Earnings call transcript Q2 2023

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Operator

Good morning, and welcome to Carrier's Second Quarter 2023 Earnings Conference Call.

I would 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 second quarter 2023 earnings conference call.

With me here today are David Gitlin, Chairman and Chief Executive Officer; and Patrick Goris, Chief Financial Officer.

certain relevant on performance in business. discussing management call, of be are believes assessing will non-GAAP this measures which the We the financial non-GAAP website at in GAAP is These to ir.carrier.com. reconciled presentation, available Carrier's earnings which figures from download are measures our to

any details are filings, reminds and provide subject forward-looking and important and Carrier's that SEC to Forms could results flow listeners provided XX-K, cause X-K, statements company statements. from to sales, earnings risks forward-looking The cash factors that differ during including XX-Q the and those on the expectations other the call actual in anticipated uncertainties. materially

the question participate. Once that one and ask one we follow-up everyone for is to call to questions, opportunity to you limit yourself give open the

the like to Gitlin. that, over Dave CEO, to our and With turn call Chairman I'd

David Gitlin

good Thank everyone. you, Sam, and morning,

transforming," Our I are well "performing with and both. as am proud theme remains we at our team progressing Carrier while of

Slide in You performance see that strong results our X. on QX

grew industrial Organic global truck and double-digit aftermarket. commercial residential, broad HVAC, commercial X% based We growth Fire and Security, growth trailer, and in across sales controls strong & X%. up with commercial Within and and drove growth fire. was Security light & HVAC Fire security, both

cash came Carrier productivity track historical over was stronger Total increasingly to at adjusted Adjusted free operating Toshiba on gross million in strong XX%, expected, performance $XXX of this in was and $XXX EPS and levels, company million. profit are were deliver Price/cost than QX, well flow year. we on positive backlog a remains above and respectively, and XX% up two-year stack. up XX%

year for EPS. we operating growth, of are organic result our half margins a strong and raising our performance, full guidance As adjusted adjusted first

growth X. secular climate in being our to unwavering A Slide we around and backlog growth you trends our team global continue sustained sustainability into sustainability-driven leaning is leader from clear intelligent the the key see solutions, see focus robust healthy on and on result With as and initiatives. traction of our buildings, driver and our energy of organic

in sales XX% double-digits pump in sales saw Europe, in doubled up Europe. heat America over units pump commercial of in another transport heat North and been growth have electric we Resi year-to-date, quarter

is buildings part billion, in were up up $X.X driven U.S., pipeline XX% quarter. Xx in where healthy the by over to over K-XX in the Our orders

to We positioned sustainable planet. transition are core a a clearly of the at more

continue to We half moves, CDP. XXXX the our portfolio our to which now report on to our XXXX, emissions After We sales sustainability increase. published to while more ESG operations. of in proportion that carbon progress X track own expect about in reduce yesterday by and by we clean completing tech, remain relate directly our disclose neutrality we than achieving our will customers' gigaton through carbon

on to year gain remain X. with first yet solutions continues mid-teens and digitally-enabled QX on we laser-focus track as and half you aftermarket double-digit Our growth quarter deliver another saw aftermarket compared Slide the see last to traction year, to of growth beyond. on this up double-digit

and our Lynx, and across working: portfolio; expanding and rates; the and agile connected increasing rates capabilities The increase deployment and digital attachment Abound sales key coverage deploying pricing overall by supported to playbook increased is and the revenues. fulfillment devices platforms; of part recurring improved subscription-based

AI failures, set controlling air equipment energy data solutions metrics, AI temperature our generative for can We're drive prevent help drive patterns also improved quality air strategies. by controlling ventilation, into to performance generative By rates efficiency embedding and scheduling point, AI flow and and Abound and sensor customers. by capabilities increase analyzing

progressing So, our execution is well.

get the to we Solutions, the more X. know close. Slide excited short version our are brief more we on update the On A portfolio to Climate is, on them, transformation Viessmann

running ground actively working is hit the planning Frankfurt integration team one. Our ensure we on in day to that

Climate is very of their projections. Solutions well, Viessmann performing ahead

half and sales remain profitability of on in cost significantly XX%. EBITDA Solutions' also pump heat Viessmann confident and billion this First compared up up over million €X with up €XXX impressive Climate remain €XXX year-over-year, and chain, is primarily track million they sales XX% to an were last We value the year. sales in in synergies, supply by engineering. deliver to insourcing driven year

European areas for Viessmann's expanding Viessmann's energy digital globally, incremental even a platform management The business through offerings channel home more building opportunity provide is end-to-end growth compelling. The strategy, solutions combined globally. multi-brand and heating differentiated sales include and the more sustainable prime Viessmann's driving on to even using focus

good Security and Fire the expressed have these The in interest that Moving strategics commercial exits. is superb refrigeration & news to considerable and sponsors assets.

exits. to We these we've sequencing tracking the for established are

to have expect a business systems, Fire Profoid Residential later. and in initiating with in security process including Commercial commercial market the the will follow. mechanical sale refrigeration, month exits so and We September, Residential now or Fire its

Carrier Slide Toshiba the The X. Solutions, in Viessmann and attractive has growing The acquisitions champion with entity to Carrier of result the position over tremendous new that on century, Carrier of a very past see together become climate the combination that global is positioning and established market the combined Climate segments. the you true

our matters. And differentiation Focus a as position pure-play sustainability, on high-growth us focus company.

our talents and technologies come. to for people brands, planet and create Our generations our the combined world-class customers, will for channels, solutions

