Alok Maskara: Sure. I think overall, we expect that to get even by 2025. I mean, in the independent channels of the distribution channel, we fully expect, because of comps and because of inventory get to appropriate level, increase in sales versus last year. We’re not sure of the timing on when that stops, given all the comps and everything else. But we do think inventory levels and order patterns normalize and we will see a bounce back in our sales to the channel, irrespective of what happens from the channel to the dealer. On the dealer side, we were pleased with the resiliency that we saw, although volumes were down, they were better than most of us expected. And that resiliency gives us comfort going into 2024, and we expect and have baked in sort of flat to down numbers on that going into 2024.
Just because of all the chatter around repair, replace, interest rate, election year, which so far has not turned out to be true, but we want to kind of make sure we put all of that and let [you guys] decide. Like here are assumptions that you can decide how you look at it. We focused on what we control, and we know we are going to win share through the transition, and we are recovering our service levels nicely.
Operator: And we’ll take our next question from Noah Kaye with Oppenheimer.
Noah Kaye : Here’s a potentially easy one. What drove the rebranding of the segments? Any functional difference to be aware of?
Alok Maskara: No, no functional differences to be aware of. We simplified it from 3 to 2. We had some internal confusion going on between business unit name and segment name so we embarked on a new branding, which I guess the positive message. Overall, at Lennox, we have not focused on building a brand with dealers and consumers, and there were just different confusion going on. We simplified our websites. We have huge investments in improving our customers’ experience, introducing new technology, updating even our e-mail addresses and our lennonx.com. It was part of a big rebranding exercise. It was just about time to differentiate residential segment from business unit, but I wouldn’t read anything more to it besides just simplifying our internal nomenclature and better reflecting what we do, right?
Because what was called commercial also had a tiny bit of refrigeration in there. So I do think the new names better reflect what we do and are more consistent with our new branding guidelines.
Noah Kaye : Alok, as you talked about in your prepared remarks, a significant effort over the past year around the culture. You mentioned implementing more pay for performance. Can you highlight what some of those major changes were functionally in terms of pay for performance, what types of metrics you’re trying to incent people towards, the timing of when you did those and how you might expect that to impact behavior and performance as we get into ’24.
Alok Maskara: Sure. Let’s start with me and the highest level on the executive staff. So last year was the first year where our short-term incentives had a growth component or a revenue component to it. So 20% of our [indiscernible] STI now comes from growth. And that just changed the mindset. Just to give you an example, but let’s take it down to a few levels on where it really matters. So if you think about sales incentives and compensation, it used to be the other way around because only on revenue are not enough on profits and margins. So as we talked about accountability, autonomy and in deploying all of that in the sales force, we are now measuring our sales team more on profits, more like a distributor would measure them versus purely on revenue.
So that’s kind of the 2 switches on the more senior level, more focused on growth and on the street level, more focused on profitability and profit margins. And that’s a long journey because you can’t change these things overnight, especially if they have been seeped into the culture for many, many years. But we are pleased with the early results and fully prepared for the long-term journey as we add technology and finance score cards and metrics-driven behavior versus the storytelling behavior, sometimes pleased to get there.
Operator: And we’ll take our next question from Joe Ritchie with Goldman Sachs.
Joe Ritchie : Thank you, Joe, for everything. Have a great retirement. It’s well deserved. So my question is for Alok and Michael. It sounds like the implied 1Q guide is above where consensus is today and consensus is towards the high end of your full year guidance for the year. So like I’m just trying to understand kind of like the conservatism that might be baked in to the low versus the high end. So any color you want to provide there would be helpful.
Alok Maskara: Sure, I’ll start, and then Michael will jump in. Because we really did not consider consensus was giving guidance, and we don’t give guidance by quarter. But here’s what we did, right? We laid out the volume assumptions on Page 11, so you can look through that. And that kind of brackets are low end and the high end, all on the volume assumptions. As we look at it, Q1 is going to be a little weird because we get more mix benefits, as Michael said earlier, because last year, we still had old SEER and new SEER products. Some of the price increases go into effect in February for us, as you saw along with the other competition. So you get only half a quarter benefit on that. And seasonality will be similar to what we have seen unless there are any unusual weather patterns. So honestly, we didn’t spend tons of time looking at quarter-over-quarter. We were just thinking of the longer term where we are focused and drive that. Michael, what would you add to that?
