Lennox International, Inc.

Stand by, your program is about to begin. If you need assistance during your conference today, please press star zero. Welcome to the Linux fourth quarter and full year 2023 earnings conference call. All lines are currently in a listen-only mode, and there will be a question and answer session at the end of the presentation. you may enter the queue to ask a question by pressing star and one on your phone. To exit the queue, press star and two. As a reminder, this call is being recorded. I would now like to turn the conference over to Chelsea Poulshan from the Linux Investor Relations team. Chelsea, please go ahead.

Thank you, Shelby. Good morning, everyone. Thank you for joining us this morning as we share yet another quarter of outstanding performance. With me today is CEO, Alok Miskara, our new CFO, Michael Quenzer, and our outgoing CFO, Joe Reitmeier. Alok, Michael, and Joe will share their prepared remarks before we move to the Q&A session. Turning to slide two, a reminder that during today's call, we will be making certain forward-looking statements which are subject to numerous risks and uncertainties as outlined on this page. We may also refer to certain non-GAAP financial measures that management considers relevant indicators of underlying business performance. Please refer to our SEC filings available on our Investor Relations website for additional details, including a reconciliation of all GAAP to non-GAAP measures. The earnings release, today's presentation, and the webcast archive link for today's call are available on our Investor Relations website at investor.linux.com. Now please turn to slide three as I turn the call over to our CEO, Alok Miskara.

Thank you, Chelsea. Good morning and welcome. I'm proud to represent our 13,000 employees as we delivered another full year of record results. We are pleased with our 2023 growth, margin expansion, and more important, cash generation. Our strong results were noteworthy given the unprecedented destocking faced by residential HVAC manufacturers last year. I'm deeply grateful for our employees and our customers whose hard work, loyalty, and dedication drove the results that we will be discussing today. I would like to begin by highlighting four key messages on slide three. First, we delivered $3.63 in adjusted EPS for Q4, an increase of 41% year-over-year. Adjusted EPS for the full year was $17.96, a 27% increase year-over-year. Our 2023 full-year results were also notable for 6% core revenue growth, 300 basis point expansion in adjusted segment margins. In addition, our operating cash flow more than doubled compared to prior year. Second, we continue to invest wisely in manufacturing capacity, distribution optimization, technology transitions, and growth initiatives while maintaining our industry-leading ROIC of 44%. Third, while end-market uncertainties linger, Our transformation momentum sets a strong foundation and gives us confidence in our 2024 EPS guidance range of $18.50 to $20. Fourth, given the robust progress on the self-help transformation plan, we are pleased to increase our previously announced 2026 financial goals. Now, please turn to slide four for more details our 2023 self-help accomplishments. In 2023, Lenox experienced significant success during the first phase of our self-help transformation plan. Our strategic initiatives allowed us to effectively navigate these talking challenges, which demonstrated our resilience and exceptional execution. This phase laid a solid foundation for future growth and positioned us to capitalize on further growth opportunities. We accelerated growth by strengthening our distribution muscle to better serve our existing customers, attract new customers, and increase our share of wallet from HVAC dealers. We are investing in our sales and stores teams to create greater alignment, accountability, and autonomy for improving the customer experience. To ensure resiliency, we implemented pricing excellence initiatives to recover margins from previously depressed levels as many long-term key account contracts which were signed before the recent inflationary period came up for renewal. We also achieved higher factory output, enhanced productivity, and optimize product mix. Together, these measures contributed to the overall margin expansion and strengthened our margin resiliency. Finally, to ensure consistent execution, we implemented a balanced scorecard-based operating system, which we refer to as Lenox Unified Management System. This system was instrumental in driving accountability and ensuring alignment with our strategic goals to accelerate revenue growth and expand margins. We also simplified our portfolio with the sale of the European businesses and improved our total lifecycle value proposition with the recent AES acquisition. On the next slide, I will share more about how we fine-tuned our internal engine to ensure success of the transformation plan and accelerate growth throughout the journey. Slide five shows the five components that fueled Linux's success in 2023 and are building momentum that will continue to power Linux's bright future. At the heart of our transformation is our unwavering commitment to our vision and mission. These set the true north direction for everything we do, aligning our efforts towards a shared goal. Moving outward, the strategy to great will deliver accelerated growth, resilient margins, execution consistency, advanced technology portfolio, and talent and culture that help us win every day. Next is the commitment to our customer charters, emphasizing our dedication to always being a partner of choice by delivering exceptional customer experience and quality solutions. Another crucial element to our outstanding performance was the implementation of our Linux Unified Management Systems. We are utilizing Balanced Scorecard to drive accountability, integrating standard processes and best practices, and aligning operating cadence for efficiency. This represents our commitment to a unified approach that enables Lenox to shift into a higher gear and outperform competition. Lastly, our core values and guiding behaviors serve as a foundation of our high performance growth culture with a passion for improving the customer experience. Last year, we rolled out nine guiding behaviors that improve the team's focus on critical behaviors such as positive engagement and sustainability. These five components not only helped us build momentum on a self-help transformation this year, but also act as a springboard to continue our long-term journey of growth and expansion. Before we move into the detailed financial sections, allow me a few moments to express my gratitude to our outgoing CFO, Joe Reitmeier. I'm thankful for Joe's years of service to Lenox, and I'm especially grateful that stayed with us to train me, the new CEO, and to oversee a smooth transition to a new CFO, Michael Quenzer. Now, for the last time, on an earnings call, let me hand the call over to Joe.