Patrick. it And, with Patrick? me over to that, turn let

Patrick Goris

Thank everyone. and good you, morning, Dave,

X% will We XX% had QX impact to X% growth reported segment's year-over-year sales, results and of a negative up Fire turn whose had acquisitions not the organic starting was point record Toshiba X the divestitures & driven with in to Security company to August. substantially deconsolidation year, sales. The but X. from versus reported become Slide Carrier, KFI sales of about organic was billion, growth. total by prior material Please $X

productivity year. includes quarter was basis operating profit and in Adjusted QX XX XX.X% TCC basis up to headwind prior excluding points, and in TCC. consolidation XX% as impact margins XXX operating expanded adjusted the means from price/cost, of strong the have well margin as of the volume, the about from $XXX Toshiba driven Carrier. was a adjusted would This million by operating point compared the margins consolidation,

in $X.XX about expectations, the Adjusted sales, quarter. mostly of was XX% was earnings Core of and because stronger-than-expected of EPS price/cost ahead our performance. TCC conversion

generation Free cash for up us reduction. This compared to approximately full to year. year, inventory $XXX the free million by positions of $X.X last well was flow deliver significantly helped flow of cash billion

You will related Viessmann with U.S. include results impact associated the the adjustments the acquisition. notice hedges mark-to-market of KFI, that the foreign our and currency GAAP deconsolidation to of

the euro-dominated purchase that the recall may we fully portion You cash hedged of price.

our hedges loss As of yesterday's non-cash QX would neutralized. these adjusted We the results. most the rates, exclude on be items of from

to our segments in growth in performance X%, aftermarket XX% by more X controls, Organic up Slide and commercial to had an double-digit in detail. performance driven QX. HVAC growth turn HVAC, cover please over in growth Now, were light excellent and in commercial. sales high-teens

quarter, than North North we in mid-teens, we realization volumes residential mix expected. bit the benefit from to America and America continued residential XXXX adjusted as weaker transition. to the residential up mid-single HVAC Overall, were slower-than-expected sales the a digits quarter. revenues price were down down SEER in movements from

a point basis operating TCC the basis by Adjusted last for margin compared up price/cost. despite points to up XX to compared and productivity, performance headwind year, XX% Adjusted segment of was consolidation from XXX operating last the favorable volume, TCC. year, was driven profit HVAC

now on guide Residential commercial All strong to XXXX to our closer the three HVAC and XX%. over versus businesses performance, Based we full half within comfort XX% segment light prior solutions. be expansion: first expect commercial, HVAC global margin had margins year of

closed on we Toshiba that transaction Let brief year a Carrier acquisition one to Slide as update move me our X ago. and provide about

EBIT. committed timeframe. As achieve mid-teens acquired five in Toshiba a $XXX cost to projected years We same million, that $XXX EBITDA in and million XXx reminder, we Carrier synergies about margins in for to

is is of running an projections. our performance and outstanding Our job ahead all doing Tokyo-based of team

Japan returned this earlier to year. profitability

EBITDA cost their the We are projecting performance would double-digit using team course, mid-teens. achieving high-teens are, margins experience as and $XXX that which than for excellent of rather and million are playbook In we integration. and in we short, operating the Viessmann plan now by management of synergies, already drive margins

organic quarter. in sales The down small we the Refrigeration quarter the down with a on Moving Reported is Slide divestiture to in discussed X%. XX. first X% sales were difference

digits transport strong was roughly by XX% was performance truck/trailer up in America down Within was sales the quarter European which North trailer double offset container, refrigeration, mid-teens. continued truck This were than more up and and year-over-year.

these we expect more units we QX. sequential continue Importantly, to in sequentially QX and improvements and delivered container

Refrigeration in As result, sales entire year. a we half expect container and segment business the organic to to this of the second the return growth

to as European food to cost job our improves. and as customers team continue position top-line strong pressures. refrigeration performance year-over-year retail a financial great high-teens is The down base for adjusting our doing the capital managing commercial see working business was this refrigeration Commercial

absence refrigeration, second Price/cost last year, to container basis operating the of margin million was declines commercial in due down quarter. gain favorable. Adjusted the volume the and year's last in points compared $X XXX mainly to was and

Excluding sale sequentially QX the the Refrigeration we this segment progress one-time operating basis in QX gain the first in pleased points made quarter. on margins from are adjusted with XXX grew for and the quarter,

growth X% on XX. fire. saw from was industrial We up offset & strong basis. X% security X%. currency in were Organic and residential double-digit and across fire deconsolidation organic growth Fire including were F&S the Moving and on portfolio, commercial This in sales digit Slide decline by to Fire a & KFI. sales high-single up partially a of on the Security growth a both reported Security and X% a

and volume adjusted as from was margins the XX KFI impact adjusted Adjusted $X.XX operating year we of million, of operating up points by KFI, the the as up prior headwind operating for basis year-over-year or bps quarter Sequentially, deconsolidation mix XXX offset expect to year, were down the margins in improve the profit the progresses. productivity adjusted which was about $XX includes favorable and and year-over-year the of Carrier. X% versus deconsolidation. margins about price/cost, were operating were Adjusted which EPS

times orders Turning XX. Total in Slide business. as down quarter organic company lead the digits continue mid-single were normalize to throughout our to

healthy next are levels, Xx backlogs and and reflected remain longer-cycle As see strong the levels, in rates. XXXX our order year. believe into We you businesses, very supply for our left, that can about backlogs chains normalizing on at extend

HVAC HVAC down both excluding digits, some declines. but backlog down to robust in sequentially, X% and with XX% orders mid-single were Overall, orders NORESCO. the units business Commercial were quarter remains grew the seen

returned to orders month, commercial growth. Over have past HVAC the

were were orders Refrigeration up with truck as in by demands recover. and declines in those refrigeration strong sequentially demand and and refrigeration. orders commercial transport decline growth a container. about XX% up with quarter Container orders offset in flat above to were remained the begins partially Global trailer The XX% in

