Everyone, and thanks for attending Deutsche Bank's Industrials Conference. We are back in Chicago, excited to be here. Thanks to everyone in the room who is sitting in for Lennox Fireside Chat today. We have Alok Maskara, who is CEO, and Geoff. Geoff, please help me with your last name. I should have asked you before we started. Geoff Dethlefsen. Thank you. I would have butchered it. Geoff is VP and GM of Lennox Commercial HVAC. Alok, I am going to start with something kind of high level, and then we will dig into the nitty-gritty stuff. You have been CEO for four years now, which is really hard to believe. Time flies. What are you most proud of in your time as Lennox CEO, and where do you see the most opportunity for further improvement in your next four years? Sure. Great question. It is always a good time to reflect back when you come to an anniversary, and also when your stock price takes an unforeseen decline. I did that recently. Look at the things I am most proud of, and we will start with that. The first is our growth journey. I looked at it compared to four years ago. We have still grown. We have grown 13% over four years despite some divestitures in Europe, some acquisitions, and almost all the growth is driven by building commercials division for us. We have obviously faced a really tough residential market. To be able to deliver growth, and that growth is driven by we have gained share in five of our six business units. One place, like in residential, we have gained share at replacement and lost in new construction. Kind of a mixed bag. That is the one thing we are very proud of, is the growth and the momentum that is still continuing. Second is margin. I asked AI to do this for me, and then had a finance team confirm it. Q2 2022 versus Q2 2026, we are up about 500 basis points in margins. As we talk about margin improvement and our entitlement to get both manufacturer's margin and distribution margin, we are making solid progress. We met that we got investor day target for 2022. We already came up with new set of targets. Very proud of both the growth journey and the margin journey. What is most proud moment for me is the momentum that behind all the future improvements that is going to come through. The investments we have made, whether it's emergency replacement and commercial distribution improvements in residential, relooking at our product portfolio with greater emphasis on heat pumps, parts, the JVs we have done with Samsung and Ariston. We believe all of those momentum is going to carry us forward for the next four years. We are early innings in almost all of those initiatives to get some meaningful changes. It's a super exciting time. I think I'm more excited about the next four years because of the potential we have, and given where we are, it's on the trough of the market versus when I started four years ago. Yeah, that's a good point. Okay, got it. That was great. Great answer. We got to talk about 2Q. It was tough. What surprised you the most, and how much conviction do you have in the new guidance range that you guys have set now? Yeah. Let's start there. Listen, it was tough. We obviously felt terrible about missing our consensus and guidance, and lowering guidance is not something any company should take lightly. We did not. When you lower guidance, you only want to do it once. You never want to do it multiple times. Yeah. Yes, we put forward a fair guidance. We went with a bigger range than we normally do. At this point, we would have gone with a $0.50 range, but we kept a $1 range because there is still uncertainty in the market. The changes in oil price, the inflation, consumer sentiment, repair versus replace dynamics. There are just a bunch of uncertainties. We kept a dollar range to make sure that we do not fall out of the range. We have good conviction in the range. I think from that perspective, what we learned out of the whole Q2 thing was, A, is sometimes we are too transparent. I went back and looked at the feedback around share, and then we went back and what other companies said about their residential growth in Q2 last year. What happens is, when you are a sell-through business, you appear to be losing share when restocking is going on. You gain share when destocking is going on. Last year, almost all our larger competition did not give the equivalent for us to look like. Last year, Q2, if we had analyzed the numbers same way, it would have looked like we are gaining share. This year, it does look like we are losing share. In addition to the residential new home construction business that we walked away from. I think we could have done a better job explaining that. We should have seen that coming, and we did not. From a market perspective, as we said in Q2, the overall reason for where we are is the residential recovery in HVAC is delayed. We said it is going to be the second half when we announced full year guidance in January. Now we are saying it's going to be sometime in 2027. I think that's the fundamental. Everything else is kind of nitpicking and what we could have done. From the outside public perspective and analyst changes, any big recovery in residential beyond inventory movements and stocking, destocking is likely to be in 2027 now. Okay. Understood. There are some people[audio distortion]. Okay. Can we try to project a little bit more? Yeah. Maybe we can turn our bodies this way. Okay. Okay, so that was an important point, Alok, that you made around the replacement volumes versus peers. I think