CARR - Earnings call transcript Q3 2020 | Carrier Global Corporation

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Operator

Good morning, and welcome to Carrier's Third Quarter 2020 Earnings Conference Call. This call is being carried live on the Internet, and there is a presentation available to download from Carrier's website at ir.carrier.com. I would now like to introduce your host for today's conference, Sam Pearlstein, Vice President of Investor Relations. Please go ahead, sir.

Sam Pearlstein

Thank you, and good morning, and welcome to Carrier's third quarter 2020 earnings conference call. are McLevish, President Chief today Officer; Chief here Tim and Financial me David and Gitlin, Executive With Officer. significant restructuring Except will as referred and to excluding significant as nature, be company a other costs items. speaking to by and/or otherwise results from often noted, nonoperational items of the other nonrecurring management operations, also expectations call forward-looking other during the and are uncertainties. reminds to statements that and earnings the listeners company any The and flow risks subject cash provided on statement on Form and Carrier's could SEC the registration filings, and materially details including on forward-looking reports provide cause differ XX-Q in important XX Forms those to Carrier's the that anticipated from statements. actual X-K, results factors year we results leave our financial we'll will the quarter time for for morning, questions of review outlook, the XXXX at and third This full end. the XXXX, discuss call you that follow-up to Once we up and limit give yourself opened participate. everyone the questions, one one the opportunity question to for ask is to

the reinserting CEO, Dave turn You the and to President may to ask our permits. into call like by further over yourself Gitlin. with queue I'd time questions that, And if

David Gitlin

Thank you, everyone. morning Sam, and good

until week. Before at Goris in we let comment last first the with projects currently CFO as At get smooth a transition be key announced we transition the me upcoming CFO joining Tim will of Rockwell role that and retirement will CFO us on Automation point, on us going, Advisor, Patrick our that specific helping a couple of to weeks. take in on Senior the taking mid-February. Patrick his

enough the that balance us search, could be for and all personally Patrick the agencies Carrier. the perfect perfect help and for done I everything the community company, of his happier him course charting him hired me Doing a function, as including be CFO to more, he team well. with Tim Tim, he and building rating his time. I investment for would priorities, establish thorough effectively For can't not strengthening a that suspect very the have to up was with at we I the working thank has strategic know helping context, us public successor. clear in and our for sheet, most when has you stand us. been finance us joining role After

the welcoming had short, We very substantially XX%, the highlights. but and operationally quarter. year-over-year. in was billion profit exceeded were Sales During his million was in costs. Carrier Patrick of shift strong I'll and time allocation team. a turn We line model. helped in the industry-leading With capital strategic reported a X, optimization. X% company XX% decrementals revenue at public instrumental the bottom Patrick quarter recurring operating up at Rockwell, top our to $XX function, QX incrementals Slide transformed additional encouraging a discuss and and drive putting finance our he portfolio forward that, X% to up our In year-over-year toward please factoring Adjusted $X was guiding look where And expectations. year-to-date performance of to QX at

profit. highest Our continued growth and XX% our which In America in was the operating this performance in initiatives. and HVAC, North resi, and on costs continued driven both strength was residential by traction ever by was quarter our for sales up quarter

driven sale the from X in realized pleased cash $XXX our net cash And million, We was higher capital performance. with income taxes and are quarter, free million by before shares in of better primarily million which our $XXX Beijer. we of working flow generation

G&A simplifying and We approach, continue to strategic a back-office. aggressively via disciplined costs reducing reduce the including

in We again will cash which year. XXX are and growth, full allow this takeout while strength, our to of Based invest million on our year by we fund XXXX on margin the to flow. now $XXX remain recurring QX of we cost result, initiatives profit adjusted are incremental raising free end operating growth This in raising investments costs in for a Carrier driving Carrier XXXX. outlook million track on As XXX, sales, us expansion. $XXX to

Given that down billion at billion quarter. of the in $X.X we debt of had plan the we to of quarter, end fourth pay cash $X.X the

our growth winning And aggressive, putting first. through put quality and is a all which on ensuring Adoption a Excellence with more starts expect of that of Next Carrier innovative, agenda. year, flexibility focused the our has a and our to and is agile, on-time playbook overall Slide gaining created of X Way resulting now performance profound progress is Supplier deployment our which we we Excellence M&A rigorous cultural for increased transformation, preserving delivery and our customers an do in our to a in supporting while place dividend Pivoting organization, opportunities. It culture, our helping year-to-date. improved traction. Carrier in has and priorities, program, fuel XX% our XX% performance has

growth continue to our in We invest initiatives.

XX% to digital of business on sensing attachment and year the We detection terms closed personnel a with smoke all-electric a and fully sales globally, and first And the have this this that advanced incremental end achieve of sales number autonomous, quarter introduced services, fire commercial detector engineless trailer at our by new refrigerated capabilities. of year. cloud-connected and initiatives, added track rate in XXX innovative HVAC aftermarket have Europe, multipurpose support system combined an XX% a offerings, commercial in including the