With down were in orders and strong in the security and were fire moderated Orders lead fire, times improving double-digits. in quarter. industrial remained up and commercial

we light than primarily moving We Now, expected. couple by XXXX on better on a Slide half million with increase mid-single in Performance than the XXXX XX. of to hundred growth. commercial driven be The commercial higher digits billion to and net of somewhat dollars guidance price. now and first is HVAC, more expect $XX was organic revenues

a expect be about guided, previously XX% and we at $XXX million what adjusted now positive expect for be driven by performance the improved organic We margins between little We year. full better sales, and year price/cost than higher now Toshiba higher operating to to Carrier. XX.X%, slightly price/cost

by As range. adjusted the we despite from of guidance adjusted our year KFI, range new are the and deconsolidation mid-point a to full we $X.XX, be the at result, expect EPS adjusted a of headwind EPS $X.XX EPS increasing

Slide on For adjusted bridge benefit, guide-to-guide included your XX. we an EPS

to As to $X.X flow, generate expect we this continue billion to free cash year. approximately

for So, quarter good overall, outlook an XXXX. improved and another

back I'll turn that, over With to Dave. you, it

David Gitlin

Okay. Patrick. Thanks,

correct first me something Let the misstated exits. on business that I

month then in and to a so security We and fire expect market fire refrigeration resi later, the or will September, follow. commercial in and have commercial industrial

just the Q&A, moves in we organic secular get portfolio are HVAC price/cost transforming. schedule; mid-single-digit schedule of for our first performance us So, and growth of Carrier declines, adjusted growth, resi helping full Viessmann guidance further performing in we tracking our and we've adjusted continue confidence drive EPS. while upcoming XXXX; operating Toshiba summary half giving to into in investments; improvements continues margins well and year trends Despite and are realized the demand; before is focus aftermarket ahead are productivity growth funding integration; raising the we and operating are margins organic to exciting and

the will And, with questions. we into get that,

Operator

Research Instructions] Vertical Thank comes Jeffrey first Partners. Our you. with [Operator question Sprague from

line Your open. is

Jeffrey Sprague

morning, Thank Good and Dave you. Patrick.

David Gitlin

morning, Good Jeff.

Jeffrey Sprague

look of wrangling play political incentives morning. on pump love on the view in that would and the forward Good view plays Dave, kind couple on heat you years. how of next the your into or Viessmann your as into in kind of does Germany growth related not

David Gitlin

see clear April, more Well, keep after business legislation out. German mind, you heating the previously, the regardless continued a approved being proposed which in will we're case. we Germany of confident in now the pumps. in to be see Viessmann mean, was thought specifically already that's is debated plays proposed to heat in us. growth And our what going we're district how going transition I had legislation may We're than -- to see good for we well

of So, what saw case over-deliver. legislation. less by year. growth, I mentioned, XX% without this we we their heat the way, pumps that legislation under-promise XX% is than business growth Viessmann and the stands approved first to is sales. Germany proposed half September, overall in of of in XX% total gets And, whatever is fully continues regardless what know intact what and do in perhaps And that's our the

over I just think, it's XX%.

XX there in heat fossil XX total have European announced countries And more bans in XX bans fossil broadly, countries pump that newbuilds. for have countries on or fuel Europe, implemented boilers fuels, are have incentives, on

look, monitor So, to PV, remains legislation, continue confident. towards very the our towards towards we'll away competence from fuels pumps, the batteries fossil in heat solar but electric transition German very, specific

Jeffrey Sprague

better you on more a headcount big question, reductions guess, maybe but culturally, Viessmann. part link are think difficult, at (ph), spirit about you're the not and right, done my [TFC] bit capture. what a you've is I you Viessmann could those and little of is, are sport and, don't synergy also, seeing (ph) indicating the between then, of And the elaborate And, -- [TFC] I

elaborate maybe that to you by So learned and on what a little lessons you're Viessmann? going that mean to just bit apply playbook

David Gitlin

representation, one team the together drive the Look, Yeah. playbook first cultural pulling has in aspect multi-country for been with our of to TCC as a results integration customers.

what value breaking creation. really very and at been not team what look just working the focusing being works well extremely done and Siddiqui there, sensitive have to on what's You Saif well culturally it's and clearly

insourcing. higher headcount do similar had terms the said, we far Most of in $XXX constraints the million. there of the $XXX engineering, looking from than with are sourcing, from We It's coming as for which, in TCC. it's that least, value same of Patrick Germany. at, from at now We're be areas. Japan coming synergies will some coming million kind That's of elements

So, that playbook same applies on side the synergy there. cost

tremendous Heim that on synergies Solutions the has cascaded revenue look, want we've tremendous technology phenomenally globally. to be include Toshiba cascade a seeing well-run be will We also Viessmann side. running the has Climate Riello. to business, which culturally globally. sensitive. that we're -- very is plan our But company. technology we will Viessmann Thomas And, tremendous Climate Solutions European

we areas that anyone know Our worked to in we to to here. work they world, do make the creation. goal is value that combined than how for playbook allow look what will them go do of better and Toshiba while sure with That's same

Jeffrey Sprague

you. Thank Great.

David Gitlin

you, Thank Jeff.

