so and really Alok about has already the I'm there that's Is observations than joining the chapter not, even in give significant He's and back Alok and us his next in Of very shift? ultimately and And look excited a what is. excited. coming

Gautam Khanna

And you. made. on thank I that, appreciate up an to you earlier Joe, just comment follow

components the more quarters are bill, you've any in hikes the units bottlenecks Did seen improvement a in know you mix a as there I QX? been despite and that. mentioned in subsided sophisticated haven't the erosion any part higher better see SEER that electronic on actually in the bit. portfolio past the of all mix, the the in You i.e. Has mix price

Joseph Reitmeier

erosion. Residential X%, we're mix Yes, not the up was seeing but roughly modestly,

One of of because get, end. availability limited high electrical for SEER, the we're more Gautam, components XX commercial and the that's on limiting as more and instance production The of you difficult to sophisticated mentioned, things, obviously our products. are

up we're was it So you some at that's the constraints, mix of overall where year-over-year. look seeing when slightly but

Gautam Khanna

guys. Thanks

Joseph Reitmeier

bet. You

Operator

go ahead. of Please go the to Wojs we'll And Baird. with Tim line

Tim Wojs

hey everybody, good morning. Yes,

Todd Teske

Hi, Tim good morning.

Tim Wojs

price, pricing and both guess, the of I would Hey, by price I different you maybe year? contribution the the just you between on just as segments, think the for maybe incremental the segment kind entire pricing about guess how of contribution kind distribute,

Joseph Reitmeier

as think expect be that would time of And X. that Residential delays expect, experiencing the company segment. given acquiring would the would Refrigeration expect be Commercial, X. then some towards challenges to you will be I par average. be I on heavily higher of than yield Residential typical to to north the average be with price it's of the that. to expect more Company slightly to versus we're Yes, actions, below their expect average. cost closer there the I I tilted I and company slightly

Tim Wojs

what number? have you would carryover next for the Okay. impact that And then Do year be?

Joseph Reitmeier

honest excuse or the Tim, to trying I'm with first me, quarter, through second be get to now, quarter the you.

be that will that But out. year, haven't will be what increase early there figured just May. this The So to certainly carryover effective pricing. announced similar experienced we'd price really we some we

Tim Wojs

year? end what you the the you're are for make Lennox I sure as think XXXX, that of of some SEER line to just that the mean, just internal doing is the kind regulations in then it at ready of snaps about And when transition activities the with transition kind the of good. Okay,

Joseph Reitmeier

it's -- we're yes, affect Residential. And Yes, the XXXX regulatory change and those already XXXX quite and executed, to roll, have frankly. things that both been Commercial the ready

the of most on one year you're shift dynamics think make is we efficiency probably phased challenges the this to units in have supply think with And minimum product unique where chain, the that the and it's minimal depending being those out. new are are I with at. I investments going towards OEMs different

date with as on In well. on the it's north, on south, date. manufacturer date. on instance, manufacturing the Residential, For in And the then the installed the Commercial, it's it's

challenges. given but things will way have affect the we flexibility the So there's that some that supply do behave, OEMs I think some there, limiting chain

Tim Wojs

Okay, good. question. on Thanks year. for Well, rest good the of luck the

Operator

we'll Linzey go to Americas. with go Please next Mizuho Brett ahead. And

Brett Linzey

morning good all. Hi,

Todd Teske

morning. Good

Joseph Reitmeier

Good morning.

Brett Linzey

to new Hey, trying and configuration some similar the to and of there activity is quarter. the system terms to Commercial pieces in in the just the specifically, And XX% the procuring wanted think parts. would the business of just come underpinning I down back reconcile construction,

share what's curious just around? that there? projects color driving I'm shift pocket? you on Any seeing Are weakness construction So new any moving the

Todd Teske

Yes.

focus on to and planned I a it's we're the account national conscious that our activities and their serving. think customers also replacement verticals effort

the a itself it's So think and our as it is that's share as quite sure in significantly making and the situation preserving new to numbers lending concentrated efforts protecting where Commercial sticky. And of was. we've the being frankly, I business core construction we're that production most down the that

to conscious preserve on effort don't I know business. it our dynamic is of part Commercial a our a So if core the necessarily more than it's market

Brett Linzey

are Okay, pieces inputs, the the at margins understood. a what level incremental for Refrigeration? but you're appreciate moving full segment the And the year assuming basis, on Residential on and I cost

Todd Teske

business don't that down not go specific we going to so Yes, I'm give path. unit guidance,

