Lennox International Inc. (LII): Business Model Canvas [Dec-2025 Updated]

You're looking past the quarterly reports to see the actual engine room of Lennox International Inc., and honestly, their 2025 setup is a masterclass in navigating transition. This company is currently managing a near 9% material cost spike while simultaneously pivoting its entire product line to meet new low-GWP (Global Warming Potential) standards-that's serious R&D spend. The bedrock, though, remains the residential replacement market, driving about 75% of sales through their dedicated dealer network, which helps them project a solid $550 million in Free Cash Flow for the year. If you want to see the precise structure supporting these numbers, check out the full Business Model Canvas below.

Lennox International Inc. (LII) - Canvas Business Model: Key Partnerships

You're looking at the core relationships Lennox International Inc. (LII) is cementing to drive future growth, especially as the industry navigates refrigerant transitions and market shifts.

Joint venture with Samsung for ductless HVAC and VRF systems

The joint venture, named Samsung Lennox HVAC North America, is a 49.9% owned interest by Lennox International Inc.. This partnership launched the Lennox Powered by Samsung mini-split systems and the Varix™ variable refrigerant flow (VRF) lineup in early 2025.

The Varix™ VRF systems are available in sizes ranging from 5,000-96,000Btu/h for a system capacity up to 38 tons, supporting connections of up to 64 indoor units. The mini-splits offer a standard efficiency model achieving SEER2 up to 25 and HSPF2 up to 10. Lennox management expects this joint venture to contribute to growth starting in 2026.

Joint venture with Ariston Group for North American water heating products

The newly formed entity is called Ariston Lennox Water Heating North America, with Ariston USA holding a 50.1% stake and Lennox owning the remaining 49.9%. Ariston Group reported revenues of 2.6 billion-euro in 2024. Sales of water heaters under the Lennox brand through this venture are scheduled to begin in 2026. Lennox management anticipates the Ariston partnership will begin contributing to growth in 2027.

Independent Lennox dealer network for installation and service

Lennox International Inc. distributes its primary residential brands directly to a network of independent installing dealers, which includes sales through company-owned Lennox Stores. For the year ended December 31, 2023, direct sales to this dealer network represented 75% of revenues. This compares to 70% in 2022 and 73% in 2021.

Suppliers of key raw materials like steel, aluminum, and copper

Lennox International Inc. navigates input cost volatility from raw material suppliers. In September 2025, manufacturers raised HVAC component prices on average close to 10%. This was partly attributed to tariffs on materials like copper.

Recent acquisitions like DuroDyne and Supco for parts and accessories

Lennox completed the purchase of the HVAC division of NSI Industries, which includes the Duro Dyne and Supco brands, for approximately $550 million in cash on October 16, 2025. The deal is expected to contribute approximately $225 million to revenue and $55 million to EBITDA by 2026. This translates to an approximate $0.35 increase in earnings per share by 2026.

The key financial impacts from these supplier/aftermarket partnerships are summarized below:

• Acquisition Cost: $550 million
• Expected 2026 Revenue Contribution: $225 million
• Expected 2026 EBITDA Contribution: $55 million
• Projected EPS Uplift by 2026: Approximately $0.35 per share

Lennox International Inc. (LII) - Canvas Business Model: Key Activities

You're looking at the core engine room of Lennox International Inc. right now, the activities that turn raw materials into high-efficiency climate control systems and deliver them profitably. It's a balancing act, especially with the regulatory clock ticking on refrigerants and ongoing cost pressures.

Manufacturing and assembly of high-efficiency HVACR equipment.

Lennox International Inc. focuses on producing systems that meet increasingly stringent energy standards. The operational output is reflected in the segment performance, which shows the results of this manufacturing activity, even when facing volume headwinds. For instance, in the second quarter of 2025, the Home Comfort Solutions segment, which represents approximately two-thirds of total revenue, posted net sales of $1.009 billion, growing 3% year-over-year. The Building Climate Solutions segment achieved revenue of $492 million, up 5% in the same period.