there is a lot of perception among investors that you guys have lost share. How do you get comfortable that it is just an inventory issue? Can you see data on sellout that compares more favorably to what peer shares are seeing? Yes, we do. Remember, AHRI data are well-published. AHRI data is sketchy, not so great. Yeah, we analyze market share by ZIP code to DADS, right? AI tools are getting even more competition. We can see people are compared to the AHRI data, we would have gained share last couple of years and we lost this year, but it's essentially the same. I'll give you a bigger answer. We went back and looked at share data for the past 12 years, because we can do that too, on the data. Our share at the end of Q2 2026 is about the same as our share four years ago when I started, going back to the four-year-ago analysis. This is despite the residential new construction business that we walked away from, which clearly show that we are gaining share in replacement, just not enough to fully offset the residential new home construction loss that we walked away because of lower pricing and margins. Yes. We look at share against competition by ZIP code, by region, by product category, and we can clearly see that trend, that our share is good. We've lost a bit in new construction, gained a bit in replacement, and net-net, we are doing okay. We have good conviction. Okay, very clear. I guess on the topic of that new construction share loss, which was, you guys decided to do that, right? You walked by yourselves. Is it just one contract? Is it a handful of contracts? Is this something that's going to remain a headwind to your volumes for several quarters, or was it just a one quarter thing? No, it's going to remain a headwind till probably one more quarter. Most of those bids come out in about Q3. There were two bids, both large new home builders. We walked away at a price which was reasonable given our focus on profitable growth. Our competition went lower than that, which, at least in the earnings, you could hear them talk about the negative impact on mix as their margins took a big dip on it. You could see that in both the manufacturing competition and the distribution competition. You could see that. It's not permanent. There are two more bids going on right now. These are large new home builders. Their only loyalty is to low price and low cost. Those two bids are in the market, and we have another decision to make. Honestly, we don't like chasing that business. We have a strong value proposition. We provide good value to our contractors. New home construction is a way to fill your factories. If we choose to do that, we would let you guys know. From our perspective, it was the right decision. I would rather work on factory efficiency and build our recurring revenue base through our most profitable, most loyal contractors. Makes sense. Are these one-year contracts that come up for renewal every year, or do they last a long time? Maximum two years. But again, there is no guarantee of these anything. They could both take you out at RFP anytime. But right now, there are two big RFPs going out. Okay. Understood. Last year, there were two big RFPs. Last year, we were the defending side. This year, we are on the offensive side. Got it. Maybe let's move on to inventory. How would you characterize channel inventory today? I know most of what you do is through your own distribution, but I guess if you're seeing anything out there from an inventory perspective with competition, and then in your own factories, how do you feel about inventory? It still looks a bit elevated to me. Is that something that you're planning to work on through the rest of the year? Yeah, it's slightly elevated, and that's because our Q2 sales were a little softer than what we thought. Our inventory reduction is going as per plan, maybe late, better than planned. As you saw, when we reduced guidance, we kept our cash flow guidance the same, which is why we are offsetting some of the lower earnings with higher cash from inventory liquidation. Our inventory position, we feel good about it. It fills with very well, which is almost more important than our inventory. From a channel inventory perspective, I think clearly, destocking is behind us. We've started restocking in Q2, which gives you an artificial, weird comparison. We think the channel inventory is a pretty healthy level. I won't say we are overstocked or understocked at this point. We shouldn't expect a bump from restocking to continue, nor should we expect another destocking. I just hope we stop talking about this by next year, so we just talk about sell-through and consumer and how we win share the good old-fashioned way. That would be nice. Any comments on how July shaped up or August as we're getting through the hottest part of the summer selling season? It feels like weather's gotten a lot hotter. Cooling degree days are up. Is that good for the business? It's always when you're in the middle of summer, it always seems it's too hot. In the middle of winter, it always seems it's too cold. All I tell you, we were two weeks into July when we put in our forecast for one of the consensus. We sort of took all that into account when we gave our guidance. No further update at this time. Okay. Understood. From our perspective, weather does make a difference. We should acknowledge that. We watch out for other things, mortgage rates, consumer confidence, interest rates, new home construction, existing home sales, and I can tell you, none