Q1 2025 Lennox International Inc Earnings Call Transcript
Key Points
- Lennox International Inc (LII) reported a 2% revenue growth in the first quarter, driven by favorable mix initiatives from new R-454B products.
- The company has successfully transitioned to new low GWP products, with approximately 50% of equipment sales in the quarter being the new R-454B product.
- Lennox International Inc (LII) has implemented two price increases to offset tariff impacts, which are expected to boost price gains to 7%.
- The company is actively pursuing tariff mitigation strategies, including production shifts and leveraging more U.S.-based components.
- Lennox International Inc (LII) maintains a strong balance sheet, with net debt to adjusted EBITDA at 0.8x, an improvement from 1.4x in the prior year quarter.
- Segment margin decreased by 140 basis points to 14.5%, primarily due to tariff-related costs and manufacturing inefficiencies.
- The Building Climate Solutions segment experienced a 6% decline in revenue, with sales volumes down 9% due to expected destocking and order delays.
- Operating cash outflow increased to $36 million compared to $23 million in the prior year, due to inventory investments.
- The company has revised its full-year volume assumptions downward, anticipating a decrease in sales volumes by 4% compared to previous guidance of a 2% increase.
- Lennox International Inc (LII) faces ongoing challenges from tariff impacts, with total cost inflation now expected to be 9%, up from previous guidance of 3%.
Welcome to the Lennox first quarter earnings conference call. (Operator Instructions) As a reminder, this call is being recorded. I would now like to turn the call over to Chelsey Pulcheon from Lennox Investor Relations. Chelsey, please go ahead.
Thank you, Margot. Good morning, everyone. Thank you for joining us as we share our 2025 first quarter results. Joining me today is CEO, Alok Maskara; and CFO, Michael Quenzer. Each will share their prepared remarks before we move to the Q&A session.
Turning to Slide 2, a reminder that during today's call, we will be making certain forward-looking statements which are subject to numerous risks and uncertainties as outlined on this page. We may also refer to certain non-GAAP financial measures that management considers relevant indicators of underlying business performance. Please refer to our SEC filings available on our Investor Relations website for additional details, including a reconciliation of GAAP to non-GAAP measures.
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