Research and development (R&D) for low-GWP refrigerant transition (R-454B).

A critical activity is managing the regulatory shift, particularly the transition away from R-410A to lower Global Warming Potential (GWP) refrigerants like R-454B. This R&D and product readiness is essential for future sales, as the company noted that full-year 2025 core revenue growth is anticipated to be primarily driven by the mix of new refrigerant products. The transition is active, as evidenced by Q3 2025 commentary noting the system is 'Mostly R-454B with limited R-410A' due to the regulatory transition.

Managing a complex, multi-brand distribution and logistics network.

The company actively manages its channel to market, which includes strategic partnerships to expand its offering. Lennox International Inc. has formed partnerships with Samsung for mini-split systems and with Ariston Group for water heaters, aiming to capture share where dealers already participate (e.g., 75% of dealers participate in mini-splits). This distribution management is a significant cost driver and focus area; for example, Q2 2025 results noted an $11 million impact from investment in distribution and selling, and Q3 2025 showed a $2 million impact from similar investments.

Pricing excellence and cost control to mitigate 9% FY25 material cost inflation.

Lennox International Inc. is executing pricing excellence to offset input costs. The company projected it would offset expected FY25 inflation of approximately 6% through productivity improvements and cost actions totaling around $75 million. This pricing power is evident in segment results, where Q2 2025 saw favorable mix and pricing contribute 12% to Home Comfort Solutions revenue growth, offsetting a 9% volume decline. The focus is on maintaining margin expansion despite the pressure of the stated 9% material cost inflation target for the year.

Here's a quick look at how the segments performed in Q3 2025, showing the impact of these activities:

The ability to generate significant mix/price benefits-$85 million in HCS alone for Q3 2025-is a direct result of pricing excellence offsetting volume contraction and cost inflation.

Lennox International Inc. (LII) - Canvas Business Model: Key Resources

You're looking at the core assets Lennox International Inc. (LII) relies on to run its business as of late 2025. These aren't just line items on a balance sheet; they are the engines driving their market position, especially after navigating the 2025 refrigerant transition.

Flagship Lennox Brand Equity and Other Brands (e.g., Armstrong Air)

The Lennox name is the flagship HVAC brand, which the company has maintained as a premium brand to support its pricing power. Lennox International Inc. markets its products under several names across its segments. For the Home Comfort Solutions segment, these include Armstrong Air, Ducane, AirEase, Concord, and the premium Dave Lennox Signature Collection.

The company's focus on energy-efficient climate-control solutions is a key component of its brand promise. This focus helped them achieve a segment margin of 21.7% in the third quarter of 2025, a record for that quarter, despite revenue challenges.

Extensive North American Manufacturing and Distribution Infrastructure

Lennox International Inc. is heavily focused on North America, having sold its European HVAC and refrigeration businesses in late 2023. This infrastructure supports a trailing 12-month revenue, as of September 30, 2025, of $5.35B. The company has been actively investing in this base, including the ramp-up of a new commercial factory, though this incurred costs that pressured segment profit margins in early 2025.

The scale of the operation is also reflected in its workforce. As of December 31, 2024, Lennox International employed approximately 14,200 people, with 9,000 of those being hourly workers whose numbers flex with demand. The company also recently bolstered its parts and accessories portfolio with the acquisition of Durodyne and SUPCO, which brought in annual revenues of approximately $225 million.

Intellectual Property (IP) in Energy-Efficient Climate-Control Technology

A core asset is the intellectual property surrounding energy-efficient climate-control technology. This innovation focus is essential for navigating regulatory shifts, such as the 2025 refrigerant transition. The company's ability to manage this transition while delivering a Q3 2025 Adjusted diluted EPS of $6.98 speaks to the underlying strength of its technology and execution capabilities.

The company's product portfolio is designed to offer a complete line of home comfort solutions, available in various designs and efficiency levels.