We over XXX the BlueEdge June. in contracts have signed program since launched

the also network. are connected offerings We continuing to across drive

and Kidde see and and business, X. sustainable and refrigeration productivity maintenance Carrier uptime by with improving chain In condition-based for very For XX% health we our program, example, level, Slide business healthy, in fire building Systems cold XX%. improving first for are remote our a healthy, a Fire service which & Fire over alarm leaning about its a Security, by emerging At safe, sustainable commercial in control technician system successful on you buildings. suppression the units. around monitoring we Starting into industrial trends truly solutions, and Enterprise IntelliSite, completed safe, on shipped pilot the orders

be purifier’s the our Our leading gain kill that is air customer rigorous product trapped strategy XXX% in quarter. XX% filtration its process to interest capture We technology through third kind. those continue is systems strong and here for the inactivates testing shop the provider, Infinity obtained new a of and filter, driving which year-over-year traction. first of independent introductions one-stop that the were to up coronavirus Orders validation on

orders Carrier's & in which for with And will XX% nearly Denver-area have we unit up by bipolar technology at Through ionization HVAC a Island quality. were we for cost to BlueEdge the working improved X,XXX on and are save pipeline we its along upgrade campus, with Long a we air deal for just XX campus also purification active to One We systems able our more. OptiClean XX,XXX air in Court office estimate strategic deliver with Cushman rooftop in Wakefield, units, needlepoint every with City, platform. signed and and annually Square service energy Tower comfort relationship

am strategy and And of our potential building early active we opportunity Services, of develop activity are the space ahead with pipeline our overall, the capture of operations. with order powerful the For maximize Amazon now the have of healthy, recently for thrilled ecosystem to new offerings cold still with stages in chain our a we're partnering in Web sustainable comprehensive program. million. and safe, us. Similarly, we whom putting we $XXX an I to launched place relationship chain data and healthy robust cold

key our food partners, by connect business capacity Pods monitored Sensitech provide distribution. mobile cold one-stop Carrier We dots shop working also both we're approach for introduced pharma to chain cold support insights. added for and cargo the solutions With to to chain a and

progress results, and our strategic growth our So on made financial we've culture, capital allocation. performance initiatives,

which Tim, have turn X I give me current it outlines three on lines order Slide Before broken two color each. over our segments, business to you some into let we key trends.

We color geographic also HVAC. starting region, provide by with

& to inventory in on resi. driven here and now levels were year-over-year the orders with from XX% strong distribution Light up our Residential see balance. You are dealers distribution quarter, Commercial by Movement that

Commercial from down truck rates was the solid improved October seen business. business, trailer June from our about indicate container but more QX, our also that trends segment’s September, orders quarter, QX orders. HVAC, in lumpy have order QX. sequentially doubled than were these but down orders XX% in Commercial were almost QX. In order the down tend For to bottom we for Refrigeration to and be in in QX flat orders Unit improved Refrigeration to transport from

weak. business, nature For non-recurring improved Fire the XX%, XX%. China small about around We and QX improved orders controls almost and in XX% fire, to oil improvement that X% down and orders in orders service business gas and around recurring & Security orders commercial were were field Installation and QX. F&S the The down to while the medium-sized from were flat. residential saw QX work, markets of down hospitality and in and XX% in discretionary monitoring while down down business products, from service given

and education, has medium gas, hospitality the challenged. economy, centers remain business reflected and where Our have businesses the strong, verticals and remained and bifurcated macro small data healthcare, residential, warehouses while oil

a is challenged. U.S. excluding same the is are geographically, very much recovering of China Europe bifurcation Asia, verticals latter the remains and part the Fortunately, see strong. portfolio. smaller We where and China our

With global we Tim? While turn I'll that, remain it to to recognize we're Q&A. uncertainty to come continued and encouraged Tim by we QX then prepared order before summarize adapt. trends, back the and over

Tim McLevish

Good Slide X. morning. Thanks, Please to turn Dave.

billion residential year-over-year prior profit year. our a we sale operating in includes is markets surpassed sales participate. in that declines while case as across As that on HVAC, decline about not Dave year year. believed billion operating to Beijer. That last would very of the and GAAP quarter, but just up of and QX. profit the saw said million we quarter, sales in organically. over of Adjusted strong million up we demand from second that the as modest $XXX decline, year-on-year and in HVAC gain fact, X% X in the which had the mentioned This X% in since improvement $X driven in proved the for we the low QX sequential million expected we the did by still last recovery was company we're we primarily the was the continued had sales we broader almost be be point businesses X% what Recall shares the $XXX majority quarter QX of saw $X.X residential

this the number incremental Our control margins. and and productivity cost continued company TSA on drove Accelerated materially and was performance higher absent a XX% strong would margin be public costs. incremental

Since comparisons are year-over-year GAAP the last EPS and QX was year, adjusted we‘re EPS not was Our not $X.XX. $X.XX public meaningful. company a

income, difficult net for cash we free but a in a Our higher flow and considerably The impact All third things we than and had driver higher biggest strong, timing very environment. Carrier improvement strong a considered payments. capital very favorable from was also expected. quarter interest saw tax was a working

Let's the comparisons. organic numbers The now segment performed. look at year, turn will last I was XX% residential and how Slide to note are X, up within up to that from segment were which XX%. the refer year-over-year HVAC sales Please the segments

unprecedented field We and as did to saw continue the entered with commercial HVAC QX on we a QX of likely fairly created North Applied up Commercial, share. during in of a lag residential that executed single-digit levels year. down light the normalized continued, saw America business. field than business will We down year are a year as inventory ended its QX proud this was commercial improvement XX%. QX, this reopenings lines. very to in COVID Recall we total. unusually normal modest QX business. in and we slowed gain decline In Light services Commercial us this that but declines We strong QX, materially the that see about sales of were and full end expect for year expect sequential we in XXXX end in more HVAC, of we most overall down a atypical back backlog we sales prior sales how as businesses. less very cycle saw decline levels XX%. a longer demand was with X% to a enabled down At high and in to down expect the seasonality low the the with were applied team well single-digit inventories of decline healthy levels as

remains All heavily weak, sales China those the second of commercial it improved was as From about to regional perspective for COVID. from excluding Asia quarter. impacted year-over-year declines India, especially a were HVAC, quarter, these but related the in XX% up by China in disruptions

we and confident America gained China applied. in are We share in North

in that X%. refrigeration, mid about were a where XX%, was to sales down and from and order both XX% segment Europe single-digit. XX% businesses. saw flat truck have We we turned trailer truck the truck on almost was down to offset improvement but cycle America modest North in close Asia. a over in growth down was Europe container the trough QX. for sales North improving single-digit America decline the Now as reflects quarter, we trailer up and were trends and mid refrigeration Commercial by the was trailer both down in corner believe EMEA in saw

in down the products Fire Moving X%. Americas Security down over segment, Europe offset double-digit & partially growth business with The was and segment, were to was in declines which China. consistent the by

which by some the slowdown more business The business fire segment. and our Americas, small is markets. in hospitality single-digits, businesses was the our also the by with Within line of offset that security low are business at grew in declines down impacted the products field residential