Operator

Thank you.

question Tusa next Our from comes with Steve JPMorgan.

open. line is Your

Steve Tusa

Hey, guys. morning. Good

David Gitlin

Steve. morning, Good

Patrick Goris

morning. Good

Steve Tusa

commercial. turning Just resi light and towards

you do you to first the where quarter? were in channel where inventories resi side, the see relative On now

David Gitlin

being down and portfolio on resi quarter. of we of HVAC digits. Steve, that's inventory XQ we liked. closed were of we digits. saw questions were grow been would and And that, furnaces do with the we half. that get what the saw look there in expect have Splits with mid-single balance. a underneath mid-single Yeah. is saying destocking course, it's what Steve, basically We down that at know, our in some We that, broadly, XX% second about you down grow, can resi than more in higher and say X%, levels, lot I'll obviously And When we we've exactly we last resi

had resi the second was That about to of full remember, we high-single than where down be XQ because with are in a you bit still year, wave right business. for that So, the the feels splits will better we will into which construction so. look, for lower That as half, calibrate some though we that but digits. help recently, the us, we more thought, the XX% going destocking XX%. to of came movement, down when we rest little into had will to the new down or be on replacement year, We sales XX% residential than it see the be closer at even look for will heat level thought said will piece construction we our obviously, translate -- saying, year it's thought, flat volume we to like new probably looks

look it at of of or But the zone. And, trends. some year, down it we're easier full point it be in the pleased two remember, still with we half what have could being we the mean, the we feel So, second instead a still We're comparison. I as flat, we said. calibrated -- of year, the in perhaps. recent could in

The only terms in in of other on splits channel. say is, I'll sequentially thing inventory levels the inventory levels was down

Steve Tusa

then, are commercial, next And numbers commercial. on that tough I a obviously, of lot. backlogs but mean, pretty big light up big driver like pretty like, the comp at numbers, backlog, And a year catching even some on up you're light like these what's for These all? is are that?

David Gitlin

commercial inherently could Christian more sales a not Well, how differentiation. pleased look, anytime Justin and in a you with it's think, invested good -- example you we where we've be it's produce tough comp. team XX%, look, over frankly, I are and create But, the of doing, light and technology

whole been lot and more fan, share about to the of there's a remember, mix getting proven this other half about there in was Because, involved about of residential other growth right talked was help and take things. talked generation, results a than the far axial which light we've and of us previous but and share seeing gains. has like in about are way, sales, that half in a that energy-efficient vane We mix price We've commercial just because and price. bunch We piece. is is lot the the XX% volume

overall, and performing in XQ But very the but XXXX into channel us well. light compare versus it an year, We'll XX% to coverage over So, of terms commercial, Backlog of news is there. last up track in -- backlog is very wasn't gives is, XXXX. year-over-year, of through the that that extends strong is team rest good the robust. levels continue easy inventory it

Steve Tusa

a Great. lot. Got Thanks it.

David Gitlin

Thank you.

Operator

Thank you.

Our next Barclays. Julian Mitchell question with comes from

open. line Your is

Julian Mitchell

Hi, perhaps the around first the earnings cadence the within of morning. question for of Maybe half. a good sort second Patrick just and top-line

we So, the sequentially should on is then front, and year mid-single. in a the down? sort organic up I half And and sort organically flattish low- EPS to then be thinking sales that think you grew of digit first then, of mid-single is normal QX step

we way year-on-year kind about high--single acceleration QX being don't in do I the know, to is about or think So, of digit, an think that sales? mid- up,

Patrick Goris

on profit an QX. that think, closer the gets Julian, effective of operating tax rate, EPS you basically, will similar be that's being XX%. difference think to or question, similar, to we in $X.XX first A below. the QX very be you And maybe can in key $X.XX than will very

that that so after have to. you were normal referring QX you And then in drop-down

of sequence. So that's kind the

course, which better assumption. QX. are we've growth QX than which would now year, for little would Similar in the we a In means QX, weaker. balance, then that the growth organic seen of that of expect in current we in our terms That's we as before. And mid-single be be had organic which is mid-single low- to QX the at full digits,

Julian Mitchell

question, sort the supply you backlog looking trend on at to because the times we clearly, around the thinking thoughts kind here lead moderate thinking you're just and, times different of side any as just Thanks of six when aggregate rebalancing, naturally have from next, much. and about that, second XX at call trends markets And lower geographies then chains? backlog how chart shorten. left-hand Just months, very it, of Do where the different wondered backlog please? But XX, Carrier. for normalizing about you're the Slide my see

Patrick Goris

to what we what businesses I we're at is at. think, looking were it. Then, looking that it Julian, depends

shorter-cycle some were that backlog. weeks residential the at look of example in A HVAC. seen we've than quarters you few more If would ago, four have probably talking maybe we is our six one of best Typically, and backlog quarter. businesses we

have get four that's residential six-week for seen And example, chains so, in HVAC. to we've backlog you normalize. supply in that order We're for, the as don't as an normalized, adjustment range backlogs those we've the big back and of and seen declines of to that year-over-year orders some without intake, the why normalized

for strong see like there will six some So, of At some normal businesses growth and longer-cycle the of short-cycle see level. we more I continued see cases would longer, have that backlogs businesses, HVAC, months, demand. a and time, some those businesses, our same expect back -- are to in we we some backlog there are that continued commercial

David Gitlin

add, over issues, is is sort environment I'd of not couple best seen chain What supply trends look projections. indicator we've at growth Yeah. Julian, purely of at that, years, future that the of COVID the really order into if leading anomalies year-over-year of looking the the you last

& still some what we've the backlog lot looking levels, good pieces commercial, So, longer which backlog HVAC, feel levels the Security, where is and of Fire of we very commercial, light we like a with are. about the been

have So, support about we rates feel do growth those. growth our we we're backlog good order incoming the at, to projections, and do looking and

Julian Mitchell

Great. you. Thank

David Gitlin

you. Thank

Operator

Thank you.