Dedicated Network of Trained and Certified Lennox Dealers

Lennox International Inc. goes to market primarily through a dedicated channel structure. For the Home Comfort Solutions segment, products are sold either directly to a network of independent installing dealers, which includes sales through their network of Lennox stores, or to independent distributors. In fiscal 2024, direct sales to dealers and stores represented 74% of revenues for that segment. This dealer network is crucial, as the company's business is sensitive to contractor behavior and sentiment, which was cautious in 2025 due to macroeconomic conditions.

Here's a quick look at the financial scale underpinning these resources as of late 2025:

The operational focus is clear from the segment breakdown:

• Home Comfort Solutions (HCS) revenue in Q3 2025 was $913 million.
• Building Climate Solutions (BCS) revenue in Q3 2025 was $514 million.
• Durodyne and SUPCO acquisition contributed approximately $225 million in annual revenue.
• FY 2024 direct sales to dealers/stores represented 74% of HCS revenues.

Finance: draft 13-week cash view by Friday.

Lennox International Inc. (LII) - Canvas Business Model: Value Propositions

You're looking at the core reasons customers choose Lennox International Inc. over the competition as of late 2025. It's about compliance, comprehensive coverage, premium quality, and a reliable network.

High-efficiency, low-GWP HVACR products meeting 2025 regulations.

Lennox International Inc. delivers products engineered to meet the January 1, 2025, EPA regulations for refrigerants, which mandate a Global Warming Potential (GWP) of 700 or less. The company's commitment is evident in its product lineup utilizing R-454B, which reduces GWP by as much as 78% compared to the phased-out R-410A for whole-home systems. Even with volume challenges, profitability in the Home Comfort Solutions segment remained strong as they transitioned to selling primarily R-454B products in Q2 2025.

• Transitioned residential line to R-454B for heat pumps and AC units.
• Commercial rooftop units and ducted split systems feature R-454B.
• Ductless options utilize R-32, also designed for low GWP compliance.
• New systems use 5-10% less refrigerant than comparable R-410A units.

Complete climate-control solutions for residential and commercial spaces.

Lennox International Inc. offers a full spectrum of climate control, segmented into Home Comfort Solutions (HCS) and Building Climate Solutions (BCS). The HCS segment, which covers residential needs, represented about two-thirds of total revenue in Q2 2025. In fiscal 2024, residential HVAC accounted for 67% of sales, while commercial HVAC and Heatcraft refrigeration made up 33%. For the full year 2025, the company projects total revenue growth of approximately 3%.

Premium, reliable equipment like the Dave Lennox Signature Collection.

The Dave Lennox Signature Collection is positioned as the premium offering, exemplified by the SL22KLV model, which pairs comfort delivery with low GWP refrigerant technology. Lennox is the company's flagship HVAC brand. The company's focus on innovation, including cold climate heat pumps engineered to operate efficiently down to -22°F, supports the premium reliability proposition. This focus on high-quality, sustainable solutions helps drive favorable mix, which contributed 11% to HCS revenue growth in Q2 2025.

Strong dealer support and parts availability for quick replacement.

The business model heavily relies on its distribution network, with residential replacement sales making up 75% of total sales, while new construction is 25%. This reliance on the dealer channel means support for quick replacement is a critical value driver. The company is actively working to enhance parts availability, noting that recent acquisitions like Supco will help accelerate the attachment of parts and accessories across segments. Furthermore, 75% of dealers participate in mini-splits, indicating broad channel engagement for new product lines.

• Residential replacement sales: 75% of total sales.
• Dealer participation in mini-splits: 75%.
• Acquisitions like Supco are intended to accelerate parts and accessories attachment.

Finance: draft 13-week cash view by Friday.

Lennox International Inc. (LII) - Canvas Business Model: Customer Relationships

You're looking at how Lennox International Inc. manages the people who buy and install its climate control systems. It's a mix of deep partnership with its independent network and direct management of big commercial clients. This approach is critical, especially given the regulatory shifts and the need for specialized knowledge.