of those are flashing green. While weather makes a difference, the repair versus is going to continue shaping the rest of the year. Okay. That is a nice segue. That was the next question on my list, is what you are seeing with respect to repair versus replacement. I guess repair does not defer replacement forever, right? It is kind of a band-aid. Does that mean that if we are seeing a lot of shift to repair today, and tell me if we still are, that two, three years from now, there should be a surge in replacement demand from all these repaired units? No, you are absolutely right. We have seen more repair versus replacement. In our view, it buys you about two years if you change a motor, if you fix a coil, you change a compressor, maybe three. But this is just deferred replacement, because these units are fundamentally at a stage where something else will break. There are three or four major components in a unit, and they all fail about the 10 to 15-year mark. From that perspective, to us, that is just deferred replacement. Yes, it will come back. That has happened before. At the end of the day, the fundamental of the residential industry has not changed. There is extraordinary focus in the short term, and I know that is the upside downside of being a public company and where we are with the different cycles. But the fundamentals of residential industry remains the same. Very attractive industry, 80% replacement. Replacement cycles are continuing to getting shorter. Energy efficiency does prompt our replacement in both commercial and some of the other applications. Yeah, we remain very bullish on the state of the long-term prospect for residential industry. Okay. [audio distortion] Do you have any assessments on like items which re-installation price by certain consumers from places which may be an efficient possible substitution for replacements or maybe for achievement where you economize maybe significant sense of price installation? We do, and we model price elasticity. Now, two things. First of all, a switch from ducted to ductless, like we know, is extremely rare. That does not happen, and some people might use it for their kids' dorms or retrofitting a house that did not have air conditioning. But the cost of doing a ducted to ductless is just extremely rare and not feasible. So put that aside. You could go to more of a side discharge type unit. You could go to more of a type unit. Those are trading down that we have seen. You will still see it in the repair versus replace band, if you think about from that perspective. What we have found is the following. Manufacturer price since COVID has gone up about 40%. The price to the consumer has gone up more than 100%. If you think of that dynamic, there is major price elasticity, more and more consumers are getting two to three quotes. After COVID, you got one quote, somebody showed up, and you were thrilled that somebody's coming to replace it. Now, people are getting three to four quotes, and there is price compression between the contractor and the homeowner. The homeowners are getting much smarter about it. They are shopping more, and they're kind of trying to figure out what's a private equity-owned contractor and what's kind of for the typical residential homeowner. We do see a lot more price contraction and more price give in that segment, and I think that will continue happening for the next few years, and we will see that dynamic happen. But where you see this repair versus replace or downgrade, unlikely to see substitution as a window unit, because those are just shotgun fixes or more fixes. Affordability has become a pretty well-telegraphed issue here. Does that change at all the way Lennox thinks about approaching price over a multi-year period versus obviously a lot of price has been taken because of inflation and refrigerant standard changes and all these things that have materialized since in the post-COVID era? We do. I think there's multiple things we are doing right now. First of all, we are making more units that are affordable. In terms of less government reserves, simple replacements. There's a lot more demand for those, and we are making those and making them very effectively. So that's one. Second, we are running a lot more consumer promotions. Instead of giving discounts to the contractor, we are running consumer promotions. That could be a $2,000 Costco rebate. Okay. Preferred partner in many cases, or just efficiency rebates back to the homeowner direct. We are trying to mitigate it that way. Third, we are, and we have launched things like side discharge units, which are more the box units, more affordable units. We obviously have a Samsung partnership to go to the mini split types. The side discharge units are another very affordable option, especially if you are working in California with zero discharge laws, necessary zero watt lines and things like that. Yes, we are continuously switching our portfolio to make sure we can provide consumers with an affordable option. Finally, we help with financing. We have our own financing partners. We will do financing promotions, 0% for 36 months, 0% for 48 months, and/or help our dealers work with the financing to do that. I think all of us have to be aware of where the economy is, where the consumer is, and help out. We see good traction with that. I think our contractors appreciate that. At the end of the day, we know a new unit is a better financial decision for the consumer if your current unit is more than 10 years old. This