I N T E G R I T Y | | R E S P E C T | | E X C E L L E N C E |
INVESTOR DECK
MAY 2024
DRIVEN BY OUR CORE VALUES
INTEGRITY
Accountability
We deliver on our commitments.
Positive Engagement
We energize and motivate others.
Trust
We are honest, ethical and safe.
RESPECT
Customer Experience
We earn the loyalty of our customers.
Sustainability
We care for our community and planet.
Talent
We foster belonging
and create opportunities to grow.
EXCELLENCE
Innovation
We embrace original ideas and
creative solutions.
Quality
We strive for continuous improvements.
Results
We prioritize superior outcomes for
our stakeholders.
Integrity | Respect | Excellence
2
FY 2023 FINANCIAL SUMMARY
Core Revenue*
68%
32%
FY 2023 | ||||||
Core Revenue | * | Adjusted | Adjusted EPS* | Operating | ||
Segment Profit | Cash Flow | |||||
Margin * | ||||||
$4.7B | 17.9% | $17.96 | $736M | |||
($114 | ||||||
$2.75 | M) | |||||
+6% YoY | +300 bps YoY | +27% YoY | ||||
+$434M YoY | ||||||
Home Comfort Solutions
Building Climate Solutions
Integrity | Respect | Excellence * See appendix for reconciliation to GAAP performance | 3 |
CASH FLOW AND CAPITAL DEPLOYMENT
Operating Cash Flow
$736 | |||
(US$ Millions) | $600 | ||
$302 | $500 | ||
2022 | 2023 | 2024E |
Cash conversion continues to improve
- Inventory levels normalizing
- Temporary build in 2H 2024
- Accounts receivable & Accounts Payable
- Focused on 2024 efficiencies
Debt Profile
Net Debt to Adjusted EBITDA*
2.0x | ||
1.3x | 1.5x | |
1.0x | ||
2022 | 2023 | LT Target |
Sustain a healthy balance sheet
- Grow dividends with earnings
- Share repurchases to offset dilution
- Maintain investment grade rating
Investing for Growth
Return On Invested Capital1
44% | 44% | 46% |
2022 | 2023 | 1Q24 |
Industry leading ROIC
- New commercial factory will enable emergency replacement share gain
- A2L conversion investments on track
- M&A opportunities
Integrity | Respect | Excellence * See appendix for reconciliation to GAAP performance. Net debt is net of cash balances | 4 |
2026 LONG TERM TARGET UPDATE
Execution of Strategic Objectives Will Deliver…
$5.4B - $6.0B | 19% - 21% | ~90% of Net | |
ROS* | |||
Revenue | Income | ||
Home Comfort | Building Climate | Free Cash Flow | |
20% - 22% | 22% - 24% | ||
Previous Target | Previous Target | Previous Target | ||
$5.0B - $5.5B | ~90% of Net Income | |||
Total 18% - 20% | ||||
HCS 19-21% | | | BSC 19-21% |
Integrity | Respect | Excellence | *Estimated corporate cost of ~2% of revenue | 5 |
REFRIGERANT TRANSITION UPDATE
2024
2025
Transition Ready:
Design, Manufacturing,
And Contractor Training
•
All elements of transition on-schedule
•
Have begun to train and inform contractors
and distributors
Launch New Product*
(Expect Minimal Residential Demand)
•
Expect EPA clarity on repair components
•
New product* priced >10% above
R-410A products
•
Manufacturing transition cost headwinds
Demand
Grows
•
Expect 50% to 65% of end market / sell
through demand for new low GWP products
•
Adoption of low GWP products supports
favorable mix
Integrity | Respect | Excellence *New product will use R-454B refrigerant which is a Low Global Warming Potential (GWP) gas that is ~80% less harmful to the environment than existing R-410A refrigerant | 6 |
STRENGTHENING DISTRIBUTION NETWORK
QUALITY
CUSTOMER
EXPERIENCE
Organization, Talent, Expertise and Culture | ||
• | Regional P&L with aligned sales and distribution | Share & |
• | Invest in field sales, revenue ops, pricing excellence | |
Margin | ||
• | Renewed parts and supplies P&L focus | |
Distribution Network and Digital Processes | |||
• | Digital twin design to improve fill rate and costs | Growth | |
• | End to end demand and deployment planning | Capacity | |
• | Offshore analytical and admin support | ||
Building Customer Loyalty | |||
• | Net Promoter Score and customer segmentation | Net Promoter | |
• | Refresh and improve brand perception | ||
Score | |||
• | Customer charters to increase retention | ||
Enhancing Customer Experience
Integrity | Respect | Excellence | 7 |
GENERATIVE AI UTILIZATION
Best positioned HVACR company to harness the benefits of Gen AI
Intelligent HVAC Products
Direct to Dealer model provides more
insight than most of the industry
Technologically Advantaged
Distributor
~45% of Home Comfort Solutions revenue is through Lennox Pros
Unified Digital Data Platform
Single ERP and unified IT platform provide clean, usable data to fuel AI
- Prognostic and diagnostic learning to support dealers and homeowners
- Home comfort algorithm aided by smart sensors
- Supply and demand planning
- Optimized logistics & transportation
- Lennox Pros upsell recommendations
- Advanced Warehouse Management
- Net promoter score smart dashboard
- Single source of truth for all data
- Extensive and consistent historical data repository for most applications
- Experienced team with robust in-house machine learning capability
Integrity | Respect | Excellence
ATTRACTIVE INVESTMENT OPPORTUNITY
Execution Consistency
and Disciplined
Capital Deployment | Advanced Technology |
Resilient Margin | Solutions with |
business focused on | Direct-to-Dealer Network |
sustainable HVACR |
Talent & | ||
Growth End | Culture driven by | |
Core Values, Guiding | ||
Markets with Strong | ||
Behaviors and Pay- | ||
Replacement Demand | ||
for-performance | ||
Integrity | Respect | Excellence | 9 |
I N T E G R I T Y | | R E S P E C T | | E X C E L L E N C E |
APPENDIX
MAY 2024
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Disclaimer
Lennox International Inc. published this content on 10 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 May 2024 17:32:08 UTC.