Dedicated, high-touch relationship with the Lennox dealer network.

Lennox International Inc. relies heavily on its independent distribution system for the North American residential heating and cooling market. They distribute their flagship "Lennox" brands directly to these independent dealers through a company-owned process. This isn't just transactional; it's about embedding their brand within the contractor's business. For example, the Samsung partnership for ductless products also flows through this direct-to-dealer network. To support this, Lennox has been investing heavily in its physical touchpoints. The company opened a new Customer Experience and Training Center at its Richardson, Texas headquarters, which includes HVAC training labs and five classrooms. This facility hosts over 1,000 customers for in-person courses each year, helping to cement that high-touch relationship.

The focus on digital support is also part of this relationship enhancement. Earlier in 2025, Lennox launched a Technical Support AI agent specifically for HVAC technicians and dealers. This tool has already logged over 15,000 sessions with more than 7,000 registered technicians, showing strong adoption and a commitment to field efficiency.

Here's a quick look at how the relationship structure breaks down:

• Distribution for "Lennox" brands is company-owned, direct to independent dealers.
• The company focuses on North America after divesting European operations in Q4 2023.
• The residential market, which relies on this network, accounted for about two-thirds of total revenue in Q2 2025.
• The company aims for its parts revenue attachment rate to reach 30% to 35%, up from the current teens, which requires strong dealer buy-in and training on selling lower-cost items like capacitors.

Direct sales and service for large commercial national accounts.

For large commercial customers, Lennox International Inc. operates a different model through its National Account Service ("NAS"). NAS provides installation, service, and preventive maintenance for these national account customers across the United States and Canada. This is a single point of contact approach designed to maximize uptime and lower the total cost of ownership for large portfolio managers. The company strengthened this capability by acquiring AES Industries, Inc. and AES Mechanical Service Group, Inc. in October 2023, which are dedicated to service and sustainability in light commercial markets. This direct channel helps them offer turnkey planned replacement programs, allowing national clients to proactively manage aging equipment on their own terms and budget.

The Building Climate Solutions segment, which includes these commercial services, posted net sales of $1,764.2 million in 2024. In Q2 2025, this segment showed stronger revenue growth of 5% year-over-year, reaching $492 million.

Training and technical support for installers on new refrigerant systems.

The regulatory environment demands intensive support. The transition to refrigerants with a Global Warming Potential (GWP) of 700 or less for most HVAC products became effective on January 1, 2025. This transition, specifically to refrigerants like R454B, created temporary challenges like canister shortages, but Lennox reports that 100% of units are now close to using 454B, and the necessary training has improved. The Customer Experience and Training Center in Richardson, Texas, features interactive exhibits specifically showcasing low GWP products.

Brand loyalty built on a century-old reputation for quality.

Lennox International Inc.'s reputation is rooted in its founding in 1895 in Marshalltown, Iowa. This long history translates into a brand image that customers and commercial clients increasingly link with reliability and quality, which is crucial in a competitive landscape. The company actively reinforces this through product recognition; for instance, the EL297V gas furnace received the GOOD DESIGN Award, which enhances the brand image as forward-thinking and responsible. Financial actions also signal stability to stakeholders. In 2024, the company returned $160 million to shareholders through dividends, which represented a 4.5% increase in the quarterly dividend. As of October 13, 2025, the market capitalization stood at $18.4B.

You can see the relationship focus across the business segments:

Lennox International Inc. (LII) - Canvas Business Model: Channels

You're looking at how Lennox International Inc. gets its climate control products-from residential units to commercial systems-into the hands of the installers and end-users. The channel strategy is clearly multi-pronged, balancing direct control with broad wholesale reach.

Company-owned Lennox Stores (one-step distribution)

The Lennox Stores serve as a direct-to-dealer parts and supplies access point across the United States and Canada, supporting the one-step distribution model for the primary Lennox brands like the Dave Lennox Signature Collection and Elite Series. While specific revenue contribution from only the stores isn't isolated in the latest reports, the company emphasizes these stores provide an easy access solution for contractors.

