Lennox International, Inc. · NYSE:LII
Lennox International — Q4 2022 Earnings Presentation
23 slides from Lennox International's earnings presentation, Jan 31, 2023
Slide 1: Fourth Quarter 2022 Earnings Conference Call
Fourth Quarter 2022 Earnings Conference Call January 31, 2023 INTEGRITY | RESPECT | EXCELLENCE LII LENNOX // Q4 2022 Earnings //
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS The statements in this presentation that are not historical statements, including statements regarding the 2023 full-year outlook and expected consolidated and segment financial results, as well as financial targets for future years, are forward-looking statements within t
Slide 3: Executive Summary
EXECUTIVE SUMMARY Double-Digit Revenue and Earnings Growth Strong Q4 Results • Record Revenue of $1.1B: up 13% with 9% price yield • Profit of $132M: up 30% with profit margin up 150 bps • Adjusted EPS of $2.63 up 12% Record Revenue, Record Profit, Record EPS Record Full Year • Record Revenue of $4.
Slide 4: Business Updates
BUSINESS UPDATES Dave Lennox • 2023 end markets outlook remains unchanged Signature • Direct dealer network reduces the impact of any channel destocking Collection Heat Pump • Current order and sales trend consistent with expectation Wins • 2023 SEER change complete; 2025 Low GWP transition on-track
Slide 5: 4Q22 LII Financial Results
4Q22 LII FINANCIAL RESULTS Revenue +13% Profit +30% $1,094 (US$ Millions) (US$ Millions) $965 Key Points $132 $102 • Record Revenue • Strong profit growth and 4Q21 4Q22 4Q21 4Q22 margin expansion Profit Margin +150 bps EPS +17% +12% • All segments contributed to profit growth (Margin %) 10.6% 12.1%
Slide 6: 4Q22 Residential Results
4Q22 RESIDENTIAL RESULTS Revenue +13% Profit +8% Profit Margin (90) bps $703 17.8% (US$ Millions) (US$ Millions) $119 16.9% (Margin %) $620 $110 4Q21 4Q22 4Q21 4Q22 4Q21 4Q22 Key Points • Growth Continues: Four Consecutive Quarters of YoY Revenue and Profit Growth • Gaining Share: Volume Growth with
Slide 7: 4Q22 Commercial Results
4Q22 COMMERCIAL RESULTS Revenue +19% Profit +79% Profit Margin +390 bps $241 $28 11.6% $201 (US$ Millions) (US$ Millions) (Margin %) 7.7% $16 4Q21 4Q22 4Q21 4Q22 4Q21 4Q22 Key Points • Profit Recovery Advancing: Price, Mix and Volume Growth all Favorable • Factory Output increasing but supply chain
Slide 8: 4Q22 Refrigeration Results
4Q22 REFRIGERATION RESULTS Revenue +5% Profit +42% Profit Margin +330 bps $143 $150 12.5% $19 (US$ Millions) (US$ Millions) (Margin %) 9.2% $13 4Q21 4Q22 4Q21 4Q22 4Q21 4Q22 Key Points • Price: Main driver of both Revenue and Profit margin expansion • Europe: Revenue Up 9% as Reported and Up 22% at
Slide 9: Free Cash Flow
FREE CASH FLOW $ USD Millions • 2022 Free Cash Flow of $203M FCF • Inventory replenishment post COVID lows in 2021 $250 to $350 • Inventory build ahead for 2023 SEER change • Raw material investment to buffer supply chain FCF • No change to 2023 free cash flow guide of $250-$350M that $203 includes
Slide 10: LII 2023 Full-Year Outlook
LII 2023 FULL-YEAR OUTLOOK 2023 Revenue & Earnings Key Assumptions Revenue Growth Flat to Up 4% • Residential end-market Unit Volume Down $14.25 − $15.25 MSD with revenue flat to up LSD GAAP and Adjusted EPS • Commercial End Markets Up HSD with Financial Outlook revenue up HSD/LDD Free Cash Flow $25
Slide 11: 2023 Success Factors
2023 SUCCESS FACTORS Factors Key Indicators • New home construction rate Industry Unit • US consumer confidence impact on repair vs. Shipments replacement • Commodity and component cost trends Price vs. Inflation • Industry pricing discipline • Increased output from Stuttgart factory Commercial Reco