As piece install restricted jobs, some across low in and service business. building single-digit recurring line, the commercial trends a continued repair in offset with of access areas. declines Bottom recovery activity construction effect partially of we and saw growth drove was by that on mid-to-high lagging the company the differing pace encouraging single-digit

programs. quarter each While target future have cost controllables continue normalizing target XXX. year, we the focus and Carrier increasing XXX this are we cost year management $XXX and renaming million on in more to success, this to provide Carrier for us and slide, spending market an and for unchanged. With on still position us the million program that previously help for do we investments our conditions, on million $XXX that On will to XXXX confident the R&D, accelerated see fund for $XXX now Please so. We growth. we you'll our investments to expect turn update in-year the of Carrier I'll planned sales, had the for controlling three $XXX observed savings have we in In investment plan X. Slide to that over digital remain years million discussed about three and aggressive XXX.

taken has much we quarter, savings as some from from cost to this we the year. updated as from $XXX executing been discussed You'll has the expected is from temporary and quite actions level, actions strong at resulted had headwinds last containment execution in Better as quarter down earlier volumes notice is bad our the that cost pandemic. last related we headwind million the being productivity $XXX in Also related absorption not a now that the million, well absorption of higher quarter, restoring because than fourth as anticipated. people issues business are the

expected year-over-year of and XXXX would for model million original at about the investments our was our containment Carrier we Carrier This of of fully and savings recall, on remainder next means to a you drop the X. reversal headwind benefits. will require portion $XXX incremental drop line growth savings in year. XXX our in impact With margins the through. cost If measures, the Slide larger for our XXX it generated bottom should the would fund Continuing from could less one-time

the focus strong ample in a which sale than by which billion see priority with driven our managed cash tightly flow, in the you we've capital. earnings pandemic key was $X.X helped partial on by this enabled We very liquidity. of Beijer. slide, on sheet, expected has the shares cash better has As balance on during been working and exited quarter maintain free to And our good as said, the was cash

the sheet, improved, we billion a repayment down on we market have positioned towards big $X.X With opportunities well stronger on the the in the year, and pay end before footing pandemic in environment. plan debt debt to to now from balance capitalize the conditions emerge as are a a plans. of returned As more step our normalized we to a healthy

to our and position XX, capital reflected experiencing. Slide associated in the result, ranges that we expect details our allocation guidance year. you were call, turn review communicate uncertainty a with to we I'll more next early QX the Please a As on climate gave priorities On outlook. economic to we broader our be

of and range, from and to provide economic the to Now We in the the based residential in outlook higher improvement. on this HVAC months we $XX.X was QX high what two we go saw is a can our guidance in you year, sales improved in the broader July. more expect significant precise gave about strength we end be than now prior billion

outlook which profit a operating This On billion I'll end $X.X high billion. range. the of prior cash and the adjusted flow, the $X.X from cash significant back expect before prior flow generate billion, is to net of XXXX, income hand outlook. capital reflects timing it that, also our The With management our few $X.X drop from a items. tight in up continued higher about of improvement higher Dave working the to expect with approximately at through we to Q&A. is things along least of biggest free We wrap now above driver sales

David Gitlin

Thanks, Tim.

unprecedented are environment. Our demonstrate through that we navigating results successfully this

of flow. We growth and actions strategic our mid five sales to growth confident focus driving high We our single-digit initiatives. on remain in continue growth, year strong while three single-digit key cost to medium-term aggressive cash outlook EPS

and With Given growth pulling the of anticipate XXXX, it next open questions. driven strategy base medium-term for up those year. that, the execution we’ll COVID we from the in disruption order trends lower recent our into rates

Operator

[Operator Sachs. Thank comes Ritchie from question Instructions] Our Joe first you. Goldman of

now Your open. line is

Joe Ritchie

Thanks. Good morning, everybody.

David Gitlin

Joe. morning, Good

Joe Ritchie

guidance better. year full the a just that understand to want little just I So bit

to the out sequentially that XQ as I about think it lot to think than we XQ about it going it and turned a mean guide. lower Just stronger is because turned be XQ driven I'm clearly out a trying just sequential, the year? is understand just anticipated, way So to to than stronger XQ by be expected I be this lot to XQ resi.