• Lennox Stores distribute products under the Lennox brand directly to independent installing dealers.
• These stores are part of the overall strategy to strengthen the distribution network.

Independent wholesale distributors (two-step distribution) for other brands

This channel moves the 'other' brands, such as Armstrong Air, Ducane, Air-Ease, Concord, MagicPak, and ADP Advanced Distributor Products, through independent distributors who then sell to installing contractors. The performance here is tied to the Home Comfort Solutions (HCS) segment, which saw revenue decline by 12% in the third quarter of 2025, partly due to channel inventory rebalancing following a regulatory transition. The sell-in volume for HCS dropped by 23% in that same quarter, reflecting distributor destocking. The company operates a network of 240 Lennox distributors in the United States as of October 08, 2025.

Here's a snapshot of the distributor footprint and related segment performance:

Direct sales force for large Building Climate Solutions projects

The Building Climate Solutions (BCS) segment, which includes commercial projects, relies on a dedicated direct sales force and specialized channels. This segment showed resilience, with revenue growing by 10% in the third quarter of 2025, despite volume challenges of -3%, which was offset by a 8% boost from mix and pricing. The company expects the bulk of revenue from new product lines, like those from the Samsung joint venture involving VRF products, to start coming through only in 2025. The direct sales force is responsible for obtaining total system specifications from specifying engineers and design-build contractors.

• BCS Revenue Growth (Q3 2025): +10%.
• BCS Volume Change (Q3 2025): -3%.
• Mix/Pricing Contribution to BCS Growth (Q3 2025): +8%.

Digital tools and apps for dealer diagnostics and ordering

Lennox International Inc. is continuing investments in digital capabilities, which are key to streamlining operations and improving speed-to-market. A major component supporting this is the new Customer Experience and Training Centre in Richardson, Texas. This facility includes state-of-the-art HVAC training labs and five classrooms, designed to provide hands-on technical training to over 1,000 customers for in-person courses annually. The company also mentioned leveraging the Lennox Unified Management System to share best practices and execute strategy, which supports digital integration across the network. Capital expenditures for 2025 are projected at $150 million, focused partly on innovation centers.

The investment in infrastructure supports the digital push:

Capital Deployment Focus (2025 Projections):

The company's Q3 2025 segment margin reached 21.7%, a record for the third quarter, showing that disciplined execution across channels is driving profitability even with top-line headwinds. Finance: draft 13-week cash view by Friday.

Lennox International Inc. (LII) - Canvas Business Model: Customer Segments

You're looking at the core customer base for Lennox International Inc. as of late 2025, which is heavily weighted toward existing equipment replacement. The company's strategy clearly prioritizes the installed base over brand-new projects, which makes sense for a mature, essential-service industry.

Lennox International Inc. manufactures and distributes heating, ventilating, air conditioning, and refrigeration products primarily to the replacement market, which accounts for approximately 75% of sales. The remaining 25% of sales is generated from new construction residential and commercial projects. This focus on replacement is a key driver of revenue stability. Following the divestiture of its European operations in late 2023, Lennox International Inc. is now strategically focused on the North American market.

To give you a clearer picture of the revenue split based on the latest full-year figures available, here is how the main business segments broke down for the full year ended December 31, 2024, alongside the market split you mentioned:

The commercial side of the business, which includes the Building Climate Solutions segment and the Heatcraft Refrigeration Products business, serves a diverse set of customers who require reliable climate control for their operations. Heatcraft Refrigeration Products is specifically identified as a business segment of Lennox International Inc., leading in commercial refrigeration solutions.

You can see the geographic concentration in the third quarter of 2025 results, showing where the bulk of the sales activity is occurring:

• United States market net sales (Q3 2025): $1,328.4 million.
• Canadian market net sales (Q3 2025): $98.4 million.
• Home Comfort Solutions segment volume decline (Q3 2025): 23% decrease in sales volumes.
• Building Climate Solutions segment net sales increase (Q3 2025): 10% increase.

