Financial Data and Key Metrics Changes - Revenue decreased by 11% in Q4 2025, primarily due to weak residential and commercial end markets, with full-year revenue down 3% [7][8] - Segment margin for Q4 was 17.7%, while full-year segment margin reached a record 20.4%, marking the first time margins exceeded 20% [5][7] - Adjusted earnings per share (EPS) for Q4 was $4.45, with full-year adjusted EPS at $23.16, a 2% increase from the previous year [7][8] Business Line Data and Key Metrics Changes - Home Comfort Solutions (HCS) revenue in Q4 was down 21%, with significant declines in residential new construction impacting performance [28][60] - Building Climate Solutions (BCS) achieved 8% revenue growth in Q4, driven by favorable mix and pricing actions despite lower organic sales volumes [16][60] Market Data and Key Metrics Changes - The North American HVAC industry faced significant challenges in 2025, including channel destocking and low dealer and consumer confidence [8][9] - The light commercial HVAC industry experienced a decline for 17 consecutive months by December 2025, but emergency replacement initiatives showed growth [8][60] Company Strategy and Development Direction - The company plans to continue strategic investments, including $250 million in capital expenditures for 2026, focusing on innovation, training centers, and digital technology [19][12] - The self-help transformation plan is entering its final phase, emphasizing portfolio diversification and market position strengthening through joint ventures and acquisitions [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for 2026, anticipating a return to revenue growth and continued EBIT margin expansion [22][25] - Key factors influencing future performance include consumer confidence, interest rates, and the completion of channel destocking [44][45] Other Important Information - The company adopted FIFO accounting, which positively impacted EPS by approximately $1 for 2025 [14][15] - Free cash flow for 2025 was $640 million, exceeding prior guidance, supported by strong collections and disciplined payments [18][19] Q&A Session Summary Question: HCS revenue trends in Q4 - Management noted that November and December were worse than October, with surprises mainly from residential new construction performance [28] Question: Inventory levels and normalization - Management indicated that inventory levels are higher than seasonally typical, with expectations for normalization by Q2 2026 [34][36] Question: EPS guidance for Q1 - Management expects Q1 to be down due to tough comps and ongoing destocking, with a more favorable outlook for the second half of the year [42][43] Question: Repair versus replace dynamics - Management believes the repair versus replace activity is stabilizing, with dealer confidence improving [91][93] Question: Future M&A activity - Management maintains an active pipeline for potential acquisitions, focusing on bolt-on opportunities that enhance their market position [96][97]