Lennox International, Inc.

Please stand by, your program is about to begin. If you need assistance during the conference today, please press star zero. Welcome to the Linux third quarter 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, please press star and two. As a reminder, this call is being recorded. I would now like to turn the conference over to Chelsea Poulchen from Linux Investor Relations. Chelsea, please go ahead.

Thank you, Katie. Good morning, everyone. Thank you for joining us as we share our 2025 third quarter results. Joining me today is CEO Alok Miskara and CFO Michael Quenzer. Each 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 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, everyone. I am proud to report that Lenox maintained resilient margins and high customer service levels amidst a very challenging external environment. Our talented team worked tirelessly with our loyal customers and channel partners to deliver these results, and I'm very grateful for their hard work. Our results were also fueled by our recent investments, which will accelerate our growth and expand our margins as the industry turns a corner into a brighter 2026. Let us turn to slide three for an overview of our third quarter financials. Revenue this quarter declined 5% as growth initiatives and share gains were unable to fully offset the impact of soft residential and commercial end markets. Ongoing channel inventory rebalancing and weak dealer confidence following the regulatory transition created more complexity for the quarter. Our segment margin was 21.7%, a record for the third quarter. Operating cash flow was $301 million, which was lower than last year as a sharp industry decline has temporarily elevated our finished goods inventory levels. Adjusted earnings per share was a third quarter record of $6.98, a 4% year-over-year increase. HCS segment profit margin expanded by 30 basis points as the team executed a meaningful cost actions to offset industry headwinds. HCS revenues declined 12% as the residential industry faced a weak summer selling season and as both contractors and distributors rebalanced inventory post-regulatory transition. BCS segment results were impressive as profit margins expanded 330 basis points and revenue grew 10%, even though the end markets remained weak. The team was able to offset end market conditions with rigorous execution of growth initiatives, such as share gains in emergency replacement, business development in refrigeration, and full lifecycle value proposition in commercial services. Given current end market conditions, we are adjusting our full year outlook to reflect an anticipated sales decline of 1%. We now expect adjusted earnings per share in the range of $22.75.