comes with warranty, efficiency. You do not have to worry about breaking down again. We just have to make sure that we get the message and put money where our mouth is by putting the warranty and financing behind it. Okay. Makes sense. We are all kind of waiting for recovery and demand to happen. What are you looking for, Alok? What do you think would be the biggest helpful driver to actually cause a recovery? Is it rates? Is it existing home sales? I think I will start with consumer confidence. If you go back to the University of Michigan consumer confidence, it goes through a lot of it seems like it is bouncing along the bottom. I would hope for a meaningful recovery there. That will help all building products company, not just us. You know, they are strong. It really all works. I think that is first of all. Yes, we love, obviously, more existing home sales, so that is a catalyst for people to look at their HVAC system or renovation. Of course, we like to see more new home sales. That is often cascaded into existing home sales as people upgrade. Interest rates, both mortgage rates and truly borrowing rates for people who are doing home equity loan and things. Those are things we are watching out for. I tell you, though, oil price or inflation going up doesn't help. We almost see a fairly direct correlation with consumer confidence and their willingness to change an HVAC system and how stressed they are. Sure. Okay, makes sense. Just want to talk about heat pumps a little bit. I think the last Investor Day, you guys targeted 30% of sales from heat pumps over the long term. How has the customer response to the new heat pump offering been so far? Maybe because demand isn't great, it is not the best time to ask this question, but any signs of share wins yet? Yeah. As you talked about, we are winning share in the replacement market. A lot of that is coming from heat pumps. Heat pumps, let me first touch on the mini splits, which are also heat pumps in a way, right? Some of the Samsung piece, we launched it at a terrible time, because we launched it right when the market was crashing, so a tough time to launch. But now it's picked up momentum and it's doing well. What also is helping us is a lot of new products that we have launched. For example, we do heat pumps indoor unit that worked in Florida because the units were too big. They were designed for Midwest. They won't fit in a cabinet in a condo in Florida. We launched that, but it was called R2-D2. Cute name for Star Wars for Samsung, right? It kind of fits in the closet. Those have suddenly started making a big difference as our contractors have embraced that and gone through all of that. We have also now a whole full series of heat pump with different SEER ranges, so we can offer the entire spectrum. Earlier, we only had the really low end and the really high end. We didn't have the units in between. Good uptake, good momentum. But you're right, when the market's down, everything feels terrible. It's hard to show the same underlying momentum when your headline numbers are down. Yep. Okay. Understood. Good to hear that you're seeing some kind of momentum, though. That's really good in this market. There's the other long-term growth drivers as well. Parts attachment, you touched on ductless a little bit, and water heaters. Can you just give us an update on how that's going so far? Our parts, I feel very excited. In hindsight, I would claim the Duro Dyne, Supco acquisition was just brilliant because we bought it right before the repair versus replace thing come around. In fact, the seller, private equity, keeps saying, "I don't know how you timed it so well." But it was not genius. We just wanted to go into parts, and we bought it at a good multiple at a good time. It's doing very well for us. As we went from more repairs, we need more parts. We are working through that. That's also helping us build our own internal momentum on how do you do more parts. At the end of the day, our parts attachment rate is right about 15%. It should be 30%. With the acquisition, we added a couple of points to that already. Next year, we'll be launching our official what we call parts distribution strategy. As you realize, finished goods distribution and parts distribution are very different games. Next year, right about March, April timeframe, we'll be launching a completely revamped parts distribution, which will have options for contractors, which will be got new options for our own store, direct ship overnight, with our goal is, you already buy equipment from us. We make it much, much easier for you to buy parts by giving you the right part at the right price at the right place. Next year, we'll have a big launch on that and truly pick up more momentum. But we remain very confident. Does that launch for next year give you the ability to get to 30% parts attachment, or do you have to do more inorganically or organically to get to that 30% attachment? I think we're done with inorganic on this one. We've got enough momentum. That'll get us to 30%. In the end, do we need more sourcing arrangements? Of course, we can do that, but I think we're in good shape with that. That gives us what we need. This is not a big CapEx. You won't even see it because of these facilities, things like that. I think we're good. Okay. It's more internally part of our overall, which is that we're going to be a better distributor. We have addressed the equipment side with the Dallas FDC. I know some of you saw in the Investor Day. This will be