Tim McLevish

is transitioning I and in QX we a air from as We're into expecting bit they of of resi are QX mean, more that normalized favoribility. Joe. QX conditioners Tim. splits strong some Yes, of have Well a yes, XQ particularly was This lot furnaces. drove kind our

million we So And more going million cost. do company QX, year-on-year normalized anticipating, than spend remember, it in we've set but public we from saw we $XX that we bit effect will a that million $XX in $XXX quarterly are QX, our about investments. anticipate impact be have also from about to of of for the aside we're

it of $XXX You reality this question considerably. with hit, takes million ramp back-end an started why, so the might year we down better, we're things But that invest the COVID are reinstated the little it going now back ask we a scaled to of time loaded. and And back to ramp is, but before bit out as expectation, up. looking we

have we from kind about related of is to baked investment there as And transition of other we things in about our standalone UTC So $XX as hit. $XX of there company. million million public

So normalized that adjusting quarter. for see more much those fourth you would things, as

Joe Ritchie

cost this is, see That down XXXX, sense. Got Carrier up year. step the think about also stepping a Carrier the I to to my follow-on question containment there, makes Tim. Appreciate as it. color guess encouraging and non-recurring action XXX really obviously, XXX lot you of

next about that this less reduction also I from of the year, belief temporary Carrier the is on then and to there more and to kind year? cost think headwind margins the a is goodness guess savings cost XXX takes, puts going a be we took about think from As this actions of you way for from that than the probably especially

Tim McLevish

unbalanced, we'll stepped is that headwind mean, this going of versus that cover and XXX unbalanced I'm the a from to look of is step probably the we haven't COVID I Carrier the identified cost experienced Tim. from measures, a we investments across we those about a that the little then probably get bit, containment down than headwind at of impact would some a bit carryover, little typically you related the then average also we've million to remaining XXX the probably of but subtract set fully, Carrier of more Joe, if $XXX back on out – snap probably Carrier the the use productivity that And have some XXX has to still actions. not take document. it a – probably XXX, net travel we down Well, I and we will up to XXX mean, bit experience. year-on-year and will XXX our little already, remaining think

Joe Ritchie

in Okay, great. Thank all. you I'll queue. get back

Operator

Thank from comes you. And our Jefferies. of next Volkmann question Stephen

line is now Your open.

Stephen Volkmann

are wanted to think touch salesforce market. your of Thanks that kind best everybody. Or Hi, It I the those areas good share to where and compensation? something. pretty that people anything could talk in that. guys Maybe for that Thanks. kind salesforce taking question. I any about of appears Is the driving you've managing doing, think broadly, improving was you like share incentive you my these how you share there morning, Just And you on so the is done are process relative said XXX I guess done change gains? just is Dave, up else or now?

David Gitlin

first. On I quarter, look, Xx one mean, we we first yes. the overall hit market. the me were the resi gains, share XX% let Yes, really in grew

a So we at it's at fair up not, picked one I share in third quarter. time. think just But look quarter to really the clearly us for

at team, our Keppy, the distributors. look done a Nelson, on growth which marketplace. is picked indicator. I were job of nice of team and it into look, partnering said XX lean I Justin our you really a that in up to a we've have focus basis out with month think winning that And the period, Chris points think and really XXX we really going we If But a better over about share,

seen we've it side seen we've U.S. So across the just really it the furnace not well. on as it's splits, and

XQ factor inventory to with depressed our perform the and dealer into to were fact levels the some And the there channels, forward up year-over-year. sure in quarter a levels was the in it of coming to turn and that into had came orders to is heat part think the dealers, saw then that distribution make we provide our kind that inventory able was about spike I operationally July other look the were down that think could conversion. frankly, been June August. customers. challenge. we somewhat is sudden really units you we it of XX% And at into we I carried support And with We

Our customers have the done on a balance forward. But a gains, great is job that - working been with we pleased was the support us, it them. we've to sustain very but share going we quite did ramp with that key

more a Europe, which up had into come as adding and said, XXX our competitors, added XXX, to we'll versus this in of has we really is mostly in in I had more XXX challenged North as next to go been – the deficit services that's the year a the year. where those and we we've America on that much I in don't salespeople, it, China, applied think I outside space of both in we've and we adding global side, the very looking resi refer OE that there. we'd well that's been mostly end as think little some end saying into been phenomenon, But of bit at in a add of we the bit we add terms that's we've And aftermarket. think a them

Stephen Volkmann

to resi And call anything trends relative to October quickly out so then the Great. just in far? Thanks.

David Gitlin

mean to I give them to good. the orders in they when it. our so so see strong, product have distributors out. the October we've work with need to far that need seen they play have how we'll We're So things trying been

strong not have that, year, beyond. up schedule. remained and with our we managing and So for off continuing we'd of be to kind time down gear as working through and we're delivery we're support that the doing work on season XQ ramping to customers at we're orders this them Normally a

Stephen Volkmann

guys. you Thank Okay.

Operator

of from Julian our Mitchell And next comes Thank Barclays. you. question

Your line is now open.

Julian Mitchell

Maybe But good follow-up to – the investments. Hi, a on for savings say spin. help the Tim, morning. since and the all versus thanks want maybe question

of number So any around around check And that, and million implied the sort of you $XXX you Is as between of after million is year. million and you think year sort thoughts should $XXX talked of extra any investment, is dial around? leverage to baseline there just to calibrate said, after? we there split this million there And about previously. maybe that of and savings level XX% left I kind next operating any you that wanted in? $XXX $XXX of XX% the year minimum

David Gitlin

a Julian, level add Tim high and let ask at start me to Yes. then on.

that as think the surprised I but by start at you we said a would of that were of single-digits, me we've we high bit last couple do end grow even I let that XXXX the resi we ourselves that strength we we've a is the sales the line think is we mid – think about What kind couple over had told and ago would forward, the months. have on going months seen on side been top mid single-digits.

a all end have go, these that. incrementals you of parts next moving And be XXX would that still you year, of more XX% puts low then take the XXX costs that probably Carrier the single-digits, on and between in we've consider consistent probably we been year the range, have it's but that. after or takes year could our at so XXX, and increase to in So various system. mid And give

we going of million one-time And year $XXX one-time of headwind investments. because one-time – year. into this incremental the have the next have of million We savings of sort $XXX that then incurred we

at then mid the those what probably growing at think I you're really single-digits, the the sales. So on end drop looking sales through is and lower