Brett Linzey

lot. Thanks on. a it pass I’ll Okay,

Todd Teske

Brett. Thanks,

Operator

And next, ahead. Coe go Research. Nigel we Wolfe Please will go with to

Nigel Coe

Thanks, good morning.

the component of confident Commercial, that share? on can in you losses of to replacement shortages So feels well. emergency you as that regain are some you getting some it beyond the the once are share these that get and How and Residential share in constraints like

Todd Teske

once the right are I are replacement can that's the the in our the emergency the where pretty core national success the the hopefully, we has And sticky, at to to right place, supply again, most protect labor factory the and base. having the been that share provided strategy improvement account in through then we in these at think regain of price. factors product right customer able chain, once and share get with direct quickly. business we We challenges feel Yes, think of is our

in So and get more will we of we it. some be once that product of out navigated that that share we've the aggressively the have attack challenges factory. We'll factory

Nigel Coe

that great. running you've bit in been little really by already, buildup buildup, mean, was finished I I'm touched And progress, color but any this on in, inventory any sure goods? then in know the Okay, mainly Was lower sense, work design, XXXX. a in on that so through inventory we've I Q&A the components, that?

Todd Teske

in board, was value challenges the is than so and had category waiting higher the And that inventory the the effects One what that we've in inflationary we've in have or goods more by I mean in some the in semi-finished in of business. as that. final you specifically things our that but And components look been you process work impacted commercial that's volume, finish then but across business, of commercial can we that some have slightly really with also have it got driving our see at degrees. where varying we there's build that normal that Yes, to And well. is, when come for numbers, to raw a materials, number. we're two the

Nigel Coe

talked then inflation you the that that the Would right. bridge? productivity is your in be bucket just Right, labor guidance about, housekeeping, elsewhere? And in that

Todd Teske

the it's productivity. in No, Yes.

Nigel Coe

thank Thank you. Good, you.

Todd Teske

welcome. You’re

Operator

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

John Walsh

Hi, and good appreciate taking the you I questions. morning

Todd Teske

John. morning, Good

John Walsh

and to Commercial. can about, Thank think you. your of manufacturing the residential particularly component Maybe much automate Mexico the talked actually some Commercial about higher you a down facilities. and difference labor strategy But some actually between just can a done the build factories, your a how is you in requiring just you've we've versus I there question, Resi I'm unit? obviously at in little curious, bit talk automation first

Joseph Reitmeier

Yes.

at manufacturing the bit matter you configure-to-order less But lines automation It's those geographic the of homogeneous investments. impact a along for cost It's look really portfolio. it's manufactured auto a we the given footprint. our in half opportunities roughly look in the at Commercial, look high certain we've and examining Commercial when just be throughput. activities, more XX% improve you costs, number. the is typically in the opportunity labor there's that or of and conversion manufacture consistent Residential little might think versus fairly product Residential. of I and raising, component products when that of goods prioritizing of to with us entire to to across tried we've more to we'll do with investments for our that of to do continue done make And us so things selecting along And and nature quality

Todd Teske

company would Labor only capital that off the is the capital add is also good fixed. I versus not John, at fixed. necessarily Obviously, is thing is balancing very has been labor. And what

of of important that of that Again, side got and and assuming engineers inflation that become company some we've robotics side inflation -- manufacturing becomes the at balanced may one the And things, trade-off well. automation continues, the labor so to things, wage things that. in and robotics ramp in this great really as as inflation up obviously things to continue doesn't more automation not and like the that the area continues,

don't for and the so the team amount variable to right in versus become fixed that And always imbalanced. amount opportunities we right maintain is business of deploy the looking of capital the so

Joseph Reitmeier

to in manufacturing we'll opportunities line punch for strategy. expose there among things our opportunities, other are additional John, is continue the Yes, yes and automation

John Walsh

you as pumps, impact roll talk that thank Great. mix or Can lastly, the housekeeping those heat does your Residential? does the then then the maybe mix sales if -- here. when you? furnace your about impact And that just give price helped that in And and just through, a you

Joseph Reitmeier

be our prices affect And on it, because a could both higher-margin price then it products. furnaces of raised are there Yes, we've element. so some will

affect will mix it yes, favorably well. the as So

John Walsh

thank you. Great,

Joseph Reitmeier

You're welcome.

