Great. Thanks, everyone for being here. It's my pleasure to have up next, Lennox International. We have Michael Quenzer, CFO, Prakash Bedapudi, Chief Technology Officer. So thanks very much, Michael and Prakash, both for being here today. Maybe we'll just start off with, you know, some of the nearer-term questions, Michael, and then we'll get into the technology side of things. You know, maybe help us understand kind of how you've seen—been a lot going on the last few months in terms of consumer confidence, the home data. The weather's been somewhat extreme as well, most recently in the last sort of month or so. So kind of how are you seeing everything play out in terms of sell out, I guess, and- Sure. the trends there? Yeah, I mean, obviously, we're early in the year at this point, but we enjoy weather extremes. We like to see it 0 degrees in New York, and hopefully followed by 100 degrees in Dallas. So those things help systems fail, which is the main driver of the replacement cycle. So what I characterize, though, January as okay, and okay is an improvement, though, from bad in the fourth quarter. So it's off to a okay start. If you kinda look at our quarter, though, most of what we rely on the first quarter is our March, and our March sell-through, and more importantly, the order rates into the two-step channel in March for April and May. But overall, a decent start. Weather definitely helped. You know, we feel good that inventory in the channel at this point is pretty much behind us. If you think about last year, the R-410A obsolescence created an environment that it had to be kind of removed by the end of the year, so we think inventory is low, and now it's about demand in, in 2026, and we think there is gonna be failure demand, and we think the repair activity within that failure will be kind of normal and improving a bit. Great. And on that point around sort of the inventories, you know, it has been hard times to get visibility, I think, for all the OEMs into where those stand in the overall market. I know Lennox has started to use that kind of warranty registration data more. So kind of how has that moved the last few months when you're kind of keeping track of that? Yeah, it's a new metric that we've developed, where you go back and look at the trailing three- and six-month shipments and see what percent of those have not been registered as a warranty. When it gets registered as a warranty, it's basically been installed, and at that point, we can know that it's not kind of inventory in the channel. And what it does when you go back and look in the second half of 2024, we definitely saw, you know, inventory in the channel in the one-step, which we didn't think kind of existed to the same degree, and you can kinda see that build-up in the one-step inventory. Now, when you move forward, you look at this metric, you're actually seeing, you know, warranty percentages, you know, very high compared to historical averages of the trailing shipments, which suggests inventory in the channel is low. In fact, you know, it might be lower than normal, and that and on the distribution side, there may be some customers kind of leaning on OEMs because of our good availability. You know, the flip side of that will be when the heat comes on, we're gonna be prepared through our inventory availability to service that demand, and we think it's coming back. But overall, we think at this point, inventory is really cleared out and just a position of growth now. When you think about the overall industry, you know, it feels like in the last 2-3 years, every year there's a sell-in versus sell-out imbalance, and that makes, I think, things very challenging for everyone really in the industry. Yep. How are you thinking about sell-in versus sell-out in residential this year? You know, whether in terms of the absolute unit millions number, and then the kind of year-over-year delta. Yeah, maybe I'll first talk about our guide. So within our guide, we've assumed that we're gonna be down about mid-single digits, full year in volumes. And if you break it down by channels, it'll be a little bit higher in the one-step just because we have some pressures in the residential new construction business. There's some pricing kind of pressures in some of that business, low-margin business that we're losing. So that will be down a little bit more than the two-step, but the two-step is just gonna have a lot more volatility. It's gonna be down from a comp perspective, pretty significant in the first half, and then from a comp perspective, kind of up in the second half. So we think those are how the two channels are gonna play out, both be down kind of mid-single digits. In the longer term, what we're doing is going back and looking at the shipments for the past 20 years, and you can apply statistical failure rates on those shipments, and you can run many simulations based off kind of repair activity. What generally that does support is a healthy repair environment for, you know, the next several years. Unless there's this massive change in the repair cycle, where people continue to add on many, many years for repairs, which we don't think will happen. We think we're in a position for growth in the next several years when you go back and statistically look at kind of shipments. The average life hour of these equipment continue to shorten, both because heat pumps are a bigger piece of the population, stressing the system, stressing the system with hotter summer days. So all of that generally is supporting what we think is a growth environment for the next several years. We need to fight through kind of this last leg of the destock comp issue, but thereafter, we should be kind of growing from an industry. Great, and I suppose one factor that's perhaps newish in the industry more recently as a headwind is just around customer