Carrier Global Corporation · NYSE:CARR
Carrier Global — Q3 2023 Earnings Presentation
29 slides from Carrier Global's earnings presentation, Oct 26, 2023
Slide 1: Q3 2023 Earnings Conference Call
Q3 2023 EARNINGS CONFERENCE CALL October 26, 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: Q3 2023 Summary
Q3 2023 Summary $5,731M Highlights Sales Organic* +3% Y/Y HVAC and Fire & Security sales up MSD organically Adjusted Operating $1,044M Profit* +21% Y/Y Continued double-digit aftermarket growth 240 bps of adjusted operating margin expansion Adjusted EPS* $0.89 +27% Y/Y Strong price/cost and producti
Slide 4: Performing While Transforming
Performing While Transforming Sales Adjusted EPS +MSD Up ~15% organic Y/Y Adj EPS >$22.0B $2.60 ~$2.70 midpoint ~$22.0B $2.55 $20.4B $2.34 2022 2023 2023 2022 2023 2023 2023 (Feb Guidance) (Jul/Oct Guidance) (Feb Guidance) (Jul Guidance) (Oct Guidance) • Strong Commercial and Light Commercial HVAC,
Slide 5: Digitally Enabled Lifecycle Solutions
Digitally Enabled Lifecycle Solutions Double-digit aftermarket growth in Q3; +13% YTD ✓ Added scale property development ✓ On track for ~80K chillers under customers to Abound Healthy Air long-term agreements by year-end Solution and Net Zero Management in Q3 ✓ Healthy Buildings pipeline up to ~$1.7
Slide 6: Global Leader in Intelligent Climate and Energy Solutions
Global Leader in Intelligent Climate and Energy Solutions New Product Introduction Sustainability ✓ Since 2020, helped customers avoid ~270M metric tons of greenhouse gas emissions ✓ New OptimaLINE™ container refrigeration unit with industry-leading ✓ Net zero-ready product strategy aligned with SBT
Slide 7: Viessmann Climate Solutions
Viessmann Climate Solutions Transformational Combination: Gearing up for day 1 ✓ 2023: Viessmann Climate Solutions on track for ~€4B sales and ~€0.7B EBITDA* ✓ Cost synergies: developing detailed plans to achieve ~€200M by year 3 ✓ Revenue synergies, new product introduction, “…We’re in a decade of
Slide 8: Business Exits Update
Business Exits Update Commercial Security Industrial Fire Refrigeration Residential and Commercial Fire Processes proceeding well Creating standalone industry leader Strong interest in superb assets Achieves strategic priorities Expect definitive agreements by end of Q1, if not sooner Expect public
Slide 9: Q3 2023 Results
Q3 2023 Results Q3 2023 Q3 2022 Y/Y Sales $5,731M $5,451M 5% Organic sales* 3% Acquisitions / Divestitures, net 1% FX 1% Adjusted operating profit* $1,044M $861M 21% Adjusted operating margin* 18.2%** 15.8% 240 bps Adjusted effective tax rate* 21.4% 23.0% Adjusted EPS* $0.89 $0.70 27% Free cash flow
Slide 10: Q3 2023 HVAC Results
Q3 2023 HVAC Results Q3 2023 Y/Y Highlights Sales $4,008M 7% • Commercial HVAC sales up HSD Organic sales* 4% Acquisitions / divestitures, net 3% • Light Commercial HVAC sales up ~30% Adjusted operating profit* $833M 33% • North America Residential HVAC sales down LSD Adjusted operating margin* 20.8
Slide 11: Q3 2023 Refrigeration Results
Q3 2023 Refrigeration Results Q3 2023 Y/Y Highlights • LSD organic sales decline in North America Truck & Sales $924M 0% Trailer vs. tough prior year comparison Organic sales* (3%) FX 3% • Commercial Refrigeration orders returned to growth Adjusted operating profit* $111M (6%) • International Truck
Slide 12: Q3 2023 Fire & Security Results
Q3 2023 Fire & Security Results Q3 2023 Y/Y Highlights • Industrial Fire and Security up HSD Sales $923M 2% Organic sales* 6% • Commercial and Residential Fire combined grew FX 1% MSD Deconsolidation of KFI (5%) • Strong margin performance driven by volume, Adjusted operating profit* $169M 13% price
Slide 13: Organic Order Trends
Organic Order Trends Backlog Trend* Orders by Key Business Line Q3 2023 Orders by Geography Q3 2023 (Y/Y) (Y/Y) All Other Backlog* C-HVAC Backlog* HVAC** ~(10%) Americas** ~(15%) Residential & Light Commercial ~(15%) Commercial HVAC** Flat EMEA 10% – 15% Refrigeration (20%) – (15%) Transport Refrige
Slide 14: 2023 Guidance
2023 Guidance Current Guidance Prior Guidance Over $22B Over $22B Sales Organic* up MSD Organic* up MSD FX ~0% FX ~0% Acquisitions / Divestitures, net +~5% Acquisitions / Divestitures, net +~5% Segment Adjusted Operating Margin* Current Guidance Prior Guidance Adjusted Operating ~14.5% 14.0% – 14.5%