addressing it through more of a parts distribution center, just getting more specialized and better. In the end, we are competing with companies like Johnstone Supply. We're not competing with Trane and Carrier. We're competing with Johnstone Supply and Grainger and Ferguson and Parts Town. We got to build capabilities that are very distinct than an OEM manufacturer. Okay. Let me move on to[crosstalk]. Oh, you're talking about water heaters. Sorry. Oh, yeah. We need to hit on water heaters. Yeah. We had good positive times. That launch went better than expected. Okay. That's a rare thing to say, especially when the markets are down. That went very well. We are pleased with the momentum. We think this convergence is real. The convergence between plumbing and HVAC is putting them all together, so that's been very good. I also want to be clear, we are not going after A. O. Smith and trying to become number one. Our goal is to serve our channel better, but we have no desire or ability to become number one anytime soon. I get a lot of shit from my friends at A. O. Smith and other places, and I want to make that clear. We're not going after A. O. Smith. We just want to serve our channel better. Okay. On record. Just wanting to move on to profitability within HCS. You said many times, Alok, that you think your margin entitlement is you put together the OE margin and the distribution margin since you guys are effectively doing both. What are the key factors that can unlock this over time? Yeah, I know. A year ago, we had outlined the strategic factors remain the same. I mean, the number one for us comes down to better distribution efficiency. If you remember, 30%-40% of our freight was being wasted because we're moving things between our warehouses. I think we're addressing that early innings, but the Dallas FDC is helping us with that, right? Second is more dynamic pricing. We have done a lot of key account pricing in more brute force. Now we're really investing in dynamic pricing all throughout our network system. Won't be live till mid-next year. That's kind of we are working through. That's the second piece on unlocking that. Third is just more output from our stores. If you take parts, you take Samsung, you take Ariston, put that through our 250 stores, our stores start gaining more efficiency without having to add more square footage. Because right now majority of our stores are very inefficient. If you think about just distribution logistics, dynamic pricing, and getting more through our current stores, all those three lead us to the walk on getting back to manufacturers plus distribution. This is sticking with our long-term targets. In fact, we remain very confident in long-term targets. What you're seeing now is highly unprecedented changes. We get tariff changes on Friday, and we got to start paying on Monday. We get supply chain shocks about certain companies in China being barred from sending products to the U.S., and we get one-day notice to react to that. We see inflation on materials because of secondary impact of tariffs and other things that we hardly get any time to react to. Then of course, the absorption impact on our factories. We understand the pressures this year. We are fighting hard, but it is, in fact, might be much worse than COVID, in terms of the supply chain and the inflation impact. Except this time there's a way to pay for it and make it less bad. But we remain very confident in our long-term trajectory. We just have to fight through the current environment where everything's going up and down every day. I just wish there'd be one set of things published on tariff, one set of trade restrictions, one set of NAFTA or USMCA agreement, and just be done with it. We can run the business as we can. That's probably causing the biggest jumps and changes in our profitability right now. Understood. Is there anything specific on supply chain that you guys are seeing that's a challenge, or is it just like Whac-A-Mole, like things kind of showing up in different places on different days? It's a bit like Whac-A-Mole. The latest, which you've heard, is I think August 1st, the government designated 43 different Chinese companies as companies using forced labor. Those companies supply electronic components, and I think this is impacting everybody, whether it's Nidec motors are on hold right now. Oh, I see. Okay. Automotive, HVACM, and everybody. This is Whac-A-Mole. I'm sure by next week I'll be talking about something else, but right now that's the top of mind for probably half the auto manufacturers and all HVAC is you can't get motors suddenly. Or if you have bought motors, you can't use them because it's changed, and we get literally zero days. Is there a supplier in the U.S. that you can use that's qualified? Yeah. There's Regal, [crosstalk] Nidec from Broad-Ocean. It just, when you have zero days notice. Disruptive. It's highly disruptive and you got to airfreight things, then you got to bring it on. Okay. Understood. Back to the margin discussion. I think at the Analyst Day, you guys laid out total company long-term segment margin target of 22%-23%. When you kind of drill down to the contribution to get to that target between the two segments, what's the expectation for HCS within that framework? I think both will be about equal. But they both are really good businesses. BCS is a little ahead already. As you know, I mean, BCS' margins has improved substantially. This used to be a low single digit margin four years ago, Nicole. Now we are