affordability constraints. You know, how serious do you see those? And you mentioned earlier you think repair relative to replace is normal or stable this year. Yeah, and I'll, I'll put that in the broader context of that we saw kind of repair activity increase last year, and really, really kind of characterize that around three big drivers of why repair activity went up. The first is that we were going through a large regulatory change to the new R-454B product. There was a bit of adoption curve, some complexity around contractors understanding the product, and some shortage of 454B canisters. So that created some repair activity in 2025. We think that's behind us. That'll now turn into a tailwind. So that's kind of the first point. Second point is that existing home sales have been continue to be depressed. I mean, I think they go back to 1990s, low levels, and you have a lot of homeowners that are stuck in their home, hoping they can maybe squeak out a 2-year repair. So we see that activity coming. Hopefully, existing home sales seem to be maybe bottoming and coming up. That will help. And then the last one is about affordability. We do see some homeowners making what we would say is maybe not great economical decisions, doing a $4,000-$5,000 repair on an 18-year-old unit. We think that'll continue to neutralize as the cost of repairs are going to continue to go up. Both the cost of the legacy R-410A gas is going to increase. The technician shortage to do these complex repairs are going to go up. Overall, contractors make more money on system sales, so they will continue to push the system sale. And also just homeowners will start to recognize the benefits they get of a brand-new system, that as utility costs go up with, you know, AI and cost of electricity going higher, there's a bit of an ROI on these products, to get a new system. So we think all of those will continue to put pressure on the repair environment over the next year or two. As you said, there's a repair, you know, you could characterize as a very short-term fix. You know, what does your work and history suggest is the extension that repair activity, on average, can add to the lifespan of a unit? About five. I realize it's case by case, but- Yeah. I mean, if you replace a compressor in a 15-year-old or 17-year-old system, perhaps you get another year, year and a half. The reason the compressor failed in the first place is there's something else wrong in the system. There's a leak somewhere, a valve is not working properly, not returning lubricant back to the compressor. Those are the things. In many cases, or most cases, dealer comes out and replaces what failed. They're not going to go figure out exactly what the root cause. So the underlying root cause is still there. A new compressor will chug along for another year, 9 months, 18 months. It'll fail again. So it's not going to extend the life. It's not going to restore another 5, 6 years of life. So in theory, you might have, as you said, repair went up last year, stays at a high level, but that happens for a couple of years and then you'll just get the replacement. Yeah, so you might tack on a few more years for repair, but if you look at the average life without repair, these are failing faster, both because of heat pump adoption, stress in the system. So you have that natural- The longer run times. After COVID, we are seeing we've got a lot of IoT systems, million IoT-connected thermostats out there. We can see the run times. In general, after COVID, people are staying home longer, working from home three days, four days out of a week or something. When they're home, they're running the systems longer. Life of the unit is directly proportional to the runtime. The longer you run, shorter the run life. So that's another one accelerating the replacement. Mm-hmm. And one other element, I think, Michael, you mentioned that, Prakash, interested in, in your thoughts on this, around the heat pumps. You know, Lennox, years ago, was a bit behind there on technology. I think it's sort of more than caught up today. So maybe help us understand, Prakash, like, where does the Lennox... You know, how satisfied are you with the heat pump quality of, of what Lennox is putting out and the R&D that's happened there? And, you know, how do you see the sort of share of Lennox units that are heat pumps today versus the broader U.S. market? Great question. First of all, Lennox always had a great heat pump technology. We won the Cold Climate Heat Pump Challenge for both residential and commercial before anybody else in the industry. So the issue was not having the heat pump technology. The issue was about having all the applications, SKUs required to fit all the applications. For example, in Florida, the air handlers, indoor part of the heat pump, is installed in a very tightly constrained space, like a closet. So we didn't have an air handler offering that would fit in that, so that automatically ruled us out of that market, for example. So what the technology team at Lennox has done is come up with an updated product portfolio offering SKUs that fits every application. We just launched the most compact, shortest air handler available in the industry with the highest performance. So that would fit every application required. So that's how we're going to proliferate heat pump and gain the share. Another thing we're doing is, while we have the cold climate heat pump technology that works really, really well down to minus 20 degrees, that may not be necessary for Texas or Georgia or Florida. So we are optimizing that technology building blocks to regionally come up with a heat pump that makes the best combination of, in terms of efficiency and performance, for both cold operation and the heating operation. So slightly different recipe, if you will. So it's the SKU proliferation and regional optimization