Julian Mitchell

help cleanup helpful. That's some you, that and to of portfolio, of macroenvironment process the that stake you sale around you with steady my the with how I few would Dave. the portfolio you Beijer of sort maybe is now sort Do to a And second quickly back. to And question maybe and sheet of actions a think take partial try do rationalization? weeks be Thank think want delevering? that balance started pace conducive some then that

David Gitlin

consistent range that can shareholder our We've remained we long on plan. value Yes. is to execute the best do thing single create

terms transactions, that they of over but focus perhaps on saw the reviewed by it's use strategic take way great we've of for just a is is our by actually on focus. a with said in unit, our and we it look XQ, significant are our business within time, make in to but value we we cost we muscles we've assessment M&A, You our XX sure did really with that track initiatives, we including strat sure we've clinical side, growth done also and clarity some sort and divestitures We've And continue LRPs are the but performance JV significant at And that those then have our would the making confident JVs, all very board. the portfolio, really executing look new biggest to a bolt-on bigger we our And that and is of we create at very the of now we'll look which our the best culture LRP. laser some run transformative at that traction. capital. can done some using business focused reviews, some done our you initiatives, that detailed every getting we're take Carrier, very shareholder we actions on our that right

Julian Mitchell

Great. Thank you.

David Gitlin

Thank you.

Operator

question And Thank of Stanley. our from Pokrzywinski Morgan you. Josh next comes

Your open. is now line

Josh Pokrzywinski

guys. morning Hi, good

David Gitlin

Good morning, Josh.

Josh Pokrzywinski

but front? us not should the given in just what the dig a comp more a house. is applied want the Because on just there channel, standpoint little bit a order on keep especially at of mind? is should of inventory, to be anything in you where there know we're guess that into replenishment I flat, side Order there, pretty and that seeing David, construction, or spectacular of can from we least I it's anything really mix there business headwind. a tell commercial non-resi the

strong. as me being that So surprises particularly

David Gitlin

watch well, especially globally, think buildings, like restaurants picked up warehouses. a commercial acute a you and data more Yes. impact bit things when our applied, has continued bifurcated, commercial seeing some know is there not at hospitality, China there U.S. on some universities, but and real business. healthcare and a headwinds in We K-XX, like Education quite in real Look, that quite I item. retail, strength light strength of We're look only that has is the centers things it's

it it's So XX%, but about to of Architectural year-to-date Billing did XX% the a to of that when around we forward-looking one look indicator, business XX. XX, which we metric. at it XX, pop been Index, hovering saw good bit that up down is that encouraging north up ABI, a we metric was would we to Dodge only about see go ties our construction is like see

watch some it's So all you strong. item, is where together, a there areas it's I put when think that encouraging and

has seeing and leaned we've has share proud North continuing I think and really the to America gains, and been there recover. some been I'm quite into China strong particularly team of

backlog it's it. up year monitoring our into So but with keep going I watch item applied to have going and look a or exit business think we'll XX% we're around X% at to clearly next year, this I it,

Josh Pokrzywinski

like it whole then this very building And and That's around efficiency. collection into about energy And helpful. it. think Carrier remarks. sizing terms show of that and with industry actually some customers, group IAQ turned of kind discussion with up you for that can I seeing is this has of your sounds opening clearly Anything the in Got basin opportunity. part talk of

mentioned You there. opportunity rooftop some

I this kind into people of there various seeing us Carrier’s fall kind how question, of of of of Thanks. that know exposure. level there the and a you're I just slices maybe kind lot second. consider what that out set would is think unpack unitary most on kind first, in to would applied but

David Gitlin

I very time Josh, that tell with you would are that by IAQ, people opportunity. the the but trends XX% starts premise the of indoor. we seeing encouraged Yes. not spend It only in their we're

that's you've going if XX over double the amount the indoors. spent years at to this years on So next of years. square footage earth you you're look XX old, XX indoor And

the when have safe that light sustainable So sure something air criticality at environment. to of like making people look really COVID, you on shine healthy, indoor it's and

certification going the And ionization those been work round products, a and of about air types We're for filters out that, the new airflow way really whether there that to working or and indoor it's the it is more our the working is we've that we're pull. at twofold, look and and electrostatic then we'll ultimately more that top air really solution. safe on and the On per working air to hour gets is one and of are significant introduce like the on portfolio digital been customized more something solutions of things broader bipolar approached on be OptiClean, quality, solution independent assessments into So ventilation on get holistic about home. broader we've market filtration, changes changes. purifiers, healthy new UV solutions is

standard. HVAC a at we When billion our have this Fire what visibility market if environment whether that is indoor about say, sell we $XXX look IAQ And air is lot opportunity $XX systems, think that about look holistic I'd to tenants the billion. into, through rolling to we is size, or total the XX%. a that you market And created get not at additional out to in we'll up the that more be products we & systems, our here's way. question the Security So then and

that you So confident our And billion. $X share get piece. than can fair we'll $XX call it that of to one thing billion I I'm that tell extremely is more

traction, million, making real time some $XXX pipeline takes customers real it to we a I up, talked Now about build continue to of see orders.

it's but going time. it's that we certainly to do think to sites within our to up So over take time build number, some

Josh Pokrzywinski

XXXX, for Thanks there. like great so Dave. in I had that's color. myself speak can just much, XX feel I I've so And years certainly Hey,

David Gitlin

I’ll endorse.