The commercial customers for the Building Climate Solutions segment include entities like retail locations, schools, and offices that rely on Lennox International Inc.'s unitary heating and air conditioning equipment and commercial HVAC services.

Lennox International Inc. (LII) - Canvas Business Model: Cost Structure

You're looking at the major drains on Lennox International Inc.'s operating cash flow for 2025. Honestly, the cost structure is dominated by the things they buy to make their products, which is typical for a manufacturer in this space.

High variable cost of goods sold (COGS) due to raw materials is a defining feature. The nature of the business means most costs move with production volume. For instance, in the first quarter of 2025, the Cost of Goods Sold reached $744.1 million, which was a 5.2% increase over the first quarter of 2024 figure of $707.1 million. Management noted that for the full year 2025, they expect total cost inflation to be approximately 5%, a slight improvement from their prior estimate of 6%. To be fair, management stated that the majority of their costs are variable, which helps absorb some of the volume swings.

Capital spending is clearly delineated. Lennox International Inc. projected capital expenditures for the full year 2025 to be approximately $150 million for general capital improvement projects. This is a planned outlay for maintaining and improving the asset base.

Investment in new product lines and manufacturing capacity is evident through operational spending, even if specific R&D dollar amounts are not clearly detailed as a large line item for the full year 2025 in the same way as CapEx. However, the focus is clear: revenue growth in 2025 is driven by the mix of new refrigerant products. Furthermore, the Building Climate Solutions segment saw early benefits from the new commercial factory. The company is also actively working on redoing its distribution network and footprint starting in 2026, which implies current investment in logistics infrastructure.

Distribution and logistics costs for the North American network expansion are a recurring expense pressure point. In the first quarter of 2025, distribution and selling expenses contributed $10 million in additional costs. For the second quarter of 2025, continued investments in distribution and selling, along with other inflationary impacts, amounted to a $11 million impact on profit. This spending supports the company's presence in its primary North American market.

Here's a quick look at some of the key 2025 financial figures related to costs and performance:

The cost structure also involves specific operational overheads:

• Tariffs and factory ramp-up issues cost $29 million in Q1 2025.
• Corporate expenses for Q2 2025 were $24 million, flat to the prior-year quarter.
• The company expects interest expense to be approximately $40 million for the full year 2025.
• The tax rate is projected to be around 19.3% for the full year 2025.

Finance: draft 13-week cash view by Friday.

Lennox International Inc. (LII) - Canvas Business Model: Revenue Streams

You're looking at the core ways Lennox International Inc. (LII) brings in money, focusing on the numbers as of late 2025. This is how the revenue gets generated across their main business lines.

The revenue streams are primarily segmented by the end-user market and the type of product or service provided. The largest portion comes from residential equipment sales.

• Sales of Home Comfort Solutions (HCS) equipment, which accounted for approximately 67% of total sales.
• Sales of Building Climate Solutions (BCS) equipment and services. For instance, in the third quarter of 2025, the BCS segment saw revenue grow 10%, with profit margins expanding 330 basis points.
• Sales of replacement parts, supplies, and accessories, which is being strengthened by recent acquisitions, such as DuroDyne and Supco, to boost attachment rates. Growth in emergency replacement products is also a key driver here.

Here's a quick look at the key financial guidance figures provided by Lennox International Inc. for the full-year 2025, which gives you a sense of the expected financial outcomes from these revenue streams.

To give you a bit more color on the BCS segment performance, which includes commercial HVAC, refrigeration, and service offerings, the Q2 2025 results showed a 5% increase in revenue, helped by an 8% benefit from favorable product mix and pricing, even as segment sales volumes declined 3%.

The company's focus on operational discipline and pricing excellence is designed to support these revenue streams, especially when facing end-market softness, which led to the revision of the full-year 2025 revenue outlook to an anticipated decline of 1%.

Finance: draft 13-week cash view by Friday.