Our next question comes from Markets. Capital with Deane RBC Dray

is open. line Your

Deane Dray

you. morning, Thank everyone. Good

David Gitlin

Deane. morning, Good

Deane Dray

the say, price/cost, that there of material the that, Thanks. some the go higher dynamics million, pace $XXX through And quarter as mix to take new much mentioned the hoping decompose can what you well? was, you the of the SEER. how was Could pricing then, through I raw and better the that? -- price/cost was in improving from you us let's if Hey, contribution

Patrick Goris

here. Deane, Patrick Okay.

part points. think remainder that organic can the terms had, think X% mix, as think the of of the as X of we mix pricing being you put points, quarter, we and X of of so up volume being the volume/mix In the growth as about and

kind that's for overview the the of quarter. So,

probably the price some -- year, that than full of the it year. less to as from course, be full of year, we we which think will For won't little be price X%. We to closer a is, last the X%, for the realization it increases expected lap be think X%

then, the was? And second question your of part

Deane Dray

you pace -- improving the of the price/cost. said Just

Patrick Goris

Yes.

mentioned that on price/cost recall a QX, in may year. It positive would that margin, we we that was the weakest said operating few positive. basis price/cost You modestly has of be our segment impact the of points and tens QX

can think You year-over-year, now XXX bps expected. and about better of QX, price/cost it's what $XXX for million is full than million being positive closer benefit $XXX basically versus the to so we prior guide, the year which in

equation, better. of is bit both -- price terms In a little the

On we're the best, impact is pluses minuses. the the where some most cost we logistics. on and favorable probably side, The area seeing see

Deane Dray

All right.

Patrick Goris

equation. there Yes, minuses but the probably logistics the benefit cost are plus biggest we're on where the some (ph) seeing see we and materials, [similar] there, and is area freight

Deane Dray

side sale keep going you as from the And how helpful. on pending? ball how a the Dave, and there is do you keep this, real then the change one is and you do a focused ownership units management And of just forth, the just processes in on follow-up. when so a this the really to each here? helpful. And eye which just lot That's on specifics gave of timing

David Gitlin

for and we generations value in hands sponsor Jurgen And in is to & will do, professionals. working people Marcus we who's on create they know, these they're that their team strategic core a what know either refrigeration, which phenomenal to of so opportunity true commercial the Security, Well, have they refrigeration. a his Fire is who Fire in commercial a team and someone for what the or for the with are & Tim fortunate both Security businesses come. of

value. day, So, we're why well. and every are members the so very decision create a very come was reasons lucky. with because parting the performing their customers and put tough, that for do down It's to job their team we phenomenal heads of They're one work

lucky very and we're them the been have closely I've we've them the businesses. pleased franchises, with We vision respective So, people. brands. with that their the interest, teams. great to to shared of for very, phenomenal work paint future in Phenomenal level with both for

it's uncertainty value we and So, company us for as customers spun, we knew know true for from us amount and and same create was But spun Greg when the fair there knew as our an that, independent will a like we Carrier just would be of UTC. them. that,

Deane Dray

you. Thank

David Gitlin

Thank you.

Operator

you. Thank

Our next Research. question comes Nigel from Wolfe Coe with

Your is line open.

Nigel Coe

everyone. Thanks. the for Good question. morning, Thanks

David Gitlin

morning, Good Nigel.

Nigel Coe

phases Patrick. been price I go to have And terms that want be XX% just commercial of a light that and maybe million price back bit much of granular growth. maybe would mix? to mix, maybe can $XXX is How of you Obviously, if how the just and through more the year? in price/cost,

Patrick Goris

realization. split would up and mix price for Yes, light equally between commercial, about remainder more than half the be volume and the the

little can the QX. for will mentioned mentioned far a full think about stronger QX bit QX. I The $XXX than it, by price/cost, will is year, be way million weakest Nigel, full XXX for -- you the I on and next year, quarters benefit think was then the And similar, I be two bps

share quarter. exact second clearly, quarter, pickup I the but, seen we've numbers So, can't in by a the significant

the that a expect similar to the be We year. perspective, for year-over-year for year. margin QX, continue will bps XXX to QX, from to QX get And margin the impact the on

a QX, basically, every of little the That's QX. kind over bps XXX So, granularity have. I quarter, QX,

Nigel Coe

package rule interest clearly you mean, process? seen great. from strategics, based can for I the out spin of of is potentially is Security Do question, indication portfolios. refrigeration, the at fire are back the but Fire out both XX you've & follow-on you know Patrick. many you a the still to the whole now KFI And there's then the but Chapter That's parts for there's factor commercial there And a on Thanks. and coming Thanks, whole buyer to this maybe assets, sales? where I PE think my gating assets? a the point excluding

David Gitlin

industrial we'd and targeting and the Nigel, would I of those divestitures. way We The in that those a commercial business Labor mentioned refrigeration it, three. two after for security bit fire, is first the Yeah. having that those then We're Day. have describe will be the market

the having So, in out plan month later, we the also be we're And or also a -- those will to September. end so before that industrial that of fire a divestiture. and market targeting will then, follow

a spin, we're And go and and can first They can three the different those of we're fire can on focused forms. forms now, going that weighing portfolio. deals whole try of all those directions, split options executed and through here divestitures, bunch progress to those to our of commercial of on we're take get with to respect And those. primarily still The to of the pieces be in signed a make in those. be weighing like residential months coming lot different right take and But, all that.

they've And handled course, appropriately in of independent Board our being, terms by well of the KFI of process. process, XX progressing that been the KFI. sense that's It's the and Chapter through

the the with all Creditors F&S AFFF that Committee. And, since was litigation of also been of came the consent and then, AFFF automatically upon of claims KFI against have All filing. and the the stayed against Carrier stayed,

the anticipate XX themselves the So, KFI, sale do sell next as that against anticipate months. for whole next of as would we to will for And do planned. Board KFI AFFF will the other they the proceeding the Chapter entities. lawsuits year, resolve discharge then, carrier the which and process start process KFI begin within is We that in couple

progress. Board I think, progressing have I it their to as that's would think So, expected

Nigel Coe

Okay. Thanks, Dave.

