Charles Brown

Charles Brown asked about the organic growth outlook for the HVAC business in calendar 2026, assuming a weak housing market, and the company's confidence in returning to its target mid- to high-single-digit growth. He also inquired about the latest pricing strategy in Contractor Solutions, considering tariffs and input costs, and the approach to future price increases. Finally, he asked for an update on capital allocation priorities, willingness for further near-term acquisitions, and the current M&A pipeline.

Answer

James Perry and Joseph Armes reiterated the long-term expectation of mid- to high-single-digit organic growth for Contractor Solutions, despite recent challenges, citing encouraging order volumes and customer inventory levels. They explained that pricing actions, including a mid-year increase, have largely covered tariff impacts, and the company remains proactive in adjusting prices for rising commodity costs. On capital allocation, James Perry noted the current 2.3x net debt-to-EBITDA ratio is comfortable, with strong cash flow expected to reduce debt. Joseph Armes stated that while a period of "digestion" for recent acquisitions is underway, future M&A opportunities would be considered in "quarters, not years," maintaining a disciplined approach.

Charles Brown asked about the organic growth outlook for the HVAC business in calendar 2026, particularly if the housing market remains weak, and the company's confidence in returning to its mid- to high-single-digit growth target. He also inquired about the pricing strategy in Contractor Solutions, considering tariffs and input costs, and the approach to future price increases. Finally, he asked for an update on capital allocation priorities, willingness for near-term acquisitions, and the current M&A pipeline.

Answer

James Perry, EVP and CFO, stated that the Contractor Solutions segment historically achieves mid- to high-single-digit organic growth through cycles, expressing encouragement from recent order volumes and customer inventory levels, with easier comparisons expected later in the year. Perry detailed annual and mid-year price increases to cover tariffs and input costs, affirming a willingness to implement further increases if warranted. Joseph Armes, Chairman, CEO and President, and Perry discussed maintaining a strong balance sheet with a 2.3x net debt-to-EBITDA ratio, opportunistic share repurchases, and a 'quarters, not years' digestion period for M&A, emphasizing disciplined capital allocation.