Operator

Steve to JPMorgan. with go we'll go Please ahead. Next, Tusa

Steve Tusa

guys. Hey How you? morning. Good are

Todd Teske

Good thank you. morning well Steve. Doing

Steve Tusa

cycle save Yes. I CEO. you, new debate for I'll spare guess the on the the Joe. I'll spirited

side? captive on the the difference on just Resi, and pricing the major on So independent price any between the realized

Joseph Reitmeier

almost both to those channels. the of same price No, level at we able capture are in

Steve Tusa

helpful. That's Okay.

construction, On guys actually market the actually on were do down in market what quarter? the new in XX. down. I the up the Commercial? market you quarter think there was don't think You was the Commercial Was the

Joseph Reitmeier

serve. think down, again, is I Once think, flat may for construction for the the I quarter. No. Steve, been this commercial Once we verticals have again, new that slightly to

to we conscious flat the to We other effort due areas were was down. that's to again once it So more in saw business. down of focus what slightly the significantly

Steve Tusa

Right. come? a you then had not the side, people actually taking actually come curious kind to that And to provide of I get like Like to people a is what more what to to to on and you're then kind having just benefits more kind just necessarily are Lennox work? get of What into maybe labor factories? I -- it get inflation to having like to is macro. the make perspective, a of there. of cost wanted sure to I'm from magnitude just taking people of kind increases

Joseph Reitmeier

unique or and it's business in Yes. with a of situation geography less. it's of we And do a the population where bit a X% a area because unemployment Arkansas, of declining

a tight it's a So begin with. labor situation where very market you've got to

volatile employee But been demographics five years' recently unemployed. And that that experience, less and more the than been imagine, facility folks having schedules have the working work market. in more have have them you and employees in we tolerance a hiring Our then demands of us manufacturing than of can wages historically think the were as resulted a overtime were our those for. at I of have had most

we So Arkansas when certain that demographics years' employed. as had We market. folks high a them facility. are And of lot for in and high early now work reads expectation jobs with open experience applying that are are, currently look those five of up as as more for previously raise pool that above to at that the have folks you went would facility, broader our wages above a candidates the XX% where of areas were we the in than

a it bit career-minded with more little in to So it's little there. and pool more the bit exactly facility probably hire can folks doing to do of a we was manufacturing that and what talent wanted broaden pull from folks experienced we our

we'll time. once taken. think steps -- price a came with cover incremental are over we the we've but the the those with So factory again price, that They along in time, productivity with initiatives increases with over

Todd Teske

rest the levels to in basically, at Arkansas. of organization. those broader of not kind the Joe, And specific we're question, talking The Steve, you're

typically our So the in others we're of market. the market what are seeing operations. the at are we is in seeing And what rest

so plant. do that had seeing we what to Arkansas. That was really near in And we're anywhere Arkansas not specific to down

Steve Tusa

bad and too last for On Steve. -- Todd. That's you, one Joe for it. Got one

I green still of and to there ask, kind kind and the going employer Does new he is CEO question early pretty strategic to a with refrigeration the portfolio. green to big kind took think his strategically Board overseeing really prior you're obviously, fair on given something think a of kind does the HVAC this strategy. material? on do light -- putting strategically I he or have mean, aside, at a to just of here here is a of swing be business a Lennox light major I core is do something have

Todd Teske

took be go So let totally needed over, I'm back the fun. but The needed lot done. to from everything me And Luxfer, not Steve. different where The and needed that we else's your That's swing. understand Lennox. go big I from Luxfer, a a happened else really always everything work. to here at that explaining familiar take of question, transformation and you very a is of restructuring -- to what at company when business are when premise with there was he was Alok It someone to

and observations done. time, shows assimilates swing the tell to immerses took So his himself big needs the I comes the what and to the got as would himself fact At you our that unvarnished recommendations. team, he his in that courage a do that be into obviously want the learns industry, really we he's and and he same and company

We're it consolidation we're a it Board, things. know talked, to conferences consolidation, with it but so, to those a I has to at and shareholder to been shareholder create of lot to has time, long it, discussion industry whatnot there's as and of first as company sorts industry regards foremost, and it as creates the anything of and value. open relates -- open And And as outside value. over we've

of has look put We going look to that broad on the or ultimately, him want And or things. a he so any to standpoint from that are at areas. overly take Alok can't we to not this constraints very these view in

we're to where and forward to what we going to move chance that's get he's ultimately a digest so and had after to And are that's forward. looking

Steve Tusa

Understood, you. thank

Operator

Ritchie the Please ahead. Next, go Sachs. go Goldman with Joe we of to line can

Joe Ritchie

good morning. Thanks,

Todd Teske

Hi, Joe.

Joseph Reitmeier

Hi Joe.