David Gitlin

you. Thank

Operator

Thank you.

question Ritchie from next Sachs. Our with Goldman comes Joe

is open. Your line

Joe Ritchie

morning, thanks. Hey, Good everyone.

David Gitlin

morning, Good Joe.

Joe Ritchie

times? with comment. on far normal do we off to And just -- expect are lead when normalizing how normalize? Just still starting you the fully maybe times curious, that just I'm above lead

David Gitlin

still for to come approach a by levels looks said closer, has that to it Joe, normal. range past we've Light is down, the getting four It's six Patrick bit range starting commercial normal. to those like six-week business. little in It to of four be And in varies resi. -- seen would of but that it's normal. resi above kind closer kind

places In varies traditional in and normal, we which almost China, little see is United like some higher in strong HVAC the operational commercial next That address, year. underlying making region. the been of but some levels. we'll States, levels a But And a until challenges it's on facility, beyond our hard this closer, has and that But well working into to issues. still backlog had those Europe team a bit be very get box, very than would backlog. year Charlotte of it go we've the in above continue has backlog to fully progress the lot elevated by

in make we to have site nice that more issue. it's need to progress backlog, the So, chain do particular the on but supply still

supply traditional So, kind our overall levels, it's varies but on it it bit little getting performance. a by in general, to by chain closer of based region, and business, varies

demand some have What the where in doubling is I still will because we're one fluidity processes, our that chips. a down add, basics. side, some things Joe, sales is we team lead the doing on with is We longer planning, [SIOP] operations on that there in environment times to help brought an and like thing for inventory new our we're (ph)

so the can to they and and we very focus middle for we need they that's what get planning, with inventory whole in our customers us a have stuck materials want and give they not agile when it levels, internally. and been So, need what need area demand

Joe Ritchie

maybe the the backlog. sequentially. put words want commercial It started Got I And to in guess connecting dots sounded had like to It grew don't reaccelerate, to was it. Dave, with good backlog the I business that mouth. sense. just hear that but your makes

order So real just on time? talk to there us the trajectory bit just the ground seeing you're little and what about maybe a

David Gitlin

Yeah.

the think HVAC? Joe, commercial, think, I mentioned that Patrick is with question commercial respect I about -- that to

Joe Ritchie

Yeah.

more commercial applied say and would broadly. I Just

David Gitlin

Yeah.

past look, I to seen we've was nice demand four over think see weeks the -- it that positives. or so, that

You mentioned cases, for look North I and incoming some America, an well in have go at well commercial historical orders. that the we example, above business, in -- still have, beyond effect HVAC as does that on levels backlogs

will start moderate, North that to there. especially in levels will demand backlog to those be the expect America, do as So, we continue

go when fish, was four it Billing at job business Architectural You doing, in look team in are you where when the XX, the Index are. lot customers I talk last like over When a you you're the in been and look when both at think months. over over was It's go that ours, I And and June. the the you Gaurang a XX very ABI, May agile. been -- about where they've We go you are. the fish XX

show So, from the areas continues of areas is away centers some K-XX And weakness. of which positive. transition has strong. been Healthcare we strong, healthy be buildings. Industrial Data activity positive. some has then, to been

a of We to residential were that's in China weak. and estate parts commercial hard infrastructure, industrial and driving been lot So, demand. real of pivoted

order good So, to the and backlog, rates month see so. nice the we the or over last about feel it's

Joe Ritchie

Great. Dave. Thanks,

David Gitlin

Thank you.

Operator

you. Thank

from Josh Morgan Stanley. Our question Pokrzywinski comes next with

is open. line Your

Josh Pokrzywinski

Good Hi. morning, guys.

David Gitlin

Josh. Hey,

Patrick Goris

Good morning, Josh.

Josh Pokrzywinski

mega are just data worked little a that like sense bit is to harder around wanted on by is important. to warehouse little tease think, non-residential the I the HVAC things getting follow-up brain but projects, maybe which content that on last as construction? I your declining, I the What's maybe a out. Obviously, not think question. of your pick Dave, some to

So, now? sense like market your good. on that it's The seems data what's

You've and ground talked demand the anything are you backlog about on normalization seeing there? more shifts. real level But

David Gitlin

a bit it's has think I that of have clearly, But, weaker, areas retail. yeah, areas the retail seen that, of we've been lower some the end some Well, positive. interestingly, been

but of that's than of applied commercial less weaker. all and estate -- that but some estate not have real areas remember retail business know And real So XX% in Josh, business. been North and retail, this areas American you is our applied our commercial of

that going we with of But were terribly watch there's some watch nothing to regional reaction we We see banks. the So, the acute. been it.

the some areas is I be I still And, that significant to of been has good. Data look you at bringing construction some is healthcare has that to ed good, chipset, the and Higher new United industrials, And positive. on a we of been that very amount center extremely the spent. space continue mean, think, have back positive to side, be strong. K-XX. States, flip extra funding then

it So, we globally. at look

leading I a six-month is in activity. tell order new is estate item. will on is a you the watch around indicator That flip it's think, theme the encouraging. for general, real about ABI side, I

that months on to an drive So, six the showing out. eventual could real some should some estate folks it side see which moderating of new growth, activity indicate see rates, construction ABI

So, warehouse strong. we'll I happens. in have side, mentioned, say. see other But watch that the been if have and bit been would has as the weaker to on a And, meantime, the some verticals of you

Josh Pokrzywinski

but asked a Got if missed it I follow-up, attention I a of very then just gotten And lately. It IRA know, pump seems be any in kind over strong, been might it. helpful. apologize. nine obviously ago Heat pumps already, topical, comprehensive. uptake? the the think don't on months? and And what less quantification six, worth That's market little of XX something what's tighter of sense it, next, months that someone it's IRA, general has I Very like XX, the maybe heat your in was maybe and kind you

David Gitlin

then went was in a to exactly a you're the But effectuated. happened into cases, but will and while dealing a implementation. And hard the state-by-state not only passed, of It's say actually is IRS, I got low bit that what we getting it. some with dimensionalize period legislation

quarter but of XXXX on has incentive of like in want would would start you very overall, impact planet. States be So, also very the really to getting going how codified see we're applied to that heat see the benefit United pleased I want And things $X,XXX kind to is pumps that XXXX which the it. to to mid-tier codified. it's the would I to that year rate with see in really important kick think in of we the think, have been level, the which the you for to take going that I getting gotten was of year the on where and call first 'XX, the it's consumers,

There working cold still in of applied North, There's heat seeing technology area define there. North pumps the because some levels the equally to the the we're weather that South definition is on in a the where how the like South. variance the We'd background one we're in heat and they for for pumps. the

legislation the made part improvement tangible expect northern to I So, the be to we'll into there's start think, still a in the But get XXXX. see, I for as we country. some, of benefit think, I

Josh Pokrzywinski

Got it. update. a Thanks Helpful lot.

David Gitlin

Thanks.

Operator

you. Thank

Our with next from Oppenheimer. comes Kaye question Noah

line Your open. is

Noah Kaye

for maybe wanted guys. I Easton. process Hi. approval update Good deeper morning, a to on just regulatory get Thanks. the

slippage the at? mentioned regulatory But for any track steps on to take close around timelines? are approval just year-end. You key by those maybe where through And potential us

David Gitlin

FDI overlap Well, to gotten approval as it's And Hats it's see. is well. the that team, be We've well because been got we approvals to us the that's Germany. and there's country that along, well, positive we'll and the China, been really between frankly I very QX going because off down in the various progressing progressing in no them. Union, to European think and was we've very as such material progressing

that track said that. for remain we and So, around year-end, would close we on we

Noah Kaye

sales the of platform. Services AI penetration maybe of AI Okay. for increase double-digit traction the up to another I sales in help digital aftermarket you're generative the AI And, different mentioned and together prepared around help remarks Abound And quarter. does Aftermarket and Great. Switching embedding in services. was topic, and generative could tie us XX%. you those wondering seeing. if and How actually aftermarket? some you digital and investments Dave,

David Gitlin

very our centers using and where like with it the our -- and more we've center efficiency set. we've it's working establishing we're a we for Bobby responsiveness call can are customers, in and much George end bit areas digital AI as team, a our call skill AI, centers, in while. encouraging. that's where AI, excellence using for of generative Well, generative some been more basic Look, drive There a an

Abound ultimately build affect make we data at to of be capturing controls and the and and And, issues I to the automation. things of generative that think, algorithms area as drive And out really using capabilities that, AI the occur, all applications Lynx, can you're are around to around fundamental going that looking capabilities very -- then and significant. and like our digital they in the what is Abound data Lynx, anticipate platforms using before

to taking with associated it looking a advances before level, of a anticipate occurs, of at now We're and years. temperature, to the capabilities, some pressure many for we're you're this where new equipment you the because equipment. the it of at aspects physics-based AI because in of been failure algorithms the seeing certain start We've other

and use diagnostics use look on You other and that side. capabilities geo-fencing beyond -- Lynx prognostics and start cold chain controls go temperature to to the

very it's we It's yet distinguishing digital our to So, can feature platforms. another exciting. add

Noah Kaye

color. the for Thanks interesting. really That's

David Gitlin

you. Thank

Operator

Thank you.

question from with Volkmann next Our comes Stephen Jefferies.

Your open. line is

Stephen Volkmann

here. morning, Good Thanks Great. in fitting me for guys.

think? a questions, of Do back -- to little bit pricing that couple kind And norm, about might there or is think reason XXXX, little maybe higher? do we wouldn't think it as stay Or a little a mix of longer how go historical about the bit you bit XXXX? I'm go a Just we a trying term? longer to in But there term. you continue is any reason to improve

David Gitlin

over you continue you think, see, Well, price pricing being years, last dealing dollars couple have over keep look we're mind look, two the to We I year. more to going do levels. close pricing continuing, Patrick think but that this I see that mean last around of historical I at were the at think, million of said in to of price I and with, a to couple $XXX billion of I years.

what pace normal at the price reductions, price typical see see So, But increasing. the we've of of don't not we levels I seen We last to continued the in think, that on kind course, be but certainly over couple that, years. will we price. we assume more of

be to into that the the XXXX commercial see we light SEER positive. residential to side. extend continues benefits Mix year We'll the change saw in next continue on

as they see to a beneficial would as the to further very well, side be the is like mix in we're truck seeing places as side, well. a on mix Refrigeration and Europe trailer seeing diesel-powered which transition then, United as also we're we'll and change in We And the up XXXX extended that refrigerant truck/trailer the the to HVAC lower-emission mix get transition we America, side, also into but that have on to XXXX, the same parts electric. of transition units, up. That benefits North States

in then will drive normal levels. to resume -- we'll on productivity. the be our continue both mix on aspects positive all the to business, background, pricing So, and job But it's of

digital this we net of X% XXXX, driving one productivity Operations, tool Button, for talked and year. one team truth, And looking well. hundred new of XXXX that is the every of to looks the not platform using productivity we're The at but we that is few week, source only well and as digital our million up to a the about forever. have productivity things at that Adrian X% very everyone set So, are team Head for doing one ourselves

really get line sight beyond going So, good we months. XX of well

Stephen Volkmann

Perfect.

maybe margin it And then Thanks. 'XX? Okay. for a TCC follow-up get dilutive? we just Patrick. quick How into as should about we think still Is of cadence the

Patrick Goris

did this dilutive of instead P&L. income we to year margin Well, is as why reason the the the we're recording consolidating entire equity acquisition, key prior now is

impact. expect average, revenue $X But profit. of year closer of significantly main but the dilutive I reason with is operating $XXX-million-plus-ish get company it we to at to the this their overall to billion That's would it. because it's be this -- be already that improve. than little expect might the I it that And I not company to So, would margin year, double-digit next bit so mentioned level, would continue operating a the lower consolidate basically why is dilutive incremental the at yet year, average.

Stephen Volkmann

Perfect. Thank you, guys.

David Gitlin

Thanks, Steve.

Operator

Vlad And comes you. question from Citigroup. our Bystricky Thank with last

Your line open. is

Vlad Bystricky

call. taking guys. Good Thanks my morning, for

David Gitlin

Hey, Vlad.

Vlad Bystricky

Hey.

momentum are maintain of how just you're in just year couple is comps seeing next about trying think, So, market, in forward the little there there. in But demand ask what easier. a terms about better what got China to talk understand the trends just you're wanted uptick I underlying a you orders China the China? to thinking I over potential one about of Can ago, know the quarters? we're in And positive going quarter. orders the to trends I in

David Gitlin

level still comps easier, it's back see X% are up outlook but our is overall China recently just got growth. total our The us China, this see double underlying in sales. set, and bit about for to year. Yeah. of do Vlad, we And it I digits from a promising. We

The over first just half up XX%. was

in some there had were or because us so compares, QX and QX last XX% in easy of up COVID the was QX Now, for lockdowns remember China. year

estate see in saw we it and been the medical when us I over that in the look, especially side. said industrial real that's weakness half up were first growth in by not the like the first half. to under helping -- offset industrial helped -- the pharma that China, the we on kind just think, was XX%, some And, have over commercial the side. But renewable we verticals that was way, might I overall, that of XX%, range. was And verticals was in energy, strong, of in The but it applied XX%

residential Fire think business, to And applies side, I'll and thing agile. we've the to & being is But in commercial is HVAC, success our That's it's that's this seen the the say I it to Security other especially very China, China. our in light globally. about teams commercial and resi side, key applies true, of part GCS our true

XX/XX, we commercial It's reverse. the are five mix where property, now years our industrial. XX% at at HVAC, ago, look you XX% just was If

in of there we that incentivize has I&I strong there. the which So, further some see we've believe after go to will extremely partners our over growth do been I about been our folks, very, sales purposeful very And where the shifting sales incentives to growth, continue with space. government our

going remain overall, overall, -- not we line. straight be on it's But, we China. bullish to So, a

Vlad Bystricky

my shifting given That's some mentioned, seen there. question I or spending K-XX Dave. as hear K-XX then really in you've we good and seen maybe we've follow-up, concern America. that helpful, around And the to potentially just the One Great. from know market, strength you strength peak-ish in vertical. just that Okay. North is investors obviously

So, in whether can of you're broadly growth from about you signs forward? sort are how customers? of any the vertical -- going And in you talk K-XX constraints thinking those about runway increased seeing budget

David Gitlin

I of opposite it actually that. the Yeah. view -- I

$XX decades billion of of months, yet $XXX in where allocated and had $XXX there's to billion has the government has allocated. -- funding first XX K-XX. dedicated is the next allocated had ESSER $XXX -- or that still I ESSER this I think they've over that there's and area the in the the billion be funding. billion fund on federal sufficient K-XX runway time And remember tremendous

So, $XX be has coming still billion the the XX to $XXX of billion months. over allocated

and be that's remains Now, possible to I be not would to that physically whether extension of not be there or suspect seen. to whether or needs seen, will remains an there be.

we growth meantime, the in I as orders the actually have is in long to has for But, XX%, digits quarter. mentioned, runway -- more a been double We continue time. than up orders saw past. K-XX there up in mean, ahead there the I see been

Our pipeline where over XX% had in QX it been. is now up

expensive-type vertical. funding a spent it's lower think way we time, the the is gets that So, And some is attractive funding very initial the of lead less projects.

into that's III, you get when III do ESSER ESSER there's billion with $XXX still $XXX into get that of have you billion and As an like is funding, HVAC. things the more to

So, we in runway think there's U.S. of the lot ahead in K-XX a

Vlad Bystricky

I appreciate Thanks. color, guys. the

David Gitlin

you. Thank

Operator

you. Thank closing back call the I'd to remarks. like turn Dave to for over

David Gitlin

thanks Well, team look, my the Carrier. at to members XX,XXX

achieve tirelessly system. of continues lot moving to parts behalf team great on The a of in have customers work We results. the our and

as So, we for to course, our and the Carrier through go investors. And, will to my thanks day. questions thanks everyone be Sam available of our at

thank you all. So,

Operator

participation. you your the Thank This for program. concludes

disconnect. Everyone, a have now may You day. great

Carrier Global (CARR) 27 Jul 232023 Q2 Earnings call transcript