Lennox International (LII) Goldman Sachs Industrials and Materials Conference summary

Strategic Focus and Transformation

• Emphasis on accountability, customer experience, innovation, and core values such as integrity, respect, and excellence.

• Significant margin improvement from 14% to 19% over two years, with aspirations for double-digit growth and revised long-term targets of 19%-21% ROS.

• Three-phase transformation plan underway, with phase one nearly complete and growth acceleration beginning.

• Investments in residential distribution profitability, commercial emergency replacement, new factories, and ongoing bolt-on acquisitions.

• Focus on sustainability, talent development, quality, and results as part of operational strategy.

Financial Performance and Outlook

• Achieved $5.1B in core revenue and $920M in operating cash flow for TTM Q3 2024, with 18.9% adjusted segment profit margin.

• Adjusted EPS reached $20.61, up 22% YoY; core revenue grew 9% YoY and margin improved by 160 bps.

• Free cash flow conversion targeted at 90%, with $2.5 billion expected over the next three years.

• Divested European operations in Q4 2023, focusing on North American markets.

• Adjusted segment profit for TTM 2024 was $964M, up from $805M in 2023.

Growth Initiatives and Operational Improvements

• Pursuing bolt-on acquisitions, expanding product range, and enhancing service offerings, with a pipeline of 30 potential deals.

• Investing in factory capacity, lead time reduction, and digital process improvements.

• Emphasizing regional autonomy, pricing talent, and network efficiency to drive profitability.

• Samsung joint venture aims to boost presence in mini splits and VRF, leveraging Samsung’s brand and technology.

• Heat pump business lags peers, with a five-year plan to close the gap through the Samsung JV and internal R&D.