Operator

And you. Nigel Thank Research. of question from Wolfe next Coe our comes

now open. is line Your

Nigel Coe

Thanks, good morning. And Tim luck thanks for chapter. next and the health good

Tim McLevish

Nigel. Thanks,

Nigel Coe

coupling guessing I'm today. too there questions be won't many

just the curious sell-through from of sell-through market from just any intelligence obviously Carrier there. your that channel I'm but channel? on brands be up how have to going high-teens, from And do the looks the you and impact your to But I'm I But your compared benefits the performance curious, it's back I'm that is just still back understand guessing so obviously channels? resi that. like out Because

David Gitlin

from the consistent Yes. movement what our dealers our we distributors to and been would track with We closely have thought. it's

the is inventory is about thing at our at encouraging ending the levels distributors would those XQ what seen think inventory we have I levels last year.

very going unprecedented we that up when happened to is there into what of and in at whole like XQ single-digits is it we’ll as next be single-digits, when you XX%, QX, high When up QX look year. excuse up the swings mid and QX more going for explain you But So this trying to XQ the the be XQ market – you XX%. we're unusual year to be down something holistically compares unbelievably next look year. get me saw – at year,

unusual So just an within year, incredibly unusual the not phasing year.

Nigel Coe

show. speaking that Yes. That's summer. year compares, the of spring then through I on you really the think tough with furnaces a and the had And of last kind compare the rebuild happens

just in is with So markets I'm that expecting you the dynamic, that well XQ, given both do quite to fair?

David Gitlin

range. should XX% I but would be guess that think strong to XQ XX%, clearly Well, resi, our in not the I XX% on

Nigel Coe

great the touch bit can weaker That's one little just than federation color. what on They then question, And we just more margins? maybe a we were expected. Okay.

what saw and [indiscernible] So trends of And expect to expecting truck strong we of as that that XX% come in we into terms the range trailer. XXXX, and margins further segment? there for be mix maybe wondering, you going to leverage. Would then just north now from

Tim McLevish

it. And take Nigel, I'll Yes.

commercial in First operating and what you decline of on between line. all, small CCR, line. that a There there. of refrigeration $XX modestly of of the $XX I and pretty about within to across was high the get Commercial call small and that. business, say, was small million law business it, sales There million bottom margin was a business top at the in a transport. bottom and flat when $XX down will were saved a profit our detrimental line, in our on segment down piece mix a had couple look XX% business kind charges and But Transport, other you the I for of refrigeration, you of the first down numbers. was all of obviously that decline million balance

really as we're nice very very way strong the a and up, but recover. of of say that I bottom that last see the explains at on transport that we strong and will – business, – we the kind for that we or the attractive question, will incrementals seen when you see back it would turnaround margin very see the incremental detrimental business, that is see cycle, the to your high So bottom have expect you

Nigel Coe

Great. Thanks very much.

Operator

Thank Tusa JPMorgan. question next you. comes our from And of Steve

Your line is now open.

Steve Tusa

Good morning. Hey guys.

David Gitlin

Good Steve. morning,

Steve Tusa

What for in was price in realized company then the quarter? revenue the for and HVAC

Tim McLevish

Flattish Steve.

Steve Tusa

HVAC? it. Got Okay. both And and for company the

Tim McLevish

Yes.

Steve Tusa

next said because timing Okay. When items? looking year grow guidance timing cash, how those those than less of you income you were you moved less kind bit – assume down What little revenues you're increase And think, than can of in do you items. cash I kind think net of I at some timing from but items? the to a maybe

Tim McLevish

in year, would we year-to-date expect the will where of out is quarter typically where we and are you timing of what in that if fourth see not the a would cash quarter, subtractive the is guidance see play kind actually of in Most method for use to fourth year. the you fourth Yes. quarter we the this our is what – of flow

Some we terms. is, strength long resi the terms of the the payable in relatively had and and receivables that short

tax back bit the of So maybe and somewhat flow into had the that cash deferrals startup related, you're as that purchases for purposes. them. some COVID fourth positive related interchange bleed those quarter, QX, first practical between a in we of next mostly then year. little a have for seeing somewhat a in the lot pay quarter also We'll of we And

instance, gain the sale for third obviously Beijer. quarter. recognize there's of We on of the So in $XX million million, the tax $XX

tax fourth We for it as then quarter. will probably the the tax $XX pay was million, $XX $XX another And timing. some estimates million in million, there of

working some tax So some really items, it's impact. capital

Steve Tusa

lastly, just the call on resi And market Dave, What's the said Trane of then the I quarter, singles, the it. right. Lennox trend timing the see, view think market kind next bit. got what's said resi of kind on mid level fourth here? your year? in a has on up high your I I

David Gitlin

Yes.

it think I range. up mid the into sort of feels low, it gets single-digit in that perhaps

you look underlying more think is the there demand IAQ. I think at some when do factors, I of for

the be up are conditioning construction. that whole we have at good more studies resi, look of strength mid underlying people fundamentals putting next this new should demand up really the, see, state resi that are spend next because their families for residential year. We their or that We do year, probably weather, construction have continue We'll air more you we've have year. see home And spending on the time prioritizing with position a to new They'll obviously people continue of mid phenomenon to strong, house on at their for driven into we'll home. additions about seeing A but lot that. see now. the seen

that certainly think will into continue I next year.

issues, and there's going mid-range. it So may feel the into be get up to but it compare low certainly would some

Steve Tusa

help you the of good out a in to environment very a public company and both on coming congrats pretty as to for tough Thanks. start Tim, sure. a thanks for all

So kudos on job. to guys Great you the execution.

Tim McLevish

Thanks Steve. Appreciate it.

David Gitlin

Thank you, Steve.

Operator

Jeff from question Thank next you. Hammond comes KeyBanc. our of And

Your line open. is now

Jeff Hammond

guys. morning, good Hey,

David Gitlin

Good morning, Jeff.