of the heat pump technology that's going to enable us to gain significant share in the heat pump market. And Prakash talked about the ducted, but there's also a ductless solution that we've done with the Samsung joint venture. So we have access to a full product portfolio, a really strong brand name with Samsung. We launched it last year. It was still kind of an R-410A year, so we didn't really see the full year. This will be the first year of us really gaining the benefit of that Samsung joint venture as well. O n that point, on the JVs, you know, Samsung is one on VRF, and then you've got the Ariston one for water heaters. Water heaters. Just remind us kind of the split of, say, technology in those JVs, and who does that investment, and then kind of who does the manufacturing, and how does that work with each of those two JVs? Yeah, the core products, mini split is developed by Samsung, but we work with them very closely in adaptation of that technology to the marketplace. Unified apps, for example. So a homeowner who has a ducted split system adds on for their garage or add-on sunroom, a ductless mini split. We've integrated cloud to cloud between their cloud and our cloud, so that one single app on their phone, smartphone, can control both systems. They can see the mini split, Lennox, powered by Samsung, and the Lennox, Lennox ducted split systems all operate on one app. Not only that, the dealer can see, installing dealer can see all the systems on their dealer service dashboard so that they can get prognostic, diagnostic, error code information. So it's easy for the dealer and easy for a homeowner from the experience perspective. That's what we're doing. Manufacturing is done by them, but distribution is owned by us. We distribute. That's part and parcel of our one invoice, one shipment, one, you know, warranty claims process. That's how we're enabling our dealers to win in the marketplace. Same thing with Ariston water heater. We'll integrate, go through the same distribution, same app. From a user experience perspective, they can set the temperatures, they can monitor their equipment. Michael, anything you'd add? I think overall, our strategy is to look at our contractors, things that they're currently buying elsewhere that we want to have them buy. So 75% of our contractors buy ductless, 100% buy parts and accessories, which we have a limited offering, but we're making improvements on, and then 50% buy water heaters. Those are really where a lot of our growth verticals are, in those pieces that they're buying products elsewhere. Great. And then maybe, you know, switching for a second towards the BCS or, you know, commercial unitary markets. I think volumes there have been under pressure in the industry. You know, K -12, we had another HVAC OEM saying that had been soft orders sort of late last year. Yep, yep. So how do you see those different verticals in BCS playing out? Yeah, overall, that industry's been challenged a bit. I think it's been down 15 consecutive months from an industry perspective. Have seen some weakness in the education side that we play in, have seen a little bit of weakness in certain retail sides. But I'd say one of the biggest areas of weakness has been actually in the emergency replacement, which is 40% of that industry. Well, the benefit to us is that we had to exit out of that piece of the industry as we had supply challenges. We're now back in that piece of the vertical, and we're actually seeing growth. So although the industry's declining, we're actually seeing, you know, growth within pieces of the vertical. And even more, our big national accounts have multiyear refreshes that we're working closely with them. They're all wanting to adopt better electrification, which products that Prakash is developing, as well as they really enjoy the stickiness of our service offering that we can install, we can maintain that equipment, and at the end, we can kinda reclaim and recycle. So there's a full life cycle offering that we do for big national accounts that are helping us win in that market, too. You know, that plant in Mexico for BCS, not that new anymore. It's at full production for some time. Kind of how are the economics on that- Sure plant, the output? Yeah, there are two main drivers of the economics there. First, to grow market share and emergency replacement. You can see within our results, we are driving that. The second was to get cost productivity. We are early in that journey. What we saw was within 2024 and 2025, as we launched that factory, we had some ramp-up headwinds. Those are kind of now behind us. Now, as we get into 2026, it's about looking at cost productivity versus 2023, when we started this journey. But it's also just about improving the customer experience. What we had is really long lead times with some of these big national accounts. We've shortened that. We've improved the quality as well. So there's a lot of other qualitative benefits, but overall, extremely impressed with the team. I mean, that is not an easy thing to stand up a factory like that, and I'd say we delivered it extremely well. You know, when we're thinking about pricing trends across the two segments, you know, again, volumes have been under pressure in both. You mentioned, Michael, that some of the very low tier maybe of resi, there's a bit more price competition. How do you see the overall discipline competitively in the two segments? Yeah, and I wouldn't say it's on the low tier specifically. It's more on the residential new construction channel where we've seen it, which has an aspect of low tier. But if you look at the replacement side, overall, the industry's generally been disciplined for the past several years. We've had cost inputs coming into our business. Others have as well, and we're gonna continue to increase our pricing to maintain our margins. I