Joe Ritchie

Maybe was if volume comparable what volumes following Steve's volume up business? just Was on so the Lennox did this in Lennox and versus Allied, quarter? pricing spike Resi in is -- question, what down the

Joseph Reitmeier

it, characterize the Our price you flat in layer would when more is business. the it slightly in and business Lennox way digits volume was was the on the probably and I up Allied mid-single maybe two-step or

Joe Ritchie

to million right, pricing all where $XXX that trying the just price future does account and that coming increases are base the better. great. in May, on Maybe in you've a that touching should is put I'm know million Okay, $XXX in million, little that $XXX increases? these the all does once pricing described -- increases May, that contemplate that, so bit for understand you or

Joseph Reitmeier

more if No, work, continues need just announced we'll prices. the price go And increases, does do. with to it and and continue always that out price pace would do then we at incorporate what to inflation we'll more we run all

Joe Ritchie

the structural that of degradation was helpful. anything to that this like kind the And makes felt like some quarter, are the quarter, That some there would this Commercial shouldn't seems sense. and labor-oriented just was another Any Okay. repeat real then talked of you nature. the since costs you on going be of margin in really about, quantification of side saw just the forward? obviously, business. quick onetime understand We've from one it I'm pressure that of trying

Joseph Reitmeier

Yes.

think to supply I by production disruption I'll having with frequently. a but and characterize -- then you quantify results you It's if chain, to the situation -- I'm it, it. constraints in labor and compounded not reschedule results can going imagine, which where in you

But discussed of we as that. further these absence productivity engaged, lot bad that, the people more up tailwind again, drive by we be issues. of It to all we'll we address employ the nature inefficiencies be and side away on we as news with of once Just other is we initiatives. once get with continue And will follow go a that become and will of once initiatives we news then to like as it, just a creates going productive may automation do. expect more they aggressively again, that in of be virtue on But address that earlier. onetime the of that and more bad to productivity always

Todd Teske

that long-term And why Joe, the business. for we're target that's not changing

business supply run. a points other Joe chain And of the labor all that, that, as gets so fixed at and side the we lot gets of out, disruptions the this room has think to

Joe Ritchie

Okay, great. Thanks a lot.

Todd Teske

Joe. Thanks,

Operator

go can Research with Jeff go we next ahead. Please Sprague Partners. Vertical And to

Jeff Sprague

little bit. also, Thanks. morning a the you unique to things look And And minus out. But did some you Good you put environment. little Have of period of as there's on at in thought revenue cycle? no here plus growth just Joe, everyone. everybody's would a of we mentioned market, or potentially entering And haven't question? around what that, the volume at and we're context and portend guys I that? of kind I price. want you a are you about in growth cycle where on peak or could right, wonder, key played that touch sort say Does just look itself, we of and is

Joseph Reitmeier

seasonally last read in too Residential into wouldn't quarter, our our volume, year, again, where I again, in off quarter, we we much revenue were once Once in first Yes, up XX% comps XX% business. coming have. lightest the

those comp. you again, see but the some be homeowner it's the tough along that, parts homeowner on we overall of mix I things where indicator consumer, sales. look would the that as things. an Obviously, stress they're down, not And again, there's eroded and just and the think more pointed degree seeing the of once don't challenging we're being at the times, are health a So a to financial once supply but with challenged out, which we more

characterize even in I continue point business, like for pipeline. and I multiple and So would our to residential, the growth there's that's strong in on a finger as things keep that rates the residential our order when all in of order what said, to GDP continued pulse we orders the at the direction we we what backlog of see and look building continue

Jeff Sprague

ground of Lot there. it you. Thank covered. leave I'll Great,

Joseph Reitmeier

Jeff. Okay, thanks

Operator

the back go call to ahead I'll hand here. our and speakers

Todd Teske

you. Great, thank

So We're we actions business. the Residential another wrap taken Lennox challenges up, commercial on Refrigeration strong, for focused to and International, expect our and We've the remains demand the by improvement current aggressive year operational led in year and businesses. record progresses. expect as

excited. ahead Looking not on a I we continued is employees and today. overall, to for Alok's great future and foundation success. team, be more Under and a you joining look bright, strong to the forward with of management dedicated future us the Lennox could which grow, leadership, very Thank

Operator

conference and for Thanks Teleconference. AT&T Thank that gentlemen, and today. the you. conclude your for Ladies using for does participation

now may You disconnect.

Lennox International (LII) 25 Apr 222022 Q1 Earnings call transcript