Jeff Hammond

just commercial couple service. on questions Hey, a

was high said single-digits. down think I it you

not Just resilient a here. little to get surprised more starting that that's

And you're couple you street. So a attachment then at outlook seem the years entitlement what's feet as just is comment, service look you think forward? do rate going encouraged, attachment adding the the you rates, on What out? of for on

David Gitlin

at rate. year year had get we're we XX% we'll and this thought to And XX test we going ourselves attachment XX, be this originally exit at was look, the XX. – we to Yes,

the what on will there. with the I have we're the we we at our AssuranceONE it. really, And do, really on focus and jumpstart keep rates. to us street, The away years, will of chipping say got getting see mentioned, of that is bit couple traction modernizations peers feet know help. our Look, their had over attachment XX% up I that playbook to program to just a clear, that. you next So like helping as a few getting we strong is number a things on

have a up, we So of it. We we in in confidence all catch we're but the what know know playing playbook, do. bit little candor, to

overall of at at modernizations backlog, look you right, pushing orders that to some you have some our actually If when about up the tasks. other because service customers we've look had been it's the XX% out some pushing and out

some see next we So into think growth we'll real year, get as that on service we the side.

Jeff Hammond

hear verticals just that just kind of the singles rates order mid kind and markets key was the are Okay. within of there? are And the that up, What of kind then on helping exiting to encouraging it that end kind backlog the backlog, got is the mix you apply year. this resilient. normalized quarter within or What of more or

David Gitlin

now, places places the customers education be right positive the And to it's things centers, bit It's in like that data they of really trends. helping mentioning – healthcare, you has around go fish in you little shown I kind some where a when Yes. are. it's where are warehousing, are, go fish, like you us. by and vertical. – location happen by was It's

have positive. those So been quite

light much replacement. to XX/XX XX%, business. Our commercial very XX% business is but is down a that's replacement

last up America, some a pick weeks. recent North over I'm we've have we come nice wins job. expect really, China to start the traction into share and in we And back, those few as seen continued the we as some do eventually seen So But very recover proud of They've get here really team. would even that XXXX. real to to – and

So get challenged here key even very I wins coming, in environment, North confident some a continuing that America. feel in to we're

Jeff Hammond

Okay. Appreciate the color.

David Gitlin

Thank you.

Operator

our Jeff Sprague you. Research. Thank of next And Vertical comes question from

Your line open. now is

Jeff Sprague

everyone. you're Thank day, Hope you. Good doing well.

David Gitlin

Jeff. Hi,

Jeff Sprague

with in ago. we're we on kind in doing core, data that bit little a company, kind Nlyte, center color the little thinking? agreement if kind the play too of on data first, a one you're questions, all center two could. top struck management long what of not Maybe just of incrementally ALC information on centers cooling an Maybe data weeds of

David Gitlin

Yes.

has centers of we area group data into a us. a focus kind for And verticals. had at number Carrier look covers it data It every wins. plays across is Carrier. a overall, been we You centers, key We've the one our actually when of that have which sells look that of story at big

and data business kind things a systems, So very like ALC well of others, solutions. aspects rest and include complete suppression our Marioff it'll many on our can from data of and include that Jurgen's play digital portfolio of that It'll it course purpose of security, chillers include, everything centers. the system fire for fit provides HVAC centers, for but

hospitals, building data when solution. look into win to same our group have have significant center hospitals talking we sells had we we're on. like verticals, a other we Emory we that a holistic where the for do at So University systems across the things with that that We now country

can group really look that offerings So holistic at

Jeff Sprague

in And Are just just year. we you. at million Interesting. then of some of the suggesting And kinds that. kind items, that's $XXX also to this be just might XXXX? question of of level run a CapEx a what investment that on spend, similar be into a follow rate Thank to on on kind up goes on up variance I these a XXXX higher clear or – incremental variance you're

Tim McLevish

Yes.

hit, the so XX, of of growth Investor you at start for XXX, changed into recall business and as it Day, pacing. XXX, investment if So and was it back to let kind me back we kind the on that dimensionalize that, position COVID then

So we're another of finish quarter, this may program third XXXX, we XX expect further will at then we'll there we most would fourth year. what the I anticipating the to-date have the from investment That quarter. XXX in we've spent expect And sense. and XX to to said XXXX, be earlier, Again, XXX In that we're see in out make hundred. XXX.

a contributes of baked flow quarter. kind year. what consider you of $XXX we fourth expect in From the spend that's into earlier. still fourth a might the, all the to weaker considerable what CapEx said capital standpoint, that, of do that's million cash this So in and million, we That also quarter $XXX

capital there there. So is considerable spend

will would out because back we recall the spend XXX considerably capital may said also Day, COVID. But push in back expect XXX kind we Investor as scaled do that that You XXXX. was into of to That of in we expenditure foundational XXXX.

see level would in So that XXXX. you

headwind So there will there. be some cash

Jeff Sprague

Great. Thanks for color. the

Operator

question from John Thank you. next And our Credit Suisse. comes of Walsh

now is line Your open.

John Walsh

Hi, good morning, everyone.

David Gitlin

John. morning, Good

Tim McLevish

Good morning.

