Lennox International(LII) - 2021 Q4 - Earnings Call Transcript

Financial Performance Highlights - For 2021, revenue increased by 15% to a record $4.2 billion, with constant-currency revenue up 14% [6] - GAAP operating income rose by 23% to $590 million, and GAAP EPS from continuing operations increased by 34% to a record $12.39 [6] - Total segment profit for the full year rose by 19% to $604 million, with total segment margin expanding by 50 basis points to 14.4% [6][7] - In Q4, revenue was up 6% to a record $965 million, while GAAP operating income was $98 million compared to $139 million in the prior year quarter [9] Business Segment Performance - Residential revenue in Q4 was up 12% to a record $620 million, with segment profit down 5% and segment margin down 310 basis points to 17.8% [10][16] - Commercial revenue decreased by 11% in Q4, with segment profit down 64% and segment margin down 1170 basis points to 7.7% [11][19] - Refrigeration revenue in Q4 was up 6%, with segment profit rising by 29% and segment margin increasing by 170 basis points to 9.2% [13][20] Market Performance - North America revenue for refrigeration was up more than 20%, while Europe refrigeration revenue was down low-single digits [14] - The company expects revenue to resume year-over-year growth in the first quarter of 2022, with profitability anticipated to improve by mid-2022 [13][15] Company Strategy and Industry Competition - The company is reiterating guidance for revenue growth of 5% to 10% for 2022 and plans for $400 million in stock repurchases [14][15] - Demand in the HVAC and Refrigeration market remains high, with expectations to capitalize on growth opportunities as COVID-19 and global supply chains improve [15] Management Commentary on Operating Environment and Future Outlook - Management noted that the operating environment has been impacted by COVID-19 and supply chain disruptions, but they expect a return to normalcy [8][41] - The company anticipates strong consumer demand and a potential record year if weather conditions are favorable [39] Other Important Information - The effective tax rate for the full year was 17% on a GAAP basis, and corporate expenses were $37 million in Q4 [9][22] - Cash from operations was $516 million, with capital expenditures of $106 million for the year [23][24] Q&A Session Summary Question: Update on quarterly cadence and earnings for 2022 - Management expects a return to normal cadence similar to pre-COVID years [33] Question: Impact of commodity costs on 2022 - If commodity prices decrease, particularly steel, it will be beneficial for the company [34] Question: Volume growth in residential segment - The company is starting strong with a robust order backlog, indicating strong consumer demand [39] Question: Inventory levels and supply chain stabilization - Inventory levels remain low, particularly in commercial, but the company is focused on increasing them [49] Question: Margin headwinds in Q4 - The company faced headwinds from fewer days and COVID impacts, which are expected to lessen in Q1 [103] Question: Commercial market share performance - The company believes it lost market share in the commercial segment but remained flat to slightly up in residential [108]