Slide 12: LII: Growth Potential
LII: GROWTH POTENTIAL High Growth Innovative End Market Products with with Strong Direct-to-Dealer Replacement Network Demand Narrowly Robust Focused on Execution and HVACR with Disciplined ESG Value Capital Proposition Deployment We Believe LII is a Compelling Investment Opportunity INTEGRITY | RES
Slide 13: Appendices
APPENDICES Fourth Quarter 2022 Earnings Conference Call January 31, 2023 INTEGRITY | RESPECT | EXCELLENCE LII LENNOX // Q4 2022 Earnings //
Slide 14: Full Year 2022 LII Financial Results
Full Year 2022 LII FINANCIAL RESULTS Revenue +13% Profit +10% $4,718 $666 $4,194 $604 (US$ Millions) (US$ Millions) Key Points • Record Revenue and EPS 2021 2022 2021 2022 • 10% price yield Profit Margin (30) bps EPS +12% +12% • Commercial $13.88 $14.07 14.4% $12.39 $12.60 manufacturing 14.1% challe
Slide 15: Full Year 2022 Residential Segment Results
Full Year 2022 RESIDENTIAL SEGMENT RESULTS Revenue +15% Profit +10% Profit Margin (80) bps $3,198 $597 $2,776 $540 19.5% 18.7% (US$ Millions) (US$ Millions) (Margin %) 2021 2022 2021 2022 2021 2022 Key Points • Record Year: All Four Quarters were a Record Revenue and Profit. • Gaining Share: Volume
Slide 16: Full Year 2022 Commercial Segment Results
Full Year 2022 COMMERCIAL SEGMENT RESULTS Revenue +4% Profit (27%) Profit Margin (380) bps $111 12.8% $865 $901 (US$ Millions) (US$ Millions) $81 (Margin %) 9.0% 2021 2022 2021 2022 2021 2022 Key Points • First Half: Sales down (10%) and profit down (68%) • Second Half Recovery: Sales up 20% and pro
Slide 17: Full Year 2022 Refrigeration Segment Results
Full Year 2022 REFRIGERATION SEGMENT RESULTS Revenue +12% Profit +60% Profit Margin +380 bps $79 $619 12.7% $554 (US$ Millions) (US$ Millions) (Margin %) $49 8.9% 2021 2022 2021 2022 2021 2022 Key Points • Record: Record Revenue and Profit • Price/Mix: Yield of 14% • Europe: Revenue Up 2% as Reporte
Slide 18: Reconciliation of Q4 diluted EPS to adjusted EPS
Reconciliation of fourth quarter earnings per share – diluted, a GAAP measure, to adjusted earnings per share – diluted, a non-GAAP measure INTEGRITY | RESPECT | EXCELLENCE LII LENNOX // Q4 2022 Earnings // 18
Slide 19: Reconciliation of full year diluted EPS to adjusted EPS
Reconciliation of full year earnings per share – diluted, a GAAP measure, to adjusted earnings per share – diluted, a non-GAAP measure INTEGRITY | RESPECT | EXCELLENCE LII LENNOX // Q4 2022 Earnings // 19
Slide 20: Reconciliation of segment profit to operating income
Reconciliation of segment profit (loss), a non-GAAP measure, to operating income, a GAAP measure INTEGRITY | RESPECT | EXCELLENCE LII LENNOX // Q4 2022 Earnings // 20
Slide 21: Reconciliation of operating cash flow to free cash flow
Reconciliation of cash provided by operating activities, a GAAP measure, to free cash flow, a non- GAAP measure INTEGRITY | RESPECT | EXCELLENCE LII LENNOX // Q4 2022 Earnings // 21
Slide 22: Recast Segment Results 2022
RECAST SEGMENT RESULTS ($US in Millions) Q1 2022 Q2 2022 Q3 2022 Q4 2022 Full Year 2022 As As As As As As As As As As Reported Adjusted Reported Adjusted Reported Adjusted Reported Adjusted Reported Adjusted Residential segment net sales $ 682.2 $ 682.2 $ 977.5 $ 977.5 $ 835.3 $ 835.3 $ 703.4 $ 703.
Slide 23: Recast Segment Results 2021
RECAST SEGMENT RESULTS ($US in Millions) Q1 2021 Q2 2021 Q3 2021 Q4 2021 Full Year 2021 As As As As As As As As As As Reported Adjusted Reported Adjusted Reported Adjusted Reported Adjusted Reported Adjusted Residential segment net sales $ 606.3 $ 606.3 $ 838.0 $ 838.0 $ 711.0 $ 711.0 $ 620.3 $ 620.