John Walsh

U.S. about talked their especially they're announced, you green I'm some really trying what you to installed around forward? going that called big of you're Is about when commercial intact and see these China. opportunity is Obviously, out opportunity seeing are in France thinking that you stimulus Europe, curious a that an particular, or in earlier, plans about base. where being

David Gitlin

Europe. introduced very focus It chiller think but traction, in scroll sure the just that have seen globally initial acute side. probably strong air-cooled technology We RXX most we've some the sustainability that is. GWP our is early We on we

new with out year. next invest to continue coming We products

And things But we've low Europe. look, performance on focus order to critical we be some the COVID is little months. in play lean see think of the We'll I last happening does were with do a the Europe bit real team a out what's GWP is to offerings. to So trends continue traction Europe some in over going present into that an differentiator ourselves, we seen And to of have opportunity. of that, our couple in with how starting XQ, think gain I recently.

John Walsh

and the in right position market product the But it feel participate sounds that? the you to within like like right you have

David Gitlin

will We next offering have come, that's out mag-bearing the you we we have do. We feel I well that tell year. positioned. more a products on coming

in we and the to we afterwards. invest the get going and year as continue we portfolio. So into next certainly but like be innovation key to We products have, technology the year is the

John Walsh

taking it but the a separate of Obviously, investments asked call, for the of the that's XXX you on Great. And couple why than of earnings times. still discussion an a is on, you're I the into like as probably just much about kind kind then year, a savings. get your here, up seems and number question larger gave next question, investments. maybe we that think bridge right

of take And relative investment an we else it? we XXX equal, up to offset time to through that extra of or thinking right so before, you drop could kind million actually, all number were over what have that is

David Gitlin

the we'll Look, assess over to have the time. levels investment

bps that's we've mid we've LRP, an come level. ROS in does to that we take a And reign with would we've year. consistently investment expect said We it also and improve have where consistently up single-digit in, to XX what factored grow that that

– all but a I we in So tell new, that you in grow. could we keep very very are that at our algorithm, balance bit thematic but Carrier is something little going is that to

are going going growth them. we're going areas to to a commitments we're invest and on be consistent. lot make to We to starts. do not going fits growth in We're We're and of to to stick and going

John Walsh

Appreciate you. it. Thank Great.

Operator

Markets. from And you. of question Deane Thank comes our RBC Dray next Capital

now Your line is open.

Deane Dray

you. morning, everybody. Thank Good

Tim McLevish

Good morning, Deane.

David Gitlin

Good morning, Deane.

Deane Dray

to air buildings the that of you And and then what that of called the sales equipment quality and split would – if up sense piece? HVAC want that's the orders side first the of players. among are group the does appreciate make that size all does part of is. the just context million in forth. BlueDiamond healthy out of I it you give on opportunity should that between us the the Just and for assessment terms indoor so big we XXX recurring to the theme, that that you follow this, How bucket this And your

David Gitlin

that XXX the was Yes, pipeline. a

have actually typical that lights filtration Cushman – was Wakefield, ionization, quite significant. wise We've XX and number an focused with firm orders, of in a where we have bipolar often is the looking We've are really we would we kind into on our would we mentioned, significant. a & is the we've Southeast seen pulled and have it of another at where I like something, UV add-ons back. IAQ chiller a But were obviously we top review other with typical kind a order been OptiClean that this welcoming to through all sale a mentioned We was sale, have we they added Colorado, significant which of Asia project very orders projects where firm and I not And I actually, had where had number – very students been in they university were dedicated they're active other yet. others.

So look, some are order. firm

things his because side, have Some is the Jurgen be to you solution part that team are, of also COX looking your that primarily capabilities look I the of and or also – it some attributes intimacy, around at great piece kind a it's us insight the me, your smartphone whether those you're may IAQ, you for really will be amount seven ventilation those going that where give our creative measuring. The BlueDiamond into at. offerings. that that has but to levels seven think, and orders. you And are converted end really see HVAC And We you monitor tracing. into be overall for can other the at been attributes. firm soon seeing, gives on customer source how of the BlueDiamond can indicators BlueDiamond digital or and can actual that's piece were attributes that about contact to, be have your we'll use customer excuse looking to be

team have around We with FLIR and the Jurgen scanning. drove that announcement thermal

there's more of Solution. part Carrier attractive So are attractive, become a in portfolio they're but a when things lot his number of that the

Deane Dray

last look, just we're to in one I of top hour, know I the squeeze And but did the Terrific. at question. want

a interested ESG yet. public of top haven't you the scanned stock. this are be really has what in peers how start favorable expect HVAC demand is the expect – seeing terms happen be you Would Your community new within all new ESG we as position all that the company, interested to and will you XX Carrier? holdings, before in cracked in considering to ESG you'll Carrier But for sustainability the are investors

David Gitlin

Yes, – ourselves specific with question going up folks think and Obviously, will be ESG about we'll Deane, we our you around quite D&I, elements from that and focus very the I'm targets that's believe it's on on just operations. pleased D&I reviewed in year, really everything big glad where and a how all publicly. how on includes going our with it sustainability. the But various had that's impact ended I be energized be just releasing targets. sustainability that moment we In our into And to we're around other our deal that we're to, profound aspects board, this will we to our I'm and suppliers be that us stepping we've committing by And diversity leaned because inclusion. that's be sustainable. own of

on very, will top differentiate Carrier, thematic looking basis. And the for be this to ESG it's our very think space, would us we're So you for to I expect within think really I quartile ourselves. thematic an be but

Deane Dray

Great to you. Thank hear,

David Gitlin

you. Thank

Operator

ladies you. and does now closing turn Gitlin conclude to back Thank any for I gentlemen, our session. like this the Dave And remarks. would question-and-answer call over to

David Gitlin

for thank questions. of of course, beyond the for all. the And thank Well, around is Thank rest and any Sam you day all Okay. participating. you you.

Operator

participating. this today's call. Ladies you for gentlemen, Thank concludes and conference

disconnect. now may You

Carrier Global (CARR) 29 Oct 202020 Q3 Earnings call transcript