Lennox International, Inc.

Please stand by, your program is about to begin. If you need any assistance during your conference today, please press star O. Welcome to the Lenox first quarter 2024 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 one on your telephone. To exit the queue, please press star two. As a reminder, this call is being recorded, and I would now like to turn the conference over to Chelsea Polshin from the Lenox Investor Relations Team. Chelsea, please go ahead.

Thank you, Savannah. Good morning, and thank you for joining us today. We are excited to share our 2024 first quarter results. Joining me is CEO Alok Mascara and CFO Michael Quinzer. Each will share their prepared remarks before we move into 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 GAAPs and non-GAAP measures. The earnings release, today's presentation, and the website 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 Mascara.

Thank you, Chelsea. Good morning. I want to begin by expressing my gratitude to our customers and employees whose loyalty to Lenox helped us deliver strong Q1 results marked by record profit margins. Specifically, I want to extend my appreciation to our dealers, distributors, and key account customers for trusting Lenox to deliver industry-leading HVACR products and solutions across North America. The success of our transformational effort to strengthen our distribution network, elevate customer experience, advance innovative platforms, execute pricing excellence, and drive productivity can be entirely credited to the unwavering support from our employees and customers. This successful quarter further demonstrates our ability to maintain our growth momentum, navigate complex end markets, and effectively prepare for the upcoming low GWP regulatory changes. Now, let's dive into the details of this quarter on slide three. where I would like to highlight four key messages. First, Lenox's core revenue grew 6%, and our adjusted segment margin expanded 157 basis points to 15.9%, resulting in our adjusted earnings per share increasing 23% to $3.47. Our operating cash usage was $23 million, a significant improvement from 79 million usage in the prior year. Second, Home Comfort Solutions delivered a slight revenue decline alongside moderate EBIT growth. With the destocking effect on volume counterbalanced by price and mix, we delivered 30 basis point margin expansion. And we are all glad to see the destocking phase nearing its end. Third, our Building Climate Solutions team delivered record Q1 margins supported by both revenue and profit growth. We remain on track for the opening of our new Salteo Mexico factory in early Q3, which will enable us to fully satisfy customer demand and our growth presence in emergency replacement market segment. Lastly, we are delighted to announce the updated fiscal guidance for this year, as the Q1 results give us greater confidence in our earnings per share range. Michael will provide a detailed review of the guidance later in the call. But for now, let's turn to slide four for more details on the upcoming low GWP refrigerant transition. We are fully prepared and on schedule for the upcoming refrigerant transition. Our product designs, manufacturing processes, and technology engineering have all been finalized. We are currently transitioning our raw material inventory to facilitate the product launches, and we plan to start shipping the new low GWP refrigerant product later this year in time to meet expected demand. We anticipate price increase of 10 plus percent for the new product line. During this low GWP transition, we will face manufacturing headwinds as we convert each production line in our factories. Our approach to reconfiguring our factories will effectively balance production flexibility with cost efficiency. Looking ahead, we foresee 2024 as predominantly an R410A refrigerant year. As we move into 2025, we expect the demand for the new low GWP product to reach approximately half to two-thirds of the end market. This shift in demand will benefit our product mix and also position us favorably to capture market share. Ultimately, we are well prepared and confident in our ability to navigate this transition successfully. Now, please turn to slide five for an overview of our initiative to become a better distributor of HVAC products. As you know, Lenox is a top-tier HVAC distributor in North America with substantial geographical coverage through over 250 outlets supported by more than 25 regional distribution centers. Nearly 45% of Lenox residential sales are now through our digital platform, LenoxPros.com. where our contractor partners also have access to a digital service dashboard for equipment prognosis, diagnosis, and monitoring. We have the opportunity to grow our market share by expanding geographical coverage and improve our share of wallet through greater focus on parts and accessories. We also have an opportunity to increase dealer loyalty with improved fill rate and an enhanced customer experience. The distribution network improvements and the three core changes highlighted on this page will accelerate our growth and increase our margin resiliency. First, we have established a decentralized and better aligned organization that is consistent with distribution best practices. As a result, local leaders who have better visibility into local market conditions will have increased autonomy for faster decision-making. Furthermore, we have established five regional P&Ls led by experienced leaders who are accountable for both regional sales and stores. In addition, we are building our capabilities in critical areas such as revenue operations, pricing excellence, and distribution management. This is a long-term journey and we are pleased with the early progress we have seen thus far. Second, to improve the quality of our customer service, we completed a physical distribution network analysis to ensure that we have sufficient growth capacity and optimal cost structure. We have streamlined and digitized our end-to-end demand and inventory deployment processes, and we are also implementing a modern warehouse management system throughout Linux. It will take us a few years to fully realize the benefit of these changes, but thus far, we are pleased with the recent trend in our fulfillment rate. Third, we have created customer charter for our businesses and have established net promoter score practices across the company. This allows us to collect feedback and set numerical goals around our customer interactions. We are delighted with the improvements we are seeing in our net promoter scores and know that this is a commitment that will continue to yield results over the long term. To summarize, we are becoming a technology-enabled distributor and we are investing in talent and resources to support this growth opportunity. While there are early signs of promising results, this is a multi-year endeavor that will accelerate growth and promote margin resiliency. Now, let me hand the call over to Michael, who will take us through the details of Q1 financial performance.