making a higher margin. HCS, if it wasn't for the 12, nine months of massive volume challenges and tariff challenges, would be in better shape as well. We're pleased with the underlying rate. I think both will be about equal when we get there. We remain very committed and confident in that. Got it. Maybe just a nearer term question on HCS. I think you guys got a one-time tariff refund benefit of like $30 million in the second quarter. Do you expect to receive more refunds in the second half? Do you have more requests to the government for refunds, or is it done? Pretty much. One-time thing? Okay. We want to clean it up once, you know? I mean, in reality, it's one time, but from a customer perspective, the way we explained it is the new tariffs went into effect beginning of Q2. We delayed our pricing till almost the end of Q2. That's because we were getting this refund. Customers, they all call us and say, "Hey, are you going to pass the refund off to us?" Like, "Remember the discussion we had? We could have done price increases earlier in Q2, and then you would have got the refund and paid me here. Right. Which is we avoided the transaction. So in a way, it's one time, in a way, just continued tariff impact that everybody's facing. Okay. Understood. Just another shorter term question. You guys said on the earnings call that you expect HCS margins to be down again in the second half, year-on-year. With volumes starting to improve, particularly in 4Q when the comps are really easy, why is that the case? What are the biggest drivers of year-on-year margin pressure in the second half? You know, absorption has become a headwind in Q3 because as volumes, we reduce the volume forecast, we reduce our production as well, so that automatically impacts Q3 numbers for us. That is the largest driver of that, right? Q4 is just not a big quarter for us, so from overall perspective of Q4, and we don't produce much in Q4 either. As the factories are going through the transition and holidays. Their largest single impact is absorption running into Q3, so. Okay. Got it. Is it possible that 2027 is a normal year for, and all we're talking about is actual demand, supply and demand, and that's it? I sincerely hope so. In my four years in the HVAC industry, we haven't had a normal year, but I'm also on the record saying in 2025 that 2026 might be a normal year. In 2025, we faced the Liberation Day shock, I was calling. We dealt with all of that. Then we knew there will be some destocking. Then we have now the war challenge and the consumer confidence. But yes, I would join you in celebrating 2027 as a normal year. I won't count on it yet, but I really hope that's going to be the case. We like winning with new products. We like winning with technology. We like winning by serving our customers better, and I hope we get to do that versus chasing some supply chain switches every day just to minimize tariffs from U.S. to Canada. Yeah. I mean, that itself was a big change in our supply chain that we had to move through. Okay. Let's all hope. I'm going to move on to questions on BCS, but wanted to give everyone a chance in case there's anything else to tie up on HCS. Okay. All right. Moving on to the BCS segment. Year to date volume growth here has been really impressive, up double digits in both 1Q and 2Q. I guess, how much of this would you attribute to the overall light commercial market being stronger than expected, and how much would you attribute to share gain, particularly in emergency replacement? Geoff, do you want to? Yeah. It's a mix, but mostly share gain. If you look at our BCS business, there's three business units within there, refrigeration services, and then the light commercial HVAC, which is the business that I run, and that's the business where we get the AHRI data. AHRI data has been up low single digits year to date. And we're up in the teens, as you just noted. We're taking a lot of share. If you look at where we're taking it, our emergency replacement has really been growing strong, and we've seen outsized gains in our national accounts, our chains business as well. So it's a mix, but mostly share gain. Okay. That is great. I guess, you guys have been on this quest to regain share of emergency replacement for some time now. It is nice to see that is paying dividends. Where do you think we are in that share gain quest, maybe in baseball terms? What inning are we in? Yeah. Probably the third inning, I would say. We have got a lot of room to run there. As I think you guys know, we have made a lot of investments in this space. Massive new factory, hired a lot of salespeople. We have got 50% more distribution centers with our commercial product in them in the U.S. and Canada, digital investments. We have made a lot of investments. Now it is time over the next two, three years to get that return on those investments. We said at our Analyst Day, another $125 million of sales over the next two, three years. We see that upside there. We have also seen a lot of growth pathways. We had to cut off a lot of customers, post-COVID, when we did not have capacity. Now we do have capacity to serve them. We have got a distribution business allied within HCS that we can go to, and then we are out winning new business as well, especially with our residential dealers. A lot of them do 10%, 20% commercial business. They are very loyal to Lennox. Third inning, a lot of room to run. Right. That is good to hear. You mentioned national accounts as well as a reason for strength. Maybe