think others have generally been as well. You know, we, as an industry, have realized that, you know, pricing, you know, taking it away, does not win market share. We're all trying to be out here and be competitive on service level offering. We're gonna announce kind of a mid-single-digit type price increase this year, expect to stick, you know, some form of kinda half of that. We think that is reasonable in the environment that we're in with the cost inflation, and we'll continue to monitor. Right now, pricing's been resilient. You know, you mentioned the sort of cost increase, and I know there's been a lot of investor scrutiny of that 2.5% i nflation guidance that you gave a few weeks ago. Maybe help us understand some of the building blocks within that 2.5% figure and, you know, where costs are today. Is there any part of this year where you see the biggest squeeze or risk on price cost to margins? Yeah, I think there, there's been some questions around this, specifically because commodity costs are up double digits. So like, "Well, how can that be up and you're only 2.5%?" Well, 2.5% is on our total cost portfolio. So it's the cost of goods sold and our SG&A. So there's big pieces within that cost structure that have little to no increases. We have fixed contracts on things. Wages are, you know, limited on the increase. So the biggest drivers of, of the percentages have been on commodities, and what we've clarified is that if you look at our cost of goods sold, which is, you know, $3 billion or so, 20% of that is commodities. And within that 20%, half are steel, which we've locked in through kind of fixed forward arrangements and contractual arrangements. About a third of that is aluminum, and what we do is have a hedging strategy for kind of an 18-month period, so we've locked in a good portion of that cost for 2026. And the remaining is copper, and this is where procurement team have done a really great job moving away from copper. It would've been a significant headwind to this organization had we not done that. So overall, we feel good on the 2.5% guide. We'll, we'll keep watching it, but right now, it, it feels reasonable in the environment that we're at, we're at. Is there any period where you'd see a bigger sort of squeeze or risk to the gross margin through this year, or it's fairly level loaded? No, I, I think overall price costs are gonna be kind of disciplined. It's gonna balance itself out. I think the big drivers between the top and the bottom end of our guide are end markets and, you know, how the end markets behave and our position to win market share in some of these growth verticals on water heaters and ductless and some emergency replacement and warm climate heat pumps. Those are really gonna be the big drivers of our margins. I think price cost is gonna be a small piece of it, compared to the guide we have out there right now. Yeah, I know there's some excess inventory ending last year at Lennox. So maybe just kind of talk us through the thinking around that and, the sort of underabsorption, m aybe. So I think a lot of investors have pointed out to me, say, yesterday, that the, y ou know, it seems a pretty big drop-off sequentially in the earnings in the first quarter, and sort of trying to understand, is there really that much underabsorption headwind, given Q4, you weren't exactly running at full tilt to produce? Yeah, I think what we're trying to do, since we're both an OEM and a distributor, is we have to balance the production and demand. So we have two things we need to use our inventory for. And what we've seen historically, I've been with the company 20 years, Prakash has been here too, is that these rebounds can come back fast. And putting stress on the factory by significantly reducing it and then trying to bring it back up creates a lot of challenges, a lot of cost in itself. So what we've been trying to do is very disciplined, kind of reduce our inventory levels such that we get to the season selling inventory level we need to be at by April, and we're kind of already there in December. So what we're gonna do is reduce some production in the first quarter, keep our inventories flat, but that reduction of production in the first quarter will create an absorption headwind that we'll recognize in the period. And we've made it visible just because our first quarter, it's a shoulder season, it's a smaller quarter s o it's a bigger piece of that overall quarter. But we think that absorption noise is gonna be behind us in the second quarter. And then in the second half, actually, we'll start to see the opposite, where we were ramping down factories in the second half of this year. Now we're gonna start to ramp up, and you actually start to see maybe an absorption benefit in the second half. Got it. So you'll get a sort of a gross margin improvement, and then the cash flow improves as the inventory- Yeah, that will start to burn down. The excess inventory will burn down in the second half of this year. Correct. Yeah, another challenge to ramping down, taking inventory down and trying to ramp up in season is supply chain constraints. Compressors, control boards have certain lead time, and you can't really ramp up more than 10%-15% surge capacity, within the season, right? So if the market recovers quickly, hot summer, you'll be out of compressors and other key components too, even if you can add multiple shifts in your factory. So you'll become supply chain constrained. Yeah. So that's why it's really a good balancing act to have enough component inventory and enough finished goods inventory to respond quickly so that we don't lose sales. Yeah, it's a small cost to hold this inventory, and the obsolescence risk is basically none. Yeah. Got it. But that's really early in the year, the big driver of the earnings rolling sequentially is that absorption. Is that absorption