Slide 15: Key Q3 Takeaways
Key Q3 Takeaways • Strong adjusted operating margin, adjusted EPS and free cash flow performance • Double-digit aftermarket growth • Price/cost and productivity driving adjusted operating margin expansion • Raising full-year outlook for adjusted operating margin, adjusted EPS and free cash flow • Ba
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 $0.04 $2.70 $0.05 $0.01 $2.60 Adj. EPS* midpoint Operational Interest, net Tax Rate Adj. EPS* midpoint (Jul Guide) (Oct Guide) 17 *See appendix for additional information regarding non-GAAP measures
Slide 19: Additional Items
Additional Items Current Guidance Prior Guidance Shares outstanding (diluted) ~853M 850M – 855M Corporate expenses / eliminations ~$275M ~$225M Adjusted interest expense, net* ~$180M - $190M ~$185M - $195M Adjusted effective tax rate* 21.5% - 22.0% ~23% Non-service pension income / (expense) ~$0M ~$
Slide 20: Carrier Q3 2023 vs 2022 Sales Reconciliation
Carrier Q3 2023 vs 2022 Sales Reconciliation Y/Y % Three Months Ended September 30, 2023 Compared with Three Months Ended September 30, 2022 (Unaudited) Factors Contributing to Total % change in Net Sales FX Acquisitions / Organic Translation Divestitures, net Other Total HVAC 4 % — % 3 % — % 7 % Re
Slide 21: 2023 Adjusted Operating Profit Reconciliation
2023 Adjusted Operating Profit Reconciliation (Unaudited) Three Months Ended September 30, 2023 General Fire & Eliminations Corporate (In millions) HVAC Refrigeration Security and Other Expenses Carrier Net sales $ 4,008 $ 924 $ 923 $ (124) $ — $ 5,731 Segment operating profit $ 763 $ 107 $ 164 $ (2
Slide 22: 2022 Adjusted Operating Profit Reconciliation
2022 Adjusted Operating Profit Reconciliation (Unaudited) Three Months Ended September 30, 2022 General Fire & Eliminations Corporate (In millions) HVAC Refrigeration Security and Other Expenses Carrier Net sales $ 3,734 $ 923 $ 905 $ (111) $ — $ 5,451 Segment operating profit $ 1,314 $ 116 $ 142 $
Slide 23: 2023 Adjusted Operating Profit Reconciliation
2023 Adjusted Operating Profit Reconciliation (Unaudited) Nine Months Ended September 30, 2023 General Fire & Eliminations Corporate (In millions) HVAC Refrigeration Security and Other Expenses Carrier Net sales $ 11,846 $ 2,794 $ 2,724 $ (368) $ — $ 16,996 Segment operating profit $ 1,940 $ 327 $ 1
Slide 24: 2022 Adjusted Operating Profit Reconciliation
2022 Adjusted Operating Profit Reconciliation (Unaudited) Nine Months Ended September 30, 2022 General Fire & Eliminations Corporate (In millions) HVAC Refrigeration Security and Other Expenses Carrier Net sales $ 10,092 $ 2,940 $ 2,610 $ (326) $ — $ 15,316 Segment operating profit $ 2,369 $ 370 $ 1
Slide 25: Q3 2023 EPS Reconciliation
Q3 2023 EPS Reconciliation (Unaudited) Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023 (In millions, except per share amounts) Reported Adjustments Adjusted Reported Adjustments Adjusted Net sales $ 5,731 $ — $ 5,731 $ 16,996 $ — $ 16,996 Operating profit $ 645 399 a $ 1,0
Slide 26: Q3 2022 EPS Reconciliation
Q3 2022 EPS Reconciliation (Unaudited) Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022 (In millions, except per share amounts) Reported Adjustments Adjusted Reported Adjustments Adjusted Net sales $ 5,451 $ — $ 5,451 $ 15,316 $ — $ 15,316 Operating profit $ 1,526 (665) a $
Slide 27: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation (Unaudited) Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 (In millions) 2022 2022 2022 2022 2022 2023 2023 2023 Net cash flows provided by (used in) operating activities $ (202) $ 32 $ 790 $ 1,123 $ 1,743 $ 120 $ 384 $ 1,041 Less: Capital expenditures 56 66 91 140 353 70 74 92 Free cash flow
Slide 28: Net Debt Reconciliation
Net Debt Reconciliation (Unaudited) (In millions) September 30, 2023 December 31, 2022 Long-term debt $ 8,651 $ 8,702 Current portion of long-term debt 134 140 Less: Cash and cash equivalents 3,902 3,520 Net debt $ 4,883 $ 5,322 27 See “Use and Definitions of Non-GAAP Financial Measures” for additio
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