Lennox International : 2024 May Conferences Investor Presentation

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