as we navigate through that, correct? Yep. Got it. And you know, when we're looking at the margin profile in HCS, you said there's a lot of moving pieces. Price cost isn't the biggest one. What's the comfort that those segment margins for the year can be sort of stable? If anything, I think our demonstrated ability to drive margin execution has been proven. I think we have navigated the cycle well. I think we will continue to navigate it well. We have a lot of cost productivity initiatives that we haven't fully driven. You can see that in our guide, $75 million of cost productivity across kind of carryover of SG&A that we've already taken, new cost productivity and big distribution investments we're putting in a top of the network distribution facility in Dallas that's gonna drive a lot of freight and other efficiencies, and as well as just sourcing and other manufacturing efficiencies that procurement team have been driving. So those will help us navigate this. End markets get a little bit better, then we'll even see better performance on margins. Perfect. And, you know, I think one long-standing focus has been, since Alok came in, was around sort of can resi capture more of the distribution value and, and sort of bring that onto your own P&L? You know, where are we on that front? Yeah, I think overall it's two things. First, we had a network that's about 20 years old. We needed to make some significant investments, both in the physical footprint and the digital deployment of how we navigate through that network, and we're making those investments. Then after that, it's about having more products go through. We talked about Samsung ductless, we're talking about water heaters, we're talking about parts and accessories. Parts and accessories is a big opportunity for us, and historically, we've tried this in the past. What we've done differently this time is we've actually put significant effort and investment behind this. We've made an acquisition at SUPCO Duro Dyne, which gives us a platform and a culture to start to build on. These are specific organizations that know how to do parts and accessories. In the past, it was kind of a product line within our existing business. We've also taken parts and accessories that previously existed in the businesses, kind of brought that with SUPCO and Duro Dyne, have a central organization, a new culture, an investment around that, around a centralized warehouse and deployment. So we are making investments like we've never made before, and a lot of these are already in our P&L to drive that parts and accessories attachment. So it's about the cost efficiency we're gonna get by the optimization of the network, and it's also about the volume leverage that's having more product go through it. All of that will structurally increase our both revenue and our margins. Fantastic. I know you have an investor day coming up soon, but, you know, Prakash, maybe give us some insights into some of the biggest kind of technology developments that you're excited about today. Yeah, we're pretty excited about now that we're on the other end of the A2L transition, the low GWP transition, all our technology organization is working on, having a full portfolio of heat pump products, like I mentioned, and air handlers, our indoor component for every application. Driving the cold climate heat pump technology to the middle of the product line, because you need variable speed. Variable speed is a key component of driving heat pump performance. So we have some proprietary variable speed technology we've developed in-house that you are beginning to see at a lower cost point. So that affordability question came up, right? Heat pumps, cold climate heat pumps can be pretty pricey. Mm-hmm. We're working on bringing that technology building blocks in the middle of the product line. That's one. Controls is another area we're investing more to have a smart thermostat at every level, single stage entry-level equipment through very complex multi-stage or variable speed equipment control, all of them on a unified design language, unified app that you can download, you can... And dealers can carry one brand of one suite of thermostats for all applications. Mm. They can monitor them on their service dashboard, remotely diagnose, remotely troubleshoot, all that stuff. So it's pretty exciting. On the commercial BCS side, Michael talked about heat pump product. Yep. We just launched a brand- new heat pump product that works with existing electrical infrastructure on the national accounts. For example, a big box retailer, if they have to put a new heat pump that has more electric demand, cold climate heat pump, they'd have to spend $500,000 to upgrade the store electrical infrastructure. With our heat pump technology, the way we optimize it, it works with the existing electrical infrastructure, no additional switchgear, transformers, wiring. So that's pretty big relief for them. So we're able to work with them within the constraints. So now that we've done with one big national account customer, other national account customers are noticing that they're also doing field trials of that technology, that equipment on their roof. So pretty excited about a lot more options we can give them on that heat pump platform. We're pretty excited. Great. Full portfolio products. We look forward to seeing more of that in a couple of weeks. Absolutely. So with that, I'll pivot to audience response survey questions. The first one is really about, do you currently own shares in Lennox? Generally, no, not at the moment. No. The second question, though, is around kind of general bias or attitude to Lennox at the moment. So slightly positive. Thirdly is around earnings growth profile, Lennox versus the multi-industry average is the peer set here. So below peers slightly. Next question is around use of excess cash.