you could double-click on that a little bit and talk about what you are seeing with national accounts. Yeah, it's a great business for us. I really believe we're differentiated with national accounts with our direct one-step model. But if you look at what we did with our investment in factory down in Mexico, that had the effect of freeing up capacity in our Arkansas factory to better serve national accounts as well. We see a lot of room to run there. We're able to go on offense right now because we have capacity there, and I think we've got a great model to do that, and we've seen some nice new wins this year with national accounts that we're really excited about. We see a lot of room there. Great. Maybe a shorter term question here as well. The full year guidance implies a pretty big deceleration to mid-single digit volume growth in the second half. Why? I mean, this just seems to me as the most obvious area of the model where there's room for upside versus the mix items. Yeah. I'd attribute. Very interesting, Jan. Focus on him. I'd attribute a lot of that to comps. If you remember the first half of 2025, we were going through the refrigerant change in commercial. We're going to be lapping a little bit tougher comp there. Frankly, the industry's still a little bit choppy. If you look at the industry data, May was down, January was down. Four of the six months to start the year were up, but two were down. I would say we're still maybe not out of the woods completely on the industry growth. We took a balanced approach when we looked at our second half, kind of weighing some of the macro choppiness in addition to some of the outsized growth pathways that we see as well. It's a balanced view. Okay. Understood. One area that we've had questions on so many times is I think investors have been surprised at how resilient the overall light commercial market has been. If you were to drill down to the different verticals that you sell to, do you have the visibility into what's actually driving some of that strength? Yeah. I can talk about that a little bit. I'll highlight a couple within our national accounts business. Restaurants and retail. We're fortunate to have some great national accounts that are growing at a faster rate than the market. I would also say that new construction is a relatively low percentage of our national account business. If you look at the pent-up demand, Alok was talking about residential earlier, about units last 10- 15 years. There were a lot of commercial units installed 10- 15 years ago, and those are coming up for replacement. Also over the past 10- 15 years, units have gotten a lot more efficient and operating costs of running those are quite a bit improved, so there's logic to replace those as well. I would highlight retail, restaurants plus all this pent-up demand give us good confidence that we can grow. Got it. I just thought of a question. Sorry to put you on the spot. This wasn't on my list that I sent you guys, but I guess if you were to look at your BCS sales in terms of planned versus emergency replacement, what does that split look like today versus essentially very little emergency replacement a few years ago? Yeah, I would say it still skews. I don't want to give an exact percentage, but it still skews heavy on the planned replacement as well as the new construction. We see growth, a lot of growth still remaining with emergency replacement, some of our other areas. Okay. Got it. A question that we often get as well is, I don't know if this might be more of an Alok question than a BCS specific question, but do you have interest in becoming a supplier to data center customers over time? Is there a way you can possibly do that through product development with the technologies that you have in-house, or would that require some kind of an acquisition from a technology perspective? Start with the acquisition because we have looked at some of those acquisitions, and we think the multiples are very frothy right now in that space. We have stayed away from that. Yes, we have the core technology, and in the end, we do refrigeration, we do HVAC, all of that. We have typically not done data center, but we have put in internal capital. We have developed new products. We don't really have much to talk about right now in terms of sales forecasts and numbers. But no, we have interest, and we have the technology, and we are working through. What we will do is not go be the 60 manufacturer of CDUs that take Open Compute specs and puts up a factory. That's not our goal. You will not see us do that. What you would see us is invest in next generation technology, which is likely to be non-water-based, purely driven by direct-to-chip, purely driven by two-phase flow, driven by CO2 type technologies. I think we're going to invest in the future, not chase the current demand capacity with Open Compute specs. But it's not something that I would call it as a good option value versus a core part of our future growth. Okay. Got it. One on BCS profitability. Alok, you mentioned that both segments should contribute to the long-term segment margin goals. But I guess, we've seen quite a bit of BCS margin improvement already. You mentioned that. It's been really dramatic. What are the next levers of margin expansion within the business? Is it about just getting leverage on volume growth? Do you see more room to improve operational efficiency? I'll start by saying, listen, in HCS, you don't see the margin improvement because of the volume