Lennox International Inc. Q1 FY2026 earnings call

• CEO Alok Miskara recognized team adaptability and customer trust, noted revenue growth, segment margin, and reaffirmed full-year adjusted EPS guidance. • CFO Michael Quenter discussed revenue growth, segment details including home comfort and building climate solutions, cash flow, and updated 2026 financial guidance. • Mentioned innovation in product introductions, adaptability to macro environment, and focus on cost mitigation and supply chain optimization

Revenue was $1.1 billion, up 6% year over year. Segment margin was 14.4% in the quarter, down 130 basis points. Operating cash flow was positive 16 million and adjusted earnings per share was $3.35. Home comfort solutions: revenue declined 10%, organic revenue declined 12%, organic sales volumes declined 21% but improved sequentially, new product introductions contributed. Building climate solutions: organic sales up 26%, sales volumes increased 17%, profit margins expanding 300 basis points

• Reaffirmed full-year adjusted earnings per share guidance range of $23.50 to $25.00. • Updated revenue expected to grow approximately 8% compared to prior guidance of 6% to 7%. • Segment revenue guidance: ACS expected to grow 4% vs previous 2%, BCS expected to grow approximately 16%. • Cost inflation expected to be up approximately 5% from up 2% driven by tariffs and input costs. • Pre-cash flow remains expected to be $750 million to $850 million

• Macro environment remains uncertain. • Tariff-related increases across commodities, components, and finished goods, fuel and transportation costs rising. • Litigation against Resi-HVAC manufacturers pending, with company disputing allegations and defending through legal channels

Q: Michael, about FIFO conversion and timing of cost increases vs price realization.

A: Most cost impact and price impact will fall in second half, price increase announced earlier this week will have some impact later in second quarter but predominantly in second half.

Q: Ryan Merkle on HDS revenue outlook for 2Q.

A: Hard to call quarters due to weather impact, no further clarifications compared to past.

Q: Julian Mitchell on overall operating margin guide.

A: Overall margin guide has slight decline, BCS margins expected to be up, HCS margins expected to improve as under absorption issue lessens.

Q: Chris Snyder on HCS revenue trajectory.

A: Comps get easier in second half, mix will still benefit in Q2, pricing will have more impact in second half.

Q: Jeff Sprague on inflation and competitive implications.

A: Input costs have hedging and fixed contracts, no competitive drawback, working on cost mitigation.

Q: Amit Mehrotra on Section 232 changes.

A: Scope is wide, teams working through uncertainties, every manufacturer dealing with metals impacted.

Q: Tommy Mull on one-step channel volumes and BCS emergency replacement.

A: Sequentially things have improved in one-step channel, BCS emergency replacement in early innings with momentum.

Q: Jeff Hammond on 232 impact and BCS enthusiasm.

A: 232 derivative tariffs impact broader group, BCS performance with easier comps early.

Q: Nicole DeBlaise on BCS market performance and under-absorption in 2Q.

A: Overall market remains challenged but Linux outperforms, under-absorption will have little headwind in 2Q by end of second quarter.

Q: Stephen Volkman on ERP, AI, and growth programs.

A: ERP work on integrating acquisitions, AI investments in pricing, demand planning, productivity.

Q: Nigel Koh on tariffs and growth programs.

A: No massive reshoring yet, committed to Samsung and Ariston joint ventures.

Q: Joe O'Day on pricing announcements and HCS seasonality.

A: Price increases working through, equipment pricing not big driver of consumer price elasticity, HCS margins expected to improve with volume recovery.

Q: Dean Duray on new product vitality and litigation.

A: Vitality index in 45-50% range excluding refrigerant changes, litigation pending with company defending position.

Q: Patrick Bauman on inventory and residential units.

A: Inventory built $60 million in Q1 vs $210 million last year, normalizing, residential units with progress in inventory drawdown