Carrier Global Corporation · NYSE:CARR
Carrier Global — Q2 2023 Earnings Presentation
29 slides from Carrier Global's earnings presentation, Jul 27, 2023
Slide 1: Q2 2023 Earnings Conference Call
Q2 2023 EARNINGS CONFERENCE CALL July 27, 2023
Slide 2: Cautionary Statement
Cautionary Statement This communication contains statements which, to the extent they are not statements of historical or present fact, constitute "forward-looking statements" under the securities laws. These forward-looking statements are intended to provide management's current expectations or pla
Slide 3: Q2 2023 Summary
Q2 2023 Summary $5,992M Highlights Sales Organic* +6% Y/Y HVAC and Fire and Security sales up 9% organically Adjusted Operating $964M Refrigeration down as expected; container volume up Profit* +12% Y/Y sequentially Continued double-digit aftermarket growth; up mid-teens YTD Adjusted EPS* $0.79 +13%
Slide 4: Sustainability and Healthy Building Leadership
Sustainability and Healthy Building Leadership • NA residential heat pump sales up ESG Leadership double-digits YTD ✓ ~50% of HVAC* and Transport Refrigeration sales related to Sustainability • European commercial heat pump clean technology Leadership sales up over 20% in Q2 ✓ ~212m metric tons of g
Slide 5: Digitally-Enabled Aftermarket Solutions
Digitally-Enabled Aftermarket Solutions Aftermarket Sales Outlook Aftermarket Highlights Double-digit aftermarket growth in Q2; up mid-teens YTD +HSD- LDD +10% ~$7B+ Abound being implemented across Carrier facilities and serving as a compelling proof-point with large scale customers +11% ~$5B Secure
Slide 6: Portfolio Transformation Update
Portfolio Transformation Update Fire & Security and Viessmann Climate Solutions Commercial Refrigeration ✓ Integration planning progressing well; anticipate to ✓ Dedicated teams progressing business exits close around year-end ✓ Expect to be in the market for commercial ✓ Tremendous team, culture, t
Slide 7: Carrier: A Global Climate Champion
Carrier: A Global Climate Champion Higher growth, higher impact Americas Europe Asia Pacific Complete Energy Management Solutions Commercial HVAC Residential and Light Commercial HVAC * Transport Refrigeration Differentiated, sustainable solutions for generations to come *The transaction with Viessm
Slide 8: Q2 2023 Results
Q2 2023 Results Q2 2023 Q2 2022 Y/Y Sales $5,992M $5,211M 15% Organic sales* 6% Acquisitions 10% Divestitures (1%) Adjusted operating profit* $964M $862M 12% Adjusted operating margin* 16.1%** 16.5% (40 bps) Adjusted effective tax rate* 23.3% 22.9% Adjusted EPS* $0.79 $0.70 13% Free cash flow* $310M
Slide 9: Q2 2023 HVAC Results
Q2 2023 HVAC Results Q2 2023 Y/Y Highlights Sales $4,216M 24% Light commercial HVAC sales and backlog up over 60% Organic sales* 9% Acquisitions / divestitures, net 16% FX (1%) Commercial HVAC sales up high-teens Adjusted operating profit* $791M 29% NA residential HVAC sales down MSD Adjusted operat
Slide 10: Toshiba Carrier Corp. Performance Update
Toshiba Carrier Corp. Performance Update ✓ Closed August 2022; paid ~$900M for ~$90M incremental operating profit Key Financial Metrics ✓ Fully integrated organizational model accelerating Current Target Initial Target execution Synergies ~$200M ~$100M By year 5 By year 5 ✓ Strong financial performa
Slide 11: Q2 2023 Refrigeration Results
Q2 2023 Refrigeration Results Q2 2023 Y/Y Highlights Global Truck/Trailer sales up double-digits, orders up Sales $972M (7%) more than 40% Organic sales* (6%) Acquisitions / divestitures, net (1%) Container and Commercial Refrigeration sales and orders down as expected Adjusted operating profit* $11
Slide 12: Q2 2023 Fire & Security Results
Q2 2023 Fire & Security Results Q2 2023 Y/Y Highlights Sales $932M 5% Organic sales* 9% Double-digit sales growth in Industrial Fire and Security FX (1%) Deconsolidation of KFI (3%) HSD sales growth in Commercial and Residential Fire Adjusted operating profit* $137M 1% Adjusted operating margin* 14.