constraint. Otherwise, you see it there as well. That is also growth, just not as compared to BCS in overall number. In BCS, the two big margin improvement opportunities remain as, remember, our new factory is still highly underutilized. We built it right when the market started going down. I think that perspective, there's still a lot more capacity we can add without adding much fixed cost. I think there's a whole series of activities that go in there. Remember, BCS consists of three businesses. So that's one, LCH with Geoff Browns. Second for us is services business. Our services business, which is better than most services business, is still running on antique point of technology. We don't have the appropriate AI driven route optimization or dispatch systems. We are putting all new technology in that this year. So you're going to start seeing productivity impact of that starting next year. I think that's going to become It is already just slightly below the BCS average. I think it will start going above the BCS average. The BCS business remains our refrigeration business, which has been gaining share. It went through significant inefficiencies this year because of the whole regulatory change. Then the government pulled it back, and then there's been no enforcement. When that settles down, there's a lot of productivity opportunity there as well. Manufacturing and service are the two areas for productivity and margin opportunities. Okay. Understood. I'm going to move on from BCS, unless anyone has any tie-ups. Okay. How's NSI going? I guess, if you were to look at the baseline level of growth that the business is seeing, has it been better than you guys had expected? NSI, which is basically made up of two brands, Duro Dyne and Supco, it's going better than what we call a bold pro forma. We always have pro forma, and we update it every quarter. Both sales and margins are going better than what we had put in a deal pro forma. When we do the acquisition, I always talk about 65% of them destroy value, and our goal is to be the 35%. Within the 35%, half of them do much, much better. We are in that percent. I think it's doing very well. What it gives us is heft in parts and supplies. We wouldn't have been able to put the new distribution capabilities that we're going to launch next year if it wasn't for these two. They had 14 locations. I think one. If there's some other productivity opportunities there, we announce a few closure. We are working through all of the tasks. I think that's going to turn out to be one of our dream acquisitions. Great to hear. I guess you've been more acquisitive than past CEOs that we've known at Lennox. You kind of mentioned that you're done with acquisitions on the parts side, probably feel pretty good about where you're at with that. How's the acquisition pipeline now? If we're kind of coming to the end of the acquisition journey on the parts side, what's the next thing of interest to you? Sure. Yeah, on the parts side, the way I answered the question, just to come back to that, I said we don't need more acquisitions to build these capabilities. At the same time, it is highly fragmented, and if we can find things at nine multiple that gives us synergies and do that. We're not ruling that out. I'm saying I don't need it to get more scale. But it could still have opportunities for us to create value for shareholders. So that part would clarify. But yeah, we are building our infrastructure based on what we have, not based on what I need to buy. I think that part too. But that remains a fragmented space with opportunities. The other places we continue to look for is service. So going back to commercial and BCS, we are highly underpenetrated in service. So if there are opportunities in service in BCS, we continue focusing on that. There are also adjacent categories. Going back to, we talked about using energy and home energy management and what we can do in the home energy management space. That gives us a leg up and accelerates the true convergence between the industries that is going on right now. I think we're looking at that as well. In the end, we also very open to doing acquisition like we did for the recent Heat Controller. It's two of the last remaining brands that are not already owned by one of the big things. We got Comfort-Aire brand that goes to distribution, small distributor. Anytime we can find those niche, narrow opportunities, we do not use bankers, we proactively approach them, we do the deal ourselves, and those opportunities are good. Our pipeline is pretty robust. My board sometimes gets overwhelmed with the number of opportunities we show them, but we remind them that we only close four out of the 20 opportunities we pursue in paper. Whatever we close has to make a lot of sense for the shareholder and has to do better than share buyback. In today's world, share buyback is also very good use of our capital. Acquisition must pass the bar of better than share buyback. Okay. I was going to ask if the pendulum is swinging towards buyback after 2Q. It seems like maybe it is. It will, yeah, Jan. Strongly believe in a consistent daily share buyback, but then we layer that up with opportunistic buyback when the share price drips significantly below the intrinsic value. We got lots of financial calculations, and we put that together. Yes. Okay. Well, I think we're at time, Alok. This was a great discussion. I really appreciate it. Geoff, thank you for coming, too, and thanks to everyone in the room. Thanks, guys. Appreciate it.