Slide 13: Organic Order Trends
Organic Order Trends Backlog Trend* Orders by Key Business Line Q2 2023 Orders by Geography Q2 2023 (Y/Y) Backlog* HVAC** (10%) – (5%) +32% +1% Americas** (10%) – (5%) Residential & Light Commercial (15%) – (10%) Commercial HVAC** ~(5%) +26% ~10% EMEA ~(5%) Backlog +3% Refrigeration Y/Y Transport Re
Slide 14: 2023 Guidance
2023 Guidance Current Guidance Prior Guidance Over $22B ~$22B Sales Organic* up MSD Organic* up LSD - MSD FX ~0% FX ~0% Acquisitions / Divestitures, net +~5% Acquisitions +~6% Segment Adjusted Operating Margin* Current Prior 14.0% – 14.5% ~14% Guidance Guidance Adjusted Operating Margin* Includes ~5
Slide 15: Key Q2 Takeaways
Key Q2 Takeaways • Solid 6% organic growth despite a residential HVAC decline • 9% organic growth in HVAC and Fire and Security • Aftermarket up double-digits • Secular trends continue to drive demand • Full year price/cost equation improving to ~$300M and on-track for ~$300M gross productivity • TC
Slide 16: Appendix
APPENDIX
Slide 17: Use and Definitions of Non-GAAP Financial Measures
Use and Definitions of Non-GAAP Financial Measures Carrier Global Corporation (“Carrier”) reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP"). We supplement the reporting of our financial information determined under GAAP with certa
Slide 18: 2023 Adjusted EPS Guidance Bridge
2023 Adjusted EPS* Guidance Bridge $0.09 ($0.03) ($0.01) $2.60 $2.55 2023 Adjusted EPS Operational KFI Deconsolidation Other Non-Operational 2023 Adjusted EPS (prior guidance midpoint) (current guidance midpoint) 17 *See appendix for additional information regarding non-GAAP measures
Slide 19: Additional Items
Additional Items Current Guidance Prior Guidance Shares outstanding (diluted) 850M – 855M 850M – 855M Corporate expenses / eliminations ~$225M ~$200M Adjusted interest expense, net* ~$185M - $195M ~$185M - $190M Adjusted effective tax rate* ~23% ~23% Non-service pension income / (expense) ~$0M ~$0M
Slide 20: Carrier Q2 2023 vs 2022 Sales Reconciliation
Carrier Q2 2023 vs 2022 Sales Reconciliation Y/Y % Three Months Ended June 30, 2023 Compared with Three Months Ended June 30, 2022 (Unaudited) Factors Contributing to Total % change in Net Sales FX Acquisitions / Organic Translation Divestitures, net Other Total HVAC 9 % (1) % 16 % — % 24 % Refriger
Slide 21: 2023 Adjusted Operating Profit Reconciliation
2023 Adjusted Operating Profit Reconciliation (Unaudited) Three Months Ended June 30, 2023 General Fire & Eliminations Corporate (In millions) HVAC Refrigeration Security and Other Expenses Carrier Net sales $ 4,216 $ 972 $ 932 $ (128) $ — $ 5,992 Segment operating profit $ 742 $ 112 $ (157) $ (146)
Slide 22: 2022 Adjusted Operating Profit Reconciliation
2022 Adjusted Operating Profit Reconciliation (Unaudited) Three Months Ended June 30, 2022 General Fire & Eliminations Corporate (In millions) HVAC Refrigeration Security and Other Expenses Carrier Net sales $ 3,388 $ 1,041 $ 887 $ (105) $ — $ 5,211 Segment operating profit $ 585 $ 147 $ 134 $ (16)
Slide 23: 2023 Adjusted Operating Profit Reconciliation
2023 Adjusted Operating Profit Reconciliation (Unaudited) Six Months Ended June 30, 2023 General Fire & Eliminations Corporate (In millions) HVAC Refrigeration Security and Other Expenses Carrier Net sales $ 7,838 $ 1,870 $ 1,801 $ (244) $ — $ 11,265 Segment operating profit $ 1,177 $ 220 $ (64) $ (
Slide 24: 2022 Adjusted Operating Profit Reconciliation
2022 Adjusted Operating Profit Reconciliation (Unaudited) Six Months Ended June 30, 2022 General Fire & Eliminations Corporate (In millions) HVAC Refrigeration Security and Other Expenses Carrier Net sales $ 6,358 $ 2,017 $ 1,705 $ (215) $ — $ 9,865 Segment operating profit $ 1,055 $ 254 $ 1,352 $ (
Slide 25: Q2 2023 EPS Reconciliation
Q2 2023 EPS Reconciliation (Unaudited) Three Months Ended June 30, 2023 Six Months Ended June 30, 2023 (In millions, except per share amounts) Reported Adjustments Adjusted Reported Adjustments Adjusted Net sales $ 5,992 $ — $ 5,992 $ 11,265 $ — $ 11,265 Operating profit $ 489 475 a $ 964 $ 1,044 56
Slide 26: Q2 2022 EPS Reconciliation
Q2 2022 EPS Reconciliation (Unaudited) Three Months Ended June 30, 2022 Six Months Ended June 30, 2022 (In millions, except per share amounts) Reported Adjustments Adjusted Reported Adjustments Adjusted Net sales $ 5,211 $ — $ 5,211 $ 9,865 $ — $ 9,865 Operating profit $ 819 43 a $ 862 $ 2,556 (1,03
Slide 27: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation (Unaudited) Q1 Q2 Q3 Q4 FY Q1 Q2 (In millions) 2022 2022 2022 2022 2022 2023 2023 Net cash flows provided by (used in) operating activities $ (202) $ 32 $ 790 $ 1,123 $ 1,743 $ 120 $ 384 Less: Capital expenditures 56 66 91 140 353 70 74 Free cash flow $ (258) $ (34) $ 6
Slide 28: Net Debt Reconciliation
Net Debt Reconciliation (Unaudited) (In millions) June 30, 2023 December 31, 2022 Long-term debt $ 8,655 $ 8,702 Current portion of long-term debt 134 140 Less: Cash and cash equivalents 3,209 3,520 Net debt $ 5,580 $ 5,322 27 See “Use and Definitions of Non-GAAP Financial Measures” for additional i
Slide 29: Amortization of Acquired Intangibles
Amortization of Acquired Intangibles (Unaudited) Q1 Q2 Q3 Q4 FY (In millions) 2022 2022 2022 2022 2022 HVAC $ 4 $ 4 $ 16 $ 22 $ 46 Fire & Security 1 1 1 1 4 Total Carrier 5 5 17 23 50 Associated tax effect (1) (1) (7) (4) (13) Net impact to adjusted results $ 4 $ 4 $ 10